The Oil Stops Flowing

America's largest oil field (Prudhoe Bay in Alaska) has closed while Beyond Petroleum (here on referred to as BP) scrambles to repair corroded pipes in a 22 mile stretch of the pipeline that delivers oil to America. Analysts everywhere are in a frenzy telling people that gas prices are going to skyrocket and there's been talk (from the government no less) of opening the strategic reserves (a supply of oil the government keeps squirreled away in case of emergency). I'm here to fight the flow and convince everybody that this isn't the end of the world. Furthermore, there is no need even for mild panic.

Ever since I can remember, oil (and therefore gas) prices have risen steadily. The main reason for this is not instability in the middle east, or hurricanes in the gulf, or any of the other excuses oil companies throw out. Oil prices are raised because raising the price doesn't affect demand, as it would for any other commodity. Because demand isn't affected, supplies are a little tighter, which raises prices (it's a circle). Americans with their oil are like addicts with their drugs, we don't like to pay more for it, but we can't just not buy it. The idea that America pissing off the government of an oil producer causes some kind of drop in supply (which is implied when the price goes up) is a load of crap. They may hate us, but the money we pay the mid east for it's oil is what runs those countries. Plus, we've been rubbing shoulders with the mid east since before I was born. You may also remember gas prices spiking after Katrina, supposedly because refineries were damaged. Well prices went back down after a day or so. That's a pretty quick repair job for a big refinery if you ask me.

Because of some recent news events that are much bigger than an oil crunch, this headline has kind of been drowned out, but you can bet that somewhere, crooked oil companies (the only kind) will try to raise prices, citing this pipeline shutdown. I've taken the liberty of checking my facts, and Prudhoe Bay accounts for only 8% of our oil. Not a very big slice of the pie, and if Americans were conservation minded (which they aren't, sadly) they could easily cut consumption for a couple months to compensate. Since that's unlikely, we'll probably just import that extra 8% in the meantime. Before you all head out the door with torches and pitchforks asking for directions to the nearest Saudi embassy, let me share a little known fact: the country we import the most oil from is Canada (18% of imports), with Mexico in second (15%), and Saudi Arabia and Nigeria tied for third (12%). In total, 49% of our imported oil comes from countries in the Americas. Don't believe me?

There will be no large drop in supply, let alone some kind of crisis. If you wanted to go one step farther and see oil prices drop, you could start limiting your use, and encouraging others to do the same (you'll need those skills when the oils runs out and stops flowing for good in a few years). The real tragedy in this is for BP, whose profits are expected to grow 2% less than they did last year because of this fiasco, and isn't that horrible? Actually, the state of Alaska is losing a few million dollars every day that the pipeline is down (I'm guessing this is in lost taxes mostly).

So there you have it, no need to panic.