Domestic Drilling Doesn't Decrease Gasoline Prices

Whoops! Solely AP Not MPR by eldavojohn · 2012-03-23 00:06 · Score: 5, Informative

Minnesota Public Radio pulls some choice quotes ...

Submitter here, my mistake on that above source. When I read this in my news feed yesterday, I didn't see the AP markings all around this story. All of it appears to be completely and solely Associated Press sourced. I apologize if that confused anyone.

Noticed that when I was looking to see if anyone had come up with a sufficient rebuttal to this empirical link but aside from a few insane pundits, I didn't find much. The remaining arguments for "drill here, drill now" probably rests on "job creation" (waiting on that fact check) and, according to Thomas McClanahan from the Kansas City Star, it "means fewer dollars going to nasty, unstable regimes and more revenue for the Treasury, especially if the drilling is on public lands." He might be right about lowering the trade deficit but I think there are other things we could stop doing to prevent unstable regimes.

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My work here is dung.

Re:Whoops! Solely AP Not MPR by fotoguzzi · 2012-03-23 00:21 · Score: 5, Insightful

Drilling domestically might not lower the price of gasoline, but perhaps it creates a buffer in case worldwide oil flows are disrupted. That is, if all oil is imported and there is a boycott against the U. S., we are back to 1973, waiting in gas lines. If a local industry had to begin from scratch, prices would presumably be high for quite a while.

Having at least the ability to drill locally should prevent huge price swings every time there is a panic. The price might rise for a while, but presumably the large oil producing companies would return to the market with slightly lower prices.

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Their they're doing there hair.
Re:Whoops! Solely AP Not MPR by arth1 · 2012-03-23 00:26 · Score: 4, Insightful

I think you're missing the point, which isn't to drive down oil prices, but to make the country less reliant on foreign oil imports and to improve trade deficits.
That's a laudable goal, but unfortunately it doesn't help the consumer, it just helps the Rockefellers and Gettys.
Why? Because it's a piss in the ocean. If you have a street full of limonade sellers who sell it at 99 cents per cup, and you have a limited amount that you can sell at 50 cents, you won't do so. There's not enough of your product to have an effect on the market price. So your price will converge towards the common price.
How to make it benefit the public, then, in the short term? Regulation and taxation. The oil industries are given special privileges that they don't need. The US of A is no longer in a boom period where incentives were given to sustain the overall high growth. Start taxing them at a reasonable level for using up non-renewable resources that belongs to the country.
Re:Whoops! Solely AP Not MPR by Anonymous Coward · 2012-03-23 00:29 · Score: 2, Funny

my mistake
Hey, hey, stop that! We don't do that sort of thing around here.
Re:Whoops! Solely AP Not MPR by AlecC · 2012-03-23 00:43 · Score: 5, Insightful

Not really, as long as oil is freely traded. If oil spikes from, say, $120 a barrel to $150 a barrel, do you seriously expect US-based producers to turn their back on $30 a barrel extra profit in order to please domestic consumers? They will either export their production or (more likely) expect domestic consumers to pay the market price. It is called the Free Market and the US is supposed to be keen on it. Oil is one of the most transportable, commoditized things around, and the market is world wide.

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Consciousness is an illusion caused by an excess of self consciousness.
Re:Whoops! Solely AP Not MPR by __aasehi2499 · 2012-03-23 00:51 · Score: 2

...and you have a limited amount that you can sell...
The limitations are imagined, otherwise the largest export for the U.S. last year would not have been gasoline.
Re:Whoops! Solely AP Not MPR by aslagle · 2012-03-23 01:04 · Score: 4, Informative

You're artificially conflating oil (a natural resource) with gasoline (a refined product). Yes, you obtain gasoline from oil, but the reason we export it is that we have refining capacity to do so, and export it to countries that don't. Also, don't make the mistake that gasoline is all we get from oil. Pretty much every bit of a barrel of oil is processed at the refinery, from gasoline, diesel, lubricants/grease (possibly even more critical to our economy than fuels) - and when everything else is made, what's left is made into asphalt.
Re:Whoops! Solely AP Not MPR by Jawnn · 2012-03-23 01:38 · Score: 3, Insightful

No.
The term "buffer" implies an excess, something that would provide for the required flow during intermittent disruptions upstream. Given the numbers involved, the impact of any realistic amount of additional domestic production would not be a "buffer".
Now, what actually would have an affect on the price of gasoline is reducing the amount that is exported. Yeah, that's right. We are the refinery for the world. We (the people who live here) get the mess AND the high prices. Such a deal we're getting in this magical "global economy".
Re:Whoops! Solely AP Not MPR by __aasehi2499 · 2012-03-23 01:47 · Score: 3, Insightful

What, and suddenly the 260,000,000 autos out there are supposed to become more fuel efficient? All the people that own those autos are supposed to suddenly buy a more fuel efficient auto? The people who can least afford this option are also the people that can least afford a new auto.
Re:Whoops! Solely AP Not MPR by sycodon · 2012-03-23 01:59 · Score: 4, Insightful

You may blithely dismiss Limbaugh's point but you can't argue against it.
The AP study looks at actual oil coming out of the ground, which is but a small part of the price of oil.
Since oil is a commodity market and markets are subject to the law of supply and demand, producing more oil will impact the market. Last I heard, U.S. production is part of the world wide market.
Also, since speculation is a primary component of the cost of oil, actions that tend to calm the speculative market will undoubtedly reduce the price of oil at least to the extent that the price is driven by speculation.
For you to argue against this is to argue against all the Democrats who were screaming for Bush to tell the Saudis to increase production. And you also would have to ignore the fact that after Bush opened the outer continental shelf to mere exploration, prices came down as speculators considered the fact that there could be more oil on the market. Lest you forget, when Bush left office, the price of a gallon of gas was less than $2 after being in the high $3 range prior to his executive order.
As for job creation, for you to even suspect that additional drilling wouldn't mean tens of thousands of new jobs is like someone suspecting that water isn't wet.

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When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
Re:Whoops! Solely AP Not MPR by ArcherB · 2012-03-23 02:01 · Score: 2

Your post is spot on up until the last sentence. While I'm not railing on you, this is more for the people who think that oil in the US is the US's oil. This is not the case.

Start taxing them at a reasonable level for using up non-renewable resources that belongs to the country.
State or government are other words that could be used in place of "country". It wouldn't change the meaning in the slightest, but I feel it takes a more ominous, but accurate, tone.
The resource belongs to whoever holds the mineral rights. If the government can claim the oil under my land, why can't they claim the food that is grown from the soil on my land? See Collectivisation:

Collectivisation was Stalin's answer to his belief that Russia’s agriculture was in a terrible state. Stalin believed that Russia had to be able to feed itself - hence collectivisation - and that at the very least the peasant farmers should be providing food for the workers in the factories if the Five Year Plans were going to succeed
Now change that to oil:

and that at the very least the oil companies should be providing oil for the workers in the cities and suburbs

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There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
Re:Whoops! Solely AP Not MPR by spxero · 2012-03-23 02:09 · Score: 2

Yes, if the oil was obtained on U.S. soil.
That is a selfish viewpoint, but I don't expect Iran to look out for us over themselves.
We are all running out of time and these guys are making obscene profits as is. I live in West Texas and see this on a daily basis. Other than safety, there is little account for responsible spending. Example: workers that used to check and maintain the pumpjacks are promoted to "manager" and told to call a consulting/maintenance firm to do any repairs, costing a ton more than just using the person that was hired to do the original job.
If they obtain it from U.S. soil, refine on U.S. soil, and sell on U.S. soil there is no reason for a spike for the U.S. caused by world factors.
Re:Whoops! Solely AP Not MPR by swalve · 2012-03-23 02:30 · Score: 2, Insightful

I think he is pointing out that in spite of increased drilling in recent years, the price is still going up. Hence, increased production doesn't help. Because the world demand will eat up any "excess" oil that might reduce prices. The only way to "reduce" the price of gas is to not use as much.

And I think the pipeline *will* get built, just not until it is done right. He only "blocked" the pipeline because the a-holes in congress tried to give him an ultimatum.
Re:Whoops! Solely AP Not MPR by NeutronCowboy · 2012-03-23 03:27 · Score: 4, Insightful

The point is that the US can't meaningfully impact the price of gas. Maybe a few cents here and there, but that's it. The reason the Saudis can do it is because they have an oil extraction infrastructure that is very broad and flexible, as well as oil that is easily accessible. And even they have a hard time to significantly do it on their own. The US has neither, and yet people seem to think that tapping the piddly extra reserves the US has is going to bring us back to $2 a gallon gas. Fucking ridiculous.
The price of gas also came down during an election year, when some team won the Baseball World Championship, and when there were exactly 27 sun spots on the sun. Which one had the most impact? Show your work.

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Those who can, do. Those who can't, sue.
Re:Whoops! Solely AP Not MPR by hipp5 · 2012-03-23 03:56 · Score: 2

Lest you forget, when Bush left office...
...the world economy had just taken an swan dive off a huge cliff. I propose that this had a lot more to do with gas prices than Bush's executive order.
Re:Whoops! Solely AP Not MPR by s73v3r · 2012-03-23 05:11 · Score: 2

The market is giving you a simple signal. CUT YOUR OIL CONSUMPTION.
The problem is, oil consumption in the US is down, and has been for a while. Prices have still gone up. Seems to me that the free market only works for those who want to make a profit off of high gas prices, not for the country as a whole.
Care to try again?

One word by TraumaFox · 2012-03-23 00:08 · Score: 4, Interesting

Speculation. That's what it boils down to, folks. If you really want to see $2.00 gas prices again, outlaw speculation and it will happen overnight. It is absolutely mind-boggling that this practice is allowed with no checks or balances to keep it from driving our gas prices sky high. People will bring up anything else, like gas taxes or domestic drilling, just to draw attention from the real problem. It's almost like no one on either side wants to have that conversation, though.

