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Oil

It isn’t just the politicians, I have been hearing people in stores pontificating on what has to be done to lower the price of gasoline – approve the Keystone XL pipeline and drill everywhere. That’s it, that’s all there is to it.

Except –

The Earth Bound Misfit found a Christian Science Monitor story that looked into the project and discovered what the pipeline company is telling the drillers in Canada about the project which can be summerized: The Keystone XL pipeline is designed for export, and will raise prices in the Midwest.

Prices for the refined products are higher in the countries served by the ports in the Gulf of Mexico than in the US, so the products are going to those markets, not the US. Further, there is currently an excess of product going to the Midwest which is keeping that market below the US average, so the XL pipeline will allow that excess to be removed from that market and exported, which will raise prices in the Midwest.

As for drilling, CBS had an AP article that looked at the effect of US oil production and the price of gasoline for decades. The conclusion – there is no connection between US oil production and the price of gasoline. If there was a correlation between the two, when production increased, the price would go down, as predicted by good old supply and demand. Doesn’t happen with a predictable pattern, because oil is a global commodity. The price of oil is set on a global basis, so US production has almost no effect on anything.

If Zero would like the price of gasoline to go down, he could stop threatening Iran. That would have a much larger and more immediate effect on the price of oil, than anything else he can do.

March 21, 2012   Comments Off on Oil