Last week Mitt Romney offered an energy plan that promised "energy independence." In reality it was just hot air:
The Romney energy plan, laid out in a 21-page white paper, relies heavily on creating deeper partnerships with Mexico and Canada. Mexico could use technical help to reverse its declining oil production, he said, and "Canada has oil sands. We're going to take advantage of those, and build that Keystone pipeline and work with Canada to make sure we have advantage of their great energy sources."
All told, that would dramatically boost oil and gas production, the candidate said.
"I will set a national goal of ... North American energy independence by 2020."So, let me get this straight: Romney's plan to make America "energy independent" relies completely on Canada and Mexico. Any plan based on a direct contradiction of its basic premise isn't a plan, but a big fat lie.
At its core this plan is doomed to abject failure because it focuses almost solely on gas and oil. These fossil fuels are global commodities. That means Canada and Mexico — and every American oil company — will be able sell their gas and oil to whoever offers the best price. And that means we can't be energy independent if China is willing to pay more for our (and Canada's) oil than Americans are. The Chinese will simply eat our lunch. Canadian and American oil companies will make out like bandits, but we won't be able to drive to work without paying an arm and a leg. That is, unless the government restricts or heavily taxes exports of oil. Which we know the Koch brothers won't let happen.
Thus, Romney's talk of "energy independence" by depending on fungible Canadian and Mexican commodities traded on world markets is either hopelessly uninformed about the basic economic laws of supply and demand, or mendacious and deceptive campaign rhetoric.
True energy independence can only come from energy resources that will last for centuries at minimum, that come directly from the United States, which cannot be diverted to foreign countries with deep pockets. Romney's plan fails on all counts: North American sources of oil will be depleted within my lifetime, they come mostly from Canada and Mexico, and booming Asian economies will be able to outbid us for them.
There are, however, energy resources that can provide true energy independence: wind, solar, hydroelectric, nuclear and to a lesser extent, coal. Other forms of energy (certain types of biofuels, but not corn-based ethanol) hold promise but can't be counted on yet.
To be truly independent we need to shift to renewable energy sources for basic electricity generation, long- and short-haul rail transportation and short-haul small vehicle transportation. We should hold non-renewables like coal in reserve for peak-demand power generation, and oil and natural gas for long-haul small-vehicle and air transportation. And as a bonus, we'd also cut down on air pollution, reducing the incidence of asthma, emphysema, heart disease and cancer, as well as reduce the effects of climate change.
This country needs a real energy plan, not Romney's marketing strategy for the oil and gas industry.
57 comments:
I can see that you're not an engineer, Nikto. Please think this through. On what fuel will cars and trucks operate? Name one that will not be exportable to higher bidder. The reports are rampant in Europe and elsewhere of wind power over-promising and under-delivering, and nowhere close to being competitively priced, nor can it be if backup gas power plants must be built and kept on standby for times when the winds either blow too little or too much. Batteries simply don't have anywhere near the energy density nor longevity to do the job. You're also talking about remaking our entire power and transport networks. Immense opportunity costs being sunk into a plan that depends on scientific breakthroughs that have not yet been made and can't be scheduled.
For the short term, Romney's plan is the only one with even a prayer of coming close to achieving NORTH AMERICAN energy independence (you could use some reading comprehension, there, old Nikto). Long term, nuclear is the only one source that can really change things. We can build a whole hell of a lot better than the 1960's designs currently in use. Thorium reactors hold out a lot of promise. Eventually fusion will be a player, but you can no more plan on that than you can plan for breakthoughs in battery or solar cell technology.
We'll just pass over the obvious issue of rare earths needed for making high-powered magnets for electrical systems, and other materials for batteries. You would howl at the ecologic destruction necessary to get the requisite amounts. I've heard enough proggy howling for one day.
Plus ole N makes the same mistake that M makes by assuming that oil being a global commodity somehow divorces it from market forces - while at the same time bemoaning the effect those same forces have on a global commodity.
Supply. Demand.
Increase supply, apply to global market, decrease global price.
Obviously, such a simple economic concept is completely lost on you. We can drill and drill and drill but the oil we produce will go to places in the world where the demand is higher. It's not going to go here which means prices won't go down.
Further, you are not taking into account cartel behavior which always must be considered in determining price.
And the speculators in the world oil market don't help the price go down either.
Now, I know you won't take my word for it due to your inability to admit error so here you go.
http://news.yahoo.com/fact-check-more-us-drilling-didnt-drop-gas-065231245.html
More oil production in the United States does not mean consistently lower prices at the pump.
http://money.cnn.com/2011/04/25/news/economy/oil_drilling_gas_prices/index.htm
That's because the amount of extra oil that could be produced from more drilling in this country is tiny compared to what the world consumes.
Plus, any extra oil the country did produce would likely be quickly offset by a cut in OPEC production.
"This drill drill drill thing is tired," said Tom Kloza, chief oil analyst at the Oil Price Information Service, which calculates gas prices for the motorist organization AAA. "It's a simplistic way of looking for a solution that doesn't exist."
Are you going to continue to be unmoved by facts?
