Oil prices, gasoline prices, diesel prices, jet fuel prices, everything oil based is in a swirl of disinformation,, misinformation and general purposeful ignorance. While lots of press and opinion makers, regular citizens, businesses, politicians and even the post office are making the point that the hardships of a fast increase in oil and its derived products, the major facts of why gets missed.

So lets get honest, at least with ourselves, about the one part that’s closest to us.. It started with supply and demand. Less than ten years ago the supply was so far beyond demand that oil was priced under $10 per barrel. Oil companies flirted with financial disaster, merged into larger organizations for economies of scale, and consumers bought larger and heavier vehicles. The economic growth expanded to include more countries and billions more people. For a decade, little money was available to expand exploration and development and the oil business both the free world’s independents and the government companies holding 95% of the reserves simply worked on efficiencies and cost controls with a certain amount of cut throat competition and expansion as new operations came on line.

Obviously, demand caught up to the supply. The populations of both China and India and other countries wish to ease their lives and improve their economic productivity like in the developed world. To boost economic growth and keep their power those governments have subsidized first the growth and of late, the use of oil products.

Now the spread between supply and demand is very narrow – even small disturbances send markets out of reason – and some leaders, terrorists, rebels and any newsmaker plays into oil as way to generate attention and often to provoke a rise in oil prices. It doesn’t take many smarts to realize that even threats can make billions when you’re a dictator needing money to buy off the population. It’s just a perfect storm for speculators looking to buy an interest in oil long enough to sell later for a profit. With any little bit of bad news, a profit can be made.

But supply and demand isn’t so simple. Crude oil comes in a couple dozen different “grades” that are marketed differently and require refining facilities that are flexible or specialized to make what can be in short supply, the end products like gasoline, diesel and jet fuel, etc. Its really a market after a market and factually speaking, the conversion of crude oil to products market has been much more volatile than the crude oil market. But, through the filter of the media and politicians and the race to protect monetary value in currencies, the crude oil market has been the main determinant of the price of products. You see, crude oil never has come up short over the past three years, or even come close.

All news and opinion to the contrary, there is enough production capacity for crude oil. What there is not, is precise matching of refining capacity to match the crude oils available in the most price economical and production efficient way. That hard fact can make a “shortage” seem real when it isn’t oil at all when the weather by a hurricane or flood disrupts transport, or some small war or rebel group cuts a pipeline or a dictator shoots off his mouth. The shortage isn’t crude oil, its refining capacity of the crude oil that can be bought cheaply. Who’s is to blame there?

Sorry, it isn’t “Big Oil.” These companies have been working and have acquired a century of experience that is passed along to each generation of leadership. Actually, they and their competitors, the independent refiners, have been planning for and working to prevent this very situation. The situation would be much different today if the planning had panned out and the development done. There is some blame to be laid.

You’re likely to get angry, but here it goes.

Chevron has a refinery that serves California, the most expensive gasoline market in the U.S., that they have been trying to upgrade to meet the consumer’s needs with the lowest cost and available crude oil supplies. Now well into the fourth year of trying to get government permission to proceed, the upgrade remains locked up by the special interest activists. The opposition is based on a faked up set of emission claims that the activists have made a “truth” through repetition and third party or even further removed estimates. But there is hope of a kind. A straight through approval could have been worth as much as 6 cents of more per gallon – perhaps more. That means there is money on the table to do a deal. Or a shakedown of Chevron first and California consumers in the end.

Under the auspices of Attorney General Jerry Brown, the Attorney Generals Office and the City of Richman California are angling for 900,000 tons of greenhouse gas emission reductions – the wildly erroneous claim of the environmentalists – to be done either at the refinery or in Richmond or elsewhere in California (as doing that at the refinery itself won’t fit the engineering projections). The deal becomes Chevron must purchase 450,000 tons of “carbon credits” annually from the City of Richmond or the State of California at about $10 per ton or effectively a tax $4.5 million dollars a year. If Chevron can sleep with the extortion the deal could get done if the “Public Officials” can betray the environmentalists. No government people seem the least embarrassed by the whole thing. This is still extortion, even if the state’s top law enforcement official is doing the deal.

Even being a corporate good citizen and being part of the community can backfire with incredible betrayal that comes to pick the consumer’s pocket in the end.

