Sunday, May 18, 2008

Politics and Oil

Issues in the news recently is oil. Who would have guessed that? Our elected politicians have voted to stop filling the nations Emergency Oil reserve. The official reason is to take pressure off demand. Each day about 70,000 barrels go into this reserve. This is about 1% of what we consume daily. Does/will this have any affect, no?

What I have been doing is tracking unleaded gas futures versus the pump price. When I see a divergence I buy and stock up on gas. My problem is I have limited storage capacity, but it is enough to span three weeks without having to buy. In this way I have been able to keep from having to pay more than $3.51 a gallon. Hopefully, the price will fall before it goes higher.

The word on the street is $150 a barrel oil. Is it better to buy oil at $125 or $150 a barrel? If it is better at $125 then why stop filling the reserve? The only reason would be that they predict oil to drop below current levels. Is this wishful thanking?

Our problem is not only increased world demand, but devaluation of the Dollar and a no drilling position, but we have max’d out our refining capacity. Even if we did have more oil, we cannot refine it.

We have candidates for President who would tax the windfall profits of oil companies, but do nothing to increase supply. On top of this they provide tax credits to perpetuate the same type of fuel to use in cars. It is time politicians stop subsidizing energy alternatives and let the private market do what they are best at doing, innovation. With the price of oil at over $100 a barrel, it will spur research and development into other types of energy. The reason is simple, there is a huge potential for profit with oil at over $100 a barrel.


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