So last time we talked supply and demand and oil/gasoline prices in the US, there was quite a bit of disagreement about whether or not US demand for gasoline makes any difference in gas prices at the pump at all. There was agreement that gasoline price increases are pretty elastic (they respond to oil supply cuts and demand increases) but are obnoxiously inelastic when it comes to price decreases (reduced demand doesn’t lower the price of gas.)
We’ve now got evidence that increasing domestic oil production also does not lower the price of gasoline at the pump, because hey, we’re producing more oil domestically under this President.
The United States’ rapidly declining crude oil supply has made a stunning about-face, shredding federal oil 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 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 United States now has more rigs at work than the entire rest of the world.
“It’s staggering,” said Marshall Adkins, who directs energy research for the financial services firm Raymond James. “If we continue growing anywhere near that pace and keep squeezing demand out of the system, that puts you in a world where we are not importing oil in 10 years.”
There are doubts that energy independence is that close. But many say the booming shale oil fields in Texas and North Dakota and the growth of deep-water drilling in the Gulf of Mexico will allow the nation to cut its reliance on oil imports significantly over the next couple of decades.
But wait…Republicans have told us that increasing oil production now will lower gas prices now. Certainly Johnny Volcano and Moose Lady ran on a platform like this in 2008. And yet…gas prices are now going up. People keep forgetting that President Obama has, on several occasions, said he would increase domestic energy production and work to get technologies on the road to decrease consumption. Certainly one of the very, very minor bright spots in the Great Recession is that it lowered demand for gasoline in the US.
“Drill baby drill”? Hey, that’s what we’re doing. And yet we’re facing $4 gas this summer. Not only do we have decreased demand, we have increased supply brought on line. But gas prices are still high. Here’s another example of President Obama’s policies doing what the Republicans said we should be doing but of course the President not getting any credit for it. But the big money continues to be put down on long positions.
Hedge funds and other large speculators boosted their net- long position in crude futures to the highest level in nine months, according to the U.S. Commodity Futures Trading Commission. Managed-money bets that prices will rise, in futures and options combined, outnumbered short positions by 233,889 contracts in the week ended Feb. 14, the Washington-based regulator said in its report on Feb. 17. Net-long positions rose by 28,180 contracts, or 13.7 percent, from a week earlier.
And lo and behold, the long positions are again driving prices up. But we’re told speculation is “a scapegoat”. Well, it’s not demand, and now it’s not supply. Either we can’t do anything about gas prices by affecting production and demand in the US so the Republicans should shut it, or we need to have a little talk about rampant commodities speculation.