Re:One word by repapetilto · 2012-03-23 00:12 · Score: 3, Insightful

Outlaw speculation... how will the price be determined?
Re:One word by Anonymous Coward · 2012-03-23 00:12 · Score: 2, Insightful

Good luck legally defining what constitutes "speculation".
Re:One word by TraumaFox · 2012-03-23 00:14 · Score: 5, Funny

We can only speculate
Re:One word by cfulmer · 2012-03-23 00:21 · Score: 5, Informative

Please spell it out: what are the mechanics of speculation driving up gas prices?
Speculators buy and sell futures contracts. Every time they buy a contract, they are betting that the price of oil will go up. But, whenever they buy, somebody else is selling, betting exactly the opposite - that prices will go down. And, recall that speculators eventually have to sell those future contracts (or have 100 tanker trucks pull up to their homes.) When they do, the price will be determined by the actual facts on the group -- how much demand is there, and how much oil is being produced at the time.
Re:One word by TraumaFox · 2012-03-23 00:22 · Score: 3, Insightful

Hopefully by actual supply and demand, rather than what speculators predict future supply and demand will be.
Re:One word by rednip · 2012-03-23 00:23 · Score: 4, Interesting

There are proven ways to reduce the effects of speculation. I know for a fact that increasing margin requirements (the amount of cash you need to put down to hold a contract) is one of them. The trick is getting such tactics passed by a GOP filibuster or (a partially Democratic one when the GOP can't quite hold the line, as Wall Street money is just that good).

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The force that blew the Big Bang continues to accelerate.
Re:One word by jythie · 2012-03-23 00:24 · Score: 3, Insightful

Via the market? Companies selling their product to other companies that use it, rather then speculators inserting themselves between buyer and seller.

Speculation pulls money out of a market and raises prices without adding value simply because people with enough resources are able to force getting their 'share' of whatever is going on. Markets do just fine without speculation, in fact they generally do better with lower prices and greater stability... but fewer useless people getting very wealthy for no other reason then already being wealthy.
Re:One word by LF11 · 2012-03-23 00:25 · Score: 5, Informative

I congratulate you and wish you well in your asbestos underwear!
Speculation is not the problem. The safety net provided by government bailing out the biggest speculators (the big banks) is the problem. Let those folks go out of business like they ought to, and we wouldn't have a speculation problem.
cej102937
Re:One word by TheRaven64 · 2012-03-23 00:29 · Score: 4, Insightful

The same way it was before the USA deregulated commodities speculation about 15 years ago. A limited number of speculators were allowed, but mostly the price was determined by supply and demand, i.e. most of the people buying commodities were people who actually needed them, not people who were hoping that they could sell them for a higher price.

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I am TheRaven on Soylent News
Re:One word by XxtraLarGe · 2012-03-23 00:34 · Score: 3, Insightful

Speculation. That's what it boils down to, folks.
No. Speculators play a valuable role in the market, by taking on risk. They don't control the price of any commodity any more than than consumers do.

Gas prices are going to stay at $4 a gallon as long as people are willing to pay it. It's supply and demand. If demand dropped by half overnight, you'd see a precipitous drop in prices as well.

--
Taking guns away from the 99% gives the 1% 100% of the power.
Re:One word by SomeKDEUser · 2012-03-23 00:39 · Score: 5, Insightful

That was the motto of the communist system. Just in case you weren't making your comment tongue-in-cheek.
But there is an important point hidden there. In politics, you will hear "free markets are GOOD", "central planning is BAD". Or sometimes the reverse (in Europe). People forget that the point is to maximise the goods and services produced, as well as their access from everyone.
If you have no idea what to produce, a market is a good idea. If you know exactly what to produce, a market is an idiotic idea: central planning is the way to go. If you know that this good or service will produce a natural monopoly, you should go for either a tightly regulated market (but due to regulatory capture, this is dangerous) or central planning.
In real life, there are also externalities. Tax accordingly so that your market works better. Yes, taxes are a vital component of making markets work: you want the real price to be reflected, e.g. pollution must be paid for by the polluter.
TL;DR : regulation and taxes on externalities are important. Monopolies should be public. Leave the rest to the market if you don't know what is optimal. If you do, get rid of the market. In the future, robotic overlords will and should plan the economy for us.
Re:One word by TraumaFox · 2012-03-23 00:42 · Score: 5, Informative

Speculation and futures bend the rules of supply and demand. Gas prices are not determined by actual supply and demand, they are determined by speculators hedging on low supply in the future. Would you care to explain why despite supply being at an all time high just a few years ago, prices never came down to match? You can't say that it has anything to do with our oil coming from unstable nations; it's been that way for a long time, decades before we ever saw gas prices climb above the $2 mark.
I take it what you're asking is how futures contracts actually impact the market price of anything since they are essentially an artificial market not bound by the laws of supply and demand. When speculators buy enough contracts at above the current market price, oil producers see this and start artificially limiting their supply in hopes that they'll be able to sell it all down the road at that higher price, and that causes the price of oil to go up now. We had an agency called the CFTC put in place specifically to prevent this sort of thing from happening, but what happened? Enron happened.
You remember Enron, don't you? They were instrumental in exploiting a loophole in the CFTC's regulatory powers to allow oil speculators to trade outside of those regulations. As the CFTC lost power, the futures market exploded, and as it has continued to increase dramatically over the past decade, so too have oil prices. You have to be out of your mind to argue that oil prices coincidentallyskyrocketed with the futures market.
Re:One word by repapetilto · 2012-03-23 00:43 · Score: 3, Informative

So, under your system, if I need to buy oil for some purpose, am I allowed to predict that it will be cheaper in a month and wait until then? This really makes no sense to me so I must be misunderstanding.
Re:One word by AlecC · 2012-03-23 00:51 · Score: 2

Rubbish. Speculators cannot hold a massively produced, massively consumed commodity at a high price over a long time. They might be able to profit from sudden price changes - up or down - by anticipating them, but over the long term they can have no effect. Nobody has the money to buy and stockpile a year's oil production.
The reason the price is rising is that much of the easy oil has been pumped, and we are now on to the harder, more expensive, oil. It is a fact of the market that the price of oil is the price of the last gallon pumped. Price will rise as long as demand exceeds supply. Rising prices bring in new producers, unviable at lower prices, but drive out consumers. When they match, the highest cost producer is just breaking even, and lower cost producers are making big profits.
So attempting to solve the problem by adding more, higher cost, producers pushes prices up, while small reductions in consumption can have disproportionate effects on the price as high-cost producers close down and leave the low cost ones. Saudi's marginal production cost is reckoned at about $10-20 a barrel: if we could reduce consumption to their production only, that is the price we would pay.

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Consciousness is an illusion caused by an excess of self consciousness.
Re:One word by nedlohs · 2012-03-23 00:59 · Score: 3, Informative

Speculation also lowers prices when speculators think the future price will be lower.
Speculation also puts money into a market when the speculators get it wrong. If speculators really are pushing up the price of oil above what it "should" be then the oil producers (part of the market) are taking money from the speculators by taking them up on their promise to buy.
Re:One word by icebraining · 2012-03-23 01:08 · Score: 3, Insightful

I don't really like the idea of the government having any excuse for taxes other than to fund itself. Maybe instead the rules should be changed so it is easier for corporations to be sued over externalities or something.
If the externality is not supposed to happen (e.g. oil spill), lawsuits make sense, but if it's an expected event like the fact that you're using a limited resource that belongs to the common, how do lawsuits fit in? It doesn't really make sense to sue someone over that.
If you don't like that the money from those taxes can be used for anything, a better option is to set up an independent organization that can only use the funds for a specific purpose, like one that receives the taxes from tobacco and can only use them for funding lung cancer prevention and treatment.

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Dilbert RSS feed
Re:One word by baegucb · 2012-03-23 01:24 · Score: 3, Insightful

Incorrect. Big banks do invest in oil commodities, and are into it big time. http://online.wsj.com/article/SB10001424052702304563104576359704074143190.html
(I wish I could find the link that expresses it better, but the Wall Street Journal is the first link I could find quickly).
Re:One word by AngryDeuce · 2012-03-23 01:25 · Score: 2

The Executive branch can Vito the Law from the Legislative.
The last time I was Vito'd I spent a week in the hospital. I knew I should have never borrowed that money...
Re:One word by Kokuyo · 2012-03-23 01:27 · Score: 4, Interesting

Please, do correct me if I'm wrong about this, but when I read 'speculation' I don't think 'Waiting for the price to come down to buy the goods'. I think 'buying paper or digital numbers that represent goods'.
Isn't this the same thing with just about any traded object on Wall street? None of those buyers are interested in owning a part of a company, a few bars of gold or a ton of concentrated frozen orange juice. They just want to act as if they did and then sell this facsimile to some other schmuck who wants to act like that... hopefully at a better price than they payed previously.
I mean, this is like children play-acting supermarket, only that the adults afterwards have to actually pay the prices for milk their children have come up with. And THAT is the problem, because so much capital is sunk that way. This capital doesn't really find its way into the market, after all, unless we, the customers, start paying higher prices for our products. The Wall Street does not generate anything of worth. All their gains must be paid and we are the ones to do that.
And therein lies the problem: As long as people are allowed to speculate this way, prices will not go down. After all, prices going down is not good for Wall Street people... unless they're going up much more right after they bought in. There is only one way for prices to go, if you ask Wall Street.
The whole concept just boggles the mind, frankly...
Re:One word by repapetilto · 2012-03-23 01:46 · Score: 3, Insightful

Maybe oil prices should be skyrocketing and the regulations on speculators is preventing this?
There are two reasons we should expect prices to be higher 10 years from now:
1) Inflation of the USD
2) We are running out of oil
What reason do you have to think the price should drop?
Re:One word by arth1 · 2012-03-23 01:48 · Score: 2

But there is an important point hidden there. In politics, you will hear "free markets are GOOD", "central planning is BAD". Or sometimes the reverse (in Europe). People forget that the point is to maximise the goods and services produced, as well as their access from everyone.
Silly me. I thought the point was to maximize the quality of life of the populace.
Re:One word by dj245 · 2012-03-23 01:59 · Score: 2

Outlaw speculation... how will the price be determined?

