Monday, March 27, 2006

"The Gasoline Follies"

The WSJ.com says [pay site]:

Gasoline prices are rising again, and this time Iraq or hurricanes aren't to blame. Congress's energy policy mistakes are finally catching up with it, and American drivers are paying for the bungles."

Drivers can send their thank-you notes to Capitol Hill, which created the conditions for this mess last summer with its latest energy bill. That legislation contained a sop to Midwest corn farmers in the form of a huge new ethanol mandate that began this year and requires drivers to consume 7.5 billion gallons a year by 2012. At the same time, Congress refused to include liability protection for producers of MTBE, a rival oxygen fuel-additive that has become a tort lawyer target. So MTBE makers are pulling out, ethanol makers can't make up the difference quickly enough, and gas supplies are getting squeezed.

[The Cost of Ethanol]

It didn't take an economics degree to see this coming. The MTBE industry's defense in the many lawsuits claiming its product has contaminated water supplies is that since 1990 the government has required use of oxygenates like MTBE. But with that requirement expiring in May, producers and refiners will face far greater liability, which has set off a race to exit the market. Valero, one of the largest manufacturers, has already announced plans to phase out production. Even the pipeline operators that carry MTBE to high-use areas in the Northeast are backing away.

This abrupt cut-off of a product that makes up some 1.4% of the nation's fuel supply -- and far greater percentages in some places -- is certain to wreak price havoc. According to a February EIA report, ethanol production is already running near its capacity of 283,000 barrels a day. Yet "about 130,000 barrels per day of additional ethanol may be needed to replace the MTBE currently used" in gas.

14 Comments:

Anonymous Anonymous said...

This comment has been removed by a blog administrator.

12:38 PM  
Blogger SquarePeg said...

Not sure what secrect shopping has to do with anything . . . but back to the issue at hand. Plain and simple - we need to enhance the diversity of our energy supply. We need access to energy sources close to home and we need to develop more alternatives such as ethenol, solar power, wind power and so on. Any suggestions on how to make that happen?

5:33 PM  
Blogger Bill Millan said...

If we could get the Gov out of the way, we could find local oil and gas. A lot of the country and offshore sites are off-limits. Ethanol, solar, and wind are government supported boondoggles.

5:38 PM  
Blogger SquarePeg said...

I agree we need access to the energy sources we have here close to home. It is imperative that our oil companies reinvest their profits into doing just that.

5:45 PM  
Blogger Bill Millan said...

Best way to get Big Oil to invest in finding new oil and gas is to get out of their way and make it profitable for them to do so. Right now, The NYT is busy screaming about their "unjust profits." Congress ran a witch hunt on them last month complaining that they were doing too well.

The left will never understand where prosperity comes from.

5:49 PM  
Anonymous sunlover said...

Good points! I feel the government was looking to get in on some of their profits and unjustly fill its coffers. All the while, oil companies already pay taxes just like every other industry. And making a profit allows them to invest in developing newer technologies to improve efficiency, emissions, etc.

8:13 PM  
Anonymous adobecat said...

"The left will never understand where prosperity comes from."

So true! I've been having this discussion with lefties on other sites and it's impossible to get through to them: taxes on business = higher prices and less prosperity for consumers.

8:37 PM  
Blogger SquarePeg said...

Again Bill you are right on. Our government needs to stop their witch hunt against the domestic oil companies and keep their hands out of their profits. These companies should be applauded for running such profitable companies and the government shouldn't punish them for it. And as long as they continue to reinvest their money into finding alternative sources for oil and for alternative sources of energy the American people shouldn't have issue with it either.

6:48 AM  
Anonymous sunlover said...

SquarePeg, my thoughts are in line with yours. Perhaps instead of government punishing them for making a profit, it should instead pay close attention to their business practices. Then maybe we wouldn't constantly be faced with new taxes!

6:57 PM  
Blogger oldhats said...

It's so nice to see some reasonable discussion on this topic! Instead of penalizing American oil companies for their success, we should celebrate that their success translates into huge R&D efforts (not to mention an already onerous tax bill!)

1:54 AM  
Blogger andyw38 said...

As soon as a company starts making money, our government doesn’t see it as a successful business. Instead, they are seen as a potential tax revenue source that needs to be tapped. Congress brings the oil executives to testify on why they are making so much money as if they are criminals. Congress has no idea how the oil markets work and they think that these guys are getting up in the morning calling all the gas stations to tell them to raise it a nickel. Congress needs to get a grip on reality and come up with a real energy plan that takes into account the needs of oil companies and our demands for oil in the US.

2:01 AM  
Blogger Bill Millan said...

Thanks for all the comments. I hit a nerve with this post. Seems to be general agreement that the solution is to get the Government out of the way of the oil companies.

5:53 AM  
Blogger SquarePeg said...

I think the issue of "energy" is on everyones mind these days. You summed it up just right - our government has no right to attack our oil companies and I hope the American people won't support any type of additional tax on them.

7:35 AM  
Anonymous sunlover said...

Bill, thanks for the post that has generated such great discussion! Squarepeg, I'm confident the American people wouldn't support further taxation on our oil companies since doing so would mean increased prices. However, it's not the American people I am concerned with...it's Congress. We must let them hear our voice on this!

5:18 PM  

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