gas prices

EIA maintains offshore drilling gains will be negligible

The GOP and McCain/Bush keep insisting that an end to the federal moratorium on (some) offshore drilling is a major solution to America's oil woes, even though Bush's own energy analysts make clear it is not.

That Energy Information Administration analysis is, however, a couple of years old, so I called up the author today and asked if it was being updated. Turns out a new version will be published in a couple of days, but she explained to me that the "answers are not very different" -- no significant impact for the duration of the analysis (through 2030) -- for reasons I will discuss below. First, however, it wasn't until I talked to her and looked closely at the original analysis -- "Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf" -- that I understood what a cruel hoax this whole issue is.

The oil companies already have access to some 34 billion barrels of offshore oil they haven't even developed yet, but ending the federal moratorium on offshore drilling would probably add only another 8 billion barrels (assuming California still blocks drilling off its coast). Who thinks adding under 100,000 barrels a day in supply sometime after 2020 -- some one-thousandth of total supply -- would be more than the proverbial drop in the ocean? Remember the Saudis couldn't stop prices from rising now by announcing that they will add 500,000 barrels of oil a day by the end of this year!

Here is the key data from EIA:

Congressional Dems consider preventing oil drilled offshore from export

Any article on how politicians are gearing up to "do something" about oil prices is bound to contain more than the usual share of silliness. Still, though, this managed to stop me cold:

Congress scrambles for short-term solutions to counter oil prices

I was afraid of this. The irrationality being exhibited about the price of gasoline is on prominent display this week in Congress.

According to the New York Times article "Congress feeling pressure for action on oil prices," some of the things being considered are 1) drilling, of course, 2) anti-speculation legislation, and 3) "incentives for renewable fuels," ergo, corn ethanol.

No easy explanation for continued price increases in the oil markets

At the end of last year I predicted that the price of oil would go down; so far I have been terribly wrong. My prediction, shared by many other economists and energy experts, was premised on a reasonable assumption: Since the world was headed for an economic slowdown, brought about the housing bubble and the financial crisis, global demand for energy would likely moderate, putting downward pressure on prices. While it was a sensible prediction, I am happy that no one took me up on my bet.

So what happened?

Costs for utilities rise faster than politically palatable rate changes can keep up

This is one for the "Things No One is Talking About But Should" file.

Greenwire has this report ($ub. req'd) from Standard & Poor's noting that the credit risk of our utilities depends in large part on their ability to recover rising fuel costs, and this ability is diminished due to the fact that:

High fuel costs translate directly to higher customer rates, but instituting constant and often significant increases is politically and socially unpalatable.

This gets it half right.

Climate policy isn’t a pill to swallow, it’s a way off a sinking ship

This Ezra Klein post echoes what has rather rapidly become conventional wisdom among progressives on climate legislation, and it makes me want to tear my hair out. The idea is that climate legislation will inevitably hurt people financially in the short-term, in order to secure environmental benefits in the distant future, so the only way […]

Staycation, all I ever wanted

"Staycation ... a portmanteau that combines "stay" and "vacation" and refers to a holiday that takes place either at or near home."

With gas well above $4 per gallon this summer, and with airlines raising prices and canceling flights because of high fuel costs, it's not too surprising to find a word like "staycation" gaining a toehold in the North American lexicon. Google now finds nearly 200,000 web pages that use the word -- most of them added within the last few months, if my casual browsing is any indicator.

But even back when fuel wasn't so pricey, some of my favorite vacations were spent within a 50 mile radius of home. It's easy to forget how many parks, museums, nature walks, boat rides, and all-around fun can be found close to where you live -- which makes a staycation a perfect opportunity to reconnect yourself to your home town.

So I'm curious: Is anyone out there planning a staycation this year? Where are you, and what do you plan on doing?

Ten million cars off the road, 1970s style GDP growth

CIBC World Markets has just released a stunning yet detailed economic analysis of near-term oil prices and impacts. The PDF has some excellent figures I will convert to JPEGs.

The two key pieces are "Getting off the Road -- Adjusting to $7 per Gallon Gas in America" (PDF) and "Oil and Growth -- That 70s show Re-Run" (PDF). Main points:

• "That additional 200,000 barrels per day pledged from Saudi Arabia is a pittance compared to the four million barrels per day this year that depletion will hive off world production. What little increase in production Saudi is capable of will probably all be gobbled up by that country's own voracious appetite for energy."
• China's recent oil subsidy drop? Another yawner: "Most North Americans would gladly line up at the pumps for China's now $3.25 a gallon gas."
• "The only supply response to date has been yet another round of cost overruns and lengthy project delays running the gamut from Canadian oil sands to deepwater Gulf of Mexico wells."
• "With the basic laws of supply and demand no longer operative in crude oil markets," CIBC is "compelled to once again raise our target prices for oil" to "an average price of $200 per barrel by 2010." That "should translate into a near -- $7 per gallon pump price within two years, a 70 percent increase from today's already record levels."
• "Higher oil prices spell stagflation for the US economy next year" and beyond. The report has a good analysis of why "The US economy has managed to avoid feeling the full brunt of oil prices over the last few years, but 2009 will be the year that its luck runs out."

The analysis seems very solid and suggests the only thing that can "save" us from near -- $7 gas by 2010 is a major global recession, but even that would only be a temporary respite. The implications for Detroit are staggering:

Saudi Arabia to host summit on high gas prices

Since when do we deal with our addiction by going to summits hosted by drug suppliers? Yet here is the Washington Post:

"Saudi Arabian Oil Summit Hopes to Isolate Cause of Price Rise"

JIDDAH, Saudi Arabia, June 21 -- Leaders from oil-producing and oil-consuming nations will meet here Sunday to try to pinpoint the reasons behind the rise in oil prices, which have doubled over the past year, and to find ways to bring them down.