The Gasoline Blues

[Tom 1960]

I was fortunate enough to get regular unleaded for 3.99/gal yesterday considering right down the street it costs 4.05 and 4.07/gal. Interesting sidenote, there are 2 local gas stations right across the street from one another. The Mobil sells gas at 4.05/gal and the Citgo next door 4.17/gal. You'd be amazed the cars I see everyday pumping gas at Citgo. Fools. It must be nice to be rich and not have a care in the world.

[Jim Alfredson]

The supply and demand argument is bullshit. If demand is so high and we supposedly don't have enough refineries, why is there no gas shortage?

[Joe G]

The supply and demand argument is bullshit. If demand is so high and we supposedly don't have enough refineries, why is there no gas shortage?

There are shortages, just not where we live. Richer countries can still afford to buy oil at the current price, but poorer countries are being bid out of the market.

But, if we have passed peak production worldwide (2006 being the high water mark so far, I understand), then there is still a lot of oil coming out of the ground. Peak means peak. The concern is that from here on out, we begin the downward production slide, which will almost certainly mean higher prices and shortages. And not just of gas. Hang on to your butts.

http://www.google.com/search?q=gas+shortag...amp;startPage=1

[BERIGAN]

An interesting response to a later Krugman piece in the times....

Raymond J. Learsy

Paul Krugman and the New York Times' Pious Pontifications at the Pump

Posted May 16, 2008 | 05:46 AM (EST)

On May 12, upon reading Paul Krugman's bizarre Op-Ed "The So-Called Oil Bubble," they must have been popping champagne corks at the American Petroleum Institute. The New York Times, consistently off-base when reporting on oil markets and their construct (please see "The New York Times' Hidden Hand on Oil's Agenda", 04.25 08) permitted their resident economic guru to hit one out of the "Alice in Wonderland" ballpark.

In an extraordinary piece of jejune analysis Mr. Krugman instructs us that the rise in oil prices isn't the result of runaway speculation but rather "of fundamental factors," and then repeats the standard oil patch saws citing growing needs of emerging economies, difficulty in finding oil, etc. Therefore "there's no good evidence that prices have gotten out of line." There, words coming from the hallowed pages of the New York Times. An oil flack's dream come true!

The nonsense continues. Speculation in oil markets is dismissed. According to Krugman, higher prices due to excessive speculation would result in a situation "in which supply exceeded demand. This excess supply would, in turn, drive prices back down." So according to Krugman, in that this hasn't happened, the vertiginously high oil prices as we now know them are a legitimate reflection of market forces. Simple as that. Economics 101. Oh, for the good old days.

That trading markets can be successfully manipulated is dismissed. Think Enron and California utilities. Think CFTC investigation of BP's alleged manipulation in crude oil trading. Look at India suspending futures trading in foodstuffs markets because of the distortions that have resulted. Think of the fire power inherent in Middle East sovereign wealth funds, giving the capability to move oil and energy markets if they chose to do so (are they, aren't they? an open question).

Then Mr. Kugman continues as though he had landed on this planet from some outer celestial body made of blue cheese. Not a single mention, not one, of the oil cartel, the Organization of Petroleum Exporting Countries who control 40 percent of the world's oil supply and willfully and collusively keep millions of barrels of supply off the market each day- and no comment on what that has done to distort oil markets.

In repeating the oil industry mantra about the "difficulty in finding oil" comes no coherent examination whatsoever of the veracity nor accuracy of that statement considering the development and exploration work being done around the world from offshore Brazil, to the South China Sea and on.

He goes on to piously inform us that "France consumes only half as

much oil per capita as America" and voila, the last time he turned his gaze toward, "Paris wasn't a howling wasteland." What our good instructor overlooked

in his lesson is that in France, over 80 percent of its power grid is

sourced by nuclear energy. Ah details, and the good editors of the Times

dare not contest the anointed wisdom of their economics professor.

Then finally, and most dangerously, a baleful whitewash of high oil prices.

