I Can't Afford My Gasoline

[HummerNewbie]

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by DennisAJC:
They know where the oil is. The problem is getting to it with todays technology.

In some cases, the cost of extracting is more than the worth. We just have to wait until technology catches up to demands.

Also it depends on where you live. British Columbia, Northwest Territorries have some of the biggest oil caches in the world. But we can't touch it because the land is protected by enviromental laws that were put in place decades before.

Saudi Arabia use to have some of the most dense lush forests in the middle east. Now it's mostly desert. They didn't have land management or enviromental impact concerns in mind at the time. They got greedy, now they must pay the price.

I'm starting to sound like an enviro wacho? </div></BLOCKQUOTE>

You wacho leaf licker

I would have to agree that there is some greed going on with the big boys in the game but there are costs as well. I am actually leaving tomorrow to go check in on a new well be drilled. It is always a gamble on whether there will be anything there or not but with the prices they way they are, it's usually worth it. One good thing about the prices are more smaller companies are spending more to get oil from reserves here in the states and pumping money into upgrading current wells to get better production.

[Hart1]

(I agree with Mr. Reynolds' current viewpoints on oil prices.)
FYI...

Oil Prices: Cause and Effect
by Alan Reynolds

Alan Reynolds is a senior fellow with the Cato Institute and a nationally syndicated columnist.

Why is crude oil so expensive? Why does it matter?

The price of crude didn't rise from $12 in early 1999 to nearly $60 because the world suddenly ran out of oil. On the contrary, the world supply of petroleum has risen 10 percent since then, according to the International Energy Agency (IEA), from 65.8 million barrels a day in 1999 to 72.5 million in 2004. Cambridge Energy Research Associates estimates global oil production capacity will increase at least twice that rapidly over the next five years -- by as much as 16 million barrels a day by 2010.

Oil prices did not quintuple after 1999 because Americans suddenly switched from mini-cars to SUVs. On the contrary, if all passenger cars, pickups and SUVs were replaced with bicycles, the United States would still import a lot of oil.

We import nearly 58 percent of all petroleum, yet only 45 percent of each barrel is used to produce gasoline, and a significant portion of that gasoline is used in delivery vans and taxis. Commuter and leisure driving accounts for little more than 40 percent of the oil we consume -- far less than the amount we import. The rest of each barrel of crude is used for heating oil and diesel fuel for trucks, busses, farm machinery and ships (23 percent), petrochemicals (17 percent), jet fuel (9 percent), asphalt (4 percent) and propane (4 percent).

U.S. industries use petroleum to produce the synthetic fiber used in textile mills making carpeting and fabric from polyester and nylon. U.S. tire plants use petroleum to make synthetic rubber. Other U.S. industries use petroleum to produce plastic, drugs, detergent, deodorant, fertilizer, pesticides, paint, eyeglasses, heart valves, crayons, bubble gum and Vaseline.

When the cost of oil goes up, production costs are increased and profits reduced for industries that depend on oil. Producer costs -- not consumer gasoline costs -- are the reason high oil prices threaten to shrink industrial production of goods directly affected and also of energy-intensive products such as aluminum and paper. This threat affects all new and old industrial economies, whether those nations import or export oil. The United States may be least vulnerable because of superior energy efficiency and a larger service sector.

Of these many uses of oil in industry and commercial transportation, gasoline demand among ordinary consumers may be the least sensitive to price. That is why the relatively invariable demand of motorists cannot possibly account for the wide cyclical variations we observe in crude prices. It's the other 60 percent of the barrel that matters most, at the margin.

The U.S. index of industrial production peaked at 116.4 in June 2000 and then fell to 109.1 by December 2001; the price of West Texas crude simultaneously fell from $32 to $19. U.S. industrial demand for petrochemicals declined, and so did the related need for fuel used to transport industrial supplies and products.

Similar effects were magnified worldwide. Falling industrial production in any region has the same effect on oil prices, so crude fell from $25 to $12 in the wake of the Asian currency crisis of 1997-98.

It is commonplace to blame rising oil prices on industrial expansion in China, but that is a misleading exaggeration. Long before China's rediscovery of capitalism, earlier Asian Tigers accounted for a rising share of world petroleum demand. From 1978 to 2004, oil consumption rose 28.6 percent in the world but only 8.9 percent in the United States. That difference was exemplified by a 344 percent increase in South Korea's oil demand.

The United States still accounts for 25 percent of world oil consumption, but a declining 10 percent share of oil production. China accounts for 8 percent of consumption and 4 percent of production. China looms much larger, however, in terms of the incremental increase in demand. The IEA estimates China will account for 25.8 percent of this year's increase in demand and the United States will account for 14.6 percent. This leaves nearly 60 percent of the year's added demand coming from the rest of the world. Or maybe not.