It is actually simpler than you probably think. The price will be determined by the people who buy oil.

Right now, if you have enough money, you can buy a bunch of oil. But, there are various methods by which you can own the oil but never have to actually take delivery of it. Usually by placing futures orders which allow them to take delivery of the oil at a specific date in the future, which can be weeks or months from now. All we have to do to get rid of the excessive speculation is require that any oil purchased has to be delivered to the buyer within a short but reasonable period of time. What is a short yet reasonable amount of time? I'm not sure, but several months from now is too long. Maybe a week would be good.

I would love to see a hedge fund manager have to deal with having to take physical delivery of some oil, or have the contract be void. It may not make speculation impossible, but it would make it a lot harder.

The only downside might be that legitimate fuel users could not hedge against price increases so well. Most airlines hedge on oil prices since one of their largest operating costs is fuel. However, any price increase would be related to an actual supply/demand problem and not Rich Uncle Pennybags manipulating the market.

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Even those who arrange and design shrubberies are under considerable economic stress at this period in history.
Re:One word by AngryDeuce · 2012-03-23 02:08 · Score: 2

Is there some law that prevents people from possessing oil?
Joe Wall Street can rent himself some legal storage to keep his oil in while he's trying to sell it just the same as anyone else. Am I supposed to feel sympathy for someone bidding up the price of tens of thousands of barrels of oil knowing full well that he would never actually be able to take possession of it?
If I go down to Home Depot and buy all of the lumber they have in stock, Home Depot isn't going to let me leave it on their shelves while I find other people to sell it to at a profit. They're going to tell me to get my shit out of their fucking store so they can put more unsold lumber out. If I didn't, they'd dump it out back and start charging me storage, as well they should.
I'm not proposing that we limit who can speculate. I'm proposing that we require speculators to take possession of the product they're trading. Why can't they hire someone else to take possession on their behalf? I don't much care what Joe Wall Street does with his oil as long as it is environmentally responsible.
Re:One word by berashith · 2012-03-23 02:42 · Score: 2

or maybe just convince people that they have to use your money to buy something that everyone needs, such as oil. If anyone refuses this, then you could invade them with your guns and enslave them. That is way too far out to think it could happen in the real world though.
Re:One word by JazzHarper · 2012-03-23 02:59 · Score: 4, Informative

Please, do correct me if I'm wrong about this, but when I read 'speculation' I don't think 'Waiting for the price to come down to buy the goods'. I think 'buying paper or digital numbers that represent goods'.
First, speculation can take many forms, and not all of them involve options contracts. Hoarding is also speculation. At the moment, it is quite profitable to hire Suezmax tankers (day rates are quite low), fill them with crude oil and have them travel very, very slowly to their destinations.
Second, there is no objective way to distinguish between hedging and speculation. Selling and buying futures is an essential mechanism for both producers and consumers to manage risk. Wildly fluctuating prices, which is what you would have in the absence of futures contracts, are bad for everyone. Producers would be less inclined to invest (and less able to secure capital) in growing crops or extracting raw materials because they would not know if they could do it profitably. Consumers would not be able to plan their businesses properly, because they would have no control over their input costs. In other words, prices would be much higher across the board in the absence of futures contracts, because of the greater risk aversion of both producers and consumers.
Third, futures contracts do not tie up nearly as much capital as putting a commodity into inventory (hoarding), which is what would happen in the absence of futures contracts.
Fourth, in anything other than the short term, futures contracts have neutral effect on commodity price. Futures contracts are written in brackets above and below the expected market price. All the futures do is smooth out the fluctuations. Sometimes that works to the benefit of the producers, and sometimes it works to the benefit of the consumers, but neither can hold prices artificially high or low through futures contracts for very long, because the contracts do expire. When new futures contracts are written, the premium at which they are sold reflects the reality of the new supply and demand conditions.
Fifth, this has absolutely nothing to do with "The Wall Street". Energy commodities are traded at the NYMEX, which is on the opposite side of Manhattan from Wall Street, and agricultural commodities futures are traded in Chicago.
In the case of gasoline, part of the problem is that the individual consumer does _not_ have any way of hedging the fluctuations in price through options at the retail level. Individuals have no negotiating power and and must _always_ pay the spot retail price at the pump. It would be very interesting to see what would happen if fixed-price gasoline contracts were offered to individuals (or if individual consumers themselves formed a co-operative to negotiate gasoline contracts with distributors).
Re:One word by repapetilto · 2012-03-23 03:02 · Score: 2

The only reason this works is because the actual, true demand for oil can be counted on to continue rising at a pace faster than the supply. If a sudden breakthrough in solar panels occurred, all those people holding oil futures would get screwed. As long as the government doesn't bail them out, all is fine.
Re:One word by Alioth · 2012-03-23 03:02 · Score: 2

Prices didn't fall because demand was ALSO at an all-time high - it's called supply *and* demand. When demand collapsed, so did the price.

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Re:One word by locofungus · 2012-03-23 03:08 · Score: 2

We could be at a point that even if demand fell off, the traders who last purchased the oil have enough cash that they dont have to actually sell it, they can just wait until demand picks bak up, and always sell high.
It doesn't work like that. Once the future matures you are obliged to deliver or take delivery. Having lots of cash lets you avoid getting wiped out by margin calls due to a temporary dip in the future's price.
A few years ago (3rd October 2006) there were a few trades where the spot price of gas in the UK went negative. Speculators had agreed to take delivery of gas and had left it as long as they possibly could to close out their position. Eventually they were forced to find a buyer for the gas they had agreed to buy.
Tim.

--
God said, "div D = rho, div B = 0, curl E = -@B/@t, curl H = J + @D/@t," and there was light.
Re:One word by SomeKDEUser · 2012-03-23 03:23 · Score: 4, Insightful

This is almost too easy. Energy production can easily be planned, and in fact in most of the world, is planned.
Water utilities can be and are planned. When they are not, disaster ensues.
Land development is planned. Try suggesting that cities should get rid of all zoning laws.
Military procurement is planned. It is always better than a private army.
Essential services such as hospitals are frequently planned.
Money supply through central banking is planned.
Initial telecommunication infrastructure was planned.
Large-scale research is planned. The LHC is not the product of market forces, you know.
Roads are planned.
As to why the government may be better than the market? Easy: the market is trying to solve in an unconstrained way an NP problem (efficient market is true if and only if P==NP ; there is actual mathematical proof of that). However, many solutions are not acceptable to society. The government can avoid them, not the market.
After the greatest economic crisis since the Great Depression, where the economy was basically saved by the intervention (planned) of the government, and in the slow-growth sluggish aftermath caused by the stupid "the markets know" mantra, how can anyone think that markets always know best? were you born this year or put into hibernation those last five?
Re:One word by z4ce · 2012-03-23 03:26 · Score: 2

Huh? Future markets are very much limited by supply and demand. At a given price, you'll only be able to purchase so many futures.
What futures allow is stockpiling oil in dollars rather than in actual physical oil. This can increase demand for oil because to meet those contracts you must have oil. However, it also serves to allow more actual oil on the market. If I'm Southwest and want to hedge my bets on oil I don't have to actually acquire and store 10s of billions of dollars of oil which would be off the market.
Re:One word by repapetilto · 2012-03-23 03:31 · Score: 2

The hedge fund manager would just pay someone else to store it or find a buyer... which is what is already happening.
Re:One word by Qzukk · 2012-03-23 03:38 · Score: 3, Insightful

Fundamentally, this is hard. Take, for instance, fracking. How do people prove that the antifreeze they are pumping from their wells came from the drilling when it could be either a crack in the well casing as it passes through the water table or it could have been dumped 50 years ago in some mechanic's backyard and finally seeped in?
The solution we have chosen is for someone with power to say that if you want to drill a well or run a car shop, you have to follow these regulations. This isn't perfect and half the regulations were reactive and these days companies act like the regulations are the absolute minimum effort to make, but it helps keep disasters from happening before having to figure out who to sue to fix it.

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If I have been able to see further than others, it is because I bought a pair of binoculars.
Re:One word by roman_mir · 2012-03-23 23:54 · Score: 2

Would you care to explain why despite supply being at an all time high just a few years ago, prices never came down to match?
- obviously. I can explain this very easily with one single word, but you can expand my other comment to see more details.
Inflation.

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You can't handle the truth.

False Premise by EmagGeek · 2012-03-23 00:11 · Score: 2

Oil prices do not depend solely on the amount of production in the United States. Oil prices, which drive gasoline prices, depend on many factors in addition to domestic production, such as world wide production, and political tension in producing areas.

Re:False Premise by repapetilto · 2012-03-23 00:17 · Score: 2

The thing is that everyone knows we will run out of the stuff eventually and in the meantime it is getting harder and harder to find and extract. There is no reason to think the long term trend is going to be anything but higher and higher. This leads leads to a positive feedback loop amongst the speculators, but actually this is a good thing.
If the government just set the price of oil we would literally just keep using it up until the point there is none left, it will never be in a politicians best interest to have higher oil prices. Allowing the market (not free) to have an effect on the price will at least put the brakes on (higher and higher prices) before we really run out.
Re:False Premise by bunratty · 2012-03-23 00:19 · Score: 4, Insightful

That wasn't hypothesis, according to TFS. The hypothesis was that drilling more oil in the U.S. would cause gas prices to decrease. In other words, the amount of drilling in the U.S. would be one factor of many, not the sole factor, for determining gas prices. The analysis showed no correlation between drilling in the U.S. and gas prices, so the researchers were not able to find evidence to support the hypothesis.
I see a similar mistake when people try to "disprove" global warming by showing that climate changes naturally. Just because climate changes naturally does not mean that increasing the amount of carbon dioxide in the atmosphere artificially cannot also change climate. Natural factors (such as solar output or the orbit of the Earth) are some factors, and human-casued factors (such as more aerosols or carbon dioxide in the atmopshere) are others. Of course, there is no one factor that determines gas prices or climate.

