Drill, Baby, Drill!

[InTheLight]

Remember how the liberals scoffed at Republicans plan back in the 2008 and 2012 elections to drill for more oil and get us out of dependence on foreign oil?

Well...

• U.S. oil production is booming at record levels, and U.S. oil exports have also reached new highs — 3 million barrels a day in the last week, according to government data.
• Those exports are more than most OPEC countries can produce each day and only lag two OPEC countries, Saudi Arabia and Iraq, in terms of exports.

US oil exports boom to record level, surpassing most OPEC nations

 

[Benjamin]

Yeah, I'm kind of surprised though that gas prices have gone up because I would have thought they would go down.

 

[Baptist Believer]

Yeah, I'm kind of surprised though that gas prices have gone up because I would have thought they would go down.

There's a couple of factors that affect gas prices:
(1) Refining capacity - this is a huge issue. Crude oil has to be separated into the various products and refined to make gasoline. The United States has a limited amount of capacity, so it really does matter how much crude oil you have available, it must be refined before consumers can use it.
(2) Blends for hot weather - Refiners have to adjust their blends throughout the year to account for the climate and altitude in various regions of the country so as to improve performance and minimize pollution. Moving into the summer months, this creates a modest shortage of gasoline while refiners adjust their formulas.
(3) Crude oil is an international commodity - Drillers sell onto an international market, so shortages from other parts of the world can raise the price here.

The widespread use of fracking technology opened up many gas and oil fields over the last decade, allowing our nation to get into this position. This was unexpected even a decade ago, especially for oil exploration.

 

[InTheLight]

There's a couple of factors that affect gas prices:
(1) Refining capacity - this is a huge issue. Crude oil has to be separated into the various products and refined to make gasoline. The United States has a limited amount of capacity, so it really does matter how much crude oil you have available, it must be refined before consumers can use it.

When you say the US has limited refinery capacity do you mean that in an overall sense (yes, there is a limit to how much the US can refine) or do you mean that in a specific sense (the US does not have enough capacity to keep up with their own demand)?

(2) Blends for hot weather - Refiners have to adjust their blends throughout the year to account for the climate and altitude in various regions of the country so as to improve performance and minimize pollution. Moving into the summer months, this creates a modest shortage of gasoline while refiners adjust their formulas.

Yes, they have different blends for different seasons. However, this excuse always strikes me as being hollow. It seems to me this shortage is deliberately created. OK, every year you know when the switchover to the summer blends or the winter blends is going to occur. How about overproducing and storing some surplus reserves so there is no "shortage".

(3) Crude oil is an international commodity - Drillers sell onto an international market, so shortages from other parts of the world can raise the price here.

Conversely, US producers of crude might want to sell it overseas rather then keep it here because they get a better price.

The widespread use of fracking technology opened up many gas and oil fields over the last decade, allowing our nation to get into this position. This was unexpected even a decade ago, especially for oil exploration.

I think we knew about fracking and its potential for a lot longer than 10 years. I remember the emails at least 15 years ago about the gigantic reserves of crude in the Bakken oil fields of North Dakota (which were dubbed as "mostly false" by Snopes, LOL.) I think the surprise was not that the oil was there but that we can get so much of this oil out of the ground.

 

[Reynolds]

Remember how the liberals scoffed at Republicans plan back in the 2008 and 2012 elections to drill for more oil and get us out of dependence on foreign oil?

Well...

• U.S. oil production is booming at record levels, and U.S. oil exports have also reached new highs — 3 million barrels a day in the last week, according to government data.
• Those exports are more than most OPEC countries can produce each day and only lag two OPEC countries, Saudi Arabia and Iraq, in terms of exports.

US oil exports boom to record level, surpassing most OPEC nations

Yeah, but I don't like it. We should have maintained the Reagan strategy of sucking the rest of the world dry before we tap our own vast reserves.

 

[Benjamin]

. However, this excuse always strikes me as being hollow. It seems to me this shortage is deliberately created.

Yeah, I would be highly suspicious of oil companies manipulating the price, but that seems like it would be hard to do with booming supplies.

 

[Benjamin]

Yeah, but I don't like it. We should have maintained the Reagan strategy of sucking the rest of the world dry before we tap our own vast reserves.

I used to think that but now I think oil consumption is going to go down because of electric cars and that we might as well use it while it still has value.

