What’s With All This Drilling Fever?

I’ve been quite happy with the decline in crude oil prices lately for a number of reasons.  My first hope is that reductions in energy costs will be good for the economy.  All kinds of things should be less expensive.  My second hope is that it will get the nuts off of this idea that we can drill our way to happiness.  I’ve seen a lot of Republican furor that we need to drill in Alaska, drill offshore, drill under my mother’s house, drill drill DRILL!! 

So, it’s been bashed into our heads that supply and demand are the key factors here.  That a lack of supply and concern over future supply has pushed the cost of crude up, which in turn has pushed the cost of gasoline up.  I got to thinking about this and the only answer I could formulate was BULLSHIT!  The cause is collusion and price fixing.

Let’s start with the supply and demand issue.  From a complete layman’s perspective, without any hard quantitative data to back it up, I’ve been told that supply concerns are easing.  A number of factors, including conservation (spurred by high costs), higher inventories, dodging hurricanes in the Gulf of Mexico, and OPEC’s continued production levels have made crude oil a worse bet for investors.  So, the price of crude has come down.  Currently, it’s hovering around $104 a barrel.  That’s quite a slide from its highs around $150.  So, if we follow the laws of simple economics, the cost of gasoline should have slid from about $4.00 a gallon to somewhere in the neighborhood of $2.65.  

Now before you go saying that I’m insane, by looking up some national averages on the Interwebs I’ve found that in April of this year, crude oil was running around $104.  The national average for gas at that time was about $2.65.  So I pose the question, why is the cost of gas at my local station $3.69??  I have a quick answer, greed.

The oil companies have been saying for years that the key is refining capability.  So, when they had record profits did they start building any additional refineries?  No, they did not.  The oil companies have started to tell me that the issue is supply and they need to drill in new places.  Why on Earth would I believe they would spend the money to go find the oil, bring it out of the ground, ship it to refineries, and then sell it to me?  It seems, using their logic, that this would increase costs.  Costs that they would, of course, pass along to the consumer.

So I keep hearing about how Sarah Palin stood up to the oil companies but I also hear her shrill voice screaming “drill, drill, drill.”  If she and the McCain camp really wanted to stand up to the oil companies, why not encourage them (through a series of incentives and dis-incentives) to explore new forms of cheap, clean, and plentiful energy?  Wouldn’t that really be standing up to them?

I’m not saying that Obama has put forth a plan that I find to be the end-all-be-all solution, but I’m getting sick and tired of hearing how Sarah Palin is the fucking second coming.  Not only does Sarah Palin hate freedom she doesn’t get energy policy either.  

If drilling and increased supply were the answer, then reduced crude costs would equal gas well under $3.00 a gallon. It’s time that the Democrats, the news media, hell the Republicans tell the American people this. Big oil is destroying our economy and instead of being outraged, too many people have drilling fever.


5 responses to “What’s With All This Drilling Fever?

  1. So you’re saying that gas & oil prices can not be a simple result of supply & demand – the first thing you learn in Econ 101 (maybe you weren’t bashed hard enough) – that that theory is bullshit, and instead it is 100% on account of an international conspiracy? Sure, it’s a dirty, dirty business, but any endeavor making that kind of money – it’s gonna have a dark side. As usual, the truth is somewhere in the middle.

    Regardless of what you paid to fill up this week, supply concerns are not only NOT easing, they NEVER really will be. This is a planet with finite resources that we are depleting at an alarming rate. Yeah, there’s more for now, but most analysts have said that we basically know where all the oil left on this planet is, and that every active well has less in the ground then they have already removed from it. Soon our dependance on oil, foreign or domestic, will be a thing of the past – just like the dinosaurs whose guts made it, and like the oil we just can’t quit.

    The ever-increasing amounts the US has been using for 50+ years will soon be overshadowed by the amounts China & India will be using in the next decade. Even if the supply could increase, it would not be able to keep up with the kind of demand created when all the Chinese own cars.

    The Oil companies LIKE to “spend the money to go find the oil, bring it out of the ground, ship it to refineries, and then sell it”, uh, ’cause that’s their business and how they make 100+ Billion dollar profits. Do you have any idea what it costs to build those huge rigs and then ship them out to sea to drill in 2000 ft. deep ocean? (a couple hundred mil.) but there are 4000 active platforms in the Gulf of Mexico alone.

    Palin is talking about drilling in places you can DRIVE to. ANWR is 1.5 million acres of land set aside within a 19.6 million acre wilderness refuge in the topmost portion of Alaska, it is a flat plain covered by ice and snow 9+ months out of the year, which Congressional Bill 10-02 SET ASIDE for “oil & gas exploration” in 1980. It IS exciting to know we could just go up there and get it and mitigate our foreign dependance, at least for the short-term. Not only does Palin “get” the energy policy, she’s credited with brokering the biggest pipeline deal in our countries history.

    The phrase they actually used at the RNC is Drill Baby Drill, and I am pretty sure the oil companies plan to do it until it’s Gone Baby Gone. Eventually, we will drill everywhere there is oil; hopefully, we create a sustainable, commercially viable, energy source before we do so. As of tonight, however, I believe the $300 million prize to invent a plug-in car is yet to be claimed.

  2. What I’m saying is that the oil companies claim that the cost of crude goes up because inventories are low (not the total WW supply) and that has a direct impact on fuel costs. However, the cost of crude has dropped significantly and the cost of gasoline has not matched it.

    Drilling in ANWAR is not the answer and opening it up is really pandering to the oil companies. Why not encourage them to change their business model? GM didn’t and look what’s happening to them!

    Oh, and the $300 million prize is still a proposal. I actually think its a good idea and not enough of a prize. Let’s have a new Manhattan project for energy.

  3. Opening ANWR may be pandering to oil companies, but they are in turn pandering to us. While I have no love of Big Oil Companies, I must admit I do love their product too much for my own good. If you really want to get out from under their thumb – stop driving! If we didn’t want it/need it/love it, they couldn’t sell it to us.

    While we can try to blame them for destroying our economy, we have to face the fact that oil has driven our economy for the past 75+ years, and has become the cornerstone of industry in a modernized world. Not only the gas itself, but car sales, air travel, interstate & international commerce, agriculture, very few industries exist that do not rely on energy from oil. The recent price increases have done a fabulous job at highlighting that fact. Coming to terms with our own complicity is long overdue. Encouraging “them to change their business model”?, well that will require quite a few blowjobs now, won’t it?

  4. No it will require regulation and politicians who won’t take their money. The oil companies have gone beyond greed. The way they do business and take advantage of the American consumer is dangerous. We depend on electricity, waste removal, and other utilities just as much but I don’t see their costs skyrocketing.

  5. Pingback: Yet Another Reason to Get off Oil « Ruined My Life