Get it Straight - It Is NOT ABOUT SUPPLY

[JFN1]

High gas and oil prices are not a problem of supply and demand. I get a bit riled when I see Democrats try to explain this problem as if it were all about supply. Supply is certainly a component, since demand has increased dramatically in the last ten years. But the high prices we have been experiencing for the last four years - are not about supply.

If it is a supply problem, then explain how it is that in 2000, Exxon profited around $5 billion for the year, while the last four years or so, they've profited $35 - $40 billion a year. They made an extra $100 billion over the last four years - and there is a supply problem?

If it were a supply problem, then Exxon's profits would not have gone up 800%.

If it were a supply problem, then Exxon's profits would have stayed at or close to their 2000 level profits, for THEY would be paying out the same amount more that we consumers are paying out.

If it were a supply problem, then there would be lines at the gas station like there were in the 70's, when war caused an ACTUAL supply problem.

If it were a supply problem, then why is natural gas, of which the US has supplies in excess of 11 trillion cubic feet, gone up in price right alongside oil?

If it were a supply problem, then why does the price of oil rise $5, $10, even $15 dollars in a single day - with absolutely no interruption or limiting of gas at the pump at the same time?

The fact that ALL of the oil companies have seen outrageously huge profits adding up to HUNDRED OF BILLIONS OF DOLLARS should tell you it is NOT a supply problem - just extraordinary greed in action.

Stop believing the oil company, Republican, and White House propaganda about high gas prices, and start looking at the FACTS before you agree with THEM. For when you agree with them, you justify and legitimize their greed.

[On the Road]

1. I Agree That the Spike in Oil is Mostly a Market Bubble

or rather, a gradual long-term change in supply and demand that escalated into a speculative frenzy.

Some of your other point, however, I don't understand, such as how this relates to oil producers' profits. As I understand it, the producers are the ones profiting, while companies further down the supply chain are not benefitting at all.

[JFN1]

6. Simple

Who are the producers? The oil companies. Who are the suppliers? Countries like Saudi Arabia. Who has had record profits during this supposed supply crisis? The oil companies and their suppliers.

During the supply problems in the 70's, oil companies did not experience record profits - in fact, it was just the opposite. The oil suppliers like the Saudis, are getting their cut, too, don't doubt it. But if the oil suppliers were the ones taking all of the profits, then how is it the oil companies are still getting such huge profits?

Again, if the oil companies are paying more, then why are their profits so unnaturally high?

[On the Road]

53. Oil is Not My Industry

and I don't understand how oil is priced under the contracts between a government like Saudi Arabia and an oil company like Exxon. Can you explain this to me, and how those contracts differ from those in the 70s?

I understand this is a different situation from previous oil shocks, but not the nature of the difference.

[JFN1]

56. Exxon just posted their quarterly profits - they earned $1,485.55 - every second - or $11.68 billion

in just THREE MONTHS. Sounds like they have plenty of oil to me...

"While oil companies are earning record profits and gas prices are soaring, the largest oil companies have invested more resources in stock buybacks than U.S. production," said Congressional Democrats in a press release shortly after Exxon announced its earnings. -- link

[Tandalayo_Scheisskopf]

2. I don't believe it is a supply problem. NOW.

I do believe it is the result of greed, manipulation and lax governmental oversight by a corrupt administration and those in congress who would suck the shitstains from Big Oil's shorts.

On the other hand, there is no time like NOW to start the process of eviscerating and winding the intestines of Big Oil up on garden hose reels. In the bargain, we get national security gains, cleaner air and water and we create new industries and jobs.

Because the time for that is NOW. Well, 30 years ago, actually.

And in 2009, when Dems take control of Washington, that will be the time for investigations by all proper bodies and agencies of the government into the sorry spectacle of this nation being bent to the will of The Oil Field Trash, with all appropriate indictments and trials necessary.

[glowing]

3. Its a speculation problem.. that was caused when they allowed regulation

the last bits of regulation to fly out the door during the enron debacle..

And if you look at the production v. the actual purchased oil, you will notice that the production levels were above the purchased levels.. so how can that be a direct supply/ demand problem?

[katty]

4. yup-greed train in action and not stoppin' for no one

[graywarrior]

5. The prices are high because we pay them without bitching.

We pay them. We pay them. We pay them.

