Oil and gasoline nonsense

The other day I spoke to my grandfather about the current economic situation. He is very angry about the price of gas, as well as oil, mostly because it makes absolutely no sense at all. He explained to me that on CNBC, he couldn't help but notice the market watch in the corner, where oil was DOWN and gasoline was UP.

This is Arco, which pretty much has the cheapest gas in the Bay Area.



Chevron has always felt the need to be a few cents higher.

What exactly is going on here? Again, it doesn't make much sense. My grandpa likes to blame the oil companies, while I prefer to direct blame at the oil-producing countries who believe that $100 per barrel is a fair price (never mind that they were still building gold-placated palaces all across the Middle East when it was only $25 in 2003). Either way, I think both take the blame.

With the economic downturn and lack of profit, maybe the oil companies have decided to just start raising prices again to see how long they can do it until consumers start complaining again. If anyone else has a theory as to why gas is going up, I would really like to hear it.

This isn't just a local or a national issue. I remember last month when Russia threatened to shut off gas supplies to the Ukraine. Russia accused Ukraine of falling behind in payments, but I think that Vladimir Putin and Dmitry Medvedev wanted to generate a crisis to boost the price of gas and provide some relief to Russia's faltering economy.



But that's that. Gas at $2.09 a gallon is a hell of a lot cheaper than what we were paying over the Summer. As of two weeks ago, gasoline at Arco was the cheapest I had ever seen it since moving to California from Boston. Notice all of this bad economic news is not stopping people from going out and enjoying their lives...one of the local cafes and the Subway was packed with customers all anxious to enjoy the beautiful weather after a couple days of rain.



Yes, I realize that this is turning into more of a multi-pronged ramble instead of a post, but I thought I should show this picture. There's been a lot of panic that California is undergoing a drought, but the recent rain is really beginning to green-up the hills. The view of the mountain is quite breathtaking, isn't it?

Bringing some good news to the forefront

Things haven't been positive lately. If you turn on pretty much any news program today you are probably hearing about how "hopeless" things are. Waking up to news every morning and seeing that oil and gas prices have risen to new highs and the the outlook for the economy is "bleak" could certainly give someone the impression that there are few reasons to be looking up.

However, if you push past the morning news and the words coming from politicians who are seeking to translate these issues into votes, you can see that there are some good things--very good things in fact--that are happening.

Consider this...

From Timesonline:

Iraq dramatically increased the official size of its oil reserves yesterday after new data suggested that they could exceed Saudi Arabia’s and be the largest in the world.

The Iraqi Deputy Prime Minister told The Times that new exploration showed that his country has the world’s largest proven oil reserves, with as much as 350 billion barrels. The figure is triple the country’s present proven reserves and exceeds that of Saudi Arabia’s estimated 264 billion barrels of oil. Barham Salih said that the new estimate had been based on recent geological surveys and seismic data compiled by “reputable, international oil companies . . . This is a serious figure from credible sources.”

But that's not all. As its reserves grow, Iraq has the potential to reap in more than $70 billion in oil revenues in 2008. A profit like this means that the Government of Iraq can put more efforts into reconstruction and security improvements.

“We need to recognise after so many decades of mismanagement of the oil industry that we need to call a spade a spade,” he told a group of delegates at the World Economic Forum in Sharm el-Sheikh. “We can regulate it, but we need private investment to develop Iraq’s production capacities.” He said that Iraq was pumping 2.5 million barrels of oil a day at present, earning about $70 billion (£35.9 billion) in revenue this year.

Iraq may be receding in terms of news coverage. Success stories in Baghdad--like Operation Salaam, do not tarnish the current president's image nearly as much as the "struggling" economy do, which precisely the effect many in today's media would like to see. Americans going to the polls will no doubt be most concerned with the events happening in their immediate and everyday lives, like economic problems. Good news from the other side of the world may not be the first thing on voters minds this November, but nevertheless, to the people of Iraq, this current "oil crisis" is a blessing in disguise.


If Iraqi leaders can find a way to work together and use Iraq's commodities to rebuild their country, perhaps Iraq can become a safe and prosperous country. Perhaps this good news could even help to safeguard attempts by a possible Democratic Administration to pull the plug on American aide to Iraq in the coming months and years. Personally, such a notion allows me to breath a sigh of relief.

I can imagine it now--an Iraq that can govern itself, maintain a prosperous and growing economy, secure its cities, and open up to the world its amazing and beautiful culture. Terrorism will be a thing of the past in the streets of Baghdad, and checkpoints and roadblocks will be replaced by cafes and restaurants frequented by tourists from all across the world. Iraq will no longer be a political issue being debated on Capitol Hill...instead, it will be the subject of curiosity and desire to experience all the country has to offer.

It may seem like a dream, but then again, nothing is impossible, right?

Defying the system of economics

I drove past the gas station the other day and I couldn't help but notice that the price of fuel went up 11 cents OVERNIGHT, bringing the overall cost to $3.56 a gallon. That of course, is just at Arco...at Chevron, the price is $3.65. Those of us in the San Francisco Bay Area have the honor of having some of the highest prices in the US.

I've reached the conclusion that the "law" of supply and demand is no longer relevant. For one thing, fuel supplies have been up, oil production is strong, and the demand for gasoline has been going down...yet the prices continue to rise, completely defying the system of economics. The question is, who's to blame? Some blame the oil companies, others blame the government, whether it be the Republican Administration OR the Democratic Congress (both of whom have done very little). To be honest, I don't really care who's responsible, I just want someone to fix it.

The real issue:

I couldn't help but laugh when I read this. Just recently, another report was released and offered further proof that the hysteria that is global warming is nothing but a crock, just as I have said on this blog many times. It always seems that these global warming predictors are finding ways to contradict themselves, including the back and forth predictions on hurricanes. Instead of running all these adds proclaiming that we need to "solve" global warming, we should be working to find alternative and more efficient energy...without having to make up some fictitious problem starring Al Gore and a bunch of other alarmists. There is no doubt we have an energy problem, but we should be trying to solve it without having another pretense. Talk about the need to cut back on fossil fuel consumption and the need for a new energy source is everywhere, but it seems that its always followed by the warnings and fear tactics about global warming and how it needs to be stopped. In the end, the threat of $4 per gallon gasoline will probably frighten people a lot more than Al Gore getting up on a lift, pointing to a chart, and preaching about how the destruction of humanity is imminent (unless of course, we listen to him).