May 01, 2006
Oil Prices : War, Deficits and all the stupid Republicans
Sunday morning, FOX News Sunday had new White House CoS Josh Bolton on the program and Wallace Jr. asked him specifically about oil prices. The set up was the SPR and cutting additional deposits to it. Here's the transcript:
WALLACE: But halting deposits to the reserve would add 10 million barrels of oil to the U.S. supply. That's half of what Americans consume in a single day. I mean, isn't that basically, in terms of dealing with this problem, meaningless?BOLTEN: Oh, it's a modest step, and I think when the president announced it, he said it was a small step. What we've got to realize here, Chris, is that this is a very large problem. It's built up over many years — decades, in fact. It's not going to be solved in the short run by some silver bullet.
There are a lot of policies that need to be put in place over the long run to wean ourselves from our dependence on foreign oil. That's the only thing that's going to make a difference in the long run.
Oh sure, it's built up over decades. Right. Here's the real break down
1) We have fewer refineries mostly because of oil industry mergers. Fewer refineries means a choke point for production of gasoline and diesel and little spare capacity to handle spikes in demand. Or, I don't know, having more than 10% of the refining capacity shut in because of a natural disaster. Like (and I'm just gonna throw this out) A HURRICANE RIPPING THROUGH LOUISIANA AND ANOTHER ONE THROUGH SOUTH EASTERN TEXAS. This is not exclusively the fault of the Bush Admin, Clinton deserves a little blame as well. Still, Bush and Congressional Republicans have done NOTHING to alleviate the problem other than give massive tax breaks to already wildly profitable oil companies and relaxing environmental restrictions that actually weren't all that restrictive in the first place.
2) Then there's the deficit and that is EXCLUSIVELY the fault of the Bush Administration and Congressional Republicans. The deficit has weakened the dollar substantially. As Democratic Congressional candidate Robert Ricketts outlined in this post on BOR, the deficit and the resulting weak dollar have added roughly $22/bbl. That's $1.00 in the price of unleaded at the pump.
3) But let's not forget Iraq and the Administration's rather bellicose 'diplomacy' with Iran. $5-10/bbl in war premium/'global instability' (per Credit Suisse) brings another $.20 - $.45 increase in the price of unleaded at retail.
Norming everything, without quantifying the effects of tight refining capacity, oil should be at $40-45/bbl with unleaded at $1.35-$1.60 per gallon at the pump. Why so much higher than the late 90's? Global demand is up. However, current prices are what we are paying in the real world for the failed policies of the Republicans.
We need a massive project in terms of R&D and deployment to alleviate the problems and put us on a cleaner, more stable energy footing. Anything else is mantaining the unsustainable status quo.
Posted by mcblogger at May 1, 2006 07:19 AM
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