Hot Air has a piece on the real reason gas prices are high. I don’t think they go far enough. People don’t want to talk about the real reason.
Gas prices are high because oil futures are high. High oil futures drive up gas prices now. Gas futures are a way for an investor to bet on where oil prices will be in the future. The people investing in futures — smart people, with lots of money that they made through smart investments — are betting that oil prices are going to go even higher. The reason that they are betting this is crystal clear to me, and it has little to do with China or developing countries. It has everything to do with Obama, the Democratic Congress, and to a lesser extent Hillary.
The closer Obama gets to the White House, and the more control Democrats get in Congress, the higher oil futures are going to go. And the investors have good reasons to do this. The main reason is supply. There is no reasonable expectation that supply will increase under an Obama administration, especially one with a filibuster proof Democratic congress. There is even a good chance that it will decrease. The first reason is domestic production.
Most oil is not produced by oil companies. It is produced by state-owned foreign oil agencies. Iran, Saudi Arabia, Venezuela — the government owns the oil in all those places, not oil companies. Oil companies have to buy it from them. The only way for the oil companies to participate in expanding supply is through domestic production. That is a non-starter in a Democratic administration. Off-shore, ANWAR, even the new reserve in the Dakotas — forget about all of it. Same supply with the more demand: prices go up.
The other half of it is refinery capacity. The biggest stickler with refinery expansion is environmental regulations and NIMBY asshats. If the Democrats win the White House and a supermajority in Congress, no oil company will be able to afford dealing with the environmental burden that would be placed on a new refinery, and wouldn’t be able to beat back the NIMBY fools if they could. If anything, oil companies might end up shuttering some refineries because of tightened environmental regulations. Less refinery capacity equals less supply, and less supply with the same demand means that prices go up.
And that is just the domestic side. The other issue is Iran and the middle east. Obama (much less so than Clinton) simply isn’t credible on dealing with Iran and the middle east. He has given every indication of being feckless in dealing with a country that has shut down the Persian Gulf before, and has shown every intention of doing it again. If there is not a credible military deterrent to Iran taking over the Gulf, they will do it. The end. When shipping can’t make it through the Persian Gulf, oil supply takes a major hit. Less supply with the same demand: prices go up.
It is the same with Venezuela. Chavez is C R A Z Y. If he isn’t kept on a short leash, there is a good chance that he will end up in war with one of his neighbors (especially Columbia.) If that happens, his oil fields stand a good chance of going up in flames. That would mean a big hit in supply. Less supply with the same demand: prices go up.
Obama has no credible plan for stablizing Iraq. In fact, he seems to be hell-bent on pulling troops out of there regardless of what it does to Iraq. Iraq is pumping a ton of oil right now (and putting those funds right back into its own infrastructure for its people — really.) If we pull out of Iraq in a way that gives the terrorists an opening to try to retake the country, the first thing the terrorists will do is blow up the oil fields and pipelines in an attempt to starve the Iraqi government of money. And they will, too, because the Iraqi government won’t be able to sell as much oil, meaning that supply will go down. Less supply with the same demand: prices go up.
Gas prices are up because oil futures are up. And this is why.
(Hot Air gets one thing right. The other side of this equation is that if there is less demand while supply stays the same, prices go down. We need to build more nuke plants. Do you think there is any chance of that happening under Obama and a Democratic supermajority?)