Just as oil market pundits typically ignore the 60 percent of petroleum not going into passenger cars, they likewise ignores the 60 percent of incremental oil demand not coming from China and the United States.

Recall how regional industrial contraction collapsed the oil price in 1998 and 2001, then examine the last pages of The Economist to see what happened to industrial production over the latest 12 months. U.S. industrial production looks strong -- up 2.7 percent in May -- but that same figure a year earlier was up 4.8 percent. For Japan, industrial production is up only 0.6 percent, though a year ago it was up 8.3 percent.

Countries that were experiencing industrial increases of 12 percent to 22 percent a year ago -- such as Taiwan, Brazil, South Korea and Singapore -- are now up only 1 percent to 4 percent. For the Euro area, industrial production is down 0.1 percent. For Britain -- which exports oil -- it is down 1.9 percent. For Mexico -- which exports oil -- it is down 4.7 percent.

The Organization for Economic Cooperation and Development (OECD) tracks all major economies plus one mid-sized economy (Mexico) that accounts for 13.7 percent of U.S. exports. A six-month trend of the OECD leading indicators was up 7.5 percent at the start of 2004, but has since fallen to minus 0.5 percent this April.

Want the bad news first? High oil prices have already slowed industrial production in many countries, even China and the United States to a lesser extent. Leading indicators point to wider and deeper trouble ahead.

The good news is that oil prices have proven very sensitive to industrial production, so this problem is self-limiting. Cost-squeezed industrial firms -- not necessarily in the United States -- will be reducing production and thereby reducing world oil demand and prices.

Meanwhile, some clueless senators are oddly eager to push the Chinese currency up, which would make oil cheaper for Chinese industry and more expensive at home. The White House seems oddly eager to enact more tax-financed subsidies for those who buy Japanese hybrid cars, German diesels and ethanol made from corn or sugar. It is difficult to imagine a more irrelevant "energy policy."

The only policy that might actually shrink the "fear premium" in oil prices (estimated at $10 to $20) is to use the strategic petroleum reserve strategically -- to quell panic during hurricanes, strikes, wars and the like. But the United States has instead imported oil to add to the reserve whenever oil prices were unusually high (1981 to 1985 and now) and sold oil when the price was low (1997).

Nobody in Washington shows the slightest awareness of the global nature of the oil market, of the fact that industrial damage from high oil prices has nothing to do with whether a country imports or exports oil, or even the fact that there is a crucial two-way linkage between worldwide industrial production and worldwide oil prices. When it comes to causes and effects of high oil prices, nobody in Washington shows much interest in logic or facts. It might be sad if it wasn't so pathologically pathetic.

This article originally appeared on Townhall.com on June 23, 2005

[ROX]

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by Hart1:
(I agree with Mr. Reynolds' current viewpoints on oil prices.)
FYI...

Oil Prices: Cause and Effect
by Alan Reynolds

Alan Reynolds is a senior fellow with the Cato Institute and a nationally syndicated columnist.

Why is crude oil so expensive? Why does it matter?

The price of crude didn't rise from $12 in early 1999 to nearly $60 because the world suddenly ran out of oil. On the contrary, the world supply of petroleum has risen 10 percent since then, according to the International Energy Agency (IEA), from 65.8 million barrels a day in 1999 to 72.5 million in 2004. Cambridge Energy Research Associates estimates global oil production capacity will increase at least twice that rapidly over the next five years -- by as much as 16 million barrels a day by 2010.

Oil prices did not quintuple after 1999 because Americans suddenly switched from mini-cars to SUVs. On the contrary, if all passenger cars, pickups and SUVs were replaced with bicycles, the United States would still import a lot of oil.

We import nearly 58 percent of all petroleum, yet only 45 percent of each barrel is used to produce gasoline, and a significant portion of that gasoline is used in delivery vans and taxis. Commuter and leisure driving accounts for little more than 40 percent of the oil we consume -- far less than the amount we import. The rest of each barrel of crude is used for heating oil and diesel fuel for trucks, busses, farm machinery and ships (23 percent), petrochemicals (17 percent), jet fuel (9 percent), asphalt (4 percent) and propane (4 percent).

U.S. industries use petroleum to produce the synthetic fiber used in textile mills making carpeting and fabric from polyester and nylon. U.S. tire plants use petroleum to make synthetic rubber. Other U.S. industries use petroleum to produce plastic, drugs, detergent, deodorant, fertilizer, pesticides, paint, eyeglasses, heart valves, crayons, bubble gum and Vaseline.

