There’s a Direct Link between the Type of Crude refined and the Price at the Pump

Posted by PITHOCRATES - February 26th, 2012

Week in Review

Oil is not oil.  There is Brent sweet crude.  And West Texas Intermediate (WTI).  We import the Brent.  While a lot of the WTI comes from wells closer to home.  The U.S.  Canada.  The Gulf of Mexico.  And there is a correlation between gas prices and the type of crude (see Angry About High Gas Prices? Blame Shuttered Oil Refineries by Matthew Philips posted 5/24/2012 on Yahoo! Finance).

The U.S. refining industry is being split in two. On one hand are the older refineries, mostly on the East and Gulf Coasts, that are set up to handle only the higher quality Brent “sweet” crude—the stuff that comes from the Middle East and the North Sea. Brent is easier to refine, though it’s gotten considerably more expensive recently. (Certainly another reason for higher gas prices.)

Then there are the plants able to refine the heavier, dirtier West Texas Intermediate (WTI)—the stuff that comes from Canadian tar sands, the deep water of the Gulf of Mexico, and the newer outposts in North Dakota, which just passed Ecuador in oil production. These refineries tend to be clustered in the Midwest—places such as Oklahoma, Kansas, and outside Chicago. While the price of Brent crude has closed at over $120 a barrel in recent days, WTI is trading at closer to $106. That simple differential is the reason older refineries that can handle only Brent are hemorrhaging cash and shutting down, while refineries that can handle WTI are flourishing.

“The U.S. refining industry is undergoing a huge, regional transformation,” says Ben Brockwell, a director at Oil Price Information Services. “If you look at refinery utilization rates in the Midwest and Great Lakes areas, they’re running at close to 95 percent capacity, and on the East Coast it’s more like 60 percent,” he says.

How about that?  Economic reasons for the high price of gasoline.  The cost of Brent sweet crude makes it impossible to sell in America at a profit.  So the refineries are selling it overseas at prices that can keep them from operating at a loss.  Or they’re shutting down refineries.  To reduce the surplus of gas they can’t sell at a profit.  Making the gas stations supplied by these refineries sell at record high gas prices.  Whereas those stations supplied by the WTI refineries are able to sell gas at more affordable prices.

The lesson here?  The amount of oil brought to market matters.  The more the oil supplied the lower the price.  And the lower the price of gasoline made from that oil.  There’s not much we can do about the price of Brent sweet but there is something we can do about WTI.  Drill more.  Build more refinery capacity for it.  And build more pipelines to move that precious cargo all over the United States.  Creating lots and lots of jobs.  And letting people enjoy hitting the highway again in cars they like that may also happen to be gas guzzlers.  Which will also reduce the price at the pump.  Because demand for gasoline will rise to sustain this economic buildup.  Allowing prices to fall due to economies of scale.

And it’s all there for the taking.  All we have to do is to take this future.  Instead of the one we’re working on now where driving has become a four-letter word.

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British Corn Laws and Empire, the U.S. Free Trade Zone and the Eurozone

Posted by PITHOCRATES - November 29th, 2011

History 101

With the Royal Navy, the Steamship, the Railroad and the Telegraph, Great Britain Peacefully Ruled and Led the World

The British Corn Laws were on the books from 1815 to 1846.  To protect domestic cereal farmers from less expensive food imports.  By adding a tariff to these grain imports.  Increasing their price.  So they weren’t any cheaper than the domestically grown grain.  Interestingly it was the few great landowners who wanted these tariffs.  Not the people who had to buy the food.  For paying more for food meant they had less to spend on clothing and other things.

When it came to consumer prices the people were always for free trade.  Because whatever they earned it never seemed enough.  So paying more in taxes was never a good thing.  These wealthy landowners even put forth the argument that paying higher food prices meant higher wages.  In a feeble attempt to maintain these tariffs.  They said that manufacturers just wanted cheaper food so they could pay cheaper wages.  Because if food wasn’t that expensive their workers wouldn’t need as much pay.  And, of course, the greedy manufacturers would just pocket more profits.  Much like the greedy landowners were doing thanks to the Corn Laws.  But their greed was somehow different.

Well, free trade won out.  Eventually.  And they repealed the Corn Laws in 1846.  And, as expected, food prices plummeted.  Soon they imported more food than they grew.  Because it was cheaper.  And it freed up more money for use elsewhere in the economy.  Stimulating innovation and invention.  Taking the Industrial Revolution to new heights.  And raising the standard of living for all people.  Not just the wealthy landowners.  The British Empire reached its zenith in the 19th century.  After the defeat of Napoleon there was about a century of peace called the Pax Britannica.  Where Great Britain became the global policeman.  With the Royal Navy, the steamship, the railroad and the telegraph, Great Britain peacefully ruled and led the world.

