The price of oil dropped $2.19 today, to $117.91, spurring a stock market and dollar rally. Sounds like good news. Except that it’s dropping because the market thinks more people won’t be able to afford to drive their cars as much. Who’s up for a “staycation?”
Oil Prices Tumble Again; Stock Markets Surge [NYT] (Photo: hanapbuhay)
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@Hongfiately: Honestly, I think the best reason to drill for oil off coast is that it’s there. Why leave something valuable in the ground? Even if it doesn’t have a large impact on prices it will generate jobs and tax revenue, and make our cars go. It’s worth opening up a gold mine even if it’ll take 10 years to get the gold out.
In fact, the BEST time to drill would be when prices are high.
@RagingBoehner: Right. Speculators don’t just make money by “driving prices up”. They make (and as you’ve said they can lose big) money when price moves in either direction.
@ekasbury: win for “imagication”.
lolz
@Bladefist: Thanks for leaving personal views out of this. Though I have my views, I tend to try and be politically neutral (which is why I said both sides won’t have an impact) unless the discussion is already partisan.
If I remember what I saw on the Daily Show correctly, the 2030 estimate comes from a study done by the government itself. However, I believe the study was about when the oil would “have an effect”, not necessarily when the oil would reach the market. The segment didn’t go over the details of the assignment, so I’m not sure how they define it. Even if you ignore the time it takes to find and drill the oil, there’s no guarantee that it will do much of anything to the price. Sure, Econ 101 will tell you more supply = lower prices, but it depends on how supply we’re talking about (think % increase, not total increase), and a bunch of other factors related to the real world.
Pretty much I’d say that both proposals have their merits and their risks, but either way I’d advise against holding your breath. For the most part though, I’d say Obama and McCain are telling us what we want to hear.
@mackjaz:
Ahh, the corollary to “it’ll take x years” is “it’ll only last x years.”
The 1002 Area of ANWR is a desolate Arctic mud plain, far away from the wilderness area.
That national speed limit of 55 did wonders for the economy in the late 70s. Now I just need a tire gauge to go with my sweater.
I’ve been doing staycations for 8 years. It’s been great. It means I paid off my insane credit card debt racked up during my insanely stupid immature years, paid off a sensible car, and will have enough bank come January to pay all of grad school. Woo!
@ThinkerTDM: I like to tell my husband that 2 years before he married me there was a gas station on my way to work that had gas at $0.8999/gallon. Those were the days! (Yes, less than 7 years ago.)
Whoops. I got a little happy with the nines. It should be $0.899.
@Hongfiately: You’ve cracked open an Econ book and read the introduction. Congratulations!
Okay, current prices in a market economy are set – in part – by anticipated events. However, they have to be significant events of a reliable nature.
If the experts in the DoE – who know more of such things than you and I – state unequivocally that drilling wherever Big Oil wants to will take years to produce results and the reserves added to the global supply are insignificant, then it won’t have any impact worth mentioning. Unless you assume that global markets are stupid (this would be a bad bet, by the way).
Until you have the resources of the US Department of Energy hiding under your desk, you have to cede to the experts.
Related note:
[www.nytimes.com]
@Hongfiately: Yes, I know there was widespread failure to adhere to the speed limit, but I trust you get my point? Unless Americans are willing to give up some of their irrational exuberance and show some restraint, I will never support short-term (depends on your perspective, eh?) blind adherence to big oil’s status quo. And we all know how important my personal support is!
In thirty years, where will we be? In exactly the same place, except the ANWR will be trashed, and our kids will be having this very same discussion. How about we… plan ahead?
@Bladefist:
The way I understand it the major bottleneck to getting oil to customers isn’t the crude, it’s the refineries…refineries that have been closing down and going into disrepair because the oil companies have been passing their profits on to share holders for short term gains rather than reinvesting in their own infrastructure.
@Trai_Dep: This discussion has been very civil.
@ekasbury: I think you win Comment of the Week! I need to steal that imagication.
So sad that we have very few environmentalists around. How about we stop raping this planet of all it’s natural resources? Start focusing on alternatives and population control. Why does no one seem to care about future generations! It’s the I want it now, the cheaper the better mentality that will be the demise of planet Earth.
@RagingBoehner: Problems are that accidents happen. Too many to bother citing. And when they do, they’re ruinously expensive to clean up. And it’s us that pay for it, rather than those whose fault it is.
