Since the election of President Obama, domestic crude production has steadily risen for the first time since 1985 reversing nearly a quarter century of decline.
Simone Sebastion reports:
"The United States' rapidly declining crude oil supply has made a stunning about-face, shredding federal projections and putting energy independence in sight of some analyst forecasts.
After declining to levels not seen since the 1940s, U.S. crude production began rising again in 2009. Drilling rigs have rushed into the nation's oil fields, suggesting that a surge in domestic crude is on the horizon.
The number of rigs in U.S. oil fields has more than quadrupled in the past three years to 1,272, according to the Baker Hughes rig count. Including those in natural gas fields, the U.S. now has more rigs at work than the entire rest of the world." EMPHASIS OURS
At the same time, domestic demand is down dramatically.
As we said yesterday, the answer lies in the fact that there is no "free market" for fossil fuels. Supply and demand simply don't matter much in the equation.
First of all, unrestrained futures speculation is a major factor.
Second of all, the reality that we are obligated to maintain our international price agreements effectively explodes the myth of ever achieving "energy independence" with petroleum.
Kevin G Hall writes:
"U.S. demand for oil and refined products – including gasoline – is down sharply from last year, so much that United States has actually become a net exporter of gasoline, unable to consume all that it makes." EMPHASIS OURS
If this makes little sense to you it's because you, like most Americans, have been sold a bill of goods with quaint oversimplifications about "markets" as they were once understood.
Grant Smith and Aaron Clark report on the complexity of the forces involved:
"The highest U.S. oil production in nine years is failing to dissuade Goldman Sachs Group Inc. (GS) from predicting that the price of the country’s most-traded crude will keep climbing.
The New York-based bank says West Texas Intermediate will gain 7 percent by August to trade within $5 a barrel of North Sea Brent, even as rising output swells the nation’s inventories. Citigroup Inc. (C) takes the opposite view, forecasting that WTI’s discount to Brent may widen to $20 a barrel this year, from about $15.79 yesterday.
“There’s a danger in trading the Brent-WTI spread right now with any strong fundamental conviction,” Olivier Jakob, managing director at Petromatrix GmbH, a Zug, Switzerland-based oil researcher, said in a phone interview yesterday.
The outlook for WTI is being clouded by a deluge of oil to Cushing, Oklahoma, the delivery point for WTI futures, amid a production boom that has cut America’s dependence on imports to a more than-10-year low. The logjam is likely to be relieved in June, when flows through the Seaway pipeline are reversed, giving producers in Canada and North Dakota direct access to refineries on the Gulf coast, according to Goldman Sachs, which correctly forecast Brent would decline in April last year and recover the following month."
While the GOP is sharpening its knives and rooting for prices to continue to skyrocket as an electoral weapon, their framing of the current situation is simply not rooted in reality. They blame Obama for the potential crisis facing consumers but simultaneously deny that supply and demand have been supplanted, not just by predatory domestic traders, but also by an artificial international trade structure from which we cannot hope to ever disentangle ourselves.
With this in mind, so-called "green" arguments for alternative energy development are nearly irrelevant. We must engage in massive investment in solar and wind for the simple fact that it's the smart move for our bottom line.
Of course, not poisoning ourselves would be a splendid side benefit.