The Gimmick

by Lee

Posted by tenshi_arashi on 08/05/08 at 10:19 AM from

Name a good reason not to lower taxes or flood the market with oil.

Posted by on 08/05/08 at 10:38 AM from

Name a good reason not to lower taxes or flood the market with oil.

1) The temporarily lower fuel tax would be made up by increases in (probably) three other areas and when the temporary decrease expired, we’d have higher fuel tax AND the other increases (which wouldn’t be so temporary).

2) 70 million barrels of crude can hardly be called “flooding the market” when the US doesn’t have the refining capability to increase production of fuel.

Posted by Ed Kline on 08/05/08 at 10:45 AM from

Yesterday, the “we-are-the-ones-we’ve-been-waiting-for.-We-are-the-change-that-we-seek” candidate showed that he could be just as gimmicky as any other presidential aspirant. Obama proposed releasing 70 million barrels of crude from the Strategic Petroleum Reserve as a way to drive down high gas prices.

Impomenis analysis is shortsighted.  What people forget is that we’d be selling it at a large profit ( because of the price of oil now vs. when it was acuumulated), and driving down the price of oil possibly quite a bit as that it would make a larg impression on speculators. They are a flighty lot. If we drive the price down a little bit we( the reserve) can buy back oil at a lower rate than we sold it now and theoretically do it again if need be ( if not then the governemnt loses no net oil, and makes a tidy profit). There are many people who have advocated this very idea, including Newt Gingrich. This is not a bad idea.

Posted by Ed Kline on 08/05/08 at 10:55 AM from

2) 70 million barrels of crude can hardly be called “flooding the market” when the US doesn’t have the refining capability to increase production of fuel.

Not all that relevant if it helps lower the price of oil futures.

This is simple.. sell it high, drive down the price a bit , buy it back slightly lower. Repeat as neccessary, though it will have less of an effect the next time.

My only gripe is that 70 million barrels isnt nearly as big as we could go. 200 million would be a lot better.

Posted by on 08/05/08 at 11:16 AM from

sell it high, drive down the price a bit , buy it back slightly lower. Repeat as neccessary

You guys actually believe this will work?

Posted by on 08/05/08 at 11:17 AM from

Not all that relevant if it helps lower the price of oil futures.

*If* is the key word. But it won’t help lower oil futures in any useful amount because 70 million barrels won’t affect global supply (oil futures are a global market after all). Global oil cunsumption is at approx. 85 million barrels per day. The propsed 70 million barrels from the SPR is not even a single days supply.

Posted by on 08/05/08 at 11:18 AM from

You guys actually believe this will work?

Nope.

Posted by on 08/05/08 at 01:55 PM from

The propsed 70 million barrels from the SPR is not even a single days supply.

This is what I was going to say.  70 million barrels is a drop.  People really should start looking at oil in terms of barrels per day.  Using the simple principles of supply and demand, you can see why we have an oil problem.  The world can produce what it demands each day.  Demand is currently increasing because of China and India.

Lee, since you are from an oil family, perhaps you could confirm or deny something that I read.  Offshore oil rigs are obviously not sold at Walmart and there aren’t many (if any) sitting around.  For every offshore hole drilled, a rig and crew has to be removed from a dry hole and moved to the new location.  What this seems to be saying is, we can only replace dwindling capacity unless the oil industry invests in many new rigs.  It isn’t a reason not to drill, but hoping to reduce oil prices this way seems naive.

Posted by on 08/05/08 at 02:33 PM from

flogg:  Given the amount of money to be made is oil maintains its current price, I’d be awfully surprised if the oil companies didn’t find a way to erect new rigs if offshore drilling were opened up.  That doesn’t mean they’d go up right away, mind you… but the market has a way of taking care of that sort of problem.

With regards to the gas tax holiday vs. strategic oil reserve release, they’re both gimmicks, however the release of oil ends up making the government money (even if it doesn’t make a dent in the price of gas), whereas the gas tax holiday loses the government money… so if I had to choose one or the other, I’d choose the one that doesn’t increase the government’s debt.

Posted by on 08/05/08 at 03:05 PM from

Well, I though of that.  I asked Lee because I simply don’t know what would be involved in building more rigs and maintaining them.  To a lay person like me, it sounds like a lot of money.

Posted by on 08/05/08 at 03:20 PM from

McCain’s plan to repeal the gas tax is stupid, but everything else about his energy plan is sound. His nuclear plan could be big.

Obama made a great point about the Canadian LNG pipeline. Hopefully that means it will get built.

The only sane position is to develop all sources of energy, and conserve.

Posted by on 08/05/08 at 05:49 PM from

Wow.

Watch this NOW! (100% on topic)

I can’t believe I’m saying this, but I think I actually, gasp, like her now.

Posted by on 08/05/08 at 06:01 PM from

Thanks, kevinmkr.  That was pretty funny.  Clearly they didn’t get her permission to use her image ...

Posted by tenshi_arashi on 08/06/08 at 12:07 AM from

The only sane position is to develop all sources of energy, and conserve.

That’s exactly what I’m getting at.