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What’s Really Driving Up Gas Prices

Oil Industry analyst Daniel Yergin takes to the pages of The Wall Street Journal today, and points out that the major factor driving up world energy prices at the moment have very little to do with domestic energy policy, and everything to do with foreign policy:

[E]lection-year politics aside, the forces driving up prices at the pump are very different today than they were four years ago. In 2008, it was primarily the surge in oil consumption in emerging markets, disruptions, and a belief that the world was running short of oil (the so-called peak oil crisis).

In 2012, the reason is mainly geopolitics. Last November, the United Nations declared that Iran was clearly developing nuclear-weapons capabilities. The West is responding with sanctions aimed at reducing Iran’s ability to export oil, on which it depends for more than half of its government revenues, to get it to halt its nuclear-weapons program. Tehran has answered by conducting large naval exercises and threatening to close the Strait of Hormuz, through which passes some 35% of the world’s oil exports.

Global oil prices and U.S. gasoline prices have both risen about 20% since mid-December. And all this is occurring in a world oil market that is already tight, tighter than it was last year, with no more than 2.5 million barrels of spare capacity. At least half a million barrels a day are currently out of the market because of disruptions in South Sudan and Yemen and civil war in Syria.

A market this tight would already be susceptible to upward price pressures. But the market is operating on expectations that supplies will become even tighter as new U.S. and European sanctions against Iran take effect and the risk of military conflict increases. Put simply, the oil market is reading the front page.

Given these circumstances, there’s not much Washington can do in the short term to reduce prices at the pump. Indeed, the picture would look much worse were it not for the nearly 20% increase in U.S. oil output since 2008. More efficient permitting could get more U.S. oil fields up and running faster, but even then there are lead times. Moreover, new oil flows from Canada, North Dakota and elsewhere are hobbled by an outdated pipeline system.

The market is clearly responding to what it sees as dangers ahead.

So it would seem. This shouldn’t be surprising, of course, over the past several years every single discussion about Iran and its nuclear program has come around eventually to the idea that one of the consequences of ratcheting up pressure on Iran could have economic consequences for the United States and the rest of the world. In the case of military action, those consequences could be quite severe if shipping through the Straits of Hormuz becomes endangered or Iran decides to retaliate against the Gulf States, which largely at least tacitly approve of the idea of taking the Iranians down a peg rather than allowing them to become a major power in the Middle East. Now, it seems, we’re learning that there are also consequences to the non-military measures we’re taking against Iran in an effort to pressure them hold back on their nuclear program.

You’re unlikely to hear any of this from either side of the political aisle, of course. Democrats will mimic the President by pushing “green energy” plans that are mostly Solyndra-like boondoggles and any benefits from the ones that aren’t are years if not decades in the future. Republicans will continue to push the idea that energy price increases are due solely to, or can at least be solved completely by, increasing domestic oil exploration. That assertion seems to be largely disproved by the fact that domestic oil production has increased some 20% over the past three years, and yet prices have risen. The main reason for that, of course, is that most of the factors that determine the price of gasoline and oil are far beyond the control of the President and Congress. Moreover, there’s no reason evidence that massively increasing energy production would have a significant impact on world prices.  A 2010 Department of Energy study, in fact, found that opening the entire outer continental shelf to offshore drilling would have very little impact on the price of gasoline. In ten years, there would be virtually no  impact on gasoline prices from the increased supply of oil.  Over twenty years, US gasoline prices would be three cents a gallon lower. None of this is to say that we shouldn’t be drilling and exploring for oil, we should. But let’s not pretend that it’s going to be a quick fix to our problems. Because it won’t.

Getting back to Yergin’s hypothesis, it would seem that there’s very little we can do about energy prices in the short term unless we change course on policy toward Iran. And nobody is going to want to do that.

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About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May, 2010 and also writes at Below The Beltway. Follow Doug on Twitter | Facebook

Comments

  1. Both sides do it, in this case, though one side is more extreme.

    Once side faults the President for not being more aggressive in Syria and Iran … and at the same time faults him for high gas prices.

    You have to be pretty out of it to think that can work.

    Like or Dislike: Thumb up 12 Thumb down 2

  2. steve says:

    Meanwhile, natural gas prices have plummeted. It cannot be shipped as readily. We should be looking at using it more.

    Steve

    Like or Dislike: Thumb up 4 Thumb down 0

  3. Neil Hudelson says:

    @john personna:

    I would love to hear a speech from Newt claiming he’ll bomb Iran until gas is at $1.00 a gallon.

    Like or Dislike: Thumb up 3 Thumb down 3

  4. @steve:

    Out here in California all of our buses and garbage trucks have been converted to natural gas. Fleet vehicles seem to be a niche that can easily be served. It’s easier from the infrastructure standpoint than consumer vehicles.

    We have had the Honda Civic GX for sale out here for (10?) years too, but you’ve got to be dedicated, and keep your booklet of available filling stations at hand.

    Like or Dislike: Thumb up 0 Thumb down 0

  5. Dave Schuler says:

    It may be indelicate to point this out right now but our comparatively low federal excise taxes on gasoline have the effect of rendering our economy much more vulnerable to oil price shocks than are the economies of our European cousins.

    Our domestic policy has both benefits and costs.

    Like or Dislike: Thumb up 4 Thumb down 1

  6. Hey Norm says:

    “…But the market is operating on expectations that supplies will become even tighter as new U.S. and European sanctions against Iran take effect and the risk of military conflict increases…”

    Read that as SPECULATORS. Dodd-Frank has provisions to regulate this but the rules have been delayed…you know…the whole de-regulation thing that is supposed to magically cut prices and provide us with cars that run on Unicorn tears…at least in the wet-dreams of Republicans and Libertarians.
    From McClatchy:

    “…Historically, financial speculators accounted for about 30 percent of oil trading in commodity markets, while producers and end users made up about 70 percent. Today it’s almost the reverse. A McClatchy review of the latest Commitment of Traders report from the Commodity Futures Trading Commission, which regulates oil trading, shows that producers and merchants made up just 36 percent of all contracts traded in the week ending Feb. 14…”

    Then you have Doug’s fantasies:

    “…Democrats will mimic the President by pushing “green energy” plans that are mostly Solyndra-like boondoggles…”

    Well…except that the loan-guarantee program, first enacted by Bush with bi-partisan support and expanded by Obama, has backed nearly $38 billion in loans for 40 projects around the country. Solyndra represents just over 1% that…and, as far as I know, it’s the only loan that has gone south.
    The facts just do not match your ideology and your hyperbole.

