Behind those high gas prices

Monday, March 5, 2012

Gas prices have risen steadily in the last month and Nebraskans are rightfully concerned and asking why.

First, the rapid rise isn't a result of domestic oil production. We're producing more oil in the U.S. now than we have since 2003. As a matter of fact, under the previous Administration domestic production of crude declined every year, whereas since 2009 domestic production has increased every year.

Second, this has nothing to do with the Keystone Pipeline. The price of oil is set on the World Market and is impacted by a host of factors -- including unrest in oil producing nations. It isn't a simple supply and demand pricing issue. Actually, the U.S. has demonstrated the lowest demand for gasoline in 15 years but the price of crude oil has still gone up.

Several Reasons for the Rise

The cause is more likely a combination of factors, including volatility in oil producing nations and lower refining capacity in the United States -- some U.S. refiners in the northeast closed their doors late last year because their plants aren't equipped to deal with the type of crude oil that is most abundant now.

This, combined with low demand for gas, resulted in operating at a loss, so refiners shut down and that resulted in about 4% of our capacity going away.

The Energy Information Administration projects slightly higher average prices for the Midwest -- about $3.50/gallon -- for 2012 and then steady at $3.50 in 2013.

The high price of gasoline is another reason why the U.S. needs to continue working to build the renewable fuel industry.

Ethanol has helped hold keep the price of gasoline from going even higher, and will continue to play a major role in our efforts to become energy independent, while reducing greenhouse emissions and creating jobs.

Ethanol Holds Down Use of Foreign Oil

The Renewable Fuels Association reports that in 2010 ethanol sales in the U.S. totaled 13.23 billion gallons. Nebraska, the second leading ethanol producer in the country, produced 1.9 billion gallons from the state's twenty-five ethanol plants, according to the Nebraska Ethanol Board.

Of that, 4 percent goes into Nebraska fuel tanks and, because of lower costs at the pump, saves motorists some $55 million dollars annually.

The 13 billion gallons of ethanol the U.S. used meant that we imported 445 million fewer barrels of oil. That's more oil than America imports every year from Saudi Arabia, our third leading supplier. By importing less oil we saved $34 billion.

Ethanol production is expected to continue to increase to 36 billion gallons by 2022 as provided for in the renewable fuels standard passed by Congress.

While the prospect of continued high gas prices is not pleasant news, it emphasizes the need to continue the production of ethanol and increase efforts toward other bio fuels and renewable fuels, including wind energy. That's the good news, especially for Nebraska, which continues to be a leader in renewable fuels.

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  • Senator Nelson;

    I find it odd that you don't mention speculation in oil futures on the Commodities Exchange as also being a cause of increased gasoline prices. Several recent studies have brought to light that speculation may account for as much as $.56 cents in the price of gas at the pump.

    A recent letter (3-5-12) submitted to the Commodity Futures Trading Commission by 23 Senators and 47 members of the House, told federal regulators to enforce provisions of the Wall Street Reform Law and curb speculation in crude oil markets. I notice your name is not included with this letter, leaving us wondering what your position is on the issue.

    A statement from you clarifying your position on this issue would be greatly appreciated.

    -- Posted by Geezer on Tue, Mar 6, 2012, at 11:06 AM
  • The Senator fails to point out that every drop of the consumption decline of oil and gasoline and diesel in the US has been replaced by even greater demand for exactly the same materials in China, India, Brazil, etc. Not only is crude oil traded on world markets, so too are gasoline, diesel and jet fuels.

    He also fails to mention the fact that the increase in production of oil in the US cannot be due simply to the policies of the Obama Admin. As we often are told by radical environmentalists, "drilling now won't result in more crude oil for at least 5 years." So, for an increase to have occurred in 2009 and beyond, the permitting for all those projects had to have occurred long before 2009. President Obama would like nothing more than to put the US oil business out of business. He won't say that, because he knows it will result in a massive defeat in Nov 2012.

    And as a proud and hard-working member of the "evil refining industry," I also will remind the Senator that according to the US Energy Information Agency (part of the government) his cherished ethanol industry exported some 1.2 BILLION gallons of ethanol during 2011. So the next time he or any other politician complains about exports of gasoline or diesel, remember that little fact about ethanol.

    My industry exports gasoline and diesel, because we have a competitive advantage over refiners in the destination countries, or those countries have insufficient refining capacity for local demand. If you wish to tax those exports, are you then also willing to tax the exports of corn, wheat and soybeans? We export lots of those commodities as well.

    My industry provides 100s of thousands of well-paying jobs to Americans in America. A person with a high school education can easily earn $60,000 a year PLUS BENEFITS in a refinery or working in the exploration and production areas, such as the Bakken Shale or Eagle Ford Shale.

    Frankly I am sick and tired of a crowd of idiotic, no-knowledge politicians in Washington DC denigrating my industry. And Americans had better wake up to the fact that THEIR industry may be the next one to be denigrated by idiotic politicians in Washington DC.

    -- Posted by clh8712 on Tue, Mar 6, 2012, at 11:22 AM
  • *

    clh8712 - I appreciate your information, and find that I must add to the part concerning domestic production increases. As you stated, the oil-flow for permits granted during this administration wouldn't be realized for about half a decade.

    The permits for public area drilling, during this administration has, in fact, declined, and there is still a moratorium on gulf leases. However, the increase can be linked to drilling on private land, and on long-term leased land; something the government can do nothing about...yet.

    But it's nice that Mr. Nelson has a desire to carry the Presidents water on this issue. I'm surprised he didn't remind us to get tune-ups and air up our tires.

    -- Posted by Mickel on Tue, Mar 6, 2012, at 2:37 PM
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