High oil prices are OK because "energy conservation becomes increasingly

important, in which many people may even -- gasp -- take public

transportation." That is the extent of discomfiture to the nation's citizenry

cited by Mr. Krugman. Certainly no heads-up from Krugman that the issue

here is not energy conservation, which is essential and must be acted upon

with or without high prices. The issue here is the price of oil and his

whitewash of a corrupted market (our OPEC friends, were they American or

chargeable under American law, would all be sitting in jail as massive

violators of anti-trust laws). What Krugman has done is

given legitimacy to a massive heist of billions out of our pocketbooks

into the voracious treasuries of the oil industry and the transfer of our

nation's wealth to malign regimes who are a danger to our values and future.

Mr. Krugman, you should be ashamed of yourself.

http://www.huffingtonpost.com/raymond-j-le...s_b_102046.html

[Guy Berger]

The supply and demand argument is bullshit. If demand is so high and we supposedly don't have enough refineries, why is there no gas shortage?

Because prices are rising to adjust. That's the point of supply and demand -- when supply decreases or demand increases, prices go up.

Guy

[Chuck Nessa]

The supply and demand argument is bullshit. If demand is so high and we supposedly don't have enough refineries, why is there no gas shortage?

Because prices are rising to adjust. That's the point of supply and demand -- when supply decreases or demand increases, prices go up.

Guy

'cept that ain't the result. Demand has not fallen to keep the supply up. Back to the classroom.

[Guy Berger]

Krugman may or may not be right on oil prices currently experiencing a speculative bubble. (Which can largely be boiled down to the idea that the actual price of crude oil has diverged from its "fundamental value".) However, he is 100% right that the fundamental value of oil (and other forms of energy) IS increasing, due to rapid growth in India, China and other developing countries.

It's a little late here for me to dissect the article posted by Berigan, but it strikes me that this is largely a mishmash of accusation and doesn't contain many serious arguments.

I would like to say that:

(A) "Speculation" (as commonly understood) is not the same as a "speculative asset bubble". Plenty of speculation can happen in situations where assets trade close to their fundamental values.

(B) "Market manipulation" is different from "speculation" or "speculative asset bubbles". The latter two can happen without any market manipulation whatsoever.

An interesting response to a later Krugman piece in the times....

Raymond J. Learsy

Paul Krugman and the New York Times' Pious Pontifications at the Pump

Posted May 16, 2008 | 05:46 AM (EST)

On May 12, upon reading Paul Krugman's bizarre Op-Ed "The So-Called Oil Bubble," they must have been popping champagne corks at the American Petroleum Institute. The New York Times, consistently off-base when reporting on oil markets and their construct (please see "The New York Times' Hidden Hand on Oil's Agenda", 04.25 08) permitted their resident economic guru to hit one out of the "Alice in Wonderland" ballpark.

In an extraordinary piece of jejune analysis Mr. Krugman instructs us that the rise in oil prices isn't the result of runaway speculation but rather "of fundamental factors," and then repeats the standard oil patch saws citing growing needs of emerging economies, difficulty in finding oil, etc. Therefore "there's no good evidence that prices have gotten out of line." There, words coming from the hallowed pages of the New York Times. An oil flack's dream come true!

The nonsense continues. Speculation in oil markets is dismissed. According to Krugman, higher prices due to excessive speculation would result in a situation "in which supply exceeded demand. This excess supply would, in turn, drive prices back down." So according to Krugman, in that this hasn't happened, the vertiginously high oil prices as we now know them are a legitimate reflection of market forces. Simple as that. Economics 101. Oh, for the good old days.

That trading markets can be successfully manipulated is dismissed. Think Enron and California utilities. Think CFTC investigation of BP's alleged manipulation in crude oil trading. Look at India suspending futures trading in foodstuffs markets because of the distortions that have resulted. Think of the fire power inherent in Middle East sovereign wealth funds, giving the capability to move oil and energy markets if they chose to do so (are they, aren't they? an open question).

Then Mr. Kugman continues as though he had landed on this planet from some outer celestial body made of blue cheese. Not a single mention, not one, of the oil cartel, the Organization of Petroleum Exporting Countries who control 40 percent of the world's oil supply and willfully and collusively keep millions of barrels of supply off the market each day- and no comment on what that has done to distort oil markets.

In repeating the oil industry mantra about the "difficulty in finding oil" comes no coherent examination whatsoever of the veracity nor accuracy of that statement considering the development and exploration work being done around the world from offshore Brazil, to the South China Sea and on.

