Friday, June 03, 2011

Fear of Future Oil Shortages are Causing Gas Prices to Rise

In addition to the stagnant economy and continued high unemployment, the American economy is also being hit by rising gas prices.

People are paying as much as $100 or more every time they fill their tank.

According to the Administration, Congressional Democrats and their supporters in the mainstream media the problem is a combination of a shortage of oil and and the OPEC cartel conspiring to raise oil prices.

The fact is that the so called oil shortage or energy crisis is a myth. The problem is the misguided policies of the Federal Government and not a lack of oil or conspiring by Middle Eastern oil producing nations.

The oil shale lands in the Rocky Mountain area of the United States and the oil sands area in western Canada EACH have potential oil reserves greater than the proven reserves in the Middle East.

These shale oil deposits are in ADDITION to other oil producing areas in Texas, California, Pennsylvania, Alaska and other parts of the U.S. which are currently producing oil.

Then there are the proven reserves, most of which are currently off limits to drilling, off our Pacific, Gulf and Atlantic coasts as well as the, also off limits, Alaskan National Wildlife Refuge (ANWR).

Oil and gasoline prices are being driven up not so much by rising current demand and limited Middle Eastern supplies of oil but by fears of future shortages when the Middle Eastern supplies run out.

It is true that oil produced from the shale fields and offshore fields will be more expensive than current Middle Eastern oil and. It is also true that it will take a number of years to get production in these areas in the United States up to speed (actually Canada is already producing from its oil sands fields, but environmentalists in the U.S. are blocking a proposed pipeline that would bring it to the U.S.).

However, simply removing U.S. Government restrictions preventing the drilling of the shale oil and in off shore areas would be a signal to users that future supplies will be available. This act alone will cause prices in oil futures markets to fall and when they fall current prices will also fall.

Proof of this can be found in 2008 rapid rise in oil prices which promptly fell when then President George Bush removed restrictions on offshore drilling causing current prices to drop almost immediately. Click on the link below for my article on this.

Politics and Falling Oil Prices

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