Gasoline Prices Up $.25/Gallon in Two Weeks -- Time to Refocus on the Strategic Petroleum Reserve
Our economy is at a critical crossroads. The financial mess has threatened to tip our economy into depression. The administration is valiantly trying to steady a listing ship in sight of an iceberg. And yet in the last five months, in spite of all the government's efforts and the need to resuscitate the world's economy, our friends at OPEC have colluded to restrain production, and the speculators and manipulators are back trying to game the oil price. In the last five months the price of oil has escalated more than 60% and the price of gasoline has jumped by more than $.25/gallon in the last two weeks alone.
Thus, the same elements are at play that helped crater the economy. Consider the following: Just before the financial blow-up, oil prices had reached $140/barrel and gas over $4.00/gallon. Put yourself in the position of a prospective home buyer at the time. Given the vast transportation uncertainties occasioned by the explosion in gasoline prices, would you have committed to buy a home whose access depended on your car, and the spiraling price at what would become your local gas pump? For many the answer was no, not now, and then the housing market began to crater with all its financial impact.
Given past history, it is time for the government to act. The Bush administration in its inimical fashion -- helpful to his oil pals to the end -- began adding oil to the Strategic Petroleum Reserve just weeks before turning over the baton of governance to the Obama administration (please see "Stop The Energy Department From Hiking Oil Prices By Reinstituting Purchases For The Strategic Petroleum Reserve," January 4, 2009).
It is time for the Obama administration to show it is cognizant of the creeping upward push of oil and gasoline prices and its impact on a still very fragile economy. It is time to undo the last-minute Bush administration policy of reinstituting purchases for the reserve, by stopping all further purchases until the economy has truly stabilized (please see "Why Are We Paying $50 a Barrel for $20 Barrel Oil??," April 27, 2009) and the price of oil has retreated significantly.
Stopping purchases would send a signal to OPEC and the speculators that the government will no longer sit idly by while prices are manipulated ever higher placing our economy at strategic risk!
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Some nice graphs for you:
Incremental new supply cost:
http://1.bp.blogspot.com/_eqgnp7qkKUs/SX2wbF3BbtI/AAAAAAAAAe0/nZ1lXcTncUg/s400/oil_price_marginal_cost.JPG
Ouch... the black stuff is getting expensive!
Offshore drilling to the rescue:
http://www.energyinvestmentstrategies.com/wp-content/uploads/2009/01/image.png
Not!
Discover greatly outpaces production...
http://www.leg2capital.com/image/PeakOilDiscovery_op_800x489.jpg
No, it doesn't.
:-)
So when is the peak?
http://mwhodges.home.att.net/energy/world-oil-prod-proj.gif
It's now. It may have happened 2006 or 2007. OPEC has ten more years to go... then they better start breeding really efficient camels, again, in Saudi Arabia. They need something to export, after all...
:-)
Gasoline prices are creeping up and hitting new highs for the year but it is not time to panic about OPEC and speculators. The slumping economy will hold prices lower than they were last summer with summer driving reduced, economic activity slower, and family vacation plans being cancelled. With unemployment at close to 9 percent, people will most likely be staying close to home this summer and there are still market dynamics in play. We will have to swallow the annual increase for the mandated change in gasoline blends for the summer months but the reduced consumption should keep fuel prices in check. I would leave the strategic petroleum reserve as is at this time.
SAVE 50 CENTS/GALLON AT THE GAS PUMP & CUT POLLUTION BY 90%
Thirty-seven years ago during the 1973 Oil Crisis we developed a liquid fuel enhancer. We call it MPG50. When added to gasoline or diesel fuel, it provides many benefits including a gas mileage boost of 25% to 50%, a several point octane boost and up to 90% exhaust pollution reduction. It is extremely cost-effective and widespread use of MPG50 could cut American dependence on foreign oil by 35%.
See: http://www.youtube.com/watch?v=mSQh4zQcThc
Try a bottle of MPG50, (which treats 160 gallons of gas) for $25 & you get a $40 Gasoline Rebate Voucher. So, you make a $15 profit for trying it. Plus, with gas prices a $2/gallon one bottle of MPG50 will save you 50 cents/gallon, times 160 gallons, that's $80 more in gas or diesel fuel savings.
