I’m intrigued by this NYT explanation: “a surprising culprit: uncertainty created by the government’s push to increase the supply of biofuels like ethanol in coming years. In his State of the Union address in January, President Bush called for a sharp increase in the use of biofuels, along with some improvement in automobile fuel efficiency to reduce America’s use of gasoline by 20 percent within 10 years. Congress is considering legislation calling for a nearly fivefold increase in the use of ethanol. That has forced many oil companies to reconsider or scale back their plans for constructing new refinery capacity. In hearings before Congress last year, oil executives outlined plans to increase fuel production by expanding existing refineries. Those plans would add capacity of 1.6 million to 1.8 million barrels a day over the next five years, for an increase of 10 percent, according to the National Petrochemical and Refiners Association. But those plans have since been scaled back to more than one million barrels a day, according to the Energy Information Administration, an arm of the federal government….”
Another way to put it: blame the enviro-craze.
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The article conveniently neglects to mention why a new refinery hasn’t been built in 30 years.
Also due to environmentalists, with an assist from bureaucrats and lawyers.
Since prices reflect scarcity, I wonder how much the current war is contributing to oil’s rise? It must take quite a few drops to keep that military engine humming. That would mean less oil on the market – reflected by higher prices at the pump.
Eric;
Now image if the state stop stocking up for their strategic petroleum reserve, which has over 700 million barrels in it already…
The war also disrupted Iraq oil production and exports. Both are below pre-war levels.
The SPR has always been a brilliant invention of the officeholders. It has been sold as a reserve for the citizens in case of a supply problem but it seems designed to be the state’s alternate gas tank if the necessity ever dictates. It would be the only time the politicos would be able to agree to release the reserves: for their own protection.
There are, obviously, several factors for oil’s rise in price. But one can only wonder how plentiful the supply would become upon removing environmental restraints and that action’s subsequent effect on oil prices.
I was just reading about a new gouging bill passed by the house. Apparently, the new Hill-billies in D.C. can’t resist demagoguery any more or less than their predecessors.
Not only do actual government interventions in the market cause unintended, undesirable consequences, but just the threat of government interventions causes unintended, undesirable consequences!
Imagine!
Same political storm down in Australia, with people calling for the government to intervene. The same politicians who increased taxes to discourage petrol use, and win environmentalist kudos, and refuse to reduce the tax are the ones people are asking to take petrol companies to task for high prices. If they cut taxes prices would be immediately lower.
More amusing is people suggesting we follow the US model of fining “profiteering” petrol companies, when we know in the US petrol stations have been fined for sellng petrol lower than their competitors.
A classic fallacy
Whenever you see statement of the form the cause of “this” is “this” beware. There are very few things in this world that are caused by a single factor. Gas shortages are no different. However, look for one common cause – government interference.
The latest showboating by Congress overlooks the simple fact that the biggest gouger in the price of gasoline is the government and the biggest contributer to high prices is government regulation. In California we have pandering to the ethanol lobby, and a difference between winter and summer blends.
This article is so typical of government interference in the market, is it not.
Another way to put it: blame the enviro-craze.
So President Bush – who in the SOU called for “a sharp increase in the use of biofuels, along with some improvement in automobile fuel efficiency to reduce America’s use of gasoline by 20 percent within 10 years” – his administration and Congress are the puppets of the enviro lobby?
I had thought that it maybe it was rent-seeking by Archer-Daniels-Midland and Cargill who were primarily responsible for the push to subsidize ethanol, so I am relieved that you have identified the right culpits enviros. Can you tell me more about how this makes money flow into their pockets?
But as for why prices are going up NOW, I thought that the NYT article pointed to other factors:
“Because they have not invested enough in refineries to increase gasoline supplies, oil companies have been unable to meet the country’s growing demand in recent years. That has forced them to rely on imports, which are more expensive than fuel refined domestically.
“The fragility of the refining system became apparent after Hurricanes Katrina and Rita in 2005. At the time, President Bush offered to reopen some military bases as sites for constructing refineries and Congress passed legislation to encourage refiners.
“But oil companies rejected the idea of constructing new refineries in the United States, saying it would be impractical and too expensive.”
In the midst of all this, why is it that I seem to be the only one who is interested in noting and cutting back the billions in subsidies that the oil business gets? Where is Robert Bradley when we need him?
Regards,
ET (TT’s alter-ego)
“In the midst of all this, why is it that I seem to be the only one who is interested in noting and cutting back the billions in subsidies that the oil business gets?”
I doubt you will find many who will disagree with you here (This is Mises.org after all) but subsidies do not usually lend themselves to price rises or shortages.
And while “big oil” is reluctant to increase their refining capacity, the environmental restrictions create a barrier to entry for people or companies which might wish to build a refinery.
“I am relieved that you have identified the right culprits enviros.”
Not the “right” culprit but, rather, “one” of the culprits.
For all we know, big oil does not wish to expand refining capacity because of other, unknown, reasons. A few possibilities are as follows:
1. They do not believe the investment is necessary due to upcoming shortages in oil.
2. They believe (or were told) the upcoming carbon restricting laws will reduce the need for more refining.
3. They wish the price to rise so people will turn to nuclear power. (something they are situated to profit handsomely from)
4. They have incompetent leadership.
… who knows how long the list is?
And beyond the oil companies you have a war in the Mideast, growing oil demand worldwide, currency inflation, and a government that could pass any law at any time for any reason which might effect the price of oil (protectionism anyone?)… to name just a few.
Honestly the mentioning of biofuels, hydrogen, ethanol, etc., are just red herrings to string us along.
As much as I’d love to fill up my car with used vegetable oil, there isn’t enough used vegetable oil in the country to support our fleet.
I’m unsure why the focus keeps going towards innefficient bio-fuels and no one is paying attention to electricity to power our cars.
Matt Timion – http://www.gassavers.org
When are people going to see whats really going on, the oil companies, the banking ind. ,and the insurance ind, are whats really running this country, they are allowed to screw and rape the people by the politicians, they are paying off, they will keep doing it untill the people get fed up and take this country back, dont thjnk you can do it by voting, you are just putting honest people into a corrupt system,
‘Honest’ people? Oh yes, those poor, innocent gullible little politicians.
They are every bit as guilty, if not more so, than the people who ‘buy’ them out. They frequently encourage such actions! After all, it is they, and the various lobbies that swarm them with entreaties, who have the greatest interest in maintaining the state.
ur all wrong bush runs this county
Right now yes there is a low supply of fuel, but not to the point where we have to pay this much in gas.
Oil companies are making the most they’ve ever made and were getting scammed especially here in Montreal where it’s 139.1 Per Liter !
I found this great article the other day that explains how to save 40% of gas…
http://ezinearticles.com/?High-Gas-Prices-Leads-Many-People-To-Run-Their-Cars-Using–Water-(As-Seen-On-Fox-News)&id=1167673
I really suggest you read it, it’s already been on Fox news an the number of people doing that are becoming more common especially in Europe.
I found this great article the other day that explains how to save 40% of gas…
I really suggest you read it, it’s already been on Fox news an the number of people doing that are becoming more common especially in Europe.
I read the article Gianni, and it says you haven’t tried it yet. Why don’t you try it and tell us how well it works, and how much money you save on gasoline? No hurry, we’ll wait…
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http://www.myfuelbroker.com/11987-0-5-3.html
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