Oil Gone BANANAS

By Jon Cordeiro

Filed Under Race for White House 2008 on Apr 15 

With the ever rising price of oil by the barrel, the price of a gallon of gas is fast becoming a campaign issue. Just this past December, Hillary proclaimed her election would instantly cut the price of oil. Obama lambastes oil companies for making a profit while at the same time taking money from those same companies.

Of the three candidates for president, the only one who has put forth an understandable plan for lowering the price of gas is John McCain. Today he proposed the government suspend its 18.4 cent per gallon gas and 24.4 cent per gallon diesel tax during the summer driving season. Yes, dear reader, the government makes more on the sale of a gallon of gas than do the actual gas stations that sell it to you. The major difference between McCain’s call for action and Hillary or Obama’s lofty rhetorical flourishes is McCain’s plan would actually impact the price of gas. The empty, energy-less rhetoric of both Obama and Hillary does little else other than increase their collective carbon footprint.

On April Fool’s Day the Congress was hard at work serving up televised Fillet Of CEO for the cameras. The target of the ever outraged legislators was a popular one – namely the CEOs of “Big Oil” – Exxon-Mobil, Chevron, BP America, and ConocoPhillips.

As you can probably gather by reading the accounts of the hearing, there are many in Congress and surely more than a few presidential candidates who believe Big Oil is directly responsible for the fact that gas prices have once again risen past the $3 mark in most of the country. They point to Big Oil’s “obscene” profits as evidence of price gouging even though – when compared to other industries – Big Oil’s profit margin is roughly similar.

In blaming Big Oil for the price of gas these politicians prove their dangerously naïve ignorance about the Laws of Supply and Demand. There are no exceptions to these economic laws. Currently the supply of oil is limited by location, amount, and political issues. The ability to control the supply of oil on the world markets is what gives power to dangerous thugs like Iran’s Mahmoud Amadenijad and ignorant tin pot thugs like Venezuela’s Hugo Chavez. Without oil, these two guys would be viewed as the non-sequiturs they truly are.

The short term answer to the current gas price crisis (one which I feel the pain of every time I have to fill my two vehicles which have 14 cylinders between them) is two fold. First is to increase the supply of oil on the markets. Believe it or not, America can do this without having to go to OPEC and beg the mullahs to open the spigots. Up until about 20 years ago, the United States led the world in oil production. For the past decade or so we have been more concerned about the mating habits of the Porcupine Caribou than we have about the price of gas. Most of the people who proclaim their environmental objections to oil exploration in ANWR couldn’t find Alaska on a map, let alone locate ANWR. Neither would they be able to tell the difference between a Reindeer and a Caribou. I’m sure they’ll hear about the latest discovery of a huge oil field in the Dakotas and Montana and rush to proclaim their concern for Buffalo and Antelope. It remains to be seen whether the militant environmentalists can tell the difference between those two species.

The second area affecting the price of gas is refineries. Believe it or not, your car doesn’t burn crude oil. The refining process is difficult and government regulation has made it even more onerous. The term NIMBY (Not In My Backyard) used to dictate where things like refineries could be built. Well, the NIMBYs started to look beyond their backyards and morphed into BANANAs (Build Absolutely Nothing Anywhere Near Anything). Simply put, there has not been a refinery built in the nearly 40 years I have walked this planet. That, dear reader is why your gas prices spike every time there’s an refinery accident someplace or any other disruption to the pipeline between the crude oil that comes out of the ground and the refined gas you put in your tank. There simply isn’t any excess capacity available to take up the slack.

Much pontificating has taken place on alternative sources of energy ranging from cow dung to windmills. While I don’t want to dash any hopes which may have been raised by these platitudes, the fact of the matter is the American economy runs on oil. No amount of congressional speechifying will change that.

As a matter of fact, all the BANANA crowd has been able to do is drive the US energy situation to the point of being FUBAR*.

Here endeth the lesson.

*FUBAR is a technical term defined (in polite company) as “Fouled Up Beyond All Recognition”

Comments

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  • Gary

    Our country desperately needs the funds collected through the gas tax. Only the foolish and hyperreflexive person would consider repealing it.

    I don’t mind ExxonMobil making billions as long as they don’t cry for government bailout when the price starts to drop.

    Our country needs more refinery capacity, but nobody wants one in their backyard.