    Like or Dislike: Thumb up 12 Thumb down 4

  7. @Hey Norm:

    Speculators just do “price discovery.” They can’t go beyond what end-users will pay.

    So to blame speculation you have to either blame end-users, or pretend that in a world of 6 billion free minds and umpty-ump free dollars, no one would do the price discovery (to their profit).

    Like or Dislike: Thumb up 4 Thumb down 1

  8. @Hey Norm:

    (Should the price of your home, or your retirement portfolio rise, do you equally blame the “speculators?”)

    Like or Dislike: Thumb up 2 Thumb down 1

  9. Moderate Mom says:

    “Moreover, new oil flows from Canada, North Dakota and elsewhere are hobbled by an outdated pipeline system.”

    Um, isn’t the purpose of the Keystone Pipeline project to address this problem?

    Like or Dislike: Thumb up 7 Thumb down 4

  10. Hey Norm says:

    @ JP…
    Well yeah…I blame Speculators for the housing bubble…although the speculators may have been my neighbors in that case.
    And yes…they can’t go beyond what consumers will pay…but they are artificially inflating the price up to that limit.
    Bottom Line…The free-market…supply and demand…is not driving the price. A handful of guys sitting at their computer are. And yet we are told nothing can be done because it’s the free-market at work.

    Like or Dislike: Thumb up 1 Thumb down 3

  11. Hey Norm says:

    Moderate Mom…change your handle.
    Right-Wing Nut Job Mom would be far more appropriate.

    Like or Dislike: Thumb up 7 Thumb down 11

  12. @Hey Norm:

    Speculators can sometimes produce bubbles, it is true. But I’m not sure the 3-5 year oil price increase we’ve had is that kind of bubble. Perhaps some short-term rallies have been, superimposed on that.

    Like or Dislike: Thumb up 1 Thumb down 0

  13. Racehorse says:

    @steve: I certainly agree that natural gas can help stabilize the market. All Federal vehicles that can should be converted to natural gas. Many states and cities did this years ago. If we can send people to the moon, change communication technology almost overnight, then we should be able to come up with more answers to the gas problem. Look at all our cell phones can do now. Just 3-5 years ago, no one would have believed it. What we need is an energy research center financed by people like Gates. Trump, Pickens, and others. Bring in the best engineers, scientists, and inventors and give them a car with everything but the drive train and tell them to go to work. No government regulators or nosy corporate boards. It can be done. Back in the ’80′s, a NASCAR engine builder developed a Pontiac V8 engine that would get 50 mpg (it also passed Federal emission tests) for GM. They dropped the project, but the family still has the motor. This is an example of private “enginuity”!

    Like or Dislike: Thumb up 3 Thumb down 2

  14. Hey Norm says:

    @ JP…
    Well the trajectory goes back to the beginning of 43′s administration, with a brief pause for the Bush Contraction…so it’s not really 3 years. And this recent spike is…what…something like 20% in the last four months?

    Something else bears mentioning here…
    Fracking and these other methods that have boosted production all rely on high oil prices to make them worthwhile. So the idea that the Keystone Pipeline is going to lower costs is a pipe dream (pun intended).

    Like or Dislike: Thumb up 5 Thumb down 3

  15. @Hey Norm:

    Keystone itself seems an upside-down argument:

    An independent study conducted by the Cornell ILR Global Labor Institute reports that the crude oil routed to the Gulf Coast will end up being exported to Asia, and not contribute to energy independence or national security.[20]

    I mean, wouldn’t oil “trapped” in the American midwest do more to lower prices in the American midwest?

    Like or Dislike: Thumb up 1 Thumb down 0

  16. Racehorse says:

    @john personna: What about the price gouging laws? Those should be enforced. Harry Truman wouldn’t have put up with this bullying from the oil companies. He would have taken them over and locked up their ceo’s.

    Like or Dislike: Thumb up 0 Thumb down 4

  17. @Racehorse:

    Tell me more. I didn’t think we had any meaningful gas gaouging laws. (Though I would probably be against them if we did. I think on average “price discovery” works out – said the Prius driver)

    Like or Dislike: Thumb up 1 Thumb down 1

  18. Scott says:

    @Hey Norm: The fact of the matter is that higher oil prices are good for the economy in some areas like Texas (where I live). What is not mentioned is that lower oil prices (while politically popular) will drive the economy down in Texas. So be aware of the rank hypocrisy of any oil state senator bemoaning high per-barrel oil prices.

    Like or Dislike: Thumb up 0 Thumb down 0

  19. Racehorse says:

    @john personna: I don’t know about the Federal government, but many states have gouging laws that basically prohibit stores from raising prices on needed goods during disasters and other occurrences. In our state, some stores were charging $20 for a bag of ice and $15 for a gallon jug of water during a hurricane a few years ago – before the hurricane even hit. Gas jumped from around $2 a gallon to over $4 in one day and you had to wait in line for that! (again, before the hurricane hit). The gas suppliers blamed a “pipeline” disruption, but there was no damage as the hurricane went a different way. Areas to the north and south of us had no problems. The governor said there would be an investigation, but nothing ever came of it; but a few days after that, the gas mysterious dropped back to normal and there was plenty of it! Politics as usual. You can’t tell me that this stuff is not planned and engineered.

    Like or Dislike: Thumb up 2 Thumb down 1

  20. Tsar Nicholas says:

    Sometimes I understand how Don Quixote felt. Sigh.

    All due respect to Mr. Yergin, but he’s only slightly correct and mostly wrong. We’re talking 80% wrong and 20% in the ballpark of being correct. I’m probably being generous.

    I work in the petroleum industry. I’m an executive-level manager with a wholesale distributor of fuel and other petroleum products. I make my living from a company that buys and sells gasoline and diesel in huge volumes, not by pontificating about stuff in a newspaper.

    The gas price spike over the past two-plus months is not — repeat: not — because of sabre rattling with Iran. Furthermore the elevated level of gas prices over the past several years is not primarily due to Middle Eastern global politics.

