NationStates Jolt Archive

http://www.channelnewsasia.com/stories/afp_world/view/100324/1/.html
Iraqi oil is repeatedly threatened, and Yukos is threatening a shutdown. Together, they account for 4% of the world's total oil production. So how does that justify oil prices rising by 20%? The oil market has always overreacted, but the IEA now says that the current prices will hurt the world economy. This is too much emotion on the part of the oil traders.

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http://www.channelnewsasia.com/stories/afp_world/view/100324/1/.html
Iraqi oil is repeatedly threatened, and Yukos is threatening a shutdown. Together, they account for 4% of the world's total oil production. So how does that justify oil prices rising by 20%? The oil market has always overreacted, but the IEA now says that the current prices will hurt the world economy. This is too much emotion on the part of the oil traders.This has nothing to do with emotion and everything to do with the fact that they know people will pay the price for guaranteed access to oil. They're charging what the market will bear, and the market will bear higher prices right now because of the uncertainty surrounding supply. It's the free market at work.

This has nothing to do with emotion and everything to do with the fact that they know people will pay the price for guaranteed access to oil. They're charging what the market will bear, and the market will bear higher prices right now because of the uncertainty surrounding supply. It's the free market at work.
Still, even that is an unjustified concern. Most of the world's oil is fairly reliable. The events of Sept. 11 and beyond have forced Gulf nations to beef up security at oil installations. Oil supplies will never be secure, so long as they come from the Middle East. However, there is far too much worrying in the oil market.

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That's the thing, though. The recent price jumps may be related to worries about the supply, but the bigger problem has to do with the fact that demand is increasing faster than production, and unlike the OPEC embargo in the 70s when the individual countries could turn the spigots backon and immediately fill the need, most countries are ator very near capacity right now. Remember all the talk about the Saudis increasing the oil supply this summer to drive down gas prices and thus help Bush get re-elected? It hasn't happened, but not because the Saudis are afraid of political backlash. It hasn't happened because they don't have the capacity to make up for what Iraq and Yukos aren't producing.

And the fact is that this was inevitable, considering how the Indian and Chinese economies are growing and their demand is increasing. High oil prices are here to stay, and they'll only get higher from here.

That's the thing, though. The recent price jumps may be related to worries about the supply, but the bigger problem has to do with the fact that demand is increasing faster than production, and unlike the OPEC embargo in the 70s when the individual countries could turn the spigots backon and immediately fill the need, most countries are ator very near capacity right now. Remember all the talk about the Saudis increasing the oil supply this summer to drive down gas prices and thus help Bush get re-elected? It hasn't happened, but not because the Saudis are afraid of political backlash. It hasn't happened because they don't have the capacity to make up for what Iraq and Yukos aren't producing.

And the fact is that this was inevitable, considering how the Indian and Chinese economies are growing and their demand is increasing. High oil prices are here to stay, and they'll only get higher from here.
While this is true, the current prices are inflated. Demand is increasing, but oil prices should be closer to $38 right now, not $45.
And I worry that they'll go way higher due to nothing but fear and speculation. Why? There are two hurricanes that are heading to the Gulf of Mexico. They'll probably be weak, but then again, most investors can't tell the difference between a Catagory 5 hurricane and a raincloud. Plus, there may be another strike in Venezuela, another relatively small producer. In a normal world, it'd push oil prices to $40. But in this current market, God only knows where the prices would go.

And the oil companies are laughing all the way to the bank because they've got us by the short and curlies and they know it.

And the oil companies are laughing all the way to the bank because they've got us by the short and curlies and they know it.
Except Yukos, that is. This may not effect the oil companies in the US, but in time, OPEC will feel the burn of oil prices. It happened in the seventies. At first, OPEC got so much money that there was actually a cash shortage. This led them to buy goods. However, most of the goods were made in the US, which had higher manufacturing costs because of this. This is how we share and share alike, and that's why OPEC is so eager to increase oil production. It won't help, though. Another Yukos-size entity goes out of business, and prices will soar higher. It makes me wonder what would happen if Saudi oil were cut off.

I say we just drill Alaska and watch those no good arabs die a slow painful death. I read somewhere that the oil in Alaska is equal to that of Iraq so theres plenty their lets forget about them useless caribou and OIL DRILL.

If Saudi oil were cut off all at once, it would trigger a worldwide financial crisis, no question, just like a US repudiation of Chinese debt (which a moron named Adam Yoshida actually suggested about a year ago) would do. A gradual weaning of ourselves away from Saudi oil by moving toward alternative energy sources, however, would lessen the crisis. It would give us and the Saudis time to diversify.

I have to wonder, though, what's going to happen to the Saudis when the oil eventually runs out. They don't have anything else, except for holy spots. Will they turn into a tourism based economy?

