Did you know that only a small percentage of oil from the Middle East is refined in California? If that’s true, how does a Middle East crisis affect the exorbitant prices we see at the pump and how can it be tamed?
Where California gets the oil
Before it can be sent to our gas stations, crude oil has to be refined at one of California’s refineries. The major refineries in the Los Angeles area include; Chevron, British Petroleum (BP), Shell, ExxonMobil, ConocoPhillips, and Valero (all the regulars).
Historically, California has been able to get most of it’s oil from California, but as our demand continues going up, our supply has been steadily going down. A report in 2006 by the California Energy Commission outlined concisely where California imports it’s oil and surprisingly, crude oil from the Middle East makes up only a small percentage of our imports.
According to the report, more then half our oil comes from the United States, mainly our own state and Alaska. In terms of foreign oil, nearly 60 percent comes from Canada and Ecuador. While we do purchase oil from Iraq and Oman, we also receive oil from Mexico, Brazil, Argentina, Colombia, and others making the Middle East only a minor contributor.
Preventing 5 dollars a gallon
Speculation, speculation, speculation! You may have heard that word being used a lot lately regarding gas prices. In fact President Obama has expressed his own suspicions of foul play, calling on the creation of a special task force to investigate the confusing world of oil speculation.
Click here for a great article on oil speculation.
Essentially, oil speculation is the trading of oil futures. Purchasing futures is sort of equivalent to heading to Las Vegas, thinking you know how to beat the casino. A trader purchases barrels of oil at one price with the intention of selling it at a future date when the price is more expensive, thus making a profit.
While oil is a new member of the futures world, items like coffee, cotton, sugar, and even orange juice (yes orange juice), have been subject to a speculator’s market for some time, all without a whole lot of controversy.
Attorney General Eric Holder, among others, find an unnatural relationship between indications of economic recovery and the price of oil. In his press release from April 22, 2011, Holder expressed his intent to root out any fraud on the part of speculators.
Insert here your own grumblings about the inability of the federal government to do anything right, but misgivings aside, a proactive stance by the government, particularly if it can be supported by the people, will hopefully be able to stand against Wall Street and stop the rising gas prices.