Hunting for scapegoats won’t lower pump prices
March 21, 2012
Exporting gasoline and diesel fuel creates jobs and prosperity
By: Paul Driessen
When President Obama took office, regular gasoline cost $1.85 a gallon. Now it’s hit $4.00 per gallon in many cities, and some analysts predict it could reach $5.00 or more this summer. Filling your tank could soon slam you for $75-$90.
Winter was warm. Our economy remains weak. People are driving less, in cars that get better mileage, even with mandatory 10% low-mileage ethanol. Gasoline is plentiful.
Misinformed politicians and pundits say prices should be falling. Our pain at the pump is due to greedy speculators, they claim, and greedier oil companies that are exporting oil and refined products.
Their explanation is superficially plausible – but wrong.
Energy Information Administration (EIA) data show that 76% of what we pay for gasoline is determined by world crude oil prices; 12% is federal and state taxes; 6% is refining; and 6% is marketing and distribution. The price that refiners pay for crude is set by global markets.
World prices are driven by supply and demand, and unstable global politics. That means today’s prices are significantly affected by expectations and fears about tomorrow.
A major factor is Asia’s growing appetite for oil – coupled with America’s refusal to produce more of its own petroleum. Prices are also whipsawed by uncertainty over potential supply disruptions, due to drilling accidents and warfare in Nigeria; disputes over Syria, Yemen and Israeli-Palestinian territories; erroneous reports of a pipeline explosion in Saudi Arabia; concern about attacks on Middle East oil pipelines and processing centers; and new Western sanctions on Iran over its nuclear program and the mullahs’ threats to close the Straits of Hormuz.
Moreover, oil is priced in US dollars, and the Federal Reserve’s easy money, low interest policies – combined with massive US indebtedness – have weakened the dollar’s value. It now costs refineries more dollars to buy a barrel of crude than it did three years ago.
Amid this uncertainty and unrest, speculators try to forecast future prices and price shocks, pay less today for crude oil that could cost more four weeks hence, and get the best possible price for clients who need reliable supplies. When they’re wrong, speculators end up buying high, selling low and losing money.
Oil speculators play a vital role, just as they do in corn and other commodities futures markets.
Basic chemistry dictates that a barrel of crude (42 gallons) cannot be converted entirely into gasoline. Depending on the type of crude, some 140 refineries across the USA transform each barrel into gasoline, diesel, jet fuel, heating oil, asphalt, waxes, petrochemicals and other essential products.
This manufacturing process leaves them with excess diesel fuel, because American vehicles consume less diesel than refineries produce – due to air pollution laws that limit diesel use. US refineries export that excess diesel to Europe, which uses more diesel than gasoline, and Europeans ship their surplus gasoline to mostly East Coast consumers. US refineries also sell excess inventories of other manufactured products to overseas markets, but diesel is by far their principal export.
America exports $180 billion in finished products every month – $2.2 trillion annually in corn, wheat, cars, tractors, appliances, airplanes, pharmaceuticals and much more.
Last year, for the first time since 1949, America was a net exporter of fuel and other petroleum products. Those exports injected $107 billion into our economy and sustained thousands of refinery and other jobs that otherwise might have been lost, as refineries also struggled in our stagnant economy.
Farm and factory jobs would evaporate if we made exporting their products illegal. Prohibiting fuel exports, and demanding that refineries manufacture only what we need here in the States, would have the same effects on our employment, economy and living standards.
The USA has 1.4 trillion barrels of technically recoverable conventional oil, the EIA and other experts estimate, and enormous additional supplies in shale and tight sand deposits. The best way to keep prices down is to produce more of this American oil, and import more from secure, friendly, nearby suppliers like Canada.
However, our government prohibits leasing and drilling on nearly 95% of the onshore and offshore lands it controls. It is dragging its feet on leases and permits for the remaining 5% and over-regulating production on private lands. It vetoed the Canada-to-US Keystone XL pipeline. It is imposing layers of costly and unnecessary new regulations on every aspect of energy production it does not simply reject.