He goes on to piously inform us that "France consumes only half as

much oil per capita as America" and voila, the last time he turned his gaze toward, "Paris wasn't a howling wasteland." What our good instructor overlooked

in his lesson is that in France, over 80 percent of its power grid is

sourced by nuclear energy. Ah details, and the good editors of the Times

dare not contest the anointed wisdom of their economics professor.

Then finally, and most dangerously, a baleful whitewash of high oil prices.

High oil prices are OK because "energy conservation becomes increasingly

important, in which many people may even -- gasp -- take public

transportation." That is the extent of discomfiture to the nation's citizenry

cited by Mr. Krugman. Certainly no heads-up from Krugman that the issue

here is not energy conservation, which is essential and must be acted upon

with or without high prices. The issue here is the price of oil and his

whitewash of a corrupted market (our OPEC friends, were they American or

chargeable under American law, would all be sitting in jail as massive

violators of anti-trust laws). What Krugman has done is

given legitimacy to a massive heist of billions out of our pocketbooks

into the voracious treasuries of the oil industry and the transfer of our

nation's wealth to malign regimes who are a danger to our values and future.

Mr. Krugman, you should be ashamed of yourself.

http://www.huffingtonpost.com/raymond-j-le...s_b_102046.html

[Guy Berger]

The supply and demand argument is bullshit. If demand is so high and we supposedly don't have enough refineries, why is there no gas shortage?

Because prices are rising to adjust. That's the point of supply and demand -- when supply decreases or demand increases, prices go up.

Guy

'cept that ain't the result. Demand has not fallen to keep the supply up. Back to the classroom.

I'm not sure what you are saying here. My sole point was responding to Jim's argument that a supply-demand framework requires shortages. It doesn't - prices adjust.

As far as the US, recent data suggests that gasoline consumption is in fact decreasing.

Finally, rising prices don't necessarily imply a fall in quantity demanded if other factors are driving an increase in demand. China and India have a rapidly growing need for energy due to industrialization, hence the quantity of oil they consume is increasing even as the price goes up.

Guy

[Tim McG]

The supply and demand argument is bullshit. If demand is so high and we supposedly don't have enough refineries, why is there no gas shortage?

Exactly my point.

The oil companies boasted an $18 Billion dollar profit [that's billion with a B and it is free and clear money after everything has been paid for] and their hue and cry is supply and demand?

Bullshit.

These bastards get government tax breaks and subsidies, too. Can you believe the arrogance?

It is all about the greed and artificially forcing the prices up so we will cave in to their demands to drill in the Alaska Wilderness.

I say, "Eat shit and die!"

Oil company Sons of Bitches.

Edited May 27, 2008 by GoodSpeak

[Joe G]

I don't think it's as simple as us poor innocents getting screwed by The Man, though I have no doubt there are some major league shennanigans taking place. How any one entity could manipulate a world-wide system right down to what we pay at the pump is a little beyond me.

It is a fact, is it not, that several of the oil fields which were major producers in the 1980's and '90's are now crashing, such as Mexico's Canterall (sp?), and the North Sea field. As far as I know, no discoveries have been made that can fill the gap. The recent find off the coast of Brazil, I've read, presents extremely difficult obstacles due to the crushing depths and very high temperatures at the site. So don't bank on that one. Elsewhere, the people who live on top of the oil are either in turmoil or don't like us very much. Also, countries like Mexico are likely to begin keeping more of what they have left for themselves and putting less on the world market.

Why wouldn't all of that drive the price up?

[Tim McG]

I don't think it's as simple as us poor innocents getting screwed by The Man, though I have no doubt there are some major league shennanigans taking place. How any one entity could manipulate a world-wide system right down to what we pay at the pump is a little beyond me.

It is a fact, is it not, that several of the oil fields which were major producers in the 1980's and '90's are now crashing, such as Mexico's Canterall (sp?), and the North Sea field. As far as I know, no discoveries have been made that can fill the gap. The recent find off the coast of Brazil, I've read, presents extremely difficult obstacles due to the crushing depths and very high temperatures at the site. So don't bank on that one. Elsewhere, the people who live on top of the oil are either in turmoil or don't like us very much. Also, countries like Mexico are likely to begin keeping more of what they have left for themselves and putting less on the world market.

Why wouldn't all of that drive the price up?

Then how do you account for the $18 Billion dollar free-and-clear profit, then?

