Some Thoughts on The Price of Oil

By September 6, 2005Energy

This price of oil thing was bugging us as much as it’s bugging you so we spent almost the entire Labor Day weekend surfing the ‘net, trying to see what we could find, to maybe help ‘splain this. Well, lo and behold, after a few days staring at Google, we stumbled upon something that kinda made sense to us. There’s this guy, Al Marshall with a theory that made some sense to us. It kinda goes like this (Forgive us, Al, if we don’t get it quite right):

If you’ve got a lot of something, but people don’t really want it, then the price is going to be pretty low. Think Charo CD’s. But if you don’t have a lot of something and a lot of people want it, then it’s gong to be pricey, like Springsteen tickets. We sat around thinking about this over the weekend, and tested the theory out a little bit. If you only have so much of something and folks want less of it, then the price will drop. But if you only have so much of something and folks want more of it, then the price will rise. Hmmmm…. Makes sense.

So we applied this to the case at hand: There’s only so much oil out there. China now wants a bunch of it, so that’ll make the price go up a bit. But what about here at home? We have refineries right here, but a a bunch of them were knocked out by the storm and the supply chain was disrupted. Al Marshall would say that if supply dropped but demand stayed high, then the price would go up. Damn if he wasn’t right.

But what if we had more refineries here? What if we were allowed to drill in the Alaska National Wildlife Refuge, a place the size of South Carolina, with a drilling footprint the size of Dulles Airport? Al Marshall would say that if supply goes up, then the price would go down. What if we were allowd to explore the Outer Continental Shelf? Al would say the price will drop even further.

So why the heck can’t we increase supply? Who is it that’s standing in the way of finding more sources of oil right here in the good ol’ US of A? Seems to us that those are the folks we need to be talking to, no?

By the way, here’s a link to a page about Al Marshall. It even has a handy-dandy graph that lays all of this out pretty well.