When the cost of oil goes up, production costs are increased and profits reduced for industries that depend on oil.<span class="ev_code_RED">WRONG! The cost of goods goes up as direct reflection of the price of the fuel. It might not happen overnight, but it will happen. Truckers must pass on the added expense in their freight charges.</span> Producer costs -- not consumer gasoline costs -- are the reason high oil prices threaten to shrink industrial production of goods directly affected and also of energy-intensive products such as aluminum and paper. This threat affects all new and old industrial economies, whether those nations import or export oil. The United States may be least vulnerable because of superior energy efficiency and a larger service sector.

Of these many uses of oil in industry and commercial transportation, gasoline demand among ordinary consumers may be the least sensitive to price. That is why the relatively invariable demand of motorists cannot possibly account for the wide cyclical variations we observe in crude prices. It's the other 60 percent of the barrel that matters most, at the margin.

The U.S. index of industrial production peaked at 116.4 in June 2000 and then fell to 109.1 by December 2001; the price of West Texas crude simultaneously fell from $32 to $19. U.S. industrial demand for petrochemicals declined, and so did the related need for fuel used to transport industrial supplies and products.

Similar effects were magnified worldwide. Falling industrial production in any region has the same effect on oil prices, so crude fell from $25 to $12 in the wake of the Asian currency crisis of 1997-98.

It is commonplace to blame rising oil prices on industrial expansion in China, but that is a misleading exaggeration. Long before China's rediscovery of capitalism, earlier Asian Tigers accounted for a rising share of world petroleum demand. From 1978 to 2004, oil consumption rose 28.6 percent in the world but only 8.9 percent in the United States. That difference was exemplified by a 344 percent increase in South Korea's oil demand.

The United States still accounts for 25 percent of world oil consumption, but a declining 10 percent share of oil production. China accounts for 8 percent of consumption and 4 percent of production. China looms much larger, however, in terms of the incremental increase in demand. The IEA estimates China will account for 25.8 percent of this year's increase in demand and the United States will account for 14.6 percent. <span class="ev_code_RED">China WILL surpass the U.S. in oil demand. It's just a matter of when. They won't move billions of people around on bikes forever, even though the enviromentalists wish they would.</span>This leaves nearly 60 percent of the year's added demand coming from the rest of the world. Or maybe not.

Just as oil market pundits typically ignore the 60 percent of petroleum not going into passenger cars, they likewise ignores the 60 percent of incremental oil demand not coming from China and the United States.

Recall how regional industrial contraction collapsed the oil price in 1998 and 2001, then examine the last pages of The Economist to see what happened to industrial production over the latest 12 months. U.S. industrial production looks strong -- up 2.7 percent in May -- but that same figure a year earlier was up 4.8 percent. For Japan, industrial production is up only 0.6 percent, though a year ago it was up 8.3 percent.

Countries that were experiencing industrial increases of 12 percent to 22 percent a year ago -- such as Taiwan, Brazil, South Korea and Singapore -- are now up only 1 percent to 4 percent. For the Euro area, industrial production is down 0.1 percent. For Britain -- which exports oil -- it is down 1.9 percent. For Mexico -- which exports oil -- it is down 4.7 percent.

The Organization for Economic Cooperation and Development (OECD) tracks all major economies plus one mid-sized economy (Mexico) that accounts for 13.7 percent of U.S. exports. A six-month trend of the OECD leading indicators was up 7.5 percent at the start of 2004, but has since fallen to minus 0.5 percent this April.

Want the bad news first? High oil prices have already slowed industrial production in many countries, even China and the United States to a lesser extent. Leading indicators point to wider and deeper trouble ahead.

The good news is that oil prices have proven very sensitive to industrial production, so this problem is self-limiting. Cost-squeezed industrial firms -- not necessarily in the United States -- will be reducing production and thereby reducing world oil demand and prices.

Meanwhile, some clueless senators are oddly eager to push the Chinese currency up, which would make oil cheaper for Chinese industry and more expensive at home. The White House seems oddly eager to enact more tax-financed subsidies for those who buy Japanese hybrid cars, German diesels and ethanol made from corn or sugar. It is difficult to imagine a more irrelevant "energy policy."

The only policy that might actually shrink the "fear premium" in oil prices (estimated at $10 to $20) is to use the strategic petroleum reserve strategically -- to quell panic during hurricanes, strikes, wars and the like.<span class="ev_code_RED">We don't even have to use it, Bush just needs to SAY he's going to use it and take the fear-factor out of the price of a barrel of oil. Wall Street will respond. But he doesn't. Like him or not.</span> But the United States has instead imported oil to add to the reserve whenever oil prices were unusually high (1981 to 1985 and now) and sold oil when the price was low (1997).

Nobody in Washington shows the slightest awareness of the global nature of the oil market, of the fact that industrial damage from high oil prices has nothing to do with whether a country imports or exports oil, or even the fact that there is a crucial two-way linkage between worldwide industrial production and worldwide oil prices. When it comes to causes and effects of high oil prices, nobody in Washington shows much interest in logic or facts. It might be sad if it wasn't so pathologically pathetic.