It is a "no brainer", because with its $40 Gas Rebate Voucher you are paid $15 for trying a $25 bottle of MPG50 which saves you $80 at the pump; See: http://mpg50.com
God Bless America
A sucker is born every minute. Make that every second.
:-)
Without knowing it, I am sure, Raymond touched on something that is an important aspect of our dilemma- how our car-topian culture is bringing us down.
Beyond the usual "oil and gasoline should be really cheap to US" ($20 oil/ $1 gas), Raymond asks the silly question "...would you have committed to buy a home whose access depended on your car, and the spiraling price at your local gas pump?"
Raymond thinks, perhaps correctly, that with the benefit of hindsight the answer would be no.
I think it is a silly question because it has been answered through the harsh reality of 60 years of history and is an emphatic YES! - we bought and ate the who rancid enchilada of the "American dream".
Allow me to re-write a couple of Raymonds' sentences:
Given our utopian suburban certainties occasioned by extremely low gasoline prices, our nation has committed over half a century to building and buying homes (and attendant infrastructure) whose access depends on our cars and enslavement to our local gas pump. As a result, all of us now are witnessing the housing market crater with all its financial impact.
Thank you.
Yawn. The same old stale argument that didn't work last time being recycled over an over again. When are we going to hear about real solutions like higher gas taxes? Ever?
Agree! The author's logic escapes me: how do purchases for the Reserve cause OPEC to raise its price? Far as I can tell, those purchases are barely noticeable on the world market. Besides, the Reserve is meant for crisis times when petroleum supplies are not available.
Is Raymond Learsy a spokesman for the petroleum industry?
The ol' it's the Arabs' fault smoke and mirrors trick, frankly has long ago lost believability. Especially so when I read about refineries reducing production because it's, "just not profitable to refine product."
Oh boo hoo, poor petroleum industry is just about broke. Then throw in parasites from wall street that are pumping up crude oil prices while Congress looks the other way.... again!
Besides, big oil has paid out good money for the Congressmen they own and control. Now that's free enterprise!!
Oh and let's not forget about the $8 Billion in lease payments that Big Oil didn't have to pay for drilling on federal land thanks to the free pass from the Bush administration.
Yes Sir, gotta love that Republican, "all for me, none for you mentality."
Larmar- what is the $8 Billion in lease payments that Big Oil didn't have to pay for drilling? Are you referring to the Deepwater Royalty Relief Act passed during the Clinton years to encourage deepwater development? That would be the act that Kerr-McGee sued the Bush Administration over? I hardly see how that was a free pass from the Bush Adminsitration, Could you illuminate me please?
Time to open ANWAR ....(ten years ago)
It's ANWR, but that's just details anway . . .
Oh, right--former president of Egypt.
I disagree with writer Raymond Learsy. In fact, we should be increasing the price of gas through gby way of higher taxes. The government hasn't done that, partly for lack of courage, but also partly as a concession to the fragile economy. That's enough. The public incentive to develop alternative energy must be kept strong, or we're never going to wean outselves off of fossil fuels.
in the meantime all of shmucks out there who can't afford a nice hybrid would be utterly sunk while they spend 10 years developing an affordable model. I don't buy gasoline for my car by choice thanks.
It is time to re-regulate oil. With the economy the way it is we cannot trust the oil industry to do the right thing. $4.00 a gallon gas prices could possiby create an economic China Syndrome creating run away inflation at a time of ever increasing unemployment. Combine this with the seemingly indifference Washington has towards We the People it could also spark civil unrest.
Would you likewise regulate the price to find, develop and produce to insure a profit or would you just mandate that oil companies produce?
The price of one gallon of gas is up over 100% since Bush took office in 2001!
What other product has shown that much growth? None.
