Showing posts with label Gas prices. Show all posts
Showing posts with label Gas prices. Show all posts

Monday, January 12, 2015

You Are Not President


You aren't president and this is not the result of anything you did.

I'm completely shocked that a conservative doesn't understand fundamental economics.

Sunday, July 01, 2012

Say Thanks

Remember a couple of months back when President Obama was secretly plotting to drive up gas prices in order to usher in an area of green and clean energy for all his Solyndra like buddies? (This, along with the same plot to walk guns into Mexico which would, in turn, lead to him being able to take guns away here at home.What a crafty Kenyan!)

Yeah, well, things didn't quite happen that way. 

In case you never heard about it, in April the Obama administration asked Congress to spend $52 million to regulate this speculation. According to the Washington Post, this included the following steps:

• Increase by a factor of six Commodity Futures Trading Commission (CFTC) surveillance and enforcement staff “to better deter oil market manipulation."

 • Boost 10-fold, to $10 million, the civil and criminal penalties against “firms that engage in market manipulation."

 • Give the CFTC authority to increase the trader margins — the amount of their own capital that traders must set aside for each bet. The administration officials said such authority “could help limit disruptions in energy markets,” according to the Post.

So what’s happened since April? Oil ended the month at $106, and as of June 22, it had lost 21 percent of its value — sitting at $84. I guess I under-estimated the impact of the CME’s boost in margin requirements for oil speculators. 

As I stated back when this flap started, the problem was never the president. The problem was the speculators. Why?

When regulators raise those requirements, oil speculation becomes less attractive to traders, and they place bets elsewhere. And when margin requirements drop, the traders pile into their oil speculations — confident that they can borrow enough to limit their downside while boosting their upside opportunity.

 In February 2011, when commodities exchanges raised the amount of their own capital that speculators must set aside in order to trade — according to Bloomberg, the New York Mercantile Exchange (NYMEX) increased its margin requirements 20 percent to $6,075 per contract, and the International Exchange (ICE) increased its margin requirement 7 percent to $5,200 – the price of oil fell 10 percent within a few months.

And a year later, the commodities exchanges cut the amount of capital that speculators need to set aside before trading — the Chicago Mercantile Exchange (CME) cut by 9 percent to $6,885 the amount that Nymex crude speculators have to post to trade the so-called front-month contract, according to MarketWatch – leading prices to soar to $109 that month.

A fine example of how the government can sometimes improve market outcomes and increase market efficiency. These speculators weren't actually trading in oil and were distorting the market. 

So, the next time you fill up at the pump. thank the president for implementing this plan. After all, he is saving you hundreds of dollars a year!

Friday, March 23, 2012

Somehow, In Their World...

A recent article in the New York Times offers an excellent summation of how truly exciting the future will be in regards to energy in this country.

Across the country, the oil and gas industry is vastly increasing production, reversing two decades of decline. Using new technology and spurred by rising oil prices since the mid-2000s, the industry is extracting millions of barrels more a week, from the deepest waters of the Gulf of Mexico to the prairies of North Dakota. 

That's right. And it's simple fact that has driven the right in this country to paranoid fits about the president and the Democrats. How dare they not act like a bunch of granola eating tree huggers?

Taken together, the increasing production and declining consumption have unexpectedly brought the United States markedly closer to a goal that has tantalized presidents since Richard Nixon: independence from foreign energy sources, a milestone that could reconfigure American foreign policy, the economy and more. In 2011, the country imported just 45 percent of the liquid fuels it used, down from a record high of 60 percent in 2005. 

But no, say it ain't so! Somehow they must be plotting and restricting access to energy reserves, right?


The domestic trends are unmistakable. Not only has the United States reduced oil imports from members of the Organization of the Petroleum Exporting Countries by more than 20 percent in the last three years, it has become a net exporter of refined petroleum products like gasoline for the first time since the Truman presidency. 

The natural gas industry, which less than a decade ago feared running out of domestic gas, is suddenly dealing with a glut so vast that import facilities are applying for licenses to export gas to Europe and Asia. 

National oil production, which declined steadily to 4.95 million barrels a day in 2008 from 9.6 million in 1970, has risen over the last four years to nearly 5.7 million barrels a day. The Energy Department projects that daily output could reach nearly seven million barrels by 2020. Some experts think it could eventually hit 10 million barrels — which would put the United States in the same league as Saudi Arabia. 

