There is NO Gas shortage. - Business week - great article

[Rosemary2205]

http://www.businessweek.com/lifestyle/content/apr2008/bw2008041_945564.htm




In January of this year, the U.S. used 4% less petroleum than we did a year ago. (Oil demand was down 3.2% in February.) Furthermore, demand has been falling slowly since July of last year. Ronald Bailey of Reason Online has pointed out that worldwide production of oil has risen 2.5% in the first quarter, while worldwide demand has grown by only 2%

..............


As for the speculators, in 2000 approximately $9 billion was invested in oil futures, while today that number has gone up to $250 billion. Now, if any publicly traded company had an additional $241 billion put into its stock in the same period, its stock would rise out of sight too—even if the company was not worth anywhere near that amount of market capitalization.

Moving on to the weak U.S. dollar as a primary cause for skyrocketing oil prices—there is "some" truth in that statement. But consider this: The dollar has depreciated 30% against the world's currencies since 2002, while the price of oil has gone up 500%. So is it the weak dollar that has caused a 500% increase in the price of oil, or is it the extra $241 billion worth of speculation? You can make the call on that one.

[Overseas]

1. K&R for more info on the speculators -- $9 bn in 2000 to $250 bn in spec nowadays ! //eom!

[LSK]

2. K&R - see this thread

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x3438071

[bullwinkle428]

3. Why does Business Week hate capitalism?

:sarcasm:

[Rosemary2205]

4. I love the last line - protecting consumers protects business expansion

Business week also has an article about Exxon getting out of the refining business because the profit margin is too low -- the real money is in pure speculation I guess.

[bullwinkle428]

10. If that doesn't totally kill the RW argument that "It's the liberals'

fault because they won't let us build refineries!", then I don't know what does!!

[LSK]

12. this will truly make their heads explode!!!!!

From 1975 to 2000, the U.S. Environmental Protection Agency (EPA) received only one permit request for a new refinery. And in March, EPA approved Arizona Clean Fuels’ application for an air permit for a proposed refinery in Arizona. In addition, oil companies are regularly applying for – and receiving – permits to modify and expand their existing refineries.<1>

http://www.citizen.org/print_article.cfm?ID=11829

[Speck Tater]

5. Here's the funny part

One expert quotes figures to prove that supply is down, and another expert quotes figures to prove that supply is up.

One expert quotes figures to prove that demand is up, and another expert qu0otes figures to prove that demand is down.

So believe whatever you prefer to believe. Facts clearly don't matter.

However, it should be pointed out that people who talk about demand going down and supply going up ALWAYS quote figures for the USA only. Those who quote figures showing demand going up and supply going down ALWAYS quote figures for the whole globe.

So, yes there are no shortages in the USA, and yes, demand is declining a bit in the USA.

But what about this?

--quote--
Buenos Aires - The shortage of fuel forced several bus lines in Buenos Aires to suspend or reduce their service on Wednesday, while the lack of diesel hampered industrial and agricultural activity elsewhere in Argentina.

Hundreds of buses were affected by the move, and there was chaos at bus-stops, as commuters tried to squeeze into full vehicles.

more at: http://www.monstersandcritics.com/news/business/news/article_1410638.php/Fuel_shortage_affects_urban_transport_in_Buenos_Aires

What about this?

--quote--
Despite endless repetition of the mantra “the markets are well supplied” from OPEC and occasionally senior international oil company officials, reports of actual shortages of petroleum products continue to increase across the globe. Reasons for these shortages vary from country to country, but most seem to stem from the cost of petroleum on the world market or efforts by governments to keep retail prices affordable. In the last week we have reports of retail shortages from China, the Indian sub-continent, numerous countries in Africa, Latin and Central America, parts of East Asia, and even from the poorer countries in the Middle East.

In China, the world’s number three importer, retail shortages seem to have reappeared as the government keeps price caps in place at least until the Olympics. The government’s newest plan is to turn the small private oil companies that were shutting down because of the high cost of crude into “contract refiners” who simply refine oil for the state companies without any price risk. China, with $1.6 trillion in reserves, can afford oil at any cost. It is still not clear just how much their imports have increased in recent weeks.

more at: http://www.energybulletin.net/45650.html

What about this? (from the same summary article as above)


Pemex said the state-run company's oil exports were headed for an average of 1.40 million to 1.45 million barrels per day over 2008, around 15% below their target and a 14% decline compared to their exports in 2007. (6/5, #12)

Russia produced 0.8 percent less crude in May than in the same month last year, bringing the country closer to the first annual drop in oil output in a decade. Exports also fell. (6/2, #4)

US EIA: Oil prices should stay above $100 a barrel through 2009 and potentially longer as supply struggles to keep up with demand, the energy forecaster said on Monday. (6/3, #3)

etc., etc.

The data is all there. But ignoring GLOBAL data and claiming the USA data is all that matters is disingenuous at best. It's manipulating the intelligence to prove the case.

[Rosemary2205]

6. but most seem to stem from the cost of petroleum on the world market

refiners are cutting back on orders because they can't afford to buy the crude due to the speculation bubble.

[LSK]

8. right, its cause and effect

Is there an oil shortage in countries because they cannot afford to buy it at these prices or because there truly is that much less oil on the market???

