Oil Speculators & Gas Prices: Is Feature, Not Bug?

I’ve already written plenty about the dishonesty of “Drill Here, Drill Now, Pay Less” (for a rundown, check here.) That’s a nice little bumper-sticker slogan that caters to the low-information crowd who still believe in simplistic supply and demand models -- something we all know does not apply so easily to oil and gasoline. Frankly, I don’t see that message getting much traction outside Fox News; American consumers are a little more sophisticated than that.

One thing I haven’t talked about too much though is the influence of Wall Street speculators on our gas prices. In that regard I found a recent interview with Ed Wallace on NPR’s “Here & Now” quite interesting. The interview built on his column of April 19, but then went into what interviewer Robin Young dubbed “provocative” territory. If you get a chance, give it a listen, it’s only around 15 minutes long.

I found his theory fascinating. He says that banks and investment houses need to make up for the money they lost in the mortgage meltdown, so they're gambling it on oil futures instead of loaning it to small businesses and consumers. This is sending the price of oil soaring.

In the radio piece (around the 11:00 mark) he specifically blamed the Federal Reserve’s policy of loaning money to the nation’s banks at virtually zero interest. The idea was, banks would send that cheap money back out into the economy in the form of small business loans, consumer loans, and the like. But as anyone knows, banks are not giving loans these days. They’re being downright stingy in that department, actually. Wallace says it’s because they’re trying to get a bigger return on their investment by speculating in commodity futures like oil. The banks are making tons of money but they aren’t sharing the wealth with the rest of us; in fact, they’re costing us, because this speculative activity has sent gas and food prices soaring.

And while President Obama is calling for an investigation into such practices, Wallace thinks it’s all so much Kabuki theater. Indeed, the "provocative" thing is, he thinks this situation is a feature, not a bug. I’ve transcribed part of the interview Robin Young conducted here:

RY: But why can’t it be exposed?

EW: Because I think they have to keep it this way. And this ... now let me speculate on my own story. The housing crisis is not over yet. They say that somewhere between 13% and 15% of all homes in America are now sitting vacant. Not all of them have been sold. The Wall Street Journal -- what was it, last September? -- did a story, said at our current sales rate for used homes in America, it’s going to take 9 years to clear off the backlog of these homes off the bank’s books and actually get them sold. That means they haven’t taken the losses, Robin. So how do you get the banks into a position where they make so much money they can slowly work out of this mess?

RY: You give them oil!

EW: You give them so much money at virtually no interest they can make money in commodities, food, oil, whatever. And these huge profits you’re piling up are actually gonna go to probably handle the losses that are still coming our way and will come our way for years to come.

RY: So it sounds like you’re saying that the government needs to keep this inflated oil market there because that’s how banks, investment houses, whoever these speculators are, can sort of offset their losses in homes.

EW: I think that’s as logical a theory, and I’m not saying that’s absolute, but why else would the government let it happen when the government’s the one that knows exactly why it’s happening, they’ve studied it. And yet they do nothing?

Why indeed!

It’s certainly a complicated issue, and while a few of Wallace’s ideas seem shaky -- who is to say the sales rate of homes will stay at its current rate, for example? -- I do think he’s onto something here.

Unfortunately, Americans can be intellectually lazy. Rather than exercise the gray matter on such intricacies as the global commodities markets and real estate inventory, they’ll jump on board the more simplistic “demand is up so gas prices are up” tale Grand Old Petroleum is selling. And any attempt to pressure the Fed to change its policy and prevent such gambling by banks in the Wall Street casino will be viewed as unpatriotic, Socialism, Fascism, tinkering with the free hand of the market, class warfare, punishing the rich, etc. etc. etc. I mean, we've seen this movie before, haven't we? Instead we'll get more oil leases off the coast of Viriginia and in the Gulf of Mexico, which won't do a damn thing because the oil companies are already sitting on more untapped, unused leases than they know what to do with. And gas prices will go up, and on and on. Lather, rinse, repeat.

C'est la guerre!

[UPDATE]: I just realized I contradicted myself when I said the "drill here drill now" slogan wasn't getting much traction outside of Fox News audiences, and then concluded that Americans are intellectually lazy. I guess what I meant is that while I believe most Americans understand the price of gas and the price of oil are complicated issues affected by more than just how many oil platforms are in the Gulf of Mexico, they aren't necessarily researching this stuff on their own to find out all the many ways prices are manipulated. It's too easy to grab onto whatever message the media is peddling today and buying into certain assumptions, such as "demand is high!" Um, well, no, actually, it's not. The media also likes to conveniently blame China and forget about the role of refineries which have cut capacity, something Wallace goes into in his April 19 column.

So, as always ... 'tis complicated.

[UPDATE] 2:

That was fast. Gosh I hate it when I’m right. I said we'd get more oil leases off the coast of Viriginia and in the Gulf of Mexico and that's exactly what our clueless House of Representatives has authorized.

I'm not worried about this. As I've said before, the oil companies have more leases than they know what to do with. The problem is not oil leases. They already know where all the oil is, the problem is pulling it out of the ground (or, in this case, the seabed.) There will be windfarms off the coast of Virginia long before there are oil platforms.

But if Congress wants to do something to lower gas prices, they're barking up the wrong tree. And perhaps, as Wallace suggests, that's all part of the Kabuki theater. They want to give the appearance of taking action, all the while knowing that what they're doing won't affect anything at all. Because they want this oil speculation to continue.

I dunno, it's a theory ... but a damn good one.

Gas Prices: Historical Perspective

(Note: I've updated this post to use a better chart going back 6 years and also showing the price of crude oil).

Some folks on the intertubes are wondering why people aren’t blaming President Obama for rising gas prices the way they did President Bush. I’m not entirely sure that’s true, but perhaps the reason there isn’t more outrage about rising gas prices is because, well, we’ve been here before:



Note gas prices have actually been more stable during Obama's term, and have yet to reach some of the peak prices that they did under Bush (and note the chart only goes back to 2005). Now, I’m not giving Obama the credit for this -- the sucky economy and drop in manufacturing has done more to reduce demand than anything else, hence the more stable gas prices (note gas prices took a nosedive along with the economic crash at the end of Bush's term). But there it is.

