Thomko Petro Chemical Blog

Thanks to all who sent e-mail from our last post about soaring oil prices. From analysts, politicians and just about everybody weighing in, there are many opinions about the cause and ways to solve our dependency on oil. Here's my personal thoughts on some of the major causes of why oil has risen to all time highs
 . . . CT

For the past 20-25 years, this country has obviously neglected to find other sources of energy and fuel, and instead opted to stay dependent on foreign oil. Now we come to a time when as Thomas Friedman's book title "The World Is Flat" hits us squarely in the face.

This is a global economy - and the rest of the world wants what we have. We are no longer the driving force on the oil & gasoline prices worldwide. Even if we cut back on gasoline consumption - drivers in the rest of the world (China, India, etc) will continue to consume more gasoline. So the answer lies not just in finding more oil, the big pill to swallow is a real alternative energy policy.

While we have been living the "American Dream", much of the rest of the global world is catching up. They want the cars, homes and a lot of the technology we have become accustomed to. There are just not enough resources to supply the demand. Actually from my point of view they are falling into the same trap we now find ourselves - but that's another story . . .  

The facts are crude oil production has remained rather flat - while the need for oil continues to rise - especially from developing countries. The American dollar is at an all time low, and let me state once again that oil is priced worldwide in dollars.

Terrorist activity around the world can send oil souring at any time as we have seen in Nigeria, and threats remain throughout the Middle East. 

Oil speculators also have to be figured into the equation of the rising oil prices. Many institutions playing the market for their investors own far too many oil contracts - and when they announce oil price expectations - prices continue to rise. It's easy to control the price when you own most of the contracts!

And the war in Iraq has dramatically cut their pre-war production of approximately 4 million barrels per day to less than 2 million barrels per day. So in reality this war has also added to the reduction of the global oil supply - and I won't even go into what the threat of war with Iran will do to the world oil market prices.

But there's more bad news . . . Russia, the world's second largest oil exporter is having production problems. Russia's lack of investment in their infrastructure and many aging oil fields has led to their first production decline in 10 years.   

At the end of the day, it's all of us who pull up to the gas pump each week who are the losers. Obviously the elected politicians for the past two decades have not had the country or our best interests at heart. So, it's up to us to make changes in our lives, and try to ride out this economic chaos.

I certainly don't have all the answers, but I do know that we are facing a very bad economic time in this country. It's going to take sacrifice, and hopefully this time we will come out this with a new outlook on alternative energy - but it's not going to happen overnight. 

That's my take . . .

While Alaska has lots of oil money, residents of many remote villages are living with a cruel irony - they cannot afford to heat their homes because their fuel bills are 2 - 3 times the national average.

U.S. nationwide home heating fuel averages $3.30 a gallon, but averages $4.30 a gallon in Alaska - and in the remote villages the cost is $9 a gallon. Gasoline is now averaging just over $3 a gallon nationally, but averages $4.54 in Alaska, and jumps to $7 a gallon in the remote areas!

The cost of shipping oil to the remote areas of Alaska by plane or barge is steep - despite the state's vast oil wealth. Most of the oil must be shipped as crude to the West Coast to be refined, and then sent back to Alaska.

The state's lawmakers are looking at offering hundreds of dollars in rebates to help remote villages offset their home heating bills - but they only have a short time to address this issue before the legislative session ends - and Hugo Chavez steps in to embarrass them once again.  

It seems in the past Chavez has been far quicker to come to the aid of Alaska's remote village residents. Last year Venezuelan oil company Citgo donated $5 million of free heating oil to poor communities in Alaska.

Arctic Village is one such community where fuel has to be flown in because this remote community is hundreds of miles off the normal roadways, and this village cannot be reached by barge. The residents in these areas depend on fuel to travel by snowmobile, ATV or boat to hunt and fish.

Alaska's state revenue will benefit a surplus of $3 -$4 million this year because of high oil prices, along with a recent hike in oil taxes. But lawmakers are looking at a steady 6% drop in production at the North Slope oil fields.

So it's a choice between giving some of that money as rebates to the poor, or keeping some of the surplus which will help tide the state over until the North Slope project is finished - but that's at least 10 years away.

