"If the nation set a goal of increasing domestic production by 2 (million) to 3 million barrels a day by opening up new sources of exploration and production, we could demonstrate to the world that we are in control of our own destiny,"
What's patently obvious is the dithering idiots in the Senate would much rather take pot shots at oil execs (politically helpful) than actually address and solve the energy problem (political hard work). Obviously one way to break our dependence on foreign oil is to increase our domestic oil production, something Congress has been unwilling to do for decades. And, much to Hofmeister's credit, he reminded them of a law that not even the Congress can repeal (although they seem set on ignoring it):
"As repetitive and uninteresting as it may sound, the fundamental laws of supply and demand are at work," Hofmeister told the Senate Judiciary Committee. "Oil exporting nations are managing their natural resource development and production to supply their local and global markets in their own interest."
So there you are - economic law rules and what is being acted out globally is simply them working. Meanwhile, the Senate fumes over the size of oil company profits. But the problem isn't their profits, but the growing energy needs of an increasingly demanding world.
The International Energy Agency will soon be releasing a study one hopes will shock them into realizing how foolish they've been all these years. You also have to hope it's not to late:
The Paris-based International Energy Agency is in the middle of its first attempt to comprehensively assess the condition of the world's top 400 oil fields. Its findings won't be released until November, but the bottom line is already clear: Future crude supplies could be far tighter than previously thought.
And future demand?
For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently. Now, the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades.
So, common sense tells you what?
"The oil investments required may be much, much higher than what people assume," said Fatih Birol, the IEA's chief economist and the leader of the study, in an interview with The Wall Street Journal. "This is a dangerous situation."
Yet our Senators are trying to devise ways to cripple our oil companies, which, btw, control about 5% of the oil in the world, through a windfall profits tax scheme.
You want to know why oil is so high right now? Partially because of Congress - they've restricted supply by onerous regulation and the refusal to exploit known oil reserves or allow the building of additional refinery capacity. They've also restricted the development of nuclear power and passed a mandate for ethanol which has seen food prices skyrocket. And what are they doing about it? Demanding oil execs explain their 6.9% profits.
You tell me - Who should really be getting the grilling over the mess we find ourselves facing?
I think that most Americans just don’t understand that the Democrats in Congress are busily implementing Kyoto .. on their dime .. even when the global temperatures have been more or less steady during the Bush years and are now dropping. This means that all solutions that involve adding to CO2 output are off the table .. even if that means super high prices and eventual rationing.
By the time any of the alternative energy products, that Obama and the Democrats are pushing, are ready for public use (after OHSA, FTC, DOE, EPA, the Serra Club, Public Citizen, AFSCME, Environmental Defense Fund, Earthjustice, GreenPeace et al are done with them), most of us will be long dead.
One of the most difficult aspects of the fact that "ideas matter" is in how long it can take for their consequences to become manifest. All sorts of delusion can persist in the time it can take for some ideas to do their work.
This might be a really hard lesson before it’s over.
Well, the question, Billy is will it ever be learned, this lesson.
Let’s be honest enough to acknowledge that the real reason for that little show ’hearing’ yesterday was to grant pols the chance to posture over the costs involved and dodge the blame for the problem... a problem they themselves caused.
I’ll tell you the truth; Our current problems, and our historical problems as well, are all traceable directly to governmental tampering and taxation. All of them and without exception.
The candidate who stands up on that basis, against governmental ivolvement in energy is going to shine in this election cycle. Not that I think many of them have the stones for that.
Ethanol is a coming reality. If cellulosic ethanol delivers, it will come soon. If not, with oil production as tight as described, it will come later perhaps within a few decades or less.
It won’t require the government to subsidize it. It will eventually make economic sense.
And at that point, I don’t see the need to protect oil or consider them picked on.
And to be honest, I question all the gloom and doom that’s been attributed to ethanol. Originally when ethanol was attributed to world starvation, I went here: http://www.fas.usda.gov/export-sales/wkHistData.htm And reduced the data for various crops in terms of 6 month periods. The six month period ending in March was the highest exporting period over the past 12 years for not just corn, but other crops as well. Some crops were slightly higher but some including corn were significantly higher
As for domestic prices at the store, its difficult to find records on what exactly goes on with food prices however it suppose to be around 20% commodity cost for food that you buy at the supermarket (probably higher if you’re buying raw corn, probably lower if you’re buying cornflakes). The rest is transportation, handling, processing, and overhead. And transportation and processing is heavily energy intensive with transportation heavily tied to gas & diesel costs. Costs which have nearly tripled over the past 3 years. That’s not to mention the energy cost in producing the commodity. Food & Fuel have been tied together ever since people stopped growing their own food. Its not new.
Saying the cost of food is up because of demand for ethanol plays to our knowledge of supply and demand. However, it seems that the effect of supply and demand are ignored when it comes to the effect that increase supply costs from oil and the increased demand from the rest of the world.