 

[Reynolds]

I used to think that but now I think oil consumption is going to go down because of electric cars and that we might as well use it while it still has value.

Electric cars have to charge the batteries on something. Coal, Nuclear, Hydro, or Natural gas have to be burned. You still have the heavy movers that won't be electric in the foreseeable future.

 

[Reynolds]

Yeah, I would be highly suspicious of oil companies manipulating the price, but that seems like it would be hard to do with booming supplies.

Why is gas so high right now?

 

[Benjamin]

Why is gas so high right now?

I don't know, that's what I'm asking. Supply and demand theory would seem to be if the U.S. is providing a lot of extra supply then demand would go down and so would the price, but not working that way. ???

 

[Benjamin]

Electric cars have to charge the batteries on something. Coal, Nuclear, Hydro, or Natural gas have to be burned. You still have the heavy movers that won't be electric in the foreseeable future.

I figure we have enough oil to last us until the market makes the switch and before the the "world is sucked dry" so might as well start cashing in now.

 

[Benjamin]

(3) Crude oil is an international commodity - Drillers sell onto an international market, so shortages from other parts of the world can raise the price here.

Apparently this is the case for the rising prices. The current production is not keeping up with the worsening supply gap.
If 3 million barrels a day wont do it then perhaps we should think yuge and go for 10.

 

[Baptist Believer]

When you say the US has limited refinery capacity do you mean that in an overall sense (yes, there is a limit to how much the US can refine) or do you mean that in a specific sense (the US does not have enough capacity to keep up with their own demand)?

We have just enough capacity to keep up with demand as long as all the refineries are running. The reason is that refineries tend to pollute a lot and to make their cleaner to abide with regulations is quite expensive. There are refinery expansions underway (I know of two, Exxon in Baytown, Texas and Valero in Port Arthur, Texas) that can ease the burden when refineries have to shut down for necessary maintenance. However, large refineries are located near port facilities in order to be able to load and unload crude oil and petroleum products from ships. That makes them vulnerable to hurricanes and other severe weather.

Yes, they have different blends for different seasons. However, this excuse always strikes me as being hollow. It seems to me this shortage is deliberately created. OK, every year you know when the switchover to the summer blends or the winter blends is going to occur. How about overproducing and storing some surplus reserves so there is no "shortage".

If you don't have much capacity to "overproduce," then you really can't do that.

I think we knew about fracking and its potential for a lot longer than 10 years. I remember the emails at least 15 years ago about the gigantic reserves of crude in the Bakken oil fields of North Dakota (which were dubbed as "mostly false" by Snopes, LOL.) I think the surprise was not that the oil was there but that we can get so much of this oil out of the ground.

Fracking was originally used to extract previously unavailable natural gas and limited amounts of petroleum fluids, including crude oil. With the massive advances in fracking technology over the last decade, they have been able to effective and consistently extract previously unavailable crude oil. That's what has made the difference.

 

[Baptist Believer]

I don't know, that's what I'm asking. Supply and demand theory would seem to be if the U.S. is providing a lot of extra supply then demand would go down and so would the price, but not working that way. ???

Gas prices need to be higher than they recently were for drillers and refiners to make money.

 

[Reynolds]

Gas prices need to be higher than they recently were for drillers and refiners to make money.

They were making plenty of money. Seen their stock prices?

 

[Baptist Believer]

They were making plenty of money. Seen their stock prices?

That is not the only measure.

When the price of oil falls, drilling stops. Fracking is much more expensive than traditional drilling, so the price of oil has to be at a certain level for the drilling and extraction to be sustainable.

The want to make good profits so they can employ many people to further their business. When the price of oil drops, people lose their job and the economy suffers in other ways. The market is finding a balance so there will be sustainable prices without killing the part of he economy that relies upon reasonable petroleum products.

 

[Reynolds]

That is not the only measure.

When the price of oil falls, drilling stops. Fracking is much more expensive than traditional drilling, so the price of oil has to be at a certain level for the drilling and extraction to be sustainable.

The want to make good profits so they can employ many people to further their business. When the price of oil drops, people lose their job and the economy suffers in other ways. The market is finding a balance so there will be sustainable prices without killing the part of he economy that relies upon reasonable petroleum products.

I understand that. We are now doing the exact same thing we have for decades railed about OPEC doing.