Help Me Understand The Price Of Oil

[Jimjim]

Actually, we can thank South America for potatoes and Native Americans for squash and other crops.

[pampal]

Oil is far too cheap as it is, the current price if adjusted for inflation is cheaper than it was in the late 1970's during the Iranian revolution. As a citizen of an oil exporting country, I would like to see a higher oil price somewhere around $200, if you cannot afford it , start riding a bike and cooking your food using a wood fire, we could care less

Edited June 19, 2008 by pampal

[Johpa]

Anyway, I totally agree with you that speculators are using the Enron loophole: http://www.closetheenronloophole.com/ and that is the main reason that is driving (pun intended) the price of gas! Anyone who believes that it is peak oil should know that that supply has increased VS demand (demand has decreased). Sorry to burst your speculative bubble!

Nobody is denying that there is some speculation going on in the financials 'market'. But peak oil, as it relates to inexpensive 'sweet crude' is very real. Although the Saudis have increased production, there has been no increase in supply, a dwindling resource, and worldwide demand has not decreased, only that the rate of increase has slowed down.

As for the 'Enron loophole', it is indeed one of the abominations of the cowboy capitalism that is bringing down the US. But regulating the cowboy financiers is a very dangerous endeavor. Look what happened to Elliott Spitzer for his attempts to clean up the financial markets, brought down by a sophisticated honey trap that utilized government resources. These people do not play nice.

[tw25rw]

Would it not be possible for the US, EU and China to form a purchasing cartel and state that from now on, they pay $20 a barrell for oil and even pass laws blocking futures contracts for more than that amount? What would the consequences be?

[slapout]

The produceable reserves of oil in many fields have increased over the past few years, even allowing for production decline, due to more effecient methods of recovery. This has been an ongoing process and some knowledable people say this will continue thru 2030+, with the present active fields. As far as privite ownership of the world oil reserves. the US reserves on private owned land would fall under this defination, but the rest of the reserves are controlled by countries of the world. The private sector does find, produce, and refine most of this, after making various royality payments to the government which claims ownership of the given area, primarily due to lack of expertise and or incompentence of the governments. Several countries has subsquently nationalized oil within thier borders after the private sector had put the finished product into the international and local system. I know of none of these countries who have been able to maintane or increase production in the long haul. I think the news media has misinformed a lot of readers and listeners simply by quoteing the propular interviewee of that day and probably adding their 2 cents, which is in many cases, not only incorrect, but outright bs. The proposal to prohibit the trading of future contracts by Funds etc would return future trading to the groups who are directly involved. This should stir up a hornets nest in the markets of the world.

[PhilHarries]

Bush is also trying to push a bill so they can drill offshore US where there are proven reserves which is currently offlimits due to environmently issues (more likely these field were being treated as reserves)

So now they are compromising the enviro standards due to oil scarcity.

You wait until the stuff starts getting real scarce, environmental concerns will be pushed right out the window. There are vast energy reserves in Antarctica, does anyone think they will be left in place while the world starves of energy? Sure the environmentalists will kick up a storm but at the end of the day if mister Joe Average and family can't drive down to the coast for their holiday they won't give a toss. The thing they, the environmentalists, should be doing is to allow exploration and production from sensitive areas but impose very strict rules on the companies and their operations. Doing this now, while they have some leverage, will be easier than in the future when they may find themselves sidelined.

Part of those rules they could impose could be an alternative energy research "tax" to better fund independant work on renewable energy resources.

[rethaired]

Anyway, I totally agree with you that speculators are using the Enron loophole: http://www.closetheenronloophole.com/ and that is the main reason that is driving (pun intended) the price of gas! Anyone who believes that it is peak oil should know that that supply has increased VS demand (demand has decreased). Sorry to burst your speculative bubble!

Nobody is denying that there is some speculation going on in the financials 'market'. But peak oil, as it relates to inexpensive 'sweet crude' is very real. Although the Saudis have increased production, there has been no increase in supply, a dwindling resource, and worldwide demand has not decreased, only that the rate of increase has slowed down.

