Tuesday, July 08, 2008

"Big Oil" Part II

Your humble scribbler recently posted here on the real impact of US oil companies regarding the price of what consumers are being forced to pay for energy, specifically the fuel used in the transportation segment of our society. He pointed out the fact that 94% of the known petroleum reserves of the planet are controlled by various governments. This of course includes the US government whose vast public lands are blessed with enormous energy potential in the form of oil and natural gas.

The policies of the US and several state governments led by California beginning in the early 1960s up to the present time with regard to the extraction of these resources has been either outright prohibition or regulation to the point of driving up production costs beyond the point of economic feaseability.

What the US government also does not tell you is that it [the government] is the leaseholder and royalty recipient of most oil production, and receives 25% of the gross oil sales before we pay for electricity to lift the oil, and propane to keep the oil-water separators from freezing in the winters. We pay a pumper to visit each well everyday plus we have equipment failures all the time. We pay for that out of our 75% of gross sales. The government does not share in any expenses to run any production well. So, if the Big Oil Companies are making record profits, then so is the federal government from it's 25% tax on every molecule of oil sold to a refinery in this country. Why isn't the government on the stand for "record" profits? What you don't see is this 25% of the sales price of crude oil being siphoned away by the government. That money, plus the road taxes, state taxes, etc., amounts to over $1 per gallon of gasoline you are buying while the governments only admit to about 50 cents per gallon.

On top of all of the aforementioned taxes is added in many states, especially California, a sales tax amounting to as much as 8% of the gross.

Initially the rationale for these policies was to protect the natural environment from damage due to contamination from carelessly handled or accidentally spilled petroleum. The impact of those environmentally motivated regulations has resulted in the tremendous technological advances in the oil and gas industry's production methods. The Alaskan Prudhoe field development and the Alaskan pipeline are noteworthy examples of those improvements as are the offshore fields in the Gulf of Mexico and southern California. Indeed, the several thousand offshore wells in the Gulf have withstood nature's ravages in the form of major hurricanes with no significant impact on the environment other than the exponential increase in sea life habitat.

With the miraculous improvements in the production and handling of petroleum, the ecological objections of the environmentalists have begun to ring hollow in the ears of the public to the extent that they are not concealed or ignored. Enter the propagation of what can be described as a politician's wet dream and the greatest hoax in history, the concept of anthropogenically driven global warming.

It is beyond the scope of this posting to address the myriad refutations of this religiously held hypothesis but some of the best are here, here, here and here.
So America, enjoy your $4.00 per gallon gasoline [and it will be seen as cheap if the current gaggle of politicians of the Democratic party remain in power]. Your dollar is now worth 0.62 Euro-Cents. The lack of American production of GNP, the massive trade deficit (as labor markets have moved overseas to fight insanely high union imposed labor [and regulatory] costs in America) and the run away printing of money (backed by nothing of value here in America) has caused the dollar to become more worthless on the international market. And that's where our oil comes from. It's paid for with dollars that become more worthless everyday. If we had just kept par with the Euro, we'd be paying $62 dollars per barrel for oil (42 gallons) or about $1.50 instead of $2.50 a gallon for crude oil.

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