Gas Prices: How Much is Too Much?

"If you want lower prices, you simply must increase the supply - yes, it’s really that simple in this case."

Actually it's not really that simple at all. The primary effect of regulation in the country is on refineries and finished products, not oil prices. As long as oil prices rise, then the increased cost from refinery regulation is minimal.

In actuality, very little can be determined as to the source in the rise of oil prices. Why? Because there is no regulation. With the complex world of commodity trading that has arisen in the last decade and a half, it is not easy to determine how much is due to speculation or to fundamental issues, thus deregulation has actually made it harder for anyone to get enough information to make rational choices.

Moreover, there are growing signs that contrary to typical economic theory, high prices may encourage a decrease in supply. As China is experiencing rampant and out of control inflation because it got too rich too quickly, the oil exporters are not keen on milking out all the money in the short term and potentially taxing their infrastructure as long as they can meet their monetary goals by producing less.

More to the point, it takes 10-15 years to develop oil fields to the point where they get much output. ANWR isn't really much of a solution: "The U.S. consumes about 20 million barrels (3,200,000 m³) daily. If the Arctic National Wildlife Refuge oil reserves were used to supply 5% of the U.S. daily consumption the reserves, using the low figure of 4.3 billion barrels (680,000,000 m³), would last approximately 4300 days, or almost 12 years. Using the high estimate, the reserves would last approximately 11800 days, or 32 years. In total, the oil deposits in ANWR contain as much oil to solely support U.S. consumption for 7 months (4.3B estimate) to 2 years (16B estimate)." Especially because global demand will have to be about 20% higher at that point to keep economic expansion going.

I agree completely with your sentiments on nuclear power and long term goals, I just don't believe that the current crisis is due to a lack of the free market being hindered or the lack of exploitation.

We are considering what to do about this problem 30 years after we became aware of it. In other words we are still chasing our tails dithering bout what to do instead of observing how more forward-thinking nations have dealt with the crisis. I don't understand why there was so much excitement about corn-based ethanol when Brazil has achieved energy independence with sugar cane-based ethanol.

IMO, the next administration should set up the equivalent of the Manhattan project, bringing together partnerships of the best and brightest from the private and public sector to work on solutions for the mess we have made for ourselves. No option-- solar, wind, electric, biofuels, mass transit etc etc should be overlooked. We are at risk of losing our affluent society because we have ignored this for so long and swallowed the myth that more drilling will solve it.

Another part of the misrepresentation on the part of those who want to blame the government (mainly the Democrats) for supply issues is that they often claim that the reason that oil shale isn't being developed is because it's on public lands and the evil liberals are stopping them from accessing it. Wrong. There are huge resources in shale available to the companies but it still isn't technologically feasible to produce oil from it at this time even at these prices.

I should note that in general, all the deregulation mantra has severely degraded the economic and asset information that runs the world, to the point where most banks cannot even accurately price their own assets. Successful capitalism is based on having access to correct information and being able to make rational choices; in the last 10-20 years the lack of government intervention has led to an obfuscation of data in the markets where now it's unclear how the ownership of the majority of newer mortgages even breaks down. The extremely complex nature of commodities leaves even experts scratching their heads.

And of course monetary policy has strong influence as well.

I don't know Jazz, I think we might actually be ready for the Big Switch to renewable energy sources. When the sluggish American auto industry is ready to mass produce a plug-in electric car (the Chevy Volt), people can put solar panels on their roof for $9000 (see www.solarhome.org) - that's about 2 1/2 years of my electric bill and I have a small house - and everywhere you look new energy efficient products are coming on-line, you know there's been a big change in the market. Even my dad - a Ford truck driving, slow-to-adapt-to-new-technology sort of guy - said a few weeks ago that he was going to stop driving his truck (except when necessary) and just drive my sister's hybrid Escape while she's away at college. Then he really blew my mind and said the day they start selling hydrogen powered trucks at the local dealership, he'll be first in line to buy one.

It's going to be a tough few years, but I don't think the answer is to let the government give us some sort of help on the energy front aside from encouraging conservation and the switch to renewable sources. In the end, we'd still be paying for it, either through our tax dollars or in further delaying the inevitable shift we have to make away from fossil fuels. People are smart and we can work out ways to get around or work within the current fuel prices - we can carpool or telecommute or switch to 4 day workweeks. We can shop at local farmers' markets instead of buying produce shipped across the country. We can turn the AC to 75 degrees instead of 68, switch to CFL bulbs, turn off and unplug appliances & electronics that aren't in use. We can add/improve insulation to our homes, install the afore-mentioned solar panels or even residential wind turbines, buy hybrid cars, and live closer to where we work. Now I'm not saying that everyone is able to make all of these changes, but if we all made an effort to hit 3 or 4 of them, it could make a huge difference in the amount of energy we consume as a nation.

