There is No Gas Shortage

Parent Cafe
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<p>[There</a> Is No Gas Shortage](<a href=“Businessweek - Bloomberg”>Businessweek - Bloomberg)</p>

<p>“They see speculation in the market, I see decline in global inventories. I don’t think this is a big surprise, that we’ve had a jump in price when there has been a decrease in crude inventories.”— Energy Secretary Sam Bodman, Bloomberg News, Mar. 5, 2008 </p>

<p>“It should be obvious to you all that the [gasoline] demand is outstripping supply, which causes prices to go up.” — President George W. Bush, Associated Press, Mar. 5, 2008 </p>

<p>One wonders if verifiable facts ever get in the way of this administration’s statements on issues that are critical to the average American’s wellbeing. After all, last time I checked, when politicians are elected to public office, or appointed, as is Energy Secretary Samuel W. Bodman, they must take an oath to the American people before assuming their new positions. How can they forget a sacred oath so quickly? Were they daydreaming when they took it, so it never meant anything to begin with? Maybe it’s just another promise you have to make to get into office: When you’re securely incumbent you can ignore even solemn oaths you took. </p>

<p>Obviously, the two quotes that led this article came from discussions concerning the current high price for oil on the futures market. Bodman appears to be protecting the speculators in oil, as opposed to looking after the interests of all Americans. President Bush, apparently, has never talked to the Energy Dept.'s Energy Information Agency to see whether gasoline demand is actually up. More troubling, the writer of that particular Associated Press article obviously didn’t look up the EIA’s numbers to verify the President’s assertions. They weren’t accurate. </p>

<li>There Is No Shortage </li>
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<p>Gasoline reserves on hand are at the highest levels since the early 1990s, which is remarkable considering the nation’s refineries have been cutting back on the production of gasoline because their margins have declined. In fact, average gasoline reserves on hand have risen since this past October, while oil reserves in this country have gone up virtually every week this year—and only fog in the Houston Ship Channel that kept oil tankers from unloading their crude one week kept it from being every week."</p>

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<p>No one who knows anything said there is a shortage. If there was a shortage, prices would be a lot higher than they are today. The price of gasoline moves (over time) with the price of oil. The price of oil is set on international markets over which neither oil companies nor the US government has any control. The price of oil is set in dollars and the weaker dollar has resulted in higher oil prices, but not as significantly as the change in the change in marginal demand over existing oil supplies. </p>

<p>As the incremental rate of demand from india and china increases over time, while the incremental rate of supple rate of supply remains stable, the price of oil increases. That price will continue to rise over the next few year and there is nothing the US can do about it.</p>

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<p>"2. Demand Is DOWN, Yet Prices Are UP </p>

<p>Just so we can all get on the same page, here are the verifiable facts on oil supplies, production, and gasoline demand. </p>

<p>In January of this year, the U.S. used 4% less petroleum than we did a year ago. (Oil demand was down 3.2% in February.) Furthermore, demand has been falling slowly since July of last year. Ronald Bailey of Reason Online has pointed out that worldwide production of oil has risen 2.5% in the first quarter, while worldwide demand has grown by only 2%. </p>

<p>Production is expected to increase by 3.3% in the second quarter, and by as much as 4.1% by the third quarter. The net result is that the U.S. daily buffer for oil production against demand, which was a paltry 1.5 million barrels as recently as 2005, is now up to 3 million barrels in excess capacity today."</p>

<p>This isn’t in the article. Oil companies made about $120 billion in profits last year.</p>

<p>Subsidies to those same oil companies from the US government were about $18 billion.</p>

<p>Hmmm.</p>

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<p>I wonder. Is the US government going to have to bail out the oil speculators too?</p>

<p>" Speculation is Up, and the Dollar Is Down </p>

<p>On the same day the President and our Energy Secretary made those foolish comments, no less an authority than ExxonMobil (XOM) Chief Executive Officer Rex Tillerson was quoted by Marketwatch as saying, “The record run in oil prices is related more to speculation and a weakening dollar than supply and demand in the market.” He added, “In terms of fundamentals, fear of supply reliability is overblown.” </p>

<p>As for the speculators, in 2000 approximately $9 billion was invested in oil futures, while today that number has gone up to $250 billion. Now, if any publicly traded company had an additional $241 billion put into its stock in the same period, its stock would rise out of sight too—even if the company was not worth anywhere near that amount of market capitalization. </p>

<p>Moving on to the weak U.S. dollar as a primary cause for skyrocketing oil prices—there is “some” truth in that statement. But consider this: The dollar has depreciated 30% against the world’s currencies since 2002, while the price of oil has gone up 500%. So is it the weak dollar that has caused a 500% increase in the price of oil, or is it the extra $241 billion worth of speculation? You can make the call on that one. </p>