This entire exercise has just been a clever marketing ploy to see how much the customer will bear. At anything north of $3, we begin to really complain, at $4 we stop using gas. At $2 and change, we'll live with it and not like it much, but keep using it like sailors on shore leave. Now that they know our price point resistance, they can keep pushing the price up gradually as we become accustomed to the new benchmark. It's the old frog in the hot water marketing campaign.
Gold, Silver, Copper, Wheat, Corn, etc...
Hadn't thought of those--do you have any backup on them? My cornflakes haven't doubled?
Your math doesn't work. In January 2001, the average price was $1.52, its not $3.04 currently. Be patient, Barrack will ge there in no time.
Time to drill on U.S. soil and off shore locations.
What are you drilling for? There is no more oil there. US oil production has peaked in 1970 and that's final.
Again, ktm, production is not the same as total resources available.
Did it stop it stop in 1970? I thought Thunderhorse in the GOM is producing 250,000 BBLS/day from 6 wells and last I heard (outdated) Tahiti is producing over 100,000 bbls/day.
No, it's time to ditch oil for renewable and clean energy. Natural gas can be a stepping stone in the transition, since we have plenty of it in the US.
Lightning- it won't be anytime soon that we ditch oil and a funny thing happens when you drill wells, you tend to find both oil and gas. But I do agree we need to put our natural gas to good use starting as a vehicular fuel.
The majority of oil wells in Colorado are not pumping. Why?????????????
The government pays the oil well owners in Oklahoma and Texas for NOT pumping, much like the government pays the farmers for NOT producing! What does that tell us. Besides, both parties
are heavily invested in oil, why would they stop the runaway of gas prices?
Vippy- You are making this stuff up or your are very uninformed, either way that ain't true.
Could be many reasons, they could be depleted, they could be uneconomic ,they could be such low producers that they produce limited hours, i.e. they are own timers.
OPEC has not colluded. First, they are under no obligation at all to ship us a quantity of oil that assures we get to be wasteful pigs with cheap gasoline. Second, refiners are under no obligation whatsoever to refine quantities of oil at gas station pump prices that would drive them into bankruptcy.
We were burning 22 million barrels of oil a day. They worked their butts off supply that quantity. The pipes and tanks all over the world were straining to meet unprecedented global demand. The system was approaching maximum production.
Then the "real estate, home building, mortgage originator" cretins clobbered the global economy. Demand for oil dropped precipitously. US demand is probably around 16 to 18 million barrels a day. To the naive, that sounds like a small change, but what it means is OPEC had absolutely no other choice than to significantly cut production. There is no place on earth to store 4 million barrels a day other than in the oil field where it has been for ages. OPEC wants the price to be around $75 a barrel. They have every right to set their production at a level they think will achieve their desired price.
We are now using as much gas as we did back in 2000 yet the population exploded, take that into consideration. Banks rented off-shore super tankers and bought oil and now are running out of oil to store. Of course, the object was to make money and that is what they are doing. Has nothing to do with the attacks by the Nigerians, etc. All excuses we hear now never happened during Clinton.
During the 1980s oil companies went out and discovered an ocean of oil, and that excessive reserve volume suppressed prices throughout the 1990s. The period is an anomaly that can never be repeated. One, producers are too smart now to repeat the mistake. They curtail projects at the first hint of economic downturn. Second, they tapped the first tier of harder oil, and it's largely been built out and combusted. The next tiers are much harder and inherently more expensive to tap.
Goldman Sach, one of the largest gamers of the product on the world markets, have their own refinery! Here on the west coast, just the threat of a refinery going down for "maintenance" can send prices skyrocketing. Can you imagine the power that one-two punch of price setting and production control gives them?