[JFN1]

7. But what is the alternative to paying them?

Our ENTIRE economy is based on cheap gas. To participate in our economy, with any degree of effectiveness, you must be a consumer of gas/energy. So the alternative to paying high prices for gas is to drop out of the economy - not a choice many Americans are financially able to make...I know I'm not...which is one reason the oil company's collective record profits are inexcusable.

[graywarrior]

9. It's a catch 22. They've got us over a barrell...literaly

When you live in rural areas you have no choice. But still, no one is talking about an immediate solution. Heating fuel is gonna be a killer this winter.

[taterguy]

50. I wonder how many miles per gallon these babies got

[The2ndWheel]

10. Found the problem

A single economy.

[cliffordu]

19. Yep.

[taterguy]

29. You have to consume gas/energy but you have a certain amount of control over how much you consume

I know folks that participate in the economy and rarely drive.

It just depends on where you choose to live.

[JANdad]

38. Still right on time...

Did you ever start that train company I asked about...your timing is always to be counted on...

[taterguy]

39. Is there any part of my post that you disagree with?

If so, say so, instead of dredging up some post from an ancient thread

[JANdad]

55. Yes...

I disagree with your whole premise...

The world is not as black and white as you pretend it to be in all of your self congratulatory, santimonious, bicylce loving, those-that-drive-are-stupid-and-evil posts!

Give it a rest...we have read your thousands of posts...and guess what???? Your crowing is not changing a damn thing!

[taterguy]

61. Where do the words "stupid" or "evil" appear in my post?

Read it again.

[JANdad]

63. Whatever...

you know what I mean...quit playing coy...

Now go start that Train Company...Tater Express "I'm always right on time!"

[taterguy]

66. I know what you typed

If you meant something different you should have typed that in the first place.

I don't harbor ill feelings towards motorists.

I just don't have much patience for people that complain about the predictable negative consequences of the choices that they make.

Of course we could endlessly and pointlessly debate the definition of the word "choice" but I ain't got time for that now.

I've got a railroad to build, or maybe a bike ride to go on:

[Odin2005]

70. That, in a nutshell, is what economists call "inelastic demand"

Things with inelastic demand are goods in which changes is price do not affect demand very much. Because of this price gouging is very easy to do.

[Terry in Austin]

71. Thank you

Elasticity is a crucial element that is missing from so many of these discussions.

Price elasticity works in concert with elasticity of demand and of supply. When supply is constrained -- as in a monopoly, for example -- the only response possible for increases in demand is an increase in price (note the vertical supply curve). This is instead of the usual response, which would be an increase in supply. In the case of a monopoly, the constraint is due to deliberate human action, and we refer to it as "gouging."

There can be other kinds of supply constraint, but the results are the same. Geological constraints on the maximum production of oil is a good example. If we also want to call that "gouging," well, why not? A little poetic license might even make us feel better. (Damn, you Geology!)

It's worth noting that whenever supply is constrained, increases in demand are no longer possible, and so-called demand destruction comes into play. This is usually accomplished by the increases in price. As you point out, oil is very inelastic, so it takes a very steep increase in price to achieve relatively small decreases in demand.

Economists quantify this factor for various commodities. For gasoline, the Congressional Budget Office puts it at -.06, which means that it takes a 100% price increase to reduce demand by six percent. This gives a pretty good idea of what kind of price increases we're looking at as world oil production continues to decline.

[cliffordu]

18. I don't. I won't.

[Toucano]

43. Minor correction.

In my experience, we pay them WHILE bitching.

There's been plenty of bitching. :)

[graywarrior]

47. I write bad things about Bush on the gas tanks

[klyon]

8. Profits are up because it still costs about the same amount

to get a barrel of oil out of the ground as it did when they got 20 dollars for it. The problem is more people want more oil and will pay more for it. Seems simple to me. Demand is driving price up up up. Speculators are just profiting by guessing on the obvious.

[JFN1]

11. Sure

I agree that demand is up, as I stated in my original post, but certainly not enough to increase oil prices 400% and more.

I suppose, then, that you agree with what happened in California a few years back, when speculation and market manipulation led to rolling blackouts and record prices? Demand was blamed for that too, if you recall...