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What a fool believes, he sees, no wise man has the power to reason away.
Re:False Premise by OeLeWaPpErKe · 2012-03-23 00:37 · Score: 2

How much oil is left is a function of a number of things, like the price. If the government were to mandate $2 prices, we're out of oil. At $4 we've pretty much got the oil we want, but as you say it's getting harder to find every day. Sadly, the prices rise by a factor as time goes on, so the oil price will increase exponentially, not linearly (although $4 may be the result of price perturbations like political tensions, so it's probably not quite at $4 yet ...)
Eventually we'll hit the 1:1 on EROI (energy return on investment) and we'll really be out of oil, despite the fact that there's still more in the ground than the cumulative total ever extracted at that point. But pumping up oil wouldn't gain you energy anymore. Then oil will really be finished. Right now we're at 1:12 according to theoildrum, which sounds good until you realize we come from 1:200. This also means that just a little bit shy of 10% of oil production is today being used just to pump up oil, another one of those numbers that rises exponentially.
Oil will increase in price for a few years yet and remain available, but long before the wells are dry it will become useless. This will happen quite suddenly, in a few years.
Re:False Premise by sunderland56 · 2012-03-23 01:57 · Score: 2

True. Alaska produces massive quantities of oil, but the price of gasoline in Alaska has hit $6 per gallon.
Re:False Premise by phlinn · 2012-03-23 02:24 · Score: 2

No, they don't. The most common cite is 97%. That came from a very flawed study. Among other things, they pared down the original set of respondents down to 79 from over 3000 respondents in order to bring the percentage up. Selection bias much?

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"Pulling together is the aim of despotism and tyranny! Free men pull in all sorts of directions" -- Havelock Vetinari
Re:False Premise by sycodon · 2012-03-23 02:37 · Score: 2

This is what happens when some AP hack is given a computer with Excel on it.

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When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.

Obvious by tbannist · 2012-03-23 00:16 · Score: 3, Insightful

Personally, I would have thought this was obvious. Any additional oil generated by the U.S. is pretty much a rounding error compared to the major producers, with international markets, American oil well are going to want to earn just as much as international sellers, if they had to choose between selling for less domestically or getting more on the international market they're going to go for more. They're essentially required to do so by their shareholders. In the absence of an amazing discovery of vast reserves of cheap, easy to extract, untapped oil reserves, the only way to actually get lower prices would require price controls and subsidies to force the price of gas lower and, frankly, I think that would be much worse than high gas prices.

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Fanatically anti-fanatical

Re:Obvious by LDAPMAN · 2012-03-23 01:54 · Score: 5, Informative

You really shouldn't trust Wikipedia. In 2010 the U.S. produced 9,688,00 BBL/Day which ranks us third in the world behind Saudi Arabia and Russia. Those two did 10,520,00 and 10,270,00 respectively. If you add up the numbers in the link below you will see thats 15% not 9%. For some reason you refuse to believe the U.S. is "major producer". A relatively modest increase in production would have an impact on world supply.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2173rank.html
Re:Obvious by hamburger+lady · 2012-03-23 04:07 · Score: 3, Informative

well, the 9.6MMbbl/day figure is 'all liquids', which includes natural gas liquids, LPG, ethanol and 'refinery gain' (which is an accounting trick used to inflate our domestic petroleum numbers). the actual crude number is noticeably lower.

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Is this the MPAA? Is this the RIAA? Is this the DMCA? I thought it was the USA!

Absurd... by cfulmer · 2012-03-23 00:16 · Score: 5, Insightful

This is the problem when journalists with political agendas pretend to be statisticians. Oil is sold on a global market and goes to many different uses. You cannot look at one part of the supply and say "well, increasing this particular part of the supply didn't affect prices in this other particular market." There are too many other factors to consider: How much oil did other countries use? How much oil was diverted to purposes other than producing gasoline, such as plastics or heating oil? What happened to production in other areas? NONE of this is accounted for in this silly "analysis." Most telling? The analysis excluded the oil shocks of the early 1970's. Why? That was the clearest time that domestic gas prices (and supply) are driven largely by the global oil market. Yet, this analysis is being put into papers all across the US. For what purpose? Could it be to deflect criticism from the Presidents' drilling policies? When an analysis concludes "therefore, the basic laws of economics don't apply," then just like one that says "therefore, the law of gravity doesn't apply," our first instinct should be to question the analysis, not the basic laws.

Re:Absurd... by joelwhitehouse · 2012-03-23 00:22 · Score: 2

When an analysis concludes "therefore, the basic laws of economics don't apply," then just like one that says "therefore, the law of gravity doesn't apply," our first instinct should be to question the analysis, not the basic laws.
Exactly. Supply and demand is still in effect here. A sufficient increase in supply of crude oil will lower the price of refined petroleum products.
Re:Absurd... by cfulmer · 2012-03-23 00:27 · Score: 3, Insightful

As I posted elsewhere, please spell this out, because it just doesn't make sense. How do speculators increase the price of oil? What are the mechanics involved? Recall that every time a speculator bets that the price will rise by buying a futures contract, somebody else is betting that the price will fall, by selling a futures contract.
Re:Absurd... by cfulmer · 2012-03-23 00:46 · Score: 2

This is not responsible reporting. Anything that increases global supply will cause prices to fall, if you hold everything else constant (i.e. compared to where they would have been if you had not increased global supply). Domestic drilling is intended to increase global supply. The problems with the article were (1) it didn't look at global supply -- only domestic production, and (2) it didn't hold everything else constant.
Re:Absurd... by medcalf · 2012-03-23 00:54 · Score: 2

Yes, and the first change you will see is much higher volatility in prices, followed by likely shortages. Then people like you will blame this on "market failure" and call for price fixing. If the government does that, then you'll see real shortages. Fundamentally, futures trading acts to stabilize the supply of goods and guarantee future flows.

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-- Two men say they're Jesus. One of them must be wrong. - Dire Straits
Re:Absurd... by Ozeroc · 2012-03-23 01:22 · Score: 2

Here's a fairly decent breakdown: http://money.howstuffworks.com/oil-speculation-raise-gas-price.htm

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Re:It's because it's a WORLD market by mrbester · 2012-03-23 00:18 · Score: 2

I'd bet you'd get a lot more than $100 a barrel if you sold it to a Jovian moon as the transportation costs are literally astronomical.

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"Wait. Something's happening. It's opening up! My God, it's full of apricots!"

Yeah, the AP Is Really Shilling for Obama, HA! by eldavojohn · 2012-03-23 00:23 · Score: 4, Informative

you now have glowing articles in the state-controlled Associated Press shilling for the administration

Really? Did you catch this part of the article:

Politicians - especially those in the party that's not occupying the White House - have long harped on high gas prices when expedient. Then-Sen. Barack Obama said in 2008, when he was running for president, that "here in Ohio, you're paying nearly $3.70 a gallon for gas, 2-1/2 times what it cost when George Bush took office."

But Obama, who has seen gas prices go up 73 percent since he took office, was singing a different tune last week in his weekly radio address: "The truth is: The price of gas depends on a lot of factors that are often beyond our control. Unrest in the Middle East can tighten global oil supply. Growing nations like China or India adding cars to the road increases demand. But one thing we should control is fraud and manipulation that can cause prices to spike even further."

Sort of makes him sound like a two-faced idiot to me. On the campaign trail he promised to fix all this and now he's in the same spot as Bush with the same damned effect on gas prices!

And the idiocy of calling the AP "state owned" is really funny considering you just said they ripped on Bush and Cheney about a conspiracy. Hello! For 8 years, Bush and Cheney were president and vice president. If the AP was state owned and if they ruled for 8 years, why didn't they just dissolve it after publishing all those "conspiracy theories" you stated? The AP is a Not-for-profit cooperative that has been around since May of 1846 -- 15 years before the start of the American Civil War!

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My work here is dung.

Re:Yeah, the AP Is Really Shilling for Obama, HA! by necro81 · 2012-03-23 01:29 · Score: 2

Sort of makes him sound like a two-faced idiot to me
No, it just makes him sound like a politician; very similar to all those that want his job.

Problem, besides factcheck speculation here by OeLeWaPpErKe · 2012-03-23 00:31 · Score: 3, Insightful

Ok, now implement this in China. If you do it in the US alone it will have exactly zero effect.

Frankly, the link between oil prices and speculation is another thing that should be fact checked. Unless I'm missing something the only thing that adds significantly to the price of oil (aside from US sales and oil taxes, things that matter more than a few cents, however rich you think ExxonMobil is, their cut out of your $4 is 2-3 cents) is the money taxed out of it by the insanity that is the saudi government. And even that amount is dropping rapidly according to theoildrum.com.

So pretty much the only action that would have any chance of dropping oil prices more than $0.10 or so would be to invade a few countries in the middle east. And China wouldn't let the US do that. Do you really think that the massive inefficienciency that these regulations would impose would be less than the 2-3% that speculation + refining + transport + ... is today ?

Do not take this that I support speculation as an activity in itself. It's morally reprehensible when you think about the fact that a lot people need oil to avoid freezing to death. Then again, given that, speculation is not nearly as reprehensible as driving a Ferrari, or driving where you could walk or bike.

