Published: June 19, 2009 05:08 pm      

LAUREN RICKS: Oil prices not a slick issue

Anyone noticed the price of unleaded gasoline inching up day by day?

I suppose soon we will begin hearing, once again, how the price of crude oil — and thereby gasoline — is the fault of “greedy” oil companies. The stories will begin rolling out about record profits made by such grasping companies as ExxonMobil.

I feel it is needed to stand in solitude with our great American companies rather than attempt to tear them down.

For the sake of full disclosure, my mother is an accountant with a smallish, domestic oil company.

But I do not own stock in any oil company, to the best of my knowledge.

I believe most of the blame should fall on the shoulders of obstructionist government officials — such as Congresswoman Nancy Pelosi (D — CA), and environmental groups — such as the Sierra Club and the Environmental Protection Agency.

Due to the actions of those mentioned and many others, the companies in the business of providing Americans with the energy we find so crucial, find it nearly impossible to explore and extract it.

My mother provided me with a bit of information concerning the cost of drilling a new well, which I feel is necessary to take into account. The initial cost estimate for a new well in North Texas is nearly $3 million. This amount does not include laying pipelines or processing in the plants.

I can just imagine what the final cost is after a company plants the required trees and pays the various lawyer fees.

Energy companies face a plethora of lawsuits when they seek to drill, build coal plants, build or expand crude oil refineries, build natural gas plants or do anything remotely related to energy production.

The end result is Americans have a severely restricted domestic supply of crude oil and gasoline. Much of the off-shore platforms and refineries are restricted by law to the Gulf of Mexico and surrounding areas.

I wonder what could possibly interrupt supply in the summer months? Well, besides a hurricane or five — nothing.

The commodities market, which crude oil is included, is based on future supply and demand. The speculators, yet another demonized group, buy or sale their shares based on what they think the market will do in the future.

They can base their decision on many factors including weather patterns. A major factor is current supply and how it relates to:

• predicted supply — which includes the actions of our dear friends within the Organization of the Petroleum Exporting Countries;

• political unrest in producing countries — Nigeria and Venezuela were both hotbeds during the highest spikes;

• the value of the dollar — the drastic spending taken on the by the current administration is expected to cause staggering inflation to our currency and increasing prices;

• and global demand — such as China stocking up on supplies before the Olympics to name a few.

The price of oil and gas dropped pretty dramatically just before the last Presidential election.

One reason, Former President George W. Bush lifted a decades old executive ban on drilling in the Outer Continental Shelf in June of last year.

Pelosi was quoted in the Oil & Gas Journal as saying, “The Bush plan is a hoax. It will neither reduce [gasoline] prices nor increase energy independence. It just gives millions more acres to the same companies that are sitting on nearly 68 million acres of public lands and coastal acres.”

The OCS holds an estimated 85 billion barrels of recoverable oil and 419 trillion cubit feet of recoverable gas.

The U.S. Congress then allowed the same ban to expire on Sept. 30, 2008, under pressure from both the Executive Branch and the American people.

After finally relenting, the resulting plummet in both crude oil and gasoline prices proved Pelosi to be very, very wrong. Oil went from a record high of $147 a barrel in July to $31.76 in January.

I believe this to be extremely significant.

As a matter of fact, Iranian President Mahmoud Ahmadinejad and Saudi Arabia’s King Abdullah both bemoaned the swift kick their treasuries took. Even as Americans were celebrating. Abdullah was quoted in the UK Telegraph saying a fair price is “$75 or maybe $80 per barrel.” Ahmadinejad was a bit more optimistic, saying he preferred over $100 a barrel.

Well we are getting closer to his goal now.

There is still a very simple cause — supply and demand. We are once again tying our own hands in the OCS and within several states, like Colorado. That, along with the moves by OPEC and Russia in restraining supply, a falling dollar and the Obama Administration’s unconstitutional actions against the business community, the market is left on shaky ground.

I hope we never see gasoline prices over $4 a gallon again, because it was extremely painful to all our budgets.

But at the rate the political classes are moving with cap and trade legislation, restricting supply and subsidizing so-called green energy, I don’t put much stock in that hope.

But at least we will be saving the planet as we suffer.

Right?