I can
teach you how to calculate what the price of gasoline should be. There are 42 gallons in a barrel of
crude. So if you take the open market price per
barrel and divide by 42 you get the price of the raw materials. Recently price per barrel was $105. So here’s the calculation.
$105/barrel equals $2..50 per gal.
Add refinery margin
.13
Add transportation .10
Add retail margin
.05
Add state&fed
tax(OK) .35
---------
Total $3.13 per gallon
pump price
Do you buy
your gas that cheap? No, I don’t
either. Here’s why. 20 to 30 cents extra is added to refinery and
transportation margins when the EPA demands that 20 different grades of
gasoline be produced for environmental reasons.
But these fairly new regulations have had little benefit on the
environment. If we just removed the
restrictions and went back to the 1990’s we’d have cheaper fuel.
Next question. How much does it cost you when Oblamer won’t
okay the Keystone pipeline? We keep
hearing about 20,000 jobs to build and maintain the pipeline. But what is the price of your gas doing? There is a bottleneck in the pipeline network
that is slowly being fixed which Keystone would have instantly alleviated. For the last
4 years we’ve had gasoline prices that have suffered. The commonly quoted West Texas Intermediate
price has been down as low as $80 while North Sea Brent has been $115 at
times. We just can't get WTI and other mid-continent crudes distributed. Because Keystone would help
alleviate the bottleneck it would allow more distribution of crudes from the
middle part of the country where the boom is on. Thus a refinery in Lyndon, NJ would get to use WTI rather than expensive Brent for
most of its refining. Recently, other
pipelines have been built and this has partly alleviated the bottleneck, but
for 4 years Oblamer and the environmentalists have cost most of the country
about 30 cents per gallon at the pump.
Third question. How much has it cost you to keep the half-moratorium
on drilling on federal lands and in federal waters? Here the answer is not large, maybe a nickel
since oil is a fungible commodity and increased production in USA doesn’t
change total world production and hence world price that much. And since 2006 US energy imports have fallen
in percentage from almost 30% to 12% as private land production has boomed.
But had the trends in horizontal drilling been extended to
federal lands and waters, it is estimated that net imports would now be—are you ready
for this?—zero. No import reliance would
make questions about whether we should be involved in the latest Middle East
follies a lot easier to answer.
And that also shows the imperative
of keeping EPA and the radical environmentalists from destroying the fracking
revolution. US production of oil has
risen from 6% of world production to 12% just behind Saudi Arabia (13%) since
2005. It has also reduced the prices of
natural gas from nearly the world average $12.40 to $4.03. That gives us a significant advantage over
China at $13.70 and Japan at $14.10 and Europe at $10.11. The advantage will ultimately translate into
manufacturing jobs as cheap energy brings those jobs home. JP Morgan Asset Management, from whom I owe
all these numbers, also estimates an economic drag on our economy of about 1.0%
due to high fuel prices since 2010. Yet US
petroleum imports as a percentage of GDP is at 2.5% (2Q’13)—at almost record highs
as per the early 80’s.
Now consider. If we add 1.0% to our lackluster 1.5% growth
this year, it becomes a respectable 2.5%.
Had we had merely that kind of recovery growth for the last 4 years, we’d
be near 5% unemployment, $3.00 gasoline and a consumer sentiment index that is
well above this lousy 80% where we are today.
How do we fix our economy? We
shoulda listened to Sarah Palin. Drill,
baby, drill!
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