Heard an economist and energy industry expert from the University of California speak on Sunday morning. The points of interest:
-- Two factors are driving the cost the gasoline: oil pumping capacity and refinery capacity.
-- Pumping capacity is limited because demand is simply exceeding supply.
NOTE: How he can say that when we have an 8 year high level of crude in storage is beyond me -- but that's what he said. Also, the Saudis do have extra capacity to pump but are choosing not to use it.
-- Refining capacity is limited because of two reasons (1) no new refineries have been built since 1969 and (2) a huge number of refineries were closed over the last few years.
NOTE: No kidding, when you create a bottleneck and restrict supply, prices go up.
-- The oil companies are making their big money on the increased price of crude. Their refining margins have fattened up as well. But the refining margins are peanuts when your pumping margins are so huge.
-- So many of the oil companies have merged that they can now spike the price of gasoline simply by shutting a refinery down for maintenance. So investigations for collusion are pointless simply because it isn't even needed anymore.
NOTE: This, by the way, is exactly what the electricity generating companies did to the state of California during our rolling blackout days -- and the Boosh administration, through the Federal Energy Regulatory Commission, said nothing was wrong the entire time. Only when recorded phone calls and e-mails came out from executives and traders ordering plant managers to take their plants offline did anything happen -- in the courts. Meanwhile, everybody here got hosed for billions -- and we couldn't get it back because outfits like Mirant and Enron declared bankruptcy.
No new ground broken here. Of course, being from Berkeley, he wants to tax gas a couple of bucks a gallon so low income people can get their gas subsidized plus a few other wacko socialist commie ideas -- but, overall, it was interesting to hear his perspective.
Last edited by b_a_betterperson; 05-01-2006 at 12:20 PM.