Yeah, simple economics are lost on you....
The amount of impact a cartel can have upon a market is related to their market share. Non-cartel members producing more, with cartel cuts in production reduce the impact that the cartel can have upon prices.
We've been over your links before - cost of domestic oil production (including development costs due to government regulation i.e. battling the green police) mean that domestic producers do not make money until oil prices rise. This means that they don't drill until prices rise. Which means your linked studies don't prove that increased drilling doesn't lower prices - all it shows is that when prices go up, drilling increases. It doesn't answer how much the prices would have went up absent the increased drilling.
Making domestic production easier - with less government imposed costs, lowers the break even point of domestic producers. That lowers the price point at which domestic oil enters the market and lowers the price point at which increased supply can have an effect upon demand.
Yeah, simple economics are lost on you....
Why don't you just say, "I disagree and here's why" rather than making it personal? If you make personal comments, I'm going to do so as well and then we won't get anywhere. Personally, I think you do this to avoid facing the facts.
Unfortunately, you are avoiding the facts in the rest of your analysis as well. Essentially, you dismiss the information I've provided and continue to grind your ax against the government. We need to start from a simple point of reality: Demand. Demand for oil is greater in the rest of the world than it is here. Since oil is part of the world market, oil companies will go to where the greater demand is, correct?
Obviously, such a simple economic concept is completely lost on you.
Personal? Those are your words two posts ago. You dare to chastise me for using your words back at you? You receive what you sow, and appropriately so according to your own statement.
GuardDuck, you stupid clod! It's different when Mark does it because he does it out of love. The love of Democrat Jesus. Not that you would understand that, you heretic dog. Err, duck.
Seriously, though, irony has been proven not to exist on Planet Markadelphia. That's because it's a gas giant made up primarily of hydrogen and methane. It's kind of a miniature gas giant, though. More of an astronomic fart, really.
Fair enough. I apologize. No need to apologize to me. Let's just move on.
Demand-Demand for oil is greater in the rest of the world than it is here. Since oil is part of the world market, oil companies will go to where the greater demand is and sell their product there.
Are you saying that people in a small market are unable to buy oil? No?
Because I'm not making an argument that says we drill here, buy here. My first post says that oil is a global commodity. But that still does not divorce it from the basic market forces of supply and demand.
Reread my first post, because you obviously didn't the first time around.
If demand is increasing, then prices will go up. If supply also goes up, then there is a countering downward pressure on prices. If supply goes up faster than demand, prices will go down. The last is unlikely, but even the second option is far better to me than the first, which is to have no downward pressure on prices and thus pay even higher gas prices, and yet not have the additional jobs, revenues, and taxes that running the fields here would provide. Because like it or not, our transportation net runs on petroleum and there is no power on earth that's to be able to change that in the next 10 years. Yes, we need to look to the future, but not by impoverishing ourselves in the short-term. You liberals may enjoy wearing your hair-shirts for Democrat Jesus, but most of us have no wish to share that poor little place with you. Not only can we survive, we can Survive in Style.
Oh, and Nikto, coal is almost the worst type of power plant to hold in reserve for peak-demand generation. It takes a loong time to fire up a coal plant. Coal and nuclear is good for baseline power. Hydro and gas plants are good for fast reaction for peak demand times.
No, I'm saying that demand in China and India exceeds demand here so oil companies will simply drill here and sell over there which won't have much of an impact on price here.
Again, if I misunderstood, I apologize and that's on me.
Coal and nuclear is good for baseline power.
Hell yes, to the latter. The left is out to lunch on nuclear. Thankfully, the president agrees with me.
http://www.washingtonpost.com/business/economy/nrc-approves-construction-of-new-nuclear-power-reactors-in-georgia/2012/02/09/gIQA36wv1Q_story.html
But if it is a global market in which global demand affects prices - then global supply also affects prices.
A gallon drilled here and sold in China is a gallon of sated demand. That leaves a gallon unsold from Mexico that would be sold here......
I really don't know why you are arguing this point.
I really don't know why you are arguing this point.
Maybe because the more advance topics of how markets address supply and demand issues via commodities exchanges and trade is not clearly understood? Just hazarding a guess.
Somehow me not agreeing to your view means I must not understand...seems to be a common theme these days.
Actually, 6Kings is correct but not in the way he thinks. It's those more advanced topics of how the market address supply and demand that are at issue here. It's not as simple as the very basics of supply and demand when it comes to the oil market. That's what I am indeed asserting.
Maybe it would be more helpful if you explained why you don't agree with the links above.
In other words, you'd rather we pay even higher prices and reap no economic benefit whatsoever? Why yes, yes, I can see why that's such a seductive notion.
Well, you've hit upon a key fact of the world today, Larry. We live in a global marketplace. American companies care about one thing: profit. Remember, rational people think at the margin and their margins show that it's more profitable to be international as opposed to national.
Somehow me not agreeing to your view means I must not understand
No, it means your replies to me are out of context - that leads me to think that you don't understand.
Maybe it would be more helpful if you explained why you don't agree with the links above.
That would be silly if you don't understand what I am saying now - getting into more complicated and complex issues would just be frustrating.