The U.S. was a Large Free Trade Zone with a Common Currency, Language, People and Customs

The British were the most advanced nation in the 19th century world.  And the richest.  Her empire dominated trade.  Her rule of law and common currency made that trade efficient.  It was a giant free trade zone within her empire.  But it couldn’t last.  The cost of maintaining the empire, plus a world war, was just too much.  Her economic might faded.  While another rose.  In a former colony.  The United States.

The sun never set on the British Empire.  Because it was that big.  Reaching around the globe.  Connected by long lines of communication.  And an imperial British culture uniting different peoples.   Who knew different cultures, laws and money.  Whereas as the United States had all the advantages of empire (size and range of resources) without any of the disadvantages.  The U.S. was a large free trade zone with a common currency, language, people and customs.  The states comprising the U.S. were as big as countries in other parts of the world.  But trade could flow between any two states without custom duties, tariffs or even inspections.  It was truly free.

When the Industrial Revolution reached the United States, the economy took off and never looked back.  By the end of the 19th century she was challenging the British Empire.  And rapidly overtook her.  There was another global policeman in town.  All because of a giant free trade zone that was as big as a continent.

The ‘United States’ of Europe created the Eurozone and a Common Currency (the Euro) to Compete with the U.S.

The United States is such the perfect model of free market capitalism that Europe created the Eurozone and a common currency (the Euro) to compete with the U.S.  And it worked.  For awhile.

The ‘united states’ of Europe as a whole has a larger economy than the U.S.  But they have their problems.  For a common currency is only part of America’s success.  The U.S. is a united federation of states with one set of federal laws, language and culture for interstate commerce.  Something Europe doesn’t have.  And probably never will.  European countries have far too much history and culture.  And nationalism.  They will never unite politically.  Like the United States.  Or the British Empire, for that matter.

The key to the British Empire was that it was British.  One currency.  One language.  One set of laws.  One culture.  For interstate trade, at least.  Just like in the country that surpassed her.  The United States.  Still, there’s nothing wrong with being a smaller economic power than the U.S.  As long as you have free trade your people can enjoy a high standard of living.  Without the added responsibility of being the global policeman.

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The Ten Year Anniversary of 9/11

Posted by PITHOCRATES - September 10th, 2011

Why the Attack on America on 9/11? 

Sunday is the 10 year anniversary of 9/11.  Ten years is a long time.  And during those years it’s been safe in the U.S.  Which makes people complacent.  That’s what time does.  People tend to forget.

So what was it?  And why was it?  The attack on America on 9/11? 

The ‘what’ is simple to answer.  A group of Muslim men hijacked four jetliners.  They crashed two into the World Trade Center.  Crashed one into the Pentagon.  And the fourth?  The passengers fought back.  Having learned of the other hijackings.  They attacked the attackers.  Fought.  And died.  Bringing the fourth plane down in a field in the country.  Far from its intended target.  These were the first to fight back in the war on terror.  A war where Americans were dying before 2001.

The ‘why’ is a little more involved.  It’s because of the Jews.  In the Middle East.  Who now live on ancient Jewish land.  Israel.  Land that has changed hands a few times since the time of King David (born 11th Century B.C.).  And King Solomon (born 10th Century BC).  And the people that lived on this land before the Jews returned to their homeland?  Muslims.  Who wrested this land from Christians.  Who got the land when the Roman Empire became Christian.  Who took the land from the Jews.  When the Romans were still pagans.  And on and on it went.  Back in time.  Until you get to King David.  And his conquests to consolidate his kingdom.

Long Story Short, Jews and Muslims hate each other in the Middle East

The Muslims want it back.  Because they conquered that land.  And they believe this makes it their land.  But if they believe that he who conquers the land has claim to the land, they have a problem.  Because the British won that land in World War I.  When they defeated the Ottoman Empire.  A member of the Central Powers.  Who lost the war. 

World War II soon came along.  And the HolocaustAdolf Hitler hated Jews.  Tried to kill them all.  So when Nazi Germany lost the war, displaced Jews who survived the Holocaust went to British Palestine.  To their ancient homeland.  Shortly thereafter they declared themselves the State of Israel.  And asked the Palestinians to kindly leave.  And they did.  Into refugee camps surrounding the new State of Israel.  They lived in refugee camps because the surrounding countries didn’t want to take them in.  So in these camps they stayed.  Where they’ve lived with a simmering hatred since.

Anyway, long story short, Jews and Muslims hate each other in the Middle East.  Israel is a tiny Jewish island in an Arab sea.  The Arabs tried to take this land a few times but were beaten back.  Thanks to an assist from the U.S.  And they lost land to boot.  The Sinai Peninsula.  The West Bank.  The Golan Heights.  And the Muslim Arabs want those lands back, too.

