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By Robert Rapier on Aug 22, 2011 with 54 responses

Keeping Michele Bachmann Honest on Gas Prices

The Promise: Gas Below $2 a Gallon

Like many of you, I am often unhappy with our political leaders. One thing that annoys me the most is that many will say or do just about anything to get elected. By now, you have surely heard the news that Republican presidential hopeful Michele Bachmann has promised a return to $2/gallon gasoline if she is elected president:

GOP candidate Michele Bachmann: I’ll bring back $2 gas

NEW YORK (CNNMoney) — President Michele Bachmann has a promise: $2 gas.

“Under President Bachmann you will see gasoline come down below $2 a gallon again,” Bachmann told a crowd Tuesday in South Carolina. “That will happen.”

“The day that the president became president gasoline was $1.79 a gallon,” Bachmann said. “Look what it is today.”

My immediate reaction to that was to wonder whether she is really that naive, or simply making dishonest campaign promises that she knows she can’t keep. Perhaps she truly believes deep down that she could achieve this. In that case, she has to be one of the most naive presidential candidates to come along in quite some time. (And for the record, I think cheap gasoline is a terrible idea in any case. I believe we should discourage consumption of depleting resources. I laid out my reasoning and a fair plan for raising gas taxes in How Much Are You Willing to Pay to be Nuke-Free?).

Fact-Checking, Obama vs. Bush, and Average Annual Gas Prices

Let’s first take a look at the basic claim. I have seen many people repeat her claim that gasoline was $1.79 a gallon when Obama took office, but I haven’t seen anyone fact check that. So I went to the EIA statistics, and found that the week before Obama took office (his inauguration was on Tuesday, January 20, 2009), overall retail gasoline averaged $1.90 a gallon. The week of his inauguration retail gasoline averaged $1.89 a gallon. So, there was some slight context possibly needed to qualify the $1.79 a gallon remark (probably somewhere gasoline averaged that price) but the general claim is basically correct: Prices were much lower when Obama took office, and now the current price of gasoline is $3.66 a gallon.

Just for fun — and before we examine the claim in more detail — I decided to check and see what gas prices were when Bush took office. When he first took office on January 20, 2001, gasoline prices averaged $1.51 a gallon. At the beginning of his second term in 2005, gasoline prices averaged $1.90. When Bush left office, gasoline prices averaged $1.90. However, as we know gasoline prices were hardly stable in between. During Bush’s second term — in the summer of 2008 — gasoline ran up to over $4.00 a gallon. The price remained at that level for almost two months before a recession brought the economy crashing down — and gasoline prices along with it.

But most families don’t fill up for the entire year on a specific day, so a snapshot of prices on inauguration day isn’t really that meaningful. Let’s consider average annual gas prices over the past few years. Beginning in 2002, each subsequent year of Bush’s administration saw higher average annual gas prices than the previous year. For six years in a row — from 2003 through 2008 — gas prices rose. Prices crossed the $2.00/gallon mark in 2004 and ultimately rose to an annual average of $3.30 a gallon in 2008, Bush’s last full year in office. And the only reason gasoline prices weren’t higher than $3.30 a gallon was due to the recession-induced price collapse in the price of oil in the second half of 2008.

Drill Baby Drill Again?

So, to put it in context, Bachmann proposes to achieve not only something that Obama has failed to do, but something that Bush failed to do for most of his second term until a biting recession brought gas prices crashing down. It’s also something political leaders around the world failed to do, so it was not limited to policies in the U.S. But maybe that’s how she plans to do it: Send the economy into a deep depression. That would likely mean a return to sub-$2 gasoline.

The honest truth, though, is that the places in the world where gasoline is under $2/gallon tend to be oil-exporting countries that subsidize the price of gasoline for consumers. Given that the U.S. imports more oil than any other country, subsidizing consumers is out of the question. Further, the fact that we do import so much oil means that Bachmann would either have to put a stop to that while keeping domestic prices low, or would have to somehow cause world oil prices to fall to under $50/bbl (which usually translates to sub-$2/gallon gasoline).

But given the context of her later clarifying statements, it is clear that Bachmann believes that we can achieve $2/gallon by simply producing more:

“What Barack Obama has done is lock up America’s eneregy reserves. We’re the No. 1 energy-resource-rich nation in the world. We have more oil in three Western states in the form of shale oil than all the oil in Saudi Arabia. That doesn’t include the Bakken oil field in North Dakota or the eastern Gulf region or the Atlantic or the Pacific or Anwar or the Arctic region,” she said.

“We also have a brand-new natural gas find in Pennsylvania with over a trillion cubic feet of natural gas. We also have 25 percent of all the coal in the world. We just aren’t accessing or utilizing our energy. Energy could be one of the most stable, accessible forms of resources for business in the United States. …And we would create millions of high-paying jobs instantly,” she said.

There are many problems with those statements. First, shale oil has been right around the corner for over 100 years. It isn’t going to be unlocked by $2/gallon gasoline when it wasn’t unlocked by $4/gallon gasoline. In fact, the reason the resource is still there, undeveloped, is that the economics are poor — mainly due to high energy requirements. This is the classic receding horizons problem. (I did not coin that phrase, by the way, although I had discussed the concept many times).

Second, the Bakken oil field has significantly increased production while Obama has been in office. In Bush’s last month in office, monthly oil production in North Dakota (where most of the Bakken production is taking place) was 6.3 million barrels. The most recent cumulative monthly production was 11.2 million barrels. Shall we credit Obama? Well, I certainly don’t, but neither do I blame him for current gas prices. But if Bachmann wants to cite statistics based on when Obama took office, certainly actual oil production should be an important one. And for that matter, not only has North Dakota production almost doubled since Obama has been in office, but oil production for the country as a whole has risen. In Bush’s last month in office, total monthly oil production in the U.S. was 157 million barrels. Today, monthly production is 174 million barrels — the highest level in 8 years. Maybe we should start calling Obama an “oil man.”

What about Bachmann’s comment on natural gas? Again, let ‘s look at the data. Over the two terms of the Bush Administration, natural gas production rose from 1.6 trillion cubic feet per month to 1.7 trillion cubic feet per month. In Obama’s, second year in office, monthly production reached 1.8 trillion cubic feet — something never achieved under Bush. In 2011 production has reached an all-time record of over 1.9 trillion cubic feet.