Maybe we are speaking different languages. Let me try a different angle.
If OPEC decided tomorrow to double oil production, and absent other factors and outside influences (which I will be glad to discuss later) would that have the effect of lowering oil prices?
I guess I'd need a definition of outside factors and influences before I could really answer honestly. At first glance, I'd say yes.
definition of outside factors
Demand exceeding said hypothetical increase in supply, other current supply sources remaining constant, inventory and supply lag time, futures trades. That sort of thing.
At first glance, I'd say yes
OK. Then if that same increased supply was instead produced and sold from US sources (with the same lack of outside influences) would your answer be the same?
I'd add in cartel behavior and the level of demand particular to individual countries to outside factors and influences. There's also some of the ones you mentioned the last time we talked about this. Was it refinery capacity?
Honestly, we could throw in speculation, taxes and tariffs as well to the list.
OK. Then if that same increased supply was instead produced and sold from US sources (with the same lack of outside influences) would your answer be the same?
Would we be selling to the world market or just our own market?
dd in cartel behavior
*other current supply sources remaining constant
demand particular to individual countries
Why? Is it not a world commodity sold on a world market subject to overall world supply and world demand?
Would we be selling to the world market or just our own market
Sigh. I've been saying the words global commodity through out this thread. I even said this: I'm not making an argument that says we drill here, buy here. My first post says that oil is a global commodity.
I would think that should make it clear. But just in case:
Sold to the world market.
Why? Is it not a world commodity sold on a world market subject to overall world supply and world demand?
No, and I suspect that may be where our area of disagreement may be. China and India are demanding more oil than we are at present. If you add in their various trade regulations, things get even more complicated.
Sold to the world market.
Then my answer would be no because demand is greater in other parts of the world. If oil was only sold here and bought here, then yes, prices would eventually go down. Perhaps you are suggesting that we hold on to our own oil?
I guess I'd like to see exactly how the articles I linked above got it wrong or if you are suggesting something completely different.
Explain how that greater demand , relative between nations, counters increased supply worldwide. Especially in light of your previous answer that it would reduce price if done by the cartels.
I thought we were talking about increased US supply, not supply worldwide. If the US increased supply on its own, then OPEC would cut production (as noted in the link above) and we would see little difference in price.
But let's just say that supply by everyone is increased. Oil companies are going to sell to the areas of the world with greater demand, right? You do agree that demand has fallen off here...
OPEC would blah blah blah
re:other current supply sources remaining constant
Oil companies are going to sell to the areas of the world with greater demand
What does the demand in China relative to the demand in say Malta have to do with anything other that both being parts of the overall GLOBAL DEMAND
Unless, of course, you are implying that because demand in China is soooooo great that people in Malta are unable to buy oil? Which you said earlier wasn't the case.
So you need to explain why that is even a factor you need to mention.
The Green War on the Poor
Global demand can't be looked at as monolithic. Each country has its own level of demand and oil companies will sell more oil to countries with higher demand to make more money, don't you agree?
Suppose for argument's sake there were only 3 countries that demanded oil: China, India, and the US. China wants 50 barrels, India 45 and we want 5. OPEC starts supplying more oil. Prices may go down in China and India (if there aren't any other factors which, of course, there are but for arguments sake...) but they wouldn't go down here because our demand is lower.
Now, if we were to sell oil only to our country and OPEC didn't pull any cartel tricks, yes, prices might go down. But now you're talking about placing trade restrictions on the free market and that's not good. I'm not saying you are advocating this but that's one big way that prices could drop in this country via increased supply.
At this point, I'd like to hear what you would do. Obviously, I've misinterpreted what your ideal energy policy would be so let's hear it.
don't you agree?
No. What's the market price for Brent crude today?
What's the price for China or India or the U.S. or for Monaco to buy Brent crude?
Same price?
I'd like to hear what you would do.
That's the second time you've asked that. The second time since you said this : "We need to start from a simple point of reality: Demand"
And that's what we have been discussing since. I have been trying to start from a simple point and discuss the basics - in which I think you are wrong and it has taken this long just to distill it to the point where your error is visible. But why do you want to move on to more complex ideas when we obviously have disagreement over the most basic ones? What would be the point of that - everything else is built upon the basics.
But why do you want to move on to more complex ideas when we obviously have disagreement over the most basic ones? What would be the point of that - everything else is built upon the basics.
From what I can tell, details within categories somehow invalidate those categories in Mark's mind. Supply and demand somehow ceases to exist when it's spread over several countries. Income isn't income when it comes from taxes. Debt isn't debt if it's not owed to a bank. Truth isn't truth if it's said by a conservative.
It's the damndest thing I've ever seen. I'm surprised that what passed for thinking in Marxyworld hasn't gotten him killed. (By that, I mean walking in front of a moving bus, or sticking a fork in an outlet, or something, not murder.)
GD, I think I understand what the problem is here and the whole thing could have been avoided if you had simply laid out your assertion and responded to the articles I linked above. You are talking about the price of a barrel of oil. I am talking about why you think the price of a gallon of gas is going to drop if we drill more here.