Tell that to Ed Littlefield, a Vietnam veteran who suffers from diabetes, lives on disability, and looks for wood to chop so he can heat his home. He's gone without fuel for days. He says, " Everybody hates Hugo Chavez, but we thank him for the fuel that lasted about 3-4 months last year".

Republican Bill Thomas represents nearly 50 small communities in the state's southeast panhandle, he suggests a $500 payout to state residents, at a cost of about $360 million that would be paid from the profits of the state's oil wealth savings account - a $38 billion Alaska Permanent Fund.

But fellow lawmakers do not want to touch the earnings fearing Alaskans would perceive it as a raid on the fund that pays them an annual dividend - $1,654 for nearly every man, woman and child last year.

Other lawmakers caution against putting money into assistance programs that will just have to be cut in the leaner years, along with giving the perception of Alaska as a free loader state with "cash giveaways" - especially after the infamous "bridge to nowhere" federal earmark.

So while the lawmakers quarrel about what to do, residents may still have to depend on Venezuela this year to help them heat their homes and provide fuel for transportation.

Source: AP

A weekly survey by MasterCard SpendingPulse found retail gasoline demand at the pump during the week ending Feb. 8 fell 3.5% compared with the previous week. Gasoline demand was down 3.1% from a year ago. This is the third straight week demand dropped.

The national average retail price for a gallon of regular fell by 2 cents. The price is down 13 cents over the past four weeks. At $2.96 per gallon, the U.S. average price is at its lowest mark since Nov. 2, but is up 35.2% over the comparable week in 2007.

"This is the largest week-to-week decline in gasoline pumped since August," said study author Michael McNamara. "Winter weather in the Mountains and Midwest helped to keep drivers off the roads in the first week of February."

McNamara said unless demand picks up significantly, there will be year-over-year declines in demand for the next several weeks. "In February 2007 the country was pumping between 65 million and 66 million barrels per week. We are well below that pace right now," he said.

SpendingPulse is a macroeconomic indicator of national retail sales based on aggregate sales activity in the MasterCard payments network, together with estimates for all other payment forms, including cash and check. MasterCard SpendingPulse does not represent MasterCard financial performance.

Source: Chron.com - Energy Sector Roundup

Weather experts are predicting a very busy hurricane season, with forecasts of 13 to 17 tropical storms, and 10 could have the potential to become hurricanes.

Since the terrible hurricane season of 2005, the petroleum industry has been attempting to repair the damage to platforms, pipelines and refineries.

And when the first hurricane comes even close to the Gulf, look for gasoline prices to go through the roof.

The hurricanes of 2005 destroyed 113 of the Gulf’s 4,000 oil and gas platforms and caused damage to 52 others - in fact more than 20 rigs had actually disappeared from the Gulf. 

Shell's Mars Platform took the biggest hit during Katrina. The rig is now stronger with clamps that Shell says are four times stronger than the ones previously used. The Mars platform resumed operation last year, and currently produces 190,000 barrels of oil equivalent a day - 20% more prior to hurricane Katrina levels.

Katrina brought attention about the need for stronger mooring systems. These systems anchor rigs to the sea floor. Major rig owners like Transocean Inc. and Noble Drilling Inc. have increased the number of rig anchor lines from eight or nine to 12 in some cases.

The World Meteorological Organization uses six lists of names in its rotation. A name is retired if a hurricane is very deadly or very costly. Katrina, Rita and Wilma are permanently off the list.

What is driving the price of gasoline? Well that depends on what report you read or newscast you hear . . .

Analysts state that this years supply of gasoline is more than 15 million barrels below normal even though the U.S. has larger than normal stockpiles of crude oil.

However, the Energy Department reported last week that gasoline stocks rose by 400,000 barrels, so what's the problem?

Well, one problem with the Energy Department's figures is that most of the gasoline inventory is located on the West coast, and for the West coast only - so the rest of the country will not benefit.

Last Friday the International Energy Agency raised the questions about supply meeting demands, and that raised the price of oil. The IEA is questioning OPEC's stand that there is no need to boost production levels, and the agency has stated that there is a danger of not meeting the 1.6 million barrel target required in June.

