Sticker Shock-$3 a gallon gas? Click the picture:
( Sign seen in Atlanta... )
All summer the skeptics scoffed at the so called "risk premium" in crude. There was a reason speculators were willing to unload massive volumes of dollars for the right to own oil. The release of reserves will stem the tide but ultimately the free market will reign in America until just before the end. Oil has no theoretical top at this time...
The West has never been more vulnerable...
J
America's oil- producing enemies are making a fortune in greenbacks.
"The West has never been more vulnerable..."
Hmmmm, maybe I should put off buying that new Hummer?
It's up to 3.00+ on average where I live, the only place signifigantly lower was at 2.88 and PACKED.
Didn't we just pass an energy bill? Oh nevermind, it probably doesn't have teeth anyhow.
These eco-jerks need to get real and quit choking out energy. Let's build refinerys and drill NOW.
Now if we could just get all those reserve refineries on line...
Oh.
It is a defining moment.
Meanwhile the opposition watches as the perfect economic storm continues to brew. I will renew my search for Mr Fusion's classic treatise on the Eastern "stretch and break attack." Seldom have conditions seemed so ideal for that type of maneuver. No doubt Entente strategists are weighing this option.
Government intervention in the free markets is a risky proposition. There are always unexpected residual effects. Should the opposition successfully divine the next intervention -- and act accordingly -- then the house of cards will come down at a more rapid rate than currently sustained.
J
I have wondered why gasoline prices in Fairbanks are $2.50 or so like the rest of the country when we pull our few barrels directly off the TransAlaska Pipeline. We should be getting gasoline for 10 cents like Iraq and Venezuela. But then consider that the oil from the pipeline is sent to California where they don't seem to mind paying Big Bucks for our sour crude, and we probably wouldn't be able to buy any oil at all if we didn't pay the going rate. Too bad the State of Alaska didn't negotiate something about that at the same time they worked out the royalty deal.
Let's see, crude prices drop and gasoline prices rise. Just exactly who does that help?
"When the smoke clears from this storm the historians will use 20/20 hindsight to sabre without mercy those in charge. The decision to release the strategic reserve is a very hard move to make, sort of like calling a raise on the turn with only a draw. It does nothing to increase gasoline supply and throws an accelerant into the crude markets once the damn breaks."
Let me parry this breathless literature with plain prose.
Releasing from SPR *will* give oil to refineries whose sources are temporarily knocked out. It will help.
The decision to release oil is not hard ... the price of crude has topped out. In the eye of the storm it hit $70, after hurricane season, it will be back to the $50s, like it was in June.
"All summer the skeptics scoffed at the so called "risk premium" in crude. There was a reason speculators were willing to unload massive volumes of dollars for the right to own oil. The release of reserves will stem the tide but ultimately the free market will reign in America until just before the end. Oil has no theoretical top at this time..."
There is no theoretical top to tulips and pets.com either, but those bubbles burst and so will the oil bubble. Oil companies were willing to give away oil for $12 a barrel in 1998 and now 7 years later they demand $70. Why? Supply and demand.
There is no 'accelerant' here with releases SPR, that's an augmentation of 1 million in supply a day and a destraction of 0.5 million in demand a day, this is a big deal in a world where the difference in $12 oil and $70 oil was cutting the supply overage from 5 million barrels a day to under 1 million.
The days of tight oil supply are about to end, for the plain simple reason they ended the 5 or 6 times this happened before: it is the plain fact that the higher oil goes, the more people will change behavior to cut demand, and the more oil companies drill to create new supply. That new supply lasts 20 years in each well, and the new demand patterns last as long as cars do. Oil is peaking now, like it did in 1980,and oil is staring at a future downslope in price over the next decade, as supply comes online (about 10 million barrels) and the demand curve flattens out due to the high oil prices and the lag effect.
The Law of Supply and Demand will Not Be Mocked.
SHORT OIL.
"The West has never been more vulnerable... "
Nah, speculative bubbles come and go. And breathless fearmongering never goes out of style.
Why it hasn't been declared a point of national security to open new refineries; re-start nuclear power plant construction; drill in those areas that promise to produce oil for domestic use and suspend and abrogate environmental "acts" that impede energy production, I cannot fathom.
Why Bush hasn't the gonads to issue executive orders, is yet another mystery for historians to ponder......if we survive this road past Hell.
None of this has caught any leaders by surpise. There simply was nothing that could be done - either practically or (especially) politically. People weren't - and aren't - willing to believe the nature of the crisis we face and therefore aren't willing to bear the pain of adjustment. Since natural laws can't be mocked or avoided the pain will be all the greater.
Those who compare our current situation with previous "bubbles" are in for a rude shock, I think. Oil - unlike tulips - is an absolutely vital commodity and all indications are that there simply is not enough to meet current demand and the future will only make the situation worse. That means demand will be cut the hard way - depression, war, etc.
The refiners who's facilities have been closed can begin importing refined product instead of crude. Imported gasoline could replace the losses quickly.
( Sign seen in Atlanta... )
The West has never been more vulnerable...
I wonder if China will hit Taiwan soon.