Whether you are intending to or not, you are coming off in a very condescending way. Just because I am a Democrat doesn't mean that I am stupid. It's enormously frustrating to have to put up with that attitude and it's a big reason why I say the things I do about the right.
So, please, just get to your point. Explain to me how if we drill here, the price of a gallon of gas is going to go down.
We don't think you're stupid because you're a Democrat. We think you're stupid because you demonstrate the accuracy of this almost Every Single Day. And after (how many?) years, you still haven't the first thing about basic thinking skills such as logic and math.
Again. Profreading (!) is your friend! Sheesh.
Correction:
"…you still haven't learned the first thing about basic thinking skills such as logic and math."
Nor about admitting and correcting mistakes.
Let's state AGAIN for those with attention span of a housefly that it might not lower the price of oil from where it is today if demand continues to outstrip supply, but it will exert a downward pressure on global prices. For the slow-witted among us, that is to say that if we don't expand production in this country, we will pay even more for gas than than if we do expand production. And we will also lose out on the jobs and income that go along with it. But Mark seems to be cool with that scenario.
Well, we are already doing that and, despite the "Pipeline Piffle", the president is as well.
http://www.factcheck.org/2012/03/more-pipeline-piffle-and-an-alaskan-absurdity/
We are a net fuel exporter and are also set to become a monster in supplying the world with natural gas and we will likely do the same with green tech once we get over all this climate change bloviating.
the whole thing could have been avoided if you had simply laid out your assertion and responded to the articles I linked above
I'm condescending? YOU DON'T EVEN BOTHER TO FUCKING READ WHAT I WRITE.
Look at my first and second posts. You want my assertion laid out? There it is fuck-wit.
You are talking about the price of a barrel of oil. I am talking about why you think the price of a gallon of gas is going to drop if we drill more here.
Bullshit. You haven't said a single thing that would differentiate between oil and gas - nothing. Meanwhile, I have posted several times and you have replied several times using the metric Barrels of Oil.
Now you want to sidestep and say "oh noes! I was talking about gas...."
Really Mark - you can just admit that you are wrong. That you don't really understand the market forces. Instead you'd rather do this? That's some real cowardly shit man.
I'll admit that there was a misunderstanding as to the issue of price and my part in that. I assumed (based on our first two comments in this thread) that we were working towards the end point of how drilling in this country would lower gas prices and that was a mistake.
You haven't said a single thing that would differentiate between oil and gas - nothing
See my first comment and the quotes that I put up which, I'm still hoping, you will refute in a more fuller explanation than you did in the comment immediately following that.
There's no need to explain to me that, in a perfect world with no outside factors, when the supply of barrels of oil increases, the price of a barrel will eventually go down. We don't live in a perfect world and that's why I'd still like an explanation as to what needs to happen in order for prices at the pump to go down. Why, for example, does Canada export more oil than it uses and still has high prices (even with taking taxes out of the equations)?
Perhaps you could expand on this:
Because I'm not making an argument that says we drill here, buy here.
So, what are you saying? Please leave out the "you don't understand" and "this has been explained to you" stuff. Equating not agreeing with you to "I don't know what I am talking about" is what I mean by condescending. Economists don't agree on a lot of things...that doesn't mean that they are all stupid.
Just detail your assertions. If you don't have time, it's not really a big deal. Do it another time. Obviously, this is an issue that is going to be around for awhile.
There's no need to explain to me that, in a perfect world with no outside factors, when the supply of barrels of oil increases, the price of a barrel will eventually go down.
Really? Because although you said as much when answering the hypothetical OPEC supply increase you denied that would happen with a commensurate increase in US oil supplied to the world market. Is that still your position? Does increased supply of oil relative to demand have a decreasing effect upon prices?
Why, for example, does Canada export more oil than it uses and still has high prices
WTF does their export/use ratio have to do with the price of oil on the world market? What affects prices on the world market is world supply and world demand.
That is the point - increased North American oil for sale increases the world supply of oil. Increased supply of oil tends to lower oil prices. Lower oil prices eventually mean lower gas prices.
The power of a cartel in a market is only as strong as it's market share. Decreasing its market share by offering alternative sources decreases its power to affect prices.
Your 'study' about increased US supply not affecting prices is flawed because correlation does not imply causation.
If I made widgets in the US but cost of production meant I could only make a profit if I sold them for $10 and Singapore made widgets and sold them for $8 I would not make widgets.
If costs in Singapore rose and they started charging $10 for widgets, I could produce and sell widgets then. When the Singapore cost dropped and they sold for $9 then I would have to cease production.
If US/Singapore widget production vs. price over the last 40 years would then be graphed it would look almost exactly like the graph in your 'study'. It would show US production increasing when prices rose and decreasing when prices dropped. It does not show that US production of widgets have no effect upon price. It shows that because of costs, US production is unprofitable until a certain price point is reached.
This I tried to explain last time we discussed that 'study'.
I also tried to explain this:
If the Singapore cartel wanted more money and decided to raise the price of widgets to $11, my production would come online and I would compete with their sales by offering my widgets for $10. People would buy my widgets and that competition would control the upward movement of the price of widgets.
