Category: Energy & Gasoline Prices

Among the reasons some are arguing for more offshore drilling and drilling on wilderness lands, is it’s a bargain. This first reported here two years ago today:

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While the oil companies are recording record profits and oil-producing nations are awash in cash, the income from the oil and gas you own (if you are an American citizen) is up just 8% from 2001-2005. (About one-third of all the oil and gas produced in the U.S. comes from federal land.)

That’s eight percent at the same time the price of oil is up 90% and the price of natural gas up 30%.

Presumably production from federal lands is down 20% and that explains the small increase in income.

Sure.

According to a report at MSN Money, at $140 a barrel, two of our best friends, Iran and Saudi Arabia — just those two — could sell their oil reserves (403 billion barrels) for enough dollars to buy the entire United States of America.

Every three months the Federal Reserve estimates the value of our collective tangible assets, financial assets and liabilities to arrive at our net worth. It’s the whole enchilada — all our cars, our houses, our durable “stuff,” bank deposits, stocks, bonds and mutual funds. Everything. Then it subtracts all our mortgages, consumer credit and other debt to arrive at our net worth.

At the end of March, for instance, our collective net worth as a nation was $56 trillion, the second straight quarter it had dropped. Divide $56 trillion by the recent $140-a-barrel price of oil and you get 400 billion barrels of oil as the value of America . . .

When it comes to the cost of gasoline, who should we believe? Here are some nominees and their viewpoints:

1. The oil companies: It’s supply and demand at its most basic, just like your professor outlined in your freshman economics course.
2. The petro-toadies in Congress: All we have to do is open up the Arctic National Wildlife Refuge and the waters off Florida and California.
3. The Department of Energy: OPEC has to pump more, and we’ve got to allow more refineries by rolling back environmental restrictions.
4. King Abdullah: OPEC pumps plenty of crude but “despicable” oil-futures speculators in the West are driving up the prices due to their “selfishness.”
5. Senator John McCain: Exxon Mobil has done such a good job of demonstrating the magic of the marketplace that it deserves another $1.2 billion in tax breaks.
6. Senator Barack Obama: Impose a windfall-profits tax to remind American oil executives that price gouging can backfire politically.
7. About 90 percent of the print and TV reporters in America: See No. 1. It really is that ol’ devil supply and demand.
8. The White House: Never mind. Nobody’s home.

Howell Raines in an article critical of news media coverage of energy issues.

Or are you more fortunate? Here are the national averages from AAA for Sunday.

NewMexiKen paid $3.84 for regular the other day. I guess I’m below average.

It’s an all-too-common belief that if only we had authorized more domestic development of oil, our gasoline prices would be lower.

Even though we are the proverbial 8,000 pound gorilla, consuming about one-quarter of the world’s energy, oil prices are not all about us. The increasing consumption of countries in Asia, South America, Russia, and the Middle East have more than made up for the slight declines in petroleum consumption we have experienced this year. Global consumption is expected to increase another 1 mbpd this year, even as consumption declines in the U.S.

The fact is that oil is a globally traded commodity. Since the U.S. imports two-thirds of the oil it consumes, the price of domestic oil will always maintain parity with global prices. Therefore, no matter how much we drill up the remaining resources, it will not significantly change the price of fuel.

With the global supply and demand balance as tight as it is for oil, natural gas, and coal, it is highly unlikely that a slight increase in U.S. production could make any noticeable difference in our gasoline prices.

From a lengthy piece about “peak oil” at The Oil Drum by Chris Nelder, author of Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century.

Another interesting point: Many oil fields are depleting; that is, their production is decreasing. Any new oil fields must make up this decrease before there is a net gain. Currently net growth of production is 1% a year. Demand is up 1.5% a year. Do the math.

“I’ve been an oil man all my life, but this is one emergency we can’t drill our way out of.”

T. Boone Pickens

So, to recap, a program designed to lower fuel prices so that rich people can continue to drive at discount prices wherever they damned well please in huge, mobile living rooms is raising the price of food so high that poor people can no longer afford to eat. The effect of that program is demonstrated in a report, but the report is not published because the powers-that-be would rather let poor people continue to starve than embarrass the leading proponent of the program.

And here we are: we’d rather starve poor people than give up our big cars. Remind me again about what a good country the United States is.

Functional Ambivalent

There’s more.

“A record 1.6 million barrels a day in U.S. refined petroleum products were exported during the first four months of this year, up 33 percent from 1.2 million barrels a day over the same period in 2007. Shipments this February topped 1.8 million barrels a day for the first time during any month, according to final numbers from the Energy Department.” (Forbes)

Put another way, we are exporting more than twice as much oil now as we could expect the Arctic National Wildlife Refuge to produce when it came online in 15-20 years.

