Posted by: stiltsville | February 24, 2012

The lowdown on high gas prices

A1 Houston Office Oil Traders on Monday

Oil traders. Image via Wikipedia

There are a lot of factors that affect gas prices, but right now, consumer demand is not one of them.

Contrary to some of the misinformation out there, the US now has more oil rigs working here than the rest of the world combined. Don’t take my word for it, The people who make drill bits for the oil rigs have been keeping count since 1944. That nonsense you hear about Obama preventing oil drilling? Yeah, it’s just nonsense.

Then there’s the fact that the US is now exporting more gas and diesel fuel than we import. First time that has happened since WW II. Why? Because the oil companies can explore, drill and refine here and export for a larger profit than they would get by selling the gas in Texas. Exporting also keeps supplies low here in the US, artificially propping up prices.

Another factor reducing supply is oil companies closing down refineries… Remember a few years back when the oil companies said there were not enough refineries? Well they made the problem worse for you by closing some. There were 150 refineries in 2008. Two have since been shut down entirely and 11 more are “idle.” 5% of US gas production capacity has been shut down in the past three months.

If you have to spend more on gas, you spend less elsewhere. Every extra penny per gallon at the pump takes $1 billion per year out of the economy. 

The oil companies control refining capacity and exports. Reduce refining capacity and supplies fall. Increase exports and supplies fall. When supplies fall, you pay more at the pump. Whether you drive ten or 20 miles less a week really doesn’t affect gas prices.

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Responses

  1. Reblogged this on DRUDGE RETORT.

  2. Fascinating! This a very very informative entry. It’s so sad to see how these oil companies just keep finding ways to make even more money. Greed will lead this country to its downfall.

  3. I wonder: What allows US oil companies to create these measures that hurt the consumer, therefore the economy when our nation is suffering stagnation? As well, I wonder who are the main people behind this paradox? Last: Will always American oil production impact negatively the nation? Very informative blog!


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