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Wednesday, April 02, 2008
 
Oil Gone BANANAS
by Cordeiro

On April Fool's Day the Congress was hard at work serving up televised Fillet Of CEO for the cameras.  The target of the ever outraged legislators was a popular one – namely the CEOs of "Big Oil" – Exxon-Mobil, Chevron, BP America, and ConocoPhillips.

 

As you can probably gather by reading the accounts of the hearing, there are many in Congress and surely more than a few presidential candidates who believe Big Oil is directly responsible for the fact that gas prices have once again risen past the $3 mark in most of the country.  They point to Big Oil's "obscene" profits as evidence of price gouging even though – when compared to other industries – Big Oil's profit margin is roughly similar.

 

In blaming Big Oil for the price of gas these politicians prove their dangerously naïve ignorance about the Laws of Supply and Demand.  There are no exceptions to these economic laws.  Currently the supply of oil is limited by location, amount, and political issues.  The ability to control the supply of oil on the world markets is what gives power to dangerous thugs like Iran's Mahmoud Amadenijad and ignorant tin pot thugs like Venezuela's Hugo Chavez.  Without oil, these two guys would be viewed as the non-sequiturs they truly are.

 

The short term answer to the current gas price crisis (one which I feel the pain of every time I have to fill my two vehicles which have 12 cylinders between them) is two fold.  First is to increase the supply of oil on the markets.  Believe it or not, America can do this without having to go to OPEC and beg the mullahs to open the spigots.  Up until about 20 years ago, the United States led the world in oil production.  For the past decade or so we have been more concerned about the mating habits of the Porcupine Caribou than we have about the price of gas.  Most of the people who proclaim their environmental objections to oil exploration in ANWR couldn't find Alaska on a map, let alone locate ANWR.  Neither would they be able to tell the difference between a Reindeer and a Caribou.  I'm sure they'll hear about the latest discovery of a huge oil field in the Dakotas and Montana and rush to proclaim their concern for Buffalo and Antelope.  It remains to be seen whether the militant environmentalists can tell the difference between those two species.

 

The second area affecting the price of gas is refineries.  Believe it or not, your car doesn't burn crude oil.  The refining process is difficult and government regulation has made it even more onerous.  The term NIMBY (Not In My Backyard) used to dictate where things like refineries could be built.  Well, the NIMBYs started to look beyond their backyards and morphed into BANANAs (Build Absolutely Nothing Anywhere Near Anything).  Simply put, there has not been a refinery built in the nearly 40 years I have walked this planet.  That, dear reader is why your gas prices spike every time there's an refinery accident someplace or any other disruption to the pipeline between the crude oil that comes out of the ground and the refined gas you put in your tank.

 

Much pontificating took place yesterday on alternative sources of energy ranging from cow dung to windmills.  While I don't want to dash any hopes which may have been raised by these platitudes, the fact of the matter is the American economy runs on oil.  No amount of congressional speechifying will change that.

 

As a matter of fact, all the BANANA crowd has been able to do is take the US energy situation to the point of being FUBAR*.

 

Here endeth the lesson.

 

*FUBAR is a technical term defined (in polite company) as "Fouled Up Beyond All Recognition"


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