So US oil production, which due to higher production cost, comes online when oil prices increase - adding to world supply, creating competition and tempering rising prices. Until such a point as the price falls below the break even point and that production ceases.
Which is why cutting production costs on US oil development is the only way to realistically increase US oil production. What are those costs that can be cut? Labor? Machinery? Land? Leases?
Perhaps permitting requirements, legal fees in battling government agencies, legal fees in battling environmental lawsuits and costs of lobbyists needed to 'convince' the government to let them find, drill and ship oil.
Does increased supply of oil relative to demand have a decreasing effect upon prices?
In a perfect world with no other factors, increasing the supply of anything relative to demand would eventually have an effect on price, lowering them Note that we are talking about supply , not quantity supplied.
WTF does their export/use ratio have to do with the price of oil on the world market? What affects prices on the world market is world supply and world demand.
I'm talking again about price at the pump..gas prices....they are a net oil exporter (using less oil then they ship out) but they still pay a higher price at the pump because of effects of the world market.
Lower oil prices eventually mean lower gas prices.
No, it doesn't...for all the reasons I've listed but especially for the one that you seem to be ignoring...we don't live in a perfect world. If we drill more, OPEC will cut production worldwide, for example.
In your widget example, you are focusing very heavily on the supply side of the equation, specifically the costs. What about demand? If there is higher demand for widgets in China and India, for example, and lower demand here in the US, they are going to supply more widgets to China and India. Increased demand-increased supply-lower price...that's final price to the customer. If there is less demand here, that means there will be less supply which means the final price to the customer won't change much.
Which is why cutting production costs on US oil development is the only way to realistically increase US oil production. What are those costs that can be cut? Labor? Machinery? Land? Leases?
What do you suppose the reaction by OPEC would be to this?
Perhaps permitting requirements, legal fees in battling government agencies, legal fees in battling environmental lawsuits and costs of lobbyists needed to 'convince' the government to let them find, drill and ship oil.
I will certainly agree that our government is part of the problem with high gas prices. But even if we removed them from the equation, we'd still have issues with final price at the pump due to world, market forces and the problem of speculation which you haven't considered either. I'm not disagreeing with you entirely, mind you, I think you are just leaving out a few other factors.
Note that we are talking about supply , not quantity supplied.
"And that is why you fail."
What about demand? If there is higher demand for widgets in China and India, for example, and lower demand here in the US, they are going to supply more widgets to China and India.
And there you are again. Tell me what the price for Brent crude oil is. It's a global commodity, traded on the global market and its price is set based upon global supply and global demand.
China may have a greater demand than Monaco, but Brent is the same price. Because its a global commodity. Sheesh.
Canada has higher gas prices than the US does (on average) for the same fucking reason that California has higher gas prices than Texas: because they have higher gas taxes and higher taxes on other facets of business! It's the same fucking reason why the Canadian price of _books_ is higher than the US price. Hint: it's not because the demand for paper is higher in the US, so that Canadian wood pulp is preferentially sold to the US.
Grade: Fail
Lower oil prices eventually mean lower gas prices.
No, it doesn't.
Yes it does.
http://www.econbrowser.com/archives/2012/02/crude_oil_and_g.html
they are a net oil exporter (using less oil then they ship out) but they still pay a higher price at the pump because of effects of the world market.
You really need to either read what others write, or stop arguing with the strawman. Either way you are an idiot. Get this through your thick skull - oil is a global commodity - as such it is subject to global supply and global demand. Canada pays the same for oil as everyone else because the oil is a global commodity. That they are a exporter of oil is beneficial to their economy. That they export oil to the world market is beneficial to the supply available and thus the price of oil is less than it would be if they did not export at all. And this entire paragraph was a waste of my time because I had to argue with you against a Fucking assertion I did not make.
What do you suppose the reaction by OPEC would be to this
Again for the reading challenged. The power of a cartel in a market is only as strong as it's market share. Decreasing its market share by offering alternative sources decreases its power to affect prices.
the problem of speculation
You overrate speculation. Speculation is only profitable when the prices are changing. Like the US production vs. oil price chart you see speculation increasing and prices rising and blame the one on the other. Correlation does not imply causation. Speculation activity increases when the prices change - up or down - because that's when the money can be made. That does not imply that the speculation is the cause of the prices changing.
http://www.washingtonpost.com/opinions/the-fallacy-of-oil-speculation/2012/05/02/gIQAk7bkwT_story.html
http://www.forbes.com/sites/timworstall/2012/04/22/futures-speculation-doesnt-increase-spot-oil-prices/
I'm just as frustrated as you are, GD.
In a perfectly competitive world, with no other factors, cartel behavior, speculation or variety of demand in different markets, your assertion is likely true specifically for barrels of oil. But that's not the world we live in and we're talking about price at the pump, not the price of barrel of oil. It would be one thing if Americans were simply buying barrels of oil but they aren't. The process that occurs from barrel of oil to pumping gas has many stops along the way...some of which you note as it supports your argument...some of which you don't as it doesn't.
