oil

A-maze-ing...

...um, not so much. Earlier posts about our lords and masters are here, here, here, here, and here.

I guess Paul Krugman never taught Econ 101

To be a modern Republican in good standing, you have to believe — or pretend to believe — in two miracle cures for whatever ails the economy: more tax cuts for the rich and more drilling for oil...

Here at Redneck Mansion we've been a little busy but this column at Investors.com was just too juicy to ignore:

The economist at the fishwrap newspaper of record defends the president's energy policy of Solyndra, Chevy Volts and algae while dismissing the oil boom on private lands as a small-town hiccup with no impact on price.
 

New York Times columnist and Keynesian economist Paul Krugman asks in a recent column why gas prices are rising if we are in the middle of a domestic oil boom. Doesn't the "drill, baby, drill" crowd claim, he argues, that prices will drop "if only we would stop protecting the environment and let energy companies do whatever they want"?...

...Keynes did not repeal the law of supply and demand, Mr. Krugman, and increased worldwide demand from places like China has helped keep prices up...

...With a straight face, Krugman says "the oil and gas industry doesn't create many jobs," and he dismisses the Bakken shale formation's contribution to North Dakota's 3.2% unemployment rate as "only possible because the whole state has fewer residents than Albany."

Well, the unemployment rate in Albany County in New York state was more than double North Dakota's in December 2011 at 6.7% and at 8.2% for the entire state. Perhaps New York could benefit from an equally vigorous development of the portion of the Marcellus Shale formation...
 
...Krugman opines that "the environmental costs of fracking have been underplayed and ignored."...
 
...Sen. James Inhofe, R-Okla., who was recently called an "oil whore" by that champion of civil discourse, actor and part-time environmentalist Alec Baldwin, notes that since fracking was first commercially applied in Oklahoma in 1949, there has not been a single documented case of contaminated groundwater in more than six decades...
                                                    .
 

Whiskey Tango Foxtrot

Gas prices are rising in the US, in many places more than they are here. So naturally one of our fearless leaders (we know he is due to his valorous service in Vietnam) suggested launching a witch hunt in the form of a grand jury:

Sen. Richard Blumenthal (D-Conn.) on Sunday called for an aggressive federal probe — including a possible grand jury — into whether rising gasoline prices stem from illegal manipulation of energy markets.

That came on the heels of this:

President Obama and the Justice Department last week announced a multi-agency task force to explore whether there is price manipulation or fraud afoot and the role of speculative trading in energy futures....

Now us rubes here at Redneck Mansion are not, as they say in Ireland, eejits.  We have an understanding of basic economics—you know, like the law of supply and demand, which to our knowledge has not been repealed.  We also know that there's a lot of truth in Occam's Razor, the notion that the simplest explanation of a phenomenon is usually the best.  So, it seems to us unlikely that there's some complicated conspiracy comprised of "illegal manipulation of energy markets," "fraud," and "speculative trading in energy futures" that is necessary to explain the increase in gas prices.  Much more likely that it has something to do with supply and/or demand combined with local, state, and DC policies.

Obviously, there's a lot of uproar currently in the Middle East and North Africa, and even the suspicion that there might be disruptions to the flow of oil from that part of the world tends to drive up prices. Add to that the Luddites of the environmental movement and we're talking real supply problems.

You may remember the stories from 2008 (the last time we saw rapidly rising gas prices) about drilling in ANWR:

Surprise, surprise...today at Fox News (via Weasel Zippers):

Shell Oil Company has announced it must scrap efforts to drill for oil this summer in the Arctic Ocean off the northern coast of Alaska. The decision comes following a ruling by the EPA’s Environmental Appeals Board to withhold critical air permits. The move has angered some in Congress and triggered a flurry of legislation aimed at stripping the EPA of its oil drilling oversight.

Shell has spent five years and nearly $4 billion dollars on plans to explore for oil in the Beaufort and Chukchi Seas. The leases alone cost $2.2 billion....

[....] At stake is an estimated 27 billion barrels of oil. That’s how much the U. S. Geological Survey believes is in the U.S. portion of the Arctic Ocean. For perspective, that represents two and a half times more oil than has flowed down the Trans Alaska pipeline throughout its 30-year history. That pipeline is getting dangerously low on oil. At 660,000 barrels a day, it’s carrying only one-third its capacity.

Production on the North Slope of Alaska is declining at a rate of about 7 percent a year. If the volume gets much lower, pipeline officials say they will have to shut it down. Alaska officials are blasting the Environmental Protection Agency...

So what else is making the price that you pay at the pump higher? Taxes:

So keep this in mind, the next time your eyes bug out at the price on the pump: a huge portion of the money you’re shelling out is due to government actions that distort supply-and-demand — and the punitive levels of taxation in many states.

The idea of "gas pump activism" is appealing for purposes of both venting and communicating with other motorists, but keep in mind that the illusionists (or "dipsticks" to use one songwriter's oil-saturated metaphor) in DC distract us with one hand to keep us from paying attention to what's going on with the other.

thanks to Tom and Sister Toldjah

Subscribe to oil