Monday, May 21, 2007

Gas prices at all time high

It's official. Gas prices are at an all-time high, not only in real dollars but also when adjusted for inflation. And they are likely to go higher during the summer, maybe even approaching (or in some places breaking) four dollars per gallon.

Just keep in mind that on the day that George W. Bush was inaugurated the average gas price was $1.39 nationally (and I remember buying gas in 1998-- less than a decade ago-- for less than a dollar per gallon.)

Also, note that crude oil futures are trading right now is around $65 per barrel, but gasoline costs more than it did a year ago when crude oil was pushing $80 per barrel. So the price of the product is less, but they are selling it to us for much more.

There are many reasons for this, and not all of them have anything to do with George Bush. But there is an underlying theme.

1. The reason one that defenders of Big Oil will tell you is that the problem is not a shortage of crude oil, but a shortage of refined products. They will tell you that there has not been a new refinery built in the United States in thirty years. That is true, in fact. They will then blame environmentalists. That is false. As I pointed out almost two years ago in the post this is what happens when you get government out of the regulatory business,

The answer is found in internal memos from Mobil, Texaco, and Chevron from several years ago which all say essentially the same thing. The thing they propose is, to intentionally limit the number of refineries in order to drive up gas prices and then, when it happens, to blame environmentalists.

And it's all right there in their own memos.
Note that the links to pdf copies of the memos themselves are in the original article.

So the oil companies have already been caught red-handed on this one, in which they colluded to prevent the construction of refineries and then blamed environmentalists. And the sad thing is, that you will still hear environmentalists being blamed (and the truth is, the construction of new refineries would probably benefit the environment because they would likely include technology that would help them to be more efficient and cleaner than the old refineries.)

2. The second reason that they will cite is the gas tax. However, Federal gasoline taxes have not gone up in years. So this is a red herring, designed to make people angry with the Federal government and demand another tax cut instead of looking at where the real fault lies.

3. The third reason cited is likely to be increased demand. And it is true that demand has continued to rise with the population. However, it didn't have to be that way. There have been significant advances in fuel technology, including carburators that get fifty miles per gallon or more. These are in routine use in other countries. But when Congress tried to increase CAFE standards, it was opposed by the oil companies and the auto manufacturers as an 'imposition on consumer choice.' Well, aside from the fact that some choices are just bad, how is it an imposition on my choices to not increase fuel efficiency by a few mpg per gallon? I can still choose from among any makes and models they put on the floor. They'll just be better than what they'd have made otherwise (and the irony is, all those SUV's they've been geared up for, is resulting in the 'choices' of laying off tens of thousands of workers as American auto makers lurch towards bankruptcy while foreign auto manufacturers earn record profits.)

Another aspect to this is mass transit. Communities who build or expand mass transit options often see a boom in their local economies coinciding with the opening of these systems. But you'll always see it as a battle over whether to build it in the first place (in metro Phoenix they are now building light rail--- at about 13 times the cost it would have been had they built in 1990 when voters bought into propaganda put out by rabid anti-tax groups and voted it down; So now people are paying far more in taxes to build it today than they would have then.)

They will also suggest that drilling in ANWR or offshore in sensitive regions of the continental shelf will solve the demand problem by increasing the supply. The problem with this analysis is that they will hope that you have forgotten about the refinery argument by now; Remember there has not been a new refinery built in 30 years? If we drill in ANWR, there will be no refinery on the west coast to handle it. So where will it go? Asia, JUST LIKE MOST OF THE OIL FROM THE ORIGINAL ALASKA PIPELINE once they discovered after its construction that west coast refineries couldn't handle the higher sulfur content of Alaskan crude (did they really 'not know' that when they built the pipeline?) Drilling in ANWR or off the coasts won't do a thing about bringing down the price of oil in America, it will only give the oil companies more to sell in foreign markets.

And alternative energy sources? The Carter energy plan provided for research on it with the goal of making America energy independent by the turn of the century. And then Reagan dismantled the plan.

But all of this is beside the biggest reason why oil prices are so high. They won't say it, but it is George Bush's failed conquest of Iraq. Just in case you actually don't think the war was about oil (remember he thought it was essential to invade Iraq over alleged WMD at the same that North Korea came right out and said they had WMD), just remember the day that Baghdad fell-- April 10, 2003. U.S. troops were dispatched to defend one, only one and exactly one government ministry-- the Oil Ministry. Never mind that we let looters burn and loot all the rest of them (including, among other things, documents on any WMD's there may or may not have been, documents on Saddam's organization, information on war crimes and political victims, information on al-Qaeda and other terror groups, information on various middle eastern governments, likely including all that was learned about Saddam's arch-enemy, Iran-- all burnt in what Dick Cheney excused as 'blowing off steam' because we sent the troops to guard the Oil Ministry instead and make darn sure we had all their geological survey maps. And as long as it looked like U.S. Oil companies would have primary access to the world's third largest supply of oil (along with refineries and whatever else they would need) the price of gasoline stayed at a reasonable level. But then Iraq started to go sour and the price of gasoline started rising precipitously. True that we also had Katrina and Rita, which damaged and/or shut down a significant amount of refinery capacity, but that was a temporary spike-- all of those refineries have been repaired or restarted by now. But it is clear that even if U.S. forces get something that will allow the Bush administration to claim their elusive 'victory' in Iraq, it will still not represent the vision that they had before the war-- a vision that included pretty much complete free reign by the American petroleum industry over the exploitation of Iraqi oil assets.

So while the official costs of the war have all been borrowed (so you won't have to worry about paying for it until some future administration), it is not true that you aren't paying the price for it now. You will, next time you fill up at the gas station.

1 comment:

Anonymous said...

Dad i am mad at youn for blogging on my b-day but i deffently agree with you.