I say we just drill Alaska and watch those no good arabs die a slow painful death. I read somewhere that the oil in Alaska is equal to that of Iraq so theres plenty their lets forget about them useless caribou and OIL DRILL.
I've heard otherwise. I think you're thinking about Canada. The tar sands have oil equal to 1.3 trillion barrels, about 100 billion of which can be recovered. That's equal to Iraq's amount, but not in Alaska.
I say that since non-OPEC oil will peak sometime this decade (if not already), we just wait for the rapidly developing natural gas economy. Quite a bit can be drilled in Trinidad. In a few decades, we can then see the point where OPEC can crumble.

I say we just drill Alaska and watch those no good arabs die a slow painful death. I read somewhere that the oil in Alaska is equal to that of Iraq so theres plenty their lets forget about them useless caribou and OIL DRILL.
You heard wrong. There's not much oil there and it's hard to get to.

I've heard otherwise. I think you're thinking about Canada. The tar sands have oil equal to 1.3 trillion barrels, about 100 billion of which can be recovered. That's equal to Iraq's amount, but not in Alaska.
I say that since non-OPEC oil will peak sometime this decade (if not already), we just wait for the rapidly developing natural gas economy. Quite a bit can be drilled in Trinidad. In a few decades, we can then see the point where OPEC can crumble.

I think your right but I read somewhere that Alaska had enough so that we could stop supporting those arabs for a while. I can't wait until we stop using oil so all those arabs run out of money then I'll laugh HAHAHA.

If Saudi oil were cut off all at once, it would trigger a worldwide financial crisis, no question, just like a US repudiation of Chinese debt (which a moron named Adam Yoshida actually suggested about a year ago) would do. A gradual weaning of ourselves away from Saudi oil by moving toward alternative energy sources, however, would lessen the crisis. It would give us and the Saudis time to diversify.

I have to wonder, though, what's going to happen to the Saudis when the oil eventually runs out. They don't have anything else, except for holy spots. Will they turn into a tourism based economy?
They have a lot of money right now. They can use that to turn into a banking based economy. It'll be vital if, as I believe, the Middle East sees genuine economic developement, and not just oil-based wealth.
But I guess my point on Saudi oil was that prices for a barrel will reach $200, as opposed to about $100 in an emotionless market. It's still more than enough to do serious damage, but the world economy could survive. At $200/barrel, as I expect Wall Street would push it to, would mean the next Great Depression.

I think your right but I read somewhere that Alaska had enough so that we could stop supporting those arabs for a while. I can't wait until we stop using oil so all those arabs run out of money then I'll laugh HAHAHA.
Maybe by that time you'll be old enough to drive.

They have a lot of money right now. They can use that to turn into a banking based economy. It'll be vital if, as I believe, the Middle East sees genuine economic developement, and not just oil-based wealth.
But I guess my point on Saudi oil was that prices for a barrel will reach $200, as opposed to about $100 in an emotionless market. It's still more than enough to do serious damage, but the world economy could survive. At $200/barrel, as I expect Wall Street would push it to, would mean the next Great Depression.The real question has to be--how high do the prices have to get before the US and the world gets serious about alternative fuel technology? I'm guessing that it's somewhere south of $100 a barrel, but how far south? I don't really know.

The real question has to be--how high do the prices have to get before the US and the world gets serious about alternative fuel technology? I'm guessing that it's somewhere south of $100 a barrel, but how far south? I don't really know.
Well, in my summer boredom, I read a book on the future of energy policy. The answer to your question is around $0/barrel. Why? Because it doesn't matter what oil is priced at. It matters how viable any alternatives are. The next candidate is natural gas. It's relatively clean, and with the construction of more LNG facilities, it'll be cheap for Americans. Around 16 LNG plants are under construction in Baja California, and more may be on the way. It's not perfect, but according to this book, it should be a bridge energy system. A lot can be done with it, such as the easy extraction of hydrogen. It can also be easily converted now to a form of synthetic gasoline. It's not perfect, but it buys a helluvalotta time. After all, in the past few years, more research into alternative energy has happened than even in the seventies. I'm optimistic that it'll happen in our lifetimes, but until then, oil will give us financial problems.

I think I have to disagree with that premise--oil will eventually get expensive enough that existing energy technologies will be more cost-efficient, and the market will dictate that the lower cost technology will win out and it will be adapted to whatever needs the market requires. I'm just curious as to where that price range is--it may well be at a level higher than $100 a barrel, although for some uses--transportation for instance--I doubt it.

And while natural gas may be a reasonable short term solution, it has to be recognized as precisely that--a short term solution--because it relies on a fossil fuel that we have a limited supply of. We'd be trading one problem for another. We have to find renewable sources of energy, and the sooner the better.