Gas prices are a lot like that metaphor about the frog in the boiling pan of water: throw a frog in boiling water and he'll jump out; slowly warm the water to boiling with him in it, and you're eating boiled frog legs for dinner. I remember being so outraged when gas exceeded $2 a gallon for the first time! Now it's like, "Meh. Been there, done that."

There’s a lot of misunderstanding about what affects gas prices, oil prices, etc. People tend to think of gasoline in terms of simple “supply-and-demand” economics but this is only partially true ... in addition to which, Newt Gingrich-types pushing “drill here, drill now, pay less” talking points tend to conveniently overlook a key component of the supply cycle, which is the refineries. Oil companies have been getting out of the refining business for years because the profit margins have shrunk.

Every time gas prices tick upwards Sitemeter tells me people are furiously Googling “why are gas prices going up?” For that answer, read my previous posts here (2009), here (May 2009 again) and here (2010). They all pretty much say the same thing: gasoline is not just a supply and demand business. The price of oil and gasoline is affected by a lot of things -- world events, the value of the dollar, refinery capacity, and yes, demand such as summer travel.

So here’s an actual conversation that was had recently between a liberal and a conservative about gas prices. The liberal mentioned that refineries are cutting capacity to maintain high prices. The conservative said that the U.S. government should build its own refineries if the private ones refused to refine enough to keep prices low.

Chew on that one for a second. Apparently nationalizing certain industries is fine with conservatives as long as it keeps gas prices low. I mean, I just wanted to bust out laughing when I heard that one. Actually, I did.

Anyway, I’ve long been of the belief that we need gas prices to be as high as they are in, say, Europe. Why the hell not? Using less oil and gasoline is in our national interest. It keeps us out of hostile regions of the world, is better for our health and environment, can spur domestic job growth as we manufacture the infrastructure necessary to transition to the new energy economy.

Want to piss off a Yemeni terrorist? Conserve energy. Ride the bus. Support solar and wind energy. Get off the oil tit.

And don’t tell me we can’t, I’m sick of hearing this shit. America was able to completely transition its industrial and manufacturing base away from civilian goods to armaments and war materiel to take on World War II. We can do this.

Why Are Gas Prices Dropping?

Yet more evidence that Newt Gingrich’s “Drill Here, Drill Now, Pay Less” campaign is bullshit: we’re two months into a six-month ban on deepwater oil drilling and gas prices are tumbling:

CAMARILLO, Calif. -- The average price of regular gasoline in the United States has dropped more than 11 cents over a three-week period to $2.72.

Not possible! We were told that unless we drill for oil offshore, we’d be paying $4 and $5 a gallon! Instead, gas prices have been dropping since the oil spill started:

WASHINGTON (MarketWatch) -- U.S. consumer prices decreased in May for the second straight month as gasoline prices fell, the Labor Department reported Thursday.

And no, I'm not suggesting that the oil spill is responsible for lower gas prices. That's just stupid.

So why are gas prices dropping like a rock, despite a ban on offshore deep water drilling? Here’s an idea:

Analysts say a sluggish start to the summer vacation season has increased gas inventories, and serious economic problems in Spain, Portugal and Greece have helped lower prices as the dollar rose in value against other currencies.

The price drops, which began May 7 when the financial crisis in Europe worsened, have reversed a trend in early 2010 that had seen gasoline prices rising considerably higher than the previous year.

Hmm. So apparently the price of gasoline is more affected by world events and the global financial market than how many rigs are drilling off the coast of Mississippi.

Interestingly, the story goes on to say that hurricanes in the Gulf of Mexico could disrupt drilling operations and cause prices to go back up. That is an excellent reminder to us all that there is, in fact, offshore oil drilling going on in the Gulf of Mexico right now, as I type this. Republicans and even a few Democrats keep telling us that unless the deepwater moratorium is lifted, it will be an economic disaster for states already crippled by the oil spill, like Louisiana. Which ignores the fact that the oil industry is still chugging along down there.

So talk about platforms, specialized equipment and even the workforce leaving the Gulf of Mexico strikes me as unnecessary fearmongering. There’s still drilling going on, just not in water deeper than 500 feet. In fact, only 33 deep water rigs have stopped operations: so little that we haven’t even felt it at the pump. Gas prices are actually going down.

So quit yer whining. If there’s some deep-well engineering firm that’s going to have to leave the Gulf of Mexico because they are out of work for six months, see ya. Go pollute the waters off of Norway or Brazil (if you can). Take your trashy, polluting, risky, unsafe industry somewhere else. I’m not going to have a sad. I’d rather have some shrimp to throw on the barbecue and you guys screwed that up for us for good.

Sending An Energy Message

I'm trying really hard to get upset about the Obama Administration’s announcement that it would open up coastal areas to oil exploration. Obviously I think it’s a terrible idea, for all of the usual reasons. But I just don't think this plan is serious. Maybe I'm in denial.

Most media folks seem to have bought the “we need to drill here drill now pay less” line the Administration is selling. From the New York Times:

The proposal is intended to reduce dependence on oil imports, generate revenue from the sale of offshore leases and help win political support for comprehensive energy and climate legislation.

Let me be the first to call bullshit on that line of thinking. No, that’s not what the proposal is intended to do because it so clearly won’t do any of that. For one thing, oil companies are sitting on more offshore oil leases than they know what to do with. So don’t expect to see any oil platforms off the coast of Virginia any time soon; indeed, there will be windmills off the coast of Rhode Island long before Virginians need to worry about ExxonMobil drilling off their beaches. Aw heck, Virginians will see coastal wind farms long before they see oil platforms.

