The Price of Oil Drops - Price of Gasoline Rises?

Here's why, according to the AP:

The price of gas is indeed tied to oil. It's just a matter of which oil.

The benchmark for crude oil prices is West Texas Intermediate, drilled exactly where you would imagine. That's the price, set at the New York Mercantile Exchange, that you see quoted on business channels and in the morning paper.

Right now, in an unusual market trend, West Texas crude is selling for much less than inferior grades of crude from other places around the world. A severe economic downturn has left U.S. storage facilities brimming with it, sending prices for the premium crude to five-year lows.

But it is the overseas crude that goes into most of the gas made in the United States. So prices at the pump will probably keep going up no matter what happens to the benchmark price of crude oil.

Letter From Senator Orrin Hatch on Energy

I emailed Senator Hatch (along with every other Utah Congressman) about energy. Here is his reply:

Orrin Hatch Letter - Upload a Document to Scribd

Note From Rep. Matheson on Oil Speculation

Dear Cameron,

A newspaper story in the Salt Lake Tribune this week supports my concern about price manipulation occurring in the oil trading markets. I read the headline "Just a Few Speculators Fueling the Volatility in the Oil Market" about the discovery by U.S. market regulators of how one financial player had gained enormous sway over the oil market--without regulators' knowledge.

Other data from the Commodity Futures Trading Commission (CFTC) shows how active trading by a single futures trader in June coincided with the rapid rise in the per-barrel oil price.

The potential for price manipulation in the oil futures trading market is troublesome. Providing the CFTC with more oversight authority is one aspect of a comprehensive energy bill I have written in response to high gas prices. I believe my bill is the right approach as we pursue an energy policy that delivers secure, affordable, clean energy to consumers.

We must end our dependence on foreign oil. To reach that goal, we must pursue every available avenue such as more domestic production from off-shore areas; exploration of oil shale and tar sands leasing in the West; more investment in research and development of alternatives, such as plug-in hybrids; more efficiency from existing supply and more private-sector innovation to take us to the next technological level.

As someone who worked in the energy industry for 13 years before being elected to Congress, I know how vital energy is to every sector of our economy and every aspect of our lives. I am optimistic we can meet our energy independence challenge, as long as we recognize that what we do now will bridge the span between our current energy needs and new resources for the future.

Sincerely,

U.S. Representative
2nd District of Utah

Lowering Your Gasoline Bill Is Really Expensive

So gas prices have skyrocketed, making the daily commute more expensive. As market forces demand, many people, in an effort to lower their gas bill, are shopping for and buying hybrid cars. It seems reasonable, as hybrids get better than 40 mpg. As a consequence, hybrid manufacturers can't keep up with demand, and hybrids' share of the auto market steadily increases even as overall vehicle sales plummet in a slowing economy.

But does buying a hybrid save money?

I did some online research to find out how much it would cost me to buy a hybrid vehicle. A quick search of large area new and used car lots found seven hybrids. Most are the Toyota Prius, which is by far the highest seller in the hybrid market. But I also found a Lexus and a couple Honda Civic hybrids. The price tag? Anywhere from $26,000 all the way to $37,000 for the used Lexus.

Now, to break that down to a monthly bill depends on a variety of factors like down payment amount, trade in value, and credit score. Not to mention any fees and taxes added to the advertised sale price.

You might argue that an owner of an SUV or truck easily paid the $26-28k it would take to buy a hybrid, so trading it in makes sense. That's quite correct. Unfortunately, SUV's don't hold value very well, so the vast majority of owners are upside down when it comes to how much it's worth vs. how much they owe. In fact, gas prices have made that scenario worse, as SUVs have taken an even larger hit to their resale value.

What does all that mean? Depending on how far in the red you are in that SUV, you may have to tack on a few (or five or seven) thousand dollars to the price of the hybrid if you want the dealer to take your vehicle as a trade-in.

But what about all that gas savings with the hybrid? That can be quite significant, depending on the vehicle you're replacing. For instance, if you average 1000 miles driven a month, and your SUV got 15 mpg vs. the 45 mpg the hybrid gets, at $4 a gallon you'd save almost $180 a month. The savings increase as gas prices rise, and decrease as they fall. However, if your current vehicle gets the more average 20 mpg, then your savings falls to $110. If you're getting 30 mpg, then the hybrid only saves you $44. In reality, the gas savings a hybrid represents still means a few years before it begins to offset its cost.

In fact, one of the biggest weaknesses of hybrids is their cost. They are generally a few thousand dollars more expensive than their non-hybrid equivalent. And the gas savings between a 35 mpg Honda Accord and a 45 mpg Accord hybrid isn't much. Exacerbating the problem is that there really aren't many used hybrids to be found, meaning you can't buy an older model to save some money. It actually could be much more prudent to buy a regular car that's a few years old and still gets 30 mpg. You could get it for half (or even less) than the cost of a hybrid, and you'd save $130 a month in gas over your 15 mpg SUV.

