Monday, March 17, 2008
Why $4.00+ per Gallon? It's Artificial!
Your humble scribbler was recently involved in an exchange in a thread at another site on the subject of energy supply, specifically petroleum. The subject is exceedingly relevant as most observers of the recent run-up of the price of motor fuel will attest. The causes of this situation are explained variously as "gouging by big oil", "extortion by the OPEC cartel" and increased demand for a "limited" resource by developing nations such as China and India. Of the aforementioned scenarios the latter two are the closer to reality. This approximation, however is not satisfactory in explaining the complete story.
In the interest of full disclosure I must needs reveal having been born into a family deeply involved in the oil production industry of California. Three of my mothers brothers were owners of independent drilling companies and two others were contractors in the oil well servicing business as was my father. I myself began work in the industry at the age of 15. I was able to partially finance an undergraduate degree by working for Conoco, Texaco, Monterey Oil Co. and later by operating up to 50 producing wells for independent producers.
During the early 1960s the Oil industry especially in California began to suffer a series of hits not entirely the result of declining reserves. Crude oil began to be imported from the Middle East at considerably less cost than that which was domestically produced. As a consequence, domestic wells were permanently abandoned as increasing costs of complying with the new governmentally mandated environmental regulations made them economically unfeasible. The redrilling of these wells is generally prohibited by recently implemented environmental regulations even though the price of crude oil has increased exponentially.
Middle Eastern crude oil delivered to the refinery at a cost of under $3.00 per barrel resulted in the abandonment of hundreds of wells producing 5 or less barrels per day at a cost approaching $3.60 per barrel. I was forced to sell 9 gravity crude oil containing 4% H20 for $1.00 per barrel. Needless to say this is not a recipe for economic survival and I consider myself fortunate to have been able to change careers in order to feed my family. The further decline of the oil industry since that era is the result of increasingly burdensome governmental regulations imposed at the behest of the environmental movement. This includes prohibition of offshore exploration and drilling off the west coast and eastern Gulf of Mexico even though considerable proven reserves exist there. Ironically, Cuba has contracted with Chinese firms to drill in the Gulf in an "Economic Zone" granted by the Carter administration ( the gift that just keeps giving).
On September 14, 1960 in Baghdad, Iraq, the cartel OPEC was founded "...as an attempt to organize and unify petroleum policies, securing stable prices for the petroleum producers". The purpose of cartels is to maximize the price of a commodity by controlling the market for it by the manipulation of supply as it relates to demand (Econ. 101). Cartels (monopolies) cannot succeed if faced with external competition hence the pressure exerted on Norway, a large producer of North Sea oil as well as Russia, to join the cartel which presently controls 40% of the worlds crude oil production.
The crusade carried on by the environmental movement capitalizing on the technological ignorance of a propagandized population to prohibit petroleum production on US controlled territory such as ANWR, western Alaska, west coast offshore, eastern Gulf of Mexico and the placing off limits of the huge oil sand resources of southern Utah by the stroke of Bill Clinton's pen is not the end of the story. A recently enacted law signed by George W. Bush will preclude the importation of petroleum from Canada as its refining will result in the increase of "greenhouse gases" thus "global warming".
There are many of our countrymen (mostly products of the government schools) who hasten to decry our reliance on the importation of foreign supplies of petroleum and the consequent accretion of power to the Islamic radicals who wish to either kill or enslave us. Think again gentle folk. For the $4.00+ per gallon price of gasoline you can thank an environmentalist without whom the muzzies would be forced into a free market for the commodity which they could never sell or even produce without the infidels' technology given their 7th century cultural system.
cross posted at: Eternity Road