The Myth About Oil – What Congress Doesn’t Want You to Know
May 27th, 2008
I asked my good friend COgirl to write a piece about our current energy crisis. She is proficient in the field as she and her husband are engineers who have worked in the field their entire careers.
I wish to thank her for taking the time to write this post.
Here is her unedited post:
The Congressional hearings last week with oil company executives were a big joke. The question is whether or not the American public is smart enough to see through it all or whether or not they can push the media views aside to see the truth.
Prices are set in the world market which many people in the U.S. do not realize also includes other countries such as China and India., i.e., the world does not revolve around us. There is a strong correlation between economic growth and energy consumption, so demand is on the rise. Also, oil is traded in U.S. dollars. So as exchange rates work against us, traders in the world market increase what they are willing to pay for oil. Prices go up for us, but not for everyone.
Our thirst for oil is nearly insatiable. While it’s “pc†to talk about alternative fuels and renewable energy, the truth of the matter is that the majority of oil consumed in this country is used by the transportation sector, meaning our cars. According to the Energy Information Agency, in February over 60% of the oil we consumed went for gasoline and jet fuel. That percentage will go up over the summer as refiners reduce heating oil production in order to meet gasoline demand during the travel season.
There are not enough hybrid cars being produced and purchased to make a significant dent in that for some time to come. If the life “expectancy†of a car is 10 years, then we replace 10% of our auto fleet each year. Even if all of new cars were hybrids, it will take at least that long to increase average fuel efficiency. In the meantime population growth puts more cars on the road, so gasoline consumption in total rises.
What have our lawmakers in Washington done for us? Well, they’ve curtailed the only tool we have to fight rising oil prices, domestic production. No drilling in Alaska. No offshore drilling. No drilling in the west. Oil shale reserves aren’t allowed to be explored and extraction techniques tested and commercialized. No refineries can be built. Yet, Congress overwhelmingly passed legislation to SUE OPEC for setting high oil prices and limiting supply. Limiting supply? Now that’s novel.
Who profits from the higher oil prices? Washington likes to point the finger at “big oilâ€, but the dirty little secret is that state and federal governments make out like bandits. According to data from the California Energy Commission, when the price per gallon was $3.89 (April 28, 2008), taxes accounted for $.65 of the price paid at the pump. Crude oil was $2.83 of that. The remaining $.41 went for refining, transportation, marketing and profits. Would Congress dare to look in the mirror?
What can be done? Both sides have to give something. We have got to allow more domestic exploration and production. It takes 10 years to bring a new oil field online so this should have been done years ago, like during the Clinton administration. But we also MUST increase our mileage standards. This has to be a comprehensive plan that also encourages the development of new automobile technology and fuels.
I’m not terribly optimistic. The hearings last week were a charade. I don’t have faith that political differences and grandstanding can be put aside. This tit for tat mentality has gotten us where we are today and I don’t see an end in sight. After all, we have an election in November and when that’s over with, they only have 2 years to work on the next. The only shot we average citizens have for getting the message out is between now and November. Let your candidates know what you want.
Guest Post Written By COgirl
Note In the initial printing of this piece I inadvertantly left out the final paragraph. It is now there. Please excuse this inexcusable error.
Welcome Conservative Grapevine readers. Special thanks to John Hawkins for the link.
And welcome to The Anchoress and her readers.
Written by Jeanette
Posted in 13 Responses to “The Myth About Oil – What Congress Doesn’t Want You to Know”
It is always a pleasure to read a well reasoned and factual post. Thanks for taking the time to work this up.
Some day there may be compromise in Washington again. After they finish using “isues” as campaign tools and begin once again working the solve the problems facing this nation.
It’s a very informative piece and takes all the hocus pocus out of understanding why our energy costs are so high.
I wish to apologize to COgirl and to the readers for inadvertantly leaving out the concluding paragraph. If you haven’t read it since I added it please read it now with the conclusion.
It showed up in MS Word as three pages and when I went to a single page view the third page didn’t show up for some reason. I copied what was on there and put it into the post.
It wasn’t until COgirl asked if I had deliberately left it off or if it was a mistake (she knows I’m dingy)8-} that I checked and was horrified I had left out the last paragraph.
I’ll try to be more conscientious in the future. :-w
[...] has a guest poster who knows a few things about oil and America and dares to tell it to you [...]
