This will come as no surprise to those of you reading this, unless you're three years old and playing around with mommy and/or daddy's computer, in which case you need to a) stop leaning on the keyboard because it's expensive, b) get down from the chair before it rolls back and you bang your head on something, and c) move out smartly because you're about to get caught doing something you know you're not supposed to.
Back to the big people reading this: we are smack in the middle of an Energy Crisis, but most of us don't really understand why. We think we do, because we've been conditioned over the years to respond to rhetoric, but that needs to change.
As I mentioned in a previous diary and BJ reminded me of a little while ago, we are on the cusp of (global) Peak Oil. It doesn't mean we're about to run out, it just means getting the oil out of the ground is going to be increasingly harder and more expensive from here on out. Combining that with emerging markets in developing countries, and you will have a supply/demand issue that will play a major role in the value of each barrel of oil.
But what we're talking about here is a slowly graduating issue, and has very little to do with why we're paying $3.85 for a gallon of gas. There are some people who want us to believe our supply is in jeopardy, but that's just not the case. One of these people is our President:
I want to talk about the supply side. We have got to increase domestic production of oil. If you want to take the price -- (applause) -- if you want to take the pressure off price, we ought to be sending a signal that the United States is going to find oil right here in our own hemisphere. And at the same time, we ought to be working on alternative sources. So I'll spend a little time on ethanol and biodiesel and hydrogen power. But I do want to concentrate on oil.
Congress has got an opportunity to send a signal to our own citizens in the world that we will, in environmentally friendly ways, explore vast opportunities to find -- bring more oil to the market right here in the United States. I'd rather be buying our oil from U.S. producers than sending our money overseas. (Applause.)
Here's where the rhetoric comes in. See, that last sentence there is meant to bolster the incorrect belief most Americans have that increasing our own production will increase our own supply by an equal amount. In other words, every new barrel we suck out of the ground will be refined and sent straight to an American gas station. This supposition is wrong, and it could be a major factor behind the 2/3 of Americans who believe we should drill in ANWR and off our Outer Continental Shelf.
In reality, that extra production would be added to the global market, enhancing it by (maybe) 1.5% or so. Yes, we are a "net importer" of crude oil, but we also export oil. That's another little detail that most Americans aren't aware of, but should be. As a matter of fact, our exports of oil have shot through the roof since last year:
While the U.S. oil industry wants access to more federal lands to help reduce reliance on foreign suppliers, American-based companies are shipping record amounts of gasoline and diesel fuel to other countries.
A record 1.6 million barrels a day in U.S. refined petroleum products were exported during the first four months of this year, up 33 percent from 1.2 million barrels a day over the same period in 2007. Shipments this February topped 1.8 million barrels a day for the first time during any month, according to final numbers from the Energy Department.
While the administration argues that more supplies would help to bring down prices, U.S exports of diesel fuel in April averaged 387,000 barrels per day, up almost seven-fold from 59,000 barrels a day in the same month a year earlier.
U.S. gasoline shipments in April averaged 202,000 barrels a day, the most for the month since 1945, when America was sending fuel overseas to ease supply shortages in other countries during World War II. Gasoline exports in April 2007 were almost half at 116,000 barrels per day.
That's right, folks. They want to muck up ANWR to squeeze about 876,000 extra barrels per day, while we continue to export twice that much. And the next time someone claims we need to wean ourselves off of foreign oil, you can explain why half of this:
The exports were also equal to half the 3.2 million barrels of gasoline, diesel fuel and other petroleum products the United States imported each day over the 4-month period.
And frankly, considering we are (and will continue to be) a net importer of crude oil, this statement from the White House makes absolutely no sense:
"Forbidding exports of U.S. petroleum reduces the incentive for domestic suppliers to produce, and could potentially lead to higher prices if U.S. production or refining declined," said White House spokesman Scott Stanzel.
Back to the (global) supply side. The major oil producers recently met in Jeddah to talk about price issues, and supply was merely a footnote:
Participants agreed that restoring oil market stability requires concerted moves to implement a broad set of policy measures, including increased oil investment, strengthened pass-through of price signals to end-users, and improved oil market data.
The Saudi Arabian government announced at the meeting that the country stood ready to increase oil production beyond the 0.5 million barrels a day (mbd) rise already planned for July for the remainder of the year. Its oil production capacity will reach 12.5 mbd by end-2009, with ready plans for further expansion to 15 mbd if warranted by demand developments. In addition, Saudi Arabia will provide a total of $1.5 billion to help the poorest countries cope with higher oil and food prices.
New policy agenda
The broad-based policy agenda developed at the meeting—held at the invitation of the Saudi Arabian government—includes measures to
• boost oil investment
• improve transparency and regulation of oil financial markets
• enhance oil market data
• strengthen cooperation among international and national oil companies and improve access to technology
• ensure pass-through of price signals to end-users, and
• step up development assistance to poor countries most affected by high prices.
If you'll note, the bulk of these recommendations are market-related, to counteract the (purposely) volatile nature of speculation. The non-end-user investors thrive on uncertainty and discord, which is how they've been able to ratchet up the price of oil for the last few years. OPEC can't stop the speculators, but Congress can and should reign them back again.
The real solution to the Peak Oil situation is not bringing prices back down, but we must do that for both economic and humanitarian reasons. The real solution is to reduce our need/usage of fossil fuels by using our most precious resource: innovation. Vehicle efficiency measures and public transportation both hold vast potentialities for reducing our demand, and they are bigger pieces of the puzzle than many in the energy industry want us to believe.
We can easily stay two steps ahead of Peak Oil and Global Climate Change, but we have to avoid the pitfalls of rhetoric and shortsightedness along the way.