At what point do we allow ourselves to see a clear and present indication of price gouging in an effort to move people to allow the oil greed-heads to drill in Alaska?

Suppy and demand does not equal abusive profiteering. I'm sorry...it just doesn't.

[Tim McG]

The so-called "invisible hand of the marketplace" is morally corrupt and ethically bankrupt.

Bank on it.

[Joe G]

Then how do you account for the $18 Billion dollar free-and-clear profit, then?

Those would be the above-mentioned shennanigans, I guess. Or, how much oil did the world consume last quarter? If organissimo sold 18 BILLION copies of our CDs, I would expect a similar level of income. :rsmile:

I don't think there's actually a huge incentive to drill in Anwar, from what I've read. The oil that's there would meet our needs for about 3 months. What oil company is going to think that's a good investment? It's mostly political posturing, I'd guess. No real will for re-arranging the way we live life here in the states.

[BFrank]

I just put a reserve/hold on a Prius today. They're back-ordered, but I'm on the list to get one when the next shipment comes in next month.

Can't wait.

[bluemonk]

Gasoline prices are just so outrageous. I have cut my traveling down quite a bit. I stay at home a lot now.

Bush has really bankrupted this country, I hope a Democrat gets in there and make it right again like they always do.

Edited May 27, 2008 by bluemonk

[BruceH]

There's not going to be much ANYONE can do about the price of oil though.

[Guy Berger]

I don't think it's as simple as us poor innocents getting screwed by The Man, though I have no doubt there are some major league shennanigans taking place. How any one entity could manipulate a world-wide system right down to what we pay at the pump is a little beyond me.

It is a fact, is it not, that several of the oil fields which were major producers in the 1980's and '90's are now crashing, such as Mexico's Canterall (sp?), and the North Sea field. As far as I know, no discoveries have been made that can fill the gap. The recent find off the coast of Brazil, I've read, presents extremely difficult obstacles due to the crushing depths and very high temperatures at the site. So don't bank on that one. Elsewhere, the people who live on top of the oil are either in turmoil or don't like us very much. Also, countries like Mexico are likely to begin keeping more of what they have left for themselves and putting less on the world market.

Why wouldn't all of that drive the price up?

It's not just an issue of "what's left in the ground" -- there's lots -- but also that not much of it is getting pumped out and a lot of THAT has to do with the policies of countries that own it.

Guy

[Guy Berger]

There's not going to be much ANYONE can do about the price of oil though.

I think the question is whether earlier investment in alternative energies, more efficient engines, etc would have reduced our dependance on petroleum for energy. But that investment isn't free either -- we would have lower energy prices but higher taxes and/or lower government spending.

Guy

Edited May 27, 2008 by Guy

[Shawn]

I think the question is whether earlier investment in alternative energies, more efficient engines, etc would have reduced our dependance on petroleum for energy.

Yes, should have started working on it HARD back in the mid-70's as far as I'm concerned. But with the big oil companies lining the pockets of politicians for decades so they could protect their little energy monopoly...didn't happen. We're going to seriously regret it and sooner than we'd like.

Steam Engines weren't such a bad thing...

[BERIGAN]

...

Bush has really bankrupted this country, I hope a Democrat gets in there and make it right again like they always do.

Ah yes, the Democrats, is there no problem they cannot solve??? Superman wishes he had the track record of Democrats!

I cannot wait til the Dems sock it to an American cartel like OPEC, and American companies such as British Petroleum, and Dutch Shell!!!

[Guy Berger]

...

Bush has really bankrupted this country, I hope a Democrat gets in there and make it right again like they always do.

Ah yes, the Democrats, is there no problem they cannot solve??? Superman wishes he had the track record of Democrats!

I cannot wait til the Dems sock it to an American cartel like OPEC, and American companies such as British Petroleum, and Dutch Shell!!!

Well, there is plenty that could be done because the private companies (Shell, BP) have assets in the US and geopolitical pressure could be brought to bear on OPEC. That said, it is unlikely that any of those actions would do much to stop the long run upward trajectory of crude oil prices.

Guy

[bluemonk]

...

Bush has really bankrupted this country, I hope a Democrat gets in there and make it right again like they always do.

Ah yes, the Democrats, is there no problem they cannot solve??? Superman wishes he had the track record of Democrats!

