Gas prices are up, so, of course, politicians feel the need to ‘Do Something!’ (via Drudge):
Senate Minority Leader Harry Reid on Friday said the Bush administration should require U.S. oil companies to disclose their fuel pricing policies and production costs.
In a letter to the White House, Reid also said the Federal Trade Commission should investigate instances where a state’s retail prices rise 20 percent in any given week “to determine if the price of gasoline is being artificially manipulated.”
Past FTC probes into U.S. oil company pricing policies have found no sign of abuse.
“This one has already being done,” White House spokesman Trent Duffy said. “The FTC and the Justice Department have been keenly watching for this type of activity for the past two years.”
Who will be the first to call for a release of the Strategic Petroleum Reserve? I guess Kerry. This, btw, is just silliness:
Separately, Democratic Sen. Bill Nelson of Florida said the White House should ask oil companies for a voluntary, temporarily freeze on prices that they charge gasoline distributors.
Because, after all, the appropriate solution for a shortage of cheap gasoline is to stop the market forces which reward conservation.
How soon we forget what those bastards did in California with electricity. I don’t see why disclosure is such a bad thing. Oil companies have been reporting record profits for at least the past two years. If they’re price-gouging we should know about it, and if they’re not, disclosure would let the public know that they can be trusted.
Read the post again, and then rethink your comment.
I agree with Mr. Caputo. Record profits and higher prices. If there is nothing illegal or unethical about it, why not let the sunshine in? As Bush himself has said in one form or another, fossil fuels are one of the fundamentals of our economy.
Oh those market forces! You know, sending an army over to the Mideast, spending a half-trillion dollars seizing other peoples’ oil doesn’t quite equal market forces. Those are armed forces.
All done under the horsecrap banner of free market. As soon as anyone is big enough to define a “market” they’re figuring out ways of controlling it. So let’s drop the “free” part.
Oil companies keep making record profits, as a logical mind would expect when looking at who’s running the country. But let’s not consider ways to lessen the impact on the rest of the country. That would affect the, ha ha, free market.
By the way, yesterday the Post Office announced postage is going up in January due to fuel costs. Since everything in this country relies on oil to move we can expect the impact of oil prices to hit all industries. So let’s give another tip of the top hat to BushCo for making all this possible. At least some of us won’t be spending as much on heating oil in the years to come.
As Republican, Democrat, or Independent, it should be obvious to everyone that our insatiable demand for fuel must be factored in to any equation designed to solve our dependence on foreign oil and/or the cost of gasoline. Instead of subsidizing the oil industry, the government should give huge tax credit incentives towards the purchase of electric or hybrid electric vehicles. From a public policy perspective, it makes no sense to have 1 individual propelling a 2 ton gas guzzling vehicle down the highway to move themselves to work every morning. For those who require larger vehicles for work-related purposes, towing, etc., special permits could be issued (at a cost). Otherwise, the government incentive should be to force Americans and the auto industry to transport themselves to and fro in fuel efficient vehicles. If we could raise the mpg of the average vehicle by 20 miles per gallon, the gas crisis would be “over.” This is simply smart policy that will further our national security interests.
The less government does, the better off we are as consumers.
The pain will be short but severe for some. Instead of cutting back on tips, I say go from 20 percent up to 25 percent because many low-wage workers have a tough time.
You are right about the market forces in some respects, but Reid is right about seeing into the oil industry and its closeted, Good Old Boy way of being.
The “market” is not going to be disturbed by a little public visibility of some of the most basic working parts of that market.
The oil industry is a very finely tuned supply-demand system. It operates worldwide as a cash-and-carry operation; the players literally put their money on the table every day. It works pretty well, really.
Asking the players to explain the game they are playing is hardly out of line. We have a rather large stake in this game ourselves.
I don’t know if Reid’s plan would work, but “market forces” are BS. I can’t remember the last quarter where the phrase “record profits” wasn’t used in relation to oil companies. It won’t be long before gas prices affect every aspect of our economy.