No one ever mentions this but that oil is too expensive to even think about pulling out of the ground until oil surpasses $100/barrel. That is, in fact, why it’s still there. For another, gas has been so cheap that the oil companies have been and continue to cut back on refinery production. I first wrote about the cut in refinery production to maximize profits last year; now, these cuts look to be permanent:

Energy companies are suffering huge losses from refining because of slumping gasoline use – a product of the economic downturn and changing consumer habits and preferences. Energy experts say refining cutbacks have already begun and will accelerate as corporations strive for profits.

Major refiners have been circumspect about their plans, saying they are considering options that could include closing refineries, selling parts of their operations, laying off workers or slashing spending.

“Refineries will have to be closed,” said Fadel Gheit, senior energy analyst with Oppenheimer & Co. “Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable.”

Apparently the nation’s appetite for gasoline and diesel have peaked. Cutting refinery capacity pretty much ensures that trend will continue, because it’s keeping prices high.

Meanwhile, gasoline is one of those commodities where what you pay at the pump is affected by more than just traditional supply-and-demand mechanisms. Speculation is rampant in the oil markets, unrest in the Middle East affects prices (though most of our oil imports come from Canada)--even hurricanes in the Gulf have caused gas prices to soar.

Opening up more offshore oil leases doesn't change any of that, and everyone knows it. I happen to think it's just more Kabuki Theater. While my in-box floods with alarming pleas for action (and donations) from MoveOn, Repower America, Firedog Lake, etc. about this oil drilling thing, I just can’t believe anyone thinks this is serious.

Most media outlets have suggested that the President’s drilling plan is also an effort to woo Republicans on cap-and-trade. Let me again call bullshit: Republicans have made clear they plan to sit on their hands until the midterm elections, and I don’t think Obama or his advisors are so dumb as to think opening the coast to oil platforms will change partisan politics in Washington.

No, I think this whole thing was planned to send a message to our “friends” in the Middle East, Venezuela, at OPEC, etc. I think we're putting the world on notice that America won't be pushed around from an energy perspective. It's an energy declaration of independence, if you will.

Consider: while everyone was busy haranguing about the new healthcare law (heads up, folks! It’s not a bill anymore!) and its aftermath, the National Highway Traffic Safety Administration and EPA have quietly implemented new vehicle fuel and admissions standards.

Such a thing has been long, long overdue. The new standards, summarized here, take into account new technology, like electric vehicles:

The most intriguing part of the whole thing? Fuel efficiency isn't king--it's all about greenhouse gas reductions. This is probably the EPA's attempt at preparing for a future where most vehicles aren't just juiced up by gasoline. Carmakers shouldn't necessarily get off scot-free if their EVs are ultimately powered by coal-fired electricity plants, after all.

That’s certainly ingenious, and casts a far wider net than previous government fuel efficiency standards ever did. Coupled with the offshore oil announcement, the message this sends is that a) we are serious about conservation, and b) we can, will and are finding our own oil supplies, which we will tap if needed.

Of course, all of this comes as oil prices are rising, but note:

So far, though, consumption of gasoline, diesel fuel, heating oil and jet fuel remains sluggish and markets are well supplied. The biggest sign of strength is from manufacturers using growing amounts of crude to restart the nation's factories.

How cool would it be if our nation’s factories were able to reboot using energy-saving technologies and conservation mechanisms, enabling us to recover the billions of dollars we throw away each year on energy waste? Our manufacturing sector needs to get on board -- and it is.

One of the hopiest-changeiest things I've seen in the past few years is the surge in renewable energy development. The economy is transitioning away from fossil fuels, not because the government is making us do it or because we're facing an apocalyptic Mad-Max-style future without "the juice" or because people drank Al Gore's Kool-Aid but because it makes economic sense. It's where the money is. Eight years of Bush-Cheney and their oil minions couldn't stop this train because the reality is that it is too expensive not to move away from the dead energy source that fueled our previous economic growth.

The future is green, not black. Everyone knows it, certainly our corporate overlords know it, and Newt Gingrich and Koch Industries stamping their widdew feet won't change it. This is positive news, excellent news, because it means we aren't doomed after all, and it means things like opening the Atlantic coast to offshore oil exploration when nobody seems to want or need the oil leases is just so much political theater.

So Much For The Free Hand Of The Market

All of you people hitting the Google to find out “why are gas prices going up again,” I have a very simple answer:

BECAUSE THE INDUSTRY IS GREEDY!

I’ve said this, oh, like a hundred thousand times before, but those old rules about supply and demand simply do not apply to oil and gasoline. So Newt Gingrich’s “Drill Here, Drill Now, Pay Less” campaign of last summer (remember that?) was and is a lie.

I know, I'm sounding like a broken record. I just think you can't say it often enough, especially when Republicans are trying to pull the ol' switcheroo where their good buddies Big Oil are concerned.

Remember back in 2003 when fears of a supply disruption caused by the invasion of Iraq prompted gas prices to "skyrocket” all the way up to $1.60/gallon? Good times, good times.

Now, however, gas prices are jumping not because there’s too little supply, but too much:

Pitfield said refineries are charging retail gas stations more for wholesale gasoline because "the refineries aren't making money. They're not making money right now. We're awash in supply, in fuel. But they're not producing it to the degree that they would normally be, as at previous demand. And demand for fuel is probably off 20 percent to 25 percent across the board, worldwide, if not more. And I don't see a great reason for that to be coming back up anytime soon."

That is, except for a relatively small increase in demand, this year, between Memorial Day and Labor Day, he said.

Let the record reflect that gas prices have continued to rise in advance of Memorial Day Weekend this year.

Under "normal" laws of supply and demand, when demand is lower, prices should be lower.

"Prices should be lower," Pitfield said. "Prices will continue to go higher."

In short, refineries have decided to refine less to keep gasoline prices high so they can make more money. Well, fuck you very much. Basically, gasoline consumers can’t win for losing; when demand goes up, so do prices. And when demand goes down, prices go up anyway.

Hmmm, seems like the system is rigged.

Now that President Obama has raised automobile fuel efficiency standards, one wonders what impact this will have on gas consumers. Funny you should ask:

11Alive: "If we'll be using less gasoline because we'll all be driving higher-mileage cars, are the refineries going to kick up the prices because we're using less?"