    McCain is not married to Big Oil like our current administration is. And he is not an environmental whacko like the other Bonnie and Clyde show. So I am confident that we are one year away from lower fuel prices as long as the stock market doesn’t completly crash first.

    Where is FDR? We need him again.

  • kristen

    Great post. I wrote about this not too long ago.

    75% of Alaskans, the governor, the two senators want to open ANWR. And it will only use up .1% of the vast 2 million acres that are out there. We may as well use what we have. Open up ANWR!

    Also, should we go after companies like Microsoft and Apple who bring in about a 25% profit margin (while oil companies are like 8%)? Seriously people. The free market works.

    It’s time we shut down the environmental wackos.

    • RedStateEddio

      Amen – Preach it sister!

  • dw

    Details Ethanol and government subsidies of same: http://zfacts.com/p/63.html

    And now Bush appears to be caving into the global warming farce… :-(

  • RedStateEddio

    Finally, the topic that raises my blood pressure to a boil! I cringe and gripe everytime I have to fill up. And I get even more irate when I have to grudgingly admit that the treehugging environmentalist whackos (EW’s) who commit arson-in-the-name of-earth-protection have Congress by the cajones because of the PR full court press they’d apply if any of them say yes to drilling in ANWR. Sheer lunacy from a couple of idiots and their spotted owl friends. [BTW, this is the same crowd all fanatical about global warming and climate change. Their goal: the elimination of man from the scene. But I digress.]

    The area in ANWR they’ll develop is the equivalent of a dollar bill laying on the floor of my kitchen, and it’s not some pristine camera-ready beauty spot. It’s ice and marsh and swamp. Today’s technology eliminates most of the environmental issues that prompted the halting of new drilling and refining back in the 70′s. But the intellectual damage has been done. It’s the same fallacious thinking that goes with other related issues like DDT spraying (proven to NOT cause any of the maladies EW’s thought it did).

    We have a 21st century economy with a 1970′s era capacity for energy to drive it. And we’re having a debate over this??? My 9 year old son could solve this issue as quickly as the knuckleheads we call leaders in DC.

    In the last 40 years, we have built no new oil refineries and no new nuclear plants, and we wonder why we’re paying so much per whatever (gallon, watt, kilo, etc)?

    My Energy Plan:
    1) Short term goals (5-10 years): increase drilling and refining capacity 30-50% everywhere possible

    2) Mid-range plan (10-20 years): Employ tech and econ incentives to develop technology and enable every house in US to lay solar panels on their roof for under $10k (currently its about 25k to install). It takes the majority of homes off the grid, decentralizes control of electricity, lowers operating costs and the need for coal burning and other dated power plants.

    3) Long term (20+ years): Set nuclear capability for 50% of all US power needs excpet autos. France currently is at 80%, and we don’t hear tree huggers and whackos protesting the Frenchies now, do we?

    ALSO: whatever car alternatives/additives need to be in place by then (hybrids, fuel cell, liquid coal, etc.) with an increase in MPG minimums.

    We are in this mess because we chose to be in this mess, and because we gave up the intellectual & PR battle to the EW’s!

    This is a national security issue and an economic survival issue. Plain and simple.

    Cordeiro-loved the BANANAS acronym!

    • Brian H

      FANTASTIC!!!!

      THANKS FOR THAT POST!

      You are so right about ANWR. Nobody goes there, it is a swamp. These people have us believing that if we drill for oil were going to have pipelines running through Santa’s toy factory, destroying all the beauty. What a joke.

      I LOVE your short, mid, and long range plan.

      Thanks for sharing…..you need raise your blodd pressure more often. That was good stuff.

      • RedStateEddio

        Thanks, Brian

        Oh, and along the lines of ranting…what are we doing thinking ethanol is the answer? It is so NOT the anwer. What galls me is that we’re taking the food to put in our bellies and putting it in our gas guzzling machines. Ridiculous! we will starve ourselves before we get enough gas through that industry. Not only that, our (up to now) surplus food that we share has been a tremendous goodwill gesture around the world to sruggling and starving nations unable to feed their own. Liberals who are so scared about our “reputation among the nations” should be alarmed that if we cut off this type of subsidizing so we can fill our gas tanks, there WILL be an uproar and backlash among the nations.