As for the 'Enron loophole', it is indeed one of the abominations of the cowboy capitalism that is bringing down the US. But regulating the cowboy financiers is a very dangerous endeavor. Look what happened to Elliott Spitzer for his attempts to clean up the financial markets, brought down by a sophisticated honey trap that utilized government resources. These people do not play nice.

I do not know the exact figure as to how much more we have cheap oil, but I would hazard to guess that as worldwide economy is going into a recession like the one we had in the late 70's, I garantee you that demand will decrease substantially. Add hybrid cars, more people switching to normal cars/motorcycles/transit, reducing airplane trips (Air Canada has reduced the number of flights to and fro the US + prohibitive tickets),... will give this mess a wicked multiplier effect as interest rates climb,... Add a terrorist attack of creative or massive proportion,... Add the bursting of that bubble,... I hedge my bets that we are not going to see tomorrow $200 a barrel (and if we are it is going to be very short-lived).

On the other hand, with stories like the following, who knows where things might go:

"With the appearance of a new haemorrhoid the cost for a barrel of oil is expected to rise another $1.22 per barrel although it's expect to drop once the swelling is down."

Where will it go? Where the sun shines no mor'?

[rethaired]

I feel more empathy than this about "Americans" or "Canadians" because as a European I can see how much advertising the average North-Am. will watch. There was an interesting study that I read a few years ago indicating that sweetness and the taste of fat are passed on (along with any other taste) to a breast-feeding baby, which does explain why NA love sweeter, say, chocolate than other people on earth, why a fat baby has fat parents. Now, it could be true that diet make people stupid (as TV does or underfunded schools or poor parents or drugs/smoking/alcohol or video games or absent parents or obsession on watching baseball for 3 hours eating pop-corn,...), but I digress!

Indeed, we digress - especially since very few American mothers breastfeeed. Even in Texas, and neither with sweet nor sour crude oil.

But thanks for empathizing with us brain-washed, chocolate-chomping, popcorn-popping North Americans. I think crude oil was first drilled in Pennsylvania (Titusville?), and chocolate and corn were both invented in North America. Europe and Thailand can also thank us for potatoes, tomatoes,squashes, chilies, vanilla, fireworks on the Fourth of July, May Day without May poles, and tobacco. However, gone are the days when the gushers of the Texas Spindletop could satisfy the world's appetite for crude oil.

Oh! What are the stats on that? I am interested to know! I wonder if the powder milk versions are as sweet as the rest of the food in NA, which should explain that then (at least partly)!

Glad you appreciate empathy, PB! Thanks for the interesting facts and the cowboy!

[Smithson]

The thing they, the environmentalists, should be doing is to allow exploration and production from sensitive areas but impose very strict rules on the companies and their operations. Doing this now, while they have some leverage, will be easier than in the future when they may find themselves sidelined.

The environmentalists should continue doing what they've been doing, which is (among other things), promoting alternatives. What the rest of us should be doing trying to get off the addiction to oil, because it can't go on forever.

Part of those rules they could impose could be an alternative energy research "tax" to better fund independant work on renewable energy resources.

Good idea.

[jayjayjayjay]

It is called gonad snacthing, the Arabs have us by the "Gonads"

<deleted>! The yanks and the brits have the arab nations by the gonads, and the oil corps have the yanks and the brits and the rest of the oil-addicted world by the short n' curlies. The result of this state of affairs is quite plain to see, once the black-stained needle is removed from the patient's arm.

Shell is Dutch/.....British co, so where do the Neterlanders come into this, whos gonads are they holding??? Looks like their hiding in behind a big pair of clogs!!

[BEENTHEREDONETHAT]

Bush is also trying to push a bill so they can drill offshore US where there are proven reserves which is currently offlimits due to environmently issues (more likely these field were being treated as reserves)

So now they are compromising the enviro standards due to oil scarcity.

You wait until the stuff starts getting real scarce, environmental concerns will be pushed right out the window. There are vast energy reserves in Antarctica, does anyone think they will be left in place while the world starves of energy? Sure the environmentalists will kick up a storm but at the end of the day if mister Joe Average and family can't drive down to the coast for their holiday they won't give a toss. The thing they, the environmentalists, should be doing is to allow exploration and production from sensitive areas but impose very strict rules on the companies and their operations. Doing this now, while they have some leverage, will be easier than in the future when they may find themselves sidelined.

