"Fool me once, shame on -- shame on you. Fool me -- you can't get fooled again." -- The President of the United States of America
Why have gasoline prices doubled in a year? Demand hasn't doubled. Supplies are the same. I have this horrible feeling -- having lived through the 2000 California electricity crisis -- that we're being gamed.
Back then, as now, we were told that the source of the problem was simple: A sudden -- but perfectly natural -- imbalance in supply and demand. And the solutions were simple too:
1) Eat it. Pay up, quit complaining, and learn to passively enjoy the mysterious jerks and undulations of the free market, like listening to your roommates have sex.
Or:
2) Drill.
Back in 2000, Californians were also introduced to two ideas about electricity that have come back with a vengeance with gas:
1) Not only is there nothing wrong with higher prices, they actually prove that the market works.
And:
2) The energy companies would love to charge less, if only the Democrats and the environmentalists would change a few laws.
Try keeping both of those ideas in your head at the same time. ExxonMobil has a sacred obligation to its shareholders to charge the maximum price the market will bear and they'd cut prices in a second, as a present -- as patriots -- if you'd just let them bespoil Alaska.
I can't completely reconcile those theories, myself. I should probably listen to more talk radio. Except the radio's in my car, and I can't afford to drive.
So Californians paid high prices for power. We're still paying. And we threw out the governor and replaced him with this kind of wizened homunculus who used to play robots. But that's neither here nor there. In 2002, after the crisis passed, we found out it had had an even simpler cause than we'd thought:
It had been entirely cooked up by some company in Houston called Enron.
Fool me once and -- uh -- hasta la vista! I'll be back!
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When Marx talked about the fetishism of commodities, he probably wasn't picturing Senator David Vitter getting diapered by a call girl, but that's his loss. Not only did Louisiana's junior Senator emerge from his scandal cleaner than a baby's bottom, but he's still in office, and he's come up with an energy plan.
It's called The Enough Act. Because "enough" is the safe word he uses when he's being spanked too hard. No, there's no evidence that that's true. David Vitter's plan is called The Enough Act because E.N.O.U.G.H. stands for Energy Needed Offshore Under Gas Hikes.
O.M.F.G.
Here's how Vitter says it works:
The ENOUGH Act would trigger increased energy exploration off a state's own coast once the price of regular gasoline reaches $5 a gallon. Once the ENOUGH Act's trigger is reached, it allows a governor, with the concurrence of the state legislature, to petition for increased energy exploration on the Outer Continental Shelf.
It makes a kind of brutish sense if you don't think about it too hard. He's not saying that the Gulf of Mexico isn't a fragile ecosystem, or that we shouldn't honor the earth and water, and guard them as a holy trust. He's just saying once gas gets to five bucks, screw it. It's every plant and animal for himself.
Go ahead and scoff, you limousine liberals. Five dollars might not mean much where Nancy Pelosi lives, but where David Vitter comes from, five dollars is a blowjob.
But think about it for a second. Wouldn't ENOUGH actually reward the oil companies for raising the price of gas? They want to drill, but David Vitter -- consumer economics super genius -- won't let them until they charge at least five dollars a gallon first.
ENERGY EXECUTIVE #1: I feel so bad for our shareholders and the American motorist. I sure wish we could responsibly drill the fuck out of the Gulf of Mexico.
ENERGY EXECUTIVE #2: Sorry, Rex. I'd love to reduce America's dependence of foreign oil, too. But you know we can't have those leases... our gas only costs $4.96 and 9/10ths. And that's where it's going to stay.ENERGY EXECUTIVE #1: Dang it!
Maybe someone should take David Vitter aside, and walk him through the meaning of "incentive."
Because, as written, the ENOUGH Act reads: "I want this donkey to go, and if it doesn't, I'm going to beat it with this carrot." No, that's not it. "I'm going to force feed it a carrot, and beat the consumer with a stick." Wait, no. "Fool me once..."
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What happens if the price of gas goes up to five dollars, the drilling starts, and then the price magically drops? (That's what's supposed to happen when they drill, right?) Do we tear the rigs down and take the leases away?
ENERGY EXECUTIVE #1: Dang it!
Wouldn't it be nice if this was done each year in the form of a gas purchase card limited to $100 ($50) per month for each 12 month period. People with efficient cars and relatively low mileage driven may end up paying little or nothing out of pocket. This project could continue until super unleaded is less than $2 a gallon. The Uncle has gobs of cash to waste on Iraq and corporate welfare, how about helping Americans cope with high gas prices?