[klyon]

24. The California situation was a conspiracy to cheat the people

by creating a fake shortage and then taking advantage of a loophole in the law that allowed Enron to charge California whatever they wanted for power. That game was rigged. The price of oil is determined by those selling it, this game is rigged also. I stand by my position.

[truedelphi]

48. I very much appreciate everything you are saying.

Some people won't drop the "demand is UP!" meme no matter what you tell them.

Of course the demand is up. But it is just as obvius that the oil company profits are up too.

And saw part of a program last night about the car that runs on compressed air. But don't worry any about our having any of these babies on our roads soon.

They don't pass USA safety standards - same standards that allow the rollover-every-time-you-make a fast turn SUV's.

[RB TexLa]

12. Their profit is the same, around 9 to 10 percent. If the demand is there for a price that will be

the price. People will pay $3+, therefore the price is sustained.

[lumberjack_jeff]

13. If you own the remaining supply, you can make a shitload of money if supplies are short. n/t

[chaska]

14. It IS supply.

Supply and demand is the point from which all the rest springs. The age of cheap energy (oil) is coming to a close.

It's many things but firstly it's supply and demand that lead to these price levels. And high gas prices are a good thing. Until the point of pain is reached nothing changes. Global warming gets worse, we do not innovate to rid us of this awful technology, society continues to deteriorate at all levels.

Stop looking for scapegoats - sure they're there, but we've got better things to do. Go forward into the future. Fuck the past.

[chaska]

15. From "Post-Peak Politics", by John Michael Greer (the smartest guy on the web).

http://thearchdruidreport.blogspot.com/



Still, leaders and governmental systems make great scapegoats, and just now scapegoats are very much in fashion. Consider the rogue’s gallery of villains blamed in the media for recent surges in the price of oil: speculators, oil companies, environmentalists, Arab sheiks, Nigerian rebels, and the US government, which – succumbing to a rare fit of common sense – refused to drain the nation’s strategic oil reserve so that vacationers could have cheap gas for their holiday driving. Veer away from the mainstream media, in turn, and you’ll find that the list of culprits for soaring oil prices has expanded far beyond an archdruid’s capacity to catalogue.

Missing from nearly all these lists, however, is the simple geological reality that there’s only so much oil in the Earth’s rocks, we’ve pumped out most of the really large and easily accessible deposits, and it’s becoming increasingly difficult to maintain current production levels – much less increase them – by drawing down the smaller and less accessible deposits that remain. It’s not hard to show that this is a major factor in the current energy crisis; when a commodity’s price doubles in a year, but the production of the same commodity fails to budge outside of a narrow range, it’s a reliable bet that physical limits on the supply of the commodity are to blame.

[klyon]

16. self delete

[JFN1]

17. I'm not looking for scapegoats

I seek the truth. And the truth, as explained by supply problems, requires one to accept certain contradictions, such as a supposed supply problem that does not include a SINGLE disruption in supply.

And as for your logic that profits are up because demand is up - that does not wash, either. High demand for a product normally lowers its price.

And, to accept this as a purely demand issue, one must also accept at face value the idea that demand has increased 800% to match the increase in profits, which are up about 800%.

[Extend a Hand]

23. There have been NUMEROUS supply disruptions all over the world

The rich countries have priced out the poorer countries. This is rationing by price.

[Subdivisions]

25. As long as they don't SEE it here, some people think the world

is awash in oil and fuel. Nobody ever wants to picture life in those places that can no longer afford $127 per barrel oil. They don't want to see the wrecked economies elsewhere. Just as long as we can go fill up, some people think there's nothing at all wrong with the energy situation.

Party on!

[JFN1]

27. I know we are running out of oil

I don't think there is an endless supply. And i am a strong proponent of conservation and alternative energy development.

[JFN1]

28. You may be right about that

That had not occurred to me. But again you may be wrong. And in either case, we're not talking about actual disruptions in the AVAILABLE supply - which is the argument I am making.

[sendero]

26. Your knowledge of market economics..

.... is seriously flawed if you think profits should necessarily corellate with demand.

When supply is inelastic, as is the production of oil, small changes in demand can and do have a huge impact on price.

There are many factors involved in the runup of oil prices. But anyone thinking we'll ever be buying a barrel of oil for less than $80 or so bullshit devalued currency-of-a-bankrupt-country dollars is delusional.