This article originally appeared on Townhall.com on June 23, 2005 </div></BLOCKQUOTE>

[KenP]

Liberal POS! I didn't think the song was funny at all. <BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content"> Originally posted by desertfox:
If you feel you are being screwed, and that we are all being screwed, there IS a solution. Just launch a few multi-billion dollar satellites into space to scour the surface of the earth for some possible oil reserves. Then set up a multi-billion dollar program to soil test, core-drill, etc. to determine which ones merit an actual drilling. Then move multi-billion dollar equipment to that location and pay the local governments multiple billions of dollars for permission to drill. Then set about drilling until you find a good well or two. Suck the stuff up, barrel it, buy a couple of multi-million dollar tankers, and bring it home. Spend just a few million more for a refinery and make your own gasoline! Now hire tankers and send some over to my place...I'll pay just 89 cents a gallon and we'll all be happy! </div></BLOCKQUOTE> The oil is in Alaska. This little place called ANWR. The environmentalist wackjobs fight the drilling there. The oil is also off the coasts. The environmentalist *******s fight drilling there, too. We need more refining capacity as in new refineries. The environmentalist cocksuckers fight those, also.

Blame the environmentalists!

Any questions where I stand?

[DennisAJC]

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by HummerNewbie:
I am actually leaving tomorrow to go check in on a new well be drilled. </div></BLOCKQUOTE>

Going to Vegas with your collegues???

What's the hooker's name?

Don't fall down the well buddy.

[DennisAJC]

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by KenP:
Liberal POS! I didn't think the song was funny at all. <BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content"> Originally posted by desertfox:
If you feel you are being screwed, and that we are all being screwed, there IS a solution. Just launch a few multi-billion dollar satellites into space to scour the surface of the earth for some possible oil reserves. Then set up a multi-billion dollar program to soil test, core-drill, etc. to determine which ones merit an actual drilling. Then move multi-billion dollar equipment to that location and pay the local governments multiple billions of dollars for permission to drill. Then set about drilling until you find a good well or two. Suck the stuff up, barrel it, buy a couple of multi-million dollar tankers, and bring it home. Spend just a few million more for a refinery and make your own gasoline! Now hire tankers and send some over to my place...I'll pay just 89 cents a gallon and we'll all be happy! </div></BLOCKQUOTE> The oil is in Alaska. This little place called ANWR. The environmentalist wackjobs fight the drilling there. The oil is also off the coasts. The environmentalist *******s fight drilling there, too. We need more refining capacity as in new refineries. The environmentalist cocksuckers fight those, also.

Blame the environmentalists!

Any questions where I stand? </div></BLOCKQUOTE>

Meh, mother earth goatse.

[h2co-pilot]

It rose to $67 a barrel today.

The markets are just freaking out because of a storm threat in the Gulf of Mexico and the hault of production there. Because the refinery capacity is scant. Instead of focusing on the fundamentals.

We are actually doing fine supply wise and Iraq is finally close to exporting prior amounts. Though a power outage by insurgents haulted it for awhile. So at this point there is no reason to break the Earth in her few areas of oil hymen yet. And if we off Chavez then we will be set.



I think it is ironic you all are talking about this btw.

[CslRkH2]

Hopefully this will start a trend

Hawaii Caps Gas Prices

[mbdougl]

It is kinda ironic since we all knew what kind of mileage we would get. You know what is really ironic is that while we are hearing different reasons for drastic price increases the oil companies are posting record triple digit profits.

[Hart1]

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">WRONG! The cost of goods goes up as direct reflection of the price of the fuel. It might not happen overnight, but it will happen. Truckers must pass on the added expense in their freight charges. </div></BLOCKQUOTE>

Good point, I agree that consumers will be impacted, to an extent. Would you not agree that the Cost of Living has not proportionately risen with the price of fuel in these past five years? At any rate, the author's claim is correct, IMHO.

Notwithstanding:

1. "Prices, properly measured, are nowhere near their historical peak. In fact, the long-term trend in oil, gas, and electricity prices is downward, not upward. "

2."If gas prices were as high today as they were in the late 1970s, we would now be paying about $6 a gallon for gas. Today's price at the pump is higher than it was as recently as 1985.
The same is true, by the way, for the cost of oil. Adjusted for wage growth, oil is slightly cheaper today than it was 20, 30, and 50 years ago, and five-times cheaper than 100 years ago. How can gas and oil be cheaper since we've used so much of it over time? Well, thanks to human innovation, we are always finding new sources of oil, while at the same time technology makes it cheaper to drill for it. "

3. "The oil cartel, OPEC, holds the world price at least twice what it would be if there were a competitive marketplace at play. After all, in Saudi Arabia and many other oil-producing nations, oil costs about 50 cents per barrel to produce. "