Pitfield: "Oh, absolutely. I mean, that's basic economics."

The new basic economics of supply and demand.

It’s always good news for the oil companies.

Speaking of, last year ExxonMobil sold 2,220 gas stations, saying they weren’t profitable, even with gas at $4 a gallon. A friend of mine who works for Mapco calls gasoline a "loss leader" -- they make their money off of beer and cigarettes.

WTF?

It’s amazing that we’re all paying through the nose yet nobody is making any money.

Why Are Gas Prices Going Up AGAIN, V.2

Once again, oil prices are falling, yet gas prices are going up.

What gives?

One more time with feeling, people: drilling here, drilling now has not in the past and will not now affect what you pay at the pump.

I have written about this a lot, most recently back in February, when refiners cut back on production in response to decreased demand, which lowered gas prices so much the refiners felt it in their own pockets.

Back then USA Today reported:

Beset by weak consumer demand and losses on gasoline sales, oil refiners have scaled back production since late December. The average utilization rate at U.S. refineries was 81.5% as of Feb. 6, the lowest in 17 years, not including hurricane-related slowdowns, according to the Energy Information Administration. As recently as early December, refineries were running at 87.4% of capacity.

Here, via the AAA Fuel Gauge Report, is what gas and crude oil prices were doing in December:

Note when gas prices hit rock bottom: yep, that would be December.

I don’t know what the profit margin is on a refinery, but clearly the refiners have become accustomed to a certain level of dough rolling in. Thus they responded by cutting back on refining the crude, at a time when crude oil was relatively cheap (compared to recent history, at least).

None of this has anything to do with drilling for oil off the coast of the United States or in an Alaskan wildlife refuge. The oil companies already have more domestic leases than they know what to do with, because with oil priced below $60 per barrel, it’s not profitable to pull that stuff out of the ground. There’s a reason this stuff hasn’t been tapped before, and it has nothing to do with tree-hugging environmentalists.

Rising gas prices do, however, provide the perfect opportunity for people in Washington to score political points and try to sway low-information voters who think gasoline is a commodity like corn or pork bellies. And yes, I do mean the usual suspects:

Republicans believe that rising gas prices are their trump card against a Democratic-sponsored climate change bill.

The GOP is struggling to regain footing after two successive electoral blowouts, but party leaders are relishing an opportunity to debate what they call a “national energy tax.”

The Democrats’ plan of moving a cap-and-trade bill this summer plays into GOP hands because as the cost of gasoline spikes, so does the public’s awareness of energy prices, Republican leadership aides say.

Rep. Adam Putnam (R-Fla.), the former House GOP conference chairman, said that the cost of gas is not likely to hit last summer’s national high of $4 a gallon, but he noted that oil prices have been creeping up recently.

Putnam said most Americans want to increase oil production, not restrict consumption, adding, “At some point, gas prices become a very potent political weapon again.”

I don’t know about that. I think all of this yanking consumers around by the gas nozzle fosters anger and ill will toward oil companies. It makes me want to send a big “fuck you” to Exxon and Chevron and find another way of getting around town.

And yes, I did buy a used bicycle a couple weeks ago.

Here's a handy reference tool to keep bookmarked for the coming debate. Next time you hear a politician tell us we need to "drill here, drill now," follow the oil money.

Why Are Gas Prices Going Up Again?

Oil prices are falling, demand is down, and gas prices are still going back up. What gives?

Blame the refiners, not the fact that we aren’t “drilling here, drilling now,” says USA Today:

A big reason for the disparity: refiners. Beset by weak consumer demand and losses on gasoline sales, oil refiners have scaled back production since late December. The average utilization rate at U.S. refineries was 81.5% as of Feb. 6, the lowest in 17 years, not including hurricane-related slowdowns, according to the Energy Information Administration. As recently as early December, refineries were running at 87.4% of capacity.

Refineries typically shut some units for maintenance this time of year. But many are trimming output because demand is anemic. That tends to rile consumers who view low gas prices as a small silver lining in a dismal economy. But go easy on the poor refiner, analysts say.

"If you're losing money on something and you're producing at 90%, you're going to cut back," says OPIS chief oil analyst Tom Kloza.

"If there's no demand, … there's really not a whole lot of point to making extra gasoline," says Bill Day, spokesman for Valero, the largest independent U.S. refiner.

And as oil prices drop, the poor, beleaguered refineries will increase their profit margin by earning more on every gallon they do refine. Nice.

Of course, if there’s no demand, it doesn’t make any sense to drill any more oil that won’t get refined, either. And if oil prices keep dropping, it doesn’t make sense to drill in some of these off-shore areas where it’s so much more expensive to drill.

I’ve written dozens of blog posts about how lowering demand lowers gas prices more immediately than ridiculous ideas like opening up ANWR to oil drilling. But “Drill Here, Drill Now” was all an election year ploy anyway, designed to rally the base, raise money and grab headlines. It was completely dishonest, since the oil companies are already sitting on gazillions of oil leases they have no intention of tapping. It was dishonest, everyone knew it was dishonest, except for the morons who slapped “Drill Here, Drill Now” stickers on their SUV bumpers. You know who you are.

Anyway, now that demand has dropped to the point where refineries are cutting back on production, perhaps we’ve reached a kind of steady-state at $2/gallon. Refineries certainly don't have an interest in seeing that price drop or they'd up their capacity.

The Stupid Vortex

Yesterday I got behind a Cadillac Escalade with a McCain-Palin sticker and one of those “Drill Here, Drill Now, Pay Less” bumper stickers. The Cadillac Escalade gets 12/19 mpg.

Today I got behind a BMW X5 with a “Drill Here, Drill Now, Pay Less” bumper sticker. The BMW X5 gets 15/21 mpg.

You people are both assholes. Yes, you know who you are. You’re the eeedjuts who bought Newt Gingrich’s bullshit suckup to the bloated oil industry. Aaron Tippin is the asshole who wrote the theme song. All three of you make me laugh.