Further, we are often quoted what percentage of corn is being used in Gasoline and for Biofuels. However we never see absolute numbers of how much is produced for food. The percentage quotes play on an implied assumption made that we’re near 100% capacity in farm output. That is far from true. It may require a higher price to encourage increased overall production and that’s what is happening. Short term that price is high because there’s risk in satisfying volatile demand. When the demand stabilizes, the price required will come down. And right now we still are paying farmers to ’conserve’ farmland (aka ’paying farmers not to grow’). So we’re far from maxed out. Essentially there is a short term inelasticity to food supply, but the long term elasticity should be much lower.
When the time comes, market forces should be allowed to win out for ethanol large scale production.
However, you can’t sell ethanol if no cars can run it and not one carries it. And with heavy government regulation of cars and what we put in them, there will be government involvement. There still needs to be a small scale effort (what we have today is more than is needed anymore actually) to bring supply, distribution and demand together to allow ethanol to be able to take off when it become cheaper. It is in everyone’s interest (almost everyone) because cheap energy is in the economy’s interest.
And nothing is stopping oil companies from getting involved in the ethanol business. In fact, Marathon just sunk $10 million in a cellulosic venture. However, they will have company such DuPont that just sunk $75 million into their own venture.
And if you want to bring some short term relief. Pull the ethanol as a gasoline anti-pollution additive. It makes up most of the ethanol consumption in fuel. Right now E10 ethanol in a modern car is an effect gas extender. The benefits to combustion offset the lower energy content. But pulling it out will only cause a 5% jump in gas demand to replace the missing additive. Its not like gas refineries are nearly maxed out or anything.
There was a book I read some years ago about the history of coal in England. By the 15th century the forests that formerly covered the countryside had long since been decimated to supply firewood meaning fuel was scarce. Relatively large reserves of coal in England were known as far back as the 11th century and by the 15th the technology was in place to move it to the cities and nearby settled countryside with relative ease. However resistance to use of "sea coles" was high among the governing elites due to the sooty smoke and generally esthetically abhorrent nature of the fuel (shades of environmentalism today). It took the better part of a century for coal use to become accepted and for the "London Fog" (really smog) to become the norm.
Seems like we may be in a similar period of national reckoning as we speak with regards to tapping more of our own oil and gas.
The aspect of energy pricing that most fascinates me is the relationship of cheap energy and human population growth. Consider that we went from $18 per barrel to $135 in less than a decade—and consider that modern farming—-the yeilds of which enabled us to flourish as a species, is totally reliant on petroleum.
Since volunteers to unburden the food supply will be hard to come by, I see conflict in this mess looming on a very near horizon.
Our current energy problems are accerbated by the Democrats. For too long they have allowed the environmental extremists to determine our enrgy policy. I am all for conservation and improving efficiency and we should be driving autos with better mileage, but we also need to improve our supplies.
It seems that there are significant oil sources within North America, or offshore, that the Democrats and their friends won’t allow the oil companies to go after. They also won’t let anyone build new refineries, LNG terminals, new coal fired plants, or new nuclear plants. They are pinning all their hopes on Wind, Solar, and conservation. What they forget is that two very powerful forces will prevent these from being the solution to our energy woes. First, the population of this country keeps growing at a rate that is the highest in the developing world; and second, the existing infrastructure is aging. Wind, solar, and conservation won’t be able to make up for these two forces.
When are these people going to come to their senses? Do we have to wait until oil is $200/barrel and the oil producing countries have used the resulting revenue to buy up all of our country.
Please note that since January 2008, the portion of the cost of gasoline attributed to refinery costs, and [oil company] profits, has averaged about 30 cents a gallon. So if even if you removed this cost completely, I.e. forced oil companies to refine gas for free, it would not make a huge difference in the increasing cost of gasoline. Crude oil costs are the most significant component of gas prices, not oil company profits. The Democrats in Congress are lying to you, they are scapegoating oil companies to divert your attention away from their failures to deliver responsible, sensible, effective energy policy. The Democrats for over 40 years have done everything in their power to block the development of oil, natural gas, coal, oil shale, and nuclear power here in the Unites States, under the guise of protecting the environment. It is clear that oil drilling can be done in an environmentally safe fashion. It has been decades since drilling related eco-disaster has occurred. Hurricane Katrina destroyed numerous off-shore drilling platforms in the gulf of Mexico, and no significant spill occurred. European nations have developed and safely operated numerous nuclear power plants for electricity, offsetting the need to use oil, coal or natural gas. Here, In US, the Democrats, with theirs necks firmly under the feet of their eco-fascist consistencies have ignored all reason, and have sold us out. A reasoned approach would have included efforts to develop safe and effective use of these conventional resources while also developing the future alternatives. For example, instead sane energy policy, these “visionary” so-called leaders latest solution to the energy crises, mandated a six-fold increase in ethanol production. All experts conclude that this not possible even if all US corn crop were diverted to ethanol. So you say, what about cellulosic ethanol? A functioning commercial cellulosic ethanol plant is not in sight let alone an infrastructure to deliver cellulosic ethanol in quantities required to supplant and reduce significant dependence upon oil. The Democrats have sold us out to the ideological tunnel visioned eco-fascists who could care less about reason. Instead they have insisted on the development of alternate sources of energy, to the complete exclusion of a more reasonable combined approach. In spite of massive government support of the development of these alternative sources, they have not delivered, they are not going to deliver this year, or next. It looks like it will be decades before they will even make a dent in energy requirements. We will remain dependent upon petroleum based fuels for a long time to come.