That's where the issue of demand comes in which you insist at looking at in a monolithic fashion. If there is more demand in one market and less demand in another, more oil is going to be supplied to that country. As that country receives more oil, prices will likely drop at the pump. The country that receives less oil due to lower demand will not see much of an affect in price at the pump. You do agree that if there is less demand, there will be less supply which means less of a change in price (at the pump), right? There's also the issue of utility which we will talk about in a moment.
Obviously, my words aren't moving you so here are some other views (some not "liberal" views)
Ken Green, American Enterprise Institute, “If the U.S. produced more of its own oil, it would probably reduce imports, but it’s not likely that it would reduce prices … We probably cannot produce so much oil to exert downward pressure on prices compared to the world market.”
This is something we haven't even touched on...can we actually produce enough oil to make a difference in price? Of a barrel? Of price at the pump? I don't think so...which is why I doubt the veracity of your statement regarding our potential power of OPEC.
Above you made a comment about Brent crude...
Peter Van Doren and Jerry Taylor, Cato Institute: “Sure, more domestic oil creates the possibility of fewer refined imports tied to the price of Brent crude, but given that the price of Brent sets the price for crude generally, the result would be more profit for domestic crude producers rather than significantly lower gasoline prices for Americans (not that there’s anything wrong with that).”
This echoes what I have been saying all along. If we follow your instructions, the oil producers in this country will sell to other countries and not here...where the higher demand is....which means the end amount supplied here won't make that much of a difference in price at the pump even if the price of a barrel of oil is a little lower. You have to consider the individual markets and not just the global market.
Christopher Knittel, MIT economist: “There are not many markets where the United States can’t impose its will on market outcomes … This is one we can’t, and it’s hard for the average American to understand that and it’s easy for politicians to feed off that.”
No shit.
Steve Koonin, Institute for Defense Analyses: “When you hear the international oil companies advocating for energy independence, it’s really about making money, which isn’t a bad thing … If they produce a million more barrels a day, they’re not going to change the global price much. And since they know the global price is going up, they’ll just make more money. There’s nothing wrong with that, but it doesn’t solve the price problem or the greenhouse gas problem.”
Now, if you wanted to argue that producing more oil at home would make a bigger profit for oil companies which would translate into more jobs at home, you'd be on more solid ground.
Severin Borenstein, UC Berkeley economist: “Producing more oil domestically will enrich the U.S. economy, particularly U.S. oil companies and their workers. With oil so valuable, it may be a good idea, though the value must be weighed against environmental consequences. But it will have no discernible impact on gas prices, because it will change the world’s supply/demand balance for oil by less than 2 or 3 percent over a decade or more.”
Good question. What percentage do you estimate that unrestrained drilling here will have on the world's supply/demand balance?
Lou Crandall, Wrightson ICAP LLC: “Higher oil prices today are a global phenomenon, and the additional supply from increased drilling by the U.S. would not alter the global balance of supply and demand greatly. Gasoline prices at the pump would be higher either way. The only difference is that a somewhat larger share of the revenue would accrue to domestic interests (governmental and private) rather than to foreign suppliers.
Michael Levi, Council on Foreign Relations: “The amount of oil you produce at home doesn’t affect the price … You can lower your vulnerability to price by lowering your consumption of oil, but not by increasing your production.”
So we can't drill enough to really affect price at the pump.
Now, let's take a look at your link...
One factor that's been driving Brent and WTI up over the last few weeks has been rising tensions with Iran.
This would be a factor that is really always in play. So, we could adopt your policy and then still have this which wouldn't lower prices because we don't live in a perfect world. Honestly, this simple fact makes this whole discussion silly.
There were some good comments in your link.
I think that we need to differentiate between long term and short term factors that affect crude oil prices. In my opinion, average annual oil prices give us the best indication of fundamental long term supply and demand factors. And of course, Brent is a far better indicator of global prices than WTI.
I agree. Why aren't you doing that?
Slowly increasing US crude oil production (up from the pre-hurricane rate of 5.4 mbpd in 2004 to 5.65 mbpd in 2011) certainly helps, but we remain dependent on imports for about two out of every three barrels of crude oil that are processed in US refineries. The dominant trend we are seeing is that the US, and most other developed OECD countries, are being gradually priced out of the global market for exported oil, as annual global (Brent) crude oil prices doubled from 2005 to 2011.
So, if we drilled more (slower or faster), we'd be priced out?
Post-2005, developed oil importing countries like the US have been forced to consume a declining share of a declining volume of GNE, with the developing countries, especially the Chindia region, consuming an increasing share of a declining volume of GNE.
Yep.
The marginal utility of oil is much higher to a low consuming country than a high one. Thus, although the Chinese are comparatively poor, their economy is growing fast, and they are incrementally increasing their consumption, because the marginal utility of oil--at a low level of consumption--is higher than the marginal utility at a high level. And the statistics demonstrate this starkly. Of every six barrels of increasing Chinese oil consumption, four are being provided by OECD consumsers. China is drilling for oil on Main Street.
Utility is key here. How does each oil importing nation manage their oil consumption?