When I see those bumper stickers and hear that song, all I can think is: you folks are morons. Listen, I don’t feel sorry for anyone who can’t afford to fill up their Cadillac Escalade. Don’t drive it, then. Get a clue.

Here’s another clue: this week I filled up at $2.02/gal. On Sept. 29 I purchased gasoline for $3.89. So gas prices have dropped $1.90 in eight weeks. Did we drill here, drill now in the past eight weeks? No we did not. And yet, we are paying less.

Wow. Imagine that.

Why? Because demand fell.

Here’s another clue: with the price of oil dropping like a rock, oil companies will not “drill here, drill now” now matter how many bumper stickers you plaster on your SUV. Why? Because the oil that is left in America is too expensive to pull out of the ground (or ocean) at $56/barrel.

And then of course we have the greatest clue of all: drilling here, drilling now does not mean you will pay less, because oil is a global commodity traded on the global market. We do not have a nationalized oil industry in this country, which means ExxonMobil, Chevron and everyone else who drills here is free to sell it wherever they like. Chances are that will be China.

Suck it up, assholes.

Newt Gingrich knows this. He’s not a stupid man. And yet, he will push this fraudulent campaign on uninformed Americans who think drilling “our” oil makes sense, because they think it’s like making widgets or something.


And now we have the latest news most Americans won’t read from OPEC:

Nov. 14 (Bloomberg) -- OPEC, supplier of more than 40 percent of the world's oil, will probably announce plans to lower supply for the third time in as many months to prevent prices plunging toward $50 a barrel, a Bloomberg survey showed.

Hilarious! So, no matter how much we drill here, now, whenever, wherever, it won’t impact the price at all because OPEC, which controls 40% of the global oil supply, will cut production to keep prices high.

This stuff isn’t rocket science, but it does require you to pay a little bit of attention, people. And that doesn’t mean watching only Fox News: it means consuming a wide variety of news from a variety of places.

I have no patience for teh stooopid.

Remind Me: Why Do We Want To Drill There?

Gas stations in Nashville are still dry. My cousin, who lives in Houston, had this to report yesterday:

Gasoline? Well, that’s another story.  A lot of the stations are still closed because they don’t have electricity to pump gas; those that are open have  folks in long lines with short tempers and little patience.   Having to go through all of this stuff locally makes one think what it would be like if there was a national disaster.  (God forbid.)

Indeed it does.

In fact, this reminds me an awful lot of 1973. I was just a kid back then, too young to drive, but old enough to remember the long lines at gas stations, the gas rationing, the “vehicles with odd-numbered license plates can purchase gas Mondays, Wednesdays and Fridays, even-numbered plates get Tuesdays, Thursdays, Saturdays.” Good times, good times. You’d think we’d have learned our lesson then, but noooo!!!

So now we have the same GOP morons singing “drill here, drill now!” Really? You think we can drill our way out of this mess? And in the hurricane-prone Gulf of Mexico, too?

Recent events show how insanely precarious it is to locate our energy security in this region. Hurricane Ike, like Katrina before it, has wrecked havoc on regional oil and gas supplies:

Hurricane Ike destroys 49 oil platforms in Gulf

WASHINGTON (AP) — At least 49 offshore oil platforms, all with production of less than 1,000 barrels a day, were destroyed by Hurricane Ike as it raced across the Gulf of Mexico, and some may not be rebuilt, the Interior Department said Thursday.

It said in the latest hurricane damage assessment that the platforms altogether accounted for 13,000 barrels of oil and 84 million cubic feet of natural gas a day.

That doesn’t sound so bad until you read the rest of the story:

The agency also said five gas transmission pipeline systems sustained damage, although the extent of damage is not yet known. It earlier had reported four oil drilling rigs had been destroyed and another damaged.

Meanwhile, the Energy Department reported that as of midafternoon Thursday, 12 of 31 refineries in Texas and Louisiana, with a total production capacity of 3 million barrels a day, remained shut down as a result of the hurricane that swept through the region on Sept. 13. A number of the others are operating at reduced runs.

[...]
About 93 percent of the Gulf's crude oil production remains shut down as does 77.6 percent of its natural gas production, said the Minerals Management Service.

The Energy Department said 10 of 39 natural gas processing facilities also were still closed as a result of the Hurricane Ike and Hurricane Gustav which hit two weeks earlier, giving the Gulf's energy infrastructure a glancing blow.

The Gulf region accounts for 25 percent of the country's domestic oil production, or about 1.3 million barrels a day, and 15 percent of its natural gas supplies, or about 7 billion cubic feet of gas a day.

Wow. So a region of the country responsible for 25% of our domestic oil production is vulnerable to storms. And hey, as we saw with Hurricanes Gustav and Hannah, the mere threat of a storm is enough to send gas prices hopping.

And this is the foundation of our so-called energy security/national security? Geeez. At least when dealing with unfriendly Middle Eastern regimes we can always, you know, send the U.S. military in to keep the oil flowing (ooops I mean spread democracy, gosh what was I thinking?) The National Guard is pretty powerless against the whims of weather and other “acts of God.” Talk about a faith-based policy.

The fact that Republicans fillibustered the energy bill last December is just further proof that they are in the pockets of Bil Oil. This has nothing to do with energy security and everything to do with giving more breaks to Big Oil, using high gas prices as a way of manipulating public opinion.

The American people may be singing “drill here drill now” today, but they will be singing the blues tomorrow. That’s not “our” oil. It’s ExxonMobil’s oil. It’s Shell’s oil. We do not have a nationalized oil industry in this country (unlike most of the rest of the world, I might add.) There is no assurance that oil pulled out of the Gulf of Mexico or off the coast of California or out of the Alaskan Wildlife Refuge will end up in U.S. automobiles. It’s all sold on the world market and it’s just as likely to end up in the car of someone living in Beijing.

So if you want to rape American land and waters to ensure the continued economic dominance of 1.3 billion Chinese, more power to you. Doesn’t exactly sound like a winning plan to me.