Exporting.

More than twice as much.

As you may have heard, oil prices have reached a new high above $140. I can already hear the outcry against speculators and their out-of-control games to enrich themselves at our expense.

Never mind that speculators have been caught shortselling oil (ie betting on a fall in prices) more than a few times in recent months. Never mind that spot oil prices, which require actual physical deliveries of oil at the end of each month, have behaved the same way as paper futures. Never mind that oil storage seems to not be increasing.

Nope, it is just too convenient, too irresistible and, let’s say it, too comfortable an excuse that speculators are to blame. It’s not our fault, we have our scapegoat. Our price increases are temporary, we’ll soon be back to “normal” lower prices, as soon as (take your pick) speculators have been punished/oil companies are taxed for their profiteering/”fundamentals” are left to set prices.

This is just denial

There are A LOT of good reasons why oil prices are going up. Let me show you just a few.

The Oil Drum runs down the reasons they believe $140 oil is real.

Whether they are correct on every point or not, this is a particularly good primer for informing your opinion.

The price of crude oil was up 4% today.

That is crude. Rude too. And socially unacceptable.

Mr. Terrazas, a 48-year-old maintenance worker, is among a flow of American “gas tourists” who, Mexican service stations near the border with El Paso estimate, account for a 50 percent surge in gasoline sales here over the last several months. (Similar increases are reported along the border all the way to Tijuana.) Even the Mexico Tourism Board is promoting the journey.

The New York Times

$2.66 a gallon in Juarez. NewMexiKen paid $3.75 a gallon at Costco in Albuquerque Tuesday. Nationwide the average price for a gallon of regular is $4.07.

Remember this?

Ten days later, same Chevron station in Orange County, California:

Bet customers wish they were getting their 18.4¢ tax rebate.

Belief: Driving close behind a truck improves gas mileage because the truck cuts your wind resistance.

Reality: True, but it’s also dangerous.

Belief: Gasoline stations near freeway exits charge higher prices.

Reality: Generally true.

Belief: You get more for your money if you fill up when it’s cold because gasoline is denser at low temperatures.

Reality: Not really. Any difference would be insignificant and besides, most pumps correct for temperature.

Belief: Turning off the air conditioning saves gas.

Reality: True, but if you then roll down the windows, the increased wind resistance may eat up any savings.

Belief: Gas prices go up on the weekend, so fill up during the week.

Reality: Generally false.

Bottleneck Blog | Los Angeles Times

Emily, official younger daughter of NewMexiKen, is on a business trip to southern California and sent this along just now.

According to AAA, today is the first day regular gasoline averaged $4 in the U.S.A. Good job Bushie.

Just a little math.

Nearly 60% of the price of a gallon of gas is the cost of oil. (The percentage has been increasing.) At $138.54 a barrel (today’s closing price) the cost of crude is $3.30 a gallon (138.54 divided by 42 gallons per barrel).

Even if the price of oil gets to be two-thirds of the cost of gasoline, that still means $5 gas is very near.

Tom Friedman last week:

I was visiting my local Toyota dealer in Bethesda, Md., last week to trade in one hybrid car for another. There is now a two-month wait to buy a Prius, which gets close to 50 miles per gallon. The dealer told me I was lucky. My hybrid was going up in value every day, so I didn’t have to worry about waiting a while for my new car. But if it were not a hybrid, he said, he would deduct each day $200 from the trade-in price for every $1-a-barrel increase in the OPEC price of crude oil. When I saw the rows and rows of unsold S.U.V.’s parked in his lot, I understood why.

Crude oil was up $9 $10.75 a barrel today, so your SUV just lost $1800 $2150 in trade-in value.

The average U.S gallon of regular was $3.98-something yesterday and the price of crude oil jumped 5% today to $134 6.5% today to $136.60 8% today to $138.54 a barrel.

I know I’ve been stocking up. It isn’t safe to re-use plastic bottles for water, but I’ve been filling them with gasoline and storing them on a shelf in the garage. I must have 30 or 40 gallons out there by now. I’m prepared.

Here’s a list of current average prices. I see Albuquerque is among the lowest in the U.S. (I paid just $3.71⁹ earlier this week.)

 

Photo from The New York Times.

Of course, if you can afford to live in La Jolla, the price of gasoline is not likely to be much of a concern for you.

(That absurd 9/10ths of a cent still hanging in there.)

Update: AAA says the AVERAGE price of a gallon of regular gasoline nationwide went up 4.4 cents since yesterday. I want my 18.4¢ tax rebate! (Gas has gone up TWICE the amount of the tax since McCain and Clinton first proposed suspending the tax last month.)