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200 plus oil

The issue with oil is not price; rather, it is supply. Murkans are addicts, right? Hence, the only thing that will bring pain is long lines at the pump, limits on number of gallons, odd/even days that you can get your fix, and such like.
 
everyone is broke ,so when you get lay offs there will be fuel but could be bread lines
 
I've been reading lately about how many eastern and mid-eastern countries subsidize oil costs, and the people living in these places are, at least in part, buying more gasoline because they don't have to pay full price for it. I wonder what would happen to their demand if the subsidizing stopped, and how that would affect prices worldwide.
I'm not saying the price hikes are all the fault of China and India; we Americans still hold the lion's share of the blame for wasteful oil use (And the commodities speculation, along with nutty governments in oil producing countries play their part too). But since we have to really deal with price the increase, our demand has begun to decrease a little. Subsidized countries won't decrease demand until the subsidies are no longer there.
I'd really like to see the algae thing work on a massive scale. That would be way neato.
 
They drive it up for the craziest reasons! It's all greed and it hurts everybody. It might just be a plot by Bush and his oil buddies.
 
Hooloovoo said:
I've been reading lately about how many eastern and mid-eastern countries subsidize oil costs, and the people living in these places are, at least in part, buying more gasoline because they don't have to pay full price for it. I wonder what would happen to their demand if the subsidizing stopped, and how that would affect prices worldwide.
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Demand would be reduced, but not drastically. The subsidies encourage inefficient allocation of resources; but it's not free, so people don't just pour petrol down the drain at the taxpayer's expense.

Indian government spends more on fuel subsidies than it does on healthcare.
 
For some perspective on the effect of oil prices around the world, in Ghana the BBC reported that 1 gallon of oil was now five dollars...... which doesn't seem too remarkable until you realise that the average yearly wage is $500. So in effect 1 gallon of oil cost 1% of annual salary, which if it was extrapolated to America would see 1 gallon of oil trading at between $300-$500.

The effect had been a severe inflation of food prices due to transportation costs, with one loaf of bread now costing about a fifth of weekly income (two dollars), and people forced to buy bread by the slice.

Shocking really. So whilst it might be bad for us here in the West, it is devastating for developing countries across the world.
 
Hooloovoo said:
I've been reading lately about how many eastern and mid-eastern countries subsidize oil costs, and the people living in these places are, at least in part, buying more gasoline because they don't have to pay full price for it.
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Well, strictly, they are not buying less.

bobrayner said:
Demand would be reduced, but not drastically. The subsidies encourage inefficient allocation of resources; but it's not free, so people don't just pour petrol down the drain at the taxpayer's expense.
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Gulf states' subsidy of fuel isn't really at taxpayers' expense, the subsidy comes from the huge sovereign wealth that oil has generated for these governments in the first place. Well, I suppose you could say that was "taxpayers' money", but there is little sign of much of it being spent on them.

Indian government spends more on fuel subsidies than it does on healthcare.
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India's subsidies increase the country's public debt which will have to be paid for by future generations, from tax or by inflating the debt away with a large FX devaluation. (Probably)
 
Well, there is some drive up just from mass speculation, but a futures market is all about speculation.

Suppose you own a refinery. You need to know that in three months you have oil, and so you can make financial plans you want to know how much that oil is going to cost you. So, you buy a futures contract and lock in a price in three months.

Suppose you own an oil well, and you similarly want to plan for your future. You SELL a futures contract for the oil you know you will be able to pump out in three months, and you have now got a stable financial footing.

Futures are not evil.

Now, people who do not consume crude oil do buy futures and hold them to re-sell later if they price goes up. Of course, if they are wrong, and it goes down, they lose money, and their activity does tend to drive up the price when prices tend up, but they also drive it DOWN, when prices tend down. However, the fundamental supply is the same (more or less) and the fundamental demand is the same (more or less) and they are just taking advantage of fairly small variations in those two factors.

However, when something happens, like Israel threatening to nuke Iraq into a sheet of glass, then creates doubt that Iraqi oil will be available at any price in the future, and so people who NEED to have that supply of oil to keep their refinery running will be willing to pay more for those contracts rather than go out of business. This cost they pass along.

This is why gasoline goes up on news.
 
Tippit said:
Gee, I don't know, maybe OPEC? You know, the cartel.
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OPEC's power to control oil prices depends on its excess pumping capacity. They don't have as much of that as most people assume, and you can expect to see their influence continue to decline as their production peaks.

Consider the aftermath of the 1973 OPEC embargo: increased fuel conservation and a glut of oil on the global market. The consumer has plenty of power in this. Think of it as a bidding war. Every time you buy a gallon of gas at the price being asked, you're beating out some poor schmuck who can't afford to buy that gallon, and will have to do without it.
 
Dymanic said:
OPEC's power to control oil prices depends on its excess pumping capacity. They don't have as much of that as most people assume, and you can expect to see their influence continue to decline as their production peaks.
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OPEC's power to lower oil prices depends on its excess production capacity. Their power to raise oil prices by restricting production depends more on their political will and financial resilience to defer income by restricting production, and the distribution of excess production capacity across other sources (including potential OPEC cheaters or conservation) that might replace their reduced production.
 
DavidS said:
OPEC's power to lower oil prices depends on its excess production capacity. Their power to raise oil prices by restricting production depends more on their political will and financial resilience to defer income by restricting production, and the distribution of excess production capacity across other sources (including potential OPEC cheaters or conservation) that might replace their reduced production.
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Fair enough. But I think the whole thing can appear quite different depending on how you chose to look at it. If OPEC could increase production, but they don't, you could choose to see that as them deliberately restricting production in order to drive up price, but it's not at all clear to me that that's really what's going on.

There seems to be a strong tendency to approach the issue from a standpoint of motives; specifically, other people's motives. Take a camera crew to any filling station in the US, and in five minutes you can have a clip of some Joe Sixpack quacking on about high fuel prices being all about the oil companies and the A-rabs as he pumps gallon after gallon of fuel into an enormous SUV. Try informing him and that neither OPEC nor the oil companies actually have total control over price, that the owner of the station he's buying gas from may be making little or no profit on the fuel at all (but rather from sales of candy bars and cigarettes inside), and that analysts do not presently see a significant shortage of oil on the market, and you'll likely meet with considerable resistance to those ideas. Joe Sixpack doesn't want to hear that he and millions of others just like him are at least as responsible for the rising prices as anyone. He wants his gas, and he wants it at a price he can afford, but it's not just that he wants that; he feels he has a right to it.
 
Dymanic said:
He wants his gas, and he wants it at a price he can afford, but it's not just that he wants that; he feels he has a right to it.
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Yeah. After living in the UK and Canada where gas prices are higher, I really don't have sympathy for people whining about gas prices where they are in fact low, and they drive SUVs.
 
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