Right now the short term issue is whether U.S. refineries can convert enough of the crude in reserve into gasoline by the time the summer driving season gets underway within the next few weeks and runs into August. 

This is the time of the year when refineries - most of them quite old - have to shut down for maintenance. One example is Exxon Mobil's refinery in Beaumont Texas, the sixth largest in the U.S., which is shutting down for maintenance.

One of the major problems in getting crude converted to gasoline is that the U.S. has a shortage of oil refineries - we have not built a new refinery in the U.S. for nearly 30 years.

Washington has discouraged the construction of new refineries through legislation that requires expensive permit requirements for the construction of new refineries, along with expanding the exisiting refinery sites.

With regards to refinery maintenance issues spare repair parts for old equipment are sometimes hard to come by, and this also delays the turnaround and shutdown time frame. Then there are those unplanned outages - at least a dozen partial shutdowns have occured recently at U.S. refineries for a number of other reasons.

The long term issue is that Americans have consumed 2% more gasoline - which is about 200,000 more barrels a day, than in 2006 - so we should either build new refineries, or really get dead serious about alternative fuel and energy.

As the price of gasoline continues to go up, it also drives up the cost of food and other services. How long will we continue along the same path?

The state of Kentucky filed at lawsuit today sued against Marathon Petroleum in a price gouging investigation related to Hurricanes Katrina and Rita. The suit accuses the fuel supplier of violating price gouging laws after the deadly 2005 storms.

Marathon is Kentucky's largest wholesale supplier of gasoline and a wholly owned subsidiary of Houston-based Marathon Oil Corporation.

Kentucky Attorney General Greg Stumbo claims that Marathon overcharged the residents of Kentucky residents 86 million dollars.

The lawsuit also claims that Speedway and SuperAmerica stores overcharged an additional 3 million dollars.

A spokesman for Marathon has denied the allegation.

California regulators have certified a temperature-adjusted gasoline pump to prevent "hot fuel" from shortchanging motorists, but the oil industry has pressured the pump's manufacturer to refuse to sell the pump in California.

In response to the revelation in the Kansas City Star Sunday, the Foundation for Taxpayer and Consumer Rights called on California Attorney General Jerry Brown to launch an investigation into whether the oil industry has unfairly used its market power to deny motorists access to an honest accounting for each gallon of gasoline.

In addition, FTCR urged U.S. Senator Barbara Boxer to hold hearings and force oil companies to withdraw their pressure on Gilbarco Vedeer-Root, the temperature-adjusted pump manufacturer, which has decided not to sell its pump in California.

When the temperature of gasoline rises above 60 degrees, gasoline expands but California pumps don't account for the bigger volume and consumers receive less gasoline than they should.

The technology to adjust for temperature has already been installed in Canada where it benefits oil companies, but domestic oil companies have resisted because the practice is so profitable, particularly in sun-belt states. Hawaii is the only state to adjust its pumps for hotter gas.

In August, FTCR called upon state and federal regulators to adopt new temperature-sensitive gasoline pump technology in response to an initial investigation by the Kansas City Star

Read the earlier Kansas City Star stories:

Hot Fuel For You, Cold Cash For Big Oil

From Consumer Watchdog:

Hot Fuel Triggers Investigation

Highway Funding Shortchanged, Loophole Enhances "Hot Fuel" Profits

FTCR is nonpartisan, nonprofit consumer advocacy group. For more information, visit http://www.consumerwatchdog.org/

Online map provider MapQuest and AAA are squaring off in a battle to provide information to drivers on gasoline prices.

On Tuesday, MapQuest unveiled its new Internet service designed to list gas prices at more than 100,000 stations around the country. Available at www.mapquest.com/gas prices, the service allows visitors to search by location and type of fuel.

AAA rolled out a similar Web-based service, AAA Fuel Price Finder, in January at www.aaa.com, then click on "Auto.''

MapQuest said in a statement that its site is "more advanced'' than AAA's, touting services such as alternative-fuels listings, directions to stations and sorts by station brand. AAA spokesman Eric Escudero countered that AAA's TripTik Internet service provides viewers with information not provided by MapQuest such as trip costs, lodging locations and local attractions.