Re:Problem, besides factcheck speculation here by AngryDeuce · 2012-03-23 01:21 · Score: 2

Ok, now implement this in China. If you do it in the US alone it will have exactly zero effect.
China has just as much interest in cheaper gasoline as the U.S. does. I'm sure China would be among the first to cheer if Wall Street wasn't able to pump the cost of a barrel of oil up months before it's even sucked out of the earth.

A Few Notes on Your Suggestion by eldavojohn · 2012-03-23 00:32 · Score: 4, Insightful

Drilling domestically might not lower the price of gasoline, but perhaps it creates a buffer in case worldwide oil flows are disrupted. That is, if all oil is imported and there is a boycott against the U. S., we are back to 1973, waiting in gas lines. If a local industry had to begin from scratch, prices would presumably be high for quite a while.

You're right but I would like to point out two things. One is that you seemingly forgot to mention the Strategic Petroleum Reserves that were created after that boycott. Despite what pure capitalists say about its influence on the market, this reserve still exists and has come in handy for taking "loans" out of during catastrophes. This would help us transition from foreign dependence to massive drilling at home.

The other thing is that we actually do a lot of our own oil refining (especially in Texas). So, it's not like we're missing that huge part of the infrastructure, we import the crude and refine it on our soil. So really what we're missing is just the crude pipeline. The "local industry" you speak of is actually mostly already here to support us, all that's missing is the source and transportation of the crude (since it would probably flip from cargo ships to trucks initially?). What it comes down to is how long would it take a company to drill and lay pipeline? Probably not very long ... they have crazy revenues.

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My work here is dung.

Re:A Few Notes on Your Suggestion by __aasehi2499 · 2012-03-23 00:45 · Score: 5, Informative

There's a third thing to consider, that being that last year the U.S.'s largest export was....gasoline! It comes down to the fact that the U.S. is using less gas, and instead of lowering prices to encourage more consumption to increase profit margins, the gas companies sell it off outside the U.S., largely to South America, keeping prices high.
Re:A Few Notes on Your Suggestion by Archimagus · 2012-03-23 00:47 · Score: 5, Insightful

I think the big thing we need to do is figure out WHY the prices don't come down from domestic drilling. I would bet it doesn't have nearly as much to do with the cost of drilling, and way more to do with the fact that people on Wall Street decide what a barrel of oil is worth, it doesn't matter where it comes from.
Re:A Few Notes on Your Suggestion by gtall · 2012-03-23 00:59 · Score: 3, Informative

It's a world oil market, Wall Street is only one input. Also, OPEC, while weakened, does control a good part of the supply. Other producers more or less keep in line with OPEC because to dump a lot of oil on the market would decrease the price. There is a long term push for an oil supply crunch due to China, India, and the rest of SE Asia become more industrialized. Add to that the instability of the mideast pushing up insurance rates, that the price remains high is not too difficult to comprehend.
As someone above mentioned, the U.S. is also a net exporter of refined oil products, i.e., gas. There isn't any mystery here either. American consumption is down because of the recession and increased use of more fuel efficient cars. Gas is also an international market. So refiners sell into that market, not strictly the domestic market.
Re:A Few Notes on Your Suggestion by fotoguzzi · 2012-03-23 01:07 · Score: 3, Interesting

My comments were based on the idea of: if it doesn't lower prices, why should the U. S. be in the oil business?

The petroleum reserve was designed for major catastrophes. Apparently in its history, total draw-downs have only amounted to around ten percent of the total capacity.

So that is one piggy bank that really hasn't been raided unduly. Thanks for bringing it up! It would be interesting to know if the market considers that large withdrawals could be made or if a major withdrawal would actually cause prices to fall.

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Their they're doing there hair.
Re:A Few Notes on Your Suggestion by theguyfromsaturn · 2012-03-23 01:13 · Score: 5, Insightful

It's a global commodity. There is no way that domestic production can change the global price if global production is declining. Globalisation ensures that your suppliers can sell to the highest bidder, and as capitalists, they'd be crazy not to.
Second, it IS expensive to drill in deep water. Not only in immediate costs, but in potential costs of litigation. You have to prepare you nest egg with that in mind. BP certainly convinced everyone in the industry of that fact. You cannot calculate only the immediate profit, but must consider that in the long term the risk of an evironmental catastrophe will hit you, and you can't reduced your profit margin, even if you were so inclined.
The bottom line is, consumers have to get off the drug. The days of free fossil fuel are over anyways (whatever those idealistic economists who obviously still believe in the tooth fairy will tell you). Suck it up, plan in consequence. Give up the macmansion in the suburb and think of a more reasonable lifelstyle. Don't blame others for what YOU can change? Fuel is expensive? Don't buy it.
(I know, we are all affected by indirect cots of other products we can't do without, but we can certainly reduce that impact by changing our behaviour anyways).

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I like my dinosaurs feathery, and my pterosaurs hairy (or is it pycnofibery?)
Re:A Few Notes on Your Suggestion by DigiShaman · 2012-03-23 01:14 · Score: 5, Insightful

Oil is fungible

"Oil is a fungible commodity, sold on the global market to the highest bidder, as McAuliff points out."
It has nothing to do with some grand conspiracy. It's a simple matter of supply and demand. America is competing on the world market for cheap energy. The locality of drilling only determines who gets first sale profits and the quality of the crude. Other than that, the highest bidder gets the oil. Simple as that.
Now personally, I think we should maintain our strategic reserve for times of natural disasters and regional conflict (war). The idea of tapping into it to spook the speculators is flat out wrong. It's also not working anymore. The hedge fund managers are starting to become immune to this political tactic.

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Life is not for the lazy.
Re:A Few Notes on Your Suggestion by craigminah · 2012-03-23 01:29 · Score: 2

I don't know much about the economics of drilling in the USA vs not drilling but they say we have more offshore oil than Saudi Arabia has onshore. Drilling that would at least stabilize our oil plus we'd spend those billions or trillions of dollars in the USA instead of overseas in countries that generally dislike us. Oil may not change noticeably in price but we'd keep a lot of the money spent on oil within our borders (this is a big part of the perks of the Canada/USA pipeline).
Re:A Few Notes on Your Suggestion by rjhubs · 2012-03-23 01:45 · Score: 2

If at the pump you had the choice between a global list of gasoline suppliers then yes, all prices would be very similar. Since in a town you only have the choice between a couple local suppliers prices vary.
Re:A Few Notes on Your Suggestion by Anonymous Coward · 2012-03-23 01:53 · Score: 2, Insightful

Oh, the future's not going to be a happy place for you.
Your nagging is already widely ignored everywhere but in the U.S. and Europe and even in those two places your tedious presumptuouness is eroding the support you garnered by taking on the pose of responsibility.
Petroleum isn't a drug and we're not addicted. It's a worthless gunk that, given an admixture of the magic ingredient, free enterprise, turns into wealth.
Since there never were any "days of free fossil fuels" those days never occured so aren't behind us. It's always cost money to find/drill/refine/transport petroleum but as the use of petroleum's made humanity wealthier we can access petroleum that was previously beyond our reach and, this is most important, at a profit. As for "giving up the macmansion in the suburb", how other people live isn't your concern no matter the clever rationalizations you devise to justify lecturing others on how to live our lives. Gasoline's expensive, in no small measure, because people with your conceits have managed to bend the political process to your demands which, I'm pretty sure, you're proud of.
Now your palid saviour is looking like one of the results of those conceits might just be a problem for him as he stands for re-election. So the narrative has to be diseminated that piling all sorts of costs on the production of petroleum doesn't have any effect on the cost of one petroleum product. I suppose you've got to try that gambit but as the rising pitch of the rhetoric emenating from the White House indicates, it's not really that good a tactic. That's why President Obama's claiming that petroleum production's risen during his term.
The fact is correct, it's just the implication, that he's in favor of increasing petroleum production, that's the lie. Care to guess why he has to make that claim? It's not because your enviro-nobility is a hot commodity any more.
Re:A Few Notes on Your Suggestion by __aasehi2499 · 2012-03-23 01:58 · Score: 2

You are mixing your commodities. Oil is a raw good, and gasoline is a refined good. Once a product has been refined, it is no longer on the same market and can't be compared to the raw good any longer. We already know that profits are high on gasoline, and the companies that sell the stuff wish for them to remain high, when the U.S. stops buying because it's too high, the companies wish to keep making high profits instead of meet the domestic market where it is, so they sell to an international market.
Re:A Few Notes on Your Suggestion by Capt+James+McCarthy · 2012-03-23 02:10 · Score: 2

Oil is fungible

"Oil is a fungible commodity, sold on the global market to the highest bidder, as McAuliff points out."
It has nothing to do with some grand conspiracy. It's a simple matter of supply and demand. America is competing on the world market for cheap energy. The locality of drilling only determines who gets first sale profits and the quality of the crude. Other than that, the highest bidder gets the oil. Simple as that.
Now personally, I think we should maintain our strategic reserve for times of natural disasters and regional conflict (war). The idea of tapping into it to spook the speculators is flat out wrong. It's also not working anymore. The hedge fund managers are starting to become immune to this political tactic.
Agreed. And I think there is another point that is missed on the consumer. If you owned an oil company or you have stocks in said petro company where is your incentive to lower prices? There isn't any. You are making cash hand over fist. I mean, no one is bitching about he cost of their IPad when Apple is sitting on a 100 billion worth of cash. But then again, some folks think Apple is "green."

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There are no loopholes. It's either legal or it's not.
Re:A Few Notes on Your Suggestion by berashith · 2012-03-23 02:22 · Score: 4, Insightful

there have been documented cases where the global demand has gone down and the global supply has gone up, and yet the prices have increased. There is something else at work beyond simple supply and demand.
Re:A Few Notes on Your Suggestion by afidel · 2012-03-23 02:31 · Score: 2

The reason we are a net exporter of gasoline is the cheap natural gas that has come online in the last few years. Mexico is shipping crude to the US to be cracked and then transporting the gasoline back home because it is cheaper than using part of each barrel to create the heat to do the cracking themselves.