[Rosemary2205]

9. Exxon is talking about closing some of it's refineries and selling others

the profit margins are so low they've decided it's not worth the hassle.

The only reason the profit margin is so low is because the cost of the crude is so damn high and the marketplace will only accept so much price increase to offset.

[LSK]

11. also, how many oil wells do they actually own???

If they can pump it at $20 and sell at $130, why have other less profitable business lines?

[JackRiddler]

17. False dichotomy.

It's both. Or rather, the speculative profiteering is founded in a genuine anticipation of supply peak. See my post 14 below. (Thanks!)

[LSK]

20. yes I know about peak oil and Hubberts peak

However that would explain oil at $75 last year vs $20 in the 1990s. It does not explain $135. Is there some new report of larges wells going dry this year versus last year? No. We are not having a dramatic sudden reduction of oil supply. We are having a dramatic sudden explosion in the price of oil that is artificial.

We do have a legitimate problem that we must face, however we have this additional problem with speculation on top of it.

[JackRiddler]

21. Exactly. I don't think we disagree...

We do have a legitimate problem that we must face, however we have this additional problem with speculation on top of it.

You've left out a big factor that explains a lot, however: the 40 percent decline in the dollar. That would cover most of the difference between your theoretical $75 and the actual $135.

[LSK]

24. the dollar did not decline 40% in one year

I will admit though that it is also another factor into all of this.

[LSK]

7. IFFFF supply is constant over a year ago, how is demand up 50% in 1 year???

Especially when one of the largest markets in the world is arguably in a recession? Wouldnt demand go down in a recession?

What on earth happened in China and India in 1 year that demand has forced the price of oil to double in 1 year??? Did everyone there get a free car or something?

Forget the figures, what makes sense to you?

[Speck Tater]

25. Demand and price are not in a linear relationship.

5% increase in demand over supply can cause a 100% increase in price. There is a huge amount of non-linear leverage built into the system.

Remember 1973? That was caused by something like a 4% reduction in supply.

It is simplistic to think that the two numbers are related in a linear manner.

[JackRiddler]

15. Hey, it's a time-honored American tradition.

World? What world?!

[yella_dawg]

13. Who besides the oil companies

has the liquid capital to manipulate the oil futures market?

Just askin'.

[Rosemary2205]

16. Goldman Sachs for one

huge conflict of interest, but the Bushitas saw fit to deregulate the futures market and now these guys can play both sides of the fence.

[JackRiddler]

14. denial's not just a river in Egypt

worldwide demand has grown by only 2%

Do you think the slowed demand growth might be related to the rise in prices?!

Demand is closer to total production than it has ever been. Supply capacity is close to peak (old fields deplete as new ones as are enclosed). Annual consumption exceeds new discoveries by a factor of three!

Why do we fight out this false dichotomy between the fact that speculators, imperialists and oil companies will do their best to price-gouge, hoard, redline (Iraq) and profiteer; even as the background reality remains that oil is a genuinely depletable resource, the production of which is bound to peak and then decline against demand, with a plateau of an indeterminate number of years (decades at most) followed by constant decline in petroleum EROEI and failure to meet demand if it grows further?

It's not an either-or. In fact, the immediate necessary step is the same whether the current price levels are due mainly to peak or to speculation, so let's not argue!

Windfall profits tax (or nationalization) is required immediately, with all of it going into development of alternatives since Exxon et al. are too irresponsible and greedy to do that themselves. (Exxon even voted down a Rockefeller shareholder proposal to put SOME of the windfall into development of renewables!)

The number-one alternative for now should be the known technological solutions on the consumption side: creating maximum energy efficiency, eliminating waste, reducing building energy needs (European buildings consume half the heating energy of American - why?!), revolutionizing transport and especially urban mass transport and the railways.

[GOPBasher]

19. Good post! I tried to say the same thing, but nowhere near as well as you did.

"Why do we fight out this false dichotomy between the fact that speculators, imperialists and oil companies will do their best to price-gouge, hoard, redline (Iraq) and profiteer; even as the background reality remains that oil is a genuinely depletable resource, the production of which is bound to peak and then decline against demand, with a plateau of an indeterminate number of years (decades at most) followed by constant decline in petroleum EROEI and failure to meet demand if it grows further?"

Exactly!

The long-term trend is a result of increasing scarcity, even if this short term trend is one of speculation.

[JackRiddler]

22. Thanks - and don't forget the drop in the dollar...

That explains much of the rise.

[GOPBasher]

18. That may be true, but the long-term trend is still one of scarcity.

The inability for supply to keep up with demand is the major reason for the long-term trend in oil/gas prices. Af course, this very recent short-term explosion has a lot to do with speculation as well.

[DiverDave]

23. K and R and bookmarked

to read later, gotta get up at 2 AM for work... took the longer day again, need that OT.
Gotta pay for all the price increases somehow.

[nolabels]

26. This is actually how a regulated free market works

(there is no such thing)

Folks wake the eff up, our government is controlled by corporations and until we put enough pressure on it to change (or we change it ourselves) it will stay at like this. They are taking what we let them steal :shrug: