As I informed you 3 weeks ago the gasoline prices are on their way to $2.00 a gallon national average before Obama takes office in January. November 4 will put us at $3.00/gallon or a little better as a national average. Multinational oil companies have a target of $2.00/ gallon by Jan 2009 inauguration day. As I mentioned earlier they have made trillions and their cash coffers are full. The only way to keep us hooked is to make gas “cheap” again (in relative terms) which they hope will make us forget about Wind, Solar. and alternative fuels. It worked in the mid 80’s, when government abandoned research in wind, solar, and alternative fuels after asserting the US was going for independence from foreign oil, because gas was below $.89 a gallon. At that time oil companies took their profits and invested in large land holdings, because home and land prices had plummeted . . . . ..sound familiar. Between 1997 and 2006 they sold most of their land holdings for substantial profits . .and the cycle starts again.
My former colleagues in the oil industry assure me the plan is still in tact. There will be ups and downs on the way, but that’s the only way to not be so obvious in price control through the futures market.
Since a lot of money is made on heating oil in the winter, they plan on making up any “loss” by charging more for heating oil. Listen to the news. They are already setting the northern states up by “leaking” news that home heating prices may be up 15-20% this winter, even though crude oil prices will be substantially lower than last winter.
Big oil got scared when the Democrats in Congress stopped purchasing oil for the Strategic Reserve and that is when the speculators made their last hurrah seeing oil spike one last time before starting the recent decline. The halting of purchases has had the accumulative affect of adding 2 days of inventory to the United States gasoline reserves. By January 1, it will add 4 days of inventory to the national gasoline reserves. At that time we will start to purchase for our national oil reserves again.
The public outcry for alternative sources of energy must be stopped to preserve the U.S. dependency on oil, which is the plan of Big oil. Gasoline could be manipulated to $1.49 to force out independents and keep us dependent by making alternative sources “too expensive”.
Posted in 2008, Alternative fuels, democrat, economic recovery, ECONOMICS, foreign oil, Gas Prices Going to go Down, gasoline prices, income tax, investment, national debt, OBAMA, oil, savings, TAX REFORM, Uncategorized
Tagged 2009, alternative energy, Alternative fuels, congress, gasoline prices, heating oil, oil, oil futures, oil industry, Oil Prices, Solar, Wind energy
Just to pass along good news on the economic front here on September 16, 2008.
Some of you know that my previous career was in the oil and gas industry for 15 years. After talking to several of my contacts in the industry, it appears gasoline will be below $3.00 a gallon by election day in November. The O&G industry is concerned that the push for green and renewable energy will continue to drive down demand. It is anticipated that the US Senate and Congress will have gains by the Democratic Party which is “bad” for big oil. If indeed the 2 houses of government see gains by the Democrats, (They don’t care who’s President; they care who runs the US legislative branch.) O&G will use futures contracts to attempt to drive oil to $60/barrel or lower.That could mean gasoline at the retail level will be $2.15/gallon by inauguration day, (Take the current price of a barrel of oil divide by 38 and you get the approximate wholesale price of gasoline. Then for Texas add 56 cents for transportation, taxes and profit.)
Todays crude price is $93 a barrel and gasoline at 2.48 a gallon (+.56) that says retail Texas gasoline should be 3.04 in about 3 weeks. Normally it takes 3 to 4 weeks for inventories to shake out so if todays crude prices hold or continue down it could take about 6 weeks for prices to work their way down. Hurricane IKE has slowed the gasoline fall because 12 refineries have not started back up after shutting down before the hurricane, but they will be back up in 2 to 3 weeks as workers move back to Houston Baytown Texas City area. That will make the election day target still viable.
This is the same tactic O&G used when I was there in 1980’s. Prices were driven down after spiking to $40 a barrel to $10 a barrel. Ronald Reagan stripped Solar and Wind power companies of their tax breaks. As a result US solar technology was sold to Japan and Windpower technology sold to Denmark. One of 3 wind turbines for US are from Denmark (we’re just buying back our own technology)
I’m not trying to address politics. I’m just sayin’ this how the O&G industry sees competition in the Energy space.
As economists say, this assumes “that all things remain equal”, in other words no climatic or geopolitical catastrophes.
It will be interesting as the above conditions mean that gas will probably drop 40 cents a gallon by October 15. One of the political parties will try to make hay on this “phenomenon”. Watch to see Republicans claim victory on getting prices from $4.00 to $3.00. It’s rally the Democrats threat of new sources of energy that’s causing this reaction.
It’ll be interesting as Big O&G is really in control at his time. If gasoline gets to $2 a gallon we’ll consider it a gift, and Big oil will drive out much energy competition and be plenty profitable.
Instead of a “windfall profits tax” on oil, The US needs an import tax of $2.00 per barrel on all oil imported from foreign countries excluding NAFTA partners in North, Central and South America. This will keep domestically produced oil cheaper and encourage independent oil operators to continue their quest to discover new oil fields in the US. It will also help pay for reducing our national debt.
Since I was instrumental in advising Democrats to impose the windfall profits tax in 1980’s, I believe it is important to note that I believe a different type of tax is now necessary. We now import twice as much oil as we did in 1982. We need a foreign oil import tax to (1) reduce the Iraq war debt that President Bush has imposed on us and (2) to provide an incentive for domestic production.
It is well known that independent oil operators have discovered most of the inland oil fields in the United States. We need the independent “wildcatters” to help us discover more American oil. The oil fields in the Western hemisphere are enormous and inland. Bush helped by rescending the Executive Order on offshore drilling which has started the major oil companies to plan for offshore drilling in offshore leases that are already approved. and we should see results from that in about 18 months. We can raise billions of dollars to reduce the debt (debt-reduction.html) our children are now burdened with because of the Republican party. We will depend less on China and Japan to buy our treasury securities to keep our economy from total collapse.
I have proposed a $2.00 a barrel import tax on this foreign oil that would be reduced $1.00 when foreign imports fall below $100.00/bbl. What we must remember is that Democrats have put a floor of $100.00/bbl on imported oil. That was done when the bill to stop buying oil for the Strategic Reserve had the clause that purchases would resume when oil fall below $100/bbl. When blended with the free trade Nafta oil that would be about 3 cents a gallon. Also we need a 5 cent a gallon tax on imported gasoline to keep foreign sources from circumventing the oil tariff. This revenue will fund tax incentives for alternative sources of energy.
This is an easily imposed tax, and does not have the complicated calculations and oversight that the Windfall Oil Profits Tax of the 1980’s imposed on even the smallest of oil operators.
Along the same line, expect gasoline to be below $3.00 by election day, pending any geopolitical uprising or catastrophic disaster involving crude oil production. The timing of the Russian invasion of Georgia is in part a reaction to falling oil prices. Russia’s main source of government income is from the high price of oil. Crude oil was in a free fall headed to $80.00/bbl when Russia invaded Georgia. Russia knows the more it stirs the pot higher oil futures contracts will go. Speculators are selling their futures into the current bounce in oil prices. The volume in petroleum futures contracts is decreasing and the NY Merc locals are getting out. When the volume of trades decreases, prices decrease. Fast.
Posted in 2008, economic recovery, ECONOMICS, foreign oil, investment, Iraq war, national debt, TAX REFORM
Tagged alternative energy, DEMOCRATS, domestic oil, foreign oil, gasoline prices, Iraq war, NAFTA, national debt, offshore drilling, Oil import, OPEC, Russia, solar power, strategic reserve, Tariff, wildcatters, Wind power, windfall profits, windfall profits tax