Free Markets, Free People

Gas price BS

In many cases, there’s not much government can do to stem the rising price of gasoline.  But there’s also pure BS afoot when it claims the following:

Michael Bromwich, the chief regulator for US offshore drilling, on Monday waded into Washington’s growing debate about high oil prices, saying his agency’s pace of reviewing oil and gas exploration plans has no relation to the rising cost of gasoline.

"Even if we permitted the hell out of everything tomorrow — every pending permit, some permits that haven’t even been filed yet — it would not have a material effect on gas prices," Bromwich said. "That’s the simple, clear reality."

Bollocks.  Anyone remember what happened when the Bush administration announced that it was opening the Outer Continental Shelf along both the east and west coast to drilling?  High oil prices immediately began to drop.  That’s because those who speculate on oil were speculating on long-term scarcity – building demand with, at best, the same amount of oil produced.  Such an announcement makes that premise questionable.

And despite claims to the contrary, it doesn’t take 10 years to bring a well in.  Depending on where it is, that can be done in a matter of months or a couple years.  So it dampened the speculation by promising increased production of oil.  Econ 101.

So Bromwich’s claims are nonsense.  Perhaps if they “permitted the hell out of everything tomorrow” it might not have as deep an impact on oil prices as the Bush declaration did, but it would certainly have a positive downward effect on oil prices.

Oh, and if governments are truly concerned about gas prices and how they can keep a little more money in your pocket, a gas tax roll back is always something they can consider:

 

GASOLINE-TAX-MAP-JANUARY-2011

 

Yeah, that’s not going to happen – so Californians, Illini, New Yorkers?  Remember that over 60 cents of the cost of a gallon of gas in your neck of the woods is taxes.  And that’s something government has full control over.

~McQ

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18 Responses to Gas price BS

  • It is really kind of funny, in a sick ironic way, that the government can claim they have no control over gas prices on even a normal day. The price set by the gas stations is primarily determined by supply constraints and huge government taxes. I am dead certain that the government could, if it so desired, maintain a nearly constant gas price for a long long time by allowing a floating tax rate to keep the price steady. It would not impact gas station profits and the government would still be minting money for many years… just not as many as they do now by basically raping consumers. There is after all no logical reason for the extraordinary tax rate on gas, other than that the government can get away with it.

  • “And despite claims to the otherwise, it doesn’t take 10 years to bring a well in.  Depending on where it is, that can be done in a matter of months or a couple years.”

    You are correct about that.  A well drilled in deep water in a region where there is no infrastructure nearby could indeed take 10 years.  This time is required to design and construct a producing platform, install it, and then install pipelines required to deliver the produced oil to a destination.  It is an immensely complicated and expensive undertaking.

    However, lots of drilling takes place on existing platforms.  A producing platform might start out with, say, 40 well slots.  In the initial drilling program for that platform, you may utilize a dozen of those slots.  (Each “slot” is for a well, intended to target a different zone in the oil reservoir.  The “reservoir” is the geologic formation where the raw petroleum resides.)  In a subsequent phase of drilling, the company will use some of the slots which were unused in the first phase.  So, if you hit a good well in the second phase, you may already have all the pumping, separating and measuring equipment required to produce the well.  From the time the drill bit comes out of the hole, you may need only a month to put that oil in the pipeline.

    —Tom Nally, New Orleans

    • In an active “play”, we brought in wells in 2-3 weeks.
      That was from rig move-in to first production.  And it was back in the early 80s and on land.

  • Yeah, the gubmint’s got no control over this stuff – including them fellers down to the EPA
     
    Go head and tell that to Shell Oil.
    Nothing to see here, move along.

  • McQ - [I]f governments are truly concerned about gas prices and how they can keep a little more money in your pocket, a gas tax roll back is always something they can consider.

    Nonsense.  If government lowered tax rates tomorrow, it would take ten years for it to have any effect on gas prices.

    / sarc

    • So, is there a difference between an oil well that takes 10 years to supply oil, and a budget plan that takes 14 years to save money, or a health care plan that takes 20 years to be implemented?

      • Oh, ABSOLUTELY.  The first is a waste of time, a pipedream made up by Big Oil to fool unwary Americans into thinking (snort!) that there’s actually enough oil in America to serve our own needs.  The second is sound fiscal policy that will save or create jobs while preserving our sacred – SACRED, I say! – obligations to our most vulnerable citizens.  The last is a vital national priority, fully consonant with our national ethics and beliefs, that will save or create jobs AND balance the budget.

        Ya siiiiiiilly!

  • All of this is like government officials railing against tobacco while reaping more in tax revenue from the sale of tobacco (and that settlement) than the industry does.

    • Or evil gas guzzling cars – no more revenue from the gas tax!  What WILL we do!  that’s right, MILEAGE based taxes, or “Electric car you own one you pay” taxes.   I love clever politicians.

  • They have prevented drilling at ANWAR for what, 10 years now?

  • How do gas prices go up???  We don’t have a big-oil bribed cowboy in the White House anymore.  I’m all confuzed and stuff….

  • http://directorblue.blogspot.com/2011/04/epa-again-blocks-shell-from-drilling-on.html
    A great graph included in there.
    Kinda makes you say, “Hmmmm…..”.

  • If they did open up all the permits, then oil prices would drop immediatly due to speculators selling short on the good news that the US again had a sane energy policy.

    • Obama and his minions have been chasing the green jobs chimera for so long that it’s an instinct. They pompously suggest that Americans ought to trade in their current vehicles for pricey, government-approved matchbox cars, asserting still that there’s “no quick fix” for high energy prices. History, and very recent history at that, indicates that they are mistaken.
      Take a look at this chart compiled by metalprices.com. It’s the price of a barrel of crude oil over the past 5 years.
      See that big peak in the middle? That was the last oil spike, in the summer of 2008. Notice how the price hit a high point, then fell off a cliff afterward?
      The day corresponding to that peak, an all-time high of $145.16/barrel, was July 14, 2008. By some strange coincidence, that was the very same day then-President George W. Bush lifted, by executive order, a federal ban on offshore oil drilling.

      Yeah.  But Obama WANTS those prices where they are.

  • Current oil prices may or may not be high because of a lack of exploration, but a lack of exploration will certainly keep them high.