Patrick’s Rants

Everyone’s pointing the finger at everyone else. The oil companies blame the “speculators” for the high cost of oil and gasoline at the pumps. George Bush and John McCain want to drill offshore and in the arctic reserve saying that it’s the Democrats fault for the high prices.

Here’s the truth. Gasoline stations make pennies per gallon on the sale of gasoline. If they don’t sell something else, they are slowly circling the drain. Credit card processing charges alone are killing them. It’s not the gas stations that are raising the price of gas.

Speculators are betting that the price of oil will go up or down. They don’t actually control the price, they merely bet on the direction. Anyone who knows anything about the commodities market knows that the so-called speculators do nothing to actually set the price - except to bet that the price will go one way or another.¹ The commodities market also helps to smooth out the price and you will find that the oil companies participate in the commodities markets to enhance their profits and even out their costs. The oil companies are reporting record profits². If it were truly the speculators - and only speculators - causing this price rise, then the oil companies would have the same profit margins as they did in the 90s. But that’s not the case is it?

The truth about the high price of oil is complex. It’s not going to be solved by drilling for more oil. It’s not going to be solved by lifting bans that protect wildlife, the coast, fishing industries, etc. The first reason is that while drilling might be safer today than it used to be it’s going to take a long time to get that oil into the pipeline and the risk to the environment is simply not worth it. Gas will be at $10.00 per gallon before we start to see oil begin trickling into the supply chain.

I’m going to be political here and blame the high cost of gasoline right at the Administration’s feet. I wrote about Dubya funding hydrogen research nearly two years ago. While funding for research that promises some possible returns 20 years from now, it does nothing to increase the supply or reduce the cost of oil today and will not work in today’s automobiles.³ So that’s strike one against Bush. The fact that he and Dick Cheney have heavy ties to the oil industry mean that even if this were a genuine initiative it’s highly suspect. Congress and Bush need to support research like that being done by Conoco Phillips and Tyson Foods⁴ which would create a renewable diesel fuel source⁵. That’s funding fuel that can be put into today’s cars.

Congress and Bush can modify the Farm Bill and fund subsidies for farms that produce ethanol feed crops. Without getting into all of the other politics of the farm bill, paying someone to leave their fields fallow to prop up food prices can be replaced by paying the farmers to redirect their output. The farmers get essentially the same result; prices remain steady and they are being paid to work instead of being paid to not work as the fallow payments encourage. Engines that can use ethanol in up to 85% concentrations exist today - the hang up is not having the premixed fuel. The other thing they can do is reduce or eliminate tariffs on imports for use in ethanol production (not to compete with food).

Cheney and Dubya need to release their energy summit meeting notes. It’s not top secret. If there’s nothing to contribute then why did they have the meetings? If all they did was toss some bones to the energy companies and Kenny Boy and twist a bogus energy crisis in California⁶ into a recall campaign against a Democratic governor, then we need to know that too. There is nothing top secret about electricity. And hey, if it’s OK for Dubya and company to listen in on my private phone conversations (and if I have nothing to hide I won’t mind will I?) then it’s damn sure OK for me to read what Kenny Boy and Dick had to say about my electric bill.

The credit crisis - as it’s being called - is a major contributor to the price of oil. Bankruptcy reform, a laissez faire attitude about the middle and lower class, and a hands off approach to the housing market all contribute. Pretending that we’re not in a recession doesn’t help. With our financial markets slowly melting down, the value of the dollar vs. other currencies is sliding. Oil is traded worldwide in US dollars. So when the Canadian dollar is twice the US dollar (when it used to be $.70 US) means that the price of oil hasn’t really changed. Consider if the dollar is only worth half of what it once was - the price of oil at $130 bbl is really equivalent to $75 a few years ago compared to the value of the dollar on the world market. (I’m simplifying this a little - well, maybe a lot, but you get the drift). None of this affects people in Dubya’s income bracket. They don’t care. You won’t see Dick bicycling to work any time soon so none of this will change.

Acknowledging that global warming is real, reducing energy dependence on the rest of the world through innovative technologies that don’t require a complete change in the type of cars that we drive (that type of change is ten+ years in the making according to Cringley) and doing things like adding more bike lanes will reduce our dependence on foreign oil. Riding your bike to work one day a week for a five day work week reduces your auto fuel bill by 20%. Asking US Citizens to sacrifice a little would reduce our dependence on foreign oil. Installing just a few more wind turbines and a couple more solar panels will help too. Actually funding research that will help today and tomorrow will help. Hell even giving new technologies the same breaks that are currently given to oil companies would even the playing field and eliminate the need for drilling over a short period of time.

1. I started writing this a few days ago and yesterday (2008/06/25), that big fat idiot blow hard Rush Limbaugh was telling his listeners the exact same thing, although I didn’t hear him remind listeners that oil companies participate in the commodities markets. If you dare, the link to that part of his show - where he got it partly right - is here. I’m posting a follow up with the other things that commodities markets do/how they operate.
2. Oil company record profits
3. Robert X. Cringley restates that in his column, It’s the Platform Stupid, presumably he has done the research that backs up his “platform” or type of car claim. He revisits the energy topic in What a Difference a Day Makes
5. The original fuel source for diesel engines is said to be peanut oil, a renewable source of diesel fuel.

Status of Conoco Phillips, Tyson Foods collaboration.

6. Enron, led by Ken Lay, is now know to have caused the energy shortages in California including rolling blackouts by manipulating supply, exploiting deregulation all while calling for more deregulation.