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We Are So Getting Screwed...



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c2105026

hello all,

After witnessing in horror oils rise to $103 a barrel, i did a bit of research on the EIA site.....here is what I discovered

1. currently there is enough gasoline in stocks to last the USA 25.8 days, at current demand. does not sound like much but last time it was this high was early 2002 when oil was $20 a barrel and gas $1.50 a gallon.

2. looking at forward days stock level, there is about 21ish days crude oil in stocks in the USA. This is higher than various times in the past with cheaper oil prices.....like 1996-1997, 2000, and 2004-2005.

3. for last 7 weeks petroleum stocks have continued to climb, yet the prices have climbed too.

so the market isn't as tight as oil companies make it out to be....so why do I pay A$1.479 a litre for my lawnmower fuel? ($5.92 a gallon to americans)

my thoughts....

*Since 1990, world oil supply has gone up by 17 mb/day, yet only 10 mb were from non-opec countries. the extra 7mb/day came out of opec's overall capacity, which is actually only 2mb/day higher than it was in 1972....so we have a reltively thin supply cushion, which exacerbates the geopolitical tension premium built into price....

*A crappy US dollar has meant all commodities have boomed - copper, wheat, gold, silver etc. like noone is talking about peak gold or peak platinum, are they? Could oil just be a victim of a general speculative boom in general? like with oil you only need to pay a 5% margin to buy a contract....this makes it more accessible and now that the stock market is going to hell this makes commodities more desireable thus valuable.

*way oil is traded - 99% of all contracts traded in NYMEX do not yield the purchase of any oil - they are basically buying and selling contracts for the future delivery of a certain good, basically a bit of paper. So they don't really buy/sell oil, they buy/sell bits of paper for the delivery of something that does not yet exist - like how can they exactly predict how much oil is coming to cushing oklaholama? how many contracts are issued? who issues them? who delivers the oil? NYMEX says it is a transperant system. clearly it leaves many questions to be answered....

*oil companies in general - apparently, the likes of shell and exxon are only pricing the future supply of oil at 30-40 bucks a barrel, roughly equivalent to $25 in 1997. Why not price it at $100+? do they think the speculative party will end? or could it be they would rather not spend extra to raise production by 10% to lower their total income by 25%? Seems plausible...

*skills shortage - about 80% of oil industry professionals are due to retire in next 10 yrs and noone is replacing. not just in exploration but the structural/mechanical engineering of platforms, wells etc. not anyone's fault, just they way things have turned out but physically possible to solve nonetheless.

feel free to discuss...

JeffG

I guess is all because we are all willing to take it... They keep repeating on TV and radio Gas is going to go over $4 this summer... Like they are preconditioning us for $4. I suppose its all supply and demand.. We want it, So does China and India, they have it... I guess we pay and pay and pay and pay some more...

Its good to own a Corolla... Perhaps I will unplug a few of my Coils and run on two cylinders this summer default_laugh

Larry Roll

JeffG hit on part of the reason for our high gasoline prices -- growing demand in China and India, not to mention the rest of the world. Also, as far as the U.S. is concerned, our high dependence on foreign oil, most of that from unstable Middle East countries who basically hate our guts as a part of their religion, causes us to be held hostage to their price gouging. Then, the loony-leftist environmentalists have essentially prohibited the U.S. from drilling, refining, and transporting our own oil, though we have vast supplies of it waiting to be tapped in our own backyards. Finally, the high demand, due to poor choices being made by a consumerism-driven society, where people regularly tool around solo in huge, gas-guzzling SUV's just because they can, adds to the demand, causing the price to continue to shoot up.

All the politics aside, I believe that unless and until the people who depend on oil and it's products for their daily transportation needs become better stewards of this finite resource, it's price will continue to climb in a manner which threatens our economic futures. And, as it happens, the price of oil and the availability of it's products (gasoline and diesel) directly affect the cost of producing and transporting the goods and services we want and need to maintain our high standard of living.

Finally, there is the selfish greed and desire for power of the people at the top of the oil industry and government. They have their own best interests at heart, and apparently don't care about us "little people." If you know of any way to change this, let us know. I know one thing for sure, however -- any form of socialism is definitely NOT the answer. Nationalizing our oil industry will only put it in the hands of people who can't do better than to work for the government. The best and brightest are the ones with the innovative ideas, creating the inventions and producing the goods and services which people want and need. Those from the bottom half of their class seek to work within the safety of government. Too much power in the hands of those least likely to use that power wisely is a large factor of the world being in the mess it's in now. Less government and more freedom is the only thing that can turn this situation around, for the benefit of all.

