The Absurdity of Petroleum

Is there a full moon out or what? In my normal course of scanning news, web sites and blogs for information I discovered a veritable trifecta of absurdity regarding petroleum the other day.

My favorite article had to be about a new study arguing that eliminating federal tax deductions for intangible drilling costs and for US oil and gas production expenses would hurt oil production growth and devastate future US natural gas development.

The Wood Mackenzie study was commissioned by none other than the American Petroleum Institute. (nod, nod, wink, wink). Aren’t these the same companies (foreign & domestic) who were raking it in hand over fist from 2003 to 2008 and making record profits?

Excuse me but when any single company’s sales outpace the domestic national product of 120 nations as Exxon-Mobil’s did in 2008 I find it hard not to be a little skeptical regarding the Woods Mackenzie Study.

We have seen repeatedly that domestic oil price shocks are a result of refining and distribution problems more than even supply. Mix that in with inadequate competition in the oil industry and an ample dose of bad energy policy and you get a real mess.  Maybe this is why the petroleum giants have tried repeatedly to discredit the performance and viability of ethanol.

This might go a long way toward explaining why they have so energetically fought against “tax incentives for blending ethanol” that actually go the ethanol blender…once again oil. Forgoing short term gain for long term profit is not a new concept. It also would explain their reaction to the current effort to raise the amount of ethanol in a gallon of gasoline.

 Increased ethanol demand cuts into petroleum’s profits and their ability to manipulate the market.  The economic impact of being able to control a product we are addicted to from cradle to grave is heady and lucrative stuff.

I almost blew coffee out my nose to hear API President Jack Gerard say “tax incentives have increased US oil and gas production, and that other businesses get similar breaks.”  Tax incentives for ethanol will continue to do so too as well as providing the aforementioned market competition.

Absurdity #2 is pointed out by Peter Mass in the latest issue of Foreign Policy noting, “It’s not polite to say so, but if Americans understood just how many trillions their military was really spending on protecting oil, they wouldn’t stand for it.”

Mass continues…”To what extent is oil linked to the wars we fight and the more than half-trillion dollars we spend on our military every year? We are in an era of massive deficits, so it pays to know what we are paying for and how much it costs.”

And absurdity #3 is the U.S. imported 65 percent of its oil, or 388 million barrels in July 2010, sending nearly $29.6 billion or $663,231 per minute to foreign countries. This is the highest number of barrels of oil imported in one month since January 2009.

T. Boone Pickens responded to the increase in oil imports in his monthly update and stated,” President Obama has pledged to eliminate Middle East oil dependence in 10 years, but the latest oil imports statistics show we’re not making much progress.  In July we imported 388 million barrels of oil, which is the highest total since President Obama took office in January 2009.”

Just for the record the next full moon won’t be until August 24, so will everyone knock this off and get real.