Alright, well, what does the energy sector think?

“We’re having a revolution,” said G. Steven Farris, chief executive of Apache Corporation, one of the basin’s most active producers. “And we’re just scratching the surface.”

Today, more than 475 rigs — roughly a quarter of all rigs operating in the United States — are smashing through tight rocks across the Permian in West Texas and southeastern New Mexico. Those areas are already producing nearly a million barrels a day, or 17 percent more than two years ago. By decade’s end, that daily total could easily double, oil executives say, roughly equaling the total output of Nigeria. 

So, why is the right continuing to insist that the president is trying to block energy output? Especially in light of this information?

Mr. Obama’s current policy has alarmed many environmental advocates who say he has failed to adequately address the environmental threats of expanded drilling and the use of fossil fuels.

Well, Paul Krugman has the answer. 

This claim isn’t just nuts; it’s a sort of craziness triple play — a lie wrapped in an absurdity swaddled in paranoia. It’s the sort of thing you used to hear only from people who also believed that fluoridated water was a Communist plot. 

Sadly, I have experienced this in comments with some folks who can't seem to understand this basic fact.

Simple economics suggests that if the nation is producing more energy, prices should be falling. But crude oil — and gasoline and diesel made from it — are global commodities whose prices are affected by factors around the world. Supply disruptions in Africa, the political standoff with Iran and rising demand from a recovering world economy all are contributing to the current spike in global oil prices, offsetting the impact of the increased domestic supply. 

Why it is so difficult to understand the concept of a world market perplexes me.

It must (as is usually the case) the fact that the paranoia about Barack X has taken over. Somehow, in their world, this...

The newfound wealth is spreading beyond the fields. In nearby towns, petroleum companies are buying so many pickup trucks that dealers are leasing parking lots the size of city blocks to stock their inventory. 

Housing is in such short supply that drillers are importing contractors from Houston and hotels are leased out before they are even built. Two new office buildings are going up in Midland, a city of just over 110,000 people, the first in 30 years, while the total value of downtown real estate has jumped 50 percent since 2008. With virtually no unemployment, restaurants cannot find enough servers. Local truck drivers are making six-figure salaries. 

“Anybody who comes in with a driver’s license and a Social Security card, I’ll give him a chance,” said Rusty Allred, owner of Rusty’s Oilfield Service Company. 

is not happening.


As Jon Stewart says, "The Republican Party...rooting for America to fail since 2008."

Wednesday, March 21, 2012

Still More Facts

In many ways, I'm very happy the energy issue is out front and center right now in public debate because we are starting to see more articles like this.

More US drilling didn't drop gas price

A statistical analysis of 36 years of monthly, inflation-adjusted gasoline prices and U.S. domestic oil production by The Associated Press shows no statistical correlation between how much oil comes out of U.S. wells and the price at the pump. Political rhetoric about the blame over gas prices and the power to change them — whether Republican claims now or Democrats' charges four years ago — is not supported by cold, hard figures.

Oh really? 36 years you say?

Seasonally adjusted U.S. oil production dropped steadily from February 1986 until three years ago. But starting in March 1986, inflation-adjusted gas prices fell below the $2-a-gallon mark and stayed there for most of the rest of the 1980s and 1990s. Production between 1986 and 1999 dropped by nearly one-third. If the drill-now theory were correct, prices should have soared. Instead they went down by nearly a dollar.



Sometimes prices increase as American drilling ramps up. That's what has happened in the past three years. Since February 2009, U.S. oil production has increased 15 percent when seasonally adjusted. Prices in those three years went from $2.07 per gallon to $3.58. It was a case of drilling more and paying much more. U.S. oil production is back to the same level it was in March 2003, when gas cost $2.10 per gallon when adjusted for inflation. But that's not what prices are now.

.But what about Keystone?

Supporters of the controversial Keystone XL pipeline say it would bring 25 million barrels of oil to the United States a month. That's the same increase in U.S. production that occurred between February and November last year. Monthly gas prices went up a dime a gallon in that time. 

Facts, folks. These are facts. Read the entire piece as it contains many more hard statistics.

And what is it again that affects prices?

