Oil $100/barrel

[w7lpn]

Some economic analyst on Fox News said she will not be surprized when Oil hits $100 a barrel. That when these trends come on they usually last a lot longer that people expect, and according to history, this trend has barely begun.
A Bio-Diesel plant near my home exploded yesterday, nearly demolishing the plant and killing a local Cowboy, bull riding hero. Imediate suspicion arose about Oil company sabotage. http://www.qrz.com/iB_html/non-cgi/emoticons/rock.gif

[ai4ep]

Is this bad news for those of us lucky folks who have stock in the oil companies ? http://www.qrz.com/iB_html/non-cgi/emoticons/tounge.gif

[w5alt]

Quote[/b] (w7lpn @ July 08 2006,21:50)]Some economic analyst on Fox News said she will not be surprized when Oil hits $100 a barrel. That when these trends come on they usually last a lot longer that people expect, and according to history, this trend has barely begun.
Now that makes absolutely no sense, but what do you expect from an economic analyst. The price of oil has always been up and down, so if the trend has barely begun, how can you tell it's a trend?

[G0GQK]

Are you aware that the trend in oil prices has
been upwards for the past 12 months?
The demand from China and growth in SE Asia will continue and prices will continue to rise.

The increase in vehicle usage in Britain is very worrying, traffic density in many parts of the country is now becoming a serious problem, #the fuel consumption in barrels used per day must be enormous, it has to increase.

G0GQK

[N3ATS]

My father went to a seminar to listen to a fellow speak a month or so ago. This fellow said "one day gasoline will be $2-3 a gallon". People said he was nuts.

That was 10 years ago. At the seminar he predicted $5+ a gallon for gasoline in the not so distant future.

Do you know that it costs a mere $5 PER BARREL to get the stuff out of the ground and to the refinery? And they say there is no price gouging. Bah.

I guess we'll have to wait and see.

[k4kyv]

Quote[/b] (N3ATS @ July 09 2006,14:32)]Do you know that it costs a mere $5 PER BARREL to get the stuff out of the ground and to the refinery? And they say there is no price gouging.
Much of the price we pay at the pump is tax (state, federal, local, provincial, ect.)

In the US, the federal tax bite is supposedly earmarked for building and maintaining infrastructure... highways, bridges, public transport, etc.

It also discourages wasteful usage of motor fuel.

Actually, there are other taxes I am prone to complain about more. If we didn't have the fuel tax, the highway infrastructure would be still be financed, out of everyone's income tax.

Let those who generate the wear and tear of the highways pay for their upkeep.

But I wonder how much of that "earmarked" money gets diverted to other uses that have nothing to do with transport, just like the tax money we pay into the social security trust fund.

In other parts of the world gas is running as high as the equivalent of about $7 a gallon.

What has me alarmed at the moment are the increases in the costs of medical care and medical insurance premiums, prescription drugs and university tuition, all of which are running way beyond the shrinkage rate of the dollar, AKA inflation.

But for some reason, my salary isn't even keeping up with the rate of inflation.

[ai4ep]

Shouldnt the price go DOWN with demand so high ?

[N3ATS]

Actually not necessarily. If you're in business to make money, you always jack your price when demand for goods and services is high. It's how you make even more money.

[al2i]

Quote[/b] (N3ATS @ July 09 2006,14:32)]Do you know that it costs a mere $5 PER BARREL to get the stuff out of the ground and to the refinery? And they say there is no price gouging. Bah.
It is the marginal cost of new production that is significant. We are getting oil off of the North Slope of Alaska now that is more than $50/barrel to produce. It is cold, viscous, full of sand, and requires downhole pumps, enormous electric plants, extreme measures in horizontal drilling techniques and so forth. Then you give 20% away in royalties to the State, pay for transportation, exploration, draconian environmental permitting requirements and delays, intense competition for new lease sales, etc., and you have a marginal cost of New Oil which is right at the current market price.

The old, cheap oil under production is making the oil companies a mint. It kinda makes the oil company stocks look pretty sexy compared to the dogface internet stocks of the late '90s. You could invest at any moment. This moment for example.

If the oil company executives committed the sin of selling for less than market price, they would be out of a job pronto. If somehow prices were forced below market rates, you will have instant gas shortages in America. It is not greed, nor profits, nor malfeasance on the part of the oil companies that causes high prices, it is the economics of scarcity.

Now that we have saved money by industrializing China and India, we must compete for scarce resources with nearly two billion new consumers. We will not handle the reality of economic scarcity any better by blaming the bugaboo of Big Oil. Big oil companies are the only ones getting gas to you car. If you can get gas cheaper, go for it.

[N3ATS]

If it costs that much to mine oil in Alaska, it seems to me that the oil companies would be shutting down their operations there and focusing their efforts where the profit margin is better. But they're not. I guess selling the crude to Japan is pretty profitable.