God, I hate to do this, but having worked for a Oil Company for many years, I need to point things out:
1.) The price of a barrel of oil has risen to $60 +. It was going to hit the consumer market at some point.
2.) You are competing with the world for a scare resource.
3.) There has not been a refinery build in the US for 20+ years. The ones in operation are running at maximum capacity.
4.) Years ago when the price of oil was low and the profit margin of a galllon of gas was .5 cents, all oil companies reduced their costs to a minimum. They all consolidated (BP/Amoco, Exxon/Mobil,etc…) to reduce costs even further. As a result when prices went up, their cost structure created high profits.
Now, in order to not have to change my name to RebublicanDude, got to say it is our own damn fault.
The quickest way to reduce cost is reduce demand:
1.) Conservation is the quickest way to reduce demand.
2.) Require higher gas milage on cars & SUVs.
3.) Have a real “Manhattan Project” to accelerate other forms of fuel.
Demand will be reduced due to price alone. It will spawn other ways to save fuel. Price increase is the most painful to make changes, but with Oil guys in charge of the govt, that is all you are going to get.
As an Oregon resident (where quirks in the supply chain mean high gas prices every damn summer), I remember quite well back in the late ’90s how the game worked. When prices started to get out of hand, our (D) Senator Wyden would stand up in the well of the Senate and demand investigations into high gas prices and collusion by the oil companies.
The oil companies would guffaw and sputter and insist that no way was there price gouging, no sir, and an investigation was completely out of bounds. Why, not a single new refinery had been built since Eisenhower’s day, and there are leaks in the pipeline, and leprechauns were turning valves off, etc etc world without end, Amen.
And then, quietly, the price of gas would drop by 10 or 20 cents a gallon. Where it would stay until the next summer.
It is clear this administration is being run by the CIO’s of big oil. It was clear way back in 2001 with the start of Cheney’s Energy Task force meetings. Policy was being hashed out IN PRIVATE among industry insiders and Cheney. The administration fought tooth and nail to prevent the release of any information discussed or policies decided in the meetings.
I work in an industry that was directly affected by Enron’s implosion and blame Cheney and Bush for their hands off approach to regulation that allowed all those events to transpire and boil over til there was nothing left in the pot. We are STILL trying to recover.
Basic math tells me that if the price of oil goes up, then the price of gas will go up accordingly. Where in that equation is the multiplier currently in place that is creating the RECORD profits the oil industry is currently enjoying?
Also, tell me why the recent Energy bill has so many tax breaks and grants for big oil? While doing almost nothing to address alternate energy sources or address corporate fuel economy averages for automakers. The fuel economy averages of automakers have remained FLAT for 20 years. Even the hybrid cars being produced today do not give much of a leap in fuel economy, because they are optimized for power and not MPG. The EPA’s fuel economy report was in fact delayed til AFTER the vote on the bill because the numbers were so bad.
I also find it interesting that we import 608,000 bpd of oil from Iraq. WHO are we paying for that oil?
Demdude good post.
I found this recent remark rather astounding:
(sorry about tinyurl — still can’t figure out how to lnk yet)
Damn, we never learn our lessons do we? I lived through the seventies and the oil embargo. We should have learned our lesson then and started doing something about our dependence on foreign oil but we didn’t. Even after 9/11 and the majority of those hijackers being from our major oil supplier, we STILL made no progress toward changing behaviors and policies. And yet again, here we are with rising oil prices and has there been any serious consideration to getting us off fossil fuels. The Bush Administration seems to think that the answer is drill, drill, drill. Are they not forward thinking enough to realize that fossil fuel is a finite resource?
I’m not accusing John of falling into this camp, but I’ve noticed that the “let the market rule” crowd tends to apply that motto selectively.
I didn’t hear those objections over the billions in airline bailouts, but they sure seem to crop up whenever Amtrak needs a boost a fraction of that size. Or hell, the no-bid contracts in Iraq. That wasn’t the free market, it was favoritism.
Stickler, I was thinking the same thing.
Wow, won’t I be glad when prices top $3 a gallon and it’s cheaper to use biodiesel in my truck.