Conclusion: Dishonest or Yet Another ‘Energy Dummy’?

So what are we to make of this? I think very few people are going to give Obama credit for increases in oil and gas production. In fact, those production increases are a function of high oil prices and of the development of shale gas technology — not any sort of presidential mandate. Presidents simply don’t control oil prices. Oil prices are set on the global market, and the best a president can do is to push for policies that ensure that demand doesn’t outpace supply. But due to the global nature of the oil market, they are limited in the impact they can make. If Bachmann thinks she is going to increase supplies by flooding the market with shale oil, then she is exceptionally naive. If she is just making hollow campaign promises, then she is another dishonest politician. Neither trait is one I want in a president.

  1. By Anon on August 22, 2011 at 7:46 am

    Americas are home to plentiful hydrocarbons trapped in hard-to-reach
    offshore deposits, on-land shale rock, oil sands, and heavy oil
    formations
     

    http://www.foreignpolicy.com/a….._of_energy

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  2. By Addoeh on August 22, 2011 at 9:09 am

    We may have a lot of oil and natural gas, but that doesn’t mean prices are dramatically going to go down. Even if the US/Canada/Brazil did increase production, OPEC could still slow down their production to keep prices high. In addition, oil consumption in India, China, Brazil, etc is going to increase in the future, even if consumption in the West decreases a little. So all we would be doing is continually feeding the monster. Prices don’t go down to the point where we can have $2 gas.

    Of course, this all doesn’t take into account the cost of turning oil shale into oil. If oil was around $40, the price that gas would be around $2, why would an oil company want to lose money on each barrel they extract? As RR points out above, oil is around $80 now and production is only now being increased. Which tells me the magic number to produce oil there is somewhat closer to $80.

    There are, of course, good reasons to increase production, mainly that the money doesn’t go to questionable regimes in the ME and elsewhere, but the price of oil isn’t one of them.

    One question I’ve also had is this. If oil production were dramatically increased in the Gulf, Bakken/Montana/Wyoming/Colorado, Anwar, etc, how many jobs would be added to the economy?

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  3. By Austroman on August 22, 2011 at 9:27 am

    Michele is nuts. 1. she has no way of promising gas at any value; 2. all the machinations of what gas ought to retail for is removed from what we should use as energy, how long will it last, and what is the energy policy for the US? Michele is playing with fire and will make herself look like a fool.

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  4. By Wendell Mercantile on August 22, 2011 at 9:41 am

    Republican presidential hopeful Michele Bachmann has promised a return to $2/gallon gasoline if she is elected president

    Perhaps she plans to select Donald Trump as a running mate? Donald Trump’s Solution on Gas Prices: Get Tough With Saudi Arabia; Seize Oil Fields in Libya and Iraq?

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  5. By Derek Wain on August 22, 2011 at 9:48 am

    The headline itself is dishonest. One can use that term with regard to fact, not with regard to a prediction. No one can know what a change in policies will bring.
    Obama said his policies would make sure unemployment never got about 8%. Was he honest? His prediction, wildlly optimistic was wrong. You cannot use “honest” or “dishonest” about Bachmann’s statement. You can argue as to how likely it is.
    Note that no one in the media has called out Obama for his absurd prediction on jobs. The article is political propaganda, not political analysis.

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  6. By thomas398 on August 22, 2011 at 10:06 am

    Obama and his team desperately hope Bachman will be on the ticket next year.   I think she does believes that more drilling will lead to lower prices.  Her statement is meant to put Romney and Perry on the spot.  Their reply to the “What will you do about high gasoline prices?” question will be more sober and thus sound “soft”.   It should be noted that most of Perry’s success in Texas can be credited to rising oil prices.

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  7. By Don Kentne on August 22, 2011 at 10:07 am

    Currently Compressed Natural Gas sells for $1.39/gal gasoline equivalent in Oklahoma; home fill is $0.75/GGE. Gasoline will sell for $2.00 when we shift our transportation system to the only viable alternative energy, CNG. Bachmann or no, gasoline prices will come down, just a matter of how bad we want to let this recession get before we make the switch.

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  8. By Tim Weiman on August 22, 2011 at 10:28 am

    Robert,

    I guess it demonstrates the right can be just as foolish about oil markets as the left.

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  9. By rrapier on August 22, 2011 at 12:40 pm

    Derek Wain said:

    The headline itself is dishonest. One can use that term with regard to fact, not with regard to a prediction. No one can know what a change in policies will bring.


     

    Yes Derek, we can. There are many reasons that we can have very good ideas of what policies will bring. There are very good reasons that oil prices rose under Bush, and good reasons that the only reason they are coming down to $2 and staying would be economic meltdown. So yes, it is either dishonestly pandering or being extremely naive about our energy resources.

    Note that no one in the media has called out Obama for his absurd
    prediction on jobs. The article is political propaganda, not political
    analysis.

    I have called out Obama many times here in my columns. He was also very naive about energy. But the facts are the facts. I don’t believe oil and gas production went up because of Obama’s policies, but if someone wants to complain about him not developing energy resources we should at least have a look at what actually happened.

    So I disagree with you 100%. Only a Bachmann homer can see her as anything other than naive or dishonest on this issue.

    RR

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  10. By rrapier on August 22, 2011 at 1:07 pm

    Don Kentne said:

    Currently Compressed Natural Gas sells for $1.39/gal gasoline equivalent in Oklahoma; home fill is $0.75/GGE. Gasoline will sell for $2.00 when we shift our transportation system to the only viable alternative energy, CNG. Bachmann or no, gasoline prices will come down, just a matter of how bad we want to let this recession get before we make the switch.


     

    Don, I agree that we could make energy prices lower under certain circumstances (generally with a higher up-front capital expenditure) but gasoline still isn’t going to $2 outside of economic calamity. This is a global market, and even as we try to change our from gasoline, growth in China and India will continue and reserves will deplete. So I don’t believe we will see a permanent return to $2 gasoline, and if we do we will be in the middle of a deep depression.

