Dear America,
There isn't much of interest happening in politics at the moment. Trump is still rampant and a few die-hard Republicans are still trying to catch Hillary Clinton in a lie--admittedly she is too clever, by her own estimation, by half so that is to be expected--but that is the state of affairs in our country today and we will be sufficiently exposed to it as to be inured by the time it all comes to fruition in elections. Frankly, I'm there already. But there are matters of more imminent import that merit attention from all of us, and though many of them stem from political venality, self-interest and dubious ideological consanguinity actually rooted in self-interest, those are not the salient features of them. Things like the price of gasoline impact us in our daily lives and, while the ability of nefarious participants in the market play a role, their political affiliations are secondary, meriting consideration when we go to the polls but constituting only the background noise in our lives from day to day. I'm speaking about the most recently prominent of actors in the play, the refiners.
As a backdrop for the piece, consider the fact that we export over 115 million gallons of petroleum distillates, something approximating 50 million gallons of gasoline alone, every day. The consequence of that practice has always seemed to be that gasoline prices were inflated here and the result was political pressure for things like the Keystone XL pipeline and more drilling in the Gulf of Mexico with less regulation of it. But the free marketers' rate of success has been mottled. Unfortunately for us, the "drill baby, drill" mantra of the Republicans and their allied business interests has succeeded in large part, thus rendering the next petroleum harvesting catastrophe a certainty. On the other hand, "fracking"--that is diluting and pumping petroleum out of the oil shale beneath the ground in various fields across the country--has led us to the dubious distinction of being the largest petroleum producer in the world, though the only real consequence is that the SUV is back and more barely post-pubescent young men are driving 400 horse power pick-up trucks than ever...except for one thing. The price of gasoline is lower than it's been in six years, and it may go below $2 per gallon at least one expert on the subject has predicted. The free market is finally working...in spite of itself...in spite of the vertical and horizontal integration, sponsored by its political apologists, that has led us to the slaughter at the hands of the virtual cartel of domestic oil producers for years, which brings me to the refiners.
While listening to one of those business programs on NPR a couple of days ago, experts on the petroleum refining sub-industry were pontificating on the subject of the price of gasoline, and at least the two that were polled claimed that refineries were working at 90% capacity and the availability of gasoline in certain regions of the country--the mid-west in particular--was under pressure though there is a glut of petroleum world-wide driving the price per barrel of oil down to the $40 range, another six year low. But the problem for the refiners is that, no matter how much they threaten darker days for us petroleum addicts, they seem to be getting farther and farther away. The consensus has always been that energy prices have to go much higher before people will change they consumption habits, but that seems to be wrong too. For example, more and more people are switching to LED light fixtures and bulbs, which in our household reduced our electricity consumption by between 17% in the summer when the AC is running to 25% when we heat with gas in the winter. And the proliferation of companies manufacturing solar panels and installing such has been notable. If you listen to commercial radio you will hear ads for such installation companies all the time, and my guess is that within a decade, solar generation panels will be so affordable that most people will either have them or plan to get them, and there is evidence to that effect. In most states, if not all, if you generate your own power your electric meter runs backwards, but also in most states, there is a limit to that required repurchase of power by the electric utilities: 15% in Connecticut. It isn't higher because the power companies have resisted it claiming that it interferes with their infra-structure plans necessitated by spikes in demand. But the nationwide grid that serves us all is already there to supply the power needed in all kinds of circumstances, and you never hear about "brown outs" anymore. Similarly, the warnings of the refining industry that any refining outage, and they purportedly occur all the time, might cause a dire shortage of petroleum distillates. Yet, the price of gasoline keeps on falling, though momentary spikes continue to be generated by a speculative international oil market run by the top 1% as if it were their own big ATM. Still, the trend is downward as far as price is concerned, and despite the resurgence of gas guzzling vehicles, while summer gas consumption is purportedly up 6%, that demand still doesn't exceed...or even equal...supply, it seems.
We may be seeing the beginning of a new trend in which the erstwhile free market of the moneyed few in our world ceases to be their ally and actually begins to operate in the fashion in which they have been telling us all along that it does...though it hasn't. It's petard time you rich people. Prepare to be hoisted.
Your friend,
Mike
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