Oil

Gasoline PumpAnyone not under a rock can’t help but notice the price of oil having skyrocketed.  $4.00 per gallon prices may seem like a lot, and indeed they are compared to what they were, and so President Bush has decided to wage a war to attempt to get domestic production up.  That means drilling off the shores of Florida and California and in the ANWR National Reserve in Alaska.

It’s a smooth political move.  He figures now that prices are high he can play this card.  However, many economists would disagree that this would do a thing to bring down the cost of oil.  First of all, many believe that speculators are stepping in and buying up oil and storing it, thus driving up demand.  These guys have a lot of money and might well be able to absorb any increased supply.  The proof is what happened when Saudi Arabia announced that it would increase oil production by 200,000 barrels per day.  Prices went up.  The fact is that the Commodity Futures Trading Commission has been asleep at the wheel.  These people are responsible for keeping speculators in check, and where they fail, we could sink speculators hard by selling lots futures from the Strategic Petrolium Reserve.  That would really stick it to them.

But even if prices had gone down, the increased retrieval of oil doesn’t translate into the increased production of gasoline, as we are driving our refineries to capacity.  Building new refineries in the United States is as popular as drilling, because it is a messy business with serious environmental consequences.  You can trust me on this: I come from New Jersey, home of toxic waste.

Fortunately the President’s efforts (and by extension those of Senator McCain) to spoil our shores and Alaska are transparent.  Unfortunately, our energy dependence problem will not go away any time soon.

In case you’re wondering, yes I am insulated just a bit by the oil increases.  A small fraction of those increases have come from the weakened dollar.  However, the dollar has stablized but oil prices have not.  The way I am more insulated than I was in California is that I now have a commute from upstairs to downstairs instead of a 120 mile round trip commute.  This is better than a Prius, but sometimes lack of colleague contact is a problem.

But our house is heated with oil, and many of the products we use require energy to create.

One thought on “Oil”

  1. I am not sure if I agree with your argument that prices may be driven up if we tap into our domestic supply. I have always been under the impression that the real reason we have not done much domestic drilling is that it wasn’t cost effective. Up until this point, it has always been cheaper to import oil. Now that prices of crude are nearing $140 a barrel, it just may be looking far more economically viable. From a business perspective, adding domestic oil to the mix will eventually slow or level off rising APEC prices.

    If this scenario happened four to six years ago, the tree-huggers of the world would be in trouble. The timing of this political stunt isn’t in Bush’s favor. Right now, many Americans are tuning into the Green Movement and, voting for political change. I doubt Bush will get his way with this bill. And, if by some slim chance he does, there is such a powerful momentum for change building in our country, the environmentalists will have a new audience listening to their concerns–the mainstream population.

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