The people who have oil recognize that they are sitting on a dwindling resource, and are not giving away what's left for cheap.

[JFN1]

30. Appreciate the criticism of my knowledge

Since you seem to have this dialed in, please explain to me how the rise in oil prices today and over the last couple of years is different from the rise in electricity prices that brought on rolling blackouts in California a few years ago. Because from my apparently ignorant and unwashed position, it sure looks the same.

[Greyhound]

42. Don't hold your breath.

We have a small coterie of energy company apologists here that just live for these threads. There is no reason needed except that's who we work for and that's what we say. The excuses change all the time, but the bottom line remains the same, "that's the way it is, so suck it up", or in the much plainer words of Henry Hill, "fuck you, pay us".

ETA; and coincidentally, they all seem to live in TX.

[Subdivisions]

20. It is a supply problem. Oil is a finite resource which is now in declining production. n/t

[YvonneCa]

21. We have to get loud about this...

...and write to the media. My letter:

>>>>>>>>>>>>>>>>>>>>>>>>>>>

It would seem to me that by this time…after 7+ years of this Bush Administration…that the pattern they follow to get their way on policy is very clear. They create propaganda (a false intent) spin it and sell it…to the detriment of the American people. Their goal is ALWAYS the same: 1) Move responsibility off the shoulders of government and on to the backs of the American people, and 2) Make money for big business as former oilmen.

It would seem to me that the media…especially television news who has covered this administration (sort of) for 7+ years would not only SEE the pattern, but feel a duty to point it out to the American people. But I watched them ‘catapult the propaganda’ on energy policy again this morning. If you doubt the pattern this administration uses to get its way, here are a few examples:


Example # 1 Social Security. Their plan was privatization from the beginning. But they mislead everyone into thinking they were trying to ‘save’ it. Put all our money in stocks…that would have worked. Have you see the stock market lately?

Example # 2 Public Education. They try to sell us vouchers. As with Social Security, the plan has always been privatization…not making schools better.

Example # 3 Katrina. Bush never wanted government to help us during natural disasters, so he created Homeland Security (hey, Mr. Orwell) and put FEMA under that umbrella…stripping a once great agency down to nothing. No wonder it failed…but then it’s easier to get rid of a failing agency than a good one. Again, privatizing an agency meant to be a support for the public.

Example #4 The war in Iraq or the military in general. They knew the only way to make it happen was to mislead us on purpose. Bush balked at helping our veterans, and tried to privatize a war with KBR, Blackwater, etc. Lots of money made there.

Example #5 Our current economic crisis…notice who his actions have bailed out. Homeowners again are left holding the bag…many without their homes.

And there are really too many to list…the Justice Department, CIA, FBI, NSA…many of whom are supposed to keep us safe (Richard Clarke has a great book on this subject).



So now, before he leaves office, Bush wants an energy policy. He has always wanted to drill for oil everywhere…and now he is renewing his push to do so. His great intentions are not to help clean up the environment. Nor are his intentions to help average Americans struggling with the high cost of gas for their cars or energy to heat and cool their homes…he is holding out and DEMANDING that Congress drill in ANWR and off our coasts…period.

Anyone who does not see the pattern here hasn’t been paying attention. Anyone who sees it and BELIEVES Bush is doing this to help the country is blind. Anyone in the media…who HAS been paying attention to his methods…who spins this in his favor is irresponsible. This administration wants to drill off our coasts and in ANWR, because…they say…we need every last drop of oil to help us through this ‘transition’ to renewable energy. That argument misleads us, the American people, and insults our intelligence. There are already U.S. lands…yet undrilled…that we can and should explore. Any oil we drill out now, won’t help gas prices…indeed, it won’t get to market for YEARS...and then much of it would be sold to other countries. We should ‘transition’ to renewable energy, like solar and wind, etc…but we SHOULDN’T take the advice from former oilmen like Bush Cheney, and T.Boone Pickens blindly.

This administration wants to drill off our coasts and in ANWR because it will make MONEY for oilmen. Period. Pickens promotes ‘his plan’ because if cars go to natural gas he will make money. Period.

