A Big Oily Mess

I could do a coherent, engineered essay on gas prices, but it'll be simpler just to put a bunch of bulleted items up to help everybody understand why the gas situation is so complicated.

Oil is traded on U.S. currency. What's this mean? That it's bought and sold on a dollar rate, as opposed to pounds sterling, or euros, or rocks. When the dollar declines in value, as it has declined in value over the last year and a half (due largely to deficit spending), it takes more dollars to buy a barrel of oil, and that translates into higher prices at the pump.

Additional elements to the economic situation include artificial currency overvaluation by the European Union. The European economy is absolutely, positively depressed. Countries like Greece are guilty of falsifying their economic records in order to qualify for European Union membership, many European nations (England being the notable exception) have double digit unemployment and shrinking economies, and yet the Euro is supposed to be higher than the dollar? Nonsense, but the Euro is still artificially inflated to twenty-two cents more than the dollar. China is also guilty of artificial currency manipulation of both their own currency and the dollar, though as you'll see from that link, they've taken at least one step in the last six weeks to discontinue some of these practices.

Contrary to popular belief, sport utility vehicles are not part of the problem. Automobiles account for only about forty percent of American fuel consumption, and we're not really driving more. Translation: the increase in fuel prices doesn't have anything to do with increased demand from Americans.

Fuel prices would be a bit lower, and more stable, if America had a greater capacity for refining crude oil. Why don't we have this capacity? Because American laws and regulations are so hostile to the construction of new oil refineries that there haven't been any new refineries constructed since the Carter Administration. Thanks, Jimmy!

Because we don't have enough of our own oil refining capacity, we're reliant on oil refineries everywhere else. These refineries are in places like the Middle East and Nigeria. We all know that the Middle East is unstable, and that places like oil refineries and pipelines get attacked because they're the manifestation of American hegemony and imperialism, or some other such propaganda from al Qaeda/MoveOn.org. Nigeria is also experiencing a protracted civil war (In Africa? Shocking!). When a refinery can't run at full capacity, for any reason, they produce less refined petroleum, and prices go up.

Last year, American oil importation/processing in Florida, the Caribbean, and the Gulf of Mexico was disrupted by a series of four hurricanes, leading to a jump in prices. This week, Hurricane Katrina disrupted importation/processing in Florida, the Caribbean, and the Gulf of Mexico, which will likely result in at least a temporary jump in prices. How long this increase will last is anybody's guess, and it's dependent upon how long the oil infrastructure takes to get back up to full capacity.

If there isn't an increased American demand on oil, then where's the increased demand coming from? China and India. China in particular is industrializing like it's going out of style, and just like every American factory that makes plastic or refined metal or whatever, the process and the manufactured items require lubricating oil and fuel. Where does it come from? Oil. If the oil is in demand by the Chinese and the Indians, what happens to the price of petroleum on the international market? Say it with me now: "It goes up."

In addition, you've got the thugs at OPEC seizing an opportunity to make more money. We've got allies, and OPEC knows that it's in their best interest not to jerk us around too much; but at the same time, they're like your local phone company, or cable company, or garbage company. They know that you need their oil as much as they need your money, and since the enforcers of international law (the United Nations, International Criminal Court, World Bank, International Monetary Fund, et cetera) essentially enforce their laws through the carrot, and not the stick, they require member submission and cooperation to get anything done. Translation? We've got OPEC by the nuts, but they've got us by the nuts to the same degree.

Bottom line? There are what Southern economic experts classify as a "shit ton" of reasons why oil prices have increased, and very few of them have much to do with what Americans or the American government are doing. Very little has changed here; most of the factors are external ones that we can only observe or anticipate, and then be reactive or proactive to.

Okay, so what aren't the solutions?

Artificially fixing the price of oil, like the state of Hawaii is doing, is a bad move. This prevents people from adjusting their lives, the demand for fuel actually increases relative to the supply, and shortages ensue. This leads to gas lines like we saw in the late 1970's under the Carter Administration.

Reducing the national speed limit, like the Carter Administration did, is also not a solution. As I said a couple of weeks ago about the "energy bill" that increased the length of daylight saving time, this type of adjustment to this type of issue, while not bad in theory, doesn't do anything to actually solve the problem. It's completely reactive, and not at all proactive. It doesn't help in the long run.

I'll discuss alternative sources of energy in the next section. The alternative energy sources that are not the solution, at least not yet, are some of the sources that environmentalists have an absolute chubby for. Hydrogen is not the answer, as it requires more energy to create than it produces, and most of that energy comes from, where else, fossil fuels. Solar power isn't the solution, as it isn't yet efficient enough to be used en masse to provide energy (though in some areas it can be a cost-saving way to provide heat for homes). Wind power, which kills birds and doesn't provide a drastic savings in energy costs, is also not the solution.

Releasing oil from the strategic oil reserve, as Senator Kerry suggested during the debate in order to make President Bush look bad, is absolutely not the solution. Not only is that fuel eremarked for military use in the case of an absolute catastrophe (read: our last line of defense), the release of that fuel would reduce the price of gas at the pump by about one cent. President Clinton did it in the 1990's, and it took quite a while to rebuild the supply, which actually increases the price of gas in the long run since there's one more massive mouth sucking at the teat of a limited resource. Translation: almost negligible short term gain, long term increase in overall demand.

And, obviously, doing nothing wouldn't help anything.

So, what are some things that could be done to help alleviate the increase in fuel prices? Here are just a few.

