How is it that oil speculators drive up the price per barrell? I mean, they think they see bad times ahead and drive up the price due to thinking that the supply will suffer from said bad times. Is this rational correct?
money .
Who here does economics? Anyone? I have an idea, but I'm not gonna say it for fear of looking moronic.
The paradox is only a conflict between reality and your feeling what reality ought to be.
~ Richard Feynman
~ Richard Feynman
My background is economics. Whenever you're looking at a futures/commodities market, speculation is when investors effectively affect the price of a commodity through anticipating a rise or fall in the value of it.
With oil, there's really no reason to think it will fall in value anytime soon, so speculators are buying futures in it rapidly. This helps to drive up the demand for a commodity, which in turn, drives up the price.
The easiest way to put it is that speculation can psychologically force a rise or fall in the price of a commodity. They're just hedging their investments on the assumption that oil will be worth more in the future, and by doing so, it becomes somewhat of a self-fulfilling prophecy.
Of course, speculation can backfire. Speculation in the housing market has bitten millions of people in the ass with a sudden fall in home prices and a rise in foreclosures.
With oil, there's really no reason to think it will fall in value anytime soon, so speculators are buying futures in it rapidly. This helps to drive up the demand for a commodity, which in turn, drives up the price.
The easiest way to put it is that speculation can psychologically force a rise or fall in the price of a commodity. They're just hedging their investments on the assumption that oil will be worth more in the future, and by doing so, it becomes somewhat of a self-fulfilling prophecy.
Of course, speculation can backfire. Speculation in the housing market has bitten millions of people in the ass with a sudden fall in home prices and a rise in foreclosures.
Yep - the emission and quantity scare is so great now (largely due to the media) that people will never see it falling again. In turn, oil companies can make yet more profit on the same amount of oil because they will turn it up in price: because the population suspects this. In the past 3 days there's been at least 2 oil articles in the Telegraph over here. One stated that "by summer oil will be £1.50/litre" - currently it is at about £1.17. And you know what? It will go up to that price when it doesn't necessarily need to. Why? Oil speculation.Turquoise wrote:
With oil, there's really no reason to think it will fall in value anytime soon, so speculators are buying futures in it rapidly. This helps to drive up the demand for a commodity, which in turn, drives up the price.
Also noteworthy is that the actual oil trading status hasn't risen that much. Taking Saudi Arabia as an example, its economy has become stronger and this influences fluctuation changes in the western world. The UK is one of the biggest "money-to-government-from-oil" areas in the world. The "real real" trading hasn't changed that much..but it's tiny influences that can cause a massive difference.
I have a background in economics.
I think what has happened here is the same thing that happened in the ENRON California electric deregulation where ENRON owned power plants and traded on the futures market. In one documentary there is a taped telephone conversation with an ENRON trader where the trader is asking a power plant manager to go down for maintenance. You can imagine the profits to be made where a trader can hedge that the price of a commodity is going to increase and then with a phone call they can cause the price to increase by actually causing a shortage or by making the market think that there will be a shortage. This manipulation of the market caused the prices in the deregulated market to increase wildly and also lead to brown outs and rolling blackouts.
I think that when ENRON went down, these people learned one important lesson, that is that the ENRON scam can not work when you are wholly under the jurisdiction of one country. I think that these people shifted over to the oil market where that market is global and it might be difficult to bring under regulation. The scam probably works like this. Oil contracts are written using the Euro and not the US dollar. The oil contracts are routed through China (probably) and held there. that is why the news media keeps saying that China is buying everything up. The futures traders belong to the company holding the contracts or they are in a related company. The holding company holds the oil contract while the futures trader hedges that the price will increase. Think of this like an oil tanker going in circles in the pacific ocean until the futures trader phones the tell the captain to bring the ship into port. the trader sells for a huge profit. the holding company releases the contract. here is where the price of oil should fall because the hedge was that there was an oil shortage that was never realized, meaning that the contract holder should realize a huge loss, but instead the purchasing oil refiner company just passes the cost along to the consumer and claims that its the market and not them. But in reality, the holding company, the futures trader and the oil company are probably one and the same.
And the reason why the contracts are written in Euros and not American dollars, is that there would be an ancillary profit to trading on the currency market as well. when the oil bubble bursts the Euro will fall back below par with the US dollar.
One interesting thing that I heard was that there was one line in some Congressional bill dealing with ENRON that deregulated energy traders....
HMMMMMM..... make you think doesn't it. Congress removed the legal blocks in place that would have prevented this massive manipulation of the oil market.