    Yes, granted, there’s a “risk premium” in the oil futures market. Undeniable. That risk premium has been present, however, for over a decade. It’s already priced in. To say the Iranian problem is the reason for the sharp recent spike in gas prices is tantamount to saying that NFL salaries are skyrocketing because of free agency. Um, no. Free agency has been in place for many years. It’s a function of the economics of the current market for players, not the fact that they’re available to be signed.

    Sabre rattling with Iran has been going on in earnest since last Summer. Only six months ago, however, in September and October, 2011, gas prices experienced a substantial and abrupt decline. It’s not as if the matter with Iran was solved. Again, the Iranian problem is a small factor. It’s not a major factor. Certainly it’s not the key factor.

    Oil and gas are not tied together 100%. Not even close. If oil futures spike 5%, for example, that does not mean that gas prices will spike 5%. Or even 4%. Or even 3%. Depending upon local supply and demand factors — which primarily is tied to refining capacity in local markets — gas prices can and often do stay flat or even drop on days in which oil futures are spiking upwards. It happens. I’ve seen it. I’ve lived it.

    Which brings us to the major point:

    The gas price problem primarily is an issue of lack of refining capacity. We’re not refining enough oil into gas to keep up with demand.

    Several weeks ago a refinery in Washington State went offline over a long weekend. The very next business day wholesale gas prices across the entire West Coast spiked upwards by 33 cents per gallon. In one day! You can look this up. It’s not a state secret. Retail gas prices spiked so far and so quickly even far-left media outfits made it front-page news. People who paid one week $3.75 per gallon here in Northern California paid $4.35 per gallon the very next time they filled up their tanks.

    Again, this had nothing to do with Iran. It was a supply and demand issue. One refinery went offline for a few days and then all hell broke loose. That’s how sensitive the gas markets are even to the tiniest supply disruptions.

    There are a lot of factors which impact gasoline prices. Obviously the economy at large. Local conditions of supply and demand with respect to local economic growth factors. Variations in state and local gas taxes. The price of crude oil. The long-standing Middle East risk premium.

    The primary factor, however, is the most basic element of supply and demand: supply. We don’t refine enough gasoline. Because there are not enough refineries. Because we went decades without building any.

    Like or Dislike: Thumb up 10 Thumb down 3

  21. Hey Norm says:

    “…Bart Chilton, a commissioner at the Commodity Futures Trading Commission — the federal agency that regulates trading in oil futures, among other commodities — warns that too few financial players control too much of the oil market. This allows them to push oil prices higher and higher — not only on the basis of their expectations about the future but also expectations about how high other speculators will drive the price.
    In other words, a relatively few players with very deep pockets are placing huge bets on oil — and you’re paying.
    Chilton estimates that drivers of small cars like Honda Civics are paying an extra $7.30 every time they fill up — and that money is going into the pockets of Wall Street speculators. Drivers of larger vehicles like the Ford Explorer are paying speculators $10.41 when they fill up…”

    Like or Dislike: Thumb up 0 Thumb down 0

  22. anjin-san says:

    The gas price problem primarily is an issue of lack of refining capacity. We’re not refining enough oil into gas to keep up with demand.

    It should be simple for you to produce data documenting the increase in demand during the life of the current price spike. To me it seems a bit odd that we should experience a demand spike in the dead of winter.

    Like or Dislike: Thumb up 1 Thumb down 0

  23. Gulliver says:

    200 years worth of recoverable oil in shales in Colorado and Wyoming according the petroleum industry – which we aren’t allowed to touch because of environmental extremism. But, of course, the price of oil is not a domestic policy issue at all.

    Look …. squirrel!

    Like or Dislike: Thumb up 3 Thumb down 10

  24. Scott says:

    @Tsar Nicholas: It does seem as though the price of gasoline is going up much faster than the price of crude. Having the price of gasoline dependent on refining capacity would seem to imply that gasoline prices would be much more localized and somewhat dependent on pipeline infrastructure. None of which has anything to do with drilling.

    Like or Dislike: Thumb up 0 Thumb down 0

  25. Hey Norm says:

    “…We don’t refine enough gasoline. Because there are not enough refineries. Because we went decades without building any…”

    Because not having refining capacity drives up demand which drives up prices which drives up profits for refiners.
    Buty I’m sure we will hear how this is somebody elses fault.

    Like or Dislike: Thumb up 0 Thumb down 3

  26. Moosebreath says:

    Tsar Nicholas,

    “The gas price problem primarily is an issue of lack of refining capacity. We’re not refining enough oil into gas to keep up with demand.”

    If this were true, how would explain the decision of one of the major oil companies (Sunoco) to leave the refining business entirely, saying there’s not enough profits in it. A shortage of refining capacity should mean the profits to the refiners are large. Instead, they claim to have lost $800 million since 2009.

    Like or Dislike: Thumb up 5 Thumb down 0

  27. Gulliver says:

    @ hey norm

    Because not having refining capacity drives up demand which drives up prices which drives up profits for refiners.

    So… the folks submitting permits to build refineries are just “going through the motions to make it look like they want more refining capacity? And maybe you think the EPA is in collusion with the evil profit-mongers because they either deny the permit or drag out the review process interminably?

    Time to put on the aluminum foil conspiracy hat to keep the aliens from reading your mind…

    The current EPA is shutting down coal plants, dams, refineries, mines, and pipelines. Just as Obama warned us he would do in 2007 and 2008 before he was elected. In his own words… or he no longer accountable for those promises just like you folks let him slide on all his others?

    Like or Dislike: Thumb up 4 Thumb down 3

  28. anjin-san says:

    But I’m sure we will hear how this is somebody else’s fault.

    My money is on Jimmy Carter. After all, he caused the 2008 crash.

    Like or Dislike: Thumb up 2 Thumb down 1

  29. john425 says:

    Had we been drilling ten years ago, that production would be coming on line now. Thanks for nothing, Democrats.

    Like or Dislike: Thumb up 8 Thumb down 11

  30. OzarkHillbilly says:

    Democrats will mimic the President by pushing “green energy” plans that are mostly Solyndra-like boondoggles and any benefits from the ones that aren’t are years if not decades in the future

    Now when did the Democrats take over the US Navy?

    Sometimes Doug, you make it too easy.