    RR

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  11. By rrapier on August 22, 2011 at 1:10 pm

    Tim Weiman said:

    Robert,

    I guess it demonstrates the right can be just as foolish about oil markets as the left.


     

    Well, I have always said that neither party has a monopoly on simplistic thinking and pandering on energy issues. And despite my friend Derek’s belief that this was some sort of political propaganda, I have said many times that I think the Democrats are even more naive on energy issues than Republicans.

    But, any time you criticize one side, partisans on the other side are going to be annoyed. I have had plenty of mud thrown at me from both sides.

    RR

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  12. By Wendell Mercantile on August 22, 2011 at 1:25 pm

    Well, I have always said that neither party has a monopoly on simplistic thinking and pandering on energy issues.

    RR,

    Always remember that at least 50% of the voters are below average, and to win, a candidate only needs 51% of the vote. (When it comes to energy issues, probably 98% of voters no little or nothing, other than what gasoline costs..)

    That’s why pandering and simplistic thinking on any issue so often works.

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  13. By Benny BND Cole on August 22, 2011 at 1:38 pm

    As usual, excellent blogging by RR.
    Actually, I think $2 a gallon is about what gasoline taxes alone should be.
    I agree with earlier sentiment that CNG offers a terrific do-able alternative to gasoline, and PHEVs also.
    The problem with our economy is not energy–it is our financial and monetary policies, but that is different topic.
    Oi is declining as a percent of total energy produced globally, and has been for decades. It is becoming a less and less important fuel. A couple of changes, and we will be exiting the oil era, easily and seamlessly. The price signal accomplishes miracles.

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    • By jim on February 28, 2012 at 3:02 pm

      I think you full of shit. people can barly put food on the table and you think the gas tax should be atleast $2. your fucked in the head!!

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  14. By walter-sobchak on August 22, 2011 at 1:47 pm

    The price of anything has two variables: one is the supply and demand for the thing, and the other one is the value of the dollar. It is true that the supply and demand for oil are global issues not much influenced by the US government, but, the value of the dollar is entirely within its control.

     

    The President can submit a balanced budget to Congress, veto bills that call for excessive spending, and use political means to cause the government to return to financial prudence. The President can replace helicopter Ben Bernanke with a Federal Reserve chairman who wants to increase the value of the dollar, shrink the Fed’s balance sheet, and make the Fed operate in a more transparent and accountable manner.

     

    All of these actions will increase the value of the dollar, and in turn cause that term of the equation to go down. It worked in the early 1980s and it should work again.

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  15. By Wendell Mercantile on August 22, 2011 at 2:51 pm

    …the other one is the value of the dollar.

    Walter,

    When in high school, I worked at my Dad’s filing station. We sold gas for $0.32 a gallon. Seems cheap, but that would be $2.31 per gallon today — still more than what MB thinks gasoline should sell for.

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  16. By Laurie on August 22, 2011 at 4:38 pm

    I’m so happy to have found a source for some believable FACTS going into the next 18 months or so. I just don’t trust any candidate or news outlet anymore. Sad, but true.

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  17. By robert on August 22, 2011 at 4:55 pm

    Obama said his policies would make sure unemployment never got about 8%.

    This has a good chance of coming true.

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  18. By flora68 on August 22, 2011 at 5:02 pm

    “Keeping Michele Bachmann Honest on Gas Prices”

    “Keeping her honest”? First she has to BE honest before you can hope to KEEP her honest.

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    • By Tom on February 29, 2012 at 9:02 am

      You’re an Idiot drinking the Obama Cool Aid.

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  19. By doggydogworld on August 22, 2011 at 5:48 pm

    Derek Wain said:

    Obama said his policies would make sure unemployment never got about 8%. Was he honest? ……

    Note that no one in the media has called out Obama for his absurd prediction on jobs.


     

    Many in the media have called out Obama for getting unemployment wrong. And he never said he would “make sure” it never went above 8%. His team put out a chart which estimated a peak of 9% without stimulus and just below 8% with stimulus.

    The most recently released unemployment rate at the time of the Obama team’s chart was 6.8%. If Bachman said gas prices were on a path from $3.50/gal to $4.50, but she had a plan to keep them below $4 then no one would be saying she’s either a liar or an idiot. But what she actually said is so absurd it’s pretty much impossible to come to any other conclusion.

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  20. By Sam Fox on August 22, 2011 at 5:48 pm

    I think Michelle is, at the very least, very optimistic. If as Prez, she  going to be guided by the Constitution, I am not sure she could lower gas prices by herself. But maybe that’s what she meant? I don’t know.
    I do know that she has a very tenuous Patriotic voting record when compared to Ron Paul.

    http://scottcountyifa.blogspot.com

    One thing I see the article got wrong was ”I believe we should discourage consumption of depleting resources.” I take it one depleting resource is oil. But is oil being depleted? Is it really a fuel from fossils? Perhaps no to both…??

     
     
     
    I post. You decide. :-)

    By the way, I have no problem with alternative energy. I think alternative R & D should be driven by the market & not govt subsidy. US govt already spends more than they take in…If I could afford it I would have solar panels all over the place.

    Also, don’t forget industrial hemp.


    http://tinyurl.com/4y4oxws

    At YouTube find Henry ford’s Hemp Car. Pretty cool!  Also,

     

     http://tinyurl.com/3uoc4yj

     
    SamFox
     
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  21. By biocrude on August 23, 2011 at 1:35 pm

    Sam Fox said:

     
     
     
    I post. You decide. :-)
     

     


    Not one of your links worked.  Also, Henry Ford had a car that ran on ethanol, not sure about hemp.  RR has looked into hemp before and concluded, “if it is such a great oil crop, why is it not being cultivated in mass quantities?”  (Right, RR?)

    Big Cotton and Paper keep hemp at bay in the US, but you would think it would sprout up commercially somewhere else if it truly was a wonder crop…

     

     

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  22. By mac on August 22, 2011 at 5:50 pm

    Bill Moore over at EV World takes on Michelle Bachman in a humorous, satirical essay.

    Of course Moore has his own point of view and agenda, nevertheless
    it’s still amusing.

    http://evworld.com/currents.cfm?jid=204

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  23. By Kit P on August 22, 2011 at 6:29 pm

    How refreshing, pandering to optimism instead of pandering to negativism and defeatism.