That's because oil is a global commodity and U.S. production has only a tiny influence on supply. Factors far beyond the control of a nation or a president dictate the price of gasoline.

Why is that so difficult for people to understand? Oh yes, that's right...Barack X and his army of killer robots that are destroying free enterprise in this country.

Of course, the ultimate irony here is that I'm beginning to think that supporters of increased domestic drilling are under the impression that the United States government would own the oil. They wouldn't, of course, because that would be socialism, right? So, the companies that would own the oil would be able to sell it on the free market.

Where do you think they would go and sell it?

Tuesday, May 10, 2011

This Guy Is the Shiznit

I found a new blog I plan on making a daily stop. Jim Wright is money. Period.

The part about this post that struck me was this:

Blowhard: Yeah. Whatever. We got him. It only took twenty years, it’s time for Barry to quit grandstanding. Gas is five dollars out in the Valley! (speaking of football, who just moved the goalposts? Zoinks! It’s weird old Mr Jenkins, the airport maintenance man!)

Dude: Exactly! It’s five dollars! When’s Oblamo going to do something about that? (And I’d have gotten away with it to, if it wasn’t for you rotten kids!)

Me: So, you guys are communists then?

Dude: (looks at me like I said “gay” instead of “communist”)

Blowhard: (looks at me like I just said “gay liberal vegetarian tree-hugging evolutionist who gives $5 hummers at the truck stop” instead of commie.”)

Me: Because, you know, that’s what it is when the government controls the price of stuff. Marxism. (Rut roe, Shaggy!)

Blowhard: The president can lower the price of gas if he wants to! He just doesn’t want to.

Me: Again, I don’t think you understand the concept of a free market. You’re saying that the president sets the price of commodities like gasoline? I’m pretty sure that’s not how capitalism works.

Yep, that's not how it works. Yet, President Obama is still getting the blame for high gas prices. My question is why. As has been said many times on here, the president and the government should not be running the economy. That's the job of the free market, right? To take care of itself. But when it doesn't, do the oil companies get the blame? The financial sector? Nope. The government does. It always gets the blame and rarely gets the credit. What a load of shit.

I've also been told several times on here that the president can't do much about the economy. If that's the case as well, again, why is he getting the blame? Why should we even talk about his economic policies?

Wednesday, May 04, 2011

Drill Baby Dr-hey, waitaminute!

Yeah, it's great that we got bin Laden but how about those gas prices? Not allowing any sort of victory for the Obama administration, the GOP and pundits are moving on to the soaring gas prices we see around our country. They are right about one thing: gas prices are high. After that, they are pretty much wrong about the rest of it.

Their solution is domestic drilling and they fault the Democrats for not allowing it to happen. If we drilled more here, they say, prices would go down and all would be well and good. As is often the case, they are completely full of shit. Here's why.

Take a look at this graph.

The blue line shows the average price of gas in the United States. The red line shows the average price of gas in Canada. The green line is the price of crude oil. Canada is a net exporter of oil meaning they export more oil than they consume. They export around 3.3 million barrels a day and consume 2.2 million barrels a day. So, even with their abundance of oil and smaller population, they still have higher prices than we do. In other words, drilling and keeping more of their own oil hasn't helped them at all. They still pay more for gas.

So why are gas prices so high and why can't drilling help us? To put it simply, that's the marketplace for oil. Whatever extra we would produce would be insignificant in comparison to what the world consumes. In addition, OPEC would likely cut production to match what we were producing.

"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."

Simplistic indeed...almost as if a child came up with it.

It's pretty clear to me what needs to happen. The first thing we need to do is unshackle ourselves from the global marketplace. This can be done with new forms of energy. Unfortunately, one party is stomping their feet and acting like a red faced bully on this one. The second thing we need to do is reveal that the oil industry is gauging prices. That's why I'm happy to report that President Obama is looking into this issue. In fact, I think this investigation should be on the same level as Harry Truman's quest to eliminate fraud and price gauging in the defense industry. Ending oil subsidies for oil companies should also be part of this.

Finally, we need to simply stop buying gas. Easier said than done, I know, but it is a way that the free market can fix this with less demand. I've made a conscious effort to not use as much gas. So has Last In Line. People need to adjust their behavior and maybe bike, walk or take a bus. Lord knows there are many Americans who could use the exercise.