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There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
Re:A Few Notes on Your Suggestion by mcgrew · 2012-03-23 02:36 · Score: 2

Also, last year was the first time since 1949 that we exported more oil than we imported.

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Free Martian Whores!
Re:A Few Notes on Your Suggestion by Kagato · 2012-03-23 02:37 · Score: 5, Interesting

Very true. Which is why Keystone is going to the golf coast. So that the crude can be refined and then loaded onto ships and sold overseas. In fact there's a $2bn anual tax incentive to take canadian crude and ship it overseas. Long term the US tax payer is the one that pays for the Pipeline via tax incentives.
If you wanted to lower gas prices in the US you would pass the Pickens Plan (the bi-partisan Natural Gas Act that was recently filibustered in the senate by those beholden to big oil) to convert comercial semi's to Natural Gas (by the way the original conversion from gas to diesel took 5 years). And then you tax the crap out of petroleum exports. You put those tax dollars into renewables and building a hydrogen infrastructure.
By the way one of the biggest by-products of natural gas production is hydrogen. So if we're going to push natural gas we might as well collect and distribute hydrogen the same time. Supply and demand at work.
Re:A Few Notes on Your Suggestion by afidel · 2012-03-23 02:42 · Score: 3, Insightful

Risk, there is a very large risk premium built into the pricing of crude. It's kind of the inverse of how the value of a fiat currency fluctuates.

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There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
Re:A Few Notes on Your Suggestion by repapetilto · 2012-03-23 02:43 · Score: 3, Insightful

Yes, it is called speculating on the future supply and demand. One is widely expected to go down and the other is widely expected to go up. The spot supply and demand estimates are only part of the equation.
Re:A Few Notes on Your Suggestion by michael_cain · 2012-03-23 02:46 · Score: 4, Informative

Use more precise terms for clarity, please: we exported more finished petroleum products (diesel, gasoline, etc) than we imported. OTOH, of the finished products we consumed in the US, some 45% were still refined from imported crude oil. And some part of the finished products exported from our refineries were derived from imported crude. The US continues to be the largest crude oil importer in the world, and is heavily dependent on imported crude to provide for domestic consumption.
Re:A Few Notes on Your Suggestion by khallow · 2012-03-23 02:57 · Score: 2

The days of free fossil fuel are over anyways (whatever those idealistic economists who obviously still believe in the tooth fairy will tell you).

Those days and those economists never existed. I gather you probably meant "cheap oil". But the transition to "expensive oil" automatically fixes the problem of weaning consumers off the "drug". As those "idealistic economists" would tell you, if you were listening.

Suck it up, plan in consequence. Give up the macmansion in the suburb and think of a more reasonable lifelstyle. Don't blame others for what YOU can change? Fuel is expensive? Don't buy it.
Or continue to live in the suburbs and pay a little extra for gas or whatever your car happens to use. There's not going to be a lot of drama in the long term unless some politicians try to go Pol Pot on the suburbs and force people to move elsewhere for ideological reasons.

(I know, we are all affected by indirect cots of other products we can't do without, but we can certainly reduce that impact by changing our behaviour anyways).
It's all about poorly thought out behavior modification. Maybe we should see what the problems actually are before we start modifying other peoples' behavior?
Re:A Few Notes on Your Suggestion by michael_cain · 2012-03-23 02:58 · Score: 4, Informative

Yes, and as the US is still heavily dependent on crude oil imports, the supply variable to look at is not global production, but global net exports -- because we can't import oil if no one is exporting. There is a long-term trend of the producing countries consuming more of their own production and exporting less. Global net exports peaked in 2005, and are down by more than 3 million barrels per day since then. The US, Europe, Japan, China and India are all oil importers, and are all bidding for a shrinking supply of the available exports.
Re:A Few Notes on Your Suggestion by chill · 2012-03-23 03:00 · Score: 3, Informative

No, it isn't. If you can't export it then the refineries will just lower production and/or close down. Supply will decrease to meet the lesser demand.
And just wait to see what happens if gasoline becomes significantly cheaper in Mexico and Canada and people are screaming that your proposed U.S. law is keeping prices HIGH.

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Learning HOW to think is more important than learning WHAT to think.
Re:A Few Notes on Your Suggestion by oDDmON+oUT · 2012-03-23 03:00 · Score: 4, Informative

Another thing to consider: The world added 80.1M cars to the gasoline leech line last year alone, every one of which was outside the US (PDF documentation).
Face it, we've exported our bad habits to the world, and now we're going to have to compete for resources we've taken for granted for decades.

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Some days it's just not worth
chewing through my restraints.
Re:A Few Notes on Your Suggestion by repapetilto · 2012-03-23 03:09 · Score: 5, Interesting

It is not an "excuse" for the price. It is people betting that the price will rise more often than that it will fall. There are numerous reasons the price could fall:
1) Huge unexpected oil reserve found.
2) Breakthrough in some alternative energy technology
3) Mass change in lifestyle
4) A Major industry converts to natural gas, etc.
Compare the likelihood of the above with the likelihood of:
1) USD will inflate
2) World population will grow, increasing demand
3) Oil supply will continue to be used up
I think it is likely the price of oil is below its true value.
Re:A Few Notes on Your Suggestion by khallow · 2012-03-23 03:19 · Score: 2

1. Most crude is traded on the 90-day futures market. This is where the speculation issue comes in, as investors try to 'predict' the price 90 days out. World events factor heavily into this speculation. For the most part, speculation is based on supply concerns - which really have never materialized. Taking crude off the furtures markey would prevent a lot of this wild speculation.
So what is so bad about the "wild speculation" that we have to do anything about it? My car insurance company is similarly wildly speculating on the likelihood that I'll have a traffic accident. Such an accident has never materialized... recently. So why do I need insurance?

If there's enough legitimate concern about supply shocks and such (which the futures market demonstrates), then it makes good sense to pay a premium for the product.

It's interesting how one has to reach a bit to find problems on the private side (aside from the usually tussle between people on opposite sides of economic transactions, such as buyers and sellers of gasoline or crude oil), but easily finds a bunch of legitimate obstructions from the government side.
Re:A Few Notes on Your Suggestion by cpu6502 · 2012-03-23 04:02 · Score: 2

The difference between a $500,000 city home versus a $150,000 suburb home will buy a LOT of gasoline for the daily commute. I'll stick with the suburb.
Also I've frequently heard that the U.S. only has enough oil under the ground to survive 60 days w/o outside imports, and then the wells will be dry. We really don't have the ability to become independent (despite what many politicians believe).

--
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
Re:A Few Notes on Your Suggestion by thesandtiger · 2012-03-23 04:15 · Score: 5, Interesting

Speculators. During the crash in 2008 speculators got out of oil in a big way and lo, prices plummeted. As they got back in prices have gone steadily back up.
And sorry to go off on a rant here, but to the larger point...
As far as triggering behavioral changes, I would recommend increasing taxes on gas (we're still much less expensive than Europe) and VASTLY increasing tolls for daily commuters. If you live in the city/suburbs and are commuting to the suburbs/city you are a big part of the problem. If employers want to reap the benefits of cheap real estate in the burbs, let them subsidize workers transit or - MUCH BETTER - make them pay so much that telecommuting is very strongly incentivized.
Spend the increased taxes on improving mass transit and information infrastructure, see consumption drop, and maybe the best part would be more people working from home and being able to spend more time with family instead of wasting hours of their days stuck in traffic to go to a job they could easily do from anywhere with a decent net connection (for the most part).
Fuel costs would stabalize or go down for long-haul uses and things like food production while purely recreational use would be treated like an expensive luxury (as it should be).
What we need is not just changing from one fuel source to another, but a radical shift in how our economy works to recognize that physical transport of individual humans from point a to point b is pointless, that productivity has increased so much that a 40 hour work week is just dumb for the most part (and would be better split up between 2 people working 20 hours/week each), and that technology will let us make quite a few office jobs things people do routinely from home rather than being the exception.

--
Since I can't tell them apart, I treat all ACs as the same person.
Re:A Few Notes on Your Suggestion by repapetilto · 2012-03-23 04:22 · Score: 2

Correlation does not equal causation. The prices of everything plummeted... Perhaps there was a common cause. If many debts were being defaulted on there was simply less money around leading to deflation. If consumers had less money to buy petroleum products the demand will drop. Then a bunch of new money was created so people had more to buy stuff and speculate with sending the prices back up.
Re:A Few Notes on Your Suggestion by s73v3r · 2012-03-23 04:51 · Score: 2

Yeah, it's called speculation. Those asshats will buy oil simply because they think the price is too low, and hold on to it. There are stories of oil barges sitting idle, full of oil, for months, just because of this.
Re:A Few Notes on Your Suggestion by EvilBudMan · 2012-03-23 06:54 · Score: 2

--2) World population will grow, increasing demand--
This is already happening. We should build as many nuke plants as possible and start using the electric motor instead of the internal combustion engine. We could embed induction wire in the interstates since batteries ain't cutting it for range yet if ever.
--3) Mass change in lifestyle--
Yeah like using less energy period. That's already working somewhat too as every so many years energy star minimums decrease. It is now just about impossible to buy a heat pump less than seer 13. It's now against the law.
Even if domestic production costs more in the beginning, it will save us later on as some things really depend upon oil even more than gas and vehicles like fertilizers, plastics, etc. are still cheaper especially fertilizer and chemicals to farm with and machines too. That's why the world has 7 billion people in it in the first place, fossil fuel. We need to work fast on finding replacements with global warming and a short supply looming. Otherwise our population will be reduced and I don't like that solution.
It will be hard as we have used fossil fuels for at least 6000 years.
Re:A Few Notes on Your Suggestion by roman_mir · 2012-03-23 23:37 · Score: 2

Obviously it is inflation.
Government printing money pushes nominal prices up, be it prices of DOW or gold or oil or cotton, whatever.
Speculators are in fact keeping the prices as low as they are today, there are 2 sides to all speculations, many are betting that prices will go up and many are betting that prices will go down.
Blaming the speculation for prices going up is a political thing, politicians never blame the speculators for prices going down, but speculators are in the markets always, up or down. They are reducing the spread, the more speculation there is the more precise the price discovery mechanism is (wisdom of groups).
It is all about inflation.