I guess the consumer will decide this one - CT

Consumers may be wondering why they're paying more at the pumps for diesel fuel than regular gasoline these days. The answer is as simple as supply and demand, energy experts say.

Diesel, processed from petroleum oil into a distillate to heat homes and fuel some cars and trucks, is 40 cents more per gallon than regular gasoline, according to national averages compiled by AAA's Daily Fuel Gauge Report.

Regular gasoline, the cost of which sky-rocketed nationwide after Hurricanes Katrina and Rita wrecked the Gulf's oil pipeline system last year, has dropped to an average of $2.09 per gallon in the New Orleans area, while diesel averages $2.55 per gallon, AAA's Daily Fuel Gauge Report said Thursday.

Read full story at Times Picayune

A recent Washington Post-ABC news pool showed that most Americans are suspicious about the reasons for the recent decline in gas prices, and also about how long this will last. I posed that same question back before labor day.

In the poll 3 out of 10 Americans think the reason for falling gasoline prices is the result of domestic political factors - in other words this is all a result of the upcoming elections in November.

Nearly as many Americans think the reduction in gas prices is due to market forces or supply and demand. If no major cutbacks are forthcoming, then the prices will remain lower, so you can't factor price without the supply and demand equation. However, does politics sway the supply and demand? We could debate that one for awhile. But back to the survey . . .

One of the interesting things about the survey is the breakdown of liberal vs. conservative:

- 16% identified themselves as conservative Republicans
- 26% White Evangelical Protestant
- 29% Southern residents think the election is the primary cause
Also, quite a few felt that the lack of hurricanes this season has also kept the price of oil down.

Analysts, the ones who get paid to know the oil market, say prices have fallen due to a demand slowdown here in the U.S. since the summer driving season has come to an end. Other factors include a build up in crude and gas inventories, the price of crude has dropped over $16 a barrel since August, and oil companies have been required to reduce the sulfur content in diesel fuels, and mix gasoline with ethanol instead of MTB.

The build up of crude inventories cannot be counted on too much because this is the time of the year when many refineries close for maintnance, and if OPEC decides upon production cuts, then those inventories will be depleted.

What is OPEC going to do, Ah that's always the question in our oil dependent world.

OPEC members have stated they want to cut production by 1 million barrels per day, which would obviously run the price of oil back up.

Iran, Nigeria and Venezuela are already producing well below capacity. Saudi Arabia has slowed their output, and since Kuwait has not cut production since 1998, it remains to see what they will opt to do. Currently about six of the OPEC countries have agreed to cut their oil production.

So from the analysts point of view, we have until Thanksgiving until this equation of lower gas prices may start to change.

Currently the national average for gasoline has fallen to $2.79 a gallon.

All the analysts predicted rising gas prices after the BP Alaska pipeline shutdown. Other factors sited in the predictions for rising prices was the tensions in Iran, Israel and Lebanon, and Nigeria.

If these were the reasons for pricing rising, what has happened in these locations to make prices fall?

Let's take a look: 

Alaska
BP plans to begin constructing the new pipeline system early next year, and return to full production of 400,000 barrels a day. Production is cut in half to 200,000 barrels a day from the shutdown due to pipe corrosion. The western part of the pipeline system resumed production by bypassing the damaged pipes. So, there's still a loss of 200,000 barrels until sometime in 2007.

Iran
The news media has kept us all aware that Iran has refused to back down on its nuclear program, the deadline has passed, and proposed sanctions are on the way. Once the deadline date was reach, oil prices went UP, so how can this be factored into lower prices? What else is going on with Iranian oil? 

Iran is threatening Japan over a project in Azadegan, which is one of the largest oil fields in the world. Japan signed an agreement in 2004, but pressure from the U.S. over the nuclear program has Japan in a bind.

Since Japan is on the hot seat, Iran is now threatening to turn the project over to Russia and China. Will Japan vote for sanctions against Iran? Russia and China have already voiced their opinion against sanctions. Oil makes for good political partners, and what about Iran's promise of oil increases if sanctioned? 