1. Oil companies do project economics based on a crude oil price of around $22 per barrel. If a reservoir is not profitable at $22 / bbl they will not drill for it. So if a project is profitable at $22 / bbl it will become a cash cow when oil is $60 / bbl
2. $22 / bbl is used because most oil companies think that is the minimum price they can be assured of in the long term.
3. The actual inflation adjusted record price of oil was around 1980 when it reached an inflation adjusted price of $94 / bbl. By 1986 it had fallen below $30 / bbl in inflation adjusted dollars. The price never consistently got over $30 / bbl until 2004. If the oil companies could contol prices how do you explain the fact that oil prices stayed low for so long?
3. The market is working in two ways. First the oil companies are using their record profits find and produce new oil reserves. The rigs are so busy it is difficult to find one that is not being used right now and new rigs are being built to fill the gap. Second, the high price is increasing conservation, people and industries are doing more to save energy now because it is more expensive.
4. Gas prices are high because crude oil is high. Another big problem is the regional fuel blends required by many states. Think of it this way if gasoline that is sold in Kansas or Illinois can’t be sold to California or Washington you have a problem. If the refinery that produces gas for California blows up gasoline from the refiners that serve Illinois and Kansas can’t be used in California or Washington. Segmented markets lead to higher prices and less flexibility.
5. On the production side oil companies are doing everything they can to bring the price of crude down. The danger is the unintended consequences of some well meaning regulatory actions. If that regulation distorts price signals conservation and production will both slow. Oil prices will stay higher for a longer period of time then if nothing had been done.
6. By and large energy prices have been a bargain for the past 20 years. By and large the energy industry economics have been unregulated for the past 20 years. Those two items are connected, if you want reasonable oil prices in the future don’t try and regulate oil company economics in the present.
If you want to see a disaster of price regulation, go read about what’s happening in China right now. They’re having shortages on the level we did in the 70s and early 80s because government price controls aren’t allowing the price of gas to follow the price of oil. I read that their refineries are actually exporting oil because they can’t get a price that will keep them in business.
I’m not sure I’ve seen anyone call for rehulation, at least not here. I’m just asking for a little less greed. Is a 5 or 6 billion dollar profit per 3 months going to hurt them?
I reread it a few times. I have no idea why what I said is off base in regard to the post. What did I misconstrue?
The disaster of China’s energy policy. Are we talking about the China whose economy is the fastest growing in the world or another China?
Jimmy Carter tried to move away from energy reliance on foreign sources. That got laughed out. The solar panels on the White House roof were just a joke for the Reagan-Bush folk.
So here’s the secret. Oil business runs this country. It has since JFK was gunned down in Dallas. Oil companies own us, they own our military, they own our future.
I don’t buy that for a second. The oil company lobbyists fight every attempt at increasing fuel efficiency standards which would decrease demand thereby lowering the price of gas. I forget where I saw it and I can’t vouch for it’s accuracy, but I read something somewhere that said if we could raise the average mpg on American highways just 7%, we’d eliminate our need to import oil from the Middle East.
Fuck 7%, let’s raise fuel efficiency 20% and tell the Saudis (the country that gave birth to those who really bombed us on 9-11) to kiss our collective asses!
Even if it’s not economically (i.e. easy to get lobbyists approval) to raise cafe standards, I think there could be better ways to cut fuel costs, etc., than what’s offered in this and this. Why can’t the government encourage people to purchase cars that get better mileage without setting a phaseout on tax breaks? It just seems like the government should keep them until fuel efficient technology spreads and becomes cheaper. If it’s possible, perhaps make the tax breaks align with some comparable drop in the price of fuel efficient vehicles. When the price drops after the technology spreads, then reduce the tax breaks for consumers. At the same time, promise the companies that if they sell x amount of fuel efficient cars a year, they’re entitled to some kind break themselves.
I’m not an expert on this stuff. I admit to talking out my ass. But, what’s being done now doesn’t seem like a very good long term strategy to deal with a resource that’s getting harder to extract and decreasing in supply.