Sorry I don't believe the scarcity theory.

Some folks are saying "well China and the far east is becoming more and more industrialized". Yes, this is true, but exponentially over the last 4 or 5 years. How does a gradual increase in development equal a sharp increase in oil prices?

If oil was that scarce, gasoline wouldn't cost less than a $1 a gallon in war torn countries in the middle east.

And how come is costs $2.65 a gallon for Halliburton to get gasoline from Kuwait into Iraq, when Iraqi oil companies are getting it there for less than a buck a gallon?

Oil companies recorded record profits last year. They ain't doing that by lowering their profit margins, and it's hard to make record profits if there isn't enough oil to be sold. Right or wrong?

So that leaves us with one of two things...

1. There is no "shortage" of oil.
2. The oil companies are jacking the price.

Pick one.

[al2i]

Quote[/b] (N3ATS @ July 09 2006,22:38)]If it costs that much to mine oil in Alaska, it seems to me that the oil companies would be shutting down their operations there and focusing their efforts where the profit margin is better. But they're not. I guess selling the crude to Japan is pretty profitable.
We compete for every cent with other opportunities around the globe, and we are reminded of that every budget cycle.

We are not allowed to ship Alaskan North Slope oil anywhere other than to the United States. It was part of the legislation to allow the trans-Alaska pipeline in the first place -- legislation with massive Californian influence. That has impacted total human wealth on the planet by a few billions. Politicians are not aware of that and they would not care if aware.

Quote[/b] ]Sorry I don't believe the scarcity theory.


If you take some economics classes, you will. Scarcity is the economic problem. All goods and services are economically scarce.

Quote[/b] ]Some folks are saying "well China and the far east is becoming more and more industrialized". Yes, this is true, but exponentially over the last 4 or 5 years. How does a gradual increase in development equal a sharp increase in oil prices?

The current explosion in commodity prices is due to rapidly increasing demand and relatively price-inelastic supplies.



Quote[/b] ]If oil was that scarce, gasoline wouldn't cost less than a $1 a gallon in war torn countries in the middle east.

That is not happening with privately-owned free-market oil. It is in effect a subsidy given to local populations by government-controlled petroleum industries in those countries..

Quote[/b] ]And how come is costs $2.65 a gallon for Halliburton to get gasoline from Kuwait into Iraq, when Iraqi oil companies are getting it there for less than a buck a gallon?


I have no knowledge of Haliburton contracts or government procurement processes. I assume they are wasteful.


Quote[/b] ]
Oil companies recorded record profits last year. They ain't doing that by lowering their profit margins, and it's hard to make record profits if there isn't enough oil to be sold. Right or wrong?

The oil companies will always sell to the highest bidder, as will anyone running a normal business.

Quote[/b] ]So that leaves us with one of two things...

1. There is no "shortage" of oil.
2. The oil companies are jacking the price.

Pick one.

Both are correct, so I pick both. There will be no shortage of oil as long as prices are free to reflect market conditions. I work for an oil company and we have produced all of the oil we possibly can. Someone, is burning it all up... all of it. We are receiving market price signals to produce the oil that five years ago was too expensive to produce. We are developing the $50+ oil now. It is a huge undertaking: vast; expensive. I assume someone will burn all of that oil as well.

Here is the Trans-Alaska Pipeline. At $150-200/barrel we could probably fill it without ANWR. It is half full now.

http://www.davemcgraw.com/Images/TransAlaskaPipeline.jpg

[N2ACX]

Without knowing the In's & out's of the oil industry but what I precieve to be costs in pumping, transportation, refining,formulating and delivery of oil and gasoline products,

I would say even $2-3/gal is cheap if compared to the cost of producing soft drinks per liter and a thousand other products sold by weight or volume. If anything, we are being robbed totally blind by those other companies, not the oil companies. Where is the outrage in coughing up 2 or 3 bucks for a 3 liter bottle of soda which is just about all water? http://www.qrz.com/iB_html/non-cgi/emoticons/laugh.gif So the question is "who's products are really ripping us off price wise?"

Don't look for any reductions in the costs of gasoline or oil petroleum products, ever. Between the exploding economies of India and China, we in the USA could stop using all these products tommorrow, and those two countries would buy up all the "surplus".

73 N2ACX

[KC9EOG]

Quote[/b] (al2i @ July 10 2006,00:00)]The current explosion in commodity prices is due to rapidly increasing demand and relatively price-inelastic supplies.
+1

Remember in the late 90's, when gas was under a dollar a gallon most days? How come these huge, evil oil companies just now figured out how to gouge prices? If ripping people off is so easy, how come every business doesn't do it all the time? If you don't like gas at $3.00, don't buy it. Who made it more important than food in your life?