Israel/Lebanon
Although the bombs have stopped dropping, we are all aware that the truce remains quite fragile. The oil spill resulting from the Israeli bombing of oil tanks in Lebanon has produced the most disastrous spill to affect the entire eastern Mediterranean basin, which includes Syria, Turkey, Cyprus, and Greece, as well as Lebanon. This is just a "wait and see what happens" situation. 

Nigeria
The Nigerian oil workers union voted to strike on September 13, in response to the violence, kidnapping, and general lack of security. Union officials say the strike could last three days, but offers of higher pay could resolve the issue. Currently Nigeria's oil production is down by 25%, which is equated to 600,000 barrels per day. Shell, Chevron, and the Italian oil company ENI are the foreign companies in the Nigeria Delta.

In their message the unions warned that "if after the three-day warning strike the government fails to address the issues raised, and provide a peaceful and safe environment in the Niger Delta, and other parts of the country for oil workers in particular, the will have no other option but to withdraw their services indefinitely". The unions blame the government for not doing enough to combat the crisis in the region. Does this sound like things will be getting any better for increased oil production in the region?

Venezuela
Not factured into the drop in prices, but nevertheless a player in the game. On August 23, Venezuela announced it would triple its oil exports to China over the next three years. That announcement made China so happy it decided to build 18 tankers for Venezuela's oil fleet.

And there are rumors that China has privately said it support Venezuela’s bid for a seat on the United Nations Security Council. Russia and Iran also have lucrative oil contracts with Venezuela.

The writing was on the wall when Citgo announced selling more than 1,800 of the Venezuela/America Citco gas stations.

Although many U.S. government officials do not believe Venezuela will shut off oil to the U.S., I believe it's only a matter of time before more of Citgo’s American facilities are sold off.

While I'm happy to get some relief when filling up my tank, I'm not buying the reasons given for the down turn in gas prices. The world of global oil production is still very shaky, and American consumers are just pawns in the game.

While we may rejoice in lower prices at the pump this Labor Day weekend, we should not see this as a sign that prices will become stable, or even go lower.

With gas prices rising, AAA said that travelers are using the Internet to map out the best routes to destinations. 

AAA said use of both AAAMaps.com and the AAA.com TripTik travel planner rose more than 20% in May compared with May 2005. 

Travelers are seeking more than just the most efficient point-to-point routes. Based on increased traffic to AAA’s Fuel Finder Web site, drivers are also using the Internet to save gas. AAA said visits to Fuel Finder have jumped 168% during the past year.

Usage of the Fuel Cost Calculator, a tool designed to help drivers estimate the amount and cost of gasoline needed to complete a trip based on the make and model of their car, rose from 43,250 visits in January 2006 to 748,829 visits in May.

http://www.fuelcostcalculator.com/

In an interview with Soledad OBrien on CNN today, Bob Malone, Chairman & President, BP America stated that BP spends $200 million dollars a year on maintenance!

The anchor was quite surprised, as well as I when he stated that figure. Malone then went on to say BP uses the latest technology in their pipeline maintenance - and they even x-ray the pipeline. 

When the anchor asked why BP did not heed employees and subcontractor warnings about possible pipeline problems, the BP Chairman fumbled, and Soledad OBrien then read the internal BP memo to him from employees and contractors alike who warned of environmental damage because of maintenance issues. 

After hearing the internal memo read to him, he stated that the warning had been investigated, and basically found nothing out of the ordinary. When the CNN anchor asked about the BP employees and contractors jobs being put in jeopardy because they raised the issue, Malone denied this happened.

When she asked Malone about the Governor of Alaska having to enact a hiring freeze due to lost income from the Alaska pipeline shutdown, and wanting BP to reimburse the state of Alaska, Malone completely side stepped that issue with polished "corporate talk" of BP's commitment to the environment, etc.

Finally getting down to the current shutdown issue, Malone explained that a micro biological growth was discovered in the pipeline, and this bacteria was what prompted the shutdown.

So, now we've heard it from the horses mouth, BACTERIA, not rust or corrosion of the pipeline, as previously reported. 

Guess those high tech x-ray machines couldn't see those tiny bacteria.

Exxon Mobil earned $10.36 billion in the April-June period, the second largest quarterly profit ever recorded by a publicly traded U.S. company.

