Hunting for scapegoats won’t lower pump prices

By Paul Driessen — When President Obama took office, regular gasoline cost $1.85 a gallon. Now it’s hit $4.00 per gallon in many cities, and some analysts predict it could reach $5.00 or more this summer. Filling your tank could soon slam you for $75-$90.

Winter was warm. Our economy remains weak. People are driving less, in cars that get better mileage, even with mandatory 10 percent low-mileage ethanol. Gasoline is plentiful.

Misinformed politicians and pundits say prices should be falling. Our pain at the pump is due to greedy speculators, they claim, and greedier oil companies that are exporting oil and refined products.

Their explanation is superficially plausible — but wrong.

Energy Information Administration (EIA) data show that 76 percent of what we pay for gasoline is determined by world crude oil prices; 12 percent is federal and state taxes; 6 percent is refining; and 6 percent is marketing and distribution. The price that refiners pay for crude is set by global markets.

World prices are driven by supply and demand, and unstable global politics. That means today’s prices are significantly affected by expectations and fears about tomorrow.

A major factor is Asia’s growing appetite for oil — coupled with America’s refusal to produce more of its own petroleum. Prices are also whipsawed by uncertainty over potential supply disruptions, due to drilling accidents and warfare in Nigeria; disputes over Syria, Yemen and Israeli-Palestinian territories; erroneous reports of a pipeline explosion in Saudi Arabia; concern about attacks on Middle East oil pipelines and processing centers; and new Western sanctions on Iran over its nuclear program and the mullahs’ threats to close the Straits of Hormuz.

Moreover, oil is priced in U.S. dollars, and the Federal Reserve’s easy money, low interest policies – combined with massive U.S. indebtedness — have weakened the dollar’s value. It now costs refineries more dollars to buy a barrel of crude than it did three years ago.

Amid this uncertainty and unrest, speculators try to forecast future prices and price shocks, pay less today for crude oil that could cost more four weeks hence, and get the best possible price for clients who need reliable supplies. When they’re wrong, speculators end up buying high, selling low and losing money.

Oil speculators play a vital role, just as they do in corn and other commodities futures markets.

Basic chemistry dictates that a barrel of crude (42 gallons) cannot be converted entirely into gasoline. Depending on the type of crude, some 140 refineries across the USA transform each barrel into gasoline, diesel, jet fuel, heating oil, asphalt, waxes, petrochemicals and other essential products.

This manufacturing process leaves them with excess diesel fuel, because American vehicles consume less diesel than refineries produce — due to air pollution laws that limit diesel use. US refineries export that excess diesel to Europe, which uses more diesel than gasoline, and Europeans ship their surplus gasoline to mostly East Coast consumers. US refineries also sell excess inventories of other manufactured products to overseas markets, but diesel is by far their principal export.

America exports $180 billion in finished products every month — $2.2 trillion annually in corn, wheat, cars, tractors, appliances, airplanes, pharmaceuticals and much more.

Last year, for the first time since 1949, America was a net exporter of fuel and other petroleum products. Those exports injected $107 billion into our economy and sustained thousands of refinery and other jobs that otherwise might have been lost, as refineries also struggled in our stagnant economy.

Farm and factory jobs would evaporate if we made exporting their products illegal. Prohibiting fuel exports, and demanding that refineries manufacture only what we need here in the States, would have the same effects on our employment, economy and living standards.

The USA has 1.4 trillion barrels of technically recoverable conventional oil, the EIA and other experts estimate, and enormous additional supplies in shale and tight sand deposits.  The best way to keep prices down is to produce more of this American oil, and import more from secure, friendly, nearby suppliers like Canada.

However, our government prohibits leasing and drilling on nearly 95 percent of the onshore and offshore lands it controls. It is dragging its feet on leases and permits for the remaining 5 percent and over-regulating production on private lands. It vetoed the Canada-to-US Keystone XL pipeline. It is imposing layers of costly and unnecessary new regulations on every aspect of energy production it does not simply reject.

We are losing billions of dollars in bonus, rent, royalty and tax receipts, killing countless jobs, and impairing Americans’ living standards, health and welfare.

“More exports mean more jobs,” President Obama said recently. “We need to strengthen American manufacturing. We need to invest in American-made energy and new skills for American workers.”