    Like or Dislike: Thumb up 6 Thumb down 1

  31. Hey Norm says:

    Well, Gulliver…You sure did spout a bunch of baseless accusations there…but not suprising…no facts.
    Between ’75 and 2000 the EPA received only one permit request for a new refinery. In ’05 the Arizona Clean Fuels application for a refinery in Arizona was denied because of it’s location…they changed the location to Yuma, and it was approved in ’07. Also refiners regularly apply for…and receive…permits to modify and expand their existing refineries.
    Beyond that…the five biggest refiners in the US control over half of domestic oil refinery capacity; the top ten control 83%. This oligarchy makes it easier for oil companies to manipulate gasoline supplies by intentionally withholding supplies in order to drive up prices. In ’01 the FTC concluded that oil companies had intentionally withheld supplies of gasoline from the market as a tactic to drive up prices. in ’04 the GAO found that mergers in the oil industry directly led to higher prices—and this report did not even include the large mergers after the year 2000, such as ChevronTexaco and ConocoPhillips.
    As is the norm…your ideology is in direct opposition to the facts in evidence.

    Like or Dislike: Thumb up 8 Thumb down 0

  32. Scott says:

    @Gulliver: The refiners have been closing smaller, less efficient refineries for years. The economics of refining (being capital-intensive, low labor) favor large capacity processing of crude. This is where the business has been. It is fashionable to blame the EPA for everything but in this instance it has been economics and business decisions that drive the reality.

    Like or Dislike: Thumb up 8 Thumb down 0

  33. @Tsar Nicholas:

    I work in the petroleum industry. I’m an executive-level manager with a wholesale distributor of fuel and other petroleum products. I make my living from a company that buys and sells gasoline and diesel in huge volumes, not by pontificating about stuff in a newspaper.

    I guess the trick question would be “how low do you really want gas prices to be?”

    $5/gal probably does more for the Christmas bonus.

    Like or Dislike: Thumb up 3 Thumb down 3

  34. (I’m not trying to malign TN. I’m just saying that no one in America really expects money to be left on the table. We all want to sell whatever we’ve got at the best price, and most of us can accept that others will do the same. If you don’t like gas prices, use less. That’s the market option.)

    Like or Dislike: Thumb up 2 Thumb down 1

  35. Console says:

    America isn’t the only place in the world that can refine oil. That’s really where Tsar misses the mark and allows the hack in himself to overtake common sense. If refining capacity were a problem then refineries would just get built elsewhere. That is real supply and demand. But that would require Tsar to explain how the EPA and liberals are keeping refineries from getting built in china, or nigeria, or india, etc. etc.

    Like or Dislike: Thumb up 5 Thumb down 2

  36. Hey Norm says:

    @ John425…
    Had we pursued alternative energy in the 70′s we would not have to worry about oil today.

    Like or Dislike: Thumb up 7 Thumb down 2

  37. Rob in CT says:

    @Gulliver:

    Recoverable shale oil that is economically viable to produce at what price point? I doubt that oil is going to reduce prices. It might, however, slow future rise. Which is why I expect those reserves will be developed, and the crazed environmentalists will be powerless to stop it. When the dust settles and pollution is discovered, the industry will resume whining about crazy environmentalists, because cleanups cost real money.

    Like or Dislike: Thumb up 5 Thumb down 0

  38. Gulliver says:

    @ hey norm

    Well, Gulliver…You sure did spout a bunch of baseless accusations there…but not suprising…no facts.

    And you on the other hand claim facts with no citations.

    _________________________________________

    “EPA pulls permits for two Texas City refineries”

    By T.J. Aulds
    The Daily News
    Published July 1, 2010
    TEXAS CITY — The Environmental Protection Agency on Wednesday rejected the air quality permits for 122 industrial facilities in Texas, including the BP and Valero refineries in Texas City.

    The pulling of the flexible air permits that are issued by the state under EPA’s authority means the facilities do not have legal operating permits.

    ________________________________

    EPA upholds Meraux neighborhood group’s challenge of Murphy Oil air permit
    Published: Thursday, September 22, 2011, 10:00 PM
    By Mark Schleifstein, The Times-Picayune

    Environmental Protection Agency Administrator Lisa Jackson has upheld a neighborhood group’s challenge to an air pollution permit granted by state regulators for a new refining unit that reduces the amount of benzene in gasoline at the Murphy Oil Refinery in Meraux.

    ____________________________________

    From FACTCHECK.ORG

    Existing refineries have been running at or near full capacity since the mid-1990s, but are failing to meet daily consumption demands. Yet there hasn’t been a new refinery built in the U.S. since 1976. Why? Several factors: Building a refinery is expensive, there are a lot of environmental restrictions on where and how they can be built and nobody wants to live near one. One company, Arizona Clean Fuels, has been trying to construct a refinery in the Southwest since 1998. Getting a permit to build took seven years, and the company twice changed the plant’s proposed location because of environmental restrictions and land disputes.

    Sorry norm but, just like your Prez. , you only tell half the story – the half that makes it look like you are being honest.

    Like or Dislike: Thumb up 4 Thumb down 1

  39. Scott says:

    @Rob in CT: We, as a country, are great at pushing costs into the future whether it be pensions, social security, or environment cleanup. I am really looking forward to the costs of decommissioned nuclear plants.

    Like or Dislike: Thumb up 3 Thumb down 1

  40. JohnMcC says:

    @john personna: Mr Personna you are in the excellent company of Paul Krugman (the Nobel-winning economist and NYT blogger not to be missed) in saying that capitalism is the main reason gasoline costs whatever it does. His column “Natural Born Drillers” (3/16/12) should be read carefully to see why the ‘blame the EPA and blame the liberals’ theme is … well, a lie.

    On a related note, I find that BP is selling two refineries (total capacity almost 750K bbl/day) because refining has a “thin profit margin” and they are planning to concentrate on the more lucrative drilling and pumping end of the business. (highbrowmagazine.com/bp-announces-it-divest)

    Like or Dislike: Thumb up 4 Thumb down 1

  41. matt says:

    @Tsar Nicholas: So you’re not an executive in an oil company? Not long ago you were claiming to be a lawyer….

    I guess lack of refinery capacity is why the number one export of the USA right now is fuel (gasoline/diesel/jet fuel/etc)…

    @Gulliver: The city I live in is basically abandoning a whole neighborhood due to the pollution by the local refineries. The Flint Hills refinery has huge storage tanks full of toxic material that they cannot even identify. They aren’t even sure if the tanks are leaking or not but they think some are leaking at an extremely slow rate. This is stuff I’ve seen and heard first hand. I’m reasonably sure the other refineries here are similar..