    My most recent road trip took me through Hazard, Kentucky and Virginia strip mining country. According to NYC journalists these places are awful places and icons for poverty and environmental destruction.

    I have been to NYC a couple of times and if someone there thinks that a place is awful, then that place must be terrible indeed. Right!

    Rather than rows of shanties in a company town we observed nicely maintained prefab homes on a few acres. Lots of new 4wd PU trucks on the roads parked beside these modest homes. Most likely owned by people with a sense of satisfaction because they produce what others need.

    If you look carefully, you can find the environmental impact of coal. I wonder how a few mountains with more regular features compares to NYC. Is possible to even find anyplace that in NYC that is not hugely impacted by man?

    Obama is at war with productive Americans who produce coal. He sings the praises of solar and wind in China while doing everything to make the electricity of Americans more expensive.

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  24. By mac on August 22, 2011 at 9:30 pm

    UK: a decline in service station numbers and fuel sales signals a testing 2010

    Ben,

    “According to the Energy Institute, the number of UK service stations dropped significantly in 2009, while fuel sales declined by 2.4% over 2008 figures. The situation for fuel retailers is set to remain testing throughout 2010, as high global oil prices and an increase in taxation will further erode fuel margins, which will inevitably lead to more service station closures.”…………………..

    The Oil Age ? Ending with a whimper and not a bang ? Maybe so……

    “In order to survive in an increasingly difficult market, fuel retailers must look to other revenue streams. Indeed, Datamonitor’s research found that motorists that are loyal to oil-branded service stations value non-fuel services such as food-to-go and coffee highly, both of which are possible areas for oil companies to exploit. Going forward, if oil companies are unwilling to match the supermarkets on price, then they must offer their own compelling convenience offer in order to counteract declining fuel sales, prevent consumers switching to supermarkets and, ultimately, avoid further site closures.”

    http://www.consumerenergyrepor…..commenting

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  25. By Wendell Mercantile on August 23, 2011 at 2:57 pm

    Big Cotton and Paper keep hemp at bay in the US, but you would think it would sprout up commercially somewhere else if it truly was a wonder crop…

    They are always looking for a crop that Afghan farmers can grow to replace opium poppy. Perhaps hemp is their solution. :-)

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  26. By rrapier on August 23, 2011 at 3:07 pm

    Biocrude said:

    RR has looked into hemp before and concluded, “if it is such a great oil crop, why is it not being cultivated in mass quantities?”  (Right, RR?)
     

    Big Cotton and Paper keep hemp at bay in the US, but you would think it would sprout up commercially somewhere else if it truly was a wonder crop…


     

    That is exactly right. I started to write an article on it once, investigating the claims of whether it really was a wonder crop. When I realized that it could be legally grown in many countries, I had my answer.

    RR

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  27. By Benny BND Cole on August 23, 2011 at 4:16 pm

    Mac-

    I see CNGs and PHEVs gradually capturing more market share, inevitably if crude oil becomes more expensive.

    The problem is, we keep finding ways to produce crude—even with most of the world’s crude locked up by thug states, such as Nigeria, Saudi Arabia, Mexico, Venezuela, Libya, Russia, etc. Big Oil leads to pygmy government.

    In a free-market world, we would be glutted in oil, for decades and decades.

    This sets up an interesting period of limbo ahead.

    We can switch to alternative fuels—and then the rug can get pulled out, as (say) Venezuela and Mexico and Iran decide to become sensible partners for more development.

    For that matter, Iraq claims they can bring 12 mbd online.

    The only thing I am sure of is the “Peak Oil” is not a serious issue. We have alternatives, and all of them seem to be cleaner. When oil gets expensive enough….

    I predict a cleaner and more-prosperous future. if we get even mediocre leadership…

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  28. By dissent555 on August 23, 2011 at 4:29 pm

    Yeah, I have to say that, as a conservative, I was really disappointed to hear Bachmann go off with this claim. Not that it couldn’t happen, since gas has been below $2 in the recent past. But to make such a blanket policy target, and not include any discussion of the market was just pandering. Had she said something about putting policies in place that make it easier for producers and refiners to operate in ways that would tend to increase supply, well, I could have gotten behind that. Guess it’s just not sexy enough, and in that regard, I am also disappointed.

     

    Bachmann jumped the shark with the $2 claim as far as I’m concerned. Same thing that Palin did previously, when she went all anti big oil demagoguery a little while back. It’s just populist pandering; by definition, this is a failure of leadership, much like we’ve seen from the current occupant of the White House. 

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  29. By mac on August 23, 2011 at 5:31 pm

    Ben.
    Well, I only mentioned the gas station situation in Britain because at one time they had about 20,000 gas stations in the UK and now the number has fallen below 10,000.

    Perhaps this is only a consolidation and re-organization of the retail gas station business in Britain. (Major retailers driving out the Mom and Pop stations) I don’t know…. but I suspect that it’s more than that.

    In the last 30 years OPEC has barely increased production while the OCED nations have doubled theirs. While we have been out busting our buns, OPEC has simply been sitting on their massive oil reserves waiting for the big kill as the West exhausts itself in the search for oil.

    Amazing !!! A bunch of autocratic, dictatorships issuing edicts about their oil production, turning the spigot on and off at will. No “free market” there, I’m afraid.

    Amazing !

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  30. By biocrude on August 24, 2011 at 2:48 pm

    Sam Fox said:

    One thing I see the article got wrong was ”I believe we should discourage consumption of depleting resources.” I take it one depleting resource is oil. But is oil being depleted? Is it really a fuel from fossils? Perhaps no to both…??



    @ Sam Fox,

     

    What on Earth do you mean by the above comments?  Oil is definitely depleting and it is a finite resource derived from fossils that are millions of years old.  This why technologies like North Dakota oil shale and the oil sands in Alberta are not cost viable or energy positive because they are going after immature oil, ie, it hasn’t had enough heat, sunlight and pressure to properly turn it into the BTU packed, magical liquid that crude petroleum is…

     

     

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  31. By Wendell Mercantile on August 24, 2011 at 3:32 pm

    But is oil being depleted?

