Why $120 oil is good

[boulder_bum]

Speculators are often blamed for artificially inflating crude prices, but some experts say high prices are needed to cut demand and develop new resources.
...

But to many, all the financial voodoo is merely a distraction. The fundamental reality of oil - and the thing that makes it so attractive to investors in the first place - is that we are using ever more and finding ever less. High prices are necessary if we are to reduce demand, find new oil, and develop alternative technologies.

Why $120 oil is good, and speculators don't matter - May. 8, 2008

[rkskeet]

Please explain how demand is greater than supply when simple logic dictatest that if there was a shortage of supply, then there would not be a continuous stream of oil available regardless of what price was charged per barrel. In other words, if you don't have the product to deliver because demand is outpacing supply, then there would be a shortage of product on the open market.. What is drastically wrong with articles like the one in the link is that there has been no disruption of supply. You just have to pay more for it. It is called greed!!! Also known as the outrageous profits the oil companies are raking in. All these types of articles tend to do is insult your intelligence by trying to somehow legitimize getting screwed!!! I think the people writing these articles are on the oil companies payroll.. Nice try but I am not swallowing this Kool Aide...

[boulder_bum]

Actually, I think they have a point:

Homer, Alaska - News - Fuel prices increase; so do bicycles 05/07/08
Fuel prices increase; so do bicycles

Drivers find alternatives to cut transportation costs

On Tuesday, U.S. oil hit $123 a barrel and analyst Goldman Sachs predicted it could skyrocket as high at $150-$200 within six months to two years, according to stories from The Associated Press. A week ago, Kenai Peninsula gas prices broke the $4-a-gallon barrier, rising more than 60 cents above the national per-gallon average reported Tuesday by AAA. Small wonder that locals like Andy Sjodin are turning to transportation methods that are fuelless or require less fuel.

Auto sales reflect industry shift to fuel efficiency - May. 1, 2008
Car buyers lighten up

High gas prices drive buyers toward smaller, fuel-efficient vehicles.

NEW YORK (CNNMoney.com) -- Reports released Thursday by top automakers affirmed the continuing shift in vehicle sales: Record-high gasoline prices are prompting more consumers to switch to smaller cars.

I also think the call for increased CAFE standards would fail if it weren't for gas prices. In Europe micro-cars, public transportation and scooters are much more popular, in part because gas is $8 a gallon.

Maybe an increase in fuel prices is just the wake-up call we need to get serious about efficiency!

That said, I fully support a windfall tax on oil companies. Their obscene profit is our nation's economic decline.

[burritos]

Originally Posted by rkskeet

Please explain how demand is greater than supply when simple logic dictatest that if there was a shortage of supply, then there would not be a continuous stream of oil available regardless of what price was charged per barrel. In other words, if you don't have the product to deliver because demand is outpacing supply, then there would be a shortage of product on the open market.. What is drastically wrong with articles like the one in the link is that there has been no disruption of supply. You just have to pay more for it. It is called greed!!! Also known as the outrageous profits the oil companies are raking in. All these types of articles tend to do is insult your intelligence by trying to somehow legitimize getting screwed!!! I think the people writing these articles are on the oil companies payroll.. Nice try but I am not swallowing this Kool Aide...

The oil companies are greedy. What a surprise. The only way to bring down the price is to consume less of it. Otherwise consider participating in the free market. I personally enjoy BP, XOM, USO, UGA.

[wogue]

Hi!

I agree with you (rkskeet) in the point that the so called shortage of oil is rubbish. But see the world´s POLITICIANS - they have all the scientists they need, and right now each single one of them is telling them the same thing about the world climate. And do they even bend a knee? NO!

When you ask PEOPLE, everyone cares "so much" about the environment, but when it comes to what is standing in their garages you see how much they really care - NO ONE GIVES A SH...!

And now "they´ve" found something new: the OIL COMPANIES start increasing the prices and all of a sudden people start to buy fuel efficient cars and feign to be so environmentally friendly. (I´m one of them)

What I said two years ago is becoming true: We will always pay the same price for a full tank when only the technologies keep developing. (Today my tank takes 45 Liters and I pay € 60,- to fill it - in 7 years hopefully the whole tank of Prius IV may take only 15 Liters but I still will have to pay € 60,-.)

It´s called EVOLUTION - accommodate (prius) or die out (SUV)!

kr
wogue

[hill]

Originally Posted by rkskeet

Please explain how demand is greater than supply when simple logic dictatest that if there was a shortage of supply, then there would not be a continuous stream of oil available regardless of what price was charged per barrel. In other words, if you don't have the product to deliver because demand is outpacing supply, then there would be a shortage of product on the open market.. What is drastically wrong with articles like the one in the link is that there has been no disruption of supply. You just have to pay more for it. It is called greed!!! Also known as the outrageous profits the oil companies are raking in. All these types of articles tend to do is insult your intelligence by trying to somehow legitimize getting screwed!!! I think the people writing these articles are on the oil companies payroll.. Nice try but I am not swallowing this Kool Aide...

Yep, there will always be folks that somehow imagine the entire center of the earth is a gigantic oily filled nouget, never to run low in OUR life time, even while geologists who know better continue to warn us ... ever since the 1950's. You want to 'not-believe' ... well there you go.
Too bad ~ if you'd ever taken a simple class in economics, you'd understand the principal of supply & demand. As long as you're willing to pay for stuff, you CAN get it. If supply goes down enough, you WILL pay more . . . and more. Some don't get it. You don't WANT to wait until you CAN'T get it ... you want to find another product to supplant the scarce one. Yes, oil companies will profit, just like food sellers made big profits in Alaska during the gold rush, because food was in short supply.

