The oil of this topic is Light Sweet and Brent crude oil, (and other grades) and how the cost of it will impact Maine’s tourism industry, or may impact it. Perception is a tricky little gadget that uses unpredictability as its main cutting edge, so who knows for sure what may happen this summer. But the big issue many Maine tourism based businesses are fretting over is the price of fuel at the pump. Regular unleaded to be specific. Although my opinion is that the price of diesel is really the bigger cause for concern way up here on the Nation’s sunrise coast.
A long time ago, January of ’05 to be sort of precise, I predicted that the oil prices were going to be skyrocketing to record highs. I believed that by the end of ’05 we would be looking at around $3.00 per gallon for 87 octane, and by the end of ’06 around $4.00. That little cutie Katrina pretty much left my predictions in the same shape as she let the Gulf Coast region. But we’re right back on track and we’re looking at some pretty high prices still the same.
If the major retailers hadn’t all gotten on the price gouging wagon and pissed off the buying public after Katrina struck, I think we’d be nearer the $4.50 mark right now, instead of $3.30 or thereabouts. You see, the problem with prices has less to do with George Bush’s big oil connections than it does to how the rest of the world looks at the US. A lot of people are bashing big oil for a lot of reasons, none of them really legitimate, and claiming that they are solely responsible for these high prices, simply because they are a bunch of selfish, greedy little right wing evil capitalists. Hmmm. Load of crap.
If the liberal left would simply step back and take a deep breath of oxygen for a moment, the picture might become a little less hazy. Sure, oil profits are humongous, and growing. These guys are in business to make money, and lots of it. Why shouldn’t they? That’s what people go into business isn’t it? To make a lot of money? That way they can sit on the beach and oil up that gorgeous girl. But you know, oil profits are not up because the price of gasoline keeps climbing. Oil profits are up because consumption keeps increasing. Just like the Great Blue Mecca (Wal-Mart), oil profits are up based on the increasing volume of consumption. We’re using more and more oil every day. If you want to reduce the big oil profits, reduce consumption.
Supply and demand doesn’t seem to be an issue here. I’ve read several different reports from maybe a half dozen or so analysts, and the ratio of supply to demand puts the supply slightly ahead of demand to varying percentage points from each of the reports. So there seems to be plenty of the stuff around.
Another interesting study I came across at http://www.wtrg.com/prices.htm gives a pretty concise overview of the history of the price of oil. There’s lots of facts and figures out there that can easily confuse the average reader astray, and a glib spokesman can make the figures say pretty much whatever he wants them to say. But there are some prevalent truths out there that can help us make some sense of what’s going on, and what we should be prepared to expect this coming tourist season.
Economists have this neat little trick they use to put the world financial picture in focus when making their observations, but we rarely see it in use on the nightly news. When dealing with an economic discussion, references to dollars are usually put into the value of the dollar during a specific year, or time frame. In this case the study puts the value of the dollar into a 2006 valuation rate.
So, according to this study, if we put all oil business to a valuation based on the 2006 exchange rate, the price of oil has remained constant from 1897,nearly up until 2007. The price has remained stable for over one hundred years. So what has happened to have caused this big increase in the price of a gallon of gasoline at the pump? Several things are really leading to this situation, and in spite of what the Bush Bashers want to think, namely Pelosi and other Left Wing Socialists in Washington, he is not the cause of this increase, and neither is the war in Iraq.
One item leading to the increase is the declining number of US owned oil rigs in the world. Government regulations and political antipathy against the oil industry in general have been souring investors desire to maintain relationships with the oil companies, causing declines in production from US owned rigs, and shutting a growing number of rigs down.
A second factor is the disruption in the supply chain caused by a sharp decline in Venezuela’s production, caused by internal unrest and political agitation by the Communist controlled unions in that country. This can be coupled with an ever increasing demand for product from third world countries, and a burgeoning Asian economy. The safety hedge between having a huge excess reserve and actual consumption has disappeared. This means that oil gets sold for what it’s worth to whoever wants to pay for it. At whatever price they can afford to pay. If they can’t afford it, they can’t buy it.
The US is no longer the world’s largest consumer of the product, so we no longer have the same impact on its price. We’re not playing by our rules anymore. And because of that, we have to pay what the market, now controlled by others, will bear. Added to the mix of problems in determining why gas is so expensive is the fact that the US dollar has a plummeting value around the globe. Remember a while back when the Canadian dollar was only worth about sixty of our cents? Well, that’s not the case anymore. For a bit there, it was worth about one hundred and five of our cents.
The same thing is happening around the globe. The US dollar has a shrinking value, and other nations currencies have increasing value. Therefore, it costs us more to buy product, such as oil, produced in other countries.
There are two reasons, in my opinion, that are causing this shift in the values of world currencies. The first reason is the perception other countries have of the US. Where we were once a strong, stable leader, we are in fact becoming and aged, toothless lion. The bickering and infighting in Washington , led by the left wingers, leave people with the impression that with the next election looming, America will become headed by a person who has no ability to lead a nation in a strategic direction. It has become a situation whereby people don’t really care who gets elected, all the candidates are the same.
Therefore, whoever becomes our next President, will be pretty much powerless, subject to the whims of the growing Socialist movement here in America. Many people disagree with my assumptions and disavow any connection to the socialist agendas, but in reality, that is what we are creating as a society in the United States, and it has led to these high energy costs.
As I see it, the biggest problem we need to tackle if we are going to change the direction we are heading in is the Gross Domestic Product (GDP) of the United States. We need to bring lost manufacturing jobs back to this country. We need to get people off of the welfare wagon train and back to work at real jobs. Not these so called service sector jobs like in call centers either. That type of business does not create income. It provides paychecks, that’s for sure, but it produces nothing we can sell to another nation, reducing our value as a nation.
So. If you want to see the prices of everything start to go down, stop complaining about problems that the media has created by promoting their own political agenda. Start complaining about the high taxation and overregulation businesses have to wade through every day.
More on this another time, but in a nutshell, be looking for a lot of foreigners roaming around Maine’s Tourist Traps this Summer…………