Through The Static

June 22, 2008

Paying Out the Ass for Gas

Filed under: Economics,Gas,Government,Politics — disciplepete @ 4:31 pm

This is a cool article on Alternet, talks about several factors contributing to the gas price insanity.

Shortly after taking office, George W. Bush undertook a sweeping review of US energy policy aimed at expanding the nation’s supply of vital fuels. The “reality is the nation has got a real problem when it comes to energy,” he declared on March 14, 2001. “We need more sources of energy.”…

…With these trends in mind, many energy experts urged the White House to minimize future reliance on oil… But Dick Cheney, who was overseeing the energy review, would have none of this…After three months of huddling in secret with top executives of leading US energy companies, he released a plan on May 17 that, in effect, called for preserving the existing energy system, with its heavy reliance on oil, coal and natural gas.

Because continued reliance on oil would mean increased reliance on imported petroleum, especially from the Middle East, Bush sought to deflect public concern by calling for drilling in the Arctic National Wildlife Refuge and other protected areas. As a result, most public discourse on the Bush/Cheney plan focused on drilling in ANWR, and no attention was paid to the implications of increased dependence on imported oil — even though oil from ANWR, in the most optimistic scenario, would reduce US need for imports (now about 60 percent) by just 4 percent.

But this produced another dilemma for Bush: increased reliance on imports meant increased vulnerability to disruptions in delivery due to wars and political upheavals. To address this danger, the Administration began planning for stepped-up military involvement in major overseas oil zones, especially the Persian Gulf…  Then came 9/11 and the “war on terror” — giving the White House a perfect opportunity to accelerate the military expansion and to pursue other key objectives.

But the invasion of Iraq — intended to ensure US control of the Gulf and a stable environment for the expanded production and export of its oil — has had exactly the opposite effect. Despite the many billions spent on oil infrastructure protection and the thousands of lives lost, production in Iraq is no higher today than it was before the invasion. Iraq has also become a rigorous training ground for extremists throughout the region, some of whom have now migrated to the oil kingdoms of the lower Gulf and begun attacking the facilities there — generating some of the recent spikes in prices…

Then there is the dilemma posed by Iran…To restrain Tehran’s nuclear ambitions, Washington has imposed economic sanctions on Iran and forced key US allies to abandon plans for developing new oilfields there. As a result Iran, with the world’s second-largest reserves after Saudi Arabia, is producing only about half the oil it could — another reason for the global constriction of supply.

But the Administration’s greatest contribution to the rising oil prices is its steady stream of threats to attack Iran if it does not back down on the nuclear issue. The Iranians have made it plain that they would retaliate by attempting to block the flow of Gulf oil and otherwise cause turmoil in the energy market. Most analysts assume, therefore, that an encounter will produce a global oil shortage and prices well over $200 per barrel. It is not surprising, then, that every threat by Bush/Cheney (or their counterparts in Israel) has triggered a sharp rise in prices. This is where speculators enter the picture. Believing that a US-Iranian clash is at least 50 percent likely, some investors are buying futures in oil at $140, $150 or more per barrel, thinking they’ll make a killing if there’s an attack and prices zoom over $200

…What can be done to reverse this predicament? There is no realistic hope of substantially increasing the supply of oil — drilling in offshore US waters, as favored by President Bush and Senator John McCain, will not reverse the long-term decline in US production — so it is only by reducing demand that fundamental market forces can be addressed. This is best done through a comprehensive program of energy conservation, expanding public transit and accelerating development of energy alternatives.

 

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