    Oh well at least the benzene levels in the water is dropping…

    Like or Dislike: Thumb up 2 Thumb down 0

  42. anjin-san says:

    Had we been drilling ten years ago

    Drilling is up, what, 20% under Obama? Try again.

    Like or Dislike: Thumb up 6 Thumb down 1

  43. Neil Hudelson says:

    @Console:

    While I shudder to support Tsar here, I do believe you are mistaken as to whom he supports and opposes politically.

    Like or Dislike: Thumb up 0 Thumb down 0

  44. Gulliver says:

    @ anjin

    Drilling is up, what, 20% under Obama? Try again.

    Another liberal telling half the story. Yes drilling is up under Obama (full stop here for liberals so that they can escape blame) but ALL of that new expansion is on private lands. Not public.

    Obama cannot take any credit whatsoever for new drilling or development in oil, coal, or other “old” fuels as he likes to call them. Under the Obama administration oil exploration leases are down anywhere from 11 – 40% depending on which study you reference. And the permits have slowed to a crawl to the point where leases have to be renewed before any exploration has even taken place.

    A federal judge had to force the Obama administration to open up the Gulf again . And coal plants are being shut down by the EPA in Penn. and VA.

    Nice try, anjin, but it is you who are denying the reality of Obama’s bass-ackwards policy on energy.

    Like or Dislike: Thumb up 5 Thumb down 9

  45. Hey Norm says:

    @ Gulliver…
    Yes…refineries pollute. A lot. The EPA’s job is to regulate pollution. There are trade-offs. I’m sure that you would be willing to just give away the farm without question. By-the-way I’m pretty sure the BP refinery in Texas City that you point to is the one that blew up…killing 15 workers and wounding 170 others. BP was charged with criminal violations of federal environmental laws…not to mention lawsuits from victims families. Ever been to the Houston/Galveston corridor? It’s one of the most polluted areas in the country.
    Also…like I said, they had to move the Arizona Clean Fuels refinery to Yuma…it was then permitted.
    Absolutely nothing you just posted contradicts anything I said.

    Like or Dislike: Thumb up 4 Thumb down 1

  46. Ron Beasley says:

    The largest export of the US is gasoline. The price is nearing or over $4.00 a gallon because that’s what the Chinese are willing to pay.@Hey Norm: The Houston-Gavelston corridor and southern LA is know as cancer ally for a reason.

    Like or Dislike: Thumb up 4 Thumb down 1

  47. Gulliver says:

    @ hey norm

    There are trade-offs. I’m sure that you would be willing to just give away the farm without question.

    The air quality in 2008 when Obama’s EPA ( with open warning in his own words that this would happen) began its war on “old” fuels was cleaner than it had ever been. Period. The ‘pollution” card is knee-jerk environmentalist fluff that will always be played because- surprise – the air will never be “clean enough.”

    Maybe you can point me to publication from environmentalists that states something like ” Maintaining air quality at level X will satisfy our requirements and expectations for the next decade…”

    You’ll never find anything like that because it will never be good enough. And the American people know this in both their pocketbook and their gut.

    Keep dancing, maybe if the music is loud enough then people will never realize that the words are just gibberish.

    Like or Dislike: Thumb up 3 Thumb down 4

  48. sam says:

    @Gulliver:

    Uh, if it’s a lack of supply owing to insufficient drilling, how explain this:

    As gas prices rise, should US oil industry stop exporting?

    At the same time that the price of gasoline is rising, the US oil industry is increasing its exports of gasoline, diesel, and jet fuel.

    Compared to a year ago, exports of gasoline have tripled – at a time when the price of gasoline is 42 cents a gallon more expensive at the pump. On Thursday [late February this year], for example, the price of crude oil remained elevated at $107 a barrel because of fears over the Iranian nuclear situation, and the price of gasoline rose 3 cents a gallon compared to Wednesday, according to AAA.

    The oil industry maintains the exports are necessary because domestic demand is weak. The industry says if refiners could not send American-made gasoline to China, India, Europe, and South America, the refineries would have to close as several have already done on the East Coast. Yet, other energy observers say exporting gasoline at a time of rising prices is sort of like throwing flammable liquid on a fire.

    “I think it is simply disingenuous to think exports of gasoline are not a factor in the prices,” says Ben Brockwell, director of data marketing and information services at the Oil Price Information Service, which provides petroleum pricing and information to the oil industry.

    The issue of US gasoline exports could become controversial if they continue through the summer when average gasoline prices are expected to be even higher than the current price which is $3.61 a gallon according to AAA. By this summer there are some predictions gasoline prices could eclipse the old record of $4.11 a gallon set in July of 2008 and perhaps peak closer to $4.50 a gallon.

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  49. As Sam says, the answer to Console is really pretty easy:

    U.S. exported more gasoline than imported last year

    If he wants extra capacity here to swamp the price and drive it down, he needs to keep going and build so much capacity that it moves the world price.

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  50. Gulliver says:

    @ hey norm

    Also…like I said, they had to move the Arizona Clean Fuels refinery to Yuma…it was then permitted.
    Absolutely nothing you just posted contradicts anything I said.

    So… since it was eventually permitted then the delays, additional costs, and hurdles are not really a discouragement to building refineries, and nothing about the EPA yanking licenses for refineries in Texas, canceling permits, or forcing relocation numerous times (with the attendant environmental site study costs and delays) contradicts anything you said?

    Nice logic. Eventual permission negates all the the negative pressures that discourage development. “All of your time and money are belonging to us… “

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  51. Scott says:

    @sam: We are in a market economy. Prices change with supply and demand. This is good. Unless you are a politician. Then, like Gingrich, you can advocate Soviet-style command and control economics as a pander to the voters.

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  52. Scott says:

    @Gulliver: The licenses in Texas were yanked because the state decided to play games with the regulations. As is typical here in Texas, there was another attempt at crony capitalism with its attendant privatization of profits and socialization of costs. Just play by the rules and, guess what, permits happen.

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  53. sam says:

    @Scott:

    Prices change with supply and demand.

    I’ve been taught that, but, as the Monitor story says (as does everyone else I’ve read):

    The oil industry maintains the exports are necessary because domestic demand is weak.

    If domestic demand is weak, why are domestic prices rising? Exports seem to be one big reason.

    These two graphs are instructive, from the U.S. Energy Information Administration, U.S. Exports of Finished Motor Gasoline . The top graph is really the eye-opener.

