Oil, Rising Gas Prices and Canada: Good news, eh!

The perception of oil as a good or evil thing truly depends on your perspective. The general public tend to form their opinion, positive or negative, based on the price of gas and to a lesser extent environmental impact. For the large multinational corporations, the countries who produce it, and others who profit greatly from it, oil is liquid gold, and with record prices for oil, business is good. The politicians and the press use oil to further their agenda or sell newspapers expounding on the rising price of gas and the burden placed on the working class. So what are some of the facts apart from the hype so heavily pumped out by mainstream media, politicians and the White House.

Canada and Oil

Canada, not Saudi Arabia, is the largest exporter of oil to the United States according to official statistics from the U.S. Government. This explains why after Obama made a comment about tampering with NAFTA his economic adviser had a ’secret’ meeting at the Canadian Consulate in Chicago to reassure Canada that it was more rhetoric than policy.

Gas Prices, Inflation and Don’t Panic

The press loves headlines trumpeting ‘record’ high gas prices and the effect on the consumer, but are the current gas prices truly at record levels? Well actually, historically speaking, yes. But in viewing the current price of gas vs. historical gas prices we may also want to consider the dramatic increase in efficiency in automobiles (MPG) and heating systems (construction and units) over time which help to soften the relative effect on the consumers.

Quit whining you…..you…..whiny Americans.

Think gas is expensive in America, consider the cost of gas in Europe. (25-40% of the gas price in Europe is attributed to taxes.)

Why is the price of Oil at record levels?

There are many reasons oil has become so expensive (discounting theories involving, Bush, Cheney, big oil and the Saudis):

1. Increasing Demand for Oil — China and India continue to boost the demand for oil and drive worldwide consumption upwards.
2. Supply — OPEC, The Organization of Petroleum Exporting Countries, began cutting supplies in 2006 when prices were low and now that prices are at record highs are unwilling to give up the current profits they are receiving and increase production.
3. Falling Dollar — with the fall of the dollar and the credit crunch many investors have begun looking for profits in commodities and are speculating on the price of oil which is driving the price even higher.
4. Problems with Oil Suppliers — Venezuela threatening to cut production, Iraq’s infrastructure still in shambles, Iranian politics, and Nigeria’s militants attacking refineries don’t help the supply problems.

The Bright Side of High Oil Prices

• High price of oil makes the relative cost of alternative sources of energy (solar, wind) less expensive and thus spurs investment in new technologies.
• There is a price of gas that becomes so high that Americans will change their consumption habits, adding to the demand for alternative sources of energy, and more fuel efficient cars (economist predict that $4.00 gas is the price).
• High oil prices make it profitable for Canada, our friend to the North, to mine even more of the ‘oil sands’ in Alberta. At current production levels they have an estimated 180+ years of supply.

The best news of all is that we live in a market economy which is driven by the consumer. Our daily decisions on consumption affect what is produced in our economy. So do your neighbors to the north a favor and fill up your SUV eh!

Read more:

Oil Statistics from the U.S. Government: Oil Statistics

Obama, Nafta and the Canadian Consulate: NY Times Story