At work, there are two guys with big, new hemi powered trucks, they own them to pull their boats with. Guess how many times, combined, they have gotten the boats out? Twice! But everyday, they drive into work. The price of gasoline is economics 101; everytime someone complains about gas prices, they also say "oh well, ya gotta pay it". You don't!

[N3ATS]

Quote[/b] ]We are not allowed to ship Alaskan North Slope oil anywhere other than to the United States. It was part of the legislation to allow the trans-Alaska pipeline in the first place -- legislation with massive Californian influence. That has impacted total human wealth on the planet by a few billions. Politicians are not aware of that and they would not care if aware.

Well it's happening. We ship ANS crude to other nations. It's been going on for years.

ANS exports totaling 36,000 bd began in 1996; they grew to 66,500 bd in 1997, dipped slightly to 52,900 in 1998 and rose to a high of 74,000 bd in 1999. According to unpublished DOE figures, during 1999, Korea (50%), Japan (36%) and China (12%) imported nearly all ANS exports. The list of customers has remained the same since 1996.

Granted this isn't much, but I betcha it's far more profitable for oil producers to sell this stuff to the far east, than it is to sell it here.

Quote[/b] ]
If you take some economics classes, you will. Scarcity is the economic problem. All goods and services are economically scarce.

Is this a manufactured scarcity or an ACTUAL scarcity? I am not sure the price increases are a result of scarcity more than it's a reflection of people getting scared every time someone rattles someone's saber in oil producing nations. Like the propaganda from Iran.

Quote[/b] ]I have no knowledge of Haliburton contracts or government procurement processes. I assume they are wasteful.

They are very wasteful. What's more is that Haliburton is selling the fuel at a LOSS! Helluva tax write off for them while WE as taxpayers are footing the bill for the war profiteers.

We can't just stop buying gasoline, our government has made us dependent on it. Let's build more nuke plants. Oh we can't that's right.

How about more hydro-electric plants? The enviro-nazis say it will hurt the fishys.

The gov't is pushing Hydrogen now. Too bad that it takes a tremendous amount of electrical energy to extract hydrogen from naturally occuring compunds. Energy produced by burning oil.

Ethanol? Yeah right.

[n0jaa]

Quote[/b] (ai4ep @ July 09 2006,22:37)]Shouldnt the price go DOWN with demand so high ?
If you'll recall your high-school economics courses, there is a thing called "Equilibrium." It basically states that when demand exceeds supply, the price of that item will increase. Conversely, when supply exceeds demand, the price will decrease to deal with the excessive supply.

When supply and demand are equal, that condition is called "equilibrium."

[VE7NOT]

$1.103 a liter.

So the math.

3.78 liters is a gallon.

The CAD is .89 USD.

Gas here is about $3.71 USD to the gallon

[kc7mrq]

Latest reports on oil producing countries in the middle east show it costs them $18 - $23 dollar per barrel to run the country. Everything else is profit. That is a 218% markup based on today's spot prices.

[N3ATS]

Quote[/b] (n0jaa @ July 10 2006,14:19)]Quote[/b] (ai4ep @ July 09 2006,22:37)]Shouldnt the price go DOWN with demand so high ?
If you'll recall your high-school economics courses, there is a thing called "Equilibrium." It basically states that when demand exceeds supply, the price of that item will increase. Conversely, when supply exceeds demand, the price will decrease to deal with the excessive supply.

When supply and demand are equal, that condition is called "equilibrium."
That's one way of phrasing it. Here's another.

When demand exceeds supply, the price of the item will increase based on the fact that you NEED the item and will pay a premium for it. Business people know this. It's how to make money.

When supply exceeds demand, the price will decrease because no one wants it and the business tries like hell to get rid of it to at least break even.

This conditions is called "capitalism". http://www.qrz.com/iB_html/non-cgi/emoticons/biggrin.gif

[K5RCD]

There are economists and energy experts who believe that oil prices will drop into the $40/ Bbl range within the next 12 t0 24 months. I don't doubt it. I saw what happened in Houston in the mid 80s when oil prices dropped from around $42 Bbl to $14 bbl almost overnight. Gasoline prices plummeted too.

If any factor should cause oil prices to drop a significant amount, it will not be a temporary drop. The speculators will panic and unload their oil futures like there is no tomorrow. It is the speculators who determine oil prices, not the oil companies or the supposed supply shortage.

Some adventurous investors are selling off their oil company stocks now and investing in airline stocks, which are currently a bargain, but will dramatically increase in value if oil prices drop significantly. I don't recommend investing the kids college tuition monies thus, but if I held much energy company stock I would sure sell it now.

[w5alt]

Quote[/b] (N3ATS @ July 09 2006,17:32)]My father went to a seminar to listen to a fellow speak a month or so ago. This fellow said "one day gasoline will be $2-3 a gallon". People said he was nuts.