We are losing billions of dollars in bonus, rent, royalty and tax receipts, killing countless jobs, and impairing Americans’ living standards, health and welfare.
“More exports mean more jobs,” President Obama said recently. “We need to strengthen American manufacturing. We need to invest in American-made energy and new skills for American workers.”
His words ring hollow. Above all, President Obama and his environmentalist and congressional allies want to end our “addiction” to oil, “fundamentally transform” America, and “invest” billions of dollars (borrowed from us and our children and grandchildren) subsidizing efforts to turn corn, switchgrass, algae and pond scum into fuel.
Generating billions of dollars and millions of real jobs by producing American oil and manufacturing American oil products doesn’t fit this agenda. Even though one of every ten jobs created in the last three years has been in oil and gas, when it comes to petroleum, Team Obama wants to punish success, and reward failures like Solyndra, Fisker and the Chevy Volt.
To paraphrase a recent White House jab at Republicans who want more drilling and fewer obstructionist regulations: Every time prices start to go up, President Obama heads down to the local pond or cornfield, makes sure a few cameras are following him, and starts acting like he can wave a magic wand, throw a few more billions around, and have cheap, eco-friendly biofuels forever.
Meanwhile, Energy Secretary Steven Chu has made it abundantly clear that he wants to “boost gasoline prices to European levels” – $8 to $10 per gallon! He’s already half way to his goal.
Those prices would certainly force Americans to drive less, and “hope” the hype about “changing” to algae-gas becomes reality in less than twenty or thirty years.
Meanwhile, skyrocketing fuel prices will certainly “boost” the cost of transporting people, raw materials, food and products by wheels, wings and waterways; manufacturing anything still made in America; and preserving jobs, family and business budgets, and dreams that depend on affordable energy.
Hunting for scapegoats won’t lower pump prices. Reality-based energy policies will.
__________
Paul Driessen is senior policy advisor for the Committee For A Constructive Tomorrow and Congress of Racial Equality, and author of Eco-Imperialism: Green power – Black death.
I don’t do much on this site any more…
October 13, 2011
Sorry to have abandoned this site. Most of my time has been spent over on www.TheMarinForum.com.
FedUpEditor
Ozone standard
August 11, 2011
our elected officials on Capitol Hill are still fighting with one another. Needless to say, the news has been dominated by the debt crisis, but there’s another serious financial issue that deserves attention. It’s EPA’s proposed ozone (smog) air quality standard, and it could be issued this week.
As you might recall, in 2008 EPA set an ozone standard of 75 ppb (parts per billion). Federal guidelines require EPA to revisit the ozone standard every five years, but last year EPA initiated a reconsideration of that standard and proposed tightening it to 70 to 60 ppb. In places where naturally occurring ozone levels can exceed the standard, including Yellowstone National Park, EPA can’t explain how to meet the new requirements.
A new study by NERA Economic Consulting shows the EPA’s health benefit assumptions are greatly exaggerated:
- EPA’s assumed causal relationship between ozone and mortality has not been supported by EPA’s science advisors;
- The health benefits EPA attributes to the tighter ozone standard should are due to a slight reduction in particulate matter (dust), which already is regulated separately by EPA; and
- The EPA’s own data show that the benefits of the proposed ozone standard will not outweigh the costs.
A study by Manufacturers Alliance/MAPI estimates that strengthening the ozone standard to 60 ppb could cost the U.S. economy more than $1 trillion per year between 2020 and 2030, and destroy 7.3 million jobs.
Air quality has and will continue to improve as the nation works to meet the existing standards. There is no reason to change the standards now.
- API
Are we there yet? The economics of going hybrid
August 9, 2011
Indy Star – Regular Saturday readers probably can surmise that I’m a proponent of advanced powertrains. I think the Chevy Volt is an incredible achievement, appreciate the efficiency of the Nissan Leaf and give props to the affect Toyota’s Prius had on the auto industry.