    Sam Fox,

    Of course it’s being depleted. True, Mother Nature is still making oil today, but unfortunately, it won’t be ready to use for millions of years.

    In a little more that a century, humans have managed to use up nearly half of the oil that Mother Nature made over about 300 million years.

    This why technologies like North Dakota oil shale and the oil sands in Alberta are not cost viable or energy positive because they are going after immature oil, ie, it hasn’t had enough heat, sunlight and pressure to properly turn it into the BTU packed, magical liquid that crude petroleum is…

    Biocrude,

    That’s also why making oil from algae and biomass is so tough. It’s darn hard to to compress what took millions of years naturally into a few weeks. It takes lots and lots of money and energy to accelerate the natural process, and it is difficult to compete economically with a process that Mother Nature did free of charge.

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  32. By paul-n on August 24, 2011 at 11:57 pm

    Biocrude wrote;

    This why technologies like North Dakota oil shale and the oil sands in Alberta are not cost viable or energy positive because they are going after immature oil, ie, it hasn’t had enough heat, sunlight and pressure to properly turn it into the BTU packed, magical liquid that crude petroleum is…

    While oil is definitely finite, and depleting, that does not make this statement true.

    Firstly, no amount of sunlight does anything to oil in the ground – it is well and truly protected from the sun.

    Secondly, the oil in both N. Dakota and the Alberta oil sands is plenty “mature” – it is the waxy kerogen of the oil shale in Colorado/Wyoming/Utah that is immature and needs heat to turn it into oil.  And only geological heat – not sunlight – can do this.

    And finally, production of oil from both N. Dakota and Alberta oil sands is absolutely energy positive.  For oilsands it takes about 1/3 of a barrel of oil equivalent energy (mostly natural gas) to produce a barrel of oil. N Dakota, and most conventional oil, is probably half that.

    The heavy bitumen in the oilsands is actually more energy dense than light crude oil – but harder to transport and refine, hence much of it is “upgraded” to make synthetic crude oil, but it still uses far less input energy than oil processed.

     

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  33. By Wendell Mercantile on August 25, 2011 at 12:13 am

    Perhaps MB plans on this to drive the price of gasoline down: Biofuel firm’s US deal paves way for major plant

    Aquaflow says it has an unique capability to produce fuels from algae and other sources such as timber. CRI has global sub-licensing rights for integrated hydropyrolysis and hydroconversion (IH2) technology, which, Aquaflow says, cost-effectively converts biomass into renewable gasoline, jet and diesel hydrocarbon blendstocks.

    He said a commercially viable plant would need about 1000 tonnes of biofuel a day, producing about one barrel of biofuel per tonne of feedstock.

    Hmmm…1000 tons per day of biomass. One semi- can haul about 20 tons. That means 50 semi-loads PER day rolling up to their plant. They are going to have to range a pretty large radius to keep that much biomass constantly flowing into the plant.

    As I mentioned several weeks ago, there is a relatively small (40 MW) electrical generation station not far from me that has converted to all biomass. They have had to range out as far as 125 miles to keep a stream of biomass flowing into the plant.

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  34. By armchair261 on August 25, 2011 at 12:30 am

    Biocrude said:

    This why technologies like North Dakota oil shale and the oil sands in Alberta are not cost viable or energy positive

    I’m not sure what you mean here by “North Dakota shale.” Are you referring to the Bakken? The Bakken is not an immature oil play. It’s actually a rather light oil (API gravity in the 40 deg range), and is not really an unconventional play in the sense of the tar sands, where oil is not captured in a mobil liquid form but instead essentially mined. Bakken wells are typically drilled horizontally through a brittle dolomitic layer sandwiched between two organic rich upper and lower Bakken shales. When the dolomite is hydraulically fractured, Bakken oil is released from the shale matrix and pre-existing natural fractures in the vicinity of the induced fractures, and then flows through these induced fractures into the wellbore.

    The fact that companies are feverishly developing both suggests to me that they are cost viable, at least for now.

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  35. By armchair261 on August 25, 2011 at 12:44 am

    Mac,

    Perhaps this is only a consolidation and re-organization of the retail gas station business in Britain. (Major retailers driving out the Mom and Pop stations) I don’t know…. but I suspect that it’s more than that.

    UK energy statistics suggest a recent (a few years) modest decline in consumption, but overall transportation energy consumption is up over the longer term. Consumption of aviation fuels, on the other hand is way up. Perhaps gas stations are being upsized and made more efficient, while more people are flying domestically rather than driving.

     

    In the last 30 years OPEC has barely increased production while the OCED nations have doubled theirs. While we have been out busting our buns, OPEC has simply been sitting on their massive oil reserves waiting for the big kill as the West exhausts itself in the search for oil.

    OPEC 1981 production was about 22 million barrels per day. By 1986 it had fallen to around 16 million. In the past few years, it has been running in the 33 to 35 million barrels per day range, or over 50% above their 1981 levels.

    Equivalent OECD production: 1981: 18 mmbopd; 1986: 20 mmbopd; last year: 18 mmbopd. OECD production has never exceeded 22 mmbopd.

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  36. By paul-n on August 25, 2011 at 12:48 am

    Interesting link Wendell.  One barrel of oil is 6GJ of energy and one (dry) ton of biomass is about 20, so the product energy yield is about 30%.   not great, but if the biomass is free – and local – then it could be profitable.  I presume some of the energy lost could be recovered for electricity generation, though they donlt mention that

    Would be a good thing to co-locate at a large sawmill or pulpmill – they have lots of waste wood.

    And, of course, put one of these plants down near Rufus and start harvesting those Chinese Tallow Trees…

     

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  37. By Wendell Mercantile on August 25, 2011 at 9:26 am

    …put one of these plants down near Rufus and start harvesting those Chinese Tallow Trees…

    I’m anxiously awaiting the press release saying Rufus is starting a Chinese tallow tree plantation in the Delta. Rows and rows of Chinese tallow trees stretching to the horizon — just like the tea and rubber plantations in Indochina, and the palm oil plantations in Indonesia.

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  38. By draiman on August 25, 2011 at 10:08 am

    World class renewable energy innovation enterprise zone revealed for Los Angeles – Proposed by YJ Draiman

    Increasing renewable energy and conservation will stabilize and reduce oil – gasoline prices.