Those who did not get a rebate because of some income limitation would not feel as much "pain at the pump" as someone making $75,000 or less.
We could tax oil/oil products imported into the country or taken out of the ground by $50/barrel; After a year, all that money is rebated back to all adult US citizens who file taxes, in equal amount (I figure about a $2000 check). Then, implement a $20/ton CO2 tax to ensure that we don't all switch to coal power, and we increase all those amounts annually to 50%->100%->150%->200% of their initial value.
US alternative energy suddenly blossoms. Technology speeds along faster than Congress can ever move.
Thinking of new ways to save energy becomes a major personal issue for every American. Three hundred mile commutes result in people moving, not people demanding assistance.
The median fossil-fuel consumer in the US sees an effect only as fast as US oil consumption changes.
The poor (who couldn't afford the average expenditure on fossil fuels in the first place) see an increase in their income which prevents them from going under, potentially staving off part of the coming Depression.
Illegal immigration is suddenly a whole lot less popular than it once was, as the cost/benefit of living here without a check becomes prohibitive. Existing illegals gain a reason to jump through the citizenship hoops.
A myriad of vehicle makers spring up that were impossible under CAFE, with its strict applications: cars & behemoth automakers.
No one has ever, I repeat, EVER
Tracked the cost/ price of a barrel of oil; from the source
To a gal' of gas, at the station where you fill up.
Please chart this for me.
1. What does the owner of the well receive
2. What is the ( market) mark-up
3. Transportation charge
4. Pipe line charge
5. Refining cost charge
6. Mark up on finished product
We (Americans) have never been told the reality on where the money goes
Is there a reason that we should not know?
Will someone much more important than me please demand
An ANSWER???
The speculation has been allowed by the Repug ENRON loophole, offshoring of trading and the devaluation of the dollar working together. The Dollar dropping each week will of course move prices up andgive the speculator an additional edge. The relative tighness of supply and the spreading of self serving rumors of pending attacks in Iran, or gulf storms or even now a shortage of corn drives the price up. A Johnny Carson joke about a shortage of Toilet paper caused one!
The lack of regulation now has oil being traded and sold 30 times before its refined. Non users of the commdoties are now doing this trading such that Morgan Stanly an investment house owns more Heating oil than those that actually distribute heating oil. This is not unlike ENRON biiding up the price of natural gas in California in 2000.
BUSH/CHENNY investigated this and said there was no bidding up/speculation. Of course they were wrong/LIED and the same BUSH Admin of course today says there is no speculation... apparantly its perfectly normal for the price of goods to go up 270 percent in 18 months or 35% in six weeks when demand dropped!
Regards
The level of oil production is in a dynamic equilibrium. Existing fields and wells drop off gradually in production. Most of the 'profit' often has to go to more exploration and more drilling in order to establish new wells and fields to replace them. If it doesn't, then as production drops, prices go up. Inflation interacts in a nontrivial manner with oil price at this point, as well.
The relevant statistic that determines how valuable an energy source is to our industrial civilization, and how much is wasted on overhead, is done in terms of energy economics. For a primary energy source, we can never spend more power harvesting it than we get out of it - that would be non-sustainable . Energy Return On energy Invested (EROI) is the ratio you're looking for - and being less than 1 means it's an energy sink.
http://en.wikipedia.org/wiki/EROEI
Blaming speculation is a red herring and desperate self-defense measure by the oil companies, because the market is how we judge scarcity. We are at or near peak oil - and we are set for a catastrophic decade or two if we continue to refuse to prepare. Attempting to squelch speculation, impose socialist price-controls, or emergency rationing in an era of *sustained* high prices is like threatening OPEC with "If you don't give us more of the most valuable and fast-appreciating resource on the planet, we'll... hold our breath!"
It was about the price of oil then too.. it was too low. Texas was hurting at $8 per barrel. The oil companies wanted the BAN to help push the price up as they were also trying to close refineries and reduce supply. Thats was then and this is now..
There will be drilling offshore or we will be using more coal instead of Oil/Natural gas as is already happening. And coal is by far dirtier and mining does more damage to the envirnment.