We should reduce deficit spending. The Bush tax cuts were the right thing to do, and they've stimulated both small and big businesses. It needs to be coupled with reductions in spending. It may be unpopular in the short term, but it would help immensely for empty, bloated spending programs like the National Endowment for the Arts, public broadcasting, et cetera to be downsized or eliminated. If I remember correctly (I heard this on the radio, so I don't have a link to give you), we give the same amount of money to public broadcasting that we give to the United Nations. We could stand to reduce our empty contributions to the U.N. (particularly in light of the complete circle jerk that is the Oil-for-Food scandal, and the U.N. investigation of the same) and we could stand to drastically reduce the budget for public broadcasting, particularly when a minority of the population watches/listens to it, and when the best they can give us is Jim Lehrer and Sesame Street. Pork barrel spending also needs to go, and whether it's President Bush or some Republican senator or some Democrat, somebody needs to start cleaning up the mess. My money is not better spent by some jackass Georgia congressman allocating it to a museum to peaches or something. If we could eliminate the empty, inefficient government spending (read: waste), and hold our elected officials accountable for how they spend our money, this would have the direct effect of increasing the value of the dollar. Since oil is purchased on the dollar, this would reduce the number of dollars per barrel we pay for oil, thus decreasing the price of fuel.

We should continue pressuring the European Union and the Chinese government to end their artificial currency manipulations. Europe in particular should be encouraged to institute conservative economic reforms, because their economic woes are directly tied to their overwhelmingly anti-business regulations. Europe's lousy economy is fixable, but it takes real economic leadership, not the same old socialistic nonsense. The situation with the Chinese, our strategic opponents and economic rivals, is much more politically complicated. The point, though, is that artificial currency overvaluation by foreign entities is unfair, and reduces the perceived value of the dollar additionally when coupled with the aforementioned deficit spending; it should be highly discouraged, even if it takes strong political action.

America needs more sources of oil that belong directly to us, no one else. This means drilling in the Alaskan National Wildlife Refuge (which all responsible studies have shown will have zero effect on the environment in the area), more off-shore drilling, et cetera. We need to find more exploitable sources of petroleum and natural gas, period. The more outside sources we have, the less committed we are to buying oil from places like Saudi Arabia, Kuwait, Iraq, Iran, Venezuela, Nigeria, Libya, Mauritania, et cetera. The more sources of oil we control, the more OPEC has to play ball with us on crude oil prices.

America needs more refineries. We're not only addicted to foreign oil, we're reliant on foreign refineries. Think of it this way: if you get all of your tea from India, what's better, importing it completely finished, or importing the leaves yourself and finishing them yourself? The actual answer is "a little bit of both", but the point is that increasing our own refining capacity would reduce the price of petroleum.

We need to increase our fuel efficiency. We're not there yet, but these gasoline/electric hybrid cars are a start. They're not good enough yet for mass use; they have a habit of stalling at high speeds, and they're still confined to those little dorkmobiles like the Prius and the Civic GX. Put the engineers on it. If American engineers can put a man on the Moon, they can eventually figure out highly fuel efficient vehicles. Until now, it hasn't been extremely politically/economically timely to do it, because it wasn't a big issue. Now it is, and there's a helluva lot of money to be made by doing it.

America needs to start using alternative sources of energy; though some areas get reliable energy from hydroelectric power, most of America's energy needs are met by plants that burn fossil fuels. If hydrogen, wind, and solar energy aren't the solution, then what is? I'm talking about safe, clean, efficient nuclear fission power, which American plants have produced almost without incident for nearly half a century. And if you need further proof, check out the U.S. Navy's submarine force, which has been using nuclear-powered warships for forty-six years without a single incident. In fact, there are new reactor designs that are extremely safe and efficient, and produce a fraction of the waste. We should also continue developing nuclear fusion, which is even safer than fission. And what's the environmental benefit of nuclear energy? All it releases into the atmosphere is harmless steam, which dissipates quickly - no greenhouse gases. Furthermore, the waste dividend of conventional nuclear fission is so nasty, it has to be properly isolated and contained. Other sources, like fossil fuel burning, aren't nasty enough to necessitate the kind of environmental responsibility that nuclear fission requires. In the long run, nuclear fission is better for the environment.

Boiled down to the bare bones, there are three factors that control the price of petroleum at home and abroad:

The value of the dollar; the currency we use, and that is used to trade oil, is currently devalued against various foreign currencies, so oil prices would decline for Americans if an aggressive, responsible economic policy was introduced. Also, foreign entities need to be discouraged from artificially manipulating their currencies, as this has a further impact on the price of crude oil.

Foreign oil sources and refineries, particularly those in unstable countries and regions; these need to be bypassed by securing new sources of oil and building new domestic oil refineries.

Overall reliance on oil; this can be reduced through vehicles that are more fuel efficient, but the real way to alleviate this pressure is by developing alternative energy sources, notably nuclear plants.

As long as oil is the solution to friction, we will never get rid of our need for the stuff. We can, however, take steps to change the value of the dollar, and we can take steps to both reduce our overall reliance on oil, particularly foreign oil, and we can change the way we use oil in the first place.

Overall, though, we still pay a lot less for oil than most Western nations. As much of an aggravation as this is, oil is still cheaper when adjusted for inflation than it was during the early 1980's, we still don't have the issue that we had under the Carter administration. This is not yet a "crisis".

Bottom line overall? There are no short term solutions. These are all long-term solutions to a problem that has been coming for years, and many of these measures should have been instituted during the Carter Administration when America's initial gas crisis occurred. It would be nice if they were instituted now, because even if this situation is short-lived, it will happen again. These solutions require bi-partisan support; the political dividend, even for Democrats who seek the support of the "green" folks, would be the opportunity to say "I was part of the solution to the problem of high gasoline prices." Even if Senator Kerry or Senator Kennedy claimed this, if they had been onboard with the legitimate and necessary reforms necessary to make these solutions possible, I'd acknowledge it.

There you have it, folks. More thoughts? Post 'em.