    Like or Dislike: Thumb up 1 Thumb down 1

  54. Scott says:

    @sam: I fully agree. I just happen to think that rising exports is a good thing. If prices rise and we earn more money from overseas, so be it. In the long run, this will be good for the country. We had a big gasoline price spike in 2008. If people didn’t learn that lesson and kept buying gas-guzzlers, theh they should live with their decisions.

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  55. sam says:

    @Scott:

    And if rising gas prices really endanger the recovery, fragile thing that it may well be? And President Santorum decides God wills we attack Iran?

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  56. Scott says:

    @sam: That is a really interesting question. Will rising gas prices endanger the recovery? If they are quick rise, probably yes. But rising long term prices will probably help in the long run by incentivizing the US toward energy efficiency. In the “If I were King” category, I would’ve probably been laying in rising gas taxes to do just that with the added bonus of infrastructure investment and less environment degradation.

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  57. Gulliver says:

    @sam

    Uh, if it’s a lack of supply owing to insufficient drilling, how explain this:

    As gas prices rise, should US oil industry stop exporting?

    At the same time that the price of gasoline is rising, the US oil industry is increasing its exports of gasoline, diesel, and jet fuel.

    May be a good point – I’m looking into it right now. On the face of it, this appears to negate claims that refining and production capacities are a factor in gas prices. I’ve also seen references to the fact that these exports may be attributed to exporting grades of petroleum products that won’t meet the standards here in the US (lower grades and byproducts that won’t pass our EPA standards).

    I’ll withhold judgement until I find out more…

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  58. Gulliver says:

    @ Scott

    As is typical here in Texas, there was another attempt at crony capitalism with its attendant privatization of profits and socialization of costs. Just play by the rules and, guess what, permits happen.

    Oh.. Crony capitalism.. You mean, like Solyndra? As far as playing by the rules goes with EPA permits, that’s exactly the problem. The rules keep changing.

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  59. David M says:

    @Scott:

    But rising long term prices will probably help in the long run by incentivizing the US toward energy efficiency.

    Why do you hate America? Just kidding, because the right wing nutjobs have been blaming the entire price increase Obama because he voiced a similar sentiment several years ago. No actual evidence other than Obama wants higher prices of course, but apparently he is all powerful and can control prices with his mind, no real actions required.

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  60. Hey Norm says:

    So Gulliver…
    What you are saying is that a refinery should be given carte blanche to build itself anywhere it pleases with no regard for the impact to it’s surroundings.
    Yes…that does indeed contradict what I said…and what I believe.
    That said…the Yuma Refinery complied with regulations and was allowed to go forward.
    Refineries are permitted for modification and expansion regularly.
    The Texas City refinery…which was in violation of multiple regulations…and was in fact deadly…got it’s permit pulled. You would not have done that…because it is a refinery and as such has special rights to destroy the environment of anyone it pleases in order to create profits at their expense.

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  61. Scott says:

    @Gulliver: Yes, just like Solyndra. In Texas, the permitting process was delegated to the Texas Dept of Environmental Quality and TDEQ got caught speeding.

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  62. sam says:

    @Gulliver:

    I’ve also seen references to the fact that these exports may be attributed to exporting grades of petroleum products that won’t meet the standards here in the US (lower grades and byproducts that won’t pass our EPA standards).

    Why would that make a difference? Refining capacity is still being utilized to create gasoline products for export. Even if the stuff being sent to environmentally benighted other countries wouldn’t meet our EPA standards, it would still be gasoline being sent out of the country. Gasoline that could have been refined for in-country use instead of being sent elsewhere.

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  63. OzarkHillbilly says:

    @Gulliver: I LOVE this guy.… he is the punching bag of every right wing talking point without factual back-up since 1910.

    You go Gulliver. Your delusions of grandeur do not measure up to your name.

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  64. KariQ says:

    @john425:

    Had we been drilling ten years ago, that production would be coming on line now. Thanks for nothing, Democrats.

    Obviously, my memory is so poor, could you please remind me who was in the White House and running Congress 10 years ago? Because I could have sworn they had Rs behind their names.

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  65. Jenos Idanian says:

    @OzarkHillbilly: Now when did the Democrats take over the US Navy?

    January 20, 2009. Democrat Barack Obama becomes Commander in Chief of the Navy.

    Sometimes, Ozark, you make it too easy.

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  66. ernieyeball says:

    @Hey Norm: @ John425…
    Had we pursued alternative energy in the 70′s we would not have to worry about oil today.

    We did pursue alternative energy in the 1970′s.

    http://www.freerepublic.com/focus/news/2251971/posts

    History teaches us that the government is not very good at getting the results it intends when it intervenes in complex markets subject to violent price fluctuations.

    Since 1961 the federal government has spent nearly $187 billion (in current dollars) for the development of advanced energy technologies and basic energy science research. About a quarter of the funds were spent during the oil crisis of the 1970s. According to an October 2008 report by the Department of Energy’s Pacific Northwest National Laboratory, $66 billion of that $187 billion has been spent researching nuclear energy, $65 billion on basic energy science, $28 billion on fossil fuel research and development, and $28 billion on renewables and conservation.

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  67. Jenos Idanian says:
  68. An Interested Party says:

    Hypocrisy can work both ways…if it was wrong to blame Bush for high gas prices, why is it ok to blame Obama for the same thing…

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  69. matt says:

    @Gulliver: Texas is doing what it almost always does. The politicians in control are just puppets for the big industries in Texas and on top of that they think they can do whatever they want even if it violates federal law. Everything from the fights with the EPA to the fights over redistricting are all examples of Texas government doing illegal things because the people in power will profit..

    @Gulliver: WEll I’m glad it only took several other posters saying the same thing I had already posted before you finally noticed.

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  70. Ron Beasley says:

    While it’s true that there is a lot of oil left it’s also true it’s very expensive oil. We have to look at EROEI, energy return on energy invested. The tar sands in Canada are borderline economic at 3:1. That means it take one barrel of oil to produce three barrels of product. We hear much about the Green River oil shale. Yes, there may be trillions of barrels there but after decades of research no one has been able to come up with even a break even EROEI process. So it takes more energy to produce a barrel of oil than you recover. In addition the Green River shale would require at least 5 barrels of water for each barrel of oil in a region that already has serious water shortage issues. This will never be an economic source of oil.
    Yes, there is lots of oil out there but we simply can’t afford most of it. We have reached Peak Cheap Oil.

