Six Dollar Gas?

KTRH ^ | June 26, 2008 | John Labus

[thackney]

By some estimates, oil prices could hit 200-dollars a barrel. If you do the math, that translates to $6.64 a gallon for gas! Meanwhile, Congress can't agree on a course of action. Democrats are looking at new regulations on speculators, while others -- like Woodlands Republican Kevin Brady -- want to increase drilling:

"...And while Congress is eager to place the blame elsewhere, whether it's OPEC or Big Oil or Big Autos, the fact of the matter is we ought to take a square look in the mirror. We need more American-made energy, and this Congress has resisted it."

Oil economist Karr Ingham disagrees with other analysts who see prices continuing to spiral out of control. He says rather than penalize the speculators, the free market should be left alone: "That's the economic system under which we operate. And ultimately, it's market forces that solve our problems for us."

Ingham says it's because of the current market that we're using more ethanol, and expanding research into other areas: "We would not be embarking on any of this if crude oil were still 20-dollars a barrel. So, it's rising prices for crude oil - relative to other sources of energy - that are going to spark the development of alternative energy."

Ingham says the current economic environment is actually more favorable to a drop in oil prices, which would bring prices down.

[thackney]

At the same time, the long term contracts they have been making for the past year are locking in some pretty high prices.

But I don't think you realize how much is actually paid. The average isn't the spot market price, but take a look at what is actually paid.

Refiner Acquisition Cost of Crude Oil
http://tonto.eia.doe.gov/dnav/pet/pet_pri_rac2_dcu_nus_m.htm

In April, the average price for a domestic barrel of Crude Oil bought by refineries was $107.50. The average spot market price for West Texas Intermediate (the futures price quoted when people talk about the price of "oil") was $112.58 for the same month.

Petroleum Spot Prices
http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_m.htm

Of course, oil comes in all kinds of quality grades and the actual price reflects that. It has different values and either produces lower grades of products or takes additional refining to produce the same amount of products as something like WTI.

Domestic Crude Oil First Purchase Prices by API Gravity
http://tonto.eia.doe.gov/dnav/pet/pet_pri_dfp3_k_m.htm

Landed Costs of Imported Crude by API Gravity
http://tonto.eia.doe.gov/dnav/pet/pet_pri_land3_k_m.htm

[henkster]

I agree with this. While we don’t like it, hey! C’mon you spoiled Americans! Make a little sacrifice here! You have your sons fighting in Iraq, maybe you could make some sacrifices yourselves!

Take one less trip this summer! Carpool! Cut out purchasing a few things, like cheap Chinese-made consumer goods!

Yes, oil priceed at $140/barrel does suck. Well? Too D*** Bad. If you are conservative and really believe in market forces, that is EXACTLY what has to happen in order to make other development of sources of energy economically feasible. The cost of capital for plant to start production has to be paid, and NO, IT’S NOT GOING TO BE PAID BY SOMEONE ELSE OR THE GOVERNMENT!!!! WE are going to have to pay for it. Plain and simple.

So, sure, we all want nuclear power for electric generation, and we want oil from oil shale and/or coal liquification. Sounds good to me. But we’ve got to pay for it.

The price of gas at $4.00/gallon and oil at $100/barrel makes this possible. So I’m not mad at price of oil. It’s what we do with this OPPORTUNITY that matters. We need to use this as a means to develop our own resources and get off the addiction to foreign oil. And say to hell with the global warming hoax and let the tree huggers go live in the woods w/o modern conveniences.

That’s what I’m more focused on.

[do the dhue]

The biggest obstacle to any problem is politicians.

HEAR HEAR!!

I received the below (in it's entirety) in an email:

ANWR = Arctic National Wildlife Refuge.

Now… A comparison:

And some perspective:

NOTE WHERE THE PROPOSED DEVELOPMENT AREA IS… (it’s in the “ANWR Coastal Plain”):

THIS IS WHAT THE DEMOCRATS, LIBERALS AND “GREENS” SHOW YOU WHEN THEY TALK ABOUT ANWR

…and they are right… these ARE photographs of ANWR

ISN’T ANWR BEAUTIFUL? WHY SHOULD WE DRILL HERE (AND DESTROY) THIS BEAUTIFUL PLACE?

WELL… THAT’S NOT EXACTLY THE TRUTH

Do you remember the map?

The map showed that the proposed drilling area is in the ANWR Coastal Plain

Do those photographs look like a coastal plain to you?

WHAT’S GOING ON HERE?

THE ANSWER IS SIMPLE…

THAT IS NOT WHERE THEY ARE WANTING TO DRILL!

THIS IS WHAT THE PROPOSED EXPLORATION AREA ACTUALLY LOOKS LIKE IN THE WINTER:

AND THIS IS WHAT IT ACTUALLY LOOKS LIKE IN THE SUMMER:

HERE ARE A COUPLE SCREEN SHOTS FROM GOOGLE EARTH:

AS YOU CAN SEE, THE AREA WHERE THEY ARE TALKING ABOUT DRILLING IS A BARREN WASTELAND.

OH… AND THEY SAY THAT THEY ARE CONCERNED ABOUT THE EFFECT ON THE LOCAL WILDLIFE…

HERE IS A PHOTO (SHOT DURING THE SUMMER) OF THE “DEPLETED WILDLIFE” SITUATION CREATED BY DRILLING AROUND PRUDHOE BAY*…

DON’T YOU THINK THAT THE CARIBOU REALLY HATE THAT DRILLING?