Regarding speculation,
http://www.forbes.com/sites/robertlenzner/2011/05/14/exxon-mobil-ceo-says-oil-price-should-be-60-70-a-barrel/
Rex Tillerson, the boss of ExxonMobil admitted last week that the price of oil–based purely on supply and demand- should be in the $60 to $70 a barrel range. The reason it’s above $100 a barrel, Tillerson explained, is due to the oil majors using futures contracts to lock in current high prices, and speculation that is engineered by the high-frequency trading of quantitative hedge funds.
So, no, I do not overestimate speculation. Suppose we do exactly as you say...drill here, cut costs, get rid of the pesky government. Oil futures look good, right? Suppose I am a speculator and now I start buying oil futures. More people do this and suddenly the price has gone up because oil looks so good, given your new policy. With the government out of the way, wouldn't that be attractive to the free market?
because they have higher gas taxes
Take out the taxes and you still have high gas prices even though they produce more than they consume.
http://www.good.is/post/chart-even-more-proof-we-can-t-drill-our-way-to-lower-gas-prices/
Jayzus Fookin' Kee-rist, but you're stupid m*****f*****, Mark. Do you have any understanding whatsoever of that last link? What the fuck do you think Canuckistanians would pay for gasoline if Canadian oil production was erased? Do you think the price would drop? Or would it go up? What do you think?
Now look at that graph,you dumb m*****f*****. Do you notice how Canadian price evenly tracks US price? Do you know what the difference is? It's taxes, dipshit. If it weren't for higher taxes, Canadian prices would be the same as US prices.
And what do you have against Americans (or Canadians) making money, and also putting downward pressure on oil prices?
POLICE: "MARK! Put down the bong, and back away from the blog! NOW!"
If it weren't for higher taxes, Canadian prices would be the same as US prices.
Me, in the comment directly above yours.
Take out the taxes and you still have high gas prices even though they produce more than they consume.
The graph shows that even without the taxes ( thus, paying the same price as the US) and with exporting more oil than they need (1.1 million barrels a day), they still end up not affecting price at the pump. Canada is a prime example of why drilling here won't make any difference on price at the pump. They are a substantial supplier of oil to the world and look at how much affect they are having with the extra oil they are sending out?
I don't have a problem at all with oil companies making money. If you are arguing that more jobs would be created as a result of drilling here, than you would be more accurate (assuming, of course, that the oil companies actually hire people). But saying that drilling more will lower gas prices simply isn't true.
Canada drills a lot and benefits a lot. What do you think they would be paying at the pump if they stopped producing? World prices would jump significantly. Why don't you go tell them they're morons for producing more oil: "Don't they know adding more oil to the world market doesn't affect prices? No one can understand why oil prices jump when a significant area of production is disrupted, no one can understand why bringing more oil to market can lower prices. All that matters is demand. China will suck the gasoline right out of your gas tanks, so it's all useless. What are you dumbasses doing? Don't you understand economics? I'ma pubic high school teach and tennis coach! And I can quote other people!"
Yeah, you just do that.
I give up. There is no way to penetrate Mark's head.
Armoured in an impenetrable shell of smug, with his ears stopped up by his buttocks, and his bollocks blocking his sight, he is the very model of a very modern liberal, our Mark is. Nice hat, Mark!
GD, you've said over and over again that if there is more supply than price will decrease. Why can't you see that if there is LESS supply here and MORE supply to China and India, that the price at the pump will be the same or higher here or lower in Asia?
Beyond answering this question, I'd like you to state on here that all of the evidence and all of the testimonials that I have presented in this thread are wrong. You've made it clear that you think I'm an idiot..fine. Tell me why the guys from Cato and AEI have thick skulls. Tell me why Rex Tillerson has a thick skull.
After that, I doubt there is anywhere we can go with this discussion as you are sadly unmoved by facts. I'm not the problem here. You are...because you can't admit when you are wrong.
Mark,
The price of Brent crude takes into account the global supply of oil and its global demand.
It doesn't matter if China wants half of it or that Monaco only wants a fraction of a percent of it. The price is already based upon the global supply and demand. And that is why they both pay the same for that oil.
Claiming that the demand is less here than in China and pointing to that as the reason prices 'won't' go down shows that you don't understand the market on a fundamental level. The reason I 'am not getting it' is that you are wrong.
You double down on stupid by claiming that the price of gas at the pump is not connected to the price of oil - when I showed you a graph that tracks those historical prices.
You triple down on stupid when you point to Canada as a net exporter of oil having high gas prices. No shit? Because gas prices are a factor of oil price. Oil price is a factor of global supply and demand. Demand is higher than supply and thus oil prices are high. You point to Canada's net export as a failure of lowering prices - if you had even the most basic grasp of the market you'd see that not only Canada's net export - but their entire oil production is part of that global supply that is sating global demand. Take away Canada's production and see what happens to prices. Increasing that production has the opposite effect.
