When will this nation ever get serious about its energy policy and kick its oil "addiction?" Maybe when oil prices hit $200 per barrel and the stock market plummets even further? Check this out:
Oil leapt to a new record high near $142 a barrel on Friday, extending gains after surging nearly 4 percent in the previous session, as tumbling global stock markets triggered a wider commodities rally.[...]
Oil, which had been trading in a range for most of the week, broke out of that range after Libya said it was studying possible options to cut output in response to potential U.S. actions against OPEC countries.
"We are studying all the options," Libya's most senior oil official, Shokri Ghanem, told Reuters, adding oil producers needed protection from what he viewed as U.S. attempts to extend its jurisdiction beyond its territory.
That's right, if the United States tries to take legal action against OPEC as a cartel (see here for more on the certain-to-fail "Gas Price Relief for Consumers Act of 2008"), our oil exporting pals - Libya, Saudi Arabia, Iran, Venezuela, etc. - might just take their own countermeasures. Translation: OPEC thinks we're a joke, doesn't take us seriously, laughs in our faces. And, sad to say, but they're right about that. We are NOT serious, or at least we haven't been up to this point, about U.S. energy policy. Instead, we're addicts. Oil addicts.
Yet the United States DOES have power, albeit latent at the moment. That potential energy could be actualized, but only if we get some leadership willing to tell the truth, bite the bullet, and stop messing around with silly gimmicks (not to mention "red herrings" and other worthless distractions). What CAN we do?
Obviously, we need to start immediately on a crash program to slash our oil consumption. It can't be done, you say? Well, it turns out that "Americans drove 22 billion fewer miles from November through April than during the same period in 2006-07, the biggest such drop since the Iranian revolution led to gasoline supply shortages in 1979-80." That's right, Americans respond to price signals. Something tells me they'd also respond to incentives and technological options to purchase super-fuel-efficient (100 mpg? more?) vehicles. Unfortunately, while the American consumer responds as best he or she can, our government has completely failed us when it comes to energy policy. As a result, our nation finds itself less and less secure, more and more reliant on the Saudis et al., and in a potentially deep recession that's just beginning. Oh, and all that money we're spending on filling our cars and SUV's? It's not going to rebuild our nation's infrastructure or pay down the debt or whatever. Instead, it's going into the swollen coffers of Saudi Arabia, ExxonMobil, and other fine folks like that.
So, are we going to get serious when oil prices hit $150 per barrel and gasoline $5 per gallon? How about when the stock market skids below 10,000 and 70's-style stagflation kicks in with a vengeance? Perhaps we should we all break out the leisure suits and bell bottoms? Or, how about our government stop with the gimmicks -- suing OPEC, a summer gas-tax holiday, offshore drilling -- and gets serious for a change. The experts know what needs to be done: a massive push towards energy efficiency and renewable power development. The public simply wants relief from the pain it's feeling. And the politicians? They appear mostly clueless (what else is new?), as our nation's economy goes down - deep, deep down - the same hole the oil comes out of.
Regulating futures markets more tightly isn't a bad idea, but it won't bring back the days of cheap oil. Nothing will. Oil prices will fluctuate in the coming years - I wouldn't be surprised if they slip for a while as consumers drive less, switch to more fuel-efficient cars, and so on - but the long-term trend is surely up.Most of the adjustment to higher oil prices will take place through private initiative, but the government can help the private sector in a variety of ways, such as helping develop alternative-energy technologies and new methods of conservation and expanding the availability of public transit.
But we won't have even the beginnings of a rational energy policy if we listen to people who assure us that we can just wish high oil prices away.
Altogether, it appears that they are a number of factors explain oil price increases perfectly well, with no need to go into conspiracy theories or market manipulations.
The key factors?
*Chinese (and other world) oil demand growth
*Saudi oil demand booming while Saudi production is essentially flat
*Oil production is declining in several key non-OPEC regions (North Sea, Russia, Mexico)
*Lack of global spare oil production capacity
*War/anxiety premium ("anxious market")
*I'd add the weak dollar as a factor, probably some speculation as well in the markets...
That pretty much sums it up. So, when are we going to get serious about having a real energy policy in this country? Before or after it's too late economically, environmentally, and strategically?
Maybe the Texas oilmen, along with other top Republican "Swift Boat" financiers like Harold Simmons and Albert D. Huddleston, will be inclined to sit this election out rather than throw money away on a futile McCain candidacy. But in the past year the spike in oil prices has enabled them to accumulate wealth beyond their wildest imaginings, so Obama and Democrats should not let themselves be blindsided by another "just make stuff up" Swift Boat style of 527 smear campaign financed by Texas millionaires.
The oil windfall is sitting in the pockets of the same people who have funded a classically successful smear effort against Kerry in 2004, and these experienced 527 donors can't possibly spend all of the windfall on more conspicuous consumption. They already have their yachts and their eight or ten mansions.
What a time to be a member of the looting class!
Thanks for citing Jerome a Paris, by the way. He and bonddad, as well as Nouriel Roubini, are must reading in trying to dig beneath the MSM fluff on economics in order to catch a glimpse of reality.
Also are most desired petroleum primarily is light sweet and not oil Saudi oil correct? I believe I heard trader talk on CNBC stating that Saudi oil is not in this tightening excess, and in fact several tankers were on standby for unload in Asian ports but with no takers until the price is bidded lower. Rather our more desire oil iw from light sweet suppliers in the Gulf of Mex, Venezuela, Nigeria.
If this is correct, would not some increases in domestic production, help ease the strain, while our energy consumption gets a makeover over the next 15-25 years?
2. Saudi oil quality is described as follows by EIA:
The Ghawar field is the main producer of 5 million bbl/d of 34o API Arabian Light crude. Abqaiq (17 billion barrels of proven reserves) produces approximately 400,000 bbl/d 37o API Arab Extra Light crude. Since 1994, the Najd fields, which includes the Hawtah field and smaller satellites (Nuayyim, Hazmiyah) south of Riyadh, have been producing around 200,000 bbl/d of 45o-50o API, 0.06 percent sulphur, Arab Super Light. Offshore production includes Arab Medium crude from the Zuluf (over 500,000 bbl/d capacity) and Marjan (270,000 bbl/d capacity) fields and Arab Heavy crude from the Safaniya field. Most Saudi oil production, except for "extra light" and "super light," is considered "sour," containing relatively high levels of sulfur.
Very light, sweet crudes come from North Africa -- Algeria and Libya. Heavier, more sour crudes come from Venezuela, Mexico and Canada. Nigeria's generally light-medium and low sulfur...
In general, U.S. refineries are highly capable of handling a variety of crude qualities from all over the world.
Floodguy refers to a 15-25 year make over. Even if (although I think you've shown what a crock it really is) we could get some domestic production running, by the time we did we may be half way? further? to the make over. So rather than expend time, resources, energy, and hope on domestic drilling, why not push all of that effort into a renewable, EE, future?
Oh, and for those who really want to lower their gasoline bill, just do this.
Also, I have been reading and hearing alot of conflicting talk about price manipulation thru over-speculation in the futures market. Some urge for gov't involvement which they believe would reduce price back to the $70-80 range, while others say excess speculation from widening investment interest has and can only have an affect of about 10-12%. Your answer(s) might be too long for this one, so if you don't have the time, I understand.
Next installment: why the line about how "there hasn't been a refinery built in the United States in decades" is not really on point (it's true, but there's been expansion at existing refineries, plus it's a world market anyway, plus, plus, plus...)