    YJ Draiman welcomes innovative renewable energy zone approach which will create 200,000 + new jobs over the next 5-10 years.
    An ambitious project that will transform the way universities, business and industry collaborate and establish Los Angeles as a world leader in the research, development and design of next generation renewable energy technology has been announced today, January 31, 2011.
    Spearheaded by economic development agency, Draiman Enterprise, and National Technology Renewable Energy Zone, will be established in the city of Los Angeles with the Universities of Southern California Technology Innovation Development at its heart.
    A large parcel of land will be allocated to set up the renewableenergy enterprise zone site, which will be in the boundaries of Los Angeles. There will be an academic center which will be transformed into a center of excellence for academic research, commercialization and industry collaboration.

    The renewableenergy zone initiative, which would span further than the confines of the City of Los Angeles and include Southern California, is expected to create 200,000 + new jobs over the next 5-10 years and give a boost to the Los Angeles economy through further industry academia collaboration and inward investment.
    Draiman enterprise Chief Executive YJ Draiman said: “This new vision of Renewableenergy Technology Innovation Center will be the cornerstone of Los Angeles Technology and Renewable Energy Zone. YJ Draiman’s vision for The Renewableenergy Zone is to provide a breeding ground for ambitious companies to harness cutting-edge research, access the best people and develop the products which will shape the renewable energy industry of tomorrow.
    “Southern California has already claimed a place on the renewables map attracting energy heavyweights and pioneers in the solar and wind sector and we believe that by establishing this zone we will help reinforce Los Angeles position as a location of choice for the rapidly expanding renewables industry.”
    YJ Draiman said: “The Universities in the Los Angeles area’s Technology and Innovation Center is a transformational project for Los Angeles, building on California’s great tradition of innovating new technologies and developments in fields including energy and engineering while creating and supporting hundreds of jobs. Through this collaboration, the aim is to quadruple the scale of research program investment in Los Angeles in areas key to economic growth by up to $10 billion in five to ten years.
    “And now, as an integral part of Los Angeles Enterprise’s new Technology and Renewable Energy Zone, which aims to establish Los Angeles as a premier location for inward investment into world-leading technology and renewables research and development, we have the potential to deliver huge economic and social benefits, not only in Los Angeles but nationally and beyond.”

    YJ Draiman said: “The Technology and Innovation for renewableenergy zone will help transform Los Angeles and Southern California. By capitalizing on our leading, industry-relevant research, the renewableenergy zone will attract billions of dollars of inward investment to the city of Los Angeles, drive global businesses, create jobs, and support the development of our highly-qualified graduates and postgraduates.
    “As a leading technological hub of Universities, they are committed to sharing knowledge to address challenges that affect every area of society, including energy, health, manufacturing and economics. The renewableenergy zone will forge new levels of collaboration between researchers, the public and private sectors to accelerate the pace of research and development and deliver benefit to companies, the economy and Southern California.”
    The collaborative approach with the Universities, Los Angeles Enterprise and existing pioneering renewable energy leaders means that companies locating in the zone will have access to government support and some of the world’s best industry and academia in the fields of technology, engineering and energy.
    The project represents a supportive government and business environment where companies locating in and around the zone may be eligible for additional support for job creation, innovation and staff development, delivered through various California Enterprise schemes.

    When need arises we will establish facilities within the existing Zone that offer temporary accommodation for prospective tenants until construction of the research center is complete or, if required, a purpose-built industry engagement building is created within the Zone?
    Renewableenergy Zone is designed to draw on Southern California’s existing competitive advantage by providing the right business environment for the renewables industry to continue to grow and further develop.
    Recent announcements from industry leaders have reinforced Southern California’s position as a world leading city in solar, wind research and development.
    A leader in energy innovation with unrivalled human and natural resources in renewable energy, Southern California is building on its rich history of oil and gas exploration and developing infrastructure to cement its position as a world class location for international companies looking to invest in renewable energy and Energy efficiency.
    “Good leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion”
    “It is Cheaper to Save Energy than Make Energy”
    YJ Draiman for Mayor of Los Angeles

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  39. By mac on August 25, 2011 at 4:44 pm

    Armchair said:

    ” In the last 30 years OPEC has barely increased production while the OCED nations have doubled theirs. While we have been out busting our buns, OPEC has simply been sitting on their massive oil reserves waiting for the big kill as the West exhausts itself in the search for oil.” – mac

    Armchair replied:

    OPEC 1981 production was about 22 million barrels per day. By 1986 it had fallen to around 16 million. In the past few years, it has been running in the 33 to 35 million barrels per day range, or over 50% above their 1981 levels.

    Equivalent OECD production: 1981: 18 mmbopd; 1986: 20 mmbopd; last year: 18 mmbopd. OECD production has never exceeded 22 mmbopd.

    —————————————————————————————

    Ann Korin is the source for the statement about OPEC versus non-Opec oil production. I mis-quoted her slightly. What she actually said was that OPEC was producing 30 million barrels of oil per day 35 years ago and that Opec was presently producing 32 million bbl/day. In the same time frame non-OPEC oil production roughly doubled, so claims Korin.

    I mistakenly used the term “OCED production” instead of non-Opec production. Here is a video reference to her comments where you can listen to what she has to say without mac mis-quoting her. She is the author of “Turning Oil Into Salt” and is a proponent of the open fuel standard. Korin claims that Opec controls about 75% of the world’s oil reserves but are not increasing supply to meet increasing demand but are sitting on their oil to keep oil prices elevated.

    http://www.youtube.com/watch?v…..re=related

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  40. By armchair261 on August 26, 2011 at 12:14 am

    mac,

    Ann Korin is almost correct. If you go back to the early 1970′s, and then again to the late 1970′s, there were a few years when OPEC was producing at or near the 30 mmbopd mark. But then, we could go back a bit further to find that they were producing around 14 mmbopd in 1965 and about 23 mmbopd in 1970. So it’s a numbers game: when do you want to pick your reference point? It depends on what interpretation you want to make.