His words ring hollow. Above all, President Obama and his environmentalist and congressional allies want to end our “addiction” to oil, “fundamentally transform” America, and “invest” billions of dollars (borrowed from us and our children and grandchildren) subsidizing efforts to turn corn, switchgrass, algae and pond scum into fuel.

Generating billions of dollars and millions of real jobs by producing American oil and manufacturing American oil products doesn’t fit this agenda. Even though one of every ten jobs created in the last three years has been in oil and gas, when it comes to petroleum, Team Obama wants to punish success, and reward failures like Solyndra, Fisker and the Chevy Volt.

To paraphrase a recent White House jab at Republicans who want more drilling and fewer obstructionist regulations: Every time prices start to go up, President Obama heads down to the local pond or cornfield, makes sure a few cameras are following him, and starts acting like he can wave a magic wand, throw a few more billions around, and have cheap, eco-friendly biofuels forever.

Meanwhile, Energy Secretary Steven Chu has made it abundantly clear that he wants to “boost gasoline prices to European levels” — $8 to $10 per gallon! He’s already half way to his goal.

Those prices would certainly force Americans to drive less, and “hope” the hype about “changing” to algae-gas becomes reality in less than twenty or thirty years.

Meanwhile, skyrocketing fuel prices will certainly “boost” the cost of transporting people, raw materials, food and products by wheels, wings and waterways; manufacturing anything still made in America; and preserving jobs, family and business budgets, and dreams that depend on affordable energy.

Hunting for scapegoats won’t lower pump prices. Reality-based energy policies will.

Paul Driessen is senior policy advisor for the Committee For A Constructive Tomorrow and Congress of Racial Equality, and author of Eco-Imperialism: Green power – Black death.

This article has 6 comments
  • David Peacock 23.03.2012 5:27 PM

    actually according to people who base line the cost it is around $2.50 per gallon;; 75% of the price today is $3.00 so where is that 50 cents;; making a rap song?????

  • mountainwest1 23.03.2012 6:10 PM

    they’re going to drag this economy down again because of their gread, money hungry. It’s all politicians, big business, and speculators that are doing it.

  • Don 23.03.2012 7:06 PM

    The Obama way is to blame it on the scape goat and all of his supporters do believe him any time that he blames someone else like the morons they are and how he has been able to control so many is very puzzling but a moron is a moron and he has many of them following him no matter what he does or says.

  • Chuck 23.03.2012 10:51 PM

    Wishing won’t make it so either.   The only businessman in the bunch of career politicians can come up with some good solutions, but it won’t be with political slight of hand.  The problem van be solved, but not by rank amateurs.

  • Jc35555 24.03.2012 9:21 PM

    Outside of unrealistic alternative energy sources, and in the face of vast petroleum  resources in the USA, what would be your plan to begin responding immediately to create lower gas prices? First, build new refineries; because, there have been no new refineries built in the USA since 1973 (some refineries have expanded to increase production) — and build enough refineries in each state so that the refineries  can compete against one another. Provide tax advantages for independent (non major) producers to drill and establish delivery lines to provide finished fuels to major distribution points in ever state of the union. Build  enough refineries so that they may stay on line producing seasonal fuels and not be required to shut down to change fuel formulae to meet seasonal requirements. Demand that fuels produced in the USA be sold within the USA at a price that will make our commercial deliveries cheap enough to compete with the cheap labor in competing economies around the world. Do not permit a pipe line be built to Texas or Louisiana (where refined fuels will be sold to overseas markets) until all of the USA and Canada are supplied fuels cheaply enough to compete with cheap overseas labor. 

    We have a national emergency. If you think not, then spend some time with the 9.6% or more U.S. Citizens who are without employment. 

    Fifteen (15) trillion debt and counting. You want to continue like this? It is time to demand that the federal government runs its affairs in the manner that they demand of us taxpayers.  

    Don’t just sit there! Do something!

     

  • Greg137 24.03.2012 10:16 PM

    You can’t put scapegoats in your gas tank!!!  But goats are much more advanced way of travel than a Obama green machine… Hell, a flintstones car is more advanced than an Obamamoblie…  Still, Obama would have better luck eating lots of beans, and “blowing” himself to the moon, than using a scapegoat to lower gas prices!!! GIVE US KEYSTONE!!!

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