Exxon Mobil's report comes as many drivers in the U.S. are paying $3 for a gallon of gas — increasing the likelihood of further political backlash in Washington, D.C.

But the company isn't alone. Royal Dutch Shell said earlier today that second-quarter earnings jumped 40% to $7.32 billion as high oil prices offset production difficulties in Nigeria and the Gulf of Mexico.

Other oil companies reported big numbers for the quarter this week as well. BP reported its quarterly profit rose 30% to $7.3 billion and ConocoPhillips said its earnings rose 65% to $5.18 billion. Chevron will round the field of five majors when it reports its second-quarter performance Friday.

A bipartisan group of US Senators Wednesday introduced legislation to reduce US gasoline consumption by over 1 million b/d in 10 years by boosting fuel efficiency standards.

The bill comes on the heels of a report released by the US Environmental Protection Agency on Monday that found model year 2006 cars and light trucks had an average fuel economy rate of 21 miles/gal, flat with the fuel-economy level for model year 2005 passenger vehicles.

Since 1992, average real-world fuel economy has been relatively constant, ranging from 20.6 to 21.4 mpg. The 21 mpg value for model year 2006 was 5% lower than the fleet-average fuel economy peak value of 22.1 mpg achieved in 1987-1988, EPA said.

The "Fuel Economy Reform Act of 2006" attempts to break the log jam on establishing greater vehicle fuel economy by establishing a target, rather than a mandate, of a 4% annualized increase in Corporate Average Fuel Economy standards.

At an average price of $2.50/gal (well below current prices near $3/gal), consumers would save $50 billion at the pump in 2018 alone. By 2028, Americans will have saved a total of 549 billion gal of gasoline and cut global warming pollution by 6,094 million mt of carbon dioxide equivalent gases, they said.

Unlike current CAFE standard, in which automakers are required to meet broad standards over their whole car fleets, the bill calls for establishment of different standards for different types of cars.

Senators said the change should help giant US automakers Ford and General Motors, which both produce full lines of small and large vehicles. Companies that just produce small cars have an advantage under the current system, they said.

The legislation also provides tax incentives for companies to retool parts and assembly plants to produce more fuel efficient cars. It would also lift the current 60,000-per-manufacturer cap on buyer tax credits to allow more Americans to buy ultra-efficient vehicles, like hybrid gasoline-electric cars.

The bill is sponsored by Foreign Relations Committee Chairman Richard Lugar, Republican-Indiana, ranking Democrat Joseph Biden of Delaware, Illinois' two senators, Dick Durbin and Barack Obama, both Democrats, Senate Energy Committee ranking Democrat Jeff Bingaman of New Mexico, Tom Harkin, an
Iowa Democrat, Norm Coleman, a Minnesota Republican and Gordon Smith, an Oregon Republican.

Source: Platts.com

Oil prices are already up within the last two days due to fuel demand, along with problems with several U.S. oil refineries - and add to that the ongoing tension with Iran, and lower gasoline supplies for the summer driving season.

And now a strike by oilfield workers in Norway, one of the top 10 global oil producers will only add to the senario we are all too familiar with . . . higher gasoline prices!

The Norwegian Shipowners' Association, which represents the rig owners, said in a statement three rigs had already been taken out of operation and added that 10-12 drilling projects could be stopped in the course of the next week or two.

"This will also affect oil and gas production on the Norwegian continental shelf because the drilling includes production wells," this can have an influence on already high oil prices and on the Norwegian shelf's reputation as a stable supplier and interesting area for investment," the association said.

Eighty-seven members of the NOPEF oil workers' union began a strike on Wednesday after pay talks failed. The union has said the action would affect "to a greater or lesser extent" well completion work on close to 30 rigs and installations.

Norway's biggest oil and gas producer Statoil said earlier that completion of an injection well at its gas project in the Barents Sea was halted and the strike could delay further Arctic exploration planned for this summer and autumn.

Norway's second biggest petroleum producer Norsk Hydro said that the strike could stop production drilling on several floating units and fixed installations from next week, but it had not yet seen any impact.

In recent years the Norwegian government has several times ended strikes in the offshore oil industry when it has deemed them potentially damaging to the economy or Norway's reputation as a reliable energy supplier.