        The scary part – liberals think that ethanol is good & green. It’s not. Economies of scale says that its an insufficient resource, and will cause as much greenhouse effect as fossil fuels. So PLEASE STOP THE ETHANOL. It’s going to be the tobacco industry of the 21st century: an industry that nobody wants, but we can’t get rid of due to all the political-money being padded and passed around, with politicians too afraid to do anything about it.

        End of tirade…

        • Troy La Mana

          1) I agree with you except with respect to Nuclear energy. What do you do with the waste? Yes, you can reprocess most of the spent fuel rods but you will still have radioactive waste. Until you can safely dispose of this waste (and it doesn’t take 500 years to decay) then I can’t support building more nuclear plants.

          2) Ethanol can be a solution except people are using corn. Corn does not give you the same energy output of sugarcane or surgarbeet.
          The farm lobby has you only thinking corn. We can still grow a good energy crop in Florida, Texas and Louisiana.

        • RedStateEddio

          Yes, I agree the nuke waste is an issue, but should that be a deal-killer? I heard a nuke engineer in an interview describe the levels of waste being much different than what is reported by EW’s. Yet they’ll throw an emotional monkeywrench into the discussion (“your kids will have 3 eyes!”) and everyone halts.

          As to ethanol, I read that other types of crops (switchgrass, etc.) have a much higher process to use ratio than corn (like 10+:1 vs. 3:1 for corn) which would make it better than corn. Still have the greenhouse effect issues, but it is a better option. The challenge has been how to effectively break it down to get it to that possible ratio level. And even then, volume is the final limiter. There’s just not enough landmass to accomodate the demand we have; I think highest capacity would be about 1/3 of current usage if all farms and open grass space in the country was converted to this type of crop.

  • Brian H

    WAIT!!!

    I thought we “went to war for oil”. Where is the oil that the Libs claim we went to steal from the Iraqis?

    I have heard that about 1/3 of a the cost for gas is taxes to the govt. I have NO problem paying my share to the companies who find, drill, and refine the gas I put in my car, this emplyees thousands. I hate the fact that I must pay 1/3 of my expense to a govt. who contributed zero to the process.

  • Fabs

    Oh, and there’s so much government wasteland in parts of Nevada already that I vote to start the new refinery building out there.

    • Troy La Mana

      Build it right next to the Solar Farm.

  • Fabs

    While I claim no expertise on the lastest and greatest in the oil industry, last I heard about shale oil is that technology used to extract the oil is in A LOT of need of further development before it becomes anywhere close to an effecient process. Some of the other technological advances on dealing with the oil situation I’m sure face the same obstacles. So it seems this part of it comes down to spending money now to develop the processes and save money later.

    As for foreign oil vs. domestic oil, I’ve heard a lot of rhetoric about strategic positioning . . . use foreign oil while we can in case the day comes where who knows what prevents us access to it and we’ll have ours to fall back on.

    So while I’ve yet to really form my opinion on the current gas crunch we all get to endure from a public policy standpoint (because I prefer to focus on the consumer side of it since that’s what I can most directly affect), we did survive the early 80′s oil crisis and I’m sure we’ll survive this too. It will be interesting to see how we actually get there but at least we don’t have gas rationing (yet).

  • East-of-Eden

    Nothing makes me more excited than a good lesson on Supply and Demand, and my classes full of high school economic students will verify that too….they often tell me I need to “chill out”.

    What I would like to see is someone mention shale oil (Wyoming and NE Utah is full of it) or coal to oil production, in addition to the opening of ANWR, building more refinieries, tax cuts etc.

    I look at this as a National Security issue. If we don’t depend on the Middle East for oil (or anyone else for that matter) then we don’t have to worry about the region. You are right on with this Troy.

    Corderio, again another good lesson, thanks!

    • SA Kalinich

      Oil shale is very expensive to harvest, causes more environmental havoc and at the end, we still have no oil refineries to process it.
      Why don’t we have the refineries we need? Could it be to tighten supply, which in turn drives up prices?
      Your local gas station owner isn’t making money on this. The oil execs are. We not only subsidize them with our taxes, they rarely pay corporate income taxes.