I am sure that my comment will be looked at as horrible and wanting to harm people, but for the past several decades we have created lifestyles that are very dependant on "cheap" everything. People bought bigger houses farther away from their jobs and now have no choice but to commute significant distances each way. People have homes that are very large and must pay to heat, cool, and upkeep them. I live in NYC (no car, small apt) and I DO undertand that not everyone wants that lifestyle. But I really think that, not only with the price of gasoline, but with everything, that we will all have to change the lifestyles that we lead. I see so many huge houses in the suburbs that have no trees and bake in the sun all day. Just the cost of the AC for the summer must be outrageous. Similar with heating and upkeep on the lawn, etc. I really think that as a result of the financial crisis we will start to see that these things need to change. Sure, no one wants to have 3 children in a two bedroom apartment, but when I see families with 2 children and 5 bedrooms, 4 bathrooms, living room, great room, study, office, etc. I just think that this is entirely unsustainable. And it is nothing personal toward anyone, it is just something that has happened over the years because things were cheap.
Not only were things cheap but we were sold by Detroit and Big Oil on the dream of life in the suburbs. And I for one bought into it. I have a little house a long way from work. But for the same money that I could have bought a home within a few miles of work and my daughter could have gone to a school that has a reputation for Drugs and Violence. But I agree with the basic premise of your argument.
Let us also remember that it was GM that bought up streetcar lines early in the last century so a personal car was not only a goal but a necessity. Along with Big Oil they also helped cripple our rail system. On a side note, just how many bike paths do we need?
We are indeed spoiled, we like big powerful person cars. But if you drive a small fuel efficient car on an interstate you come to realize just how big a Tractor Trailer really is and are quite scared by the sheer volume of them on the road.
One other thing to remember is that there used to be good paying jobs in ‘The Neighborhood’ and that is just not the case anymore. There are only so many employers that pay a real living wage and quite frankly many of them are in less desirable parts of town.
No, I don’t have a solution to this complex problem.
It was GM, Standard Oil and Goodyear plus, I believe, DuPont, who colluded with the government--from Federal down to City, Like LA--to rip up the light rail and street car lines and have the public pay for the interstate freeway system for all those new cars powered by oil (not ethanol as Henry Ford had planned) to run on.
At least when the railroad robber barons put in their system they actually bought the land and laid the track! These guys were more clever by 10! They got us to pay for the roads with our tax dollars and then buy their cars and gas too!
They made a movie, "China Town" about the great Los Angeles Owens Valley water and real estate rip off. But the only movie I've seen that touched on the GM/Standard Oil conspiracy was "Roger Rabbit." I don't have any easy answers, either, but that sure shows how seriously we take the problem.
Fact is, while credit was made available our personal income was stagnant. Someone thought of the credit availability so we would not notice that Europeans have a better lifestyle. Trying to feel guilty of bettering oneself over our parents, which is a natural progression. However, I believe we
are now going backwards.
We are going backwards and have been since wages began to stagnate in the 70's. Our dollar is worth pennies, and inflation has taken the rest.
You should rent a car and drive out interstate 80 from NYC some time on a Sunday. It's nothing but tractor trailers, running on gasoline, to feed the city for miles and miles and miles.
"Then the housing market began to crater with all its financial impact." After years of unsustainable home value appreciations, driven by banks making 'no doc' loans to people who could never have afforded a home in the first place, the housing market was going to crash no matter what. Try going to a bank and asking them to grant a interview to answer the question why they were giving home loans to people who could not afford them?
Here in the L.A. area where home values have been crashing, while a large segment of the population continues to struggle to keep a roof over their head's and make ends meet, you can still see a abundance of glorified trucks, called SUV's with their Laker flags and custom wheels criss crossing across the Valleys, stuck in traffic hauling one person to work, averaging less than 15mpg.
When it comes to the environment and water conservation, Californian's, talk the talk, but can't walk the walk.
Is it a wonder Forbes rated L.A. as the most overpriced area to live in this country?
On a final note, in regards to water conservation, a large portion of the country is facing serious drought conditions which the establishment has basically ignored and is doing relatively little to address.
All the best.
http://measureofamerica
http://raulxgarcia.com
Up here in NorCal, we are looking at water rationing--While the city council of the largest city nearby plans another 20,000 home be added over the next five years! On top of that, we have no way to deal with the sewage we already have, and the roads are at a standstill while local government cries bankruptcy. As usual, the developers will pay off the right people, build their houses and move on with their money, leaving behind a bigger mess than before.
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