Bush Seemingly Resigned to High Gas Prices

[OGTEleven]

Folks can spin this BS whatever way they want. Blame China, blame Katrina, blame ANWAR, etc, etc. The truth of the matter is the price of oil has been driven through the roof because of instability in the middle east. Plain and simple. Thanks George, the world loves you.

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George Bush created instability in the Middle East? How old is he exactly?

[Crap Throwing Monkey]

why exactly?  Is it not the policy of the gov't to keep prices stable. 

 

No. It's the policy of central banks to keep currency stable.

 

Is it not flawed that they do not use energy prices as an indicator of inflation.

 

Maybe. More to the point, what's the actual rate of price increase for oil. You say greater than 2-3% per year. Prove it.

 

The fact that the gov't doesn't include the price of energy keeps them from having to intervene when things such as oil prices get too high.

 

That probably has more to do with the facts that:

1) Fiscal policy is more concerned with currency stability than price fixing,

2) Inflation is more concerned with currency stablility than price fixing,

3) Oil prices currently have less to do with currency stability than they do market forces. Two years ago that wasn't necessarily true: the initial run-up in oil prices to about $45/bbl or so was due more to low US interest rates than it was to supply and demand, as can easily be seen by comparisons to the euro at the time. Since then...oil's rising against both the euro and USD (and virtually any other currency you want to consider). And THAT is fundamentally non-inflationary, by definition.

 

In other words, your argument - once again - is horseshit, because you - once again - don't know what you're talking about.

 

but ya.. you are mentally ill.

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If your particulary brand of stupidity is what passes for mental health these days...then I'm happy to be mentally ill.

[GG]

why exactly?  Is it not the policy of the gov't to keep prices stable.  Is it not flawed that they do not use energy prices as an indicator of inflation.  The fact that the gov't doesn't include the price of energy keeps them from having to intervene when things such as oil prices get too high.

 

but ya.. you are mentally ill.

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Ahhh. Uhhhm. Check that textbook again. Who is it "they" that you talk about?

 

If you're talking about central bankers using core CPI as the only gauge to base inflation assumptions, you'll never graduate (and if you do, I hope you go nowhere near financial services)

 

Yeah, Bernanke is sitting in his office and thinks, "You know, gas prices are over $3.00. Good thing we don't count that in inflation stats, because we'd really be in a pickle if we did. Maybe I should call a student in Montreal for some advice."

[EC-Bills]

George Bush created instability in the Middle East?  How old is he exactly?

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Just accept the fact he is responsible. It's easier than thinking.

[Adam]

George Bush created instability in the Middle East?  How old is he exactly?

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DOnt ask questions like that- that answer might terrify you

[/dev/null]

Just accept the fact he is responsible. It's easier than thinking.

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Thinking bad. Soundbytes good.

 

DING! Gotta go!

[YellowLinesandArmadillos]

If Bush was proactive, at least threatening a release of the reserve and maybe releasing a few thousand gallons, it might slow down the pricing game.

 

Furthermore, CTW the consolidation in the oil refinery market over the last number of years including under Clinton has created a defacto elimination of competition in the refinery sector and therefore is rife for price manipulation.

 

It is called and oligopoly, but you already know that, so the statement that their is scant evidence of overt price manipulation, maybe, but it doesn't have to be overt. With inelastic demand, a do nothing President unwilling to pull any economic levers, including investigating the industry...there is always b.s. in businesses this size; releasing oil from the reserves; or maybe a couple of other creative ideas to put pressure on the oil companies, i.e, temporarily eliminating oil subsidies for exploration when not needed, might get a little more rational pricing.

 

Supply right now is not the problem, refining is. But your response while wordy, misses the point. Bush is not reacting and from a political and P.R. standpoint it is a mistake. Dems can and will simplistically take him to task for it and rightly so, when the shoe was on the other foot, i.e., Carter, Repubs have done so.

 

So all the convoluted economic arguments aside,

 

1. it is happening, an "oil crisis"

2. it is hurting average Americans in the pockets books, spoiled or not,

3. there is an appearance that it is lining the pockets of Bush buddies,

4. Bush "can't do anything about it"(paraphrased)....it is against his

economic philosophy (my analysis).

5. Politically, this is very dangerous for Republicans.

6. Doesn't take a rocket scientist or a high IQ to figure it out.

[Fan in Chicago]

why exactly?  Is it not the policy of the gov't to keep prices stable.  Is it not flawed that they do not use energy prices as an indicator of inflation.  The fact that the gov't doesn't include the price of energy keeps them from having to intervene when things such as oil prices get too high.

 

but ya.. you are mentally ill.

