Tuesday, February 28, 2012

The mythical oil embargo: Keep government away from the pump

I've heard many people over the past week telling me "Obama beeds to get off his ass and fix this Oil price issue." That's interesting, because any other time these same people were complaining Government and "O" need to stay out of the Markets and Business alike.

I guess it all depends on how that involvement affects one’s lifestyle.

But let's be clear, the last thing we want in Government involvement in the price of Oil and history proves it.

In 1973, Egypt (supplied by the Soviets) organized a coordinated Arab attack against Israel on the Yom Kippur holiday. Pres Nixon, designed an airlift to help supply the Israelis with food & armor and within days the Israelis were able to regain their military power and defeat the Egyptians.

A truce was constructed to avoid fututre conflicts, thereby leaving the US and the Soviets at bay, if the conflict continued both were ready to jump in with full military action.

However, in the fall of 1973 the OPEC countries decided cut their production and raise prices close to 70% to all countries that helped Israel. The US fell victim to a price war.

Within a few months, OPEC raised their prices again and the US saw oil prices from heating oil to gasoline skyrocket.

Want did President Nixon do? He imposed a ceiling cap price on oil!

By setting a ceiling cap on oil it meant demand went through the roof thanks to an artificial price, but chaos ensued afterwards for the Market and Business because supply was already low.

People kept buying gas on the cheap, yet the gas station owner was still paying the increased cost set by OPEC and the market.

State governments tried every gimmick to slow the thirst, such as an “even-odd license plate” purchase plan that failed to slow the consumer. The United States had come to a tortoise pace thanks to Government involvement of setting artificial gas prices.

Just about anything that had to deal with Oil had almost tripled in price thanks to Government’s flawed ideas. Government started changing Speed limits and requiring better gas mileage on Domestic cars which did nothing to change the damage already done.

Now remember those people I spoke of earlier, yep, you guessed it, they even want some sort of military action on Iran to get prices down as well.

So here we are again, this time a Democratic president pushing environmental beliefs on the Oil and Auto Industry, yet gas prices have raised for the last 6 years.

As I’ve said before the current “embargo” is artificial, as we do not receive oil from Iran and Iran did not cut production nor raise pricing. Iran took the oil once sold to Britain & France and sold it to India. The artificial pricing we see today is caused by Oil speculators and the fear many feel is caused by the Media.

There is no oil shortage, it’s out there waiting to be refined, yet thanks to boardroom wisdom, Big Oil is closing refineries because they are not cost productive.

Yes, it’s true they are building newer refineries but those are being built for the heavy/thicker tar sand oil, the older refineries are useless trying to work with the tar sands.

It was quietly announced that Keystone XL will complete their pipeline from Oklahoma to the Gulf of Mexico and resubmit their application for the pipeline from Canada to Nebraska, once environmental reports have been processed. Yet, oil pricing still goes up.

Of course there's the political aspect as GOP and their candidates are saying the Keystone pipelone is not a win for "O" and "O" calling it as so.

Folks, a President cannot force Big Oil to build refineries for Crude Oil nor should government build them for it as well. A President cannot control pricing, just like a President cannot create jobs with tax incentives. It's been proven. A company will hire when they are in need and Big Oil will build Crude refineries when they see a need as well, to which neither are looking.

Let’s get this straight; things don’t appear overnight they take time.

Media, GOP Candidates, and Con-talkers all act as if a refinery gets built overnight or the Keystone pipeline will be pushing oil tomorrow.

First of all, there is no guarantee that the Keystone will be sold in the US, as Keystone announced a deal with China and Europe late in 2011. And if it does sell in the US, it will sit until it's refined as gas prices rise thanks to speculators and Market.

Secondly, get rid of the speculators and watch prices go down. It's like saying you see a short supply future for Cocoa Puffs due to a lack of "puffs." People run to the grocery stores and find out the company jacked up the price due to speculation. People will still buy at the inflated price but when new "puffs" are found, people sigh in relief but the price only drops a small fraction because the company sees a greater demand for the product.

Speculators cry wolf way to often and it's time for the Wolf bite their heads off.

Slap the tap, don't spill a drop of Guinness as it's a precious commodity. Pay the political tab

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