Intro

Sorry for the length, but I didn't have time to write a short blog.

Friday, October 19, 2012

The Cost of Gassssssssss


Back last spring, the complaint arose that the cost of gas was going up.  It has been a complaint ever since the cost of gas has continued up.  Virtually every news show, where the topic was brought up put it quite simple.

Gas is a commodity.  Its price is dictated by demand and availability.  The government cannot control the cost of gas short of nationalizing the industry or putting limits on speculation in the market or releasing large amounts of the national reserve.  To state that the government does have anything to do with controlling gas prices is smoke and mirrors of campaign rhetoric, plain and simple.

Let's take a look at history. For the sake of argument, yes gas prices were lower when Obama took office.  We had also just hit the great recession and along with other prices, gas prices fell.  Before the fall, gas prices were in fact higher than  they are now.
You may notice in 2008 July the cost of gas national average was $4.35 cents per gallon before the crash.  Gas is currently $3.88 which is actually down from last week.  When Bush II took office gas was about $1.45.  So why didn't he control the cost of gas?  The same reason Obama didn't and the same reason any president couldn't.  They can't.  To review, it is controlled by demand, availability and speculation. Remember?  To make gas prices a political issue is like demanding the government control when flowers bloom. In fact during one of the highest periods of US drilling, gas spiked at its highest.  So much for "drill baby drill."

So what of that wondrous Pipeline....called Keystone.  It would have added  jobs in its construction. Why veto it then? It would not have made us more money or more available oil.   The Republicans had wanted to fast track it, but no one had any idea what it would do to the environment because the studies were not complete.  Several climate and environmental experts were worried the method of extraction could destabilize a number of delicate ecosystems increasing further the damage to world-wide environment.  There was also the 60 day ultimatum Republicans put on the administration.  So, following the recommendations of the Department of State, Obama vetoed the idea as "not in the national interest."  Finally, after the pipeline was built across private land, the US would not make any money from it use with the bulk of profits going back to Canada.  Job situation temporary, environmental impact significant, profitability zero.  Let's not also forget that if  the pipeline broke, we would have a BP level oil spill in the heartland of the US. Nuff said.

Then there is that pesky 14% of production on public or government lands.  Politifact has rated the argument as half true only because it was true last year.  In the years before, it is untrue. It was in fact up and still higher than the previous administration of Bush II.  "From 2004-08, well into Bush’s tenure, oil production on federal lands and waters fell in four of five years, for a net decrease of 16.8 percent.From 2009-11, the Obama years, oil production rose two of three years, for a net increase of 10.6 percent." (http://www.politifact.com/truth-o-meter/statements/2012/oct/16/mitt-romney/mitt-romney-says-oil-production-down-14-percent-ye/).  Why the fall? BP oil spill (you remember that) = moratorium on offshore (government land) production.

UPDATE
I want to remind you that this is about controlling gas prices and not about energy independence. That said--

A friend pointed out the if we increase production gas prices would go down.  Unfortunately that is not true. It would make us more energy independent which is a good thing, but it would not lower the price of gas.  In 2008 American Scientific asked experts about if production would decrease cost. According to Robert Kaufman an expert in world oil prices and Ian Nathan a research assistant for Energy Intelligence Group, production may reduce our dependency, but price will still be determined by world market. If a commodity goes up on this market, then we would not receive lower prices because all pay what the market will bear.  Add to this that demand is up around the world in places like China, gas will continue to go up. According to Phyllis Martin, an EIA analyst, significant increase in oil production would not have impact on oil prices even by 2030 (http://www.scientificamerican.com/article.cfm?id=can-offshore-drilling-make-us-independent).

It could  increase jobs, our oil independence and help the economy by export providing the owners were American.  We have already improved both our exporting of petroleum products and decreased our importing.  We have also increased  oil production.  According to the EIA, per thousand barrels, oil production was 1,857,32 in 2006 increasing to 2,065,172 in 2011 (http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_a.htm).

We do have many untapped resources, but the question is what are you willing to lose in possible environmental damage to obtain some of this oil. There is oil in the Atlantic that is untapped but was put off limits in the 1980's by Congress.  Oil Shale is also available but is expensive to process.  In natural gas, our most abundant resource there is also the process know as fracking and  the debate rages as to how safe it is, but I suspect the folks who can light their tap water on fire think it is probably unsafe if done badly, not that the oil industry has any record of cutting corners.

The gas discussion is exactly that gasssssssssssssssssssssssssssssssssssss.