The American people get to decide who to listen to about energy. I hope the media…CNN, NBC, CBS, ABC, MSNBC and others …will make sure they get ALL the facts. (I know that’s tough, when some are owned by energy companies.)

But look what happened when the case for going to war in Iraq was whitewashed.

[AngryAmish]

22. You assume a 45 degree slope of the demand curve

For energy the demand curve is very flat.

What does this mean? I can't draw the graph but demand for energy is called inelastic. Prices have to change a lot for people to be convinced to use less energy.

BTW, Exxon and the ilk have relatively fixed costs for extracting the oil. Their profits would go up if the price they get goes up. Their costs really don't go up that much (if you are primarily a producer, not a reseller).

[Puzzler]

31. Weren't they telling us that refinery capacity was the problem over the last few years?

So if we don't seem to have enough refineries at present, then how can off-shore drilling possibly help?

Of course the real answer (in my opinion) is market manipulation by speculators. And in order to justify the price increases, they originally came up with the "not enough refineries" excuse. Unfortunately for them, they now are faced with two excuses that don't add up. Fortunately for them, they have a MSM that fails to ask very simple obvious questions. (And when I mean "ask" I don't just mean raise the question occasionally, but hammer away at the point!)

[JFN1]

32. The excuses change often

Oil executives told Congress they were not gathering "windfall" profits, as the profits they gather during "good" times are used to support their high overhead during "bad" times. But since they have built no new refineries in decades, this argument does not was, either.

[dysfunctional press]

33. you're right- it's about DEMAND. there's a lot of it, and it continues to grow.

but the supply doesn't.

[robertpaulsen]

34. Get it Straight - It Is PEAK MUTHAFUCKIN OIL

Yes, there is speculation. Yes, there is corruption. No, we can't trust OPEC. No, we can't trust the Big Oil Companies. All of these issues have risen from a foundation of world oil production flatlining as world oil demand increases exponentially. You could blame Chindia, but hey, they just wanna be like us, right? Nothing wrong with that, right? Right?!

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3057911#3059922

[Terry in Austin]

36. Beat me to it --

-- and more eloquently!

:toast:

[LSK]

57. Peak oil is near HOWEVER it does not account for DOUBLE the oil price in 1 year

[robertpaulsen]

62. I concur. Dave Cohen spells out the particulars quite directly.

Like I said, those other factors, sneaky speculators and corrupt oil companies, are all real. But take them out of the equation and oil will STILL be at record highs. We miss seeing the forest for the trees at our own peril.

http://www.energybulletin.net/node/45834

Please read the whole article, but especially the last graph and paragraph.

[Terry in Austin]

35. Get it Straight - It Is NOT ABOUT BELIEF

All the "if it weres" amounts to a catechism of denial. Yes, get riled -- at least you'd be progressing to the anger stage!

You speak of looking at the FACTS, yet you try to argue them away with hypotheticals. The FACT is this: oil production is in permanent decline. The arguments you make are desperately disingenuous.

You try to assign blame to "THEM," as though any conspiracy on "their" part could be effective in manipulating prices worldwide. Let "them" take the blame for the actual evil that "they" have done -- although considerable, it doesn't include the high price of oil.

Your belief blinds you to the simplest explanation of all: declining supply, steady demand. Snap out of it, already!

Now, if we believe real, real hard, maybe Tinkerbell will come back. But no amount of belief will put more oil in the ground. The heyday of oil is over. It's time for us to accept the fact and start dealing with it.

[JFN1]

37. I don't underestimate greed

Before the California energy crisis a few years ago, I believed such a thing could not happen.

I am not stupid, either - I KNOW we are running out of oil - but I don't believe the price increases - which speak of panic in your scenario - are borne out by other factors, such as the changing rational being given for those prices by the Bush administration and the oil companies.

[glitch]

40. A lot of people don't get that they use real events to manipulate markets to their advantage

They are using peak oil to justify another (and much bigger) run a la enron. Textbook Shock Doctrine.
And they are colluding on price, again.

[Terry in Austin]

41. If you know, then what's up?

I KNOW we are running out of oil

Then why get hung up trying to parcel out blame? When a hurricane hits, say, you just know there will be some lowlifes who find a way to make an extra buck on it. But they didn't cause the storm, and hunting them down won't get the place cleaned up and rebuilt. We need to get on with it.

