Where do you put the blame for the ever-rising gas costs?
Well, we went to our informative computer and it spilled out possible reasons from many online ” notably ABC News and CNNMoney.com.
The crunch at the pump can be shared by OPEC, oil barons, soaring demand, limited supply and investors who have been involved in doubling gas prices over the last four years. Take your pick.
Now, President Bush is pushing Congress to remove bans on drilling off the coasts and in Alaska. Simple? Not really. Environmentalists would hop off their bicycles to protest.
Antiquated refineries and roadblocks to build bigger and better new ones present overwhelming challenges. When landowners are approached, they say, “Build it somewhere else.” No one wants a new refinery in his backyard. There haven’t been any constructed since the 1970s.
Nine years ago, gasoline was purring along at 90 cents a gallon. How’d it get from there to here ($4-plus)?
One problem is what’s in between crude oil and the consumer: the refineries ” 149 of them across the country ” converting oil into gasoline. By 2007 a fifth of them had suffered serious breakdowns, everything from fires to equipment failures to, in one case, a squirrel that sabotaged a refinery control room.
“Our demand has skyrocketed, but our ability to supply that demand has stagnated,” said Stephen Schork, publisher of the industry newsletter The Schork Report.
“We simply can’t keep up with demand growth,” said Lynn Westfall, a senior vice president at Tesoro. “Even one refining incident is felt in the marketplace.”
Consumer advocate Mark Cooper says refinery executives should have been prepared.
“They are guilty of mismanaging this business,” said Cooper, director of research at the Consumer Federation of America. “Predicting demand? Hey, that’s their job, and it’s pretty constant. Having spare capacity so you don’t run out? That’s their job.”
“Before you can even get into the units to figure out what’s going on, they have to spend several days cooling down, depressurizing, but once you get inside there may be some damage that requires long lead time equipment,” Tesoro’s Westfall said.
Why we are finding less oil and using more of it is partly a result of low prices during the 1990s. Those low prices ” partly caused by low gas taxes in the U.S. compared with those in other developed nations ” both encouraged rapid consumption domestically and under-investment in new production by the world’s oil companies.
“Iran’s Mahmoud Ahmadinejad, Russia’s Vladimir Putin and Venezuela’s Hugo Chavez are seeking a bigger profit share from foreign oil firms or threatening to cut off oil supplies if attacked,” Schork said.
Some pin the blame on the Bush administration’s provocation of Iran and Venezuela, coupled with a botched occupation of oil-exporting Iraq, contributing to geopolitical tension.
Analysts say OPEC, which holds two-thirds of the world’s oil reserves, is comfortable with its bill of $130 per barrel and has little incentive to increase production.
Strong demand, tight supplies and a volatile marketplace have attracted the interest of investors, the last main contributor to high prices.
“The speculator has seized upon this opportunity,” Schork said. “They have recognized there is something fundamentally flawed in this market.”
Money flowing into oil ” and commodities in general ” has been especially sharp over the last six months as investors look for good returns amid falling stock prices and an inflation hedge against a falling dollar.
No hard-fast solutions to this sticky situation.