Some Christians believe that God has given us enough resources on the Earth so that it will last until the Second Coming of Christ. So there really isn’t any need for conservation. I don’t know if Bush is one of them.
If that is the case, then why did the Republican majority (and a fair number of Democrats) stuff through an Energy bill with billions of dollars in oil subsidies?
Seems to me like the government is getting more involved, not less. So I guess the government intends of shafting us royally.
The energy problem could be solved tomorrow if all you tree huugers would stop driving cars! Walk, or ride a bike. Or maybe just buy one of the sewing machines on wheels that are already out there.
What’s that… you’re worried about your safety in those tin cans. And you think you should be able to drive whatever you want, or can afford. It ought to be against the law to have a choice. I mean this is America, right?
What a bunch of whiners!!
It’s the speculators in the oil markets (remember Hillary’s cattle futures?)
The cost to extract crude from the ground hasn’t changed much. What you see are spikes in oil futures everytime someone gets nervous about supply disruption, The spike isn’t from actual events, it’s from expectation of events. Demand has pushed supplies to there limits, ergo simple economics say the price goes up. Those who own the futures are the ones raking in the profits.
I’m not sure everyone is thinking things through here. TJIT has a couple of good points, and the gasoline-market point is one of them. Do keep in mind, though, that there’s 1) the price of crude oil on the world market, 2) the price of gasoline at the pump, and 3) all kinds of interesting ways to game the relationship between 1) and 2).
Everytime I hear about shortage of refining capacity, for some reason, I flash back to the energy fiasco of 2000-2001, when Enron executives (and Vice President Cheney) said the same damned thing about power. Lo and behold, we learn later that Enron was ruthlessly gaming the system.
More government regulation isn’t obviously the only or best answer (and I really hate CAFE standards, because they put the onus for efficiency on GM and Ford, but not on Joe Consumer). But when the “free market” is behaving in suspicious ways, at the very least Uncle Sam ought to be looking at it. Remember Carter’s “windfall profits” tax?
Even though we’re at war, and even though our budget deficit is huge, and even though shared sacrifice might be a good idea to meet the crisis, I’ll bet Cheney never, ever, proposes a windfall profits tax on the oil companies.
Wellllllll….my car has cobwebs growing on it, it gets driven so infrenquetnly. I DO walk to the store, to work, and funnily enough, I have one of the old foot powered sewing machines that I inherited from my grandmother, though I prefer hand sewing. Oh, and we use solar lights and power as much as possible, too. Plus, our energy comes from hydroelectric. And, we are seriously discussing with a friend (who is making fuel on his farm) about trying out bio diesel for the engines on our commercial fishing boat. That would be so sweet.
As for the car, it’s a Saab, heavy and very manuerverable, I don’t worry about safety, I avoid being anywhere near those big pigs on the road, when I do on the rare occasion have to drive somewhere…
Sooooo..you were saying?
I hate it when they call for opening the SPR. It’s such a pandering move.
Yes, let’s make ourselves even more vulnerable to an oil shock.
You know John, they’re saying they can build pebble-bed reactor busses and trains. They could do it today.
And they’re inherently safe, because the temperature itself shuts down the reaction. It reaches a certain temperature and just sits there at it. Can’t melt down, can’t explode.
Are we talking about the China whose economy is the fastest growing in the world or another China?
I always find this “China’s economy is growing, therefore it must be strong” argument amusing.
By that argument, the strongest economy in the world is… Iraq. Followed by Chad and Liberia.
China’s economy is only moving from total basket case to robber-baron/corrupt-kleptocracy status. It’s a big step up, but they’re still waaaaay behind even minor economic powers like Singapore or S Korea.
Nice to see the Chinese people suffering a bit less though.
Demdude, Brilliant my man. Brilliant.
Well, first a few numbers …
Whether China’s economy is “strong” in terms of comparison to the American middle class, or whatever you are using as a yardstick, doesn’t matter. What matters is that China is competing for finite materials resources.