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Go back to CTM's original post which very well explains why gas prices are so high. The price of gas gets reflected in the rest of the economy so arguably including it in the producer basket is double counting. The government has very little to do in all of this - it is the surging demand for end products worldwide, lack of refining capacity, switch from MTBE to ethanol and to a certain extent the political problems in the Middle East, Africa and Venezuela that combine for where we are at.

[Fan in Chicago]

If Bush was proactive, at least threatening a release of the reserve and maybe releasing a few thousand gallons, it might slow down the pricing game.

 

Furthermore, CTW the consolidation in the oil refinery market over the last number of years including under Clinton has created a defacto elimination of competition in the refinery sector and therefore is rife for price manipulation.

 

It is called and oligopoly, but you already know that, so the statement that their is scant evidence of overt price manipulation, maybe, but it doesn't have to be overt.  With inelastic demand, a do nothing President unwilling to pull any economic levers, including investigating the industry...there is always b.s. in businesses this size; releasing oil from the reserves; or maybe a couple of other creative ideas to put pressure on the oil companies, i.e, temporarily eliminating oil subsidies for exploration when not needed, might get a little more rational pricing. 

 

Supply right now is not the problem, refining is.

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Please understand one major fact - demand is one of the biggest factors driving prices upward. There is no pricing game going on but simply market forces balancing out supply (of end products) with the demand. You got it right - refining is a problem. Their long term return on capital sucks and hence even today they are unwilling to go on an investment splurge. If they indiscriminately invest gobs of money to increase refining capacity by say 20% over the next 2-3 years, prices would plummet and their margins will be down in the dumps again. Even if it will make you happy, remember one thing - they are a business and have every right to stay profitable and give their shareholders a return commensurate with its long term risk.

I am no supporter of Bush overall so my opinion is un-biased but knowledageble. The government can pull no levers to 'right' the situation without causing major imbalances in the market. No release of ANWR or strategic reserves is going to stop the demand juggernaut. The oil demand is around 85 million barrels a day. Release of any small amount is literally a drop in the bucket. And, anyway, what are we to do with this oil if we cannot refine it ?

Oil and as exploration efforts are very high right now. But finding oil is getting increasingly difficult and whatever we find is of lower quality needing more processes to convert into gasoline and diesel. Finally, the phasing out of MTBE and phasing in ethanol is also causing a huge problem as we speak. And look in the mirror - who demanded MTBE be banned ? It is the morons who took little scientific evidence and used it to prove that it causes underground water contamination thus demonizing that chemical out of the gasoline pool. The entire uninformed public is now paying the price for that tragic misuse of evidence to swing public policy. But again, it was not the government but 'environmental' and civic action groups that are to blame.

I don't know yellow, this is way too complex an issue to blame the government for. No policies are going to stop the fundamental issues at work here.

[GG]

I don't know yellow, this is way too complex an issue to blame the government for. No policies are going to stop the fundamental issues at work here.

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No, but it sure sounds good in an election year.

 

BTW, thanks for highlighting the MTBE issue. I wonder how many people noticed how relatively quiet Congress has been about the gas prices, in light of mandated phase out of MTBE in favor of ethanol.

 

One more thing, gasoline at $5/gal, is still cheaper than alternative sources.

 

OK, one last one. If there is government intervention, get used to real gas outages and two block gas lines. High gas prices act as a naural ration to demand. Once you regulate supply, the producers will stop producing in the same quantity, leading to a far worse outcome than $3 gas.

[Taro T]

No, but it sure sounds good in an election year.

 

BTW, thanks for highlighting the MTBE issue.  I wonder how many people noticed how relatively quiet Congress has been about the gas prices, in light of mandated phase out of MTBE in favor of ethanol.

 

One more thing, gasoline at $5/gal, is still cheaper than alternative sources.

 

OK, one last one.  If there is government intervention, get used to real gas outages and two block gas lines.  High gas prices act as a naural ration to demand.  Once you regulate supply, the producers will stop producing in the same quantity, leading to a far worse outcome than $3 gas.

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I still think it is unusual for Congresscritters to not grandstand an issue even though their actions were extremely integral in creating the issue.

[Wacka]

The reason there isn't more refinery capacity isn't the companies deciding not to, it is the people with the NIMBY attitudes. There hasn't been a new refinery built in the US in about 20 years.

[Alaska Darin]

If Bush was proactive, at least threatening a release of the reserve and maybe releasing a few thousand gallons, it might slow down the pricing game.

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HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

 

Did they teach you anything in college?

[Simon]

So are some of y'all saying that even if we had shown the wisdom and restraint to put our resources into stabilizing and strengthening an Afghani government, as opposed to staggering blindly into Iraq and making a bunch of damnedable fools of ourselves, that I would still be paying over $3/gallon for gas and over $200/month for heat?

Cuz that seems like it might be some awful hard-working rationalization there.