Owners love them, but none are especially cheap. The question remains: Are hybrids really worth it?
Hybrid options
While all of the major automakers have a hybrid in their lineup, several are achieving outstanding fuel economy without complicated batteries and motors.
Chevrolet’s Cruze Eco achieves 28/42 mpg city/hwy. The redesigned 2012 Ford Focus SFE and smaller Fiesta manage 40 mpg hwy, as does the hot-selling Hyundai Elantra. VW Golfs with diesel engines go 30/42 mpg city/hwy. These are roomy cars that cruise happily at road speed.
On the flipside of the energy equation are the benchmark Toyota Prius hybrid that delivers 51/48 mpg city/hwy and the Honda Insight hybrid that achieves 40/43 mpg. A Chevy Volt slips by with 93 mpg-equivalent, but that’s an electric ghost of a different tale.
Other gas-powered sippers are coming. Toyota’s Scion brand is launching the iQ, a four-seat car about a foot longer than a Smart. Chevrolet will replace its Aveo sub-compact with the Detroit-built Sonic this fall. Even large cars like the 2012 Chevy Impala and Ford Taurus will achieve over 30 mpg hwy.
General Motors CEO Dan Akerson recently announced his company will launch a diesel-powered Chevy Cruze in 2013 that should top 45 mpg hwy.
Hybrid and the pocket book
Let’s assume you drive 15,000 miles per year and gas hovers around $3.50 per gallon. A Cruze Eco, Focus SFE or Elantra would cost you just under $1,600/year to fuel. Gas-powered micro cars like the Smart or Scion iQ drop it to about $1,400. The Chevy Volt in gas mode and Honda CR-Z sport hybrid are comparable to these.
Hybrids and electrics generally do better. A Toyota Prius will consume under $1,100/year in fuel while the Honda Insight hybrid uses just under $1,300. Electric cars, according to EPA and power company estimates, will consume about $570 in electricity.
If you purchase a Cruze Eco, Elantra or Focus instead of a base Prius, you’ll save about $5,000 ($18,500 vs. $23,500). Buy the Cruze instead of a Volt trims around $14,000 (after rebates). The Honda Insight, starting under $19,000, is priced comparably with mainstream gas-powered compacts.
Given all of this, hybrids don’t pay for themselves in pure economical terms. It would take 10 years in fuel savings to justify the current price difference between normal compacts and a base Prius. If never driven in gas mode (unlikely), the payback on a Volt is about 14 years.
The Honda Insight is the only hybrid considered that will save cash from day one.
In conclusion
Overall, you probably won’t save money by purchasing a hybrid. However, like driving a Corvette or Ford F-150 Raptor, vehicle purchases often are about emotion as much as practicality. People tend to determine a monthly budget, then buy a car they desire. Maybe they lease a Chevy Volt instead of a Buick Regal Turbo? Or, they choose a loaded Prius instead of an Audi A3?
After that choice, the Volt or Prius definitely will save money on fuel day after day.
For reasons of image and “coolness,” few people outside of us nerdy journalists actually compare a Prius to a Corolla or a Volt to a Cruze. Drivers just don’t think that way. Each of us decides by our own values and emotions what is “worth it.” Price is only one factor.
Another study details the benefits of Gulf drilling
July 21, 2011
Another economic analysis shows that stepping up the pace of oil and natural gas development in the Gulf of Mexico could give the U.S. economy a much-needed boost. The study examines the “activity gap” between energy development and the current pace of Gulf permit approvals. Compared to historical trends, pending exploration plans are up by nearly 90%, approvals are down by 85%, and the approval process has slowed from an average of 36 to 131 days.
Written by IHS Cambridge Energy Research Associates and IHS Global Insight, the study shows that increasing the pace of permitting in the Gulf would boost employment opportunities in almost every state, enhance tax and royalty revenues, and help stabilize America’s energy security.