I cannot wait til the Dems sock it to an American cartel like OPEC, and American companies such as British Petroleum, and Dutch Shell!!!

It took a Democrat to clean up after W's daddy, now it'll take a Democrat to clean up after Baby Bush.

By the way, this is kind of off topic, but what is the deal with some of these Republicans that still have Bush bumper stickers on their cars? Does anyone notice this or have seen this in their town? This really annoys me to no end.

[Jazzmoose]

By the way, this is kind of off topic, but what is the deal with some of these Republicans that still have Bush bumper stickers on their cars? Does anyone notice this or have seen this in their town? This really annoys me to no end.

Doesn't bother me at all; it's like an early warning system for "stupid"...

[Shawn]

Doesn't bother me at all; it's like an early warning system for "stupid"...

...8 years too fucking late!

[Joe G]

Veering into politics, but the view here is fairly apolitical.

Why Dems and Republicans Are Afraid of Two Words: Peak Oil

The pro-growth faction has reacted quickly and scathingly to the idea that there could be limits to growth.

Kelpie Wilson, TruthOut

May 22, 2008

In 1956, M. King Hubbert, a petroleum geologist with Shell Oil, presented a paper to the American Petroleum Institute that predicted US oil production would peak in the early 1970s and then follow a declining curve, now known as Hubbert’s curve.

But Hubbert almost didn’t get to give his paper. He got a call from his bosses at Shell, who asked him to “tone it down.” His reply was that there was nothing to tone down. It was just straightforward analysis. He presented the paper, unedited. You can read the whole story here.

Since that time, the oil industry and its political supporters have done everything they can to tone down the message that oil is a finite resource and that we will run out of it some day. Why would they do that? To further the short-sighted, short-term pursuit of profit. In 2004, Shell finally got caught in a lie about the size of its oil reserves. The company had inflated the stated size of its oil reserves to keep stock share prices high because who wants to invest in a company — or an industry — that is going the way of the dinosaurs?

Since 1956, the world economy has proceeded under a sort of oil company spell that has woven the illusion all around us that oil depletion is so far into the future that we don’t need to worry about it. That belief was essential to support the aim of an endlessly growing economy. There have been a few hitches in that strategy.

In 1972, just as oil production in the United States reached its all-time peak, a group of computer modelers from MIT released a study called “The Limits to Growth.” They predicted a steep decline in natural resources of all kinds. Because reserve numbers for many minerals, including oil, were not accurately known back then, they looked at different scenarios. Some showed us running out of oil before 2000 and some showed the peak occurring toward the middle of the 21st century.

The pro-growth faction reacted quickly and scathingly to the idea that there could be limits to growth. The MIT scientists were treated like Cassandras in academia and in the press. This strategy of killing the messenger, the bearer of bad news, soon permeated American politics. Jimmy Carter tried to grapple with the energy crisis in the late 1970s with support for energy alternatives and conservation, but he was ridiculed by the media and American consumers were not able to hear the message. Ronald Reagan walked away with the presidency and promptly tore the solar panels off the roof of the White House. Ever since then, it has somehow been “not polite” to talk about limits to growth.

Today, despite skyrocketing oil prices, most politicians still avoid the term “peak oil.” Most of the media still treat peak oil advocates with skepticism, using epithets like “fringe” and “so-called”to describe peak oil theory. To be clear, peak oil is often misunderstood. The date that the world reaches peak oil is not the date we actually run out, but the date that we stop increasing production. This is followed by a “plateau” where oil production is flat.

Eventually, oil production will decline. Even a plateau is a big problem for a world economy that is based on growth. In a world where 850 million are still going hungry and 3 billion out of 6.5 billion live on less than $2 a day, stagnant oil production means an end to development models based on economic growth. The statistics show that oil production has been flat for more than two years now.

These facts are simple. As Hubbert said back in 1956: “Nothing sensational about it, just straightforward analysis.”

And yet the most powerful institutions in our society continue to do everything they can to avoid confronting the truth. Fortunately, a vast network of independent citizens, academics and renegade oil company employees has kept probing at the truth and attempting to educate the public about peak oil. You can find their work online at sites like energybulletin.net and theoildrum.com.