Then finally you quadruple down on stupid by totally misunderstanding how oil futures work. You can't even explain how they function - yet you assume they automatically raise the price of oil. They don't. A future is when one party locks in a price for a product from another party for future delivery. The buyer wants the lowest price possible the seller wants the highest. The buyer and seller also want guaranteed prices free of market fluctuation in order to better make business plans. There is nothing wrong with any of this. The problem, as far as it is, is that when prices are fluctuating some parties do not know how far up or down the prices will go. They lock into a contract that guarantees a certain price based upon today's knowledge and prediction future behavior. If that future doesn't happen - somebody - either buyer or seller loses on the deal. For every rise in prices you can attribute to speculation - there is a lowering in prices attributable to the same.
As a final point - I don't need to tell you that your links are wrong. That you so hideously misunderstand even the most basic fundamentals of the market is explanation enough of your inability to even understand what your own links say. That you are incapable - repeatedly on this thread alone - to read, understand and comprehend simple words and sentences directed at you is explanation enough of your inability to do the same to your own links. Your own links either don't say what your think they say, show something other than what you are alleging, or as I said earlier are such a poor analysis as to be contemptible as a resource.
That you so hideously misunderstand even the most basic fundamentals of the market is explanation enough of your inability to even understand what your own links say.
Ken Green, American Enterprise Institute, “If the U.S. produced more of its own oil, it would probably reduce imports, but it’s not likely that it would reduce prices … We probably cannot produce so much oil to exert downward pressure on prices compared to the world market.”
Peter Van Doren and Jerry Taylor, Cato Institute: “Sure, more domestic oil creates the possibility of fewer refined imports tied to the price of Brent crude, but given that the price of Brent sets the price for crude generally, the result would be more profit for domestic crude producers rather than significantly lower gasoline prices for Americans (not that there’s anything wrong with that).”
Severin Borenstein, UC Berkeley economist: “Producing more oil domestically will enrich the U.S. economy, particularly U.S. oil companies and their workers. With oil so valuable, it may be a good idea, though the value must be weighed against environmental consequences. But it will have no discernible impact on gas prices, because it will change the world’s supply/demand balance for oil by less than 2 or 3 percent over a decade or more.”
The irony here is staggering.
One long personal remark about me not understanding things covering for your inability to admit fault...ah, well...I thought we were getting somewhere in this thread. I mean, really GD, you can't even answer this simple question.
What percentage do you estimate that unrestrained drilling here will have on the world's supply/demand balance?
That's what you expect of me, right?
Take note, GD, that I addressed your points and questions and you have ignored several of mine, including ones from the link you provided. They must all be idiots too. I guess things will only work out if I agree with you completely. I can't do that with so many facts and a mountain of evidence and testimony staring both of us in the face.
Oh Mark....
Let me introduce you to a new term.
Kettle Logic (la logique du chaudron in the original French) is a type of informal fallacy wherein one uses multiple arguments to defend a point, but the arguments themselves are inconsistent.
So you want me to address those quotes and answer the question?
The quotes are logical, they rely upon an understanding of economics. The conclusions are debatable. We can quibble on the numbers.
I say 'we' in reference to those who could actually quibble over the numbers. You can't. Your own position earlier makes it impossible.
Let's recap.
Your position is that any additional supply brought to the market would 'go to where demand is greater and not effect prices where demand is lessor'.
All three of the quotes you've addressed to me have one thing in common and in contradiction to your position. Each is arguing that additional supply is not enough to change prices much or at all due to insufficient ability to increase supply. That argument presupposes that sufficient supply increase would indeed have an impact.
Let me remind you that your position is that if OPEC doubled oil released upon the market then prices would decrease. You also state that if the US released an extra 33 million barrels per day then prices would not decrease. You aren't quibbling over numbers. You posit that no amount is capable of decreasing prices because of some fuzzy logic that any extra production would be sold only to places with higher demand and this would in some way be completely divorced from the rest of the world market.
This position is not consistent with those you quoted. It is contradictory.
So are you really asking me to answer to you a question whose base logic is contradictory to your own? So what if I do, any answer would have to be wrong in your mind because the base presuppositions of the question are contradictory to your position.
Or, as is more likely, as I said above you don't understand. It appears you don't even understand your own argument enough to see when you contradict yourself.
Oh, and take note yourself. I tried to keep this discussion on a narrow track. One point at a time and distilled down to a single disagreement point. You whined and bitched that other issues weren't being addressed. So I addressed those other issues. What do I get in return? More crap thrown out - that if I don't address you can accuse me of ignoring. Bullshit. Let me introduce to you a new term for your logical fallacies list:
Shotgun argumentation - the arguer offers such a large number of arguments for their position that the opponent can't possibly respond to all of them.
Add in the occasional red herring you throw out that's just beyond the scope of the actual topic.
Although I understand the red herrings. If you don't truly understand what you are talking about, then you can't make a accurate assessment of what is really relevant or not..... That doesn't mean I need to reply to every one of them though.
The problem here, GD, is that you and I are having two different discussions. You want to have one in which you prove me wrong. I want to have a discussion about all the various factors that go into gas prices and why drilling here won't lower gas prices.
I'm not interested in proving you wrong. I'm interested in being honest about all available facts and evidence as it relates to this issue.
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