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Wednesday, April 30, 2008

You've Been Robbed

Call it a parallel to George W. Bush's energy policies:

Associated Press:

A choir director who hopes prayer can bring down high gas prices is trying out his approach at some of the costliest pumps in the country.

Rocky Twyman of Washington, D.C., came to San Francisco over the weekend to stage a pray-in at a Chevron station. He is also calling on churchgoers to ask for God's intervention where he says politicians have failed.

Gas costing $4 a gallon or more has become common around the San Francisco Bay area.

For the record, I don't think that's going to work. Neither are any of Bush's ideas. The president's big idea on cutting gas prices is to drill in the Alaskan National Wildlife Refuge (ANWAR). The problems here are many. First and foremost, you've got to actually get the oil -- which involves laying roads, constructing buildings and rigs, finding the oil, pumping the oil, getting it to refineries, etc. You want immediate relief? This ain't it.

Second, there's about five minutes worth of oil up there. You've got to wonder if the oil used to get it will be worth the oil recovered. In 2004, Bush's own Energy Department determined that drilling in ANWAR would have almost no effect on prices.

Opening an Alaska wildlife refuge to oil development would only slightly reduce America’s dependence on imports and would lower oil prices by less than 50 cents a barrel, according to an analysis released Tuesday by the Energy Department.

The report, issued by the Energy Information Administration, or EIA, said that if Congress gave the go-ahead to pump oil from Alaska’s Arctic National Wildlife Refuge, the crude could begin flowing by 2013 and reach a peak of 876,000 barrels a day by 2025.

But even at peak production, the EIA analysis said, the United States would still have to import two-thirds of its oil, as opposed to an expected 70 percent if the refuge’s oil remained off the market.

So drilling in the Arctic National Wildlife Refuge would cut oil prices at the pump insignificantly and those non-savings would begin to kick in about 2013. Not the best response to a crisis happening now, is it? Environmental concerns aside, there isn't enough oil up there to even be worth the bother.

There are real ways that the administration could reduce the price of oil. In fact, there's a government mechanism designed to reduse the price of oil in a crisis -- the Strategic Petroleum Reserve. Right now, the administration is filling the reserves with top grade crude -- pulling oil off the market and reducing the supply. It's hard to believe that this is meant to do anything but drive up the price of oil. With a couple of oilmen in the White House, it's not much of a stretch to believe that they're deliberately manipulating prices.

"One step that could have an immediate impact would be to fill the Strategic Petroleum Reserve with heavier, sour crude oil," writes Kevin Hall for McClatchy Newspapers. "Right now, the SPR is being partially filled by light, sweet crude, which is lower in sulfur. This is the variety most sought after by refiners and taking it off global markets and putting it into the reserve makes it more scarce, thus higher priced. About three-tenths of a percent of global supply of light, sweet crude is being diverted to the SPR."

The same article cites oil industry analyst Philip Verleger, who says that this move would lower prices at the pump, with diesel falling a buck a gallon. Not good for the oil companies, who have been raking in record profits since Bush took office. But that'd be good for you.

Not long after the Bush administration took up residence in the White House, Dick Cheney gave a speech on energy. "Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy," he said. The new US policy toward oil was "burn as much as you can, we'll make more." The speech was basically a call for Americans to consume more oil -- a stunningly transparent bit of self-service by a former oil exec.

And an early indication of just how stupid Dick thinks we are. Luckily, he underestimated us. While it's a completely anecdotal citation, most of the people I talked to at the time thought this was completely insane. My impression was that it didn't go over very well.

But those oil companies had to get record profits somehow -- how better than to have the federal government buy the very finest crude and keep it off the market? In February, AP reported that oil giant Exxon Mobil Corp. posted $40.6 billion -- more annual profits than any company had ever earned in history. What record did they beat? $39.5 billion, held by -- you guessed it -- Exxon in 2006.

More recently, Shell and BP both reported record profits for themselves. Combined first quarter profits were about $10.9 billion (my conversion from 7 billion pounds), putting them on track for Exxon's $40 billion by this time next year.

You know, rereading what I've written so far, I think I might've given prayer-warrior Rocky Twyman a bad rap -- his plan to reduce gas prices is much more likely to work than Bush's. But that's mostly because Bush's energy policies are designed to drive up prices. It may be his only success as president.


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