Last Monday the Wall Street Journal reported that the Sierra Club and the Natural Resources Defense Council managed to squeeze the U.S. EPA into blocking the ConocoPhillips refinery expansion in Roxana, Illinois. With lots more oil available to come in from Canada now, refinery capacity is way behind in processing available supply to match to demand. The project would have increased U.S. crude processing by 440,000 barrels a day. The Illinois EPA has already passed and approved the expansion. The two environmental groups petitioned the U.S EPA to block it with the allegation that ConocoPhillips wasn’t using the best available technology for reducing sulfur dioxide and nitrogen oxide emissions.

How to square that with ConocoPhillips also being a member with these two groups in the U.S. Climate Action Partnership is unknown. When it comes to anti oil, anti consumer, anti economy, the environmentalists know no bounds of doing harm to citizens, companies, economies or eventually their own welfare. Funding these kinds of groups may be paths to our own destruction of civilization.

In the end the consumer and “Big Oil” are on the same side. Along with jobs, investment, long term community security simple law abiding ethical conduct of government affairs are at risk. It is more than a little alarming that a State Attorney’s General Office has a role in extortion. It isn’t surprising, but a structural issue has gone astray or person or a few at the U.S. EPA is executing power beyond the scope of what an ordinary citizen might consider appropriate.

The oil market operations closest to us are the most distorted by people who are guilty of making your pain at the pump. Keep it in mind the next time you’re hit up to donate or support some environmental cause. The result from such support may be our own economic destruction.


8 Comments so far

  1. Al Fin on June 16, 2008 7:19 AM

    I agree. The bad guys here are not the big oil companies.

    Big money “environmental” lobbies have become a type of organised quasi-criminal professional force for extortion. Increasingly, they exist to feed their own coffers, and will use any tactic to do so. Too many of them provide virtually no beneficial social service anymore.

  2. Allan Webb on June 17, 2008 9:00 AM

    Having lived in Venezuela for several years, I formed many friendships with North Americans who lived in Venezuela and worked in the oil business. Every single one of them concurs with you, that the problem is one of refineries and not one of production. They also concur that it is the environmentalist extremists who are blocking the upgrading of existing refineries and development of new ones.

    I am one who believes we should do all in our power (without being extreme) to save / manage our natural resources and reduce our impact on the planet. I have children and grandchildren and I want the same quality of life I had (or better.)

    On the other hand, however, I think it’s reprehensible how these groups hold the entire country (and by extension, the entire world) hostage by disrupting our economy and degrading our way of life.

    When you look at the way a few extremists (in this case environmental extremists)begin to have such a profound negative impact on the quality of life for everyone, you have to wonder how much different they are than the religious extremists of the middle east.

    Both have a desire to push their particular agenda on the rest of the world. Both their actions result in a disruption life as we know it. Both are willing to use whatever methods they deem necessary. Both think their cause is the right cause, and as such are willing to push their “rights” (the rights of the few) in front of everyone else’s “rights” (the rights of the many.)

    I’m no constitutional lawyer, but I wonder when the rights of the few became more important than the rights of the many?

    I believe congress should do everything in their power to stimulate alternative energy solutions. I believe we should get away from gasoline / oil as a fuel source altogether. But I believe there is a right way and a wrong way to accomplish that. Holding the world hostage is not the way.

  3. Boater on February 26, 2011 12:24 AM

    This is such a great resource that you are providing, and you give it away for free. I enjoy seeing websites that understand the value of providing a prime resource for free. I truly loved reading your post. Thanks!

  4. Shannon Janosek on May 17, 2011 11:52 PM

    I’ve been checking your blog for a while now, seems like everyday I learn something new 🙂 Thanks

  5. Joan Dafoe on August 30, 2011 1:06 PM

    Interesting read, perhaps the best article iv’e browse today. We learn everyday cheers to you!

  6. Tanna Mcmaster on September 1, 2011 6:13 PM

    Of course, what a great site and informative posts, I will add backlink – bookmark this site? Regards, Reader

  7. Luis Arnst on September 8, 2011 12:11 PM

    Good! Thank you! I always wanted to write in my site something like that. Can I take part of your post to my blog?

  8. Malcolm Geigel on September 27, 2011 6:12 PM

    Hello, this is my first time i visit here. I found so many interesting in your blog especially on how to determine the topic. keep up the good work.

Name (required)

Email (required)


Speak your mind