But Cameron, you say, aren't there tax incentives to buying a hybrid? The answer is...sort of.

Yes, the federal government gives a non-refundable tax credit for buying a hybrid. However, there are multiple catches. First, it's non-refundable, which means if you don't owe any tax (which, surprise! a lot of people don't, particularly the people most worried about gas prices), then the credit does you no good. Second, the credit amount varies with the hybrid you buy, so be sure to check that out first. Most average around $2,000. Third, the credits phase out over time as more hybrids are sold. Once a certain sales threshold is met, the credit is gone. Because of this, the Toyota Prius no longer has a federal tax credit. The Honda Civic hybrid's credit has been cut in half and will soon be gone. Lastly, the credit can only be used by the first owner. If your hybrid is used and was already registered by another owner, no credit for you!

But what about state tax incentives? Utah does not offer one for hybrids. None. They used to, but not any more.

There are, however, some fringe benefits to hybrid ownership. For $15 you can buy a special "clean vehicle" license plate that allows you to drive in the car pool lane even if you're alone. Plus, Salt Lake City lets you park for free at any metered space. So there's that. But these benefits might be tempered somewhat by the fact that your insurance rates could go up with a hybrid.

Even in the face of soaring gas prices, it's wise to be prudent. Buying a hybrid to save money might actually cost you more than you save. It could be wiser to just drive the SUV less in favor of a more fuel efficient second vehicle, or even trade it in for a cheaper, non-hybrid but still very efficient, gas-powered car. Or, you could always start saving your pennies now for a shot at the electric Chevy Volt in 2010.

Ethanol: Reason 4,265 Why Politics Suck

T. Boone Pickens was interviewed by the LA Times recently. The entire interview is worth a read, but I wanted to highlight one thing in particular. See, T. Boone was Bob Dole's energy advisor when he ran for president in '96. T. Boone doesn't like ethanol now, and he didn't like it then either. But this is what he said about a conversation he had with Dole during the campaign:

"Let me explain something to you about politics: There are 21 farm states, and that's 42 senators. Don't go any further." I'm getting the picture. I said, "They want ethanol." He said, "They're going to have ethanol." And so he said, "Don't waste any more of our time or your time telling us it's a bad idea, because they're going to do it."

Never mind that it's a "crime against humanity" to use corn for ethanol. No matter that food prices have skyrocketed worldwide, causing food riots and starvation. We've got 42 farm state senators to coddle.

It's Official - "Working 4 Utah"

To Our Customers,

Beginning Monday, August 4, 2008, all State Tax Commission and Division of Motor Vehicle (DMV) offices will be CLOSED on all Fridays in conjunction with Governor Huntsman's "Working 4 Utah" initiative.

In addition, these offices will have new extended hours of operation Monday through Thursday, except holidays. The new hours are 7:00 a.m. to 6:00 p.m. These hours of operationalso include the Tax Commission and DMV phone centers.

Remember that many tax and motor vehicle services are available online. Visit http://tax.utah.gov/ or http://dmv.utah.gov/ for a list of office hours and available online services.

Please note that these new hours of operation extend to most state government agencies. You are advised to check with the various agencies prior to visiting. You can also go to the state web page at http://www.utah.gov/ for more information.

Thank you for your understanding and support of this important initiative to address the energy issues facing Utah and the nation.

Sincerely,

Rodney Marrelli
Executive Director, Utah State Tax Commission

Oil Shale - Step Towards Energy Independence

Currently, the United States uses 21 million barrels of oil a day, though consumption has been flat for the last 3 years, and dropped 3% in just the first 6 months of 2008. Unfortunately, the US only produces about 6 million barrels a day. This means we send $200 billion a year overseas to import oil.

No one likes being dependent upon others, particularly when what we are dependent upon is of such vital importance. Worse, a lot of that $200 billion goes to fund governments that at best are undemocratic and at worst bankroll and support terrorism.

The problem is, most of the world's oil is controlled by these less than friendly, to put it mildly, regimes. It is estimated that there are 1.3 trillion barrels of proven oil reserves worldwide, of which the US controls 21 billion. This data makes it seem impossible for the US to ever get out from under OPEC's thumb.

Impossible, that is, until you consider that the United States has an additional 2 trillion barrels of synthetic oil just waiting to be captured and refined. It's called oil shale, and the United States has over 60% of the world's supply. The technology used to extract oil from shale has steadily improved since the 80's, when conventional oil prices fell precipitously from their 70's oil crisis peak, making shale too unprofitable to pursue. But now, shale oil can be profitable with oil prices as low as $20 a barrel. Prices now sit in the $125 range.

Clearly, if the United States wants a push for energy independence, oil shale has to be at the top of the to-do list.

Another Benefit of $4 Gas

If Utah's 41 state parks and 13 national parks are beautiful, but no one can afford to visit them, does it matter?

The President Says...

"We will protect our environment. But when this nation critically needs a refinery or a pipeline, we will build it."