I watched the hearings and had to shut off the TV. I’m so disgusted with the whole mess. When are we going to learn that all politicians are in it for them selves? What the heck do they care what the price of gas is at the pump? We buy their gas and they are full of it plus the solids that go along with it. Good post and I must say, very true.
I would respect a man for telling me the truth instead of trying to treat me like an idiot and pull the wool over my eyes. It sometimes hurts to know it but at least I would know where I stand and what to expect.
I’d like to propose a ten year compromise with the leftist greenies who hate modern civilization (it interferes with their private jet mobility)
Drill, drill, drill
Build refineries and nuke plants
Pour money into alternative energy discovery -not give away carbon credit scams.
As alternative fuels come on line -close a drilling platform for each equal production of AFs.
Offer this once and then do it anyway!
Forget those dreams of higher fuel standards unless you mean higher death tolls.
I propose we drill for oil in hollywood, in beverly hills, in new york city, on boston, in san francisco, in george soros front yard, in the kennedy compound and finally in al gore’s back yard.
If they don’t like it, I say, tough!
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[...] J’s Cafe Nette (via the Anchoress) I asked my good friend COgirl to write a piece about our current energy crisis. She is proficient in the field as she and her husband are engineers who have worked in the field their entire careers. [...]
Guess what. This problem is just about over. Inventories are getting quite high. Why? Because we’re not buying at this price. Yes sir, the American consumer is going to fix this problem. There’s tankers at sea right now that won’t be able to unload. They’re stuck out there. The only way to get them unloaded is to move out the oil. Price is about to collapse.
[...] The Myth About Oil…. Who profits from the higher oil prices? Washington likes to point the finger at “big oilâ€, but the dirty little secret is that state and federal governments make out like bandits. According to data from the California Energy Commission, when the price per gallon was $3.89 (April 28, 2008), taxes accounted for $.65 of the price paid at the pump. Crude oil was $2.83 of that. The remaining $.41 went for refining, transportation, marketing and profits. Would Congress dare to look in the mirror? [...]
The writer asks and answers:
“Who profits from the higher oil prices? Washington likes to point the finger at “big oilâ€, but the dirty little secret is that state and federal governments make out like bandits. According to data from the California Energy Commission, when the price per gallon was $3.89 (April 28, 2008), taxes accounted for $.65 of the price paid at the pump. Crude oil was $2.83 of that. The remaining $.41 went for refining, transportation, marketing and profits.”
However this is disingenuous. If she is speaking solely about taxes on gasoline, then she would note that Congress always makes $0.65/gallon. This is a flat tax, so Congress is not making out like a bandit with high gas prices. On the contrary, Congress is losing money relative to low prices because high prices cause people here to buy less gallons and thus pay the $0.65 tax less often. Their take does not grow in proportion to the price of oil, that would be the oil companies. Basically as gas prices rise, the profit oil companies make rises while the money Congress takes stays flat.
It is also disingenuous to compare Congressional gains from gas sales ($0.65) with only downstream operations of oil companies ($0.41) while stating the crude oil price as something independent and fixed. You forget to mention that while the downstream operations of O&G companies only make $0.41/gallon for transport, refining, profits…etc, the upstream exploration arm of those companies also make a large chunk of profit off of the $2.83 price for crude oil. So you have to count the proportion of cost of gas to the oil company as $0.41 + %*$2.83, which is greater than $0.65. If you wish to comment please notify me at nolasaint35@aol.com
The point is the Congress is still charging $.65 tax per gallon of gas sold, whether the gas sells for $1.00 per gallon or $4.00 per gallon. People still need to go to work and still need their cars to get there so even at higher prices Congress still gets its share of the pie. Now, people may not be doing as much leisure driving, but then the price of airline fuel is making it just as cheap, if not cheaper, to drive to their destination.
As for profits on the drilling costs, do you think the oil business is in the business of buying expensive equipment, paying good salaries and making no money from it at all?
What has the government invested in oil? Nothing and they still won’t let us drill for our own oil while China is drilling right off the coast Congress won’t allow us to drill. The question you should be asking is “why?”.
I read similar article also named The Myth About Oil – What Congress Doesn’t Want You to Know, and it was completely different. Personally, I agree with you more, because this article makes a little bit more sense for me