A Diatribe on the Almighty Gallon
Everyone thinks they know why gasoline prices are so high. You hear all kinds of arguments mostly of the conspiratorial nature that are inspired predominately by the emotions or by big liberal media. They go something like this: It’s Bush’s fault. Or it’s the war in Iraq or it’s the rich fat cats in the oil industry or it’s greed or speculators. Even if all the conspiracies theories were true at best they would only amount to pennies. I would like to talk about the dollars that go into the price of the almighty gallon.
Since 1984 I have been developing and maintaining the system that controls the single largest source of oil for our country, the Trans Alaska Pipeline. In 1988 oil peaked at 2.1 million barrels per day (bpd). As I sit here today on June 14, 2008, 20 years later I see on my computer screen we are running at 720,000 bpd, roughly 1/3 of the 1988 thru put. Now, let me tell you why the production has declined here and why it is a microcosm of what is happening all over the country, not just in oil but in the entire energy sector.
For 28 years now Congress has opposed any drilling in Alaska’s ANWR area where it is conservatively estimated may contain more than 12 billion barrels of oil but for one year in 1995 when both houses approved drilling but was vetoed by President Clinton. One of the opposition’s main arguments was that it would take 10 years to bring that oil online. It is really more like 5 or 6 years but using their own argument we could have been pumping more than an additional 1 million bpd as of 2005. Incidentally, they are still using the same argument today.
For 32 years now Congress has opposed any effort to reform environmental regulations resulting in not one single new refinery built. We are now importing gasoline, not just oil when we run production deficits. These same environmental regulations prevent the building of new nuclear power plants that could take some of the burden off oil production.
More recently our current Congress defeated new efforts to lift the offshore drilling ban in deep continental shelf regions where conservative estimates of 44 billion barrels of oil reside. However, it is somehow OK for China, Cuba and Venezuela to drill there and they are. And Canada is drilling under the waters of the Great Lakes, the same water our companies are banned from. Congress has again recently defeated a bill to drill in ANWR. Does it not tell you something that President Bush feels he has a better chance of asking the Saudis to increase production than he does our own congress?
According to the American Petroleum Institute world oil production now stands at 85 million bpd. Demand is currently running 86.4 million bpd. So, currently we are experiencing a 1.4 million bpd shortfall. Remember the 1 million bpd thru put from ANWR? That alone almost closes the gap.
Saudi Arabia was once considered the only producer in the world that could ramp up production on a moment’s notice. It now cannot currently add more than about a half million bpd to the daily production on short notice. Consequently what we have is a supply/demand squeeze that is not likely to end anytime soon unless the world economy slows down. But there is no actual shortage of oil in this country and no shortage of technology to get it, only a shortage of brains in Washington. This country alone could be sitting on as much as 80 billion barrels of easily recoverable oil counting ANWR, the coastal areas, the outer continental shelf, the great lakes region and various other sources of the banned variety and a huge harder to get Rocky Mountain oil shale reserve estimated at 1.5 trillion (not a misprint) barrels. At current consumption levels, that is enough to power the nation for over 200 years with NO imports. We could have more than 5 times the reserves of Saudi Arabia if you include the oil shale deposits. And with 27% of the world’s coal we are the Saudi Arabia of coal. We now have the technology to produce a synthetic coal carbon liquid fuel that could power the nation for generations.
Recently, congressional grandstanders again called up the nation’s oil execs to testify to their committees. But when you consider that Exxon, the largest domestic oil producer only controls 2% of the daily world production, Congress clearly either doesn’t know what they are doing or they do what they do for nefarious reasons. You have also probably heard them complain about the record profits. Here are some recent profit margins according to Yahoo Finance in %: Exxon 10.85, Bank of America 21.03, Google 24.89, and how about one of the greens, First Solar 31.54. There are literally hundreds of companies with higher margins than Exxon’s. Also consider that in 2007 Exxon made 40 billion dollars in profits, but paid 105 billion dollars in taxes, not untypical within the industry. Who do you think really pays those taxes? The dirty little secret is corporations do not pay taxes. They must remain profitable to stay in business; consequently the taxes are passed on to the consumer. Always! When you consider the embedded tax along with the per gallon tax imposed by the federal and state governments, well over half the price you pay for that gallon (these are the $s I was talking about) goes to government greed. Consider then the imagery problem the government would have if you changed the $4.00/gallon Exxon sign to the true majority shareholder, the US Treasury. As we speak Exxon is trying to correct the congressional imposed public relations problems by announcing that they are getting out of the retail gasoline business because it is unprofitable and not worth the hassle. What does this tell you?
Congress is now considering a bill that will put more pressure on oil prices disguised as what they call the windfall profits tax (think government greed). We tried that in the Jimmy Carter years. Do you’all remember how that turned out? And their most insidious proposal is to regulate who and how much trading on the open market can be done, thereby thinning the market. Any amateur investor knows a thin market is a more volatile market. This will also have the result of pushing investors overseas thereby deleveraging and diluting our influence on the world market even more. And now just hot off the wire, congress just passed a new law forbidding the establishment of regulations for leasing the aforementioned oil shale lands.
Nancy Pelosi promised to deliver lower gasoline prices when she and her comrades took over in 2006. In her own words in April 2006 she said “Democrats have a commonsense plan to help bring down skyrocketing gas prices by cracking down on price gouging, rolling back the billions of dollars in taxpayer subsidies, tax breaks and royalty relief given to big oil and gas companies, and increasing production of alternative fuels.” When the democrats were restored to power in January 2006 gasoline prices were averaging $2.25/gal. How well do you think their plan is working? I’ll tell you how. It is working very well, i.e. to drive up prices. We’ve seen this play before in health care. Drive up the prices via government intervention and regulations so that they can come back and take over thru some kind of fascist social government program.
If you get your news from the alphabet channels you will get their 3 Cs of negativity - Criticisms, Complaints and Condemnation and will know little of what I write, here. It is incumbent upon us all to find out the facts and not succumb to intellectual laziness. Who stands to gain the most from the high prices (think power first before money)? Do you think it might be those who are blaming President Bush? Is it political (think rich environmentalists - not oil execs)? Who in Congress is carrying their water (think Democrats)?
I believe the long-term strategy by the radical environmentalists and the libdems is to drive up the price of energy so that they can come back with some form of government takeover (think Hugo Chavez). Then they could dictate to us when and how much in quantity and $s each of us could purchase. Oh, I’m sorry we’ve already tried that too, remember, also in the Carter years? How did that work out? But we unfortunately have now nominated for president one of the few Republicans who also appears to be in the tank for the greenies, so I am not optimistic. And now the greens will use the Global Warming hoax as a new hammer to further their goals. Consider now that the greenies do not like oil, coal, hydro or natural gas. They like solar, geothermal and wind only if it’s NIMBY (Not In My Back Yard). Most of them support biofuels at the expense of higher food prices (think ethanol, the latest liberal debacle). Do you think we can power the nation with that? And again using their own argument how long do you think it will take to realize their dream of 100% alternative energy? It better be less than 10 years, lest they be hypocrites. I fear we will wake up some day in the near future and reminisce about the good old days when gasoline was only $4/gal.
I believe we need to hold these people accountable and I believe they WILL be held accountable some day. I just hope it happens before they wreck our economy and then our nation.
Jack DuBose Rio Frio, TX |
