Oil 101

Arlen Spector, an embarrassment to the Republican party and Chuckie Schumer, a former ambulance chaser who never saw a private business he didn't want to destroy have once again started the usual saber rattling about gas prices and how we need to punish Big Oil by taxing the crap out of them and breaking them up to create more competition.

HUH? Can anyone explain to me how adding a special tax is going to bring gas prices down? Can anyone explain to me how breaking up Big Oil creates more competition when Federal Law has made it virtually impossible to add refining capacity which would increase supply?

Can anyone explain how either of those measures lower gas prices when federal laws mandate that we use only ethanol made from corn as an additive while ethanol made from sugar is barred from import into this country by the likes of Spector and Schumer?

Can anyone explain how these measures will bring down the price of gas when Federal law mandates that Big Oil purchase their supplies from foreign countries who hate us and can sell to China at elevated prices while Billions of gallons of oil sit beneath the surface of our own country and off our coast (of course Cuba is drilling some of this now?

Politicians make me sick, they are the #1 cause of high gas prices in this country and instead of fixing years of liberal-pandering roadblocks to cheaper energy, they play the blame game creating a new enemy of the people. They are the only real enemy of the people, the concept of public servant has died and been replaced by the public being servants to the government.

From IBD:
Posted 4/25/2006

Pump Prices: Politicians can poke around all they want for gouging, collusion and other shady stuff. Fact is, the cost of your gasoline is set by supply and demand, mainly in the world market for crude.

That was how President Bush explained things in his Tuesday speech to the Renewable Fuels Association. He's telling federal agencies to check for illegal activity. But as an oilman himself, he knows the real reason for pain at the pump: There's only so much oil being pumped out of the ground, and a booming worldwide economy can't get enough of it.

This doesn't mean governments are powerless to affect oil and gas prices. Far from it. Even the modest step of suspending clean-air gasoline rules, announced by Bush in his speech, had a noticeable impact: Gasoline futures dropped about 4%. More dramatic and permanent action, like lifting drilling bans in offshore oil fields and the Arctic National Wildlife Refuge, might do much more.

But the constructive things that Washington can do tend to be tough politically. And politicians who know better will pander to the public's agony by floating dumb old ideas that get no smarter with time: a windfall profits tax (that would just discourage more oil drilling) and a breakup of the oil companies (that would just add overhead to an efficient industry and raise pump prices further).

The refining side of the oil industry has become a particular target for misplaced outrage. Sen. Chuck Schumer, D-N.Y., has been charging that refiners are manipulating prices by operating at less than full capacity and thereby keeping gasoline off the market.

So what about those nefarious refiners? Truth is, refining is a competitive, low-profit business. No one's making a bundle manipulating supplies or anything else. That's one reason no refineries are being built. They just don't return the investment. The big oil money is made in the exploration and production of crude. If anyone has raw power in this market, it's OPEC, not the oil companies. And it's the price of crude, not refining and other costs, that accounts for almost all the price hike over the past year.

Taking the latest one-year span for which Energy Department figures were available on Tuesday, West Texas intermediate crude rose from $50.52 a barrel on April 18, 2005, to $70.30 on April 17, 2006. That $19.78 hike comes to 47 cents a gallon. In the same time, the average retail gasoline price rose from $2.23 to $2.78 a gallon — 55 cents. The refining cut may have added a few pennies at most.

The good news here is that crude oil prices are highly sensitive to small shifts in supply and demand. That's one reason even modest efforts to lower demand — through alternative fuels and more efficient cars — can pay off over time.

Oil prices react to present events, but also expectations, hopes, fears and rumors about the future.
On that score, Bush shouldn't be shy about using the Strategic Petroleum Reserve. He has just said he will stop adding oil to the reserve for now. It wouldn't hurt to send a more aggressive message and let it be known that he's ready to put significant oil onto the market if prices rise sharply on speculation or fear of a break in supplies.

The SPR is the only oil weapon in America's arsenal that can work quickly. As with other weapons, it should be used sparingly, or maybe just brandished. But it should never be ruled out.