“The American people will never knowingly adopt Socialism. But under the name of ‘liberalism’ they will adopt every fragment of the Socialist program, until one day America will be a Socialist nation, without knowing how it happened.”

Socialist Party presidential candidate Norman Thomas

Thursday, August 18, 2011

Bachmann bows out in 3.....2.....1

I like Michelle Bachmann for the most part, but she's going to quickly marginalize herself in the presidential race by making outrageously outrageous claims like this....

From CNN -- "Under President Bachmann you will see gasoline come down below $2 a gallon again," Bachmann told a crowd Tuesday in South Carolina. "That will happen."

It is easily demonstrated that no matter how much oil we pump here in the US, it will have little or no effect on the price at the pump because the Saudis will likely decrease their output to offset what we pump. So the world crude balance will stay more or less the same. Plus, even if you buy the argument that we can affect the price of gas at the pump by drilling domestically, the most we could produce would affect the price by no more than $.03. It fluctuates that much daily anyway.

The next time she gets interviewed, the person will ask her to explain how she'll decrease the price as President and whatever her answer is will be wrong because she can't. By promising something she can't deliver, she makes herself look like just another populist politician.


Bill said...

You're sounding a lot like one of those "we can't drill our way out" types here, Ed. I think you're being more subtle than that, but supply and demand apply. Where do you get the $.03? Sounds made up.

Gas has been below $2 as recently as May, 2009.

Ed said...

I read a couple of articles before I posted this and the consensus arithmatic, by the think tanks that add this sort of thing up, seemed to be that the Saudi's would lower their output to match our input thus equalizing the world crude supply, and even if we sold crude directly to ourselves, maximum pumping capability would increase domestic supply by only 3% over the next 20 years, during which our demand will likely increase.

Bill said...

With the Obama economy having 17 more months to sputter, gas may be below $1/gal. Weak economies use a lot less energy.

Seriously, a few years ago there were terminals being built all over the U.S. to IMPORT liquified natural gas (LNG) and prices were soaring. Then, we started developing the Marcellus Shale, and prices plunged. Now, some of those terminals EXPORT LNG. I'm not predicting this for oil, but nobody predicted this for natural gas either.

David said...

I'm still waiting to be able to shove ear of corn into my gas tank!

Onerous government regulations and taxes on oil discovery/production/distribution and, of course, supply versus demand are the reasons gasoline prices are what they are. It doesn't help that we have a chucklehead in the White House.

No one person can control or even predict prices for anything. Saying so is idiotic and should end a candidacy...but the American people have proven to be disappointingly resilient in their stupidity.

Ed said...

I'm not sure I understand entirely the petroleum markets and how that affects supply independent of domestic drilling and production, but here's my overly-simplistic "understanding". Correct me if I'm wrong:

First, why is there a world crude market and why are we bound to participate in it? Why can't our private companies drill here and supply our refineries for gas manufacture and leave the world market out of the loop?

My guess is that because we don't have a national oil company to underwrite with tax money, our private companies get much more money on the world market. If they supplied oil directly to domestic refineries, they'd lose money and go out of business, am I right?

For this reason, we have to purchase oil at the current world price, whatever it is and this determines the price at the pump, not any domestic energy policy changes by an administration.

You guys feel free to punch as many holes in that narrative as you can.

Bill said...

Primarily, Ed, your idea of a purely domestic oil economy could only possibly work if we could indeed supply 100% of our needs. This has not happened for many decades, and is not now possible any time soon if ever.

Secondly, it would be inefficient even if possible. Transportation costs might make it more economical to send some Alaska oil overseas and import oil from Mexico and Canada and elsewhere.

Basic economics. Who would set the domestic price and prevent international trade? Only the government could. If, as an example, our domestic price were $25/barrel and the world price were $100, there would be massive incentive to smuggle oil out. If the relative prices were reversed, the same situation in reverse - massive incentive to smuggle oil in.

I'm sure you studied the age old Econ 101 example of why it's not smart to try to grow oranges in Nebraska and wheat in Florida, but rather trade them between each other. Some oil fields have trivial production costs and others have high production costs. There are many types and grades of crude that certain refineries are equipped to handle.

A world market is just the way it is.

Ed said...

Excellently explained Bill. Too bad sound-bite politicians don't get this reality.

Bill said...

Thanks! I always get bemused hearing people rage about "why do we export Alaskan oil?" For the money, silly.

For the record, I think it was silly of Bachmann to "promise" such a thing.

Ed said...

Even populists like O'Reilly and Hannity regularly get outraged about this, as if pumping more oil will solve all our gas woes. It sounds good to viewers and boosts ratings, but it's disingenuous.

muebles en cuenca said...

The dude is totally right, and there is no suspicion.