What a field day for the heat
A thousand people in the street
Singing songs and carrying signs
Mostly saying, "hooray for our side"

Monday, March 12, 2012

Newt Gingrich Is Full of Crap

Okay, one of the things Newt is promising he'll do is bring gas down to $2.50 and make us less dependent on "foreign oil" (and here we'll continue to include Canadian imports, because we really can't quit the Canadians without making us more dependent on places like Venezuela, African West Coast countries, and the dreaded Middle-East). About every price fluctuation of $10 a barrel translates to $0.25 in gas prices. Light sweet oil is about $106 a barrel right now. Current average gas price is $3.80. Okay, so to get to $2.50 a gallon oil prices per barrel would need to be reduced by approximately $52. Sounds doable, right?

Wrong. That gives us a per barrel price of $54. To keep oil flowing from the Canadian Oil Sands the price per barrel needs to be above $70. Let's say they're making 15% profit at $70, that gives us a break even point of $59.50 a barrel to mine that oil (if they'll continue to pump the stuff for costs, anybody believe they'll do that?). Canada accounts for over 20% of all our imported oil (they are by far and away the largest single contributor to our imported oil).

All that "domestic oil" that people are salivating over? That's shale oil which costs even more to produce (notice not much is being made from shale oil). Deep sea oil drilling? Not really economical for below $60 a barrel (for what we're exploring now, all the cheeper oil is being produced). PRetty much all the new oil we're looking for in the US has a bottom base price of around $60 (median, some areas are as low as $30, some as high as $80 with most being on the upper end).

So, let's say Gringrich is actually able to wave his fairy wand and make gas $2.50 a gallon (let us not discuss the over control of the market that would be necessary here, and how antithetical that control is to conservatives). Domestic oil exploration ceases. Canadian oil imports dry up (which might be good for Canada who still imports much of their oil, oddly enough). And we'll be at the mercy of countries that actually do hate us.

So, still think Gingrich has great ideas? He's farting in the pews and everybody is thinking that someone delivered roses.

Unless we have a severe program for conservation, somehow make cars that get over 80mpg, or everybody stops driving and our economy crashes to the ground, we aren't going to see $2.50 gas anytime soon. If ever again.

And before anybody says, "but if we produce more domestically…", look, oil is sold on a world market. Doesn't matter where it's produced. The only difference is that we'll stop making other countries rich from our oil habit. At best we can hope for is $2.80 a gallon. And unless we stop speculators (which is the real reason oil prices are above $80 a barrel), we won't see that either. And does anybody believe that with the current political environment that we'll be able to reign in commodity speculators?

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