Source: Aftenposten

The House defeated a proposal to allow off-shore drilling in U.S. coastal waters.

National Center for Policy Analysis (NCPA) Senior Fellow H. Sterling Burnett responded to the news by suggesting the president should send Congress back to the drawing board.

"If I were president, I would veto any interior funding bill that does not put America on a path to greater energy security by ending the moratorium on off-shore oil and gas production and allow drilling in ANWR," said Burnett. "We have billions of barrels of oil and trillions of cubic feet of natural gas going untapped, while Americans are suffering from the highest oil and gas prices in history."

The Interior Department estimates that the Outer Continental Shelf has more than 115 billion barrels of oil and 633 trillion cubic feet of natural gas available for extraction. That would satisfy the nation's oil needs for about 16 years and its natural gas needs for about 25 years at current levels of consumption.

"We are the only industrialized nation on earth that is not actively seeking new oil and gas reserves off of its shores," said Burnett. "Even Cuba is drilling offshore."

Cuba and Canada both currently run drill operations adjacent to U.S. territorial waters. As a result, those countries are tapping those reserves instead of the United States.

"This is an irresponsible move to curry favor with environmental lobbyists and the travel industry in California and Florida," Burnett concluded.

The NCPA is an internationally known nonprofit, nonpartisan research institute with offices in Dallas and Washington, D. C. that advocates private solutions to public policy problems. NCPA depends on the contributions of individuals, corporations and foundations that share our mission. The NCPA accepts no government grants.

The number of Americans driving and flying during the Memorial Day holiday weekend is expected to rise only slightly this year as consumers respond to the rising cost of airfares, hotel rooms and motor fuel, according to travel agency AAA.

AAA said 37.6 million Americans will travel 50 miles or more, or about 1% more than last year – an estimate derived from a national phone survey of 1,500 adults.

More than 80% of those travelers will take road trips, while another 10% will fly. The remainder will be packed into trains and buses.

The average retail price of gasoline is $2.93 a gallon, or 36% higher than a year ago.

AAA forecasts that flights during the holiday weekend would be about 10% more expensive than a year ago and that hotel rates would be roughly 5% higher.

More than 40% of those surveyed said they would be staying with friends or relatives.

AAA said the largest rate increase would be in the rental car segment, with prices roughly 20% higher than a year ago.

Think we've got it bad? Oh, it could be worse - look at what drivers around the world are paying for a tank of gas . . .

You could be living in the United Kingdom where the price of a gallon of petrol is currently $7.19,  somehow it sounds better to say only $1.90 a liter (one gallon = 3.78 liters).

Italians are paying around $6.00 a gallon. Australians are currently paying $3.92 a gallon. And our Canadian neighbors are currently paying up to $3.81 a gallon.

High gasoline prices are here to stay for at least the next couple of years and the government can do little in the short term to mitigate them, US Energy Secretary Samuel Bodman said at the weekend.

"Suppliers have lost control of the market," Bodman told NBC television, in explaining how gasoline (petrol) prices had risen as much as 60 cents a gallon, or at least 25%, in one month.

"We've got demand coming from China, from India, from the United States," reflecting strong economies, Bodman said.

He also noted that conflict in Iraq tightened crude supplies.

"Clearly we are going to have a number of years, two or three years, before suppliers are going to be in a position to meet the demands," Bodman said.

Bodman meanwhile rejected some lawmakers' allegations that consumers are being deliberately gouged by oil companies, and said popular calls to set a windfall profits tax on the companies would not work.

"You had 20 oil companies at one time; (now) you have five ... We need to inject some competition into the mix here," she said.

"What happens is, because this administration believes what's good for Exxon Mobil is good for America, they simply do what the oil companies want," Democratic Senator Charles Schumer said on ABC television.

Republican Senator Trent Lott told CNN that the price rises stem from unabated consumer demand and lack of long-term polices, but he assailed the oil business as well.

"I think there is manipulation. Perhaps it is the traders that are artificially driving up the prices out of anticipation of what might happen in Iran.

"But when you look at the profits of the gas companies, the oil companies ... it is hard to choke that down."