Nothing against the Chinese, of course. Just don't try to portray this as some kind of "patriotic duty" because it's not. It's more pandering to multinational corporations, and the American people are the chumps who swallow the lies every single time.

Alternately, you can start conserving NOW. You can start transitioning to alternative fuels NOW (we can’t sell our solar power to the Chinese). We can start rethinking how we live NOW. We should have started doing this back in 1973. If we had I guarantee you we would not be in the position we’re in today.

True energy security and national security means never having to say I’m sorry to a multinational oil conglomerate like ExxonMobil.

(As for the photo above, it's an oil slick surrounding a pumpjack September 14, 2008 in High Island, Texas. The photorapher is Smiley N. Pool/AFP/Getty Images).

What A Difference 2 Months Makes

Back in June I wrote about gas hitting hit $3.98/gallon.

Today I filled up at that same station for $3.59/gallon. The sad thing is, I feel like I’m getting a bargain.

Mission accomplished, indeed.

Still Dropping

According to AAA’s Fuel Gauge Report, gas prices are still dropping. The national average for regular unleaded is $3.77, down from a high of $4.11 a month ago. However, locally I’ve seen prices at $3.67 around town.

This reminds me that back in April when gas prices started climbing into the stratosphere, local conservative yakker Steve Gill said it was the Democrats’ fault.

Well, bless his heart.

So, now that gas prices are falling, do Democrats get the credit? Since they were in charge back in May when Congress voted to stop adding to the Strategic Petroleum Reserve, over Republicans’ objections?

Estimates of the impact of suspending the deposits varied. Some economists predicted the impact would be negligible, while Speaker Nancy Pelosi, citing others who have studied the issue, said prices could drop 5 to 24 cents a gallon.

But Representative Joe L. Barton of Texas, the senior Republican on the Energy and Commerce Committee, said the measure was meaningless. “If all the members of the House would go out onto the steps and clap our hands three times and say, ‘Down prices, down prices,’ that would have as much impact as passing this bill,” he said.

Heh. But gas prices are dropping. No new oil wells have been drilled. ANWAR is still a wildlife refuge.

So suck on it Congressman Barton. And you can take Rep. Michelle Bachman with you, since she thinks ANWAR is the “most perfect place on earth” to drill for oil.

Maybe she needs to check out the Middle East?

22 Days & Counting

[UPDATE]:

And still more news:

Oil sinks more than $4 as dollar rallies

NEW YORK (CNNMoney.com) -- Oil prices tumbled Friday as the dollar rallied strongly against slumping foreign currencies and concerns about a Turkish supply disruption were eased.

Light, sweet crude for September delivery lost $4.03 to $115.99 a barrel in electronic trading on the New York Mercantile Exchange.

Wow. From "a record high of $147.27 hit set July 11" to today. Tell me, which new oil fields opened up in the past month? Which oil platforms in the Gulf of Mexico were built in the past four weeks? How many wildlife refuges were opened to drilling?

All of which proves the point that offshore oil drilling and opening ANWAR won't do a damn thing to lower gas and oil prices here at home. Conservation and controlling rampant speculation will.

--------------------------------------------------------

Gas prices still dropping like a rock:

Gas prices fall: 22 days and counting

The national average price for a gallon of gas slips to $3.836. Only 10 states are above $4 a gallon.

NEW YORK (CNNMoney.com) -- Retail gasoline prices fell, on average, more than a penny overnight, extending declines for the 22nd straight day, a survey of gas station credit card swipes showed Friday.

The national average price for a gallon of regular gas fell to $3.836 from $3.849 the previous day. That's down nearly 7% from the record high of $4.114 that gas prices hit on July 16.

Gas prices have eased substantially in recent weeks amid signs that global demand for petroleum products is slowing.

Isn’t that amazing. Who could have anticipated ...?

Here in Nashville I saw $3.69 at a Pilot station earlier this week. That’s a 40-cent drop from the high of $4.09/gallon back in July. Funny none of the stories about that Republican kabuki theater on offshore oil drilling bothers to mention that.

Hey! Rep. Roy Blunt! Yeah, I’m talking to you! Guess we didn’t have to lift that offshore drilling ban after all!

And Yet, Gas Prices Are Dropping

Amid all the discussion about energy policy in the last few days, one fact has been overlooked by virtually every single media outlet save CNN: Gas prices are dropping.

Today’s AAA Fuel Gauge Report puts the national average at $3.86/gallon for regular. Three weeks ago it was $4.11/gallon. That’s a 25-cent drop in just three weeks.

What happened? Did we open ANWAR to drilling? Build some new oil platforms in the Gulf of Mexico? Have we drilled one new well or built one new refinery in the past three weeks?

No.

How can that be! To listen to Big Oil’s supporters, the only way we can lower gas prices is to drill more at home. You know, this kinda pokes a hole in Newt Gingrich’s ”Drill Here, Drill Now, Pay Less” balloon. Because we’re paying less and we haven’t drilled one new drop.

Amazing.

Bob Herbert put his finger on it in yesterday’s column:

In addition to the obvious need for more fuel-efficient vehicles, we should be demanding more efficiencies from utilities across the country; we should be requiring (as Senator Schumer has been pointing out) that states revamp their commercial and building codes; and we should be trying to weatherize homes from one coast to the other, including the homes of families without enough money to make such improvements themselves.

And, of course, there are the everyday good energy deeds that would help make a world of difference: car-pooling; taking public transportation when possible; using more efficient lighting; dropping the thermostat a couple of degrees; buying more efficient appliances; unplugging appliances that aren’t in use, and so on.

Prompted by high gas prices, Americans have already implemented these “everyday good energy deeds.” And it’s one of the main factors leading to this 25-cent drop in gas prices in just three weeks.

Look what we did without even trying, without even thinking about it. Imagine if we did think about it. Imagine if we decided to go after this “low hanging fruit in our economy”--the huge amounts of energy we’re just throwing away on a daily basis because of inefficient power plants, low-fuel economy automobiles, and the like.