Specifically, the study shows that aligning the permitting process with the industry’s production capacity could result in:
• 230,000 American jobs;
• More than $44 billion in US gross domestic product;
• Nearly $12 billion in tax and royalty revenues for state and federal treasuries; and
• $15 million reduction in the amount the US sends to foreign governments.
And that’s by the end of 2012.
Jane Van Ryan
American Petroleum Institute (API)
Where are our jobs?
July 16, 2011
Job creation is one of the most important topics being discussed, especially now that the unemployment rate is up to 9.2 percent.
As you know, a lot of people in the oil and natural gas industry have lost their jobs due to the offshore drilling moratorium and the “permitorium.” Today, API and the National Ocean Industries Association (NOIA) released a study that quantifies the job losses as well as the opportunities for job creation. According to the study:
- The offshore oil and gas industry currently supports 242,000 jobs across the country;
- 60,000 jobs in the Gulf states alone have been lost since 2008 due to the poor economy, deepwater moratorium and continued slow pace of permitting; and
- Greater access to Gulf development could increase offshore employment by 77 percent – from 242,000 jobs in 2010 to 430,000 jobs in 2013 – with almost a quarter of the new jobs outside of the Gulf region.
For more information on the study, check out this news release and my colleague Mark’s post on the Energy Tomorrow Blog. As always, let me know if you have any questions.
Jane Van Ryan
Senior Manager, Communications
E: vanryanj@api.org
T: 202-682-8181
American Petroleum Institute (API)
Are Environmental Groups Doing Themselves In?
July 9, 2011
Some time ago I saw a special on the building of the Alaska pipeline. One of the interesting items of note was how the environmental movement essentially got its start and gained traction in the early 70’s. It talked about how, much to their surprise, environmentalists were successful in slowing the construction by using the courts for push their agenda. This emboldened them to continue fighting their causes in the courts, only having to convince one or several judges, rather than counting on undependable legislators. Didn’t this country break from England to get away from one person rule?
As a result, what I have seen develop is a cottage industry of businesses catering to environmentalism. Everything from cars to dish soap and solar panels are being pitched to us on television with the promise that if we buy their products, we will help save the planet from catastrophic consequences. I believe people of the future will look back on this society’s belief in this environmental hype much as we do now about those who thought the earth was flat.
As a good Conservative, I don’t want to be seen as a person against clean air and water. After all, who would? However, I think much of the environmental movement is going too far. And now that the economy is suffering, they are shooting themselves in the foot. As with any other business they too must have a market to thrive. Here’s what I mean.
I do consulting for a company that does environmental impact studies. This is a group of about 60 people, many of whom ride their bikes to work or drive their hybrids and sit in the dark (to save the planet, I’m guessing) working at their computers to hash out environmental impact studies which are required for various building and redevelopment projects. Their work costs a lot of money so if a project ends up not netting a reasonable profit for the speculators, then they do not move ahead and hire them. As a result, this company is taking a hit and is having to lay off people.
I find it ironic that these same people who provide a service required by the various government authorities (federal, state, county and local) before permits will be granted for construction are against development. It makes no sense, even though their very financial existence is dependent on it. This would be funny if our economy wasn’t in such sad shape. And when big developers are hurting they cannot afford to hire environmental impact studies.
On another front, Michelle Bachmann reintroduced the “Light Bulb Freedom of Choice Act”. I think this is a brilliantly titled bill. After all, isn’t it about expanding our choices, not limiting them? If current legislation is allowed to stand, incandescent bulbs will be phased out of existence, and our only choice, for the most part, will be the CFL bulbs. By the way, these have that dangerous mercury in them. You know, the mercury that used to be in the same thermometers liberals saw fit to ban. So now mercury is okay in light bulbs? Well then, where is my mercury thermometer? Either it’s dangerous or it’s not.
This doesn’t mean I am against CFLs if people want them. But I resent the fact that government is dictating I must use them. This is none of their business, despite what our local GOP seems to think. If it’s about saving energy, I ask why? Because we have a lousy energy policy. If it’s about saving the planet, I say nonsense. The planet will do fine long after we are all gone.
