The more I read on the subject of oil, gasoline and the US dollar, the more confused I get. The more I try to add up the numbers, compare them and analyze them, the fuzzier the math gets. I have read articles, watched interviews and even the experts appear baffled. Is there anyone out there that can explain "in English" what is "really going on" or must I continue to swim through this murky water alone and without any land in sight?
How much oil do we have left on Mother Earth?
It seems that no one really knows. If they do, they are not telling. Countries do not have to disclose how much oil they have, and many figures that are released may or may not be accurate. So if you see an impressive chart, with impressive figures on oil deposits, discovered and undiscovered, be aware of the "fuzzy" numbers.
Who are the key players in oil?
According to BP Statistical Review of World Energy 2007, the United States has 29,900 barrels of "proven reserves" a day while Saudi Arabia has 264,300 barrels of "proven reserves" a day.
Saudi Arabia may have more proven reserves than the US, but the United States has the greatest refinery capacity (17,455 barrels a day) while the Russian Federation which comes in second only has a refinery capacity of 5,491 barrels a day. In addition to having the crude oil, the country must also have the capacity to refine it and turn it into gasoline. It seems that the US, at the moment, has the upper hand in the area of refining crude oil. What does "refining capacity" really mean? Why does the US have more capacity than other countries? Is it all about money? Or is there something else?
Saudi Arabia produces 13% of the world's oil; the Russian Federation produces a little over 12% and the United States 8%. The greatest disparity appears to be in the oil reserves and not in the production.
A great deal of the oil we consume in the United States appears to come from Canada and Central and South America and not from the Middle East.
According to the BP Chart, the United States consumes the greatest amount of oil, a little over 24% while Saudi Arabia consumes 2.4%. Why does the United States consume so much more oil than other countries with greater population? What makes us different?
How has the weak dollar affected oil prices?
According to the Center for American Progress as the US dollar falls, "oil-exporting states have been demanding more dollars per barrel of oil to protect their ability to meet expenses paid in euros and other currencies." The Center also mentions that "retirement funds, hedge funds, speculators, and other institutional investors around the world have tried to protect themselves against further declines in the dollar by moving money into commodity futures that are denominated in dollars—financial instruments that will remain stable or even rise against other currencies even as the dollar falls." These two factors combined have caused the weak dollar to therefore rapidly increase the price of oil in such a short amount of time.
If the dollar is worth less than other currencies would you want to own it or would you invest elsewhere? Therefore, who benefits from a weak dollar? Banks? Oil companies? Commodity investors? Or the average consumer?
How much do we pay in gasoline taxes?
According to gaspricewatch.com in Florida I pay the state 14.5 cents per gallon, but if you live in Wisconsin, you pay your state over 32 cents a gallon, in New York and Pennsylvania more than 31 cents per gallon. You must also add the 18.4 Federal Gas Tax to each gallon.
Therefore, if you live, for example in Wisconsin, you pay more than 49.4 cents per gallon on taxes and therefore pay around 12% tax on gasoline.
New tax laws set to expire in 2010 lowered taxes on income and capital gains. However, the price of gasoline continues to rise and the state and federal governments continue to rake in tax revenues. Not my opinion; I am just stating facts.
Did the President and Congress really lower our taxes some years ago? Any mathematicians out there?
Links and other resources
Energy Information Administration
The Big Picture