No one is really talking about this, and there’s a reason. Salon.com tapped into it with last week’s excellent article, "Why we never need to build another polluting power plant”:

Suppose I paid you for every pound of pollution you generated and punished you for every pound you reduced. You would probably spend most of your time trying to figure out how to generate more pollution. And suppose that if you generated enough pollution, I had to pay you to build a new plant, no matter what the cost, and no matter how much cheaper it might be to not pollute in the first place.

Well, that's pretty much how we have run the U.S. electric grid for nearly a century. The more electricity a utility sells, the more money it makes. If it's able to boost electricity demand enough, the utility is allowed to build a new power plant with a guaranteed profit. The only way a typical utility can lose money is if demand drops. So the last thing most utilities want to do is seriously push strategies that save energy, strategies that do not pollute in the first place.

Bingo.

And The Money Keeps Rolling In From Every Side

It’s another new record for ExxonMobil: the world’s largest corporation has just reported second-quarter profits of $11.68 billion.

That’s profits. Not gross. Profits. That means the expenses are already subtracted out.

Did I mention this is for the second quarter only? Not the entire year?

Meanwhile, Shell Oil reports higher profits despite decreased production:

LONDON – Royal Dutch Shell, Europe's largest oil company, reported a 33 percent increase in second-quarter profit Thursday, helped by a higher oil price even as production declined.

Like smaller rival BP earlier this week, Shell profited from an oil price that almost doubled in the second quarter from the year earlier, but a 13 percent drop from a record on July 11 raised some concern among investors about whether oil companies can keep up the pace of earnings growth.

Your concern is noted.

BP said earlier a higher oil price started to affect consumer demand for its gasoline, which declined as much as 10 percent in the United States and Europe.

Shell's profit rose to $11.56 billion from $8.67 billion in the same period last year. BP reported a 28 percent increase in profit earlier this week, and Italian oil company Eni said Thursday that profit in the second quarter had risen 52 percent, citing a higher oil price.

Again, this is profit, not gross. Profit. In the billions. With a “b.” Just for the second quarter.

Looking at the gasoline front, some bloggers point out that a "surprise decline in the nation's gasoline stockpile” (reported by CNN), coupled with a U.S. gasoline demand that is “significantly lower than the same week a year ago,” means that oil companies have cut production to inflate prices.

Could it be that the oil companies have become accustomed to a certain lifestyle, so to speak? To certain record profits every quarter? As bloated as these profits may sound to us, when investors show "concern" when one record-breaking quarterly profit might not be quite as absurdly high as the last, it's reasonable to assume they will take appropriate action.

I read all of this as CNN touts their own poll claiming that most Americans favor off-shore oil drilling, though “Americans are divided over whether or not offshore drilling will have an immediate impact on high gas prices.”

Well, in that case, most Americans are grossly uneducated on this issue. If it were really as simple as supply and demand, then everyone would be in favor of the simple conservation measures that have been proven to lower gas prices immediately. After all, we're told lower demand is why gas prices dropped 20 cents a gallon two weeks ago.

Unfortunately, oil is a global commodity and the oil companies are global multinational corporations. It's not as easy as drilling off the coast of Florida or in the Alaska wilderness and all of our troubles disappear. What consumers in China and India do has as an impact on gas prices here in America too, and we have no control over that. In fact, anyone who is stupid enough to believe that increased oil drilling at home will do anything other than further inflate already obscene oil company profits is smoking something.

Oil companies don't give a crap about $4 gasoline in the U.S., except as it affects their bottom line. And when consumers start cutting back, ExxonMobil and Chevron, like their brethren at OPEC, turn off the spigot. They've gotten a taste of $149 barrel oil and they aren't backing down now.

So the American people can decide they want to trade tourism and fishing industries for the oil industry all they want. It isn't going to change the price of gasoline or heating oil or electricity rates at home.

The only thing that will accomplish that is getting off the oil tit. And if ExxonMobil and Chevron and the rest are too blinded by profits to read the writing on the wall and get on the new energy bandwagon, well, you can't say I didn't warn you.

How To Lower Gas Prices

This story at the Los Angeles Times tells us how:

Gasoline prices fall in California, U.S. as demand drops

By Ronald D. White, Los Angeles Times Staff Writer
July 22, 2008

Worries that Tropical Storm Dolly could become a hurricane that might threaten the Gulf of Mexico sent crude oil prices past $131 a barrel Monday after big losses last week.

Meanwhile, gasoline prices retreated nationally and in California, the Energy Department said. Analysts attributed the decline primarily to lower demand.

[...]

Last week, worries that a weakening economy would further slow demand sent oil down more than $16 a barrel, the biggest weekly decline ever in dollar terms.

At the nation's gas pumps, a gallon of self-serve regular dropped 4.9 cents to an average of $4.064, according to the Energy Department's weekly survey of filling stations. The U.S. average was $1.106 lower at this time last year.

Wow, isn’t that interesting. Decreased demand--something we can achieve through simple conservation measures like parking the Hummer in favor of a Prius, car pooling, public transportation, etc.--has lowered gas and oil prices.

And we didn’t have to drill one drop. Or build one new refinery.

Amazing.

Memory Holes

I just don’t get it.

It seems like just yesterday the media was telling us about how gas prices zoomed after Hurricanes Katrina and Rita because the storms disrupted oil production in the Gulf. It became part of the "conventional wisdom" of the day: hurricanes in the Gulf = higher gas prices. President Bush even released some oil from the Strategic Petroleum Reserve as a result.

Look, here’s one story from MSNBC:

Gas prices in cities across the United States soared by as much as 40 cents a gallon from Tuesday to Wednesday, a surge blamed on disruptions by Hurricane Katrina in Gulf of Mexico oil production.

[...]

Katrina knocked out about 95 percent of oil production in the Gulf -- a key supply point for the U.S. About a quarter of domestic oil comes from the region. The impact is being felt far from the Gulf.

