Saturday, May 17, 2008

Penny Wise and Oil Foolish

WOW! The Democrats must have finally taken a course in Economics 101. There, they must have "learned" all about the Law of Supply and Demand. Otherwise, they wouldn't be trying to increase the supply of oil in this country by suspending additions to the Strategic Petroleum Reserve (SPR). Nancy Pelosi says that a savings of 5 cents or more per gallon of gasoline could be achieved by suspending those additions; a total of 70,000 barrels a day (See Full Story).

Sadly, an average gallon of gasoline went up by more than 8 cents in just the last week. So, Pelosi's idea of saving 5 cents a gallon might buy us about 3 or 4 days worth of actual savings this summer; assuming that gasoline is rising at a rate of nearly a penny a day. At the same time, we won't be adding to the SPR. This could make us vulnerable in the case of any future disaster that would disrupt energy supplies to the United States. Of course, who's to say that OPEC (the Organization for the Petroleum Exporting Countries) just won't cut their production output by 76,000 barrels a day. Then, there would be no savings to Americans at the pump.

As I had mentioned before, I think the most "amazing" thing out of this story is that there has been a quiet admission by Democrats (like Pelosi) that supply will lower prices. Certainly, their conservation and "green" energy bill of 2007 did nothing to do that. Since passing that bill, oil has risen from $87 a barrel to today's $127 a barrel; a 45+ percent increase in less than 6 months. The sextupling of ethanol in that energy bill has "just" caused food shortages and food prices to skyrocket while prices of the pump have risen; unabated.

If only they would take that "supply" realization to heart and begin exploring/drilling off the coasts of Florida and California and begin drilling in the Arctic National Wildlife Refuge. There is an estimated 60+ years of "domestic" oil supplies sitting in those "protected" areas of this country. Unfortunately, even if they did give the drilling-go-ahead as of today, it would take another 5 to 7 years of exploration, drilling, and production deliveries before oil prices "could" be affected. In the meantime, gasoline prices will probably double or triple from todays prices.

Since 2002, oil prices have risen from $20 a barrel to today's $127; a six and a half fold increase. Exploration has been blocked and no new technologies have been developed to offset the rising demand for energy in this country and in the world. It isn't the oil companies who are at fault. It is our own Congress who is beholding to all those special interest groups like Greenpeace, the World Wildlife Federation, and the Sierra Club.

Conservation and new technologies like solar, wind, and hydrogen will have to be developed in a "parallel path" with increase and new supplies of oil; otherwise millions will suffer. We have 243 million vehicles on the road, along with thousands of airplanes that won't ever benefit from wind, solar, or hydrogen. At the most, those gasoline-designed cars will only burn a maximum of 15 percent ethanol without suffering from the corrosive effects of that fuel. E85 automobiles (ones that burn more than 15 percent ethanol) are specially designed.

Our own energy needs will grow by 45 percent by the year 2030. At the same time, our old and exhausted oil wells are drying up at a rate of more than 2 percent a year. We barely have enough refinery capacity in this country to handle the current demand for gasoline, jet fuels, diesel oil, plastics, fertilizers, etc.; let alone any future demands. We currently only have 132 refineries in America that are capable of producing 16.8 million gallons of gasoline per day, and they are at 99 percent capacity. Since 1981, we as a country have shutdown nearly 200 refineries due to environmental issues. No new refineries have been built thanks to legal maneuvering by environmental groups. India and China are growing and demanding increases in oil at a phenomenal rate. By 2030, it is estimated that those two countries along with the United States will use 1/2 of all the oil production in the world. The Middle East is constantly teetering on widespread war and oil disruption. Nigerian rebels are attacking the oil fields and oil production facilities in that, the 10th largest oil producing country in the world.

If all these factors aren't a formula for a U.S. and worldwide disaster, then, nothing is. Certainly, a measure to save 5 cents on a gallon of gasoline could be easily considered penny wise but, overall, oil foolish.

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