Oil! Republican dependency on fantasy

Rep. Chip Cravaack, R-MN8, claims to be an independent voice for his constituents but he seems to be sticking to the ALEC and Koch brothers line.  ALEC is American Legislative Exchange Council that is an organization of big businesses to write laws in their interests rather than the public interest.

One is his recent republishing in his newsletter of his op-ed article in the Duluth News Tribune, "Reducing regulations, expanding U.S. drilling will lower gas prices".  He also republished it on his Congressional web site!  See http://cravaack.house.gov/in-the-news/reducing-regulations-expanding-us-drilling-will-lower-gas-prices/.  Hm, I'm supposed to give exclusive rights to the News Tribune for my submissions, and so I do not re-post my submissions on my blog.

Back to the subject.

As to be expected in election year, the opposition gets all the blame for any problems.  Cravaack blames Obama for high gas prices, but he ignores the high gas prices during Bush's terms.  In both cases, there are many more factors contributing to gas prices.

How about the wars in Iraq and Afghanistan?  Not only do these create uncertainty in energy markets, they add enormously to the demand for fuel.  Wouldn't it be grand if all those humvees, fighter jets, and drones could run on the hot air coming out of Congress?

How about the cost of drilling?  As the easily accessible oil is depleted, it cost lots more to get the remainder.  And these costs will go up as the oil becomes even less accessible.  Right now it costs $60 a barrel to extract gulf oil (see "Two dollars a gallon gasoline?  No way!").  But will world markets price oil only a little bit above that?  I doubt it.

Reducing regulations won't really change the price of oil; it might if Congress mandated that no oil could be imported or exported.  Do you think the large oil companies would go for that?  Right now, gasoline is being EXPORTED from the U.S.  Oil and gasoline are world commodities.  If somebody in India, say, is willing to pay $3.28 per gallon (today's NYMEX price, not including shipping) to import a tanker of gasoline, do you think any U.S. gasoline refiner is going to charge less in the United States?

Cravaack points out how the U.S. investment in Solyndra and Fisker automotive went sour.  How many energy investments have done well?  He is silent on oil depletion allowances and other tax breaks the oil industry gets.  He is silent on the huge investment in nuclear energy research made by the U.S. Government.  He is silent on the cost of nuclear waste, most of which will be borne by the U.S. Government.  He is silent on the loan guarantees that have gone to nuclear power plants.  He is silent on the huge cost in health and other externalities of burning fossil fuel.

He faults the secretary of energy, Steven Chu, when asked if his goal was to lower gas prices, he said, “No, the overall goal is to decrease our dependency on oil.”  Does Cravaack live in a bubble?  How many wars are we going to fight to ensure access to oil?  How much are we going to go into debt to finance these wars?  How many people are going to die for "lower gas prices"?  If we can reduce our dependency on oil faster than India or China can, we will be at a huge economic and foreign policy advantage.

Where's the praise for Obama on gas prices?

Here in Duluth, gas prices have been falling bit by bit from near four dollars last spring. Today I've seen $3.39/gallon. So, if President Obama was blamed by some for the high prices, where is the praise for the lower prices? See "Bachmann: I'll bring back $2 gas", Charles Riley, CNN Money, 2011-08-18

Actually, there are many factors outside the President's control for prices of anything. Would we want it otherwise? If the President could have such control over our economy, wouldn't we be getting into a dictatorship?

One of those factors is where fuel is sold, and I don't' mean within the U.S. According to today's Star Tribune, fuel prices might be lower if diesel oil and gasoline weren't exported to other countries.
"Fuel exports hit record, keeping gas prices high", Ronald D. White, Los Angeles Times, 2011-11-12.  See either http://www.startribune.com/business/133720623.html or http://www.latimes.com/business/la-fi-fuel-exports-20111112,0,7229614.story

Where's Michele Bachmann now on these exports? My searches on her name, fuel exports, and November dates didn't find anything obviously her opinion on these exports. However, her web site seems to be only drill, drill without any considerations of the consequences and without any mention that some fuel is exported.

Is Obama "lowering" the summer gas prices?

Many have been blaming President Obama for the rise in gas prices.  Analysts are predicting that gas prices will be dropping over the summer.  Will those blaming Obama for a rise in gas prices praise him for lowering gas prices?  I doubt that they will.  Is Obama responsible for the rise or fall of gas prices?  The President is only one of many actors in events with many causes.

For a more nuanced look at the rise and fall of gas prices, see "Gas prices expected to drop 50 cents by summer", Chris Kahn, Associated Press, 2011-05-08 through Yahoo! Finance.

For comparisons of gas prices, see "The World in Gas Prices: From 10 cents to 10 Dollars a Gallon", The Atlantic, 2011-05-03, via Yahoo! Finance.

Why gas prices go up faster than down

How often have you heard the complaint that gas prices go up faster than when they go down?  Especially after the latest pipeline break in Illinois.

Consider how wholesale gas or any high turnover products are purchased. 

Merchants pay for product with some of today's receipts.  In order to buy more product tomorrow, they need to raise prices PDQ.

Conversely, when prices go down they want to make up for some of the smaller margins they had as prices went up and to provide some protection against prices going up again.

If the rate of prices going up matched the rate of prices coming down, we would probably be very upset when our favorite station ran out of gas.