Hey, here’s another story from CNN:

Rita could equal $5 gas

The timing and strength of the latest storm could cause worse spike at the pumps than Katrina did.

September 22, 2005: 9:32 AM EDT
By Chris Isidore, CNN/Money senior writer

NEW YORK (CNN/Money) - Remember when gas spiked to $3-plus a gallon after Hurricane Katrina? By this time next week, that could seem like the good old days.

Weather and energy experts say that as bad as Hurricane Katrina hit the nation's supply of gasoline, Hurricane Rita could be worse.

Katrina damage was focused on offshore oil platforms and ports. Now the greater risk is to oil-refinery capacity, especially if Rita slams into Houston, Galveston and Port Arthur, Texas.

"We could be looking at gasoline lines and $4 gas, maybe even $5 gas, if this thing does the worst it could do," said energy analyst Peter Beutel of Cameron Hanover. "This storm is in the wrong place. And it's absolutely at the wrong time," said Beutel.

Heh. Good ol’ days, indeed.

So why in the hell are people in the McCain campaign--including John McCain himself--saying that Gulf of Mexico oil production wasn’t affected by Katrina and Rita? And why in the hell aren't interviewers calling them on it?

Has everyone forgotten that the hurricanes were the big reason everyone was given for the last big spike in gas prices? Cripes, I haven't forgotten. It was just three years ago, for crying out loud.

Is everyone on crack or something? Don’t you people remember anything?!

Mission Accomplished!

I never thought I’d see the day ....

Meanwhile, look what your Republican Senators have done:

Republicans Block Extra Taxes On Oil Companies

WASHINGTON — Senate Republicans blocked a proposal Tuesday to tax the windfall profits of the largest oil companies, despite pleas by Democratic leaders to use the measure to address America's anger over $4 a gallon gasoline.

[...]

Separately, Democrats also failed to get Republican support for a proposal to extend tax breaks for wind, solar and other alternative energy development, and for the promotion of energy efficiency and conservation. The tax breaks have either expired or are scheduled to end this year.

[...]

The windfall profits bill would have imposed a 25 percent tax on profits over what would be determined "reasonable" when compared to profits several years ago. The oil companies could have avoided the tax if they invested the money in alternative energy projects or refinery expansion. It also would have rescinded oil company tax breaks — worth $17 billion over the next 10 years — with the revenue to be used for tax incentives to producers of wind, solar and other alternative energy sources as well as for energy conservation.

The legislation also would:

_Require traders to put up more collateral in the energy futures markets and open the way for federal regulation of traders who are based in the United States but use foreign trading platforms. The measures are designed to reduce market speculation.

_Make oil and gas price gouging a federal crime, with stiff penalties of up to $5 million during a presidentially declared energy emergency.

_Authorize the Justice Department to bring charges of price fixing against countries that belong to the OPEC oil cartel.

Way to go, GOP! Thanks for being so responsive to Americans in need. The wingnut welfare gravy train chugs on!

Sign Of The Times

Will GM kill its Hummer line?

Today, General Motors announced that it will be closing four truck and SUV plants in North America and may discontinue its Hummer line, citing the slumping sales of large vehicles brought on by high oil prices. Sales of the Hummer were down 61 percent last month, and May was also the first month in which cars outsold the Ford F-series truck since 1992. In place of the Hummer, GM CEO Rick Wagoner announced that the GM board has approved production of a new small automobile and a new electric car. As CBS reported, Wagoner “said the change in the U.S. market to smaller vehicles likely is permanent.”

No one could have anticipated this!

Two of the plants that GM is closing are foreign: one in Canada and one in Mexico. Production of the new automobiles will be U.S.-based, in a plant to open in Ohio in 2010. As long as GM lives up to its promises, this looks like good news all around.

Depends On What You Mean By Future

Meanwhile, in other fuel cost related news:

High gas prices prompt TN farmer to switch to mules

MCMINNVILLE, Tenn. - High gas prices have driven a Warren County farmer and his sons to hitch a tractor rake to a pair of mules to gather hay from their fields.

[...]

Brother Robert Raymond added, "It's the way of the future."

Okie dokie.

High Prices Suck

Creepy neocon/Iraq War booster and now World Bank head Robert Zoellick is calling for--I kid you not--a “New Deal” to ward off a global food crisis.

“A New Deal.” Heh. When Neocons start wishing for a “New Deal”-type plan, you’ve gotta be worried.

I'm all for a New Deal right here at home. From Wiki:

The New Deal was the title that President Franklin Delano Roosevelt gave to a sequence of programs and promises he initiated between 1933 and 1938 with the goal of giving relief for the people, reform of the society, and recovery to the people and economy of the United States during the Great Depression. Based on the assumption that the power of the federal government was needed to get the country out of depression, the first days of Roosevelt's administration saw the passage of banking reform laws, emergency relief programs, work relief programs, and agricultural programs. Later, a second New Deal was to evolve; it included union protection programs, the Social Security Act, and programs to aid tenant farmers and migrant workers. Thus, the "First New Deal" of 1933 aimed at short-term recovery programs for all groups in society, while the "Second New Deal" (1935–36) was a more radical redistribution of power.

We're headed for a bumpy road, folks. This New York Times piece today explained why rising oil prices haven't led to more production. High gas prices affect the cost of virtually everything else.

Here are some interesting statistics:

Regular gas was $1.27 a gallon in 2000. Now it's $3.46. Gold was $256 an ounce in 2001. Now it's $895.

Over the past two years, commodities prices have risen even faster: corn has jumped to $4.58 from $2.08; wheat has surged to $8.75 from $3.46; soybeans are up to $12.20 from $5.80. In the past 12 months, the average price of cheese has jumped to $1.83 from $1.38

I don't understand why the Federal Reserve continues to lower interest rates to deal with this issue. Lowering interest rates only makes things worse by devaluing the dollar, making the price of foreign made imports (*cough*cough*oil*cough*cough*) more expensive, which then makes everything else more expensive. It's a vicious cycle.

We could use a new deal right now, or at least, a better one.