We must agree for now that the GOP and its clown car cavalcade that pretends governance doesn't know its ass from its elbow. Take President Joe Biden’s recent move to ban Russian oil imports over its invasion of Ukraine. Almost at once it was met with Republican demands to boost U.S. production to address high gasoline prices. Alas, the White House, also fell into the Reepo trap, and called for more drilling. Then compounding the error, cited the war as it shelved Biden’s campaign pledge to curb drilling on public lands because of climate change.
All of this malarkey calls for a rational intervention, in the form of busting oil supply and pricing myths to which too many Americans have lately fallen victim. Bear in mind before I went into the field of astrophysics I worked for an oil company (Pan American Oil Corporation in New Orleans.) The job wasn't grand, mainly working as an assistant to petroleum geologists by preparing geological seismic sections for analysis, but it paid the rent (3 bedroom, 2 bath apt. in the Garden District) and provided money to return to university. It also put me in close proximity - the office where I worked - with several of the company's big shots and deal makers. So I was able to gain insights into how the operations, drilling leases, etc. worked.
Anyway, let's get started scuttling these myths by examining the hard facts:
1) There is an oil worker supply shortage which is not Biden's fault.
We are not yet under an autocracy, so no demagogue - say like Trump if too many stupid people re-elect him - can command people to work, or else. Hence, despite all the overblown political rhetoric about quickly ramping up U.S. crude output, so the cost at the pump is less, it ain't gonna happen. The industry’s reality right now is there simply are not enough workers to expand rapidly. Further, there is scant money to invest in drilling, according to industry representatives, analysts and state officials. Until those workers return don't look for any quick fixes to oil-gas pricing.
2) The Pandemic - again- created supply problems, & Oil companies love it:
Coupled with the worker supply shortage, the primary reason for rising gas prices over the past year is the coronavirus pandemic and disruptions in supply and demand . Specifically, in the case of crude oil, demand increased rapidly - too rapidly - once pandemic restrictions were lifted. Oil production consequently did not increase and inventories did not keep up with demand. Note well, I said oil production did not increase, but neither did it decrease. (Oil production has not been reduced since the Trump administration in 2020, at which time the U.S. also became a net exporter. )
Oil companies, further, are not in a rush to change things. Why? Because as in the late 60s when I worked for Pan Am Oil, getting the benefit of a supply glitch (or creating an artificial one) means more profits. Axiom one: Oil companies - like the one I used to work for - always make more $$ when prices are high.
3)What oil the U.S. does produce has little or no bearing on what citizens can get or affect the cost
This one take some gray matter to process but it's worth the effort. The true fact is that all crude oil is sold on the open global commodities market. This is because it is a product that is generally the same (with the possible exception of tar sands oil) no matter where it comes from or who produces it. Other commodities include corn, beans, gold, copper, iron ore and cereals. Below I show a graph from the Financial Times back in 2011 showing surges in the prices of the last two commodities, and oil:
4) The oil commodity market still only partly determines the price of a gallon of gas at the pump.
It would be so simple to blame the rise in oil pricing on just the futures market. But, alas, we can't do that. According to the U.S. Energy Information Administration about 43 percent of the cost of a gallon of gas actually derives from the price of crude on the oil futures/ commodities market. So if you are paying $5 a gallon, you can blame $2.15 of that on the oil speculators. Where does the rest come from? Refining cost and Oil Co. profits take up a good 25 percent, so that is another $1.25, while 10% goes to marketing - which is another 50 cents. Lastly, state and federal taxes makes up the balance of 22 percent. There is pressure now, mainly in the red states, to cut the state gas taxes out, but the savings are minimal - in terms of the other contributions- and it may mean the red staters won't get new highways, or old roads paved.
5) Biden is NOT to blame for cutting the Keystone pipeline deal.
This one, as is often the case, found some oxygen - where else?- on FOX. But it is all codswallop. The true fact here? Even without it our oil imports from Canada increased 70 %. As for federal oil lease permits, the Biden administration has actually approved 34 percent more than the Trump bunch did in its first year.
Smart Americans need to give Joe Biden a break and stop blaming him for everything under the Sun, especially rising inflation. People cannot allow their current misery and miasma - from warped perceptions about the economy sown by the Right - to lead them into doing something monumentally stupid this fall.
Republicans at every level are openly plotting to steal the presidency in 2024, as is detailed here. An essential element of their plot is winning control of Congress. That means the future prospects of both the Democratic Party and American democracy could be severely damaged by a loss in 2022. It's time to pull heads from the memetic GOP sewer and wake up!
See Also:
by Wim Laven | March 24, 2022 - 6:31am | permalink
Excerpt:
I come from oil country, so does House Minority leader Kevin McCarthy. My hometown—Bakersfield, in Kern County CA—Kern County was once the top producer and has been a top three oil-producing county in the US as recently as 2014.
Both of us know he is lying when he blames: “These are President Biden’s prices.”
Petro Online, an oil industry news source, reports that on average it takes a month for oil to get pumped from the ground to complete the refining process (if it does not become part of reserves). I remember working on oil production equipment on September 11th when my boss said, “you better fill up before the prices go up.” They did.
And:
by Laura Flanders | March 18, 2022 - 5:39am | permalink
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