Friday, September 5, 2008

NW Indiana bloggers on gasoline prices

The last couple weeks I've been keeping an eye on oil markets, for the most part so I can better understand our options. I am calling for oil to drop to $80 by the end of the year. Glad to have some experts set me straight, but my thoughts:

First, Oil has risen in the
last year from $95.00 to close to $150. Why? IMHO it was demand increases coming from the Pacific Rim and China, as well as overall health of the world economy. Sure there was some irrational exuberance that fueled speculation as well. With monies flowing out of bond markets and housing related securities, hedge funds and investors wanted a place to get some kind of return.

The net effect of this huge upswing in oil prices was the obvious increase in gasoline prices to consumers, with gasoline swelling to $4.00. Finally at about $4.00 American consumers got sick of it and began cutting back on consumption. More and more car buyers went to flex fuel autos that allow ethanol blends (85% ethanol and 15% gasoline) with less expensive blends running almost $1.00 less. As 2008 ensued the gasoline prices started to become a political issue with people asking the question: "Are we adequately protecting ourselves as a nation with our dependency on others' oil?"

Consequences though to all decisions, a big move toward ethanol created a run up in prices on corn and grains, causing food prices to jump in early 2008. This isn't good for our economy, causing inflation, and sure isn't good for overseas nations dependent on our supply of low priced meal.

The Democrats have been quietly gleeful that prices have soared, hoping this will cause consumption cut-backs and investment in alternative fuels. My thought is that investment in alternative fuels will happen anyway, and that government ought to keep their hands as far away as possible, they merely tend to waste money and get in the way.

Republicans on the other hand began talking in the early summer about increasing our own oil drilling domestically, either on ANWR or offshore or both. When Nancy Pelosi and House Democrats decided to shut down Congress and go home for five week vacations, Republicans led by Indiana's Mike Pence decided otherwise and began staging the #dontgo home revolt, literally staying on the House floor in the dark demanding that Speaker Pelosi let Congress come back and vote for more oil production.

Now this week we get to meet Governor Sarah Palin, from Alaska, who will accompany Senator John McCain for the next 60 days in an effort to regain the White House. She, more than all the other leaders running for office, appears to have more experience with this issue. She has negotiated with oil companies, she has forced their hands, and she knows the games they play. She also is a huge proponent of drilling and investing in innovative energy resources.

So, I come full circle, what is best for our long term future?

  • An immediate release of ANWR and off-shore drilling properties with large rents or profit sharing agreements to increase supply. Though this will take 2-3 years, even the hint of legitimate supply increases in the future will push oil back to $80.00
  • Review all current land leases and make sure that oil companies willing to explore are maximizing these leases. If not, while maintaining the legality of the contracts, look to move these leases to oil companies willing to explore.
  • Invest in energy innovation, but don't meddle with government oversight
  • Pass a Shovel Ready Nuclear Power Act, that would target 50 sites for nuclear power and fast track the government approvals that currently make it impossible to develop
  • Tell OPEC to back off, I'm getting a little sick of their monopolistic games. Let the free market rule. It's time to bust up this little group of anti-freemarket countries.
  • Eliminate farm subsidies, at least this is a positive part of food price increases from ethanol, let's get rid of one of our blackeyes in international negotitations on free trade.
Does anyone have the ability to lead like this? Disagree with me, great enter the discourse.

1 comment:

Jonathan Thomas said...

This is where I pretty much break with my Liberal Brethren. I agree with all your proposals, I just want protections built in so the Oil Companies don't run roughshod over the environment and continue to gouge us at the pump.

I'm all for nuclear power. Technology has changed significantly over the last 30 years and it's much safer. France generates all their electricity from Nuclear and they don't have problems. Britain is pushing more nuclear development as well.

I'd also push for requiring new homes to have solar/wind systems and grey water systems built in. Solar and Wind generated on a personal scale is not enough to run your house completely, but it's enough to cut down on emissions and electrical costs. If mass adoption was initiated, prices would come down and it would be cheap to do this.

It would create a 'distributed power-grid' where everyone was generating electricity and contributing to the grid, thus reducing the need for power plant capacity.