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Home > Politics
Oil Drilling Deception
by Bob Powell, 4/21/11
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Summary:

Since 2005 oil exports rose by 483 million barrels while imports fell by 377 million barrels. The result: net petroleum (imports minus exports) coming into the U.S. was 25% less in 2010 than in 2005.

Exporting more and importing less oil creates a shortage of oil available to be refined in the U.S. Had operating refinery capacity kept expanding per the 1992 to 2004 trend, there would have been 642M barrels greater U.S. refining capacity in 2010. Even ignoring slower expansion, idle refining capacity increased by 10X from 2004 to 2010; idle refining capacity in 2010 was 216M barrels greater than in 2004.  See the graphs below.

Bottom line: Artificially restricting the supply of oil in the U.S. available for refining yields higher gas prices/profits and selling U.S. oil on the world market at prices driven higher by speculation does, too. Very clever.

Jump to my column in the Colorado Springs Independent on Oil Drilling Deception

Update 8/31/11:

From 2005 to 2010: As oil consumption declined by 0.6B b/yr, gas prices increased from ~$2.40/gal to over $3.50/gal. But why?

Because Operating Refinery Capacity has not been rising as it had from 1992 through 2005; this has restricted Operating Refinery Capacity by ~0.4B b/yr along with increasing Idle Refinery Capacity by greater than 0.2B b/yr. Clear manipulation of oil made available for refining in the U.S. is evidenced by Petroleum Imports falling by ~0.4B b/yr and Petroleum Exports increasing by ~0.5B b/yr. Yes, exports increased!

Oil corporations decreased imports and increased exports to manipulate the market and keep gas prices high. Oil corporations withhold U.S. supply to drive up gas prices/profits AND they sell U.S. oil on the international market at prices driven up by speculation to increase profits, too.

That's very clever. And it's economic treason that plunders U.S. resources for profit, fundamentally undermining the U.S. economy and robbing Americans.

See the charts on this on oil market manipulation, prepared for the Americans for Prosperity's so-called "Running on Empty" Tour; it shows in pictures (graphs) the story of oil market manipulation since 2005. It shows graphs on consumption, operating refinery capacity, idle refinery capacity, imports and exports, all with the same scale.

U.S. Natural Resources are being Stolen and You are being Robbed!

Letter to Rep Doug Lamborn (R):

Here is the link to my 3/11/11 letter to Rep Doug Lamborn (R) regarding his statement on his website. His recommendation on energy:

The most urgent and immediate solution though is to ramp up domestic production of oil and gas right now. As a member of the House Committee on Natural Resources, I support utilizing the vast resources our nation has to offer. We can take positive steps to lower energy prices immediately, if only the majority leadership in Congress is willing to bring production measures to a vote.

I point out that, because so much oil is being exported, this is a lie and and ask him four questions:

  • Why are you lying to your constituents and America?
  • Why are you representing Oil Corporation interests rather than those of the American people?
  • Why are you pursuing policies that increase Oil Corporation profits, rather than working to lower energy prices?
  • Why are you committing economic treason, undermining U.S. economic and national security?

Of course, I have not received a response.

Added 5/30: Can you say "market manipulation"?

Exxon Profit Up 69 Percent as Gas and Oil Prices Boost Top Five Oil Companies By SUSANNA KIM April 28, 2011

Exxon Mobil and Royal Dutch Shell today reported first-quarter profit increases of 69 percent and 30 percent, respectively, from the same period last year. With rising gas and oil prices, analysts expected the five biggest oil companies -- with Exxon as the largest -- to report that they are swimming in revenue.

Exxon earned $10.7 billion in the first quarter, up from $6.3 billion. Shell announced profit of $6.3 billion in the first quarter this year, up from $4.8 billion.

Added 4/24 on global oil supply vs U.S. oil supply and refining capacity

There's a current popular explanation for gas price increases. It's that oil is a global commodity and that oil prices are set on the world market. Despite the fact that there's currently a global surplus of oil, the story goes that it's speculation that drives up world oil prices, which also drives up U.S. gas prices.

It's primarily the oil oligopoly, not the speculators, driving up gas prices in the U.S.
But there's more going on. Exporting more and importing less oil creates a shortage of oil available to be refined in the U.S. Had operating refinery capacity kept expanding per the 1992 to 2004 trend, there would have been 642M barrels greater U.S. refining capacity in 2010. Even ignoring slower expansion, idle refining capacity in 2010 was 216M barrels greater than in 2004. But none of that would be of use anyway, because there were 860M barrels less oil imported into the U.S. in 2010 than 2005 (that's the sum of 483.4M barrels increased exports and 377.0M barrels decreased imports).

Artificially restricting the supply of oil in the U.S. available for refining yields higher gas prices/profits and selling U.S. oil on the world market at prices driven higher by speculation does, too. Very clever.

See the graphs of operating refinery capacity proving these points below the commentary.

We know Enron created artificial power shortages in California, so why would there be not be awareness that oil corporations might similarly create artificial oil shortages in the U.S.?

That "speculators are the problem" is also convenient. Consider that Obama was less than forceful about taking on BP during its oil geyser disaster. BP controlled the use of dispersants and the so-called "cleanup" despite public outrage. It still controls access to some polluted beaches. Which group would this administration be more inclined to take on, oil corporations or speculators? You know the answer.

