Video: Get ready for big hike in gasoline prices

Hot Air ^ | February 15, 2012 | Ed Morrissey

[thackney]

This was not about drilling a new well.

That is what you are missing. Look at the well flow chart I just posted. If ConocoPhillips has a thousand wells, each with similar curves, how many wells must they drill per month just to stay at the same flow rate? A significant amount. An oil company that isn't producing new wells or continuous spending money on enhanced recovery methods of the existing, is going out of business.

In addition, as the bigger facilities age, like Prudhoe Bay, Kuparuk, Kern River, etc, the maintenance cost continue to climb. We have reached a point at these facilities where we keep replacing pumps, cables, pipelines, etc.

It cost significant money, just to hold constant. And when a boom time comes along, you cannot quit, but the unit prices climb significantly.

[okie01]

I lived through oil price gains and falls in the past. 2008 was vastly different.

And I'm in complete agreement that 2008 was a bubble driven by speculation.

Recall the timeline. The prices started up in November, 2006 -- right after the Democrats took over the Congress and Nancy Pelosi essentially announced they were going to shut the industry down. The recently approved expansion in offshore drilling was the first casualty.

Anybody with a lick of sense could readily understand that the Congress wasn't going to allow the largest consumer of petroleum to do anything at all about increasing its own production. Who could doubt that the price was going to go up? It was an open invitation to speculation. Nor was it rescinded...until the economy went South.

Seems to me that market factors might be more involved in the current price spike. A Middle East even more unstable than usual coupled with a U.S. foreign policy even more incompetent than usual. Moreover, an increasingly obvious enmity toward Big Oil by the administration. All of it overlaid by the standard Spring bump due to the multiple grades of Summer gasoline mandated by the EPA and various states, coupled with the need to maintain existing inventories.

I bow to your superior knowledge of the industry, however.