At the same time, we have a bunch of people trying to push electric cars. How is that saving energy when everyone will be plugging in at night to drive the 50 miles or so a person can only get on one charge? Where will that electricity come from?
Nuclear is out now that Japan has shown us how dangerous it is. (Of course the fact that the reactors were built in a potential flood zone doesn’t seem to matter to those who are against them.) Coal is a no go. Obama has promised to bankrupt that industry. What about hydro-electric? Nope, we have to think about the effect on the fish. In fact, there is a movement to tear down dams across the county! So we are down to solar and wind.
Regardless of the fact they have proven to be ineffective in solving our energy problems, that even east and west coast liberals don’t want windmills or solar panels in their neighborhoods, it is the first thing people think of when they hear about clean, green energy. So what if the wind doesn’t blow or the sun doesn’t shine?
Please don’t suggest I submit this to the IJ. It is way too long, and I thank those of you who have read to the end. Yet it seemed timely just when our Marin GOP is considering writing a letter chastising Michelle Bachmann for misrepresenting the CFL legislation as a ban on incandescent bulbs. But when the law’s regulations and energy standards make it impossible for light bulb manufacturers to continue producing them, what else could you call it?
FedUpEditor
New pipeline and domestic drilling are key to US liquid fuel supplies
June 11, 2011
API economists have examined U.S. government data and a few studies, and they’ve discovered that with the pipeline and expanded access to domestic energy supplies the United States and Canada could provide 92% of America’s liquid fuel needs by 2030 – decreasing the nation’s projected dependency on the rest of the world by 22%.
API has produced a new video illustrating those numbers. Please feel free to use it. Additionally, more information is available on the access page at EnergyTomorrow.org, where API has posted the benefits of opening up areas that are currently off-limits to exploration and production.
The State Department, by the way, has issued a statement saying that it will make a decision on the Keystone pipeline by the end of this year.
API economists have examined U.S. government data and a few studies, and they’ve discovered that with the pipeline and expanded access to domestic energy supplies the United States and Canada could provide 92% of America’s liquid fuel needs by 2030 – decreasing the nation’s projected dependency on the rest of the world by 22%.
API has produced a new video illustrating those numbers. Please feel free to use it. Additionally, more information is available on the access page at EnergyTomorrow.org, where API has posted the benefits of opening up areas that are currently off-limits to exploration and production.
The State Department, by the way, has issued a statement saying that it will make a decision on the Keystone pipeline by the end of this year.
Obama and Facebook: The Social-ist Network!
April 24, 2011
Clean Energy – Code Word for Restrictions
March 7, 2011
President Obama didn’t mention carbon constraints in his State of the Union message. Such carbon constraints would force the nation to give up most of the energy that currently keeps us warm and productive. Instead, the President proposed a new “clean energy” program—which would force the nation to give up most of the energy that currently keeps us warm and productive. A study by the Beacon Hill Institute in Boston estimates the President’s “clean energy” proposal might well cost the economy $4 trillion over 20 years, and force huge numbers of U.S. jobs overseas.
Mr. Obama’s “new” proposal is obviously being offered as Plan B, since his cap-and-trade proposal failed in the Congress. He obviously hopes to lure some befuddled House Republican votes to pass it. The President is not “moving to the middle.” Instead he is playing bait-and-switch. Either cap-and-trade or “clean energy” would cause chaos in the American economy. Remember his desperate efforts to pass Obama-care, complete with the payoffs to key Senators? He is rigidly persistent!
Now it gets even worse. UN Secretary-General Ban Ki-Moon just announced that he will quit pushing for an international agreement to ban fossil fuels. Guess what now rates as worthy of his efforts instead: a “clean energy initiative”! Ban says this is necessary to reduce climate risks, cut poverty, and improve global health. Does anybody think he means substituting kerosene stoves in Bangladeshi huts to prevent the lung diseases women get from burning wood and dung in open cook-fires?
The left has decided that global warming is no longer an effective rallying cry.