Part of those rules they could impose could be an alternative energy research "tax" to better fund independant work on renewable energy resources.

I believe there is a twelve country treaty that requires agreement for Antarctica research or major changes. Don't know if you can get twelve nations to agree on anything that involves making money. But they should start now so our great grandchildren can enjoy the benefits.

[jayjayjayjay]

Bush is also trying to push a bill so they can drill offshore US where there are proven reserves which is currently offlimits due to environmently issues (more likely these field were being treated as reserves)

So now they are compromising the enviro standards due to oil scarcity.

You wait until the stuff starts getting real scarce, environmental concerns will be pushed right out the window. There are vast energy reserves in Antarctica, does anyone think they will be left in place while the world starves of energy? Sure the environmentalists will kick up a storm but at the end of the day if mister Joe Average and family can't drive down to the coast for their holiday they won't give a toss. The thing they, the environmentalists, should be doing is to allow exploration and production from sensitive areas but impose very strict rules on the companies and their operations. Doing this now, while they have some leverage, will be easier than in the future when they may find themselves sidelined.

Part of those rules they could impose could be an alternative energy research "tax" to better fund independant work on renewable energy resources.

I believe there is a twelve country treaty that requires agreement for Antarctica research or major changes. Don't know if you can get twelve nations to agree on anything that involves making money. But they should start now so our great grandchildren can enjoy the benefits.

Good news for Aussies, guess we'll start pumping Antarctic Oil once the coal reservse on the main land run out!

Don't know why Norway's got such a large chunk, guess Amundsen had something to do with that! The new Oil rich countries, Australia, New Zealand, Norway, France!!!!, Chilli and Argentia (they will have war over disputed land), Belgium, South Africa, United Kingdom and we will kick out US, USSR and Japan (coz we dont like them)!! I think this lot might be easier to deal with than Saudia, Iraq, Iran, Russia and Venezuela!!!!

[ThaiPauly]

Did you know that if you type the following numbers into a calculator

71077345

then turn it upside down it spells?

See for yourselves.

Just a bit of fun on what has so far been a very interesting and informative topic, I have certainly gleaned a lot fom it about why prices are so high...I never knew a lot bout this really, just pay up and move on.

Things could be worse, I could live in the UK !!

[AnnyLing]

Would it not be possible for the US, EU and China to form a purchasing cartel and state that from now on, they pay $20 a barrell for oil and even pass laws blocking futures contracts for more than that amount? What would the consequences be?

The consequences would be that any politician coming up with a similar suggestion would soon be visited by friendly men in in white suits who would present him with a white jacket that has very long sleeves and decorative ribbons.

[london]

Would it not be possible for the US, EU and China to form a purchasing cartel and state that from now on, they pay $20 a barrell for oil and even pass laws blocking futures contracts for more than that amount? What would the consequences be?

The consequences would be that any politician coming up with a similar suggestion would soon be visited by friendly men in in white suits who would present him with a white jacket that has very long sleeves and decorative ribbons.

Exactly AnnyLing !

Oil is a finite resource.

Many of the wells being pumped now have only recently been re-opened. Why? Because the world needs oil? No...its because oil is being bought at a rate that allows such drilling and pumping to actually occur.

IF the price of oil drops by say $20pbb, many of these re-commissioned wells will simply close again. Its that simple. The result: another shortage.

Canadian oil sands are vast, but again, it comes back to viability.....let alone the cost to the environment of mining!

Added to all of this, BOTH India and China (the world's largest consumers within the next few years) heavily subsidise the oil price to consumers...thus removing a lot of the pain that is inflicted on consumers in other parts of the world, were there are no subsidies, but rather, the heavy imposition of taxes. So, that means that in these places, consumers happily drive around oblivious to the global situation.

IMHO, this global oil crisis caused by the rising oil price is NOT likely to ease until alternative fuels are found. Inevitably, we have to learn to live with it.