aquapub
DP Veteran
- Joined
- Apr 16, 2005
- Messages
- 7,317
- Reaction score
- 344
- Location
- America (A.K.A., a red state)
- Gender
- Male
- Political Leaning
- Conservative
Contrary to what some unthinking, class-warfare conspiracy theorists on the left might speculate, there are real answers to the question of why gas prices are so high (and with Hurricane Katrina, why they are only going higher).
For those who do not understand the futures market, it is where companies who rely heavily on fuel prices can buy a contract to get their petrol at the fixed, current rate for so much time. When companies get worried about instability with oil distribution, they buy up futures, which is one of the things that drive up gas prices.
According to the Congressional Research Service (a branch of the Library of Congress which did the research from which the landmark 2005 energy bill was passed) these are the substantive issues behind the hikes:
-Decisions by the Organization of Petroleum Exporting Countries (OPEC)
cartel, after having reduced production quotas in 2002, to raise them only
slowly and reluctantly;
-Unexpected demand growth in China;
-Disruptions in oil production in major exporters, including Venezuela, Iraq
and Nigeria;
-Decline in the value of the U.S. dollar, the currency in which oil is traded in
the world market, compared to other major currencies, particularly the Euro.
-Uncertainty and fear of major disruptions in Iraq and Saudi Arabia, in the
context of the war in Iraq and the threat of terrorism.
-U.S. demand for gasoline has increased as economic growth has resumed.
-Domestic refining capacity has declined, both in number of refineries —
from 324 in 1981 to 153 in 2002 — and in total capacity — from 18.62
million barrels per day (mbd) in 1981 to 16.78 mbd in 2002.
-The structure of the refining industry has changed. In 1981 most refining
capacity was owned and operated by integrated oil companies that supplied their own crude oil, refined it, distributed it, and marketed the products.
Refining was only one part of the company’s profit-making operation, and
frequently was not an important profit maker. Now the refining industry is
characterized more by independently owned, nonintegrated firms. When
refineries are the sole source of revenue to the owners, it becomes more
important that the operation be profitable, leading to pressure to raise prices.
-The refining industry has been operating with lower inventories of both
crude oil and gasoline, as a means of cutting costs. The side effect has been
reduced ability to meet unanticipated demand, leading to greater price
pressure.
-Gasoline markets are fragmented regionally because air quality requirements
have led to numerous different formulations to meet varying standards. In
meeting demand for these regional formulations, called “boutique fuels,”
refiners lose flexibility to meet local variations in demand elsewhere,
leading to increased price pressure.
-With domestic refining capacity constraints, a greater proportion of gasoline
demand is being met with imported products. Foreign refiners typically
manufacture products designed to sell in the international market, not the
special product “boutique fuels” demanded by a significant share of the U.S.
market.
-Refiners have had increased costs in the past year to comply with new
requirements to limit sulfur content and to switch from the oxygenate
additive MTBE to ethanol.
This is what is actually going on. Let liberals swim in their baseless invective against Bush and his mythical, "oil buddy," Disney villain plot to plunder the world all they want. These are the facts.
For those who do not understand the futures market, it is where companies who rely heavily on fuel prices can buy a contract to get their petrol at the fixed, current rate for so much time. When companies get worried about instability with oil distribution, they buy up futures, which is one of the things that drive up gas prices.
According to the Congressional Research Service (a branch of the Library of Congress which did the research from which the landmark 2005 energy bill was passed) these are the substantive issues behind the hikes:
-Decisions by the Organization of Petroleum Exporting Countries (OPEC)
cartel, after having reduced production quotas in 2002, to raise them only
slowly and reluctantly;
-Unexpected demand growth in China;
-Disruptions in oil production in major exporters, including Venezuela, Iraq
and Nigeria;
-Decline in the value of the U.S. dollar, the currency in which oil is traded in
the world market, compared to other major currencies, particularly the Euro.
-Uncertainty and fear of major disruptions in Iraq and Saudi Arabia, in the
context of the war in Iraq and the threat of terrorism.
-U.S. demand for gasoline has increased as economic growth has resumed.
-Domestic refining capacity has declined, both in number of refineries —
from 324 in 1981 to 153 in 2002 — and in total capacity — from 18.62
million barrels per day (mbd) in 1981 to 16.78 mbd in 2002.
-The structure of the refining industry has changed. In 1981 most refining
capacity was owned and operated by integrated oil companies that supplied their own crude oil, refined it, distributed it, and marketed the products.
Refining was only one part of the company’s profit-making operation, and
frequently was not an important profit maker. Now the refining industry is
characterized more by independently owned, nonintegrated firms. When
refineries are the sole source of revenue to the owners, it becomes more
important that the operation be profitable, leading to pressure to raise prices.
-The refining industry has been operating with lower inventories of both
crude oil and gasoline, as a means of cutting costs. The side effect has been
reduced ability to meet unanticipated demand, leading to greater price
pressure.
-Gasoline markets are fragmented regionally because air quality requirements
have led to numerous different formulations to meet varying standards. In
meeting demand for these regional formulations, called “boutique fuels,”
refiners lose flexibility to meet local variations in demand elsewhere,
leading to increased price pressure.
-With domestic refining capacity constraints, a greater proportion of gasoline
demand is being met with imported products. Foreign refiners typically
manufacture products designed to sell in the international market, not the
special product “boutique fuels” demanded by a significant share of the U.S.
market.
-Refiners have had increased costs in the past year to comply with new
requirements to limit sulfur content and to switch from the oxygenate
additive MTBE to ethanol.
This is what is actually going on. Let liberals swim in their baseless invective against Bush and his mythical, "oil buddy," Disney villain plot to plunder the world all they want. These are the facts.
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