How much must gasoline prices rise before it becomes intolerable for Americans? Is it $5.00/gallon? Perhaps $6.00/gallon would put you over the edge? Could you deal with $10.00/gallon? We’re quickly heading for the all-time high price of gasoline, which occurred in 2008. So, what do we do about it?
The Strategic Petroleum Reserves (SPR) was created to protect the U.S. from a possible complete loss of oil imports for up to 75 days. It was never intended as a short-term fix to ease rising gas prices. The reserve currently contains approximately 726 million barrels of crude oil. Economists can’t even agree whether dumping a significant percent of the reserve into the market would change the price significantly. Some believe, with good reason, that it could, in fact, cause an increase in fuel prices. But to avoid looking as if they’re doing nothing Democrats are calling for tapping the nation’s emergency oil supply.
Let’s consider a best-case scenario: the government releases half of the oil reserve into the market. The oil won’t be free. Draw downs from the reserve are exchanges. The government delivers x number of barrels of oil from the reserve to a refiner, who in turn must replace it with a like quantity of oil at some future date specified upon release. It would take a minimum of 13 days from the time the President signed the order to draw down the reserve before any would be available to refine, at which point the process of refining crude into gasoline would begin. The average price of crude added to the reserve is $29.76/barrel.
Like everything, there’s a catch. Refiners must replace the crude they accept from the SPR with crude they purchase in the future; they are, in effect, playing the futures market. If oil prices are continue to rise, the cost of refined product would be based on what the refiners anticipate the future price of crude oil would be. If you could buy a barrel of crude now for $104, would you prefer to get a free barrel from the government that you’d need to replace at perhaps $150 per barrel? If you couldn’t get supply, you would have no choice, but there’s currently no shortage of oil on the market. What price do you think oil companies would demand for a gallon of gas produced from oil they might have to replace at a much higher price? The likelihood of an actual drop in gasoline prices based on the release of oil from the SPR is questionable at best. The world market is quite aware of the SPR, and would anticipate additional demand to replace the drawn down reserves, creating upwards pressure on prices. Drawing down the reserve might actually cause the world price of crude oil to rise.
Unless you live in Hollywood, you’re probably not driving an all-electric vehicle. Even if you are, you have to realize that much of our electricity is produced using petroleum. Our trains run off diesel generators. 99.987% of our cars and trucks run off petroleum. There’s no switch to throw to get us off crude oil any time in the near future. It’s just a fact; accept it Mr. Gore.
Let’s envision a non-petroleum based future with all-electric vehicles. We’ll need significantly more electric production capacity than we currently have. That makes feasible sources, such as nuclear, wind and with some technology break-throughs solar, a necessity. A quantum-leap in battery technology will have to come to fruition to allow long-distance electric trucking. This isn’t happening overnight.
This week, House Speaker John Boehner and other Republicans promised to bring forward a number of “bite-sized” energy bills, which are expected to deal with drilling, building pipelines and facilitating the development of nuclear power. We’re going to be on oil for probably most of our lives. For those of us over the age of 50, it’s likely we’ll never live to see an all-electric future. We must find a way to secure our energy present before we dream of an energy future; or at least do both concurrently. The key point being that we must do everything we can to provide for our energy future. Until such time that we’ve settled on a solution to provide the energy we need, nothing can be off the table.
“As gas prices go up, the cost of everyday life goes up,” Boehner said Thursday, warning that the increase harms the very businesses the country is depending on for a robust economic recovery.
The Republican new policy for domestic energy production has been dubbed the “American energy initiative,” and we should start to see new legislation in the near future.
We’re living in a time where we can reach billions of previously unreachable barrels of domestic oil and we’re simply not taking advantage of the technology. We also have amongst the world’s greatest reserves of natural gas. The U.S. exports a significant amount of natural gas, in liquefied form, and we’re the world’s pioneer in exploration and exploitation of our methane reserves. We actually have more vehicles in the United States that run on natural gas than on electricity. But, of course, natural gas is a carbon based product and the “greenies” aren’t going to allow any future involving that.
“Whether prices spiral out of control from an act of God or an act of (Libyan leader Muammar) Qaddafi, we should deploy the Strategic Petroleum Reserve,” Rep. Ed Markey, Democrat from Massachusetts said, while continuing to call for more clean-energy development. That statement says quite a lot. Democrats call anything involving carbon-based sources as dirty-energy. Markey is only stating what’s been the liberal policy for the last 20 years and driven to a fever state by Mr. Gore’s inconvenient but questionable truth.
According to a Gallup poll, one in four Americans thinks prices will reach $5/gallon this year, while $4/gallon gas is imminent. At what point will you say enough is enough? When will this country realize that an “all of the above” policy is the only course to a carbon-free future and where America’s energy needs aren’t held hostage to political unrest across the world?
U.S. oil production is far below projections of just a few years ago. The Obama administration has shut down production from the Gulf of Mexico and is dragging their feet on new oil lease applications. The Democrat’s base is so anti-petroleum that politics is clearly taking precedence over America’s security or economy. The U.S. Energy Information Administration estimates that 1.39 million barrels a day will be produced this year, and that the amount will fall to 1.14 million barrels a day by 2012. What’s wrong with this picture?
The U.S. has 21 billion barrels of proven reserves and recent technological developments and new discoveries predict that U.S. reserves are actually ten times that number. The Petroleum Institute believes actual U.S. reserves are in excess of 200 billion barrels. If we exploit all technologies and tap all our available energy sources, we could someday reach that utopian world of the liberals. Just do it!
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