Wednesday, January 18, 2012

So Drilling more Oil in the U.S., and adding it to the World Market, will do what...?

...for the last 7 years or so, we've seen the old myth "supply and demand" disproved, smashed, trashed, dashed to smithereens, over and over again. So I thought this headline in the conservative Wisconsin State Journal was so revealing and so pathetically clueless. Drill baby drill?

Some aren't convinced that we've seen the death of supply and demand when it comes to gas prices. But I'm sticking with it. I've been watching this for years, mostly due to articles that have been written about the very problem. But Keystone XL is always brought up in the discussion. Here's a Washington Post article disputing some of the myths and sky is falling whining from House Republicans:
The pipeline would have reduced U.S. reliance on oil from the Middle East U.S. vulnerability to turmoil in the Middle East is linked to how much oil we consume, not where we buy it from. The price of oil is set on world markets: When convulsions in Libya sent the price of crude up 30 percent last year, prices for Canadian heavy oil (similar to what is produced from oil sands) rose by nearly 55 percent.

If we don’t build the pipeline and buy their oil, the Canadians will sell it to China.
So what? World oil prices depend on how much oil is produced — not who sells what to whom. Whether the United States or China buys oil at the world price from Canada or Brazil or Saudi Arabia or Nigeria won’t affect U.S. economic fortunes. Some argue that buying oil from Canada rather than elsewhere would shrink the yawning U.S. trade deficit, since Canadians are more likely than others to spend their petro-profits in the United States. But Canada gets richer no matter whether it sells its oil to American or Chinese consumers, and its newfound wealth spills over to the U.S. economy regardless. 

The fate of the Keystone XL pipeline will be of limited consequence to either long-term U.S. energy security or climate change


  1. Economic law of supply and demand disproved? Hardly. All that has been shown by the data is that supply does not only correspond to just the bird in hand, but also those birds in the bush. Market physiology if you will. If allowed to drill and move the largest energy inventory of any nation on Earth(!), we would drive the price at the pump down.
    In related news, Obama canceled the Keystone XL pipe line today. I guess he wants (and will certainly get) more time to golf after November 6th this year or something.

  2. You're wrong. The commodities market has pushed the price, even when OPEC complained about oversupply. You're one of the many conservatives fooling yourself, believing in whatever big oil wants you to believe. No really, its true.

    Keystone XL was a bad idea for so many reasons. One big one; Texas would get the oil, next to the Gulf, to ship again into the oil market. It wouldn't benefit the U.S., It would benefit big oils profits. But who cares about the water supply or continuing our dependence on oil?

    The current pipeline from Canada leaks all the time. Keystone would too, with highly corrosive crude, which is worse for the environment.

    Koch Industries is doing everything they can to keep oil alive, denouncing alternative energy. They see the writing on the wall, and suckers like you don't. Check out the Koch AFP ad I blogged a short time ago. They're using Solyndra's failure to compete with China as an example. I wonder how much federal money has been wasted on oil subsidies. (every penny?).

  3. Wrong? No, the word you are looking for is nuanced. Your reply shows that you don't understand my comment. Let's try again sans metaphor...

    The supply part of supply and demand includes not only the physical oil in tankers and reserves, but also the expected oil, or shortage thereof, to come in the future by not exploring for new sources or by simply running known sources closer to zero. Futures markets can be/are influenced by both. By taking both the physical and psychological roots of supply into account you get a more subtle (and accurate) gauge of how the market functions.

  4. You continue to live in fantasy land.

    Exploring for new oil may, or may not, lower the price of oil? Brilliant. You haven't been watching the market, have you? The price, magically, is now over $3.30 a gallon. No lower. Funny, supplies are up, demand is low, yet prices are not dropping, but increasing due to worries about Iran..etc. Think Iran's threats will go away? Not likely, and every other excuse in the books will keep oil high, because hybrid and electric cars are cutting market share. This is big oils last stand (my theory), and oil won't go lower.

    That's why they want Keystone...and more off shoring...etc.

    Sadly, you're not thinking critically, because you're willing to go along with the commodities market manipulation. Wall Street is making lots of money on it.

    Supply and demand no longer matter when it comes to gasoline. It's been like that for years. It's time we admit that, instead of using metaphors.

    But nice try.

  5. Democurmudgeon, you claim that "supply and demand no longer matter". Maybe a simple real-world example will teach you otherwise.

    Demand for gasoline goes up during the "Summer driving season". If the law of supply and demand is cited, a upward pressure on the price would be expected. If trips to the pump are, on average, more expensive in June than in November, I'm right. If not, I'm wrong. Fact: The price is higher in Summer. Conclusion: I'm correct.

  6. to Nemo....I don't know if you noticed, but high gas prices have dramatically curbed the way Americans drive. The new normal is fewer driving vacations and long trips. Gas supplies are still in oversupply, as I recall they were the last two summers.

    The more obvious answer would be big oil jacking prices up when consumers are more likely to drive. It always happens around holidays oddly. Funny how that happens. It happens during...summer. Odd, huh?

    You are correct your own little fantasy world. That's where everything is explained through the haze of ideology.

    Thanks for visiting us in the real world again. I must say, we don't see enough of you.