You are admitting to tree hugger status? Well!!!!! While your efforts are noble, I don’t think enough of your ilk are following suit. But keep up the good work!
Arrow, I live in Oregon..tree hugger is a relative term.
I guess, because I am old enough to remember the energy crisis of three decades ago and also simply because I was raised by Depression-era hillbillies who never wasted anything, I have always been very aware of alternate energy sources.
It has been with an incredible jaw dropping amazement that I have watched this country turn it’s back on sensible energy policies and research. The vehicles got bigger, the houses got huge and everyone partied like it’s 1999, never once really thinking about the consequences. Like, say, our ME policy being tied into our junkie like dependence on foreign oil.
I don’t think that is a “tree-hugger” set of values, but more of the “we live in the woods to get away from you city folks and maybe stocking up on water and ammo isn’t such a bad idea” philosophy. Another deep strain in Oregon and the rest of the PNW.
While I do agree with Reid and others that it pays to ALWAYS demand accountability from an industry that is so vitally important to our economy, particularily when the Bush Admin is in thick with said industry…I see what John is saying.
And agree. It is a sop to the public.
Good to see you again ARROW. Vacation?
The energy problem could be solved tomorrow if all you tree huugers would stop driving cars! Walk, or ride a bike.
It turns out that when you live in an area which has sensible zoning and are willing to accept less space than a McMansion contains, you can in fact do this sustainably. Tradeoffs.
Scary harry reid is babbling nonsense again what dose this nit wit think he is doing? it sounds like he needs to stop using his limo and walk 300 miles a day
It’s not really that bad. I am a liberal environmentalist who believes in conservation, but I know that it will never happen until it becomes economically sound to conserve. It’s too bad that the oil producers didn’t do more to soften the blow… really, this is their fault more than anything, and phenomenally short-sighted anyway.
But it’s fine. America has a huge amount of room to conserve, but very little incentive to do so. Once it stops being cost-effective to ship coals to Newcastle, or say, to haul furniture from Mexico to Oregon, people will stop doing it. Of course it will hurt, but that’s what happens…
A prominent Democrat did call for the release of the SPR, New Mexico Governor Bill Richardson on FoxNews Sunday. Good thing you weren’t placing money on the Kerry bet, Mr. Cole. Ha.
Keeping in mind that an astounding amount of our ‘at teh pump’ price comes from taxes and the side effects of locals ‘blend required’ legislations– You can blame the government for well over 50% of teh price of gas.
But all of those things have been in place for quite some time, certainly longer than the last two years where we’ve seen a dramatic upswing in the price of gasoline going from around $2 per gallon to $3, and who knows how much higher.
Full Disclosure: I am involved in the mean old CheneyHalliburtonSaudi controlled oil business.
But I have a couple of questions:
Why is it the oil industry’s fault that it now happens to be selling a product with huge world-wide demand? We (oil industry types) suffered through below $10/BBl prices in the mid 80’s, went through big layoffs, etc. and nobody shed a tear. Market forces, you see! I agree. It was.
But, dammit, it still is. But now it’s “gouging” when the shoe is on the other foot.
I don’t agree with the poster in this thread (or perhaps it was another thread) that said that oil companies are doing their best to keep prices down. They don’t have any more power to keep them low now than they had to try and keep them high in the mid 80’s.
The only thing they can do is withhold production…and I can tell you that they are not doing that. (A note here: you guys need to get over the idea that all of the oil discovered and produced in the country is produced by the big names that you know (ExxonMobil, Chevron, Shell, Conoco). There are literally thousands of smaller (to really small) independent producers out there, also.
When we go to purchase an Oil and Gas Lease from a mineral owner in the hope that we find oil or gas on their property one of the things they want to know is if we, in fact, even have access to a drilling rig.
You can’t drill a well without a drilling rig and they are hard to come by right now because…guess what…there are a bunch of people out there trying to discover oil and sell it to you and they all need rigs. (No, Halliburton and Big Oil don’t have all of the surplus drilling rigs stockpiled in Area 54).