June 11, 2008

OPEC ain't the problem

OK, here's the deal. There are a bunch of people (D and R) clamoring for an increase in supply from OPEC. Let me let you uneducated folks in on a little secret... they can't just increase the amount pumped.

Of course there is additional capacity. The Saudi's could, with some difficulty, increase production to 12 mn bbl/per day, possibly. However, that's going to do three things...

1) Damage the field for the long term, sacrificing future production
2) Have minimal impact on supply since demand will automatically rise
3) DO NOTHING FOR THE LONG TERM PRICE OF ENERGY

The additional capacity can't come from Mexico, either. Venezuela has some excess capacity, as does Nigeria and Iraq. ALL of these producers have internal issues preventing this from happening. The reality is that we're going to have to fix this ourselves. And we can't do it with coal.

Wait a second! Didn't we already talk about this? There IS a way to do it and moderate carbon in the atmosphere. The cool thing is that none of this is new... all we need is for Congress to act. I even know how to pay for it.

Finally, gas prices will come down as refiners continue to add cokers to their plants and expand heavy crude (both sweet and sour) capacity. This will allow them to process cheaper crudes into gasoline, lowering the price of the end product. It's a large reason why gas isn't at $5.00/gal even now as some facilities, most notably Valero refineries picked up from El Paso, are already set up to process heavy sour.

This is all short term stuff. The long term reality is that at current prices, biofuels are far more competitive. And a lot smarter.

For some real laughs, check out this over at the Statesman, specifically the comments. Pretty clear that Mass isn't a McBlogger reader.


Posted by mcblogger at June 11, 2008 09:33 AM

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