Posted on 06/01/2008 11:12:38 AM PDT by K-oneTexas
Ten Truths About Oil by Alan Caruba Issue 108 - May 28, 2008
Having written about the energy industry and issues now for a long time, I hope I can be forgiven for being enraged by the comments by Sen. Charles Schumer (D-NY) in response to President Bush’s recent press conference. There is simply no way to describe them other than false.
The Democrat Party has long made “Big Oil” their favorite punching bag, confident that the public has no idea what influences the price and supply of oil. Saying anything favorable to Big Oil is immediately deemed evidence that one is in their pay and whatever facts are offered are therefore invalid.
There are, however, some simple truths about Big Oil that cannot and should not be ignored. To do so leaves everyone at the mercy of energy policies that have created the situation in which the United States finds itself today.
Fact #1. The combined ownership of oil reserves by the independent, investor-owned oil companies such as ExxonMobil, Conoco-Phillips, BP, Chevron and others is barely 4% of the total known oil reserves in the world. By itself, ExxonMobil’s share is 1.08%.
Fact #2. Oil is a global commodity sold on mercantile exchanges for whatever price it can command. Speculation in oil prices is the primary reason they have been driven to utterly insane costs per barrel. It has nothing to do with actual supply and demand.
Fact #3. No nation on Earth is or can be “energy independent.” The geopolitics of oil is complex, but as nations such as China and India have seen their economies grow, their need for oil grows with it and thus they compete with long established industrialized nations for existing oil supplies. This competition has an impact on prices.
Fact #4. The OPEC nations, those in the Middle East and including Venezuela, control 77% of the world’s known oil reserves. Like Russia and Mexico, where the oil industry is controlled by the state, it is generally poorly managed. Several Big Oil companies that were induced to undertake exploration and development in Russia and Venezuela actually had their assets nationalized or stolen at prices well below their investment and value.
Fact #5. Energy is the master resource. All nations with any hope of growing their economies require it, mostly in the form of electricity, but also for oil’s role in transportation. The failure to have a national long-range energy policy that is based in reality can severely impact energy prices.
Fact #6. The United States has, for years, pursued an energy policy based on environmental myths such as “biofuels” in which corn is turned into ethanol to reduce the import of oil, but it costs as much to produce ethanol as to refine oil and it provides less mileage per gallon, thus negating any reason for this additive. Likewise, suggesting that wind or solar energy can generate anything more than its current 1% of the nation’s electricity needs ignores their unreliability and the fact they are heavily subsidized, a form of hidden consumer tax.
Fact #7. It costs billions to explore, discover, extract and transport oil. It takes lots of lead-time as well. The United States Congress has, for decades, refused to permit the extraction of vast oil reserves in ANWR despite the fact it would have little or no impact on the Alaskan wildlife reserve. In addition, Congress has declared 85% percent of the nation’s coastal, offshore areas off-limits to any exploration for oil or natural gas.
Fact #8. The U.S. Environmental Protection Agency, under the mandate of Congress, requires Big Oil to refine oil into some seventeen different formulations in the name of clean air. With three grades of gasoline, that means that refiners must produce some 45 different blends. The quality of air in America is excellent, but the cost of gasoline at the pump continues to rise as the result of these mandates.
Fact #9. America imports two-thirds of the oil it uses. All of its transportation runs on oil. The population continues to grow. Failure to encourage the construction of a single new refinery since the 1970s puts a further strain on the ability of Big Oil to provide the nation’s oil and diesel fuel needs.
Fact #10. Democrats continue to demand that Big Oil’s profits be confiscated in some fashion and some of the inducements offered to explore for more oil be ended. Because the costs of exploration, extraction, refining, and transporting of oil represents billions, the actual profit margin of a company like ExxonMobil is about 10%, well below what industries such as pharmaceuticals and banking enjoy.
For these and many other reasons, Americans are being impoverished at the gas pump because Congress has dithered and failed in one of its most important responsibilities.
Alan Caruba writes a weekly column posted on the Internet site of The National Anxiety Center, www.anxietycenter.com. He blogs at http://factsnotfantasy.blogspot.com.
Fact #11. There’s a lot of oil in ANWR and now is the time for republicans to show just a little leadership.
Republicans should now push this in congress. I believe they’d get the support of the American people. They need to ask the American people if they like paying $4.00+ per gallon and if they like being at the mercy of terrorist towel-head wearing nations.