And that's another side of the market influence that has to change if you want energy prices to drop - we need an increased supply, but we also need to decrease demand, at least for certain forms of energy. Besides, at this point it would take years for any new nuclear power plants or oil refineries to come online. In the time it takes to build a new pipeline or construct a nuclear reactor, we'll be even further along in converting to renewable sources. There's no point in investing in the old technologies now.

I too am unswayed by the antiregulatory fantasies of so-called fiscal conservatives. We've actually seen the high cost of deregulation in the savings-and-loan debacle and more recently the mortgage crisis. We simply cannot get where we need to be by "letting the market decide". This is abundantly clear from the Exxon Valdez example. Nearly a quarter-century after to spoiling a pristine stretch of the Alaskan coastline, Exxon continues to fight tooth and nail to avoid their responsibility to pay for the cleanup.

Companies will not behave ethically without regulation, and consumers will not make them. Nor is there any semblance of the free market at work here. We give trillions to the petroleum industry in subsidies and tax breaks, then pick up the tab for the messes they refuse to clean up. Likewise with nuclear energy. Almost everyone of you paid the cost through your utility bills for cleaning up 3 mile Island. We in Colorado did not have to, because we decommissioned our sole nuclear power plant before 3 mile Island, hence we are not a part of the risk pool that gets to clean up after inevitable accidents.

So drill here? Drill now? Under federal mandate instead of states' rights? I don't think so. We'd rather develop our wind and solar options and the cheapest energy by far available to us right now, is conservation.

Kritt and Amanda are right, our renewable options are better choices for the future, and we should be farther along than we are, as we've underfunded innovation disastrously while pumping money into fossil fuel industries. We don't know what we can achieve if we dedicate ourselves to it, but we know the drawbacks of oil, coal and nuclear. What's possible? How about a tank full of starch (let's say from kudzu) fueling our cars? We can and will discover and develop breakthroughs when we get past our self-limiting determination to live in the past.

OK, I know I'm probably dreaming to think we will get busy, get creative and innovate. As one green energy expert put it, "We won't do it. Japan will figure it out and China will build it. We'll buy it from them."

ANWR should still be drilled. 5% of our daily usage is huge. Face it, its oil, we need it, and at some point its coming out of the ground to service out needs. I'm all for having the EPA force them to do at cleanly as possible, but get it out of the ground. Keep putting money towards alternate energy, and maybe even have some of the ANWR money go specifically to that end, but refusing all that oil because of environmental consequences in one of the largest and least populus states is just silly to me.

You missed one other energy source that 's very promising: solar thermal

http://articles.moneycentral.msn.com/Investing/...

The fantasies and worse are still found on the Left. It is impossible for us merely to conserve our way to energy independence as well as self-sufficiency, and we cannot wave a magic wand (or this year, believe Obama will after he is elected) and convert from conventional to alternative energy sources without delay or effort or pain. And those who say we should experience pain and be compelled to deliberately reduce our standard of living (be it for no reason at all, for lies about the US's "sinful" nature or behavior, or due to mental illness such as idiopathic guilt) are moral failures. This is even worse than the frequent foolishness (which is accompanied at times by much worse behavior) by the anti-nuclear losers. It is pathological (diseased) to want the US economy intentionally to be subject to higher energy prices than necessary be it from deliberate constraint on our own supplies of energy, or from higher taxes (most morally defective of all from levying sumptuary or "sin" taxes of any kind on energy or its use, or for worse than harmful, but truly bizarre non-"reasons" such as "global warming mitigation").

If we continue as we exist today, our petroleum imports will need to double or triple in the next 20 years or so. So far we haven't found any serious substitute for petroleum for transport fuels. Also, we will need to increase our electricity generation merely to accomodate our growing population and economy, which includes not a few self-absorbed, electronic-playpen leftist bloggers, using more and more computers which -- add to the growing need for electricity (even if it's often misused or wasted in many bloggers' cases). Because of anti-nuclear idiocy, coal remains attractive and a number of new coal-burning power plants have been built. Elsewhere, to reduce air pollution (to reduce real air pollution, not to submit to global-warming-lunacy-based objectives), the frequent alternative is natural gas.

Interest is there for wind power, but this is hardly the answer everywhere, every time, and with wind and other alternatives we see the predictable opposition by the Left where these are successful, and other examples where there are drawbacks to these alternatives that have also quickly drawn PC-playpen forms of opposition. Wind power has been fought near Cape Cod, where wind resources are good and this kind of power makes sense, for example, while corn-based ethanol has been revealed to have drawbacks as well as attractions and is far from an ideal solution. (Corn producers and handlers and ethanol makers, the latter of whom get assistance from government, do well, but buyers of corn for other uses such as feeding livestock to produce food, or simply to resell corn as food, do not do well.)