HERE’S THAT SAME SPOT DURING THE WINTER.

HEY, THIS BEAR SEEMS TO REALLY HATE THE PIPELINE NEAR PRUDHOE BAY*…

*The Prudhoe bay area accounts for 17% of U.S. domestic oil production

NOW, WHY DO YOU THINK THAT THE DEMOCRATS ARE LYING ABOUT ANWR?

REMEMBER WHEN AL GORE SAID THAT THE GOVERNMENT SHOULD WORK TO ARTIFICIALLY RAISE GAS PRICES TO $5.00 A GALLON?

WELL…

AL GORE AND HIS FELLOW DEMOCRATS HAVE ALMOST REACHED THEIR GOAL!

NOW THAT YOU KNOW THAT THE DEMOCRATS HAVE BEEN LYING, WHAT ARE YOU GOING TO DO ABOUT IT?

[RSmithOpt]

Of course you would know about that ...that's your occupation. My point was more that sites are available to place 'new' refineries if they are needed. I would suspect it is more economic to enlarge and modernize the existing large refineries as not to have to worry about transport of raw materials and products from the smaller sites.

I take it any refinery now cracks the oil to get all the possible product mixes (highest margins and product demand) it can out of each barrel depending upon the quality of the crude??

[nina0113]

If some wildcatter were to find a huge heretofore unknown pool of oil/gas, the dems would do their best to stop the production.

We already have huge KNOWN pools that we're not allowed to produce. I don't know why anyone would even bother looking for more, it's not like they'd be allowed to do anything with it.

[Realism]

It’s what we do with this OPPORTUNITY that matters. We need to use this as a means to develop our own resources and get off the addiction to foreign oil.

Absolutely! It's nice to hear from someone who actually sees it as I do and can put a positive spin on it to boot. Its a bit progressive for many here but I believe we need to roll up our sleeves and mow thru this time so we don't have to do it again in 10-15 years. People who think oil is cheap don't realize how much of this countries resources have been expended securing our addiction.

We really need to find ways to do much, much more while using much less.

[RightWhale]

They might do that or try to. It would depend if it is on Federal turf or not.

[do the dhue]

It is a good idea to look for different methods to produce energy. But until we have put these methods into production, it is a good idea to make available those methods that are known. We need short, mid, and long term goals to solve this problem. We need true leaders who really care about our nation (not self serving interest) to carry the flag up the hill.

We don’t need obstructionist. We need producers in our Congress and in the White House. We the people can put producers in and we can remove obstructionist. I say it is time to git r done during the next election cycle. This has to be the worst Congress in my lifetime. It is time to do something about that.

[Antoninus]

Brilliant image. That needs to be printed out and spread far and wide!

[Realism]

It is a good idea to look for different methods to produce energy. But until we have put these methods into production, it is a good idea to make available those methods that are known.

I clearly see your point, but as the last 30 years have proven, you can't have it both ways. Private investment always follows the trend, if the trend is more oil thats where the money goes. If the trend is less oil the money will seek other opportunities.

[do the dhue]

I think we are starting to trend again towards saving gas.

How about plastics? Plastics are an oil based product. Do you know what kind of oil plastics use? Is it crude? I think it may be and I think it effects the demand for oil. And if so, should we look at using something different besides an oil based product to replace plastics?

There are a lot of different kinds of plastics used around the world that would add up to demand. No?

[Realism]

Sure.. I'd bet many people don't give plastics much thought.

I believe the first major push should be transportation, residential and commercial consumption. These are the areas where people are really feeling the pinch right now.
Hitting these would have several advantages.

1. It would free up much of what we have now to be used for future growth.
2. Emissions would drop significantly. Giving us a great advantage if cap and trade happens to get thru.
3. Less family income would be tied up in utility, fuel and tax, (good for the economy).

[do the dhue]

Yes, this is where the trend will start because it is where the people will feel it the most.

[bert]

Yesterday on Cavuto, Congressman John Yarmouth (’Rat KY) raised the tired old talking points about big oil having gazillions of acres under lease and not drilling it.

He then for the first time to my ears mentioned the National Petroleum Reserve in Alaska and the failure of the oil companies to exploit it.

From discussions here, I thought the drillers were prohibited from leasing or exploring.

[bert]

If you let the truck go, you’ll have noting to haul the Vespa in.

[SouthTexas]

Some of the expansions are bigger than the average refinery.

Shhhh, don't tell them that!

[theBuckwheat]

>>
But I don’t think you realize how much is actually paid. The average isn’t the spot market price, but take a look at what is actually paid.
<<

That was exactly the point I was trying to convey.

Thanks for the generous collection of links.

[do the dhue]

I thought the drillers were prohibited from leasing or exploring.

That is my understanding. Also, I understand the gazillion acres is pretty much empty of oil.

[thackney]

I take it any refinery now cracks the oil to get all the possible product mixes

Nearly all, if not all, do so. The additional units used in a modern refinery also take up space that may rule out using the old sites.

[Gaffer]

If it's really market forces causing the hike, then I only can say we need to influence free-market action, including the freedom to drill where oil is.

I don't like it, but I can easily afford it. Maybe it will get some of these 'hoopty driving-SEARs drivers license m'efers' off the road.