Militant Muslims hate America with every Fiber in their Body

Eventually the Egyptians made peace with Israel.  Anwar Sadat formally recognized the State of Israel.  And fundamentalist Egyptian officers assassinated him because of it.  His successor honored the peace Sadat made.  Hosni Mubarak.  For some 30 years.  Got a lot of U.S. aide for helping America’s most important Middle East ally.  Until he was toppled from power during the Arab Spring.

So there’s some history in the Middle East.  The Muslim Arabs hate the Jews.  And want that land back.  And they hate the Egyptian government who made peace with Israel for all those years.  They hate the British for taking that land from the Ottoman Empire.  And perhaps most of all they hate America.  Who they blame for everything.  Had they not entered World War I, that war may have ended in a draw with no lost of Muslim land.  Had they not entered World War II, Hitler may have won that war.  Or at least killed more Jews.  If the Americans had not ‘bribed’ Sadat with aid he may never have recognize the State of Israel.  And had America not helped Israel during the Arab-Israeli wars, the Arabs may have won those wars.

So do militant Muslims hate America?  With every fiber in their body.  Can we get them to like us?  Not a chance in hell.  You see, defeating us is just step one in their grand plan.  Once upon a time Muslim power controlled the Middle East, North Africa and southern Europe.  And they want to again.  They want to restore the caliphate.  And spread Sharia Law.

Osama bin Laden led the War against America

So the radical Muslims, fundamentalists, Islamists, whatever you want to call them, waged war against the U.S.  Attacking U.S. nationals out of the country.  And planning and conducting attacks inside the country.  Osama bin Laden led the war against America.  With his al Qaeda getting bolder over time.  Leading up to September 11, 2001.

So far every subsequent plan has been foiled.  Or failed.  Like the underwear bomber on that Detroit bound plane.  And the Times Square bomber.  So it’s been relatively safe in America.  But there is unrest in the Middle East.  Which is very ominous.

Representative Democracies rarely break out Amidst Chaos

What happens in Egypt may very well tell us the future of the world.  Will they maintain their peace with Israel?  Or will they drift further into the Iranian orbit?  Further pressuring Israel.  Bordered in the north by Iranian client Hezbollah.  And in the south by Iranian client Hamas.  With an open border crossing between the Gaza Strip and Egypt.  It’s getting tense over there (see Israel, Egypt try to stem damage from embassy riot by Diaa Hadid, Associated Press, posted 9/10/2011 on the Toronto Star).

Israel and Egypt’s leadership tried Saturday to limit the damage in ties after protesters stormed Israel’s embassy in Cairo, trashing offices and prompting the evacuation of nearly the entire staff from Egypt in the worst crisis between the countries since their 1979 peace treaty.

The 13-hour rampage deepened Israel’s fears that it is growing increasingly isolated amid the Arab world’s uprisings and, in particular, that Egypt is turning steadily against it after the fall of Hosni Mubarak, the authoritarian leader who was a close ally…

Egypt’s new military rulers, in turn, appear caught between preserving key ties with Israel — which bring guarantee them billions in U.S. military aid — and pressure from the Egyptian public. Many Egyptians are demanding an end to what they see as too cosy a relationship under Mubarak, who they feel knuckled under to Israel and the U.S., doing nothing to pressure for concessions to the Palestinians.

The big question is who will succeed Mubarak.  The Muslim Brotherhood?  They have close Iranian ties, too.  So that wouldn’t be good.  But at this time they are probable the largest organized political force in Egypt.  Which carries a lot of weight following a civil war.  I mean, representative democracies rarely break out amidst chaos.  And if it did, it could even be worse.  For a lot of Egyptians don’t like Israel.  Or that peace treaty.  Which means if the people get their way, it could be bad for Jews.  And Christians.

On this Day of Remembrance, we should make sure that those who died did not die in Vain 

We need to be concerned with what’s happening in Egypt.  For if the wrong people get into power there will be no peace for Jews.  Christians.  Or for much of the Western World.

If Iran gains power and influence in the area there will be no peace for Jews.  Christians.  Or for much of the Western World.  This is even a greater concern.  Because they may soon have a nuclear weapon.  If they don’t already.

Ten years is a lot of time.  But we must not become complacent.  And not forget what happened on that day.  Because the threat to America is real.  And it won’t go away with diplomacy.  For you can’t talk sense to people who hijack jetliners full of innocent men, women and children.  To kill innocent men, women and children.

On this day of remembrance, we should make sure that those who died did not die in vain.  As in any war, some may die so that others may live.  So we must honor those who died.  By living.  And being strong.  Strong enough to deter any attack on our soil again.  To protect those they left behind.

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