I was in the inland part northern California last weekend and came across another of those huge wind farms and was again impressed. I'd love to see more of those across the country. Every kilowatt/hour we produce from renewable sources is one we don't have to get from oil.

we need to replace all those coal and oil power plants, I was out in the mid west, and a train that was THREE MILES long, in which held more coal than should ever excist in one location passed by, and one mile trains passed by every hour. if we need that much coal, we SHOULD invest in new power sorces, Im sure it would save more money long term than we can imagine. I support power sorces such as nuclear energy, however, maybe we could use hydrogen to generate power?

I think I have to disagree with that premise--oil will eventually get expensive enough that existing energy technologies will be more cost-efficient, and the market will dictate that the lower cost technology will win out and it will be adapted to whatever needs the market requires. I'm just curious as to where that price range is--it may well be at a level higher than $100 a barrel, although for some uses--transportation for instance--I doubt it.

And while natural gas may be a reasonable short term solution, it has to be recognized as precisely that--a short term solution--because it relies on a fossil fuel that we have a limited supply of. We'd be trading one problem for another. We have to find renewable sources of energy, and the sooner the better.

I was in the inland part northern California last weekend and came across another of those huge wind farms and was again impressed. I'd love to see more of those across the country. Every kilowatt/hour we produce from renewable sources is one we don't have to get from oil.
I'm not a scientist, and I refuse to speculate what will replace oil as a fuel source. However, I think that, at the moment, natural gas is economical. It should hold us over for at least three decades, giving us enough time to develope what we have. I'm sure that wind farm you visited didn't exist ten years ago. This means we're getting somewhere.
Personally, I think that microgrids should help a lot. Existing technology allows solar panels to be woven into roof shingles, but have the same efficiency. That alone should supply half the power for a small house. When the sun is out, and no one is home, it powers a reformer that transforms water into hydrogen. That can be used either to help power your home, or fuel your car. Centralized power plants will always exist, of course, but this would help put a tremendous strain of the global economy.
BTW, the Freedom Tower that they are building will get 20% of its power from wind. The building cuts off at the 70th floor, but the rest of the height is used for windmill storage that'll help power the building. It should do more than that giant solar panel on the Citigroup HQ.

In some ways, though, I welcome the high oil prices. Sure, it sucks at the pump, but if I've learned one thing in my 35 years on this earth, it's that we humans are notoriously short-sighted. We have to be smacked in the head with reality before we wake up to it, and the reality is that we're running out of oil, and we're running out of it fast.

So if $50/barrel oil prices will make GM and other car manufacturers stop making gas hogs and start seriously look into other technology, then let it happen. I'm not driving at all these days--I'm living in the lap of public transportation, most of it zero-emission--but even if I were, I'd be willing to pay more per gallon if the end result was a move away from petroleum as a fuel for transportation and energy production.

http://business.scotsman.com/banking.cfm?id=927722004
This article says basically the same thing as the first, but it highlights the fact that the IEA wants "sanity" in the oil market.

http://business.scotsman.com/banking.cfm?id=927722004
This article says basically the same thing as the first, but it highlights the fact that the IEA wants "sanity" in the oil market.

Trust me when I say this: I've tried sanity. It's overrated. *nod*

Trust me when I say this: I've tried sanity. It's overrated. *nod*
True. But hey, sooner or later, oil prices will correct themselves. A lot of investors are gonna loose a lot of money because of this.

In some ways, though, I welcome the high oil prices. Sure, it sucks at the pump, but if I've learned one thing in my 35 years on this earth, it's that we humans are notoriously short-sighted. We have to be smacked in the head with reality before we wake up to it, and the reality is that we're running out of oil, and we're running out of it fast.

So if $50/barrel oil prices will make GM and other car manufacturers stop making gas hogs and start seriously look into other technology, then let it happen. I'm not driving at all these days--I'm living in the lap of public transportation, most of it zero-emission--but even if I were, I'd be willing to pay more per gallon if the end result was a move away from petroleum as a fuel for transportation and energy production.
Well, I think we humans as a whole are more in that direction than even ten years ago. It might take high oil prices to make these technologies dominant, but they are now mainstreamed, and not just a niche market. It's a very good start.

True. But hey, sooner or later, oil prices will correct themselves. A lot of investors are gonna loose a lot of money because of this.
That's the nature of investment, though. You pays your money and you takes your chances, right?

That's the nature of investment, though. You pays your money and you takes your chances, right?
Sure. I was just saying that quite a few investors will loose money off oil for this reason. After all, from my understanding, I think that the price most often cited isn't the actual price of oil, but it's rather just oil futures. Otherwise, there'd be a corresponding gas price spike by now.
Anyhow, I think the actual price of oil is around $25/barrel. I've heard, however, that if it weren't for OPEC, oil would be about half that cost. Then again, I'm sure you'd want to tell me that it's wishful thinking on my part, right?