c2105026

very true larry - now that we are in the era where the oil that is available is more difficult to get at, we do need innovation and efficiency. As an example, when venuzuela nationalized its industry, it lost 500,000 barrels a day and has not picked up since. Mexico has now had a nationalized oil industry since the 30s, and now that we have to actually put in a bit of effort to find and develop oil the 60-70% royalties the government takes is taking its toll. As for the saudis, iranians...well, for these 2 the year that they produced the most oil (so far) was...1978 (!) their infrastucture is aging, stretched, mainly as a result of the oil bust of the 80s where opec countries nearly went bust. The reserves/production ratio of non-opec countries is currently 20 years (i.e. at rate of production, oil will be completely gone in 20 yrs). For opec its 80 years. surely even an increase of 20% in opec production is feasible (works out at 6mb/day) with even a fraction of the now $114 a barrel one gets for oil. Middle east oil is amongst the cheapest in the world to find, develop and prduce - about $5 a barrel on shore, $15 offshore.

There is another theory I have heard of - commodity market speculators are buying commodities futures contracts but are now taking delivery of futures contracts (whereas before they were sold), keeping the oil off market in private storage, inflating the price, then selling it to refiners etc for the high price. from what I understand it is legal.

A clear sign of commodity speculation is the fact that agricultural items such as wheat, soybeans etc are at record highs. even taking into account some of these products are used for biofuels, demand would line up with population growth which has slowed down markedly of late. These products are also basically renewable, so there are no worries of depletion. Again, money chases good returns, and once you get a bit of momentum going markets can ignore fundamentals. It has for energy, it has for food, it has for metals, it has for real estate.

My prediction? To our friends in OPEC, what is arabic for 'to go down in a screaming heap?'

01loadedLE

I wonder how high prices will have to get before I see pickups and big suv's with v8's not driving 80-90mph on the freeways. They are the overwhelming majority of speeders in my area. It seems like they would be the first to slow down and save gas but they appear to be the last.

c2105026

well yes at some point there must be a point where people are using less - and it is already happening. I have read that US oil consumption, year on year, is 200,000 or so barrels a day less in 2008. So maybe we have gotten past the tipping point? I mean supply is good (we had a 2005-2007 flat spot but oil supply has boosted in last couple of months), OECD demand is at best flat, yes china and india are still growing, but especially considering that even with globalisation your average indian wouldn't have the same income as a european or american surely they must be feeling the pinch?

Here is another thing.....whenever a 'commentator' starts talking up the price of energy chances are they work for a financial institution - and, yes, financial institutions are buying up commodities in a big way. Market volume on NYMEX has increased many times this decade, so what was some minor bullish sentiment is now a tidal wave, driving the price of oil well above what it should fundamentally be (I reckon $35-40 a barrel). Independent commentators are much more neutral on the matter.

Bikeman982

People will pay whatever it costs.

History shows that there are some that will change their habits, while the majority will just complain.

Start walking and save some gas!!

JeremyH

Also, as far as the U.S. is concerned, our high dependence on foreign oil, most of that from unstable Middle East countries who basically hate our guts as a part of their religion, causes us to be held hostage to their price gouging. Then, the loony-leftist environmentalists have essentially prohibited the U.S. from drilling, refining, and transporting our own oil, though we have vast supplies of it waiting to be tapped in our own backyards.

Actually, most of the oil that is imported to the US (which is about 60% of our total) comes from Canada (about 10% of our total). The rest comes from countries like Venezuela, Mexico, Nigeria, Norway and other non- Middle East countries.

 

Oil is sold at one price, to anyone who is willing to buy. Prices at the pump differ over the world because of different costs in the refining process, different taxes imposed (you didn't think that "free healthcare" was actually free, did you?) and other economic reasons.

I agree, our government should allow more drilling around our country. Hell, we are not allowed to drill in certain regions of the gulf coast, but we allow China to drill there. Doesn't make any sense...

c2105026

Australia has been a net importer for a while, although it has worsened this decade. We peaked at about 950 kb/day in 2000, we are now down to 600 or so, and we use 930. OPEC gives us about 25% of our imports. Actually, most of OPECs exports probably go to the EU where production peaked ages ago.

Larry still does have a point, the majority of OPEC countries are muslim and it isn't good from a security sense to have so many petrodollars building up in their government coffers (most opec oil companies are nationalised). The only way we can stop this is ultimately to develop alternate fuels, plastics and transport technology. The technology is there, its economically feasible, lets do it!

BTW its now $141.40, petrol in dubbo is $1.649/L for E10 (or nearly $6 a gallon in American dollars), I have seen it as high as $1.729 (6.27/gal). $4 a gallon is nothing, but then again I guess americans drive a lot more than aussies do, and drive big cars.

Something I have noticed is that the price jumps whenever someone comes out with a wild new price forecast - which led me to think; if you were the analyst, working for an investment firm, and you had a hot tip that something was going to happen that would make the oil go up by fundamentals alone, you would shut up about it to stop others from horning in on your racket, you could buy up all those futures contracts for yourself.....which led me to think if you were that confident of $200 a barrel, why trumpet about it? Futhermore, according to some research notes I have seen some price jumps were by people who went short on the options, then had to go long, then had to buy more to push the price up to make the longs more worthwhile.