It won’t make a drop of difference. This is Peak Oil and has been since Nov 2007.
If we don’t start producing our own energy here, our nation is in trouble. Energy independence an important plank of any successful WOT.
Is it just the way I read it, or do fact # 2 and fact # 3 contradict each other? Either supply and demand does, or does not, affect oil prices.
I find it very curious that the majority of Congress recognize these facts as facts and continue to push us in the opposite direction.
Their motivation can only be to drag us down to dead stop and expect us to run to them to save us.
Yes it does. And they should be splattered all over the news media. And Conservative lawmakers should be on a rant with this stuff.
Instead? ... crickets.
Another part of the path to energy Independence is conservation of energy usage and new sources of energy.
This does not have to be seen as capitulation to the Environmental Wacko's.
Republicans should now push this in congress. I believe they’d get the support of the American people. They need to ask the American people if they like paying $4.00+ per gallon and if they like being at the mercy of terrorist towel-head wearing nations.
Are you kidding?
We had a MAJORITY for how many years? ... And did nothing!
This is a typical Republican politician:
BTTT
I agree. As long as new sources of energy is the main focus. I just don’t see us having enough oil to fill our daily demand of 20 million barrels very long, even if we cut that demand to 15 million barrels.
Whether we do or don't we have 25 years of pain ahead. If we resolve the problem that will be that. If we don't the 25 years will be followed by another 25 years of pain and so on forever. We already had 30 years in which to resolve the problem and decided to party.
Good post. The other day my friend made a good point though, which is regardless of WHY prices become high (speculation, supply/demand, etc.), we are all vulnerable.
I’d like to see lots of options for vehicles but mostly, what I wish would happen is that we’d start building some mass transit systems like in Zurich. I’d love to take a train to work instead of getting stressed out in a 50 minute commute like I have now dealing with the continual summer road construction and the bozos on the road that are so busy texting and punching in numbers that they aren’t looking when they merge onto freeways and so on...
Why we never put our resources into this is crazy. It would also provide jobs, which would be another good thing.
All of the ranting about OPEC, environmentalists, speculators, Democrats, and other villains is just a distraction. We're bumping along the plateau that petroleum geologists have predicted for decades, when oil production peaks because the elephant fields are winding down, the smaller fields coming online can't replace the lost production, and flat (soon to be declining) extraction of oil meets increased demand from around the world, including the increasing energy thirst in China, India and the Middle East.
Anyone who doubts this needs to go off, do some serious research and get back to us.
Yes, it’s just you.
Speculation has driven the price higher than supply and demand would dictate,but that dosn’t make supply and demand meaningless.
Peak oil is a meaningful concept when one is talking about a place like the United States,. which is literally covered with boreholes. So, yeah, we hit outrpeak in 1970, and that could seen by plotting boreholes on a map. Worldwide, the claim is more problematic, because it is based on what geologists know. Even so, exploration in Alaska and off the coasts shows that it drilling had been allowed that we would not have reached this point for another ten years or more. Beyond that, our energy problem is troubling, because we seem to be heading for energy rationing, which would put us in the same place as Europe. I think our elites would like this, because they think that of our growth were less, the world would be a calmer place. Growth limitation fits their world view, because they would not suffer personally. As to the plain folks, let them ride bicycles.
Peak oil is a meaningful concept when one is talking about a place like the United States,. which is literally covered with boreholes. So, yeah, we hit outrpeak in 1970, and that could seen by plotting boreholes on a map. Worldwide, the claim is more problematic, because it is based on what geologists know. Even so, exploration in Alaska and off the coasts shows that it drilling had been allowed that we would not have reached this point for another ten years or more. Beyond that, our energy problem is troubling, because we seem to be heading for energy rationing, which would put us in the same place as Europe. I think our elites would like this, because they think that of our growth were less, the world would be a calmer place. Growth limitation fits their world view, because they would not suffer personally. As to the plain folks, let them ride bicycles.
Fact #2: I have been saying this for over 8 months. No ome would listen to me.
FYI
Fact #8:
Pick the most restrictive or “cleanest” and use it nationwide.
45+++ different blends is just plain nuts. Drivers buy the fuel in one place and by the time they have driven to the bottom of the tank, they are in a completely different place. Driving across country, means that you are using a great number of blends and then “blending” them inside your own gas tank. Sheer stupidity.
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