another excuse on oil prices

Bloomberg.com: Top Worldwide

Crude oil futures rose to a record for a third day, reaching $52.53 a barrel in New York, on concern U.S. supplies may be insufficient to meet demand this winter.

I’m starting to feel like a frustrated liberal here. Going into summer it’s “the summer driving season”. Going into winter it’s “winter demand.” in the spring, the refineries shut down for maintenance, so you have dropping inventories. Last week it was a hurricane, which is pretty typical for the Atlantic in September, and war in Nigeria.

Looks to me like what is actually happening is that there aren’t enough damn wells being drilled and, of course, we haven’t had a new refinery built in twenty years or more. Of course, here’s where I part company with the liberals. It’s time for action to remove bureaucratic obstacles to drilling and refinery construction. This isn’t a market problem, in spite of all the market oriented excuses. The fact is that it’s a regulatory problem- mostly environmental regulations at home and the nationalization and government monopoly of the oil industry abroad.

It’s also time for Bloomberg, industry analysts and everyone else to stop with the practice of holding out the hope that the next turn of season will bring anything but further upturns in the price since every season seems to have a reason for price increases. Only when the American people get the straight skinny that the problem isn’t “summer driving season,” “winter heating oil,” and hurricanes, will there be the political will to fix the actual problem – coercive monopolies, political instability in oil producing dictatorships and environmental regulations at home.

Why is heating oil such a driver of oil prices anyway? I know people who heat with natural gas, propane, wood, electric and I even know one person with a coal stove. I know a few people with kerosene shop heaters in their garages that get used a few days a year – it basically has to be a cold weekend day when they want to work on a car. I have never met anyone who heats his home with oil. I’ve sold 300 houses and shown or reviewed at least another thousand and never seen one that heated with oil. How big a demand is this, really?

More on oil on my site Financial Options including The Secret Way to Play Oil.

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