Texas tea, that is, black gold. I've been thinking a lot about it lately. For one, my retirement account is doing well because I've shifted a lot of weight over to commodities as the price of oil has skyrocketed. I've also been thinking about it a lot because there is a lot of groaning on behalf of "the common man" by politicians in Washington.
The groaning coming out of Washington has sounded to me like a lot of people want to have their cake and eat it too. In a nod to environmentalists, Bill Clinton closed the ANWR to oil drilling. (Oil was trading in the $20-30 at the time.) ANWR is still closed and no one in Washington wants to talk about opening it to drilling. Instead, the politicians want to complain about Middle Eastern countries limiting their production, oil companies reaping huge profits, and the common man paying more.
Let's take a look at the economics of it all and logic of it all for a moment. First, demand for oil has risen dramatically. I know most people don't take macro economics in college, so as a primer for those people, I'll point out that when demand increases and supply remains constant, prices increase with demand. The world's production capacity is already near capacity, and is also largely regulated by OPEC. Since existing production is at capacity and demand is increasing there are only two alternatives: increase potential production or deal with rising prices.
There is only one way America can influence increasing potential production, and that is to increase drilling in its own oil fields. America's current oil fields where production can increase are in the Gulf of Mexico and ANWR. Our politicians don't want to risk the environment by drilling in these places (I don't want to harm the environment either) so they won't open them up for drilling. Since they aren't willing to take responsibility for increasing potential supply, they should take responsibility for increasing prices.
And this is why I hate politicians in Washington. They will neither take responsibility for increasing supply nor increasing prices. It is all a happy little political game to them to point across the aisle and blame it on the other side. There is no price the common man can pay that is too high for a politician to reap a political reward. The pols will cry and pretend to "feel our pain" but will walk to their back rooms and plot how to gain from our misfortune.
I can't blame to oil companies. They would love to increase the production of gasoline so they could reap even greater profits. However, they can't build new refineries. It seems there are laws against building new refineries and new ones haven't been built in decades. So, once again, supply of gasoline remains constant, or even reduced because of needs to bring refineries offline for maintenance. Does this sound familiar to the oil story? It should.
The reason we are paying more for a gallon of gasoline is political. Our politicians won't allow drilling in America (something that would pay the American government in oil revenue, by the way), won't allow for increased production of gas and offers no alternatives. They raise obstacles at every turn to reducing what we pay for gas, and pretend to "feel our pain." I am not going to tell anyone how to vote this November, but if you are voting, be sure you know what you are voting for. Know what issues are most important to you and be willing to accept responsibility for your vote. Unlike politicians, you can't have your cake and eat it too.
The groaning coming out of Washington has sounded to me like a lot of people want to have their cake and eat it too. In a nod to environmentalists, Bill Clinton closed the ANWR to oil drilling. (Oil was trading in the $20-30 at the time.) ANWR is still closed and no one in Washington wants to talk about opening it to drilling. Instead, the politicians want to complain about Middle Eastern countries limiting their production, oil companies reaping huge profits, and the common man paying more.
Let's take a look at the economics of it all and logic of it all for a moment. First, demand for oil has risen dramatically. I know most people don't take macro economics in college, so as a primer for those people, I'll point out that when demand increases and supply remains constant, prices increase with demand. The world's production capacity is already near capacity, and is also largely regulated by OPEC. Since existing production is at capacity and demand is increasing there are only two alternatives: increase potential production or deal with rising prices.
There is only one way America can influence increasing potential production, and that is to increase drilling in its own oil fields. America's current oil fields where production can increase are in the Gulf of Mexico and ANWR. Our politicians don't want to risk the environment by drilling in these places (I don't want to harm the environment either) so they won't open them up for drilling. Since they aren't willing to take responsibility for increasing potential supply, they should take responsibility for increasing prices.
And this is why I hate politicians in Washington. They will neither take responsibility for increasing supply nor increasing prices. It is all a happy little political game to them to point across the aisle and blame it on the other side. There is no price the common man can pay that is too high for a politician to reap a political reward. The pols will cry and pretend to "feel our pain" but will walk to their back rooms and plot how to gain from our misfortune.
I can't blame to oil companies. They would love to increase the production of gasoline so they could reap even greater profits. However, they can't build new refineries. It seems there are laws against building new refineries and new ones haven't been built in decades. So, once again, supply of gasoline remains constant, or even reduced because of needs to bring refineries offline for maintenance. Does this sound familiar to the oil story? It should.
The reason we are paying more for a gallon of gasoline is political. Our politicians won't allow drilling in America (something that would pay the American government in oil revenue, by the way), won't allow for increased production of gas and offers no alternatives. They raise obstacles at every turn to reducing what we pay for gas, and pretend to "feel our pain." I am not going to tell anyone how to vote this November, but if you are voting, be sure you know what you are voting for. Know what issues are most important to you and be willing to accept responsibility for your vote. Unlike politicians, you can't have your cake and eat it too.
