by Mike Bryson

Portland, OR
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The a short article from last Thursday, TheState covered an interview with oil lobby economist John Felmy.¹ The quick interview shows that Felmy lays the blame on higher oil prices in decreased supply from U.S., Nigeria, Venezuela and Iraq oil wells, as well as the fact that no refineries have opened in the US in ten years due to bureaucracy. He doesn’t cover the fact that the dollar may have lost half its value in that ten year time frame; fiat inflation caused by the Federal Reserve’s doubling of the amount of dollars in circulation over the decade.

In New York, Governor George Pataki signed into law yesterday a bill to make it easier for New York gas stations to sell E85 and ethanol-blend alternative fuels.² New York has some harsh overregulation that prevents gas stations from selling fuels that their brand doesn’t market. This reduces the supply of fuels that a particular gas station can purchase. New York is not the only state with such harsh restrictions on what a company can provide to the consumers. The New York Association of Service Stations and Repair Shops executive director said with only 200,000 alternative fuel vehicles on the road, there’s little market for E85. Are we seeing preferential treatment for a few companies that do offer the E85 blend?

Republican Governor candidate Dick DeVos is offering a campaign promise to cut farm property taxes and develop Michigan into an alternative fuel center.³ DeVos said that he believes the governor’s role must be to provide leadership that promotes an environment of sensible regulation, low taxes, a favorable business climate and a skilled work force for producers, processors and marketers of Michigan’s agricultural products. Considering that previous Michigan politicians are mostly to blame for the state’s destruction through excessive taxation, regulation and bureaucracy, don’t put much faith in DeVos’ promises. Michigan has a very unique opportunity to attract hundreds of businesses if they removed all barriers to competition; their high number of available laborers would bring many corporations back if not for the state’s outrageous preferential treatment. Current Democratic Gov. Jennifer Granholm just signed into law bills that lower the state tax on each gallon of ethanol-blended fuel to 12 cents, down from the 19 cents figured into a gallon of regular gas, and that lower the tax on biodiesel fuel from 15 cents per gallon to 12 cents. Another new law offers grants to gas station owners who want to sell E85 and biodiesel fuel. Here we see some good things (lowered taxes) and some terrible things (state grants) that will likely not just wipe each other out but make things worse for new businesses who will have to pay for the grants through higher prices to the consumers.

Twelve new FlexFuel vehicles have been announced for 2007 by DaimlerChrysler, Ford, General Motors, Mercedes Benz and Nissan.⁴ FlexFuel capability allows the car to accept regular gasoline, E85 or usually a combination of the two. The FlexFuel vehicle makes the most sense as it doesn’t force owners to use ethanol, but it might increase the demand for local stations to carry the alternative fuel.

Discuss this report at the oil report forum.
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Mike Bryson is the news editor of the Global Unanimocracy Network. He lives in the Portland, OR region where he works as an IT business developer and point of sale consultant. E-mail Mike with news links or comments on this report.

Today’s oil news is pretty thin with most of the newsrags reporting that investors are sitting and waiting for the Fed report to gauge where future commodity prices will be heading.

We are seeing new discoveries of oil all over the Ugandan area, with 4 new reports surfacing very recently.¹ The Albertine region is possibly rich in crude and shale oil varities, and has seen much more attention from international companies in the past few years.

EnergyBulletin has an article towards their own Peak Oil theorists (”peaksters”) on how they can better sell their story to the public.² For me, I just want to see real economic backing to prove if we’re running out. I’ve watched the Gold to Oil ratio for nearly 10 years, now, and I’m not seeing the fears that many are pointing to. Sure, oil is expensive, but the dollar has quickly become worthless in my lifetime, and I’m not sure that we’re looking at a supply problem. There is a high demand for oil and a low demand for dollars, of course the price of oil will go up.

A U.S. Congressional panel said yesterday that Canada can give OPEC a run for the money in the oil business.³ From the article: Production from Canada’s oil sands region will put the nation in the top five producers of crude oil in the next 10 years, according to a report from the Joint Economic Committee, which examines economic policies and their impact. Canada is currently the seventh-biggest global oil producer, the report said. We’re seeing Canada’s stock market, the TSX, boom with the growth of gold and oil’s value on the world market. As the dollar price of oil goes up, the opportunities to extract new oil varieties such as shale and tar sands increases. My concern is that the price of oil is not significantly higher versus income levels compared to decades past, so will these new oil varieties really be profitable? The dollar is worth less, and it should require many more to actually process these alternative oil structures. I’ll be surprised if this is the going to be the time that shale and tar sands become profitable. The experts are telling us that most are profitable at US$60 per barrel, but that price is considering the dollar’s value from 5 years ago. Since the fall of the dollar of almost 50% in that time versus other currencies and commodities, it is possible that tar sands and shale oil might only be profitable at US$120 per barrel!

The new U.S. emissions regulations are already costing oil producers money as they have to revamp refineries again to attain the new standards for lower-emissions fuel. Suncor just invested nearly half a billion dollars into revamping their refinery in the Alberta region in Canada.⁴

I’ve been reading RIA Novosti a lot lately, the Russian News and Information Agency. Today’s article is titled Prospects of the dollar as oil currency⁵ Russia has always had a huge amount of oil to process and sell, but decades of communism always made this oil unprofitable on the world market. Now that Russia is starting to provide more semi-free market options for businesses, their oil industry is ready to explode on the market, but the petrodollar connection is one that keeps many countries from being able to get into the market on their own terms. Russia already holds enough petrodollars and reserve dollars and may not want more, especially with the dollars fast decline in value due to Bernanke’s overprinting of supply, continuing Greenspan’s decades of madness. RIA Novosti’s article covers many of the thoughts I’ve been having in recent years, and I believe it is worth taking the time to read (and comment on).

Instead of blaming themselves for allowing the Fed to go print-crazy on new money, the US Senate now wants to investigate higher prices by seeking parties to blame in the energy trade industry.⁶ While I believe speculation does tend to raise prices, it also tends to lower prices as well. We have to look at the supply of resources versus the supply of money. As long as the supply of money keeps going up (Federal Reserve-created inflation, as we’ve seen for 100 years), prices will always tend to go up as the value of the dollar keeps going down. There is no energy market collusion here, just a lot of military intrusion, currency value destruction, and usual power-tyranny being manipulated by those who can. The Senate has no one to look at but themselves, the Congress, the Executive branch and the Judicial branch that allows it all to continue without heeding the Constitution.

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