The answer is not, "It's simply oil company greed" ... the greed is just a sub-issue of the MAIN issue, which is that we ARE running low, and the world will soon have to pay the price for foot dragging onto a different 'way'. Do the math: ... we don't build new refineries any more, in the U.S. for a reason ... namely, because there isn't enough production to make new refineries worth the expense. There are less & less wells being drilled. There aren't enough new discoveries to even make up for the old pools coming off line. It's crunch time. The era of virtually free fuel, and the goo that we make everything out of, is almost over. Yes, the oilies are playing the system ... making a lot of dough. But if the countries that we import from ever cut us off (because we import over 1/2 the enery we need now), we'd go under BIG time. We imported less the 15% in the 70's and when that tiny part was cut off? Maybe you don't remember. It wasn't pretty, but we didn't learn 3 decades ago, and we still aren't learning.

[cdma77]

Everybody is quick to go after the oil companies, nobody ever says the word OPEC, which is a cartel that sets the PRICE and SUPPLY. High oil prices are bad since they effect not only the price of gas and diesel but many other products that use petroleum. And yes large cars whill go away based on the high prices.

[jhinton]

Originally Posted by cdma77

Everybody is quick to go after the oil companies, nobody ever says the word OPEC, which is a cartel that sets the PRICE and SUPPLY. High oil prices are bad since they effect not only the price of gas and diesel but many other products that use petroleum. And yes large cars whill go away based on the high prices.

OPEC does not set the price of oil. What OPEC can do is set the supply of oil to global market that comes from their members. That is, if they could keep their member countries from cheating and overproducing, which they have never been able to do. OPEC member countries only control 40% of the worlds oil production. They can effect the price but no more than a non-OPEC country such as the US or Russia. (Saudi Arabia is #1, Russia is #2, and the US is #3 in oil production btw)

The PRICE of oil is set by global commodity traders. Oil is traded on the open market and goes to the highest bidder. That is why even though the majority of the oil that the US consumes comes from the US, Canada, and Mexico we are effected by an oil worker strike in Scotland or a pipeline attack in Nigeria. When that oil stops flowing, the buyers need to get a new supply. They turn to the global market and start bidding. If the UK will pay more for a barrel of oil that the US, then US and Canadian producers start loading tankers and sending their oil to the UK. Money talks! Now when the US as a country runs out of money to buy all the oil that we want, that is when you would see a shortage of supply.

This is no different than global commodities such as corn and rice that have seen price spikes in the last couple of months. Rice in the US may cost more but we still have it. Some poor countries that rely on rice to feed their populations can't pay and don't get enough to feed their populations. Prices spike and the poor riot. You can look at the Philippines among others for examples.

[viking31]

Originally Posted by burritos

The oil companies are greedy. What a surprise. The only way to bring down the price is to consume less of it. Otherwise consider participating in the free market. I personally enjoy BP, XOM, USO, UGA.

Define "greedy". Is an 8% profit, a 9% profit, a 20% profit?? Is any company that makes a profit "greedy"?? Who, and I mean anyone, has the right to decide how much you should charge for a commodity or good you produce and make available on a free market? The government (are they less greedy ;-))? Your neighbor, your friend??? The only group that has a right to decide how much you charge or make is the general public buying your goods or services. And when it comes to fuel, their is no shortage of consumers willing to pay $3.50 and up US/gallon. So why should they (oil companies and such) charge less? That would be an incredibly stupid business model resulting in less profits and a fleeing of investors and shareholders which make nearly all large companies possible. They, as any other well run company, simply charge what the market will bear. And the market, despite the pre election media pundits, handily pays $3.50/gallon and up for fuel.

Burritos, I have read your posts and you are the epitome of preaching absolute government control in all aspects or our lives. You simply do not understand free market economics and constantly preach solutions and arguments which consistently subscribe to "having your cake and eating it too".

If you had the keys to Exxon for a day, please enlighten us on how you would reduce the price of fuel significantly and at the same time maintain cash liquidity by keeping you investors and shareholders aboard.

Rick
#4 2006

[priusenvy]

Originally Posted by hill

Too bad ~ if you'd ever taken a simple class in economics, you'd understand the principal of supply & demand. As long as you're willing to pay for stuff, you CAN get it. If supply goes down enough, you WILL pay more . . . and more.

The demand curve for gasoline by the USA has demonstrated itself to be pretty inelastic until gas reached the $4 level. Only now at the $4/gallon level are people looking for substitutes (public transportation, car pooling) or driving less. Given a perfectly inelastic demand curve, a drop in supply (inward shift of supply curve) results in a big change in equilibrium price but a small change in quantity demanded, which is exactly what we've see up to now (demand outstripping supply). Supply "keeping up" with demand would be both supply and demand curves shifting outward, with the result being an increase in equilibrium quantity and just a small change in price.

Some don't get it. You don't WANT to wait until you CAN'T get it ... you want to find another product to supplant the scarce one. Yes, oil companies will profit, just like food sellers made big profits in Alaska during the gold rush, because food was in short supply.

The increase in price of a barrel of oil is having some unintended and undesirable (at least by environmentalists and those who believe we must reduce greenhouse gases) side-effects. Previously unprofitable (at $40/bbl) oil wells are being now being restarted, and other sources of oil that require expensive extraction (shale, etc.) are being considered.

Do the math: ... we don't build new refineries any more, in the U.S. for a reason ... namely, because there isn't enough production to make new refineries worth the expense.

I have been saying the same thing for years. I believe the oil companies realize a new refinery will not produce sufficient ROI to choose it over alternate investments due to the inability to operate the new refinery for enough years, at sufficient capacity, to produce the profits that would make it the superior capital investment. Every time I say this, Republicans claim the lack of new refineries is due to treehuggers and NIMBY. But these are the same people who think drilling in ANWR would solve our dependency on foreign oil.