Unnatural Gas

Many of the statements about the availability and costs of gasoline share a similar odor with the gas that is one of the favorite subjects for the jokes of middle school boys. In both cases the sounds come from the same orifice.

It’s almost impossible to find a discussion of differences on this issue where either party employs any facts. For such a common commodity, it seems strange that it is so little understood. This also applies to all of the peripheral issues.

If you pay attention to the news you expect the price of gas to approach or reach $5 a gallon. It very well may, but do you know why? Not if you listen to the politicians and talking heads.

Will Newt or anyone else be able to to get the price down to $2.50? Only in your dreams . . . and their lies. There are several factors that go into the pricing and neither Newt nor the other liars control any of them. Neither does the president.

Quick, what is the cost of a jar of mayonnaise, a can of beans, a pound of tomatoes? You, as everyone else can quote the almost latest price of gas at one or several stations – but probably not most groceries or other everyday items. Which has inflated the most? Which, the fastest? Which hits your pocketbook harder? Gas holds a special place in our hearts. Gas is a political football.

Let’s dispel a few lies. Is the price outrageous? Yes, but not at the pump. Below is a chart of prices from 1918 to 2012, both in raw numbers (black) and adjusted to 2012 dollars (red). The points on the graph are each the average for a year, not the highest or lowest of a year.

Notice that the lowest price in real dollars immediately preceded our installing oil men in the Oval Office and as President of the Senate. It’s probably just a coincidence.

But Obama is making prices go up and making us more dependent on oil from the Middle East – isn’t he? Not really.

Imports have declined every year of his administration. He has opened up more federal lands for drilling. He has approved more drilling sites.

We now have more oil wells than the rest of the world combined. Last year we exported more oil than we imported. Put that in your pipe and smoke it, as a substitute for all of the smoke the politicians and oil companies have been blowing in your face.

Despite the whining of the rabid, with their fatuous cry of “Drill, baby, drill,” we are drilling. The real problem is that we devour 25% of the world’s supply but have only 2% of the reserves.

The Future

Americans want cars.They also want to fill them up. That doesn’t quite make us unique. The Chinese want cars and they will want to fill them up.

China has added 30 million new cars to the streets and highways in the past 5 years. They added 10 million in just one year. That means that much more competition for a limited resource. My guess is that those extra cars might put a little upward pressure on prices.

Well, there’s still plenty out there. Not really. In the past we found reserves faster than we were using it. That hasn’t been true lately. We have topped the big hump. We’re on the downhill slide. We don’t have enough to reach even close to the end of this century at the present levels of demand. Increased demand means running out sooner. Lots of potential car buyers are going to be upset when they can’t be like us.

We think and talk almost exclusively in terms of miles per gallon. It’s true, 70% of our oil goes to transportation. That still leaves 30%. So, what’s that for?

We use petroleum for fertilizers, medicines and plastics. We need to forgo using it all up on transportation, until we find alternatives for those other uses. The future could look pretty bleak if we just keep buying SUVs and pickup trucks to run across town to buy a loaf of bread and a gallon of milk.

Costs

Tell me how much that tankful set you back. No. Multiply the number of gallons by almost $17 each. You might look more favorably on alternatives if that all came out of your debit card every time you stopped at that convenience store.

$17 a gallon? Where did that figure come from? Well, that includes the costs of military excursions related to protecting our interests in a guaranteed flow.

By the way, our interests in oil production in the Middle East may not strike some as all that important since we don’t get any from there. Our biggest source of imported oil is Canada. Also on our list is Mexico, Columbia, Venezuela and a couple of countries in West Africa.

What? We don’t get any from the Arabs? No. And we don’t get any from Alaska either.

Then why do we care about those Arab countries? Because that’s the source for our friends in Europe and a few other places. Despite the grandiose bragging of some of our politicians, we cannot get along alone.

Those aircraft carriers patrolling the Strait of Hormuz cost money. We have been worried lately about how the finances of Greece will harm our economy. Imagine if all of Europe, Japan and the Commonwealth crashed simultaneously. It might cause those numbers in the bottom right-hand corner of your television screen to plunge lower than it has ever been in your lifetime.

We are paying to protect the sea lanes and facilities around the world for our benefit and that of others.

Beyond the military costs there are the environmental costs. The oil from the Alaskan pipeline (remember the Exxon Valdez) goes to Japan. Why? because the unloading in Los Angeles would pollute that stuff you breathe far above medically acceptable levels. The pollution of the air, the soil, our crops, even our farm-raised fish, takes a significant toll on health care costs.

Perhaps you’ve heard of that proposed pipeline called Keystone XL. Jobs, jobs, jobs. Yep. One to two thousand temporary jobs and 50 or so permanent ones. Canada bears a lot of the pollution burden of the fracking process. It ain’t oil. It has to be fracked to get oil out. Then it has to be refined. They want to pipe it down to Texas, as if Texas needed more refineries polluting their air.

But we’ll get more oil. Nope. It’s headed to China. If they don’t get the easy route to Texas, they will have to cross the Rockies. Either way, the oil goes to China. We get 50 permanent jobs and dirtier air.

Canada could both frack and refine and ship it to the Midwest, where the pump prices are fairly high. But they just want the pipeline to go through the Midwest on its way to China. At the cost of tremendous pollution, Canada gets a lot of money. We get bypassed.

Oh, don’t forget the $4 billion cost of corporate welfare to the oil industry while it is enjoying the biggest profits in its history.

Do you remember those $4 gallons a couple of years back? What drove up the prices? Gamblers. Instead of the oil companies and airlines buying from the producers, “investors” bought futures solely to sell them at a big profit. They did well for awhile. But most of them got their asses handed to them when the bottom dropped out.

They had driven the price up from a nominal $55-60 per barrel above $140. That’s a nice profit for them. Did they say thank you?

Who were these “speculators?” Major university endowment funds, state employee retirement funds, major corporations and such.

You would think that the beating they took would make them wary of doing it again. Harvard lost 27.3% of its endowment; in the neighborhood of $11 billion. That’s a pretty nice neighborhood. They depend on their endowment for a third of their operating budget. They had to lay off 275 people. The genius in charge of that was Larry Summers, later Chief Economic Adviser to Obama.

Just last week it was estimated that 70% of our oil is under contract to these gamblers. They are so smart they never learn.

There are other factors. Iran’s actions induce instability and, therefore, an upward push. The world presently has a production capacity which provides us about a 3 million barrel a day cushion. That is not a comfortable margin.

Why are we insisting on persisting on the wrong course?

Finally

The oil industry and politicians have put us in this mess by obstruction and delay. These problems would not exist if the 1973 embargo had spurred us to address them.

Anyway, now comes the coal industry to save us with clean coal. It’s just a minor detail but there is no such thing. There are no scientists not beholden to the coal industry that can see far enough into the future to see the breakthrough to make coal clean. 50% of our electricity comes from coal, the dirtiest of all carbon-based fuels.

A follow up article can be found at Keystone XL Redux.

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