Saturday, June 14, 2008
Oil’s dirty little secret
We’ve all sat around over the past year and watched gasoline prices skyrocket. There has been much ballyhoo as to how to stave off the rise but little of it makes sense to me.
I believe that moving away from international dependence on oil is and inherently good thing, what I don’t believe is that it will have any discernible impact on oil prices.
Many people blame the green lobby for not allowing oil to be tapped in the Anwar province. Some blame OPEC for excessive profits. There are even some that believe that taxation of oil company windfall profits will drive the prices down.
All of them are dead wrong.
On a daily basis there are some 7 million barrels of oil pumped from within the United States. US oil consumption dropped over the course of the past year to 20.7 million barrels. To help with the math, over one third of the oil needed to support this country is already being produced by this country.
Here’s the kicker, oil pumped from US oil fields is being sold for roughly $1.70 less a barrel ($133) than those mean old Arabs are selling it for($135). Remember, US demand for oil has dropped so internal supply and demand isn’t a factor.
The way I see it there are a few major factors. Other developing countries are willing to pay top dollar, oil is a finite resource controlled by a mere handful, and with it being a finite resource they can pretty much charge whatever the market will bear.
Drilling in more locations in the US won’t reduce the cost of oil because the same countries competing for that oil will continue to compete and American capitalism will prevail. That, and US oil companies have already capitalized on the greed factor and if they’re not going to sell US produced oil any cheaper now, what makes anyone that will change. The only thing that can possibly be accomplished is our lack of dependence on foreign oil and more money going into US held companies.
The real answer? How about a realistic energy plan that weans us off of a finite resource and puts on a realistic path toward sustainable energy.
The next time your at the pump, don’t get mad at the Arabs, we’re getting screwed right in our backyard.
Sources: OPEC Changes Oil Forecast
All American Crude Oil Pricelist
Increasing American Production to Reduce Oil Prices
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