Published: July 18, 2008 09:57 am         

Gas Man: America held hostage (cont.)

On May 9, I declared that America was being held hostage over high oil prices, and that drilling in the Arctic National Wildlife Refuge was the ransom. Now two months have passed and the first concessions have been made by President Bush.

In any hostage situation there is the concept of the carrot and the stick -- give me something and I will give you something, refuse my demands and I will up the penalties. Until this week, nothing had been offered by our government except more discussions. So in return the price of crude continued to climb to an all-time high of $146-plus dollars per barrel.

But finally there seems to be some real movement on the horizon. Republican presidential nominee John McCain altered his stance toward more drilling to include offshore drilling in various previously restricted areas, stating that other countries are either drilling or are making plans to drill in these areas. Some people would call this a flip-flop from his previous stands. At most I would consider it a flip, since he did not go back again. In justification, McCain stated the extreme price increases have now threatened our national security and our economy, which I believe is reason enough to alter his position.

The real movement came from President Bush this week, when he signed an order lifting the ban on drilling off the shores of the U.S., which would still need Congressional approval. He did not address ANWR as of yet, but just the offshore drilling action was enough to trigger a drop in oil prices of approximately $16 per barrel in the past two days. To emphasize -- just the carrot of these developments was enough to significantly drop the price of crude.

Others still question drilling in sensitive areas, stating that it could take seven to 10 years before we see any production from the new areas, and want to invest more in wind and other technologies that will not produce significant power for 15 to 20 years.

But I'm having a hard time with that logic, since even some talk about opening up various areas for drilling had an immediate mental impact on pricing. For sure, the prospect of flooding the market with domestic oil in 7 to 10 years will drop the prices substantially. Besides, that's only half the time it will take to develop those other alternatives.

The gas chart

Local impact from the sharp decrease for crude oil this week was met with an increase of approximately 11 cents per gallon by our local stations Thursday morning, raising their prices from $4.139 to $4.249. This was not due to an increase in rack prices, which actually dropped by about 27 cents at the Traverse City rack.

July 4-10

July 11-17

As always the above prices do not include the savings from purchasing their fuel downstate nor does the above chart reflect the shrinkage and prompt payment discounts. Keep those questions and comments coming to thegasman@thegasman.info; I read them all.