    What this example shows is that when prices are high, OPEC produces more (as they also did recently in 2008). When prices are low, they trim production and/or investment. This is pretty typical of any industry. Korin’s inference that OPEC is sitting back doing nothing, or that they don’t respond to price signals and have maintained flat production, is not correct.

    In 2003, before prices started their climb, OPEC was producing around 30 mmbopd. In 2008 their average was 36 mmbopd, and that’s the average for a year which saw an economic collapse in the final 3-4 months. In the peak month, July, they were almost certainly producing more than that. So Korin’s claim that OPEC does not increase supply to meet demand is false. The years 2007 and 2008 were all time peak global demand years, and 2008 was OPEC’s peak production year (2007 was #4). She’s probably correct though in saying that they are not producing flat out. It would be economic suicide for them to all produce as much as possible, so it’s not in their interests to flood the market with oil, just as it’s not in any industry’s interests to create a situation of excess supply and/or overcapacity. It’s their oil, and they’re looking out for the welfare of their present and future citizens. It’s not in the West’s favor, but I think most rational people would probably do the same thing.

    Think about the implication though if OPEC flooded the market with oil. Much non-OPEC production would become non-commercial, and incentives to explore and invest in development would be severely reduced. If the situation carried on for long enough, it would decimate the non-OPEC oil industry, leaving us even more hostage to OPEC years down the road. The oil flood would also be sending all the wrong signals to consumers and governments in terms of consumption, emissions, and the development of renewables. Extremely cheap OPEC oil is a case of being careful what you wish for.

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  41. By Kit P on August 26, 2011 at 7:53 pm

    “They have had to range out as far as 125 miles to keep a stream of biomass flowing into the plant.”

    After observing that mountain top removal for coal was not all that significant in Appalachian Mountains, I observed mountains of grain forming in the PNW. A place where Wendell said could not produce biomass.

    The only thing that is finite is the lifespan of doomers. I new generation of doomers will replace the present one. Those of us who produce what doomers claim is finite will continue to do so. We will never deplete doomers as a resource.

    “YJ Draiman welcomes innovative renewable energy zone approach which will create 200,000 + new jobs over the next 5-10 years.”

    Of course the California magic wand crowd will not produce any energy while they are destroying jobs. The best we can hope for is to contain California lunacy to California.

     

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  42. By Wendell Mercantile on August 26, 2011 at 11:51 pm

    I observed mountains of grain forming in the PNW. A place where Wendell said could not produce biomass.

    Kit P.

    The comment was not about all of the PNW, it was specific to Benton County, WA — home to the Hanford Site. I based my comment on the many photos I’ve seen of the Hanford works. They do make Benton County look pretty desolate. My mistake.

    I know large parts of the PNW are productive agricultural land — but there is also a lot of desert land in eastern Washington in the rain shadow of the Cascades. I don’t think the mountains of grain you see are from the part of Washington State that gets only seven inches of rain per year — except for those farms that can irrigate with water from the Columbia River.

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  43. By Kit P on August 28, 2011 at 5:00 pm

    “I don’t think the mountains of grain you see are from the part of Washington State that gets only seven inches of rain per year”

    Your mistake again Wendell. The wheat is dryland wheat from higher elevations where irrigation is not feasible. The relatively mild climate with winter moisture in the form of snow is ideal for wheat. The dry climate is perfect for harvesting and storing the mountains for barge shipment to the world. Camila could be rotated as a second energy crop.

    “except for those farms that can irrigate with water from the Columbia River.”

    Irrigation is for higher value crops such as grapes, fruit, potatoes, and corn.

    My point is to not underestimate the productivity of American farmers to produce biomass.

    Also observed not far from the mountains of wheat, wind farms parts being loaded on trucks. Apparently there is still room in dryland wheat fields for wind farms.

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  44. By JonSCKs on August 28, 2011 at 5:00 pm

    I check in on this site from time to time.. and mostly have a high regard for Mr Rapier’s viewpoints.  On this topic.. well let’s look at the field of candidates.  On a day when NYC was battered by Tropical Storm Irene and the President had to cut short his “vacation” to head to the FEMA bunker for a press photo.. do we recall what HE said as a candidate?

    “.. this was the moment when the rise of the oceans began to slow and our planet began to heal.”

    http://www.breitbart.com/artic….._article=1

    http://althouse.blogspot.com/2…..ceans.html

    So.. if we are going to point out… goofball statements.. let’s at least be honest about the goofballls making them.

     

    My next point was touched on by another poster above.

    There appears to be a pretty strong inverse correlation between the value of the dollar and Crude..

    there’s a decent chart here from a google search.. (no endorsement or comment on the rest of the link.. just googled a dollar vs Crude chart and this is what popped up.. decent.)  http://thesmarterwallet.com/20…..il-market/

    In the late 1990′s we had a very strong dollar reaching 120 on the dollar index in early 00′s.. today we are near recent lows around 75′ish

    (another google search yields this dollar chart.. again no endorsement of the site..)  http://www.ashraflaidi.com/cha…..-index.asp

    We currently are running historically record large government deficits.. which NO DOUBT are hurting the value of the dollar.

    http://www.taxpolicycenter.org…..?Docid=200

    So if Candidate Bachmann can fulfill her pledge of restoring some fiscal restraint on out of control spending.. as well as../.. in addition to a stronger dollar policy.. coupled with the continued investment in drilling.. we now have over 1,000 rotaries drilling for crude.. a 67% increase year on year..

    http://www.wtrg.com/rotaryrigs.html

     

    I’m not going to hold my breath for $2.00 gasoline.. but we’ve seen peaks and valley’s before in the markets.. 1970′s highs.. 1985 bust.. 1991 high.. 1999 bust.. 2008 high… ???  bust..  However, I also wouldn’t bet against her.  And as Mr Rapier notes above.. increased supply has had a dampening effect upon price. 

