Official "Extremely Unctuous Antics" Thread

[cheesehead]

The "real" reason for the recent rise in U.S. gasoline prices is that the value of the U.S. dollar declined earlier this year.

It's not because "the Arabs are greedy" (which the Bush administration is allowing many to believe because it fits in with their program of demonizing inhabitants/rulers of Middle Eastern oil-exporting nations), or because of some other motivation. It's simply a matter of normal, ethical economics.

Americans aren't used, in general, to thinking of buying imports as a bartering transaction, but it is. In exchange for a barrel of oil, we barter a certain number of U.S. dollars. When the value of the U.S. dollar is stable, then changes in the price of oil are generally the result of the supply/demand forces we're accustomed to discussing in the context of oil price changes. But when the value of the U.S. dollar declines, overseas sellers of oil naturally are reluctant to accept a decline in the value of what they receive in exchange for each barrel of oil. So, they ask for more dollars per barrel, and shortly thereafter the prices we see posted at gas stations go up.

Some of you have already realized this, but many Americans do not.

Earlier this year, the Bush administration deliberately took actions to modestly devaluate the dollar, in order to boost American exports by making them cheaper for those in other countries to buy. Now, there's nothing wrong with this. It's one of many legitimate ways in which a government can encourage exports and discourage imports, for the purpose of improving its balance of trade or whatever, and it's been done in the past by various administrations.

But although its dollar devaluation would inevitably cause a rise in prices Americans paid for most imports, the Bush administration was careful not to draw attention to the predictable effect on gasoline prices. I'd be inclined to accept that as a normal part of politics, except that (a) this administration has already shown that it will demonize Middle Easterners in order to further its political goals, and (b) commentators I've heard speaking about the rise in gas prices have failed to mention the connection with dollar devaluation.

I just want the Bush administration to admit, and take responsibility for, all the effects of its actions. I know they're not going to, so this is my little contribution to public education.

[cheesehead]

Let me add that I'm disappointed that Kerry and other Democrats aren't pointing out the devaluation/price rise connection, either.

[Wacky]

But let me also point out that, even after adjusting for this devaluation, the real price of oil is still at the high end of its historic trading prices. So it isn't one or the other. There is a combination of the two factors both acting to drive the dollar price of the feedstock upward.

But, significantly, you are also conveniently ignoring the "green tax". Recent strengthening of environmental regulations is, according to my sister, a major factor in the increase. In order to produce the higher quality gasoline now required, the refiners have to use more crude oil per gallon and expend extra costs in the refining process.

PS: If you wonder why I quote "my sister", it is because she is an expert in the business. She is a refinery design consultant and presently the head of her department for a significant Texas oil company.

[cheesehead]

Originally Posted by Wacky

But let me also point out that, even after adjusting for this devaluation, the real price of oil is still at the high end of its historic trading prices. So it isn't one or the other. There is a combination of the two factors both acting to drive the dollar price of the feedstock upward.

To which other factor, besides dollar devaluation, do you refer? I'm not sure of your antecedent.

I was referring to the recent (Feb.-Mar.) spike in U.S. gas prices, not the long-term trend.

But, significantly, you are also conveniently ignoring the "green tax".

No, I am NOT ignoring environmental regulations. (And what's the "significantly" about? :-) I am simply unaware that any change in them is causally and temporally related to the recent spike in gasoline prices. Will you please cite publicly-available evidence that any strengthening of environmental regulations is a major factor in the Feb.-Mar. price increase?

I grew up in Tulsa, Oklahoma, self-proclaimed "Oil Capital of the World from the 1920s through the 1970s (when Denver and Houston started competing for that title). Tulsa daily papers had an Oil and Gas section, just as they had food, entertainment, and society sections. The University of Tulsa had the world's best graduate school of petroleum engineering, which, starting in the 1950s, trained many of the young Arabs who then returned home to run the Middle Eastern oil fields. Though I never majored in petroleum engineering, I, like any other science-talented youth in Tulsa, could not help picking up a lot of general petroleum knowledge in ordinary daily life.

I worked 5 years at the Amoco Production Co. Research Center in Tulsa, plus several months at the subsidiary of the public gas/electric company that was responsible for acquiring new supplies of natural gas.

the refiners have to use more crude oil per gallon and expend extra costs in the refining process.