High oil prices due to limited world supply, and ever increasing demand are why gas, and energy prices, are increasing at an alarming rate. The cost of energy is the root cause of our economic problems. Energy is the root of all power in the world today [no pun intended]. The US is geographically a large country and heavily dependent on transportation. The US standard of living requires a lot of energy. My fellow Americans, things are going to get worse, much worse, before they get better. Even if we overturned all impediments to developing our own resources today, it will be 10-20 years before we can even begin to reverse the trend of energy dependence and ever increasing energy costs. And, that time period is without the eco-fascists suing at every attempt to block develop these resources. The US economy, our ability to compete in the global market, and therefore our way of life as we know it and expect it, is entirely dependent upon energy. Without affordable energy, we are doomed.
The Democrats rather than blaming oil companies, should be praising their efforts to deliver energy while at the same time being severely constrained by laws enacted by these very same Democrats.
In the US Congress reason is dead, blind ideology and demagoguery prevail. As long as this situation continues, you can expect more pain, a lot more pain.
Some facts we already know: World population is increasing, but much less so in highly technological societies. The benefits of capitalism are expanding around the world. Those benefits include increased personal freedom. Expanding economic growth means greater demand for energy. More people using more energy and other resources means less biodiversity. Over the next 20 years the effects of human-activity-caused warming will be seriously harmful. Expanding knowledge means the ability to do more with less material. The transition to renewable energy will be enhanced by high oil, gas and coal prices and by government subsidy. Renewable energy can eventually run the whole show but will require political will and international cooperation to do so. During the transition it may be necessary to compromise (e.g. Arctic drilling allowed but heavily taxed to subsidize development of renewables). The countries that develop renewable energy industries will acquire a tremendous economic advantage. The countries that limit their population growth (or, in a few cases, declines) will have economic advantage. This might be a big understatement: countries that do not limit their population growth will suffer mass starvation and/or Rwanda-like mass murder. An economic recession of serious proportions is beginning in the US and will last for years unless new industry is subsidized.
In case someone points out that 7+ million gallons of oil were spilled by Katrina, I’ll point out 99% of that oil was spilled by on shore storage and production facilities that drained into the ocean, not the numerous destroyed off-shore oil rigs.
I got some DOE cost breakdown data comparing at 2000-2006 and 2007. Occam is absolutely correct - crude oil is the cost driver. It is also a commodity sold on the international market.
From 2000 through 2006 we paid an average of $1.91 per gallon. Crude averaged $39
Crude oil accounted for 48% or $0.9168 Federal state & local tax were 24%, $0.4584 (note: some states add sales tax %) Refining & Profit averaged 16% or $0.3056 Marketing & distribution, 12% $0.2290
In 2007 gas went up to $2.80 as crude climbed to $68 per barrel.
Crude oil accounted for 58% or $1.6240 Federal state & local tax were 15%, $0.4200 Refining & Profit averaged 17% or $0.4760 (note: MTBE & Ethanol deltas) Marketing & distribution, 10% $0.2800
The only part of the 2007 data I question is the tax. Nowhere I know have gasoline taxes decreased. In NY, CA and IL, local sales taxes have doubled the state per gallon tax. Per gallon, Feds are at $0.184 with states around $0.24. Add 8% sales tax and the total tax is over $0.60 per gallon, not $0.42.
If everything else stays the same and crude stabilizes at say $112, crude component would rise to $2.68 and a gallon of gasoline would cost $3.85.
The sustainable peak supply of oil has now been exceeded. Everybody around the world wants to emulate us. The demand for oil in China is soaring. We are now the victims of our own suburban commuter success. We have already borrowed and spent most of the money we could have used to fix it from our kids and grandkids. The fix will now lower the dollar’s value further. The politicians who bring the awful truth that gas prices need to go up much further will not get elected. The transition to wind, solar, tidal, and geothermal energy will now do battle with the Hummer junkies as well as the companies that will profit from the production of oil, gas,coal, and nuclear energy. Additional drilling of oil offshore and in Alaska will, along with nuclear energy (which would have it’s own uranium supply and disposal problems if expanded extensively), help the transition by keeping the world economy from collapse. A deal with all Iraqi factions to safeguard and increase production now will also help (and the fix may now be in there). Those who produce solar, wind and tidal energy will survive the best, but only if they control their population growth and only if they develop renewables and efficient transportation very quickly. Biofuels are bull. Tech and infrastructure breakthroughs will require enormous subsidies and tax breaks. 7 billion people soon unless there is mass murder and starvation. The tech challenge is enormous if we want our grandchildren to live well. We really do want that. I am old. I remember the 1973 preview. Our grandchildren will not be able to visit by airplane. I will miss that the most. Skype helps. Work at home.