These networks have not only exposed the real statistics about oil production constraints, but they have begun to grapple with how the world should respond to this unprecedented crisis. Anyone who is interested in a firsthand encounter with the intrepid “peakists” might check out an upcoming conference. The International Conference on Peak Oil and Climate Change: Paths to Sustainability takes place from May 30 to June 1 in Grand Rapids, Michigan.

Michigan Congressman Vernon Ehler will launch the conference. Ehler is a member of the House Peak Oil Caucus, which was founded by another Republican, Roscoe Bartlett of Maryland. The Peak Oil Caucus is co-chaired by Democrat Tom Udall, but it has only 15 members in all. There is no similar group in the Senate and very few other politicians will use the term peak oil. None of the current presidential candidates have made peak oil an issue. Bartlett’s press secretary, Lisa Wright, said that Bartlett has talked about peak oil with John McCain but not with Obama or Clinton. When I asked if McCain would take on the peak oil issue, Wright said, “I would not describe Senator McCain as being nearly as knowledgeable or committed as Representative Bartlett on the issue.”

When speaking of energy issues, politicians will often use the euphemism of energy security, acknowledging that the US has only three percent of the world’s oil reserves and warning that most of the rest of it belongs to unfriendly or unstable governments. While there is truth to this type of statement, it sets up a framework for conflict by creating the perception that there is plenty of oil left but bad people are keeping it away from us.

Both Democrats and Republicans buy into this view. In this election season, some Democrats seem even more willing than Republicans to play the oil fear card and promote quick-fix measures that are ineffectual or downright ridiculous. First there was the gas tax holiday proposed by John McCain and seconded by Hillary Clinton. Barack Obama distinguished himself by resisting the idea.

The economics of it make no sense. It would at best save the average motorist about $30 over a summer of driving, and at worst the increased demand would drive up gas prices. Obama’s position shows he understands that oil supply is not meeting demand, even if he has not used the words “peak oil.”

In the last two weeks, Congress has seen a slew of silly proposals from both sides. Democrats want President Bush to twist Saudi arms to get the kingdom to produce more oil. If that doesn’t work, they want to cut off their arms — weapons that is.

Senator Reid plans to bring an expedited resolution to the Senate floor that would block $1.37 billion in arms sales to the Saudis unless they increase oil production by one million barrels a day.

Peak oil educator Richard Heinberg warns where all this confrontation might lead: “uppose we get tough with the Saudis and end up destabilizing the kingdom so that forces unfriendly to us take over. Then we will feel more or less forced to invade in order to maintain access to our national drug of choice. Where would it end? Does any of this help?”

Meanwhile, what Democrats would do to the Saudis, Republicans want to do to the polar bear and the caribou. Republicans are generally in favor of drilling in the Arctic National Wildlife Refuge (ANWR) despite the fact that even at peak production it would meet only two percent of American’s oil demand. But not all Republicans favor drilling in ANWR. Peak Oil Caucus Co-Chair Roscoe Bartlett thinks we should save the Arctic oil for a real emergency. Speaking in opposition to drilling, he said “I am having trouble understanding how it is in our national security interest to use up our little bit of oil as quickly as we can. If we could pump ANWR tomorrow, what would we do the day after tomorrow?”

Bartlett takes this position because he is operating with the knowledge that oil is finite and that the world is nearing or has surpassed peak production. If all members of Congress were operating within this framework, then we would see some very different policy proposals. I asked Lisa Wright why Bartlett’s office thinks the peak oil issue has gotten so little traction in the media and with politicians. Wright blamed a human psychological condition known as cognitive dissonance, “the phenomenon that you only hear what you’re interested in hearing.”

“Hard truths are hard to talk about as well as hard to absorb,” she said. “It’s much easier to believe people who say that if we just have more American production then we wouldn’t have to worry about foreign imports, without explaining that we’re already pumping our minute portion of world reserves three or four times faster than the rest of the world. But we can’t drill our way to self-sufficiency because you can’t pump what’s not there.”

When asked if she saw peak oil becoming an issue in the presidential campaign, Wright said, “It will become a campaign issue if candidates make it an issue and candidates will choose to make it an issue if it shows up as being a motivating issue for voters.” But, she said, “It’s a chicken and egg conundrum. To the extent that voters become informed and aware through media, you’ll find that candidates will follow. That’s generally the way American politics works.”

After years of toning down the message of peak oil in public discourse, voters need to let candidates know that now is the time to tone it up. ++