Can you show us hard figures on just when those costs were incurred, and when those costs have been passed along to purchasers of the refined products?

I have written in defense of the oil industry about unjust accusations of "obscene profits" and the like. Likewise, I have tried and will continue to try to refute unjustified criticisms of environmental regulations, or their citation as a "smoke screen".

Personally, I think it's critically important to slow down our use of crude oil, but only in straightforward, open ways that are adequately discussed by an informed public. Hubbert's peak will soon be here, whether we like it or not, and I think the best interests of our country lie in trying to minimize future disruptions that could be worse than 1974-75's.

PS: If you wonder why I quote "my sister", it is because she is an expert in the business. She is a refinery design consultant and presently the head of her department for a significant Texas oil company.

My sister and her husband work for oil companies in Tulsa.

[Uncwilly]

Hybrid cars, solar panels, wind farms (coupled to a hydro system to cut variablity and to create peaking capacity), along with waste stream derived energy are some very fast (all the tech is in hand) and eco-friendly methods to cut fossil dependance.

Hybrids are now starting to see the benefit of economy of scale (in the manufacturing). With Ford latching onto Toyota's tech. it seems that this will continue to grow strongly.

As production of solar cells go up the price per Kw drops. The trend has been quite nice for a while. Along with a few advances that seem to promise even better rates, the investment in the parts of the systems (the batteries, inverters, etc.) seems a wise thing to do now. Net metering of elec. is nice...

Using wind power at off peak times to fill a tank (home version) or a res. (industrial scale) helps to make wind an even better choice than it alone. There are miles of jetties and loads of other places that are great for wind, but the astestic NIMBY's don't want them. :(

All sorts of waste streams are energy rich. A recent study looked at coupling the treament of waste water with the generation of power to power the wastewater system. Microturbines can also be used to derive power and heat from sludge gas to help reduce the energy requirements of wastewater treament. Trash and "greenwaste" can be further exploited to generate power. Also, there are plenty of other things that are wastes that can be converted o power with current tech.


Future tech? It is possible to take nuke wastes of various sources and run cyclotron supported fission that generates power, and causes the wastes thus processed to become stable and non radioactive. The process can be switched off by turning the beam off.

[Wacky]

Originally Posted by cheesehead

To which other factor, besides dollar devaluation, do you refer? I'm not sure of your antecedent.

I'm referring to the fact that, even adjusted for inflation/devaluation, the world price of crude oil is now significantly higher than it was before 9-11.

No, I am NOT ignoring environmental regulations. (And what's the "significantly" about? :-) I am simply unaware that any change in them is causally and temporally related to the recent spike in gasoline prices. Will you please cite publicly-available evidence that any strengthening of environmental regulations is a major factor in the Feb.-Mar. price increase?
Can you show us hard figures on just when those costs were incurred, and when those costs have been passed along to purchasers of the refined products?

Here, I am only quoting my sister. She said that many areas of the country now require a different formulation from the one that was in use before Christmas in order to comply with the "Clean Air Act". Rather than a recent change in the law, I am under the impression that it is that previous changes are just now being felt by a larger portion on the populace. She did mention that California rules are now stricter.
As for production cost increases, I have not, and will not, bother to try to track down publicly available numbers to prove her assertion that "meeting the regulations has caused a significant increase in the refining costs". Professionally, she actually models the refineries to determine their optimal operating parameters. I trust her judgment that the increases are real and significant.

Likewise, I have tried and will continue to try to refute unjustified criticisms of environmental regulations, or their citation as a "smoke screen".

And I dismiss your implied "you didn't quote enough publicly available hard facts. Therefore your statements must be false" attitude as an even bigger "smoke screen".

Personally, I think it's critically important to slow down our use of crude oil, but only in straightforward, open ways that are adequately discussed by an informed public.

I don't disagree. But placing the "blame" for higher prices on any one component of a highly complex system is inaccurate.

My sister and her husband work for oil companies in Tulsa.

Which is not at all relevant. For all I know, they might sweep the floors.