My Golf course is located on old oil field land as are most areas around Galveston. The GUlF in Texas is loaded with drilling platforms.. its where we head to fish. Platforms extend hundreds of miles into the gulf off Mexico. Massive drilling off Brazil. Cuba is next.
By all means lets construct huge solar and wind farms in the dessert and wind/solar farms at sea off every City also... More biofuels ( but not from corn).
This will take a mixture of solutions and each solution has a negative.. biofuels consume land for enegry at the expense of food, Nuclear has a radioactive waste problem... wind towers/ and solar farms are considered eye soars. Mining coal is dirty and coal is dirty. But watching the economy collaps and people chosing between food and heat in the winter is also a downside.
Regards
A friend of mine recently sold her Galveston Island home to return to NY (family reasons...not love of taxes). I hear tell that Saudis are buying up lots of homes there. Is there something they know that we don't?
Canada and Mexico provide most of our oil. Mexico's Noxal find is bound to out-do Cantarell's output and yet where's the whining about off-shore drilling hurting THEIR tourist business or harming the environment? Just because coal is "dirty", it doesn't make it undesireable. I heat my home for less than $1,000 for a full 5 months with coal. Touch that! Harms the environment? Please. Whaddya want? Another golf course?
I'll bet dimes to dollars that if drilling for oil was a non-profit operation, most progressives would be as happy as little clams. Where do people get the idea that their food and energy should be cheap? Why are people willing to pay thousands of dollars for a tv or golf club fees, hundreds for a trip to Disneyland, sports or concerts, $20+ for DVDs and CDs, and then tell the people who feed them, provide fuel for them to drive, keep them cool and warm that THEY can only pennies for their investment? Geez, what a screwed up country.
There's no such thing. There's only a dependence on oil.
If markets other than the U.S. will pay a higher price, then any oil pumped out of ANWR or off of the U.S. coast will be sold to them, or it will be kept here to replace other oil that will be sold to those markets but it'll be priced just as high.
The way to bring down the price of oil is to reduce demand, by conservation and by substitution. Of course this will be offset somewhat by increasing demand in other parts of the world until they too decide to find ways to reduce demand.
But a huge part of their independence is not because of cane ethanol, its because they have trippled there own oil production.. and with offshore drilling.
Regards
It had been entirely cooked up by some company in Houston called Enron."
Enron did not cause the CA power crisis....it took advantage of the ineptness of the keystone cops that are our CA legislators.
In their wisdom the CUC (CA utility commission) required the power companies to fix the price to its customers but allowed the wholesale prices to fluctuate. Also, they required power purchased from outside the state to be charged at a higher rate than CA generalted power. All Enron did was exploit the stupidity of this arrangement by buying power in CA moving it to say OR and then selling back to CA at the required higher prices! It did not take a genius to figure this out.
Another bungled government scheme gone wrong.
Get the story right next time Chris.
In another century the Enron executives would have been sporting eye patches and flying the Jolly Roger.
Chris you never took econ 101 did you.
1) Of course Exxon has a duty to deliver growing profits to its shareholders but if you let the market work the way it is supposed to competitors to Exxon would emerge to fill the void if Exxon avoided drilling themselves. The only reason that may not be happening is that government has erected too many barriers (through over regulation) for new companies to overcome and thus leaves the established players with more power in the marketplace.
2) You liberals always spread mis-information that drilling in ANWAR (or anywhere for that matter) WILL destroy the environment. This is a false statement. We have the technology and the regulatory structure to minimize accidents that did't exist 30 or 40 years ago. You are behind the times Chris.
3) Exxon does not set the commodity price for oil. Their profit margin even today is lower than many other businesses. They still have to pay the market price themselves for wells they do not own.
4) Simple economics: If we drill for more oil...supply increases....putting downward pressure on prices. This is so simple I don't know why it even gets debated here.
Oh boy... have you ever swallowed the Kool-Aid! How about an example of this in real life, and not just from Vitternomics -101?
Is this the same technology that has 46 levees (built with 'our technology') bursting at the seams and wiping out the US farming industry for years to come? Next year will be a disaster no matter what. With increasingly bad weather, the downstream impact from the high oil prices and the floods of 2008 i.e. high unaffordable plastic - made from petroleum- no ethanol due to the floods, the increase in the all products in the 'food' chain including food, the volume of people being laid off due to jobs being moved offshore, corporate restructuring and greed (see how much money the CEO made in a recent HP buyout). It is not going to be pretty, BRACE yourself.