--
You can't handle the truth.
Re:A Few Notes on Your Suggestion by roman_mir · 2012-03-23 23:40 · Score: 2

Nonsense. Speculators are in all markets, do you blame them for prices going down also? Do politicians do that?
Speculators are a huge part of price discovery and increase of efficiency (you don't want to overpay for stuff, but underpaying takes money away from the seller also), the more speculation there is the more precise the prices are given the market conditions.
Speculators help to discover prices, not set them.
The obvious reason for oil nominal prices going up is inflation and nothing else.
The Fed can't take credit for pushing the prices of DOW up with inflation but not at the same time admit that the prices of all other things are also going up because of their fiscal policy of inflating the supply of money.
In gold and silver and many other commodities the prices for oil are falling, not rising.

--
You can't handle the truth.

Another word by Goonie · 2012-03-23 00:35 · Score: 2, Insightful

Rubbish.

Storing large quantities of oil is very expensive, unlike, say, gold or diamonds. You can't hoard the stuff. Ultimately, the stuff has to be sold to consumers, and if high prices drive demand down (and demand for fuel is elastic, despite a lot of nonsense to the contrary) speculators will lose their shirt.

The reason why oil are prices are at historicallly high levels, and have been for the past few years, is that global demand has not kept up with global supply, mostly because China and to a lesser extent other parts of the developing world is buying more of it. Incidentally, this is exactly the same reason why a bunch of other commodities, including other fossil fuels, metals, and agricultural products, have gone up in price.

--

Any sufficiently advanced technology is indistinguishable from a rigged demo
--Andy Finkel (J. Klass?)

Prices are higher because we're exporting gasoline by HangingChad · 2012-03-23 00:36 · Score: 3, Interesting

Why on earth would oil companies sell gasoline here for $2.50 a gallon when they can sell it in France for $10 a gallon? Gas prices are higher because we're selling gasoline overseas. Welcome to the global economy.

There's at least one domestic downside to America's growing role as a fuel exporter. Experts say the trend helps explain why U.S. motorists are paying more for gasoline. The more fuel that's sent overseas, the less of a supply cushion there is at home.

I still remember crowds of complete fucking idiots chanting, "Drill, baby, drill!!" Pathetic.

--
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage

Re:simple supply and demand by weave · 2012-03-23 00:42 · Score: 4, Insightful

July 11, 2008 a barrel of oil topped out at $145.08, July 15th Bush lifts ban on offshore drilling and by December of 2008, oil was down to $37.71 a barrel... and that was nothing more than a threat.

Oh come on. Are you telling me that nothing else significant happened in the last half of 2008 that might have affected the supply and/or demand for oil?

Oil vs. Gold by AmazinglySmooth · 2012-03-23 00:44 · Score: 2, Insightful

A barrel of oil when priced in ounces of gold hasn't increased all that much. The biggest issue is inflation, which is 100% caused by loose monetary policy. Monetary policy is set by the need to borrow by the federal government. If the government didn't borrow so much, the Fed couldn't increase the money supply so much.

Surely you troll by Goonie · 2012-03-23 00:44 · Score: 4, Informative

Yes, supply and demand is important, but you may remember that a few other things happened in late 2008? Things that might have had a little more impact on the supply and demand balance than the piddling amount of oil that offshore drilling might produce.

--

Any sufficiently advanced technology is indistinguishable from a rigged demo
--Andy Finkel (J. Klass?)

OECD dictates oil prices by Anonymous Coward · 2012-03-23 00:44 · Score: 2, Insightful

The price of oil (and thus gas) is determined by the price of oil on the market.

If, for example, you had a 1000 hectare farm in Idaho and found oil there, you couldn't just put in a well and get cheap gas or even sell it locally at a cheap price. It needs to be sold on one of the oil bourses at a price dictated by the market.

The US government is pushing the price of oil (and thus gas) up by being aggressive with Iran and destabilising the Middle East (where a large amount of the world's oil comes from.)

"Hedge funds", not banks by Kupfernigk · 2012-03-23 00:45 · Score: 4, Interesting

I don't have the exact figures, but at one time most oil futures were all about the actual users of the oil - refineries and so on - and were perfectly legitimate. Futures are what is needed to get farmers to raise hogs and grow corn, after all. Things went wrong when the futures were taken out by people who were not in the supply chain at all. This could be made illegal, but hedge funds have enormous political power.

Speculation of this kind has a long history. G K Chesterton, nearly a hundred years ago, referring in passing to the scandal of the time, wheat futures buyers who were not millers or grocers trying to buy up the entire wheat crop in order to raise prices to whatever they thought would not actually collapse civilisation while making them rich. Currently, I believe, over 70% of oil production is accounted for by hedge fund futures. It is a classical cornering of the market - but it could only be addressed by sending gunboats to banana republics like the Bahamas, the Channel Islands, the State of Delaware and the City of London.

--
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."

Facts don't make good soind bites by __aaltlg1547 · 2012-03-23 00:59 · Score: 2

US oil production will only ever be a small fraction of world oil production. In a free market, all oil costs about the same. So the USA can't influence world oil prices much by increasing domestic supplies. By it could if it could reduce demand because it forms such a large part of the market.

I expected US oil production to be anticorrelated to price because US is out of its cheap-to-get oil. But when world prices get high enough many marginal Wells become profitable.

What the politicians don't won't you to know... by Bill_the_Engineer · 2012-03-23 01:07 · Score: 2

What the politicians don't want you to know is that the production of crude oil doesn't affect the price at the pumps as much as the production capacity of the oil refineries. In fact, the US has been enjoying an oil boom in 2011 with exports of petroleum at it highest in the past 11 years or more (reference).

The republicans are using the seasonal nature of gas pricing (summer months mean higher prices) to pressure Obama into allowing the Keystone XL pipeline to be constructed through environmentally sensitive areas by threatening his reelection over an issue they feel the populace could rally behind. Welcome to election year rhetoric folks.

--
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...

Forget it... $2.00 is not gonna happen, ever again by captainpanic · 2012-03-23 01:08 · Score: 2

Two reasons:

1. When barrels of crude oil get cheaper, that just boosts the profits of the oil companies. Since all you fools buy the gasoline anyway at $3.50 or $4.00, why would they lower the prices?? You don't have any other choice anyway.

2. As long as US oil consumption is larger than the domestic production, the US cannot expect lower prices for crude oil.

The world oil market has shortages, and increasing production costs. That means foreign oil is expensive.

The US may have some domestic production, but domestic oil companies aren't gonna sell their oil far below the actual world market price... not if all the oil is sold at the same marketplace.

Look at Venezuela, Iran, and a couple of other countries that have a surplus of production. As a result, they import no oil at all, and domestically, they are able to keep the prices low. Also, those same countries don't play the capitalist game that the US likes to play.

Radicals from both sides are crazy! by onyxruby · 2012-03-23 01:22 · Score: 2

Blathering liberals think we can solve this problem through reducing demand alone. Archaic conservatives think we can solve through only increasing supply.

They are both wrong and both missing the whole point of supply and demand - 'and'. You have to increase supply /AND/ you have to decrease demand. We can't conserve our way out of European levels of gas prices any more than we can drill our way out of them. We have to work with both and get the radicals on both sides of the equation to start compromising!

Re:Gee, what a coincidence by Waffle+Iron · 2012-03-23 01:24 · Score: 2

Gee, who could've thought that after our boy-wonder President has taken a beating in the public for blocking the construction of the Keystone pipeline

It's pretty stupid that he's taking a beating, given that building the northern part of that pipeline (which is the only part he's blocking) would cause the gas prices in the central US to go up. It would basically allow the current glut of dirty Canadian (*not* domestic) oil to bypass Midwest refineries and be sent directly to the Gulf of Mexico, from which it would be loaded on tankers for export to higher bidders.

Well Duh! by coder111 · 2012-03-23 01:24 · Score: 2, Funny

Next thing you know, they'll determine that Iraq had no WMDs and no relationship to 9/11 and war in Afghanistan does not decrease terrorism, and our glorious leaders lie, and the sky is blue! What is this world coming to! I'm shocked!

--Coder

Worshipping at the Temple of the Obvious... by Anonymous Coward · 2012-03-23 01:26 · Score: 2, Interesting

People, when the oil comes out of the ground... it doesn't belong to us. It belongs to the oil companies that drilled for it who sell it anywhere it will make a profit for them. Furthermore, our lying, double-talking politicians know it. Sen Bill Nelson proposed an amendment to the Keystone pipeline bill that would have banned exporting its oil. Drill here, drill now right? I mean to hear the political class it's the universally accepted answer to lowering gas prices at the pump. Prices go down if you increase local supply right? Wrong. The Amendment was predictably rejected. Oil is priced, bought, and sold globally. Domestic vs Foreign oil is an illusion.

Add to that the fact that every state in the union tacks on its own fuel tax. Ask anyone who has tried to confront the problem with fuel alternatives such as biodiesel only to find themselves in hot water over dodging that fuel tax. (http://domesticfuel.com/2007/03/27/homebrew-biodiesel-makers-running-afoul-of-tax-laws/). Any state could immediately lower gasoline prices by declaring a tax holiday at the pump... but don't hold your breath waiting for that to happen.