There are also tens of billions of dollars in fishing, gaming, tourism – every other sector besides Big Oil, in other words – that’s destroyed when tankers crash, pipes burst, aquifers poisoned or environments despoiled.
Hence, we’re selective about where Big Oil gets to drill. Is the trade-off worth it once the true costs are factored in compared to the benefits? Not so much.
@mackjaz: ?
It still is. Citing a topical, appropriate column by the US’ paper of record isn’t uncivil…
@Trai_Dep: I guess I was referring your less-than-respectful comment about cracking open an econ book.
@Trai_Dep: Global supply seems like a static concept, but it isn’t. Markets are dynamic because supply is a variable that is dynamic. That’s right out of the textbook and onto the trading floor. Oil is down another $4 today and there’s been a 20% decline from its high in July. That’s not insignificant. Oil traders are selling their contracts short precisely because an increase in supply is a very real possibility. So, while “years to produce oil and bring its refined derivatives to market” is accurate, the statement of “years to produce results” just isn’t being played out in the market.
@snowburnt: That’s a good point. Also, we could reduce the price of gas by having a national, 1-type of gas, instead of every state having their own mix of gasoline.
@Trai_Dep: Why do you call it Big Oil? Do you stop at Big Cheeseburger, before going to Big Retail?
@Hongfiately: If it were going to increase tomorrow, maybe. But if it’s not going to happen for months, much less years, none of the people trading it will care.
@RagingBoehner: The original idea was that there are a lot of hurricanes in the Gulf of Mexico, and if a rig was hit badly, there’d be an environmental disaster. Technology greatly lessened the risk, but the law stayed on the books. When Katrina came around, the offshore rigs didn’t leak, but the refineries on land nearby weren’t so lucky. Some argue the rigs and refineries are related; others don’t believe so. This is just an FYI as to why some might not want to drill for it.
The oil drop is prices is primarily due the to the fact the speculators are predicting that the US will be unable to purchase fuel. If the economy was going great guns as it has been then we’d buy no matter what.
The fall is less due to choice and more due to economic necessity. That slow down is expected to hit China as the slowing US economy reduces factory orders. There has already been layoffs happening in China due to the economic slow down. That in turn has reduced the industrial demand for oil to ship products and run factories.
It not so much a win as a sign of a global economic contraction.
Sort of like the claiming the tax burden on Americans is less than before and realizing that is because unemployed people pay less in taxes.
@Bladefist: Also, the guy with the really cool name (T. Boone Pickens) says we should all switch to natural gas because it’s currently cheaper and has fewer emissions…plus it’s very plentiful in the US
@Trai_Dep: Partisan political attacks are not allowed.
Let’s keep things on topic and no name-calling (backhanded or otherwise).
@Bladefist: Part of the problem is that as soon a prices drop, consumption will increase and push prices back up. Yes, that’s the nature of the economy, but the result is that I don’t think drilling everywhere will lower prices because the historical American response has been to consume even more.
@Hongfiately: You meant the tire guage and sweater as a joke, but keeping tires inflated would save more gas than offshore drilling would provide. Turning down the thermostat would save more energy than offshore drilling and ANWR combined. Seems foolish to mock someone when they’re actually right and you’re wrong, no?
@mackjaz: I get your point, but the 55 mph national speed limit did absolutely nothing for the economy in the 70s. Me? I’m with Sammy Hagar.
@Trai_Dep:
If you’re going to make specific statements like this, it’s really more effective to provide proof. I’m not saying you’re wrong – I’m just saying I have no reason to believe you.
@Tiber: Fair enough. I’ll concede that there’s some risk of spillage if you drill offshore — but is that quantifiable? For example, is driving an oil tanker from the Persian Gulf more or less risky than a stationary oil rig?
Also — what of the argument that most of the leases are unused? My understanding is that’s so that others don’t “drink their milkshake” so to speak — that just because you don’t have a rig on top of an area doesn’t mean you’re not extracting oil from that area. Any geologists out there know more about this?
@Tiber: The rigs did leak. That’s just a talking point by Faux News and pro-drilling folks. Here is a link to satellite images of those spills. The rigs leaked 750k gallons. In the industry, anything over 100k gallons is considered a “major spill.”
