Disclaimer: This post is about energy and the oil industry, so I should note that I used to work for an oil company.
It’s easy to make the connection between high gasoline prices at the pump and the actions of oil companies. After all, their names are up in lights wherever we buy our gas. Politicians know this, and pander to it.
But the oil market is breathtaking in its complexity, and prices we pay are therefore the product of thousands of factors that no one person can possibly understand all at once; if it were possible for anyone to understand how the prices come about, predicting them would also be possible. Clearly, that’s not the case.
But there are some aspects of the situation that are no-brainers. One is that the President of the U.S. is not responsible for gas prices being high or low. Just because President Obama favors restricting oil drilling in U.S. territory, that doesn’t translate into higher prices today; it takes years for land to be explored and developed for hydrocarbon production, so even if he removed all restrictions this minute, positive effects would probably not be be felt until two presidential terms from now.
Because U.S. law restricts exploration and production of domestic hydrocarbon resources, we face higher prices at the pump today, so it’s the fault of politicians of the past. But fixing the problem now would not pay off for years, so politicians of today – while not necessarily responsible for the current situation – have little incentive to make the necessary changes for our future prosperity.
But what about the oil companies? The situation has little to do with them. They produce as much oil as they can profitably sell, and downstream companies (refiners and sellers of the fuels we use on a daily basis) do much the same when it comes to the products we make from oil. Obama and other anti-oil politicians like to blame the oil companies and cast them as the villains, as in this excerpt from an AP story:
On Saturday, Obama insisted in his radio and Internet address that the best answer is a long-term drive to develop alternatives to fossil fuel. He also renewed calls to end $4 billion in subsidies for oil and gas companies. “Instead of subsidizing yesterday’s energy sources,” he said, “we need to invest in tomorrow’s.”
So apparently, high oil prices, in the President’s mind, means we need to increase oil companies’ costs of doing business. How does he think this increase in costs will not be passed along to us, the consumers? He’s actually advocating that we all pay even HIGHER prices at the pump in order for HIS preferred energy sources to receive subsidies. And note that in the same sentence, he calls taxpayer money to oil companies “subsidies,” while taxpayer money to his pals in the solar and wind industry is something we “invest” in.
The hypocrisy is amazing, especially when one considers that the oil industry represents energy that is proven, reliable, and affordable, while “renewables” are untested, unreliable, and expensive.
Because of the lag in energy industry developments, tracing the line of blame for high gas prices is futile and counter-productive. However, we know what will help bring prices down in the future; we simply need to convince our lawmakers that we can indeed look a few years down the road and invest in lower gas prices by taking necessary steps today.