[only_human]

I am seriously concerned -

with devaluation driven price increases -
The world could again feel the pressure of Opec's hand on the petrol pump, writes William Keegan (Guardian Unlimited, UK, March 30, 2004)

and the many, many different formulations (18 to 24) making all of it harder by driving up prices, making supply more difficult, reducing economy of scale.
Clean fuel standards drive up price (The Desert Sun, Calif, April 4, 2004)
US Mulls Clean Gasoline Waivers to Ease Supplies (Reuters, United States - Apr 1, 2004)

"The run-up in terms of gas prices is a function, to a large extent, of the refinery capacity in the United States as well as the various environmental regulations in the United States," Adel Al-Jubeir, foreign affairs adviser to the Saudi crown prince, told reporters.

I think Hubbert's peak is going to have to hit us with a big clue-by-four before anything really different happens.

I take cheesehead's point about politicians not owning up to their actions. While I like Uncwilly's can-do optimism, I feel ultimately we mostly approach unpleasant truths of supply and costs much in the way we approach dieting. That is we point to aspects of supply (protein, carbohydrate, fat) making each in turn the villain, avoid onerous limitations (calorie restriction) and effort (exercise), and seek miracle cures and potions.

[cheesehead]

Originally Posted by only_human

The world could again feel the pressure of Opec's hand on the petrol pump, writes William Keegan (Guardian Unlimited, UK, March 30, 2004)

... and, as Keegan reminds his readers, "The first oil crisis, although prompted by the political furore over the 1973 Arab-Israeli war, and the use of the 'oil weapon', was also a response to the devaluation of the dollar that took place in the course of the breakdown of the Bretton Woods fixed exchange rate system in 1971-73."

the many, many different formulations (18 to 24) making all of it harder by driving up prices, making supply more difficult, reducing economy of scale.

Yes, of course there are other reasons. Now that I've made my point, I'm willing to put quote marks around the word "REAL" in this thread's title.

[cheesehead]

Originally Posted by Uncwilly

Hybrid cars, solar panels, wind farms (coupled to a hydro system to cut variablity and to create peaking capacity), along with waste stream derived energy are some very fast (all the tech is in hand) and eco-friendly methods to cut fossil dependance.

Yes, but without significant government assistance (not to mention removal of political roadblocks), the ramp-up time is too long for us to avoid a serious crisis. The Bush administration has wasted precious time. Future historians will rank it as one of our country's worst administrations, right down there with Harding's.

Future tech? It is possible to take nuke wastes of various sources and run cyclotron supported fission that generates power, and causes the wastes thus processed to become stable and non radioactive. The process can be switched off by turning the beam off.

But that won't be economically feasible for a long, long time. There simply isn't as much energy to be extracted from the byproducts of uranium and plutonium fission -- refer to the curve of binding energy.

[only_human]

Originally Posted by cheesehead

... and, as Keegan reminds his readers, "The first oil crisis, although prompted by the political furore over the 1973 Arab-Israeli war, and the use of the 'oil weapon', was also a response to the devaluation of the dollar that took place in the course of the breakdown of the Bretton Woods fixed exchange rate system in 1971-73."
<snip>

Keegan did a good job on the topic. Interestingly, I found an an article that shows an Arab perspective on the devaluation:
Impact of the Weak Dollar on Gulf Economies (MENA FN -- Middle East North Africa Financial Network, April 4, 2004)

It's too bad that even though Kerry and Bush turn soaring gas prices into campaign issue it seems that High gas prices lack enough pain to force change.

With this on the radar, they would have a chance to make a substantial agenda for change but it would probably be political suicide -- no one wants to hear that drastic measures now are essential. Rather than tackling that, Bush would rather talk moon and Mars.

[S00113]

Originally Posted by cheesehead

The real reason for the recent rise in U.S. gasoline prices is that the value of the U.S. dollar declined earlier this year.

Yo are probably right. The value of the USD has declined steadily since july 2001. Here in Norway the price of gasoline is varying over the same interval as the last two years. A barrel of oil cost more USD than ever that I can remember, but compared to other currencies the price has been decreasing over many years now. The US dollar is worth half of what it was in july 2001 compared to Euro, and is commonly refered to as "American Pesetas". (Pesetas was the old spanish currency. You could get 200 of them for for a dollar in 2001, and that could buy a lot of drinks in a spanish resort.)

So, why don't europeans travel to the US now that the dollar is on a all time low? Because most people don't like being treated as criminals on the border.

A more amusing effect of the low dollar: http://www.enn.ie/frontpage/news-9406537.html