Oil's getting scarcer, therefore more expensive, therefore big duh. What's with all the hand-wringing, then? Enron doesn't enter into it. We've got a huge plateful of other arrangements that need to be made. Let's get on with it.

[LSK]

58. peak oil does not explain the oil prices doubling in 1 year

http://www.eia.doe.gov/steo

[Terry in Austin]

68. Short term outlook

"Short term" is the key phrase here. Peak oil is a macro trend, and adapting to it is a generation-long project.

Throughout the history of our growth-based, oil-driven economy, supply of oil has always expanded to meet growing demand. This has now ceased to be the case. There's no precedent. It's bound to cause a lot of upheavals, turbulence and sharp aberrations. We'd be foolish to expect otherwise.

I'm not sure how you can state with any confidence whether or not peak oil "explains" this particular price movement, as it's a short-term blip in the context of a much longer-term trend.

In any case, a rise in prices is overall consistent with a declining supply. The fact is, we just don't know how fast prices are "supposed" to rise in this case, because the situation is unprecedented.

[Better Believe It]

44. There Is Not An Oil Shortage: It's About Speculation That Congress Won't Stop!

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=389&topic_id=3606939

[Terry in Austin]

52. Wishful thinking. Sorry.

Using that "it's about" device is okay for telling bedtime stories, but it's useless for any sort of meaningful argument.

Yes, oil is traded as a commodity, and commodity trading is by definition "speculation." Yes, this adds a premium to the price, but you would be hard put to make a case for its being more than ten or fifteen percent.

Suggesting that "speculation" accounts for the major part of rising oil prices is either denial-induced wishful thinking or a deliberate red herring. In either case, it distracts from the fundamentals: declining supply, excess demand.

Petrolotopia is over, gang, and we need to start dealing with it.

[Better Believe It]

60. Thinking? It's Hard Documented Facts! We're Almost Have A Oil Glut!

The hard facts documenting the main reason behind the huge increases in oil prices have been published all over by the most credible sources.

What more do you need?

Now if you can dispute those findings please do so!

So far I haven't seen or read anything credible that challenges those hard facts.

All I've seen on the internet in response is apologists defending the oil companies and oil speculators while they try to blame consumers for the energy crisis.

They try to turn the victims into the criminals!

[NickB79]

45. Let's see, Nigeria alone has reduced output by 1.5 MILLION barrels per day

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=115x165022

"The country’s current production level has dropped below 1 million barrels per day (mbpd) owing to frequent shut-ins due to renewed attacks on oil facilities in the Niger Delta region. Prior to the escalation of violent attacks on oil installations, Nigeria produced between 2.5 and 2.6 million barrels of crude oil per day."

Russia's oil output has declined 0.9%, or almost 100,000 barrels per day, in the past 6 months.

http://www.moneymorning.com/2008/06/25/declining-russian-oil-production-could-lead-to-200-oil-and-global-recession-says-deutsche-bank/

"Exacerbating the high oil prices are production problems in Russia, the world’s second largest oil exporter. Aging oil fields and a lack of infrastructure investment has led to the country’s first annual production decline in 10 years. Output fell 0.9% to 9.76 million barrels a day in the first five months 2008, Bloomberg reported."

Mexico's oil output has declined by 600,000 barrels per day since 2004.

http://www.reuters.com/article/marketsNews/idUSN3046323420080730

"The slide in oil production since peaks of around 3.4 million bpd in 2004 is putting pressure on President Felipe Calderon to push through a proposed overhaul of the state-controlled energy sector through a divided Congress."

The North Sea's output has declined by almost 2 MILLION barrels per day since 1999.

http://www.oilmarketer.co.uk/2007/02/13/north-sea-oil-gas-production-projected-to-decline/

"Production from the North Sea fields was down 9 percent in 2006 to 2.9 million barrels equivalent per day, well below the 4.5 million barrels equivalent per day peak in 1999. By 2010 production is expected to be down to 2.6 million barrels equivalent per day."

The Alaskan North Slope's oil production has fallen by over 1 MILLION barrels per day since 1988.

http://www.greencarcongress.com/2006/03/alaska_north_sl.html

"Forecasted FY ’06 North Slope production of 853,000 barrels per day is down 6.9% from the Fiscal ’05 average of 917,000 barrels per day. FY 2006 production is down more than 54% from the peak output of 2 million barrels per day achieved in Fiscal 1988."