I agree with everyone here about the prospect of ending or at least more tightly regulating speculation... and if we can't do that, we can at least stop invading countries in the middle east and sabre rattling. It is no coincidence that gasoline started its rise around the time we invaded Iraq. Now that we find ourselves playing the same broken record when it comes to Iran, despite the numbers of Americans who were looking forward to bringing our troops home and reallocating our resources accordingly, it should surprise no one that gas prices are experiencing upward pressures.

If you want to lower the price at the pump, how about getting our government to get behind a foreign policy aimed at bringing peace and stability to the regions of the world where our oil comes from instead of looking for excuses to blow middle eastern countries back into the stone age.

The oil controversy is a farce. Did you know that the United States EXPORTS 47 thousand barrels of crude oil, and 2.9 million barrels of petroleum products per day?

(http://205.254.135.7/dnav/pet/pet_move_exp_dc_NUS-Z00_mbblpd_a.htm)

Re:Prices are higher because we're exporting gasol by necro81 · 2012-03-23 01:35 · Score: 2

The price an importer pays to buy a gallon of refined gasoline in France isn't all that much higher than in the U.S. Sure, it's more expensive in France, because you have to pay shipping and there aren't that many refineries in France, but the difference isn't even close to 2.5 : 10. The price to consumers in France is so much higher in large part due to different tax structures.

Re:Because the price at the pump... by Phrogman · 2012-03-23 01:45 · Score: 5, Interesting

Is nothing to do with the price of oil per barrel essentially.
I will give you an example from up here in Canada where I live, specifically Victoria BC. The price here varies between roughly $1.12/litre and $1.39/litre (i.e. $4.24 to $5.26 US dollars. The exchange rate is $1 Cdn = $0.9997 US so no effective difference at the moment). The price per litre varies on a daily basis, with no real apparent pattern.
Now, our gas comes from Alberta as oil, is shipped to the US to be converted into gas, then gets shipped back north to BC (why we don't make it ourselves is beyond me).
The price goes up based on anything remotely bad in the news apparently. Revolution in Libya, price goes up. Bad weather, price goes up. Election coming, price goes up. Long weekend coming, price goes up. It drops periodically when things are normal. I have only seen it go over $1.39/litre once or twice and then only for a few hours. When it goes up at one station, it follows at the rest, same thing when it drops.
It seems to me that this price war has nothing to do with the price of oil internationally. I haven't noticed a pattern for the most part.
However, one change that does happen is if the price of a barrel jumps dramatically up, the price of gas jumps immediately - no matter that the gas we bought actually cost less. However, if the price per barrel drops dramatically, the price at the pump drops slowly if at all.
Its nothing more than an industry colluding to ensure they get the highest prices possible, combined with a government that is not interested in regulating it at all because they collect massive taxes on the sale of fuel.
So it doesn't surprise me that drilling in the US doesn't affect price at the pump - because the industry that sets the prices has zero interest in lowering the price of gas, they are milking it for all they think they can get away with, and with zero repercussions. Our NA society is built on burning fossil fuels, and nothing is going to change that any time soon.

--
"The first time I got drunk, I got married. The second time I bought a chimpanzee, after that I stayed sober" Arian Seid

Re:It would if they sold it. by captbob2002 · 2012-03-23 01:46 · Score: 2

Indeed, for those claiming it is all supply and demand - not manipulation for profit - why is it as demand for gasoline has been going DOWN, have the prices paid at the pump continued to go UP?

Should prices be lower anyway? by Dixie_Flatline · 2012-03-23 01:52 · Score: 4, Insightful

Here's the REAL question that rarely gets asked: why should fuel prices be lower? Fuel prices in other countries are much higher than in the US (with some exceptions in the Middle East where the fuel is subsidized to extraordinary degrees), mainly due to taxes. The taxes are there to limit consumption, while bringing in tax revenue to fund other services.

Is there a good reason why fuel prices should be low at all? We know there are costs associated with high use that aren't baked into the price of petrol. Arguably, we've never paid the true price for the fuel we use.

I understand that high fuel prices disproportionately affect the poor; rich people have more than enough money to pay for petrol. But that indicates other things wrong with the infrastructure of cities and how people move around.

Virtually no matter how you look at it, prices for petrol should be higher. On the extreme capitalist side, they should be higher because the product is in demand, the supply is dwindling and public opinion is getting harder to buy (oil spills, climate change). On the more socialist side, prices should be higher through taxes, to move money into providing better infrastructure for all drivers, encouraging better city layouts, and funding already badly strapped local governments. 'Because I hate paying more for something that used to be cheap' isn't really a reason.

Oil is fungible? by gestalt_n_pepper · 2012-03-23 02:00 · Score: 2, Informative

I'm sorry, that one is *so* wrong, I can't let it go.

OIL IS NOT FUNGIBLE!

It looks that way to a fool or an economist because they conveniently don't think about the physical details. There is no meaningful way that a "barrel" of sulfur-laden tar extracted from a deepwater well off the coast of Brazil is in any way equivalent to a barrel of light sweet crude from a Saudi well a few thousand feet deep. Refining costs are much higher and energy return are much lower for the former.

In the la-la land of economics, this is all hidden in the aggregate price defined by the world market and encourages the delusional belief that low energy return, expensive oil is as useful as high energy return, cheap oil.

--
Please do not read this sig. Thank you.

Re:Oil is fungible? by Svartalf · 2012-03-23 03:39 · Score: 4, Insightful

Do you consider gold fungible?
Silver?
If so, your argument makes both of them non-fungible; which happens to be one of the silliest statements I've seen in a while.
Not all gold is placer nuggets and flakes- you have to refine a lot of it. Silver, you have to process it to get to it.
Gold is often extracted...
Silver is extracted and while it occurs in metal form has to typically be refined out of other things
It's a raw good. Raw goods are less fungible than the refined, but they're still fungible.

--
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas

Lower gas prices are not the reason to drill local by SuperKendall · 2012-03-23 02:01 · Score: 4, Insightful

There are a myriad of excellent reasons to drill for oil locally which have nothing to do with gas prices.

* Ethically Sourced is better
Why should we be giving ANY money to cultures that treat women (or other groups based on sexuality or gender) unequally?

That money is far better off going to either the U.S. or Canada.

* Environmentally friendly
It may seem counter-intuitive that more local drilling is better for the environment, but the simple fact is that we cannot trust other cultures to care as ugh about the environment around drilling as we can. Drilling or pipelines here can be monitored more closely and we can do more to clean up problems when they occur. There are hosts of environmental issues with wells around the world but you'll never know about them because they are swept under the run by tightly controlled government press.

There is also a very logical component to the issue though. The longer you have to ship something, the more likely there will be accidents. Currently we have a vast quantity of oil coming in by ships, and one of which can and do leak. Moving to more local production means eliminating the shipping of a lot of oil from large distances across the ocean.

* Local Jobs

Producing oil locally means more local jobs, end of story. It takes people to build out wells/pipelines, and people to maintain them. Even if the number of jobs once built is not very high, it is non-zero and it requires skilled labor.

That's a few, there are more (such as strategic or price leveling reasons). The fact is we have the oil and gas we need, we should start making use of it ASAP until alternative energy industries can come up to speed.

--
"There is more worth loving than we have strength to love." - Brian Jay Stanley

Re:Because the price at the pump... by Doctor_Jest · 2012-03-23 02:04 · Score: 3, Interesting

You've hit the nail on the head (so to speak) with respect to vertical monopolies. While there isn't a giant Standard Oil anymore, the fact that the oil companies control the entire lifecycle (in one way or another) from crude to finished product at the pump shows that we can have the weird market fluctuations you described. (Going quickly up, but taking its sweet time to go down in price.) The fact that gasoline isn't something that has very elastic demand because of the way it is used in every aspect of our economy lends us to the conclusion that vertical monopolies can leverage their monopoly status to keep prices artificially high in the face of real change in the marketplace.

It is funny that our refining capacity never meets the aggregate amount of oil we are pulling out of the ground. (It's more profitable to close the refineries rather than let price go down.)

We've seen the oil companies push prices up to a point, hear the outcry, then lower prices back down slowly so the average person with a busy life doesn't notice that gasoline spiked at $4/gallon up from $2.50. But they never seem to get back to $2.50... the price just stays up where it was, slightly below the heartburn level that caused the reduction in the first place. :)

When you have an item that most people depend upon (and businesses too), you can play fast and loose with the market and not fear losing customers. (I wish the electric car would put a damper on this practice, but I'm not holding my breath.)

--
It's the Stay-Puft Marshmallow Man.

assholes! by ClioCJS · 2012-03-23 02:22 · Score: 2

This to me is not a reason to not drill, but rather a reason to deal with antitrust and price gouging issues.

Or remove their subsidy if they can't price fairly. Or just do that anyway. Fuck the subsidy.

--
-Clio
Karma: Bad (mostly from not giving a fuck)
Blog: http://clintjcl.wordpress.com

Who cares if it's a global commodity by Anonymous Coward · 2012-03-23 02:59 · Score: 5, Insightful

Who cares if it's a global commodity, the politicians said that home drilling would reduce the price of oil.

It doesn't.

Story: End Of.

We KNOW they were lying, we KNEW at the time they were.

But still it was demanded to be passed because it would reduce prices and help the poor out.

Now that it has been shown to be a load of bollocks, why will you now excuse them for lying about it?

Re: Limbaugh's point by cwgmpls · 2012-03-23 04:01 · Score: 3, Insightful

Lest you forget, when Bush left office, the price of a gallon of gas was less than $2

Lest you forget, when Bush left office, the global economy, lead by the U.S., was heading toward a bottomeless crash of unknown proportions and everybody slowed their purchase of oil products significantly. That is why a gallon of gas was in the $2 range when Obama came in. I don't know how we can expect healthy economic growth *and* low energy prices, nomatter what the source of the energy, at the same time. Simple economics would seem inform us that we can't have both.

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