<p>Possibly just to ensure oil prices don’t respond to real-world market conditions, Goldman Sachs (GS) forecast on Mar. 7 that turbulence in the oil market could cause oil to spike as high as $200 a barrel. This flies in the face of all known information—but then again, Goldman Sachs is the world’s biggest trader of energy derivatives, and its Goldman Sachs Commodities Index is a widely watched barometer of energy and commodities prices. </p>

<p>What Is Washington Thinking? </p>

<p>Rounding out the list of experts discussing our oil and gasoline situation is Bill Klesse, head of San Antonio (Tex.) Valero Energy (VLO). He spoke in San Diego a week after those comments from Goldman Sachs, the President, and Secretary Bodman. Believe it or not, Klesse said poor margins may cause Valero to sell one-third of its refinery operations; he stated that poor margins in recent months had caused planned refinery expansions—which would have produced 500,000 more barrels per day—to be canceled. Moreover, according to a report from Reuters on Mar. 11, 2008, Klesse recently released the information that gasoline production has been curtailed in response to slowing demand. </p>

<p>Imagine that: Refiners cut gasoline production, yet gasoline reserves have grown to their largest since late 1992. So much for “surging demand.” </p>

<p>Klesse also called for the government to start imposing a tariff on imported gasoline to protect U.S. refiners’ profits. Protectionism? As famed economist John Kenneth Galbraith correctly said, “In America, the only respectable form of socialism is socialism for the rich.”</p>

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<p>I like to think that we run our cars with rats in a wheel…that’s why I keep cheese around. </p>

<p>Does anyone care what the Idiot says?</p>

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<p>Global demand outpaces global supply. This isn’t rocket science.</p>

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<p>It’s not that we’re running out of oil, it’s that we’re running out of cheap, easy to extract, easy to refine, oil. The Canadian oil fields in Alberta have a massive amount of oil, it’s just all mixed with sand. And while a significant portion of that field is believed to be unreclaimable, you can guarantee that once oil prices rise enough, they’ll find a way to get to it.</p>

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<p>The majority of the oil in the oil fields in Canada have been extracted. The largest oil supply known is in Brazil under a lake and so far unreachable. By the time we run out of oil, there will be alternative methods of fuel.</p>

<p>Lack of water is the big concern, not oil.</p>

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<p>There is plenty of water on the planet, but the bulk of it is salty and not drinkable. By the time we run out of water, new procedures for water desalination will be developed, but they will require energy… Back to square one.</p>

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<p>50% of our water is contaminated with disease. Research Dean Kamen. The water issue is not mainly desalination. We are projected to run out of clean water before fuel.</p>

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<p>“Disease” is easy to take care of. Chemical contamination is a bigger issue, and more worriesome.</p>

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<p>Who is subsidizing who? Out of each dollar spent at the gasoline pump. 8.3 cents are oil company profits. 15 cents go for taxes, federal, state, & local. In addition, in 2006 oil companies paid $81 billion in income tax. That’s 40% of net income.</p>

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<p>Steps to calculate **The Gas is Still Cheap Index<a href=“%5Bb%5DGSCI%5B/b%5D”>/b</a>:</p>

<p>[ol]
[<em>] Find major, multi-lane interstate highway
[</em>] Drive on highway from step 1 and set cruise control to posted speed limit (SL)
[<em>] Count number of cars (C) that pass you during a arbritary time interval (ATI) while you drvie at the speed limit…say 5 minutes or more.
[</em>] Calculate Index using the following formula: GSCI = SL * (C / ATI)
[/ol]
Any value for the GSCI greater than 0 means that gas is still cheap.</p>

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<p>We have a problem…there is an illusion that biofuels are going to be more green, cheaper, and allow America to gain energy independence. Biofuels require land, water, and climate resources that oil, gas, coal, and nuclear don’t. </p>

<p>If the world’s breadbasket diverts more crops to energy vs. food, food prices increase. The supply will also be more susceptible to drought, flood and other environmental factors. One huge drought and <em>poof</em> your food and energy supply is affected.</p>

<p>The nation needs to think of short-term, medium-term and long-term strategies for energy. It will likely be a mix of technologies. Fortunately, scientists and engineers are working very hard to come up with solutions. </p>

<p>Economic constraints will ultimately be in the drivers seat. The current high oil prices are beneficial for creating economic incentive to move to alternatives. The quickest killer of alternative development would be if oil prices plunged…Environmentalists would consider this a disaster, but in the short term, the economy would benefit. </p>

<p>There is no free lunch.</p>

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<p>Why the quote (though I am flattered) UCB? I said nothing about biofuels, don’t support them, etc.</p>

<p>I was referring to clean drinking water, especially in drought ridden parts of the world.</p>

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<p>^ I should have been more clear… I have a tendency to ramble. :slight_smile:
You mentioned lack of water. I was pointing out that if we switch to biofuels for energy independence, the water issue might be further compounded.</p>