In just 10 minutes I was able to find links that show oil production from major oil production areas has fallen by over 5 MILLION BARRELS PER DAY in the past decade or less. I realize that smaller, newer oil fields have been brought online in the meantime in an attempt to offset the declines, but then we have to deal with increased demand from developing nations.

I do think that some of the recent increases in price have been due to speculation, but IMO if you removed speculation from the oil markets you would still see oil trading at $100/barrel.

[neverforget]

49. People are in for a shock when Saudi Arabia starts to decline if it

hasn't already.

[spanone]

46. tell it to the republicans...i don't think many here agree with the white house thugs

[TexasObserver]

51. Demand in excess of supply is what makes prices soar and profits do likewise.

I disagree with your premise. Supply is a term that encompasses many things, including the market perceptions of the availability of oil in the short and near term. There is no question that demand has outrun the supply the past few years. That's exactly the time when one would expect OIL to be at record prices, and profit taking at its highest.

There are five things that have created our current price per barrel in US dollars:

1. The war in Iraq reduced the SUPPLY of crude worldwide.

2. The war and sabre rattling the Mideast have combined to create fear of supply interruptions, and that fear has caused the price of oil futures to rise.

3. Demand has soared, based partly upon the booming economies of China and India, partially driven by US outsourcing of jobs, and importing of products from those two countries.

4. The US dollar has fallen drastically, and the price we pay per barrel in US dollars is therefore partly increased by the rampant inflation coupled with the diminished buying power of the US dollar.

5. US government policy has allowed big oil and globalists in general to run wild, and they've raped, pillaged and plundered because they could.

[LSK]

59. you are not explaining an over 50% increase in 1 YEAR

did all 5 of your points just all of the sudden happen in 2008??????????????

[NickB79]

65. The 1973 oil embargo only reduced available global oil supplies by 5%

Yet oil prices had quadrupled by 1974. The 50% increase we just saw is nothing compared to the 400% increase seen then. When demand passes supply, even by a small degree, of a vital resource that isn't easily replaced, the price begins to increase disproportionately to availability. IE, the curve starts to look more exponential, and is otherwise known as supply shock.

[TexasObserver]

67. Indeed, it only takes a small dip in SUPPLY to really send prices soaring.

Buyers of oil are buying their life blood, so they must buy far into the future, to be assured they will have their life blood. ANYTHING that threatens the free flow of oil immediately affects price upward. ANYTHING perceived to be a potential threat does likewise.

Hurricane in the gulf? Price goes up.

Sabre rattling in Persian Gulf? Price goes up.

Number three guy at State Department at table with Iran? Price goes down.

When Obama takes office, count on the price of oil dropping. As the world becomes assured that war in Iran and Iraq are not US objectives, the price will drop further. FEAR and the constancy of Bush's warlike attitude have kept oil prices higher than market forces would otherwise peg them. That is the true Bush TAX, the cost of crude to us.

[Better Believe It]

64. There Is No Oil Shortage!!! None! Zero!

Not even the oil companies are claiming there is an oil shortage to justify their prices and profits!

http://www.reuters.com/article/oilRpt/idUSL0878604620080508

http://www.youtube.com/watch?v=iKUBlMKxnfU

[meow2u3]

54. It's said 60% of gas prices are due to speculation

The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How?
http://www.globalresearch.ca/index.php?context=va&aid=8878

In other words, these $4.00 gas prices are solely due to the collusion of oil speculators with ties to the White House. If oil and gasoline prices were set solely due to supply and demand, gas prices would average at about $1.60 per gallon.

[RedShoes]

69. they stop cold when you say, loudly, "It's the REFINERIES"

I promise, they got nuthin' after that.

[SmokingJacket]

72. Not about supply as much as demand.

It seems to have occurred to the oil companies that our demand for oil can be exploited -- prices pushed up until we seriously lessen our demand. It took $4+ gas for us to cut our driving habits, and now prices are dropping...

But they won't drop that much, because we NEED to drive. Our trains are in terrible shape, so we rely on trucking. We live in vast sprawling suburbs.

Yep, it's greed... but we enabled it.