Sure. I was just saying that quite a few investors will loose money off oil for this reason. After all, from my understanding, I think that the price most often cited isn't the actual price of oil, but it's rather just oil futures. Otherwise, there'd be a corresponding gas price spike by now.
Anyhow, I think the actual price of oil is around $25/barrel. I've heard, however, that if it weren't for OPEC, oil would be about half that cost. Then again, I'm sure you'd want to tell me that it's wishful thinking on my part, right?
OPEC is producing as much as it can...

Exactly, CSW. That's the thing that was so surprising to me when I read about it this summer. More than one analyst noted that if Bush figured the Saudis could open the spigots wide and and flood the market just in time for the elections, he was in for a shock. They're the only OPEC nation that's not already at capacity, and they don't have much wiggle room to go up.

The US needs to end its dependence on Saudi oil. US governments have done deals with the Saudi devil for far too long. Bush is the worst yet (the Saudis and Bush are joined at the hip). The invasion of Iraq has opened up the Iraqi oil market to the West. However, Iraq is still a mess and so I don't expect it to replace Saudi oil anytime soon. Central Asia is the next major oil producing region but the oil flowing from that area will be limited until the pipeline problems involving Iran and Georgia are sorted, the Armenia-Azerbaijan conflict is resolved and Russia stops interfering. Rising China is comsuming oil at an amazing rate which will drive production of new oil markets.

However, oil is 'the devil's tears' and so we can expect more conflict fuelled by greed.

OPEC is producing as much as it can...
It is. However, that doesn't affect their pricing policy, if that's what you're saying. OPEC doesn't work by supply and demand. That's why OPEC was formed in the first place, to fix oil prices to whatever suited the oil producers best. Saudi Arabia may want to produce more oil, but that'll affect costs only a little. The OPEC nations set prices to whatever suits them best. Otherwise, the Gulf nations wouldn't be nearly as rich as they are now.
That was actually one of the solutions floated around during the seventies, to have the US, Japan, and Western Europe unite to form a counter-cartel of buyers. Then, it didn't enjoy broad support, as prices were only high in the US and the Netherlands. However, prices are now high everywhere. A cartel of buyers may look like an attractive solution. Think of it as the economic equivilant of the Cold War.
As for production, the country that I think has the greatest spare production capacity is not Saudi Arabia, but Russia. Last year, Russia outranked Saudi Arabia as the #1 producer, and the #2 exporter. The only reason it can't export more is because of politics: the best ports to build new pipelines to are outside of Russia.

The US needs to end its dependence on Saudi oil. US governments have done deals with the Saudi devil for far too long. Bush is the worst yet (the Saudis and Bush are joined at the hip). The invasion of Iraq has opened up the Iraqi oil market to the West. However, Iraq is still a mess and so I don't expect it to replace Saudi oil anytime soon. Central Asia is the next major oil producing region but the oil flowing from that area will be limited until the pipeline problems involving Iran and Georgia are sorted, the Armenia-Azerbaijan conflict is resolved and Russia stops interfering. Rising China is comsuming oil at an amazing rate which will drive production of new oil markets.

However, oil is 'the devil's tears' and so we can expect more conflict fuelled by greed.
Central Asia is a flashpoint. A joint US/South Korean base is at the new airport in Bishkek to support Enduring Freedom. Fifty miles down the road is a Russian base. That region is just messed up overall, but now, East Asia, Russia, the US, Turkey, and Iran all have competing agendas in the region.

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http://www.cnn.com/2004/US/08/11/crude.facts/
I posted this article for a fact it highlights. Saudi Arabia has little spare capacity. I've said before that Russia may get spare capacity soon, but when? It takes years to build extra wells, pipelines, and refineries for this stuff. In the mean time, the elimination of this cushion doesn't just make oil prices high, but it also makes them volatile. Prices are likely to fall dramatically, only to rise dramatically soon after. It doesn't matter if prices are high or low, but what Wall Street really hates is uncertainty.

However, Saudi Arabia will soon build extra capacity. There probably is a limit to how much they can build, but they do promist 1 million barrels/day worth of new production capacity.

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I'm one of those people with OCD, and this site is my addiction. Can't ya tell? I'm talking to a damn wall out here in cyberspace.

Another bump for the night.

This week, oil closed at $46.60 on NYMEX, and $44.80 on Dated Brent. With a price spike like that (and no real oil shortage), it's clear that investors are getting far too anxious.
http://www.bloomberg.com/energy/

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People, I am bored. Give me some entertainment. Tell me how you're hurting at the pump.

So, I guess no one cares?