"refusing all that oil because of environmental consequences in one of the largest and least populus states is just silly to me"

It is silly. We should proceed without hesitation to exploit our reserves. Here's a nice, entertaining comment-augmented Web page.

http://peswiki.com/index.php/Directory:North_Am...


Just the biggest fields, alone ("fields with ultimate recovery of 500 million barrels of oil, 3 trillion cubic feet of gas, or the equivalent"), are not exhausted yet.

http://www.searchanddiscovery.net/documents/200...


The environmental consequences almost certainly are nothing as they are depicted by the opponents of development. Just as they are to ridiculous extremes with nuclear power.

Here's an example from my native state. Stupid ****s: Our reactors are not like Chernobyl! And for the next, worse, thing the typical idiots will say: They cannot explode like an atomic bomb any more than a chocolate bar can. (And the waste problem is only political, and anti-nuclear-defective-developmental, not technical.)

http://mothersforpeace.org/resources/maps/chern...

(Note regarding electricity generation. In addition to the fighting against Nantucket Sound's wind project, for example, by lefties, many will object to electric vehicles in metro areas -- the #1 source of so much pollution in metro areas is from automotive transport -- that are battery-powered and recharged by power plants that are located away from metro areas.)

Yes, we should drill everywhere that it makes sense economically right now, which means not only in ANWR and out deeper in the Gulf of Mexico but obviously off both coasts of our lower 48 where we have the resources, as well as anywhere in the interior where they happen to be abundant. (Anyone outraged at the "visual pollution" of oil rigs but silent about giant wind turbines is a hypocrite unfit to participate in debate.) We also need to spay and neuter the anti-nuclear losers and proceed with the latest modular passive-safety versions of nuclear power plants. We should even reconsider hydropower development where resources have not been exploited yet for whatever reasons. (Not everything is compelled to be locked up under "wild and scenic river" status necessarily, for one thing.)

Yes, it is silly to deliberately refuse to go after the oil we have. How can our economy afford to provide research into alternative fuels and energy sources (of which many ideas will turn out to be blind alleys, and all of which will take much longer than expected or will be less economical or practical than imagined, as with oil shale or, to name another otherwise-very-tempting example, coal liquefaction and gasification) when it is deliberately choked and diseased from diseased, discredited political-economic anti-development-and-progress ideas?

I wonder frequently how often the problem is not "evil humans" but instead "more successful, i.e., American humans" rather than everyone in the world (except Israel, of course, but that nation is only a political enemy of the Usual Suspects, not an economic or environmental one that much), including those who are less efficient and dirtier users of energy than we Americans are.

By all means, do the research on alternatives (switchgrass rather than corn for ethanol, making bio-isobutanol, which is close to gasoline in energy density, using sugar cane, even importing it someday from Cuba and elsewhere it is grown besides Hawaii and using that; more fuel cell research and progress; yes, pushing for improvements with wind energy, particularly where we have the resources), but don't expect cheap, prompt solutions, and don't engage in lunacy and insistence on self-destruction of our economy and society, or merely a perverse refusal to accept and exploit the obvious and handy.

And of course the failure of any alternatives to oil and gas to be anywhere close to practical any time soon shows why the free market system is incredibly weak in many ways. Over and over again we have the church acolytes tell us how the market will lead to the development of the replacements we need. What they neglected to mention that the kind of research required would not be adequately funded until the replacement technology is necessary. And that since new technology is not discovered, refined and put into production at the snap of one's fingers there would be economic disruption and real human suffering involved, quite possibly for years. But that's "creative destruction" for you.

DLS, do you think it's possible for you to post a single comment without slamming Obama and anyone who disagrees with you? Everyone is stupid, a loser or an idiot to you. Why so hostile and angry?

Well put Green Dreams!
However, one of the most important problems we have is the five hundred and 35 plus house and senate and supreme court members who are the only ones responsible for any and all changes this country makes, not a single other person can do what the elected 535+ do.
No matter who controls with the majority, ie, the democrats for the last eight years, it is still the 535+ who are the only ones who can change the outcomes. Having said that, I am old enough to realize it is "always about the money" and has always been about the money. We have never had a president who caused anything, even though some think and say it will all change when the presidency changes. "In your dreams", as it will only change when we change the 535+ incumbents , some of which have been controlling for decades and know no other recourse than to "tax it", TAX IT!, and tax it some more.
Could it be, if we vote the same way, we will get the same results? In Washington state we have, brace yourself, a state sales tax on heating oil and as heating oil goes up the the 8.5% tax burden is a larger and larger take on each gallon of heating oil. Our state lawmakers like heating oil prices per gallon to increase as it is now a wind fall increase in tax revenue without even raising the 8.5% tax rate. It is, my friends, all about the money and always has been.