If it were due to fundamentals alone, then why haven't OPEC opened their taps? Yes it would cause a price collapse, but still OPEC isn't comfortable with $141 and rising a barrel anymore than we are because ultimately it will result in conservation and alternate fuels. I have heard a report of tankers in the middle east full of oil waiting to go to market but noone wants it. Apparently the head of OPEC has said that very few companies and refiners have come to them wanting more oil - and I beleive him.

twinky64

I think that 3 factors play a role in determining the high gas prices

1. Oil is based on speculation and its median of trade is the dollar

2. Weak dollar

3. Supply and demand.

China and India are demanding more and more oil each month. India is going to sell a car that is $2000 or something. Crappy cars however, that means that everybody (nearly a billion people) will be needing to use that precious crude.

Bikeman982

Current trends show that driving is down.

That means some people are feeling the pressure of high gas prices.

Also Starbucks is closing some stores and laying off 600 people.

That means people are using their coffee money for gas!!

JeremyH

Also Starbucks is closing some stores and laying off 600 people.That means people are using their coffee money for gas!!

There is a street near where I live that has a Starbucks on one corner and if you look across that street at the other corner, you see...........another Starbucks. I wonder if one of those will close.....

 

 

Bikeman982

Also Starbucks is closing some stores and laying off 600 people.That means people are using their coffee money for gas!!

There is a street near where I live that has a Starbucks on one corner and if you look across that street at the other corner, you see...........another Starbucks. I wonder if one of those will close.....

 

Quite possibly. I saw on the news a similar location that had three Starbucks within a short distance of each other.

 

You will still be close to one, so don't panic!!

JeremyH

Quite possibly. I saw on the news a similar location that had three Starbucks within a short distance of each other.You will still be close to one, so don't panic!!

Oh, I hope they both close down. I consider that street corner to be the nexus of the universe.

 

BTW, I hate the crap that SB sells. I cant believe they even call it coffee. I prefer to take my business to other coffee shops. I do, however, appreciate what SB did for the local coffee shops. They popularized the act of buying cups of coffee.....which means more choices and better products for us consumers!

Bikeman982

Quite possibly. I saw on the news a similar location that had three Starbucks within a short distance of each other.You will still be close to one, so don't panic!!

Oh, I hope they both close down. I consider that street corner to be the nexus of the universe.

 

BTW, I hate the crap that SB sells. I cant believe they even call it coffee. I prefer to take my business to other coffee shops. I do, however, appreciate what SB did for the local coffee shops. They popularized the act of buying cups of coffee.....which means more choices and better products for us consumers!

I don't go to Satrbucks, but my wife does.

 

It would not bother me if they all closed, but I do feel bad for the employees that would lose their jobs.

Larry Roll

I wonder how high prices will have to get before I see pickups and big suv's with v8's not driving 80-90mph on the freeways. They are the overwhelming majority of speeders in my area. It seems like they would be the first to slow down and save gas but they appear to be the last.

So true. See the post I made about this on my new blog On The Right

Bikeman982

I wonder how high prices will have to get before I see pickups and big suv's with v8's not driving 80-90mph on the freeways. They are the overwhelming majority of speeders in my area. It seems like they would be the first to slow down and save gas but they appear to be the last.

So true. See the post I made about this on my new blog On The Right

That's a fine blog, Larry.

 

Just don't try to block people that want to drive fast and get in their way.

Unless you are the law enforcement people - as it could lead to road rage, which we all know is not a good thing.

I sometimes drive fast and it does not make me think of better gas mileage or how much gas I am saving, when someone is in the left lane and all the other cars are zipping by them on the right.

The best thing to do for a tailgater or a fast driver is to get out of their way.

Did you drive downhill both ways to get that great gas mileage??

Here is an article from today's local paper - proves my point-

Tailgating leads to drive-by shooting

Daily Republic staff | | July 05, 2008 09:55

FAIRFIELD - Tailgating turned into a shooting late Friday night after the fireworks show in Suisun City, police said today.

A woman driving on Cordelia Road about 10:30 p.m. after the fireworks noticed a car following her closely, police said in a press release. She tapped her brakes to get them to back off but eventually turned on to Chadbourne Road.

As the second vehicle passed, one of the occupants fired several shots at her car, hitting it at least three times, police said. No one was hurt.

The vehicle was a dark, 1990s, two-door with a spoiler. The occupants were described as black men in their 20s. One wore a Pittsburgh Pirates baseball cap.

Anyone with information regarding this incident should call Fairfield Police at 428-7300 or Solano Crime Stoppers at 644-STOP.