Thursday, June 19, 2008

Opening Drilling In ANWAR, Taxing Our Way Out, And the Reality Of The Gas Price Crisis

The reality of drilling our way out of the gasoline price crisis is a farce. Drilling for more oil is like saying the problem with crack addicts is that there is not enough crack supply. If there was more crack it would drive the price down and they wouldn't have to beg, steal, and hook to get their fix.

Here is something that the greedy conservatives and the economically ignorant politicians that support them don’t seem to understand. Prices in a free market are set by the maximum amount buyers are willing to pay. The "demand curve" is set by this factor. The US consumer has proven they are willing and able to pay $4 plus for gas. So what makes these morons think that even if they get an increase in supply and demand stays constant, that it will cause a reduction in gas prices?
Alright, before we get started let us ask ourselves some pertinent questions?

Q: Will drilling in ANWAR take money and put it directly in your pocket. If the government gives these companies that are making huge profits with no regard for the destruction it is doing to the economy the rights to drill for more of our countries greatest drug, will a check show up in your mailbox?
A: No. They will not be sending you a check.

Q: If there is an increase in supply, does that guarantee a decrease in the price to the consumer.
A: No, prices are set by consumer’s willingness and ability to pay for the product. The guy who runs the gas station on the corner knows that we are willing to pay $4 for it. As well as the distributor, the refinery, and the oil producers know this too. They will all want their piece of the pie.

Q: Is the level of demand on the world supply stalled and not growing?
A: No, in fact with India and China’s economies in a boom, we can expect that countries with the two largest populations will be buying a lot of fuel over the next few years. So while company executives site a potential of 60 years of supply in ANWAR, they are basing it on liberal estimates using current numbers.

Q: Do Americans really want democracy and prosperity to spread throughout the Middle East?
A: No, that would mean more competition for the Oil we are addicted to.

Q: How much oil does the US contribute to the world production status?
A: 2% of the total Oil contribution is made by the United States. We consume 25%. While there are many figures thrown about, conservative numbers say that we use 45% of our own oil and 55% we get from imports. Once those supplies start flowing it, our contribution will rise only to the level of about 3.5% at best. The Saudis main occupation is controlling market levels. They could easily compensate by reducing their production.

Q: Say that the congress gives the “go ahead” to drilling in these currently off limit sites, how long will it take to actually get that oil into the production.
A: the best estimates say it will take at least 5 years. However, many experts claim that they will take closer to 8 to 10 years.

So How well does this plan rate on the logic scale. Using past performance to predict future behaviors. That being the case, it scores somewhere around fantasy land where everybody wins the lottery.

The Major Oil Companies combined made $70 billion. That is enough to send every man, woman, and child in the US about $250. Now that would fill up your tank of gas now wouldn’t it. They often prop up incidents that are going to raise the price in crude oil such as war in the Middle East, weather events in crucial regions, increase in driving habits, or a goat pissing on the electric fence outside the refinery. You never hear them boast about improvements in extraction technology, transport, or supply capabilities. They never say, “Good news we can drastically lower the price of gas. Are you telling me with the kind of money this brings they have never done that?

There is not a single economic theory, principle, or crazy guess in the dark that guarantees a reduction in gasoline prices at the pump or to the airlines. The only thing that will drive down prices is a reduction in the need for the product. As a mater of fact, here is a crazy idea. Increase taxes on gasoline right now. Do it while there is still room. Find the breaking point of the American people. Only then will the forces of ingenuity that drives the American free markets will kick in. In the mean time at least it will be our government that is putting the screws to us instead of the Middle Eastern demigods. They can use the tax revenues to apply towards research into alternate energy ideas.

A bit extreme I know but not any more extreme that asking the oil companies what we should do about their huge profit margins and our inability to stop from buying their product.

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