[www.katrinadestruction.com]
[skytruth.mediatools.org]
@ARP:
I’m going to make the same suggestion to you as I did Trai_Dep. If you’re going to make specific claims like this, you really need to provide some link or proof.
@ARP: Increasing production of oil and natural gas isn’t done for conservation purposes.
Keeping your tires inflated and being sensible about energy use are sound advice — properly inflated tires are more of an immediate safety issue than anything else, but I digress. Again: good tips, practical advice. But as the basis of a national energy policy? Not ready for prime time.
@ARP: The tires inflated comment, made by Obama is true. Inflated tires, make better gas mileage. He stated 3% better. He is right.
But, he also stated, in his first comment ever about it, that if we all inflated our tires, we wouldn’t need to drill. This is wrong for a couple of reasons.
1) He is assuming everyone’s tires are not fully inflated. If all our tires were under pressurized, and then we pressurized them, then yes, we could save a ton of money. But most people, have tires with plenty of air. Most service stations check tires when you do oil changes. So therefore, he isn’t going to be able to make up that 3%
2) If everyone inflated our tires, things would look good. But then we would be like, aight, that helped, what else can help? Oh, we should drill. See, so it’s never going to end.
@Git Em SteveDave displays attention-grabbing vanity: I believe that Steven Colbert used that word to describe John McCain while Barack Obama was touring the Middle East and Europe a few weeks ago.
@ARP:
Don’t leave out efficiencies that have come over time thanks to technology. Engines, vehicles and entire supply chains are a lot more efficient than they were in years past.
@ARP:
The National Academies said:
I understand that we’re releasing unfortunate amounts of crude into the ocean, but what of the 47 million gallons per year that naturally enter the ocean?
@Ben Popken: You know, a lot more people may follow your comment policy if you yourself don’t make personnel remarks. He did not say anything good or bad about ‘staycation’, just that he had never heard of it. I think it’s highly hypocritical of you to continually post PSA telling people to not make personnel attacks, then make one yourself.
My link, sorry: [www8.nationalacademies.org]
@Git Em SteveDave displays attention-grabbing vanity:
it’s the same place “Thundersnow” came from. “Staycations” came around as a popular thing this year because of the gas prices.
1st, to “drilling would take 10-20 years to make an impact.” There is already infrastructure for drilling in many areas, most notably the Gulf of Mexico. Opening up more of that area for drilling wouldn’t take 10 years to see a benefit. Also, increasing the supply will lower the cost. It might not be less than today’s price due to an also increasing demand, but it will be much lower than the future price if no supply is increased.
2nd, addressing the “evil speculators.” Speculators are a normal part of market economies. They are also the reason the oil price has declined so sharply lately, by speculators selling oil short. They are no more evil than people who kept buying overpriced dotcom stocks in the early part of this decade. Stupid maybe, but not evil.
Finally to the inflated tires people: how many people do you know who drive around on flat or low tires? Even if a vast majority did and we saved 3% on gas prices, why not do that and drill? Why stop at only a 3% savings if you can have more?
@Trai_Dep:
They have been saying it will take 5 to 7 years to see any effect of drilling for about 20 years now. If we wouldve started 20 years ago we would already have been seeing benefits for several years. That excuse is a lame one because eventually that time will come but you have to start some time.
@Bladefist:
I disagree that we should “let the market find a way”
Oh, don’t get me wrong, the market will always find a way to iron out any irregularities, but we may not like the way it does it.
Perhaps gas will go up to $8 a gallon, and our poorly designed government controlled highway system will be useless to most Americans, bringing us to the brink of complete economic collapse.
After which we will finally start taking alternative energy seriously.
But of course, all of this could have been avoided by having some tax dollars directed at a energy research.
The fact is, the free market sucks for some things.
Usually the market wont choose the “best” technology, just the cheapest.
And by cheap I don’t always mean in dollars, just cheap as in easy to use or less overhead.
Why do you think Microsoft Windows is so popular?
We wouldn’t have computers today if the military didn’t throw billions of dollars at computer research for several decades.
IBM was content to manufacture clocks and typewriters, and never would have invested that kind of money in research.
No one would.
You really think the oil companies will invest in what could potentially be their own obsolescence?
Of course not! They have shareholders to answer to!