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  71. Jenos Idanian says:

    @An Interested Party: Apparently you missed the part where Obama proclaimed that he would influence the price of gas… and how the price of gas has done exactly what he pledged he would make happen.

    And I would hold President Gingrich to his pledge on gas prices, too. If he’s going to make those kinds of pledges, like Obama, then he gets to be held to them.

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  72. @Jenos Idanian:

    You should really know how amazingly boring this is. Sure, you can troll out a few serious replies, but the main issues have been asked and answered above (and a thousand times before).

    There is a world price for oil and gasoline. If you don’t like it, use less. That is your option as a free agent in a free market.

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  73. (The deep irony of the “free market” party is that their trolls neither trust nor understand it.)

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  74. Brummagem Joe says:

    Yergin covers it although the existing tight market is partially a product of recovering demand and just as important anticipated recovering demand as large users like airlines and energy companies (and to a small degree pure speculators) buy forward in anticipation of steadily rising prices. Personally I think this is largely a faux controversy ginned up by Republicans in the absence of any other material issue with which to attack the president. It has had an effect on overall inflation being more or less solely responsible for pushing up last month’s number which however remained fairly subdued. Core inflation hardly moved at all.

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  75. An Interested Party says:

    Apparently you missed the part where Obama proclaimed that he would influence the price of gas…

    And apparently you missed taking what he said in context…hardly surprising on your part…

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  76. Jenos Idanian says:

    @An Interested Party: Allow me to clarify what I should have said:

    Obama’s Energy Secretary declared that he wanted gas prices to rise.

    Obama’s own words were this: “Under my plan of a cap and trade system, [energy prices] would necessarily skyrocket. Even regardless of what I say about whether coal is good or bad. Because I’m capping greenhouse gases, coal power plants, you know, natural gas, you name it — whatever the plants were, whatever the industry was… [t]hey will pass that money on to consumers.” –Barack Obama, 1 November 2008

    Obama wants energy prices to rise. Chu specified gasoline. Chu is Obama’s choice, Obama’s representative, Obama’s proxy, Obama’s delegate. It’s all part of a whole agenda. Just admit it. Just own it.

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  77. An Interested Party says:

    @Jenos Idanian: I will admit that goalposts are moving all over the place…of course, this too is hardly surprising on your part…

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  78. Robert Fannéy says:

    Stop buying into the republican propaganda on solyndra. It was a legit new tech that was killed off by Chinese dumping.

    As for the reasons for high prices, they are:

    1. Crude oil production has been flat at 75 million barrels per day world-wide since 2004.
    2. The new unconventional oil costs more and more to produce. Canada’s hydrogenated tar is 50-60 dollars per barrel. Deep water, biofuels, and fracked oil are about the same.
    3. Saudi Arabia is now saying 100 dollar oil is a fair price. They cut production in 2009 and 2010 to push prices higher.
    4. Speculation…
    5. As the world economy improves, rising demand pushes against flat supply.
    6. Syria’s oil is shut in due to political unrest.
    7. The crisis with Iran is adding about 10-15 dollars to the cost of a barrel.

    We and everyone else are going nuts drilling. But the oil is much more difficult to extract. So we’re running to stand still on supply. More drilling won’t reduce prices, but not for the reasons yergin states. The stuff is depleting and the new oil will just keep costing more and more.

    Yergin, though very knowledgable about industry history, is a terrible analyst. His Iran only focus is myopic at best.

    The only solutions are long term and large investments in renewable energy systems. Republican attacks on the Volt and the US solar industry are both shameful and harmful pandering to their oil company backers.

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  79. Jenos Idanian says:

    @An Interested Party: All the little gotcha games don’t change the very simple truth: Obama ran as the candidate of higher energy prices, and has taken several steps to achieve just that.

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  80. An Interested Party says:

    Obama ran as the candidate of higher energy prices, and has taken several steps to achieve just that.

    That is the very simple “truth” in the minds of those who suffer from ODS, like you…

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  81. Eric Florack says:

    In 2012, the reason is mainly geopolitics. Last November, the United Nations declared that Iran was clearly developing nuclear-weapons capabilities. The West is responding with sanctions aimed at reducing Iran’s ability to export oil, on which it depends for more than half of its government revenues, to get it to halt its nuclear-weapons program. Tehran has answered by conducting large naval exercises and threatening to close the Strait of Hormuz, through which passes some 35% of the world’s oil exports.

    Global oil prices and U.S. gasoline prices have both risen about 20% since mid-December. And all this is occurring in a world oil market that is already tight, tighter than it was last year, with no more than 2.5 million barrels of spare capacity.

    We’re sitting on more oil than the whole of the middle east. Most of which is made inaccessable by the siera club leftists dictating our “energy” policy. (Hint… Once their boy got in the WH, gas prices went from under two bucks a gallon to around $4/gal.)

    Put that oil in the sights of the people who drill for it, and the prices go down almost at once. True, the oil won’t be at the gas pump for a few years, but that’s the nature of the Futures markets…. When they see the extra oil coming on the market, the prices come down.

    About half of the nonsense being generated up on this issue is clearly coming from people who have no idea how the free market really works. Or, that demagogues the issue because they don’t want the free market in place.

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  82. Jenos Idanian says:

    @An Interested Party: I’ve given you Obama’s own words, and we can all see how energy prices have gone up. If your defense is that “Obama was either lying or totally delusional when he made those promises and declarations,” then I think I can live with that…

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  83. An Interested Party says:

    We’re sitting on more oil than the whole of the middle east. Most of which is made inaccessable by the siera club leftists dictating our “energy” policy. (Hint… Once their boy got in the WH, gas prices went from under two bucks a gallon to around $4/gal.)

    Oh look everyone, another logical fallacy (and I bet you just couldn’t wait to refer to the President as a boy)…Eric Florack, Jenos Idanian, and their fellow travelers are no better than those they bash on the left for blaming high gas prices on the previous president…

    I’ve given you distorted Obama’s own words, and as a result of my own preconcieved notions about what I thought Obama wanted to do, we can all see how energy prices have gone up.