 

[More graphs at Petroleum Prevarication. This appeared as a "Your Turn" column, Big Oil's great deception, in the Colorado Springs Independent on 4/28/11].



Oil Drilling Deception

You're being robbed, your pockets pilfered. As gas fills your tank it empties your wallet. You know it.

Some blame high gas prices on "evil government" preventing more drilling in the U.S. They cry, "Drill here, drill now!" Our own Republican congressman, Doug Lamborn, writes on his website: "The most urgent and immediate solution though is to ramp up domestic production of oil and gas right now."

U.S. oil exports up; imports down. Yet so many are fooled into thinking more drilling in the U.S. and in deep waters offshore, with proven extreme risks of catastrophic failure, will increase oil in the U.S. Fooled again!
Put bluntly, that's a lie. Increasing quantities of oil are being exported from the U.S. With high gas prices, the U.S. exports oil? You've got to be kidding. Really?

Yes, really. The numbers: since 2005 oil exports rose by 483 million barrels while imports fell by 377 million barrels. The result: net petroleum (imports minus exports) coming into the U.S. was 25% less in 2010 than in 2005. [Data from here].

Some argue more exports are OK; oil can be exported to places like Japan, which are closer to oil from Valdez, Alaska, so we can import more from places closer to, say, San Diego. False! First, San Diego is closer to Valdez by 1200 miles. Second, they're importing less, while exporting more.

How can this be? Proponents of increased domestic production maintain it will put more of "our oil" on the U.S. market and lower gas prices. Not so. Once they get those leases, any oil they get is "oil corporation oil", not "our oil". They can sell it anywhere they like. And they do -- for greater profits.
Petroleum Exports soared and Imports fell, taking oil off the U.S. domestic market to artificially restrict supply in the U.S. Note: I need to correct this graph, The y-axis is labeled correctly, but the text within the graph should show M(illions), not B(illions). This graph from later article: US Oil Exports Soar on this site.

"Free market" ideologues, like Rep. Lamborn, maintain that the magic of the "invisible" solves such problems. Yet they call for continuing greater government subsidies for fossil fuels than for renewables, though investing in clean energy could create four times as many jobs as investing in the oil industry. This is insane.

The oil industry is an oligopoly (dominated by few sellers). Each can be aware of the actions of others, enabling tacit collusion to manipulate prices without formal agreements. They can restrict supply to raise prices in much the same way a monopoly does.

Public Citizen reported in 2004 that the largest five oil companies operating in the United States (ExxonMobil, ChevronTexaco, ConocoPhillips, BP and Royal Dutch Shell) control 48 percent of domestic oil production, 50 percent of domestic refinery capacity, and 62 percent of the retail gasoline market. U.S. Government Accountability Office testimony in 2004 was that "2,600 mergers occurred in the petroleum industry from 1991 through 2000, mostly during the second half of the decade. Ultimately, the reasons cited ... generally relate to the merging companies' desire to maximize profit or shareholder wealth."

Mission accomplished. The oil oligopoly exports more and imports less to reduce supply, create scarcity, drive up prices, and increase profits.

Artificially restricting the supply of oil in the U.S. available for refining yields higher gas prices and profits here. And selling U.S. oil on the world market at prices driven higher by speculation increases profits, too. Very clever.

What's more, you get to pay them to do this! The Environmental Law Institute reported that the federal government subsidized fossil fuels much more than renewables for fiscal years 2002-2008: $70.2 billion to coal and oil compared to $29 billion for renewable fuels. More than half of renewable support, $16.8 billion, was for corn-based ethanol, which drives up the price of food. Bloomberg reported in 2010 that global government subsidies for fossil fuels were $557 billion in 2008, dwarfing the $43 to $46 billion for renewables in 2009.

This market manipulation plunders public resources for private gain. It increases gas prices. It pollutes, increasing sickness and death. It undermines economic and national security. It's economic treason.

How long will you tolerate this? As for myself, I'm done. What "conservatives" call the "heavy hand of government" should use anti-trust laws to smash these corporate behemoths. Better yet, nationalize the industry to stop the theft and rebuild, not erode, economic and national security.

Yes, that's "free market" heresy. To quote Republican House Speaker, John Boehner, "So be it."


Bob Powell, Ph.D. physics, MBA, is a consultant using systems thinking.

 

The gap between what oil refining capacity would have been had trends continued vs actual. The trendline is the 2nd order polynomial fit from the next slide.
Note 4/26/11:

I deleted a paragraph,

"What's worse, Exxon Mobil profits were $19 billion in 2009. They paid no federal income tax and got a $156 million rebate from the IRS. Talk about sick."

Politifact has disputed this; it turns out that their tax returns are confidential. Exxon Mobil insists that "once its final tax bill is figured, Exxon will owe a 'substantial 2009 tax liability'." They refuse to say what's "substanital". A possible alternative would be to include this:

What's more, Exxon Mobil reported a record $45.2B profit in 2009. But using offshore wholly-owned subsidiaries they legally sheltered the cash flow from operations, meaning none their income taxes went to the IRS.

I decided to just omit this for space reasons, the picture is damning enough as it is.

Data for graphs from the U.S. Energy Information Administration

 

Trend from 1992 to 2004 of oil refinery capacity with 2nd order polynomial least-square fit.

Trend for idle oil refinery capacity with 2nd order polynomial least-square fit.

 


URL: http://www.exponentialimprovement.com/cms/drillingdeception.shtml

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