      • dw

        SA: I don’t think you’re correct that Oil execs are profitting from rising gas prices. And, you’re wrong in saying that subsidies go to the execs – they go to the corporation. But, you are correct that execs rarely pay corporate income taxes. In fact, they NEVER do. Duh! The corporation does. And, where does that money come from? The consumer. That’s why raising taxes on corporations is a fallacy. In the end, the consumer pays. Thus, the beauty of the FairTax…

        But, even if oil execs are making more money personally, so what? Since when should anyone be able to dictate what is acceptable income?

  • Bill A

    Sounds good till you realize McCain won’t cut any spending to offset those billions in lost revenue.

    Options, from worst to best:

    1. Leave gas tax and spending unchanged.
    2. Remove gas tax and leave spending unchanged.
    3. Leave gas tax and cut spending.
    4. Remove gas tax and cut spending.

  • Troy La Mana

    The only thing I agree with Dems on is that the oil companies don’t need a tax break. 1) Cut the tax breaks out completely. 2) Open up some of these areas for drilling. 3) Approve the building of more refineries.
    4) Explore and us the 3 Trillion barrel oil shale reserve we have in Utah, Wyoming and Colorado. This is three times the size of the Saudis’ supply.

    I look at this as a National Security issue. If we don’t depend on the Middle East for oil (or anyone else for that matter) then we don’t have to worry about the region.

  • SA Kalinich

    OK, Lucy, ‘splain to me why my tax dollars are subsidizing Big Oil even as they reap record profits?

    It seems that record gas prices causing record profits is no longer a self-evident conclusion. (I guess 2+2 no longer = 4.)

    Yes, we need to build more oil refineries, just to get us through the weaning period as we move from oil to abundant, but not immediately profitable fuel alternatives.

    (And no, ANWAR is not the answer. It will only fuel us for a short time, not nearly long enough to justify the environmental havoc wreaked.)

    The government is underwritten by Big Oil and in turn underwrites Big Oil. The only ones who are paying are the folks at the gas pumps. (The Shrub, of course, not being among them. His “Oh. Really?” response when reporters told him two weeks ago gas was soon to broach four bucks a gallon was shameful.)

    Am I angry about gas prices? You bet I am. And even angrier that my government doesn’t seem to care. Why isn’t anyone calling for national gas reserves to open briefly to boost supply?

    • dw

      SA… suggest you review Economics 101, especially the difference between profits and profit margins. Note that big oil’s profit margin has not increased at all.

      But, so what if both have increased?!? This wealth envy nonsense that is increasing so much in this country is so not healthy. Social equality is NOT the answer. The government has no right, no authority and no obligation to take money from any person or business.

      And, the government is NOT underwritten by big oil and vice versa. In fact, the government is actually profiting more than anyone other than the middle east wackos who supply the crude. The tax revenues are skyrocketting. I don’t like McCain, but I do like the suspension of that tax. Of course, it had better come with an equal suspension of spending.

      But, I will concede that there are government subsidies in the industry, but so are the subsidies in other areas. Guess who put those in place? Yup, the lame congress critters who are catering to the extreme and the lobbyists. Solution: stop all Federal government subsidies. No exceptions.

      Lastly, the government has NO business whatsoever dictating prices. This is a free market economy. Don’t like it? Move.

      Just my $0.02 :-)

      dw

    • Brian H

      Are you concerned about the government subsidizing BIG-Amtrac, BIG-PBS, BIG-NPR, BIG-National Endowment for the Arts, etc. etc? It is funny how liberals only hate the government subsidizing things we need?

      About ANWAR, you are wrong and facts are incorrect. ANWAR is ice in the winter and mosquito swamp in the summer. If it is so pristine tell me one person you have ever met that has gone to visit ANWAR. The entire area is less than my local airport.

      • SA Kalinich

        The whole point of preserving ANWAR is to keep people out. The fact that people don’t visit doesn’t lesen its importance as a national treasure.

    • http://www.sotr.us Cordeiro

      SA:

      Such anger! :) Tapping the SPR, while it would add to the supply of crude oil on the market, would do little in the short or long term to reduce gas prices. The reason is one you noted – the US doesn’t have the refining capacity to deal with any more oil than it already refines. The last time the SPR was tapped (I believe by the Clinton (Sorry Excuse For) Administration) the oil actually had to be shipped abroad for refinment. That was really effective.

      How’s that for ‘splainin Ricky?