    Happy to be of help…

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  84. John says:

    @Moderate Mom:

    Not really. Keystone brings crude oil to the gulf where it will be refined and then exported. As it is our largest current export is refined oil (gasoline and other products). We now pay for gas what the world pays. If someone outside the US will pay a higher price then the oil companies will export it and sell it there. One more reason why drilling more here won’t lower the price of gasoline.

    If you want to lower your out of pocket expense for gasoline try the following. Drive less, carpool, get a hybrid like a Prius or a Volt or an all electric like a Leaf.

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  85. @Robert Fannéy:

    The thing I’ve noticed is that while Yergin is not well liked in web circles, he keeps being right.

    This dates to his rejection of the hard and fast peak oil that was supposed to happen a few years ago. It didn’t, and yet still he’d dismissed.

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  86. HeftyJo says:

    Other countries want our gasoline because our refinery efficiency is so high. Nobody else is able to ring as much gasoline out of a barrel of oil than our state-of-the-art refineries in the U.S. can. Now this begs the question, why are our refineries so much better than everyone else’s? Because of free markets and the pursuit of profit maximization through innovation and advanced technologies. Notice that your average country with a nationalized energy sector doesn’t have anywhere near as advanced a refining capacity as our free market approach does. Because they don’t have the same levels of competition with associated price signals to push research and development. While oil companies do certainly enjoy good profits they in turn sink a large percentage of their own money right right back into venture capital and R&D. Because they know that the next technological edge that maybe just right around the corner will give them a clear advantage over their competitors. So, if anything we should be encouraging our refineries to push more oil out to other countries. Particularly if you are one of those people who are talking about making things more efficient and better for the environment. Shutting off exports to other countries would mean they would return to less efficient means of refining gasoline and that in turn would be wasteful on a per barrel basis. Isn’t that what’s best for the environment after all? Isn’t that’s what best to boost the standard of living for the rest of the world?

    This in turn is again, why other countries send their oil here only to have us ship it back by gas tanker. Because they know we have the means to produce more with less. Because we produce a superior product that burns cleaner and pollutes less. So, I say we should encourage the oil companies to boost refining. We should encourage them to boost capacity to better match world demand and diminish the impact of single point disruptions. We should continue to do what we do best, be the premier energy producer for the world. As the saying goes, we are all a circle connected to one another. By pushing more energy products out to the world it will come back to us in the end in the form of lower gas prices.

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  87. white collar crime kills says:

    Between ’75 and 2000 the EPA received only one permit request
    You admit it!
    Just as Santorum and McConnell pre-predicted! Teh Job Creators were pre-reacting to Obama’s 2008 election and his muslimmofeminazi marrij slut plan to tearrirrize us with Teh Regillterries Insertinties! So now who’s the smartest man in the room, huh?

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  88. white collar crime kills says:

    Gulliver is the only pug here who’s making much sense. “Oil” out of the ground varies (some components can be converted at extra cost). OTOH oil sources are diverse. Market demand varies by locations and seasons (including overseas). Those factors and workarounds such as storage, *likely* influence delivery costs.
    The WA refinery out-of-service could have had catalyst effect upon an already flighty traders market. (else the out-of-service couldn’t have “spiked” costs across the continent.)
    All interact with huge complexity, and the cost “model” would be a mess.
    The EPA as excuse/cause sounds weak. Businesses have huge influence on regulation and procedures. Also, regulations still must protect everyone else from (the most egregious) externality costs, so the regulated businesses usually don’t “score a free ride” (Exceptions occur – Scott Walker most notoriously, in recent years). And permitting durations of multiple years do not cause large spikes within durations of weeks.
    The idea of varying taxation to “smooth” retail prices is tempting (as implied in Obama quotations), but IMO, buyers need to accept volatility as the reality it is.
    BTW, the 2008 ‘inverse spike’ began rising before November. Undoubtedly because the clairvoyant traders must have already known Obama would win the election and Bomb Iran in 2012. :-)

    ob megalo-gingrinch:
    Newt = Bomb Iran before the end of my 13th term = $250/gallon gas

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  89. Brad says:

    @Ron Beasley:
    Your “Energy Return On Energy Invested” ratio is an interesting concept. Thus I wonder…
    - How many train car loads of coal does it take to fire the steel mills to build a windmill farm?
    - How much fossil fuel is used to produce the electricity to drive a Chevy Volt its mere 30 mile electric only capacity?
    - How many gallons of jet fuel are used to fly diplomats to a global conference on climate change?
    - How much paper in DC, is used to regulate and reduce US paper production?

    I could think of a lot more… Just some thoughts…

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  90. Rob in CT says:

    How many train car loads of coal does it take to fire the steel mills to build a windmill farm?

    Excellent question that others have raised. Wind is, for that reason and others as well, my least favorite non-coal option.

    Generally, I think it makes sense to take a hollistic view of the environmental impact of an energy source, from start to finish.

    How much fossil fuel is used to produce the electricity to drive a Chevy Volt its mere 30 mile electric only capacity?

    Depends. In some cases, the power may be coming from an old coal plant, which is bad. In others, it may be coming from nuclear, hydro, or natural gas (or bits of each), which is better.

    How many gallons of jet fuel are used to fly diplomats to a global conference on climate change?

    This is just a “gotcha” attempt. Granted, I would like to see more video conferencing (at which point would there be complaints about the power used for the screens?). But in comparison to normal day-to-day commercial aviation… pullllease. Drops in the bucket.

    How much paper in DC, is used to regulate and reduce US paper production?

    Also likely insignificant. A much better question, however, is “how much pollution does the US government cause, and can it do a better job of mitigating that?” Like, say, evaluating all government installations for energy efficiency and making changes accordingly (energy audits). Simple and cost-effective. Are we doing that? If not, why not? Those are good questions, at least to me.

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  91. white collar crime kills says:

    - How many gallons of jet fuel are used to fly Kochs, AEI, et al to agitprop-planning shindigs on climate change?

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  92. white collar crime kills says:

    how much fuel does it take to pump fracking water into rock formations?

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  93. Matt says:

    @Hey Norm:
    But you also have to consider that the price increase of transporting the gas, so basically it cost these companies more to ship it, and if they were makin so much profit off of us then why doesn’t it show in there financial statements?

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  94. Mike says:

    @Moderate Mom: The Keystone Pipeline could be in part an answer to this and we know that the President is asking that they re-direct the line so that is does ot go through the larges aqufir in the country. Certainly it is prudent to not invite an oil spill into the water source for 8 states.

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