So you think you know oil: maybe not

Townhall ^ | June 24, 2008 | John David Powell

[John David Powell]

Here we are with a new week and another round of posturing, politicking, and punditry regarding the price of petroleum. As happens when folks do a lot of talking, very little is said.

I hang around educated and talented people. Each individual has at least one university degree. Most read, watch, or listen to more than one news source every day. They span generations with ages ranging from the 20s to the 70s.

Yet, not a single person among them knew the answers to some basic questions pertinent to the growing discourse regarding the rising price of oil. A few knew some of the answers, and some knew a few of the answers. To be fair, I had to look up the answers, or else I would have been among the shoulder shruggers.

For instance, how big is a barrel? Answer: 42 gallons. So, now you know that when the price for a barrel of crude oil hits $140, that’s the same as $3.33 a gallon.

What nation supplies the most crude oil and petroleum products to the United States? Answer: The United States. According to the Energy Information Agency (www.eia.doe.gov), our country supplied 41 percent of the oil we consumed in March of this year.

What nation, other than the U.S. , supplies the most crude oil and petroleum products to our country? Answer: Canada. Our northern neighbor accounts for 12 percent of our nation’s oil and 20 percent of all the oil we import. The rest of the top five include Saudi Arabia (7 percent and 13 percent); Venezuela (6 percent and 11 percent); Nigeria (6 percent and 10 percent); and Mexico (5 percent and 8 percent).

How much oil do we import from Persian Gulf countries? I’m glad you asked. Persian Gulf countries accounted for only 16 percent of our foreign oil imports each year from 2005 to 2007. In fact, our Persian Gulf imports declined most of this decade, from a 15-year high of a little more than 1 billion barrels in 2001 to 791.9 million barrels in 2007.

What’s the difference between crude oil and petroleum products? Answer: Crude oil provides, among other products, gasoline, diesel and jet fuels, heating oil, liquefied petroleum gas, lubricants, asphalt, plastics, synthetic fibers, detergents, fertilizers, ink, crayons, bubble gum, deodorant, tires, and heart valves.

One barrel of crude oil (which is 42 gallons, remember?), yields about 19.6 gallons of gasoline. The other 22.4 gallons go into the products just mentioned.

How much of the cost of oil goes into the price of gasoline. Answer: A bunch. We consumed about 390 million gallons of gas a day last year in our cars, trucks, recreational vehicles, boats, farm implements, and construction and landscaping equipment. Back when crude was $68 a barrel (that was just last year), it accounted for about 58 percent of the price of a gallon of gasoline. The rest of the price came from refining costs (17 percent), federal and state taxes (15 percent), and distribution and marketing (10 percent).

By the way, the price of crude accounts for about 77 percent of the cost of gas at $4 a gallon.

Here’s a little something you may not have considered. What products that you buy on a regular basis are sold with tax included? Answer: Gasoline. For everything else, you add the tax at checkout.

The folks in California pay 63.9 cents a gallon in state and federal fuel taxes, the most in the nation. That’s just the base, though. Motorists there also pay an additional 6-percent state sales tax, with some paying another 1.25-percent county sales tax plus applicable local sales taxes. Same in Illinois , where Chicago motorists pay 12.75 cents per gallon on top of the 57.9 cents per gallon in state and federal taxes. Some Illinois motorists also pay a 6.25-percent sales tax.

Politicians, pundits, and other TV talking heads don’t like to provide these answers, because facts get in the way of positions that pander to the mob. We don’t point fingers at Canada , because it’s de rigueur to paint the Saudis with the broad brush of blame. Folks float the idea of a moratorium on state and federal gasoline taxes without explaining its minimal impact on gas prices, or without mentioning the $3 sales tax some motorists pay on top of a $50 fill up. Policymakers don’t explain that oil trades in the dollar, which is weak vis-à-vis the Euro, because that would require solutions for strengthening the greenback.

And, it’s easier for simple minds to convince simpler minds to impose windfall-profit taxes on pension funds and owners of Individual Retirement Accounts who invest in oil companies than to take on credit card issuers charging double- and triple-digit interest rates to the millions of people using plastic to pay for food and fuel. Talk about irony.

And, we sure wouldn’t want to impose a windfall-profit tax on someone who goes from making $56,000 a year as, say, an Illinois legislator, to $165,000 a year as, say, a U.S. senator, an increase of nearly 200 percent (not counting book deals or real-estate related loans).

Mundus vult decipi (and as my magician friends add: decipiatur)

John David Powell is an award-winning writer and Internet columnist. He may be reached at johndavidpowell@yahoo.com.

[SAJ]

Well, you chaps are the key to efficient exploration, not a doubt in the universe.

I just wish some of you would speak up to the likes of that jackass Rahm Emanuel, who's busily whining about oil companies not drilling some large number of leaseholds. Why not? Because there's no effing crude to be found on 90%+ of them, and the 'awl bidness' knows this is so because YOU chaps have looked. Sheesh.

;^)

[Publius6961]

And isn’t the federal gasoline tax used, or is supposed to be used, primarily for highway construction and maintenance?

Judging by the bridges falling down and the pothole epidemic nationwide, the robbing of taxes earmarked by law for highway construction and maintenance has been a fraud for at least a decade now.