-President Jimmy Carter

Let Them Eat Cake

From my old Senator, Mike Crapo of Idaho:

"The driving distances between places in our state as well as limited public transportation options mean that many of us don’t have any choice but to keep driving and paying those ever-increasing prices for fuel."

It is this reality that drives my anger at the "let them eat cake" conservationists barely containing their glee at higher gas prices. After 30+ years of no new drilling, no refineries, and no solutions there are way too many people in this country pleased at all the "lifestyle changes" higher prices are causing.

In order to inject a little reality into Congress, Senator Crapo is asking for real world examples of the effects of rising energy prices:

So I am asking for your help. I'd like to share your stories about the impact that high gas and energy prices are having on your lives. It is important that my colleagues in the Senate better understand how real people in Idaho are coping with these escalating costs. Idahoans cannot ignore rising gasoline prices, and your stories could help convince federal lawmakers to stop ignoring this crisis.

If you'd be willing to share your story, please take a few minutes to send me an e-mail at energy_prices@crapo.senate.gov with a paragraph or two about how you and/or your family are affected by high energy prices. It would also be worthwhile for you to share the priorities that you think Congress should set in resolving this crisis—increased domestic oil production, expanded nuclear energy research, incentives for conservation, whatever you want to share.

President Carter's Energy Policy

Largely because of OPEC embargoes and Middle East instability, the United States faced an energy crisis throughout the seventies. In 1976 Jimmy Carter was elected president, and he spoke often about energy and what the US needed to do to avoid these energy price hikes in the future.

Today, in the midst of another round of energy price increases, I have heard a number of people hearken back to the days of President Carter, lamenting the fact that we didn't implement the alternative energy policies he endorsed.

What's interesting to me is the policy they often leave out. What was one of the fundamental planks of his energy policy platform?

Coal.

For instance, in his April 1977 speech on energy, he said,

"We must conserve the fuels that are scarcest and make the most of those that are more plentiful. We can't continue to use oil and gas for 75 percent of our consumption when they make up seven percent of our domestic reserves. We need to shift to plentiful coal while taking care to protect the environment, and to apply stricter safety standards to nuclear energy."

President Carter revisited his energy policy two years later, again advocating a significant increase in domestic coal production and use,

"I'm asking Congress to mandate, to require as a matter of law, that our nation's utility companies cut their massive use of oil by 50 percent within the next decade and switch to other fuels, especially coal, our most abundant energy source."

Had we followed (or been allowed to follow) President Carter's advice, it's likely we'd all be driving electric powered cars right now, with electricity from coal power plants - as well as from alternative energy derived power plants. As technology advanced, those alternatives would have a ready market available to them, slowly replacing coal. $4 a gallon gasoline likely never would have happened, and if it did, nobody would care. We would have produced almost all of our own energy, rather than importing from the unstable Middle East - which robbed us of much of our sovereignty in foreign policy decisions. In fact, had we followed Mr. Carter's advice and used more coal, thereby reducing our dependence on foreign oil, the Middle East could be a vastly different place than it is now.

But who needs peace, prosperity, global stability, and economic freedom when you can create $140 a barrel oil and force "behavior changes" instead?

Energy

Michael Ramirez

Alternative Energy Sources

From Orson Scott Card:

The correct solution to the oil problem, according to the Puritans, is to have fewer humans. Now, I haven't noticed them volunteering to lessen the population starting with themselves; nor have I seen their heroes bicycling everywhere (environmental ayatollah Al Gore's plane being a legendary instance).

But they do systematically resist every solution that doesn't involve wrecking the American economy and destroying the American way of life.

No insecticides! But also no genetically altered crops with enhanced resistance to insects and disease!

No coal-fired power plants! But also no clean nuclear plants! (Even though France has proven that standardized nuclear power is safe and relatively cheap.)

Yes, you can build windmill farms -- but you can't put them anywhere.

Solar collectors? Excellent -- but don't put them anywhere, either, because they interfere with the natural ecology -- even in the barest desert. (God forbid that lizards should have more shade.)

Collect solar power in space and beam it to Earth? Fine -- except that you are forbidden to actually receive the power anywhere because it's too dangerous.

Hydroelectric power? Great idea -- except that you can't build a dam anywhere because it transforms a surface environment to an underwater one, which, naturally, annoys the squirrels. Squirrels, being natural nonsinners, take precedence over evil, sinful humans, the only animal that is forbidden to act according to its nature.

Electric cars and public transportation? Great idea -- but not until after we've converted all power plants to non-carbon-emitting fuels. (Never mind that it can only ever happen the other way, converting to electric cars immediately, so they're already in place when the oil runs out or, as I hope, we stop buying it because we've met the need in other ways.)

It's so Calvinist, so Jonathan Edwards. To the environmentalists, the only reason we aren't a spider suspended by God's will over the fires of hell is that spiders are natural and don't deserve to be punished.

We have to do something -- the Environmentalists are right about that. But they are so puritan that there isn't actually anything that you are allowed to do because all the solutions are also sinful.