    Tropical Storm Irene is moving on.. the tide is rolling out.. and “the rise of the oceans have begun to slow..” so sounds like President Obama can make a partial claim of success.. I wouldn’t be so quick to write of the possibilities of a President Bachmann getting her $2.00 gasoline either.

    btw.. the comments about the cellulosic ethanol are intriguing.. due to the drought.. the government has released some of the 30 million acres locked up in a land idleing program known as the CRP (Conservation Reserve Program.)  I talked to a guy who baled almost 3 tons to the acre this past week.. not too bad for a drought.  It’s not a world setter but cranking the numbers.. 30 mln acres.. x 50% harvest x 2.5 tons x 75 gallons per ton cellulosic = 2.5 billion gallons of etoh.  Not much in a 145 billion gasoline market.. but add municiple waste.. further gains from corn.. as well as forestry waste from our nations 650 million acres of forests.. or possibly waste from the 450 million acres of scrub land.. and at the very least your talking a job or two for someone… possibly more.. and less reliance on imported crude.

    The corn thing you have to admit is pretty impressive given that we have done this in a tight stocks situation.. how much could we do if the price of everything else.. wheat, soybeans, livestock.. etc sucked and everyone jumped into corn/sorghum production?  We probably don’t have enough e-plants… ??

    Anywho.. just my $.02

     

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  45. By Wendell Mercantile on August 28, 2011 at 9:41 pm

    The wheat is dryland wheat from higher elevations where irrigation is not feasible.

    I lived in Wyoming, in an area of many dryland wheat farms. Normal practice there was to let a field lay fallow for two years to collect moisture, and have a crop every third year. Is dryland wheat farming in the Casade’s rain shadow different than the high plains of Wyoming?

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  46. By Kit P on August 29, 2011 at 10:38 am

    “Is dryland wheat farming in the Casade’s rain shadow different than the high plains of Wyoming?”

    Yes, the ‘Inland Empire’ is at a much lower elevation and protected from artic blasts. Many ‘higher’elevations are served by irrigation canals from the mountains while others are require the water to be pumped so they are limited to being close to the river. ‘Higher’ is a relative related to the cost of pumping water.

    The Snake River also allows barge navigation as far as Idaho. At the port where wind turbines were being off load were acres of straw stacked four stores high bound for Japan. Our friends with horses tell that ‘Japanese reject hay’ is still very good quality.

    I suspect that the soils are different too. The soil here is very powdery. Before farming, wind erosion and blowing dust was a major problem. Keep in mind too that that the ‘Hanford Works’ was created by evicting the small farming communities of Hanford and White Bluffs. For the environmental purest, I will point out that ‘yellow star thistle’ and ‘tumble weed’ are invasive species brought here by Russian trappers.

    Our government, DOE, pays to grow ‘tumble weed’ in green houses to replant disturbed soil at Hanford. This makes greens in Seattle like Russ happy. There are people who make a living collecting ‘tumble weed’. It is a nasty fire hazard when it collects next to your building after a wind storm.

    So if I had a choice of invasive species, I would pick the merlot grape.

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  47. By Wendell Mercantile on August 29, 2011 at 11:04 am

    Kit P.

    Thank you for the information.

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  48. By zach on August 30, 2011 at 2:53 pm

    I could see a president pulling the price of gas below $2/gal. Just imagine if you pulled a Herbert Hoover and allowed the entire financial system to collapse worldwide. If you crash the US economy and get 25% unemployment I’d wager we’d have <$2/gal gasoline in this country. Bachmann’s promise is both scarier and more humorous in that light.

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  49. By Wendell Mercantile on August 31, 2011 at 1:49 pm

    Bachmann’s promise is both scarier and more humorous in that light.

    Zach~

    I wonder if anyone has asked Michele about the possibility that if she got the price of gasoline to less than $2 per gallon would any of us have two dollars to spend?

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  50. By Kit P on August 31, 2011 at 9:02 pm

    “Thank you for the information.”

    Wendell, took a short drive along the Columbia River from Port Kelly, Washington to Cold Springs Junction which is in Oregon. This stretch of the river is a deep gorge that is habitat for a few mountain goat that can be observed with a telephoto lens.

    There is several irrigation pumping stations at an elevation of about 330 feet from the river. Three miles up Pendleton-Cold Springs Highway the first irrigated farms after a 500 ft climb. Above an elevation of a 1000 ft, wheat is the only crop that can be seen and trees around farm houses are the result of irrigation until you get to the Blue Mountains.

    If it is too steep for farming it is ‘shrub step’ habitat.

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  51. By Dave on September 9, 2011 at 9:29 am

    Hey, Hugo Chavez has managed to keep gasoline prices pretty low too. Michelle Bachmann has absolutely no clue or she is a mischievous liar.

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  52. By John Turachak on October 1, 2012 at 1:46 pm

    While I agree that the 3 basic factors for the price of anything are supply, demand, and the strength of the doller, I also believer that ALL of these factors can and have been manipulated.  And, in some cases, encouraged to do so at a drastic rate.  Despite the political angle and all the influences it has on international commodities, I agree that the President doesn’t have the power to specifically raise or lower gas prices, or to do alot of things that the average American voter thinks he can.  However, it is just like the line item veto for the President (which is never going to happen) the economic issues of the day are invariably linked to other policies that voters are/aren’t concerned with and therefore average American voting has become nothing more or less than voting for the “lesser of two evils”, so to speak when it comes things they are/aren’t concerned with.  With that being said, I seem to recall a certain Presidential hopeful a while back saying that gas prices can and should be manipulated to thetune of $5.00/gallon.  Thanks, Al Gore.  A man whose entire family fortune was made from the oil and tobacco industry–something he now conveniently claims are “evil”–being the self-proclaimed crusader for all things Green.  The irony of the whole “Green Movement” is that you, the average American taxpayer/worker/voter can’t afford it!  It is akin to shopping in the “kashi go-lean” , “all natural” aisle of your supermarket vs. the regular product aisle.  Sure, it may be healthier, but you can’t afford it!  Oh, and sign me up when they bring that $5 million hydrogen car down to around $40k.  Also, for all you Green fanatics out there who are so stoked about “hybrids” and “electric cars”, besides the cost per unit and cost to replace those battery cells, I can tell you from personal and professional experience that some of the most contaminated land in this country is from the direct result of the manufacture and disposal of batteries.  Which begs the question…where do we put it all when we are done with the batteries and the residuals?  I am talking heavy metals and chemicals.  And, finally, where do you think all the electricity is going to come from for charging your car at home or on the road?  That’s right campers…fossil fuels!  And now we have come full circle….thanks for playing.  Good luck and good night….

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