Ordinary mortals are susceptible to charges of fraud and misrepresentation; politicians are not.

[eleni121]

Mr Powell asks — How much oil do we import from Persian Gulf countries?...

He answers——accounted for only 16 percent of our foreign oil imports each year from 2005 to 2007.

---

Not one word about OPEC!!!??? That omission reveals a dishonest reporter.

The writer is being disingenuous when discussing the Persian gulf.

It's not so much about the Persian Gulf per se but about OPEC which is controlled by the Saudis.

We are dangerously controlled by OPEC aka the Saudis.

2.1 billion barrels from OPEC (all but 3 Muslims producers and two of those are Venezuela and Ecuador) 2007
2.7 billion barrels from NON OPEC nations 2007

http://tonto.eia.doe.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_a.htm

[Will88]

“Ordinary mortals are susceptible to charges of fraud and misrepresentation; politicians are not.”

I thought highway funds were being misused, just as SS and who knows what other earmarked funds find their way into the black hole of the federal budget.

But, as you point out, there’s no doubt those funds are sorely needed for infrastructure maintenance and replacement.

[T-Bird45]

I saw a show the other day about the Bra industry. You guessed it...petrolium and ofcourse the almighty silk worm.

Now there is an industry we can't afford to let down with crazy oil prices....I slay myself sometimes, LOL!

[Libertarianize the GOP]

I don’t smoke, but you are right.

[IronJack]

There are few aspects of modern existence that don’t depend on petroleum based products.

Incorrect. Those products are currently manufactured using crude oil as the raw material. But they could just as easily -- and in many cases, more easily -- be made from any other organic substance.

[Publius6961]

But they could just as easily -- and in many cases, more easily -- be made from any other organic substance.

Oh really? without unintended consequences?
I suppose that in a free market society, the market avoids "the more easy" way because they would rather keep their costs high.

Are you serious?

[RightWhale]

It’s a start.
How much of the price of NYMEX crude is du to speculation?
How much oil could be produced domestically if every spare resource were put to work producing oil?

[Positive]

"Maybe the author never buys any form of alcohol but it also has the taxes included, not added at the checkout stand."

Actually, at least in California, the sales tax is added at check out.

[Smokin' Joe]

But they could just as easily -- and in many cases, more easily -- be made from any other organic substance.

Of course. There are alternatives, after all.

The current method may be cheaper and simpler, and some manufacturing adjustments would have to be made, but we could always have the ladies chuck the lycra and the spandex and bring back the whalebone corset...

[John David Powell]

Thanks for your comments.

I do take exception, though, at your synonym for “a lie.” I mentioned the Persian Gulf countries because we continually hear about our dependence on “Middle Eastern oil.”

If one really wants to get down and dirty about OPEC, let’s make sure we take aim at Venezuela and that blustering, Castro-sucking, little peasant freak they have for a president

[saganite]

Good, I’ve got one for you. Two actually. The first is easy and I think I know the answer already but here goes. Has there ever been a survey of our coastal waters outside those areas we currently drill in? Specifically the East coast of the US.

Second, after reading all the hype about all those leases the oil companies hold that they haven’t exploited I wondered how in depth are the surveys the oil companies conduct in the areas they lease beforehand. According to the oil company execs that replied to the criticism some of those leases contain nothing leading me to believe that accurate surveys aren’t conducted until after the lease is purchased.

[Smokin' Joe]

Thanks, (and thanks for the ping, SAJ). First time in a while I have read a post about the industry without getting my hackles up at least once.

That's refreshing, to say the least.

(Wellsite geologist working the Williston Basin and the Rockies since 1979, conventional, directional, and horizontal wellbores in carbonate, clastic and fractured volcanic reservoirs)

[John David Powell]

Hmm. It’s been a bit since I stopped drinking vodka every night, but I think here in Texas they tack on sales tax at checkout. Same with smokes.

Hey, now I have an excuse to go out and buy some potato juice. Research!

[Libertarianize the GOP]

Your right, I meant to say "Maybe the author never buys any form of alcohol but it also has the taxes included, not just added at the checkout stand."

[Smokin' Joe]

... if every spare resource were put to work producing oil

Better have some of the crew building refineries and other infrastructure as you go, and shuttling a few off to work on some nuke plants would do a lot to cut the heating costs for those who use natural gas in the winter.

This (energy in general) is a problem which has been largely ignored while things were cheap, or hammered by the econazis, and we have a bunch of catching up to do all around.

[cartoonistx]

[IronJack]

By "more easily," I didn't say "more CHEAPLY." The simplest fractions of crude oil are not particularly reactive chemically. That's one of the reasons gasoline burns so dirty. Other raw materials are far more reactive, and much more easily converted into the compounds we historically associate with petrochemicals -- plastics, insecticides, herbicides, solvents.

If crude keeps heading for the stratosphere, it's just a matter of time until the replacements are economically viable.

With any luck, oil's reign is winding down.

[IronJack]

Or we could step in the 21st century and stop using a dirty, polluting substance that was only used for fuel originally because it was so easy to get to, and that isn’t all that great as a raw material for organic derivatives.