Gasoline prices are near record highs. The price of petroleum is up too on its way to new highs. Natural Gas is at low price levels. What is the difference?
When Bush was president, the high prices were payback to the oil industry. When Bush open large tracks of Federal Land for oil exploration the price of gasoline fell significantly and the price of oil came down to lows not seen in years. But the high prices were still Bush's fault.
Now we have oil and gasoline prices approaching record levels once again. Do we blame Obama? Is he in the pocket of the oil companies too? Why is natural gas so low?
The difference is when companies are allowed to use the resources on hand, they will use them. This increases supplies to the market. The Natural Gas Industry is booming now. We have surplus Natural Gas in the USA. Private oil development is booming too when allowed. If the markets are allowed to operate in a free market place, they will deliver the goods to the consumer.
Saturday, February 25, 2012
Sunday, January 23, 2011
Energy Policy
The real question is what the energy policy should be. The USA, Europe and Asia are all highly addicted to oil. The production of oil is at or near its peak. Most of the easy low extract cost oil has been found. There is plenty more oil to be had, but it will be much more expensive to extract and can cause environmental degradation. Plus China and India are growing their use of oil and oil distillates at a rapid pace, which increases demand. Increased demand and no increase in supply lead to increased costs.
So what should be done. Some say to raise taxes on it. That will increase the cost and reduce demand to some degree. But with increasing demand, the supply will not be affected and the overall problem remains. The increased tax revenue can be designated to increase research and development into alternatives and subsidize their price. Currently alternatives are much more expensive than petroleum products so this might help some. Also tax incentives can be given to encourage research and development into these alternatives and encourage new production spending.
The big problem is lack of vision. We encouraged corn ethanol and it has reduced our demand for some oil, but at the cost of increased food prices. Plus the direction keeps changing. We need a comprehensive Energy Policy that everyone can understand. That way everyone can work together and in the same direction. It will take time and money to come up with viable alternatives. This will just be a start. What do you think?
So what should be done. Some say to raise taxes on it. That will increase the cost and reduce demand to some degree. But with increasing demand, the supply will not be affected and the overall problem remains. The increased tax revenue can be designated to increase research and development into alternatives and subsidize their price. Currently alternatives are much more expensive than petroleum products so this might help some. Also tax incentives can be given to encourage research and development into these alternatives and encourage new production spending.
The big problem is lack of vision. We encouraged corn ethanol and it has reduced our demand for some oil, but at the cost of increased food prices. Plus the direction keeps changing. We need a comprehensive Energy Policy that everyone can understand. That way everyone can work together and in the same direction. It will take time and money to come up with viable alternatives. This will just be a start. What do you think?
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