The Politics of Oil: The Discourse must Change

TheOilDrum, a blog by those in the oil industry with “politically diverse” views, have released a manifesto of sorts detailing why the mainstream response to rising oil prices will not solve anything.

We strongly feel that the leaders of both political parties are not only headed in the wrong direction with respect to gas prices, but we also worry that they fundamentally misunderstand the factors behind the current situation at gasoline stations

A few factors that effect oil pices

1. Oil companies do not single-handedly determine the price of oil. The price of oil is set on the crude oil futures market.

2. The output of major oilfields is declining and that we may now have reached a peak or plateau in global oil supply.

3. The geopolitical situation is volatile, and an astute citizen may notice that every time there is news from Nigeria or Iran, the price of oil goes up.

4. Countries like China and India are industrializing at a great pace.

Demagoguery and grandstanding are not strategies for addressing our energy problems. As an alternative, the editors of The Oil Drum put forth the following recommendations:

1. It is nonsensical for political leaders of both parties to eliminate the gas tax temporarily or permanently as this will only worsen our dependence on oil by disincentivizing the innovation of oil alternatives and oil conservation efforts.

2. Both mainstream American political parties are doing their country a disservice by accusing convenient scapegoats of price gouging or price fixing instead of educating the public about how the price of gas is actually set.

3. Right now, governments should be focused on helping us cure our “addiction to oil.”

The political discourse on this topic is simply so devoid of fact, and constructive discourse so buried and out of the mainstream, that we felt we needed to raise a voice of reason. Public officials will continue to misinform and obfuscate if we allow it.

Read the whole post, the above is an abbreviated version. This is blogging at its best.

Yes, they are completely correct when they say that oil prices are set by futures prices. While oil companies are certainly exploiting this for every penny they can gouge, the real problem, as they note, is that we are running out of cheap oil at the same time that demand rises sharply. Toss in the insurgency in Nigeria and possibility of war in Iran, then prices become even more volatile.

Their real point is, this is not a short term spike. Oil prices will not be going back to $1.50 a gallon ever. So, as a country, we need to come up with a plan now, because prices are going to stay high.