@david_consumerist: Staycation is older than that THe first place I heard it was on “Corner Gas”
A CTV production and I think I was watching an episode that was a couple of years old.
It had nothing to do with gas and everything to do with being to lazy to plan a real vacation.
@Bladefist: Why do you call it Big Oil? Do you stop at Big Cheeseburger, before going to Big Retail?
I do shop at Big Box Retail and get my phone service from the Dark Side.
(It’s totally fair to call it Big Oil. Exxon had revenues of a little over $400000000000.00 last year. If anything, we should call it “Ginormous Oil”.)
@Bladefist: Oh and “Big Cheeseburger?” Merely $22b last year. Exxon had twice that in profits after taxes.
OK, let me ask anybody who’d like to respond, a question:
- I’m a typical middle-class American consumer, but with a little bit of an eye on conservation. (I used 200 kWh less in July 2008 than in July 2007 because of changes in power usage at home, for example)
- I have an OK mortgage – I can make my payments, have a decent interest rate, altho my house has dropped in value such that I’m upside down, but still…
- I drive now, a car that is more energy-efficient than any I’ve had before, at an average 28+ MPG in my personal usage records.
That said, there are a couple cars that I would *love* to own, that get worse gas mileage – and if gas goes down just enough, I’d probably pick one of them up, considering the lower prices for lower-MPG cars these days… For instance, at $3 a gallon I would still love driving certain cars or trucks that get 15 MPG, considering what I would pay for that car or truck. (This assumes the car prices don’t react as fast as the pump does)
My question: Do you see a time when automotive enthusiasts would be able to buy and enjoy the cars they love, even as the whole price rise, or even Peak Oil “thing” looms? Or did this point in time simply pass, never to be seen again? I’m just curious here, and the question was spawned by the comment that said as prices go down, demand will go back up, and prices will go back up to folllow.
Cheers
Dave
@Michael Belisle: Commas, please? Eyes…crossing…
Or maybe that’s the Large Hadron Collider starting up….
[www.engadget.com]
BTW, I quite enjoy “Staycations” – mainly because I like the time off work, but can’t find too many places that warrant spending the $$ it would take to vacation there. So, I like to stay home and tackle stuff around the house, or just vegetate.
@Michael Belisle: The Federal Government have revenues much larger than that, but no one seems to notice the had expenses much larger than that. Hey, at least Exxon can balance their own budget.
Plus, they pay many more times in taxes what they earn in profit. Not that it’s a bad thing — but the biggest winner in Exxon’s ascendancy is the U.S. Treasury.
Since we’re citing sources here: [www.exxonmobil.com]
@jammadave: Dave, looks like it all depends on two factors:
1) Your concern about the impact your actions have on the environment, meaning a. do you believe in climate change, and the currently hypothesized causes, and b. Do you care about being hassled by environmentalists.
2) How much money are you willing to spend in pursuit of your love of cars?
I think the answer to your question will be found in your feelings about those two points.
@jammadave: Get the car you want but don’t make it a daily driver. It’s really that simple.
Depending on tastes you can even get an older car american with a 6 that is light on gas.
As frame of reference. I had a 1978 Pontiac Le Mans 4 door with the v8 305, no ac. I could get over 30 mpg highway and mid 20′s city. It sat 5 comfortably and had plenty of torque even though it was only a 305. That as 100% stock and the engine was not maintained as it should have been.
If you were to install an electronic fuel pump and or a fuel injection system,with an eye to efficiency, I’d bet you can do even better.
I am keeping my eye out for an old tempest, nova or chevelle with a stock 6. I’m pretty sure one of those things tuned up nice will net you in the 20′s mpg consistently. Modify the engine to modern standards and you’d get more HP and better MPG.
@ARP: My bad. It’s not that they didn’t leak, it’s just that the leak from the rig itself was relatively small compared to how much it might have leaked without the newer technologies, and compared to the amount that was spilled by other means. Most of the leaks came from where it was stored offshore. Here was where I read about this.
@RagingBoehner: Potentially yes. The ban on offshore drilling is specific to the Gulf of Mexico, which is an area which has a lot of hurricanes. They are free to drill in other parts of the ocean. A tanker can get weather forecasts and avoid the storm. An offshore rig is fixed in place, so dangerous climate is a major issue. In fact, the ban started because a rig was hit by a hurricane, and caused a major oil spill.