It seems to me that the good old US of A has plenty of oil to be drilled, but it's like nuclear plants, nobody wants them in their back yard. It couldn't hurt to get some of the stuff out of our own country instead of being held by the balls by the Saudis. Anwar? North Dakota? WTF? Of course that is the kind of politically incorrect shit that gets politicians in trouble when they suggest it.
It's a complex matrix of supply, demand and regulation. The US gets most of its oil from Canada and Mexico, so the importance of Middle Eastern oil to the US, while most definitely a factor, is not such an overriding factor as it may seem from the hyperbole about it. However, what
does happen in the Middle East is supply control to inflate the price, and the war keeps the whole region on edge and causes futures traders to further inflate the already inflated price of oil.
Back home you have a shitty economy that has forced the Fed. to cut interest rates in order to help out domestically, which has caused the currency to tank. For example, the base rate in the US is 2%, while in Brazil it's 11%. So, even if oil was not impacted by other supply and stability issues, it would keep getting more expensive in dollar terms, because as the dollar loses value it takes more of 'em to buy a barrel of oil from foreigners. Even Canadians.
And then you have the refining end of the spectrum, where regulators and NIMBYism have restricted the ability of refiners to increase capacity. It's true that there hasn't been a new refinery built in the US in decades, but it's also misleading because there has been significant expansion in capacity at existing sites during that time. Still, it's no where near enough to keep up with demand, so the price at the pump goes up. Refiners are running on razor thin margins right now. Eventually the full force of $120/barrel oil will get passed down to us consumers at the pumps, and in the cost of everything else which requires oil to be manufactured, shipped or sold.
Ironically, if we had expanded refinery capacity over the years, gas at the pump may not be any cheaper. If the price is lower, the demand increases and so the cost of the raw material drives the price again and hey presto it's $4/gallon and the country's infested with refineries.
What to do? Grab yer ankles and grin and bear it. The impact of all of this will be felt the worst, as usual, by the less well off. Those who have a cheap, old car that they have to use to get to work, and which cannot afford to replace but for which they cannot afford the gas. they'll buy gas because they have to, and not buy other things. So all the money being sucked up by the price of gas and taken from elsewhere will cause retail sales will suffer, which will hit everywhere.
Happy Tuesday everybody!
