Kelpie Wilson: Gas Is Down - Go Back to Sleep

Last year at this time, gas prices were on the rise. Katrina and Rita had just rampaged through the Gulf, wasting drilling rigs and shutting down refineries. In the short term at least, the price rise made sense.

It also made sense in the long term, as an increasing number of oil industry insiders and analysts were coming forward with predictions that the world was very near the peak of oil production. Oil is a finite resource. As such, its production must follow the general outline of a bell-shaped curve known as Hubbert's curve. Oil will peak, and then fall. If there were little elves inside the earth making new oil for us all the time, then oil production would follow a different curve. But there aren't, so it doesn't.

We are used to gas prices going up and down in the short term, but in the last six weeks, we've seen a dip of fifty cents or more in the price of a gallon. We haven't seen anything this precipitous in a long time and it has excited a lot of comment.

The commentary itself is interesting. True to form, the TV news reports tend to stick to the "gee whiz, ain't it grand" type of story, interviewing happy motorists filling up at the pump and bypassing any sort of context or analysis.

But you can also find a strong current of suspicion in the public mind that the price drop has something to do with keeping the electorate quiescent as we head into November. A recent poll found 42 percent thinking this way.

In response, we've seen a handful of "conspiracy debunker" articles labeling those with suspicious minds as "tinfoil-hat-wearing conspiracy nuts." The source of most of these articles is a group of self-appointed liberal media "newsbusters" at the Media Research Center (MRC) funded by a roster of right-wing foundations.

MRC journalist Dan Gainor devoted a whole column to attacking CNN commentator Jack Cafferty for something Rafferty said on August 30:

"You know, if you were a real cynic, you could also wonder if the oil companies might not be pulling the price of gas down to help the Republicans get re-elected in the midterm elections a couple of months away."

I guess 42 percent of Americans are real cynics at this point. But can anyone blame us? Here are few things we have noticed over the past several years:

• Energy prices can be manipulated. Look at what Enron did to California.


• Oil companies are in charge of our national energy policy. Dick Cheney invited heads of oil companies to meet with his energy task force and refused to tell the American public what went on at those meetings.


• The war in Iraq is really about oil. Recent reports to Congress show that we knew well before the March 2003 invasion that Saddam had no weapons of mass destruction. And the latest National Intelligence Estimate reports that our Iraq adventure has destabilized the Middle East and made democracy less, not more, likely. Most Americans conclude from this that the real reason we invaded Iraq was to control its oil.

No one denies that the oil industry would like to see their Republican guard dogs stay in power and that lower gas prices help them in the polls. Motive is established. It remains to establish the means.

In fact, the bulk of the price drop probably has to do with two things. First, it is normal for prices to drop somewhat at the end of the summer driving season as demand goes down and refiners dump their summer gasoline blends in preparation for winter.

Second, we were spared the killer hurricanes this season. Refineries normally run at higher profit margins during the summer and were encouraged by gas speculators to produce all they possibly could in anticipation of hurricane disruptions. Hence, we ended the summer with a larger than normal gasoline supply.

Coincidentally, any refinery owner who thought that lower gas prices in the fall would help get Republicans elected might easily have decided to err on the side of over-production heading into the fall - hurricane or no hurricane. And if that refinery happened to serve a swing state, so much the better. I hear Ohio has about the lowest gas prices in the country.

Markets can also be manipulated in more subtle ways. Right-wing columnists want us to think that the price of oil is a simple matter of supply and demand, but oil is the most heavily traded commodity in the world. That means that oil trading decisions are processed through thousands of minds that are all subject to the mass psychology of politics and the media. Look what happened last week after Bush made a conciliatory speech about Iran at the UN. According to Bloomberg, oil prices posted their biggest drop in four months.

A real cynic might say that all the recent US saber rattling at Iran has been about manipulating oil prices upward during the summer and then down just before the elections, with the side benefit of keeping the electorate in a high pitch of fear and uncertainty about Iranian nukes.

Certainly, Bush 'n' Big Oil are not in charge of every blip and trend in oil prices. But that doesn't mean that they don't know how to steer successfully through the bumpy terrain of the oil peak. That may account for the announcement just after Labor Day of a big new oil find in the Gulf of Mexico. Chevron announced that a deep water test well called "Jack 2" had proved that oil was recoverable from an oil field lying 175 miles offshore where the ocean is more than a mile deep. The find was hyped everywhere as the "next Prudhoe Bay" that will rain the black gold down upon America once again.

But if that were so, why wasn't the announcement made back in May when the test results were first published? Here's where the conspiracy theories get real. The "Jack 2" discovery is basically a fake story planted at an opportune time. It is extremely unlikely that the new oil field will yield anything like Prudhoe Bay. First, because it is dispersed in small pockets throughout a large region of the Gulf and second - well, you think drilling in the arctic is tough, try drilling out in the middle of the Gulf where the hurricanes play.

Energy journalist Tom Whipple describes some of the challenges:

To extract oil from 20,000 feet below the surface, where the pressures run to 20,000 pounds per square inch (psi) and the temperature of the oil is in the order of 200 degrees centigrade, is going to be a major technical challenge. Wells drilled to these depths will cost in the range of $100 million each.

Whipple estimates that 300-500,000 barrels per day at the most could be got from all the wells sunk into this new oil field. Not nearly enough to justify the hype and the claim by some business journalists that our oil worries are over.

The "no worries" attitude is just what the Republicans can use right now. It's so great to have a happy face to put up next to those scowling Democrats bleating on about gas prices.

But fortunately, at least 42 percent of us are starting to get wise to these tactics.

Kelpie Wilson is the Truthout environment editor. A veteran forest protection activist and mechanical engineer, she is the author of Primal Tears, an eco-thriller novel published by North Atlantic Books.

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