That was 10 years ago. At the seminar he predicted $5+ a gallon for gasoline in the not so distant future.

Do you know that it costs a mere $5 PER BARREL to get the stuff out of the ground and to the refinery? And they say there is no price gouging. Bah.

I guess we'll have to wait and see.
Yeah, but in the Middle East it costs a mere $0.5 per barrel or less to get the oil out of the ground. Here in Venezuela I've been told that 1 barrel per day is easily economic.

Ten years ago? Look up some technical papers written back in the 70's. There's specifically one by H. King Hubbert that evaluated resource development and concluded there was a problem. The oil industry and academia told people it would happen, but no one believed them.

However, producing costs are the least of the concern. How about royalties, environmental expenses, refining costs, transportation costs, and the big one - TAXES.

Oil prices have always been cyclic and they always will be until no one needs it anymore.

73,
Walt, W5ALT

[AK7V]

Now that gas is so expensive, slightly less gas is being sold here. #How do I know? #The local government is already complaining about reduced gas tax revenues. #

We just had a gas tax hike, too.

You'd think that less driving would equal less government need for the tax money, since there would be less wear on the roads, etc. #But no, obviously not. #

Oregon is floating the idea of attaching GPS-type trackers in all cars and taxing drivers based on miles driven instead of (or in addition to) gasoline purchased. #This won't fly.

But no matter what happens, the beast won't starve. #It'll find a way to take from us. #http://www.qrz.com/iB_html/non-cgi/emoticons/mad.gif

[al2i]

Quote[/b] (N3ATS @ July 10 2006,11:26)]Quote[/b] ]We are not allowed to ship Alaskan North Slope oil anywhere other than to the United States. It was part of the legislation to allow the trans-Alaska pipeline in the first place -- legislation with massive Californian influence. That has impacted total human wealth on the planet by a few billions. Politicians are not aware of that and they would not care if aware.

Well it's happening. We ship ANS crude to other nations. It's been going on for years.

ANS exports totaling 36,000 bd began in 1996; they grew to 66,500 bd in 1997, dipped slightly to 52,900 in 1998 and rose to a high of 74,000 bd in 1999. According to unpublished DOE figures, during 1999, Korea (50%), Japan (36%) and China (12%) imported nearly all ANS exports. The list of customers has remained the same since 1996.

Granted this isn't much, but I betcha it's far more profitable for oil producers to sell this stuff to the far east, than it is to sell it here.


You are right. I am sometimes slow to pick up on change. Oil was exported for 5 years, 1996-2000.

Quote[/b] ]Today I am taking action that will allow, for the first time, exports of Alaska North Slope (ANS) crude oil. Permitting this oil to move freely in international commerce will contribute to economic growth, reduce dependence on imported oil, and create new jobs for American workers. It will not adversely affect oil supplies or gasoline prices on the West Coast, in Hawaii, or in the rest of the Nation. -President Bill Clinton April 28, 1996

The exports voluntarily ended in 2000 due to renewed threats of congressional legislation to prohibit them.

Quote[/b] ]In 2004, energy exports from Alaska expanded 23% to $376 million, or $71 million more than in 2003. The category consists primarily of liquefied natural gas, light petrochemicals and coal.

Japan purchased 80% or $300 million of Alaska’s energy exports in 2004. China, Hong Kong, Korea, Canada and Chile imported the remainder.

Alaska also produces nearly one million barrels a day of crude oil. However, the international export of Alaska North Slope crude voluntarily ended in 2000. Now these sales go to west coast refineries in the United States and therefore are not included in these statistics.
--Alaska Office of the Governor's Export Report.

[N3ATS]

My bad, I didn't read the article fully.

[w7lpn]

An 83 year old ham who was a retired geologist told me before he died that they have known for years that OIL is self renewing, that the pressure heat and friction between the specific types of ore where oil is found will cause more oil to be produced. The Lie that we are, or will run out, is a marketing tool only. http://www.qrz.com/iB_html/non-cgi/emoticons/wow.gif The aliens are laughing their skinny little arses off.

[N3ATS]

Well you would think it would have to be renewing. After all it is a "fossil fuel", and more and more organic material is fossilizing all the time.

Unless we are outusing the rate at which the fossilization occurs. My solution. Kill more stuff.

http://www.qrz.com/iB_html/non-cgi/emoticons/biggrin.gif

[w7lpn]

Quote[/b] (N3ATS @ July 10 2006,18:54)]Well you would think it would have to be renewing. #After all it is a "fossil fuel", and more and more organic material is fossilizing all the time. #

Unless we are outusing the rate at which the fossilization occurs. #My solution. #Kill more stuff.

http://www.qrz.com/iB_html/non-cgi/emoticons/biggrin.gif
He also said the belief that it was from dead dinosaurs was false. Most Oil is found too deap below the surface to be from animals which lived on this planet as we understand it.