Cya

[GG]

So are some of y'all saying that even if we had shown the wisdom and restraint to put our resources into stabilizing and strengthening an Afghani government, as opposed to staggering blindly into Iraq and making a bunch of damnedable fools of ourselves, that I would still be paying over $3/gallon for gas and over $200/month for heat?

Cuz that seems like it might be some awful hard-working rationalization there.

Cya

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In the short term, probably yes. But it's too simplistic of an argument, without looking at the long term consequences of having Saddam, Iranian mullahs and senor Chavez sitting on large stockpiles of oil, Simon. What effect would continued stabilization of Kabul have on world supply, demand & price of oil?

 

 

(ps - I would kill for a $200/mo heating bill)

[Like A Mofo]

Wouldn't know.

 

Since they closes Neeland's (sp?) Dairy there isn't much reason to stop there except for LaPaloma's.

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OMG La Paloma's is awesome!! My father lived in Alden for years and that was really the only place we went to in Alden

 

And yes, of course this is all George Bush's fault, I watch CNN

[Like A Mofo]

Just a random question as I do not claim to be that knowledgeable about this subject:

 

Is it also true the spike in oil use in China and India has greatly affected the stability of gas prices also? Now the demand and supply are the closest they have ever been in recent memory right?

[Fan in Chicago]

The reason there isn't more refinery capacity isn't the companies deciding not to, it is the people with the NIMBY attitudes. There hasn't been a new refinery built in the US in about 20 years.

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And probably will never be though not all for NIMBY reasons. The Arizona Clean Fuels refinery has all but been approved but is not going ahead. The problem is that the long term margins for refiners are uncertain. Historically, margins have swayed widely and for financing a $2.2 billion+ project that won't start seeing revenues for 3 years, with average ROI not very good, is a challenge.

Also, while gasoline production is limited domestically, Europe has excess of it and exports it to the US. Which isn't necessarily a bad thing. If shipping charges get exorbitant, then probably there is a case to be made for less imports but right now, it makes more economic sense to import than risk the capital for an all new refinery.

Finally, existing domestic refineries are not sitting on their hands. There is investment going on (Valero will invest $3.4 billion this year, $3 b next year for all projects) to expand capacities for existing gasoline producing process units. This capacity has started coming on-line but will only kick-in significantly by next year.

[Fan in Chicago]

So are some of y'all saying that even if we had shown the wisdom and restraint to put our resources into stabilizing and strengthening an Afghani government, as opposed to staggering blindly into Iraq and making a bunch of damnedable fools of ourselves, that I would still be paying over $3/gallon for gas and over $200/month for heat?

Cuz that seems like it might be some awful hard-working rationalization there.

Cya

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Sorry, but very close to that number. I think given no political instabilities (ME, Venezuela, Africa), the price of oil would probably have been $60-$65 as compared to $74 today. But all other factors I listed would still be valid and hence end price of gasoline would not be much different.

Home heating gas is another matter. We are right now building infrastructure to import LNG (natural gas in liquid form) and that capacity won't come on till maybe next year. At that point, we will start getting good supply of natural gas (from guess where - Middle East) and see prices stabilizing. Currently, our imports are from Canda and Trinidad & Tobago which is not adequate to make up the domestic production-demand gap. Our natural gas demand has really increased as a country. It is used for heating, cooking and electricity generation. As electricity demand has gone up big time, so has natural gas. Before, a lot of our elec used to come from nuclear & coal plants. But in the 90s, most were built to use natural gas (nuclear = 3 mile island hangover, coal= perceived as dirty) and hence there is more 'competition' for you as a consumer to use the available gas.

[Crap Throwing Monkey]

Sorry, but very close to that number. I think given no political instabilities (ME, Venezuela, Africa), the price of oil would probably have been $60-$65 as compared to $74 today. But all other factors I listed would still be valid and hence end price of gasoline would not be much different.

Home heating gas is another matter. We are right now building infrastructure to import LNG (natural gas in liquid form) and that capacity won't come on till maybe next year. At that point, we will start getting good supply of natural gas (from guess where - Middle East) and see prices stabilizing. Currently, our imports are from Canda and Trinidad & Tobago which is not adequate to make up the domestic production-demand gap. Our natural gas demand has really increased as a country. It is used for heating, cooking and electricity generation. As electricity demand has gone up big time, so has natural gas. Before, a lot of our elec used to come from nuclear & coal plants. But in the 90s, most were built to use natural gas (nuclear = 3 mile island hangover, coal= perceived as dirty) and hence there is more 'competition' for you as a consumer to use the available gas.

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But...but...but...you're wrong, because it's Bush's fault!

 

Serious question: what is the oil company's profit on selling a gallon of gas? Not on refining it, just selling it at the pump? I realize, from a corporate economics standpoint, it's probably a meaningless number...but I'm still curious...