One thing is for sure, this is not a supply and demand issue that is driving the price of oil because there is no shortage of gas or oil. This is the ENRON futures scam gone global. If Congress re-regulates the energy traders, the oil bubble will burst and oil will probably fall back to $50 per barrel - about 1.29 to 1.39 a gallon. but fat chance of that happening with Bush in office, he and Cheney were in thick with the ENRON crooks.
I think what has happened here is the same thing that happened in the ENRON California electric deregulation where ENRON owned power plants and traded on the futures market. In one documentary there is a taped telephone conversation with an ENRON trader where the trader is asking a power plant manager to go down for maintenance. You can imagine the profits to be made where a trader can hedge that the price of a commodity is going to increase and then with a phone call they can cause the price to increase by actually causing a shortage or by making the market think that there will be a shortage. This manipulation of the market caused the prices in the deregulated market to increase wildly and also lead to brown outs and rolling blackouts.
I think that when ENRON went down, these people learned one important lesson, that is that the ENRON scam can not work when you are wholly under the jurisdiction of one country. I think that these people shifted over to the oil market where that market is global and it might be difficult to bring under regulation. The scam probably works like this. Oil contracts are written using the Euro and not the US dollar. The oil contracts are routed through China (probably) and held there. that is why the news media keeps saying that China is buying everything up. The futures traders belong to the company holding the contracts or they are in a related company. The holding company holds the oil contract while the futures trader hedges that the price will increase. Think of this like an oil tanker going in circles in the pacific ocean until the futures trader phones the tell the captain to bring the ship into port. the trader sells for a huge profit. the holding company releases the contract. here is where the price of oil should fall because the hedge was that there was an oil shortage that was never realized, meaning that the contract holder should realize a huge loss, but instead the purchasing oil refiner company just passes the cost along to the consumer and claims that its the market and not them. But in reality, the holding company, the futures trader and the oil company are probably one and the same.
And the reason why the contracts are written in Euros and not American dollars, is that there would be an ancillary profit to trading on the currency market as well. when the oil bubble bursts the Euro will fall back below par with the US dollar.
One interesting thing that I heard was that there was one line in some Congressional bill dealing with ENRON that deregulated energy traders....
HMMMMMM..... make you think doesn't it. Congress removed the legal blocks in place that would have prevented this massive manipulation of the oil market.
One thing is for sure, this is not a supply and demand issue that is driving the price of oil because there is no shortage of gas or oil. This is the ENRON futures scam gone global. If Congress re-regulates the energy traders, the oil bubble will burst and oil will probably fall back to $50 per barrel - about 1.29 to 1.39 a gallon. but fat chance of that happening with Bush in office, he and Cheney were in thick with the ENRON crooks.
I was talking with a friend of mine today, and he pointed out that there is a way for oil to fall soon, but it would take an economic downturn caused by oil getting too expensive for economic growth to occur. There's a breaking point that comes in the price of oil where it would be too expensive for people to conduct business normally anymore. Transit costs would be too high.kylef wrote:
Yep - the emission and quantity scare is so great now (largely due to the media) that people will never see it falling again. In turn, oil companies can make yet more profit on the same amount of oil because they will turn it up in price: because the population suspects this. In the past 3 days there's been at least 2 oil articles in the Telegraph over here. One stated that "by summer oil will be £1.50/litre" - currently it is at about £1.17. And you know what? It will go up to that price when it doesn't necessarily need to. Why? Oil speculation.Turquoise wrote:
With oil, there's really no reason to think it will fall in value anytime soon, so speculators are buying futures in it rapidly. This helps to drive up the demand for a commodity, which in turn, drives up the price.
Granted, we don't seem to have found that level of expense yet. It may be coming.
Peak oil is going to be a big factor there.Turquoise wrote:
I was talking with a friend of mine today, and he pointed out that there is a way for oil to fall soon, but it would take an economic downturn caused by oil getting too expensive for economic growth to occur. There's a breaking point that comes in the price of oil where it would be too expensive for people to conduct business normally anymore. Transit costs would be too high.kylef wrote:
Yep - the emission and quantity scare is so great now (largely due to the media) that people will never see it falling again. In turn, oil companies can make yet more profit on the same amount of oil because they will turn it up in price: because the population suspects this. In the past 3 days there's been at least 2 oil articles in the Telegraph over here. One stated that "by summer oil will be £1.50/litre" - currently it is at about £1.17. And you know what? It will go up to that price when it doesn't necessarily need to. Why? Oil speculation.Turquoise wrote:
With oil, there's really no reason to think it will fall in value anytime soon, so speculators are buying futures in it rapidly. This helps to drive up the demand for a commodity, which in turn, drives up the price.
Granted, we don't seem to have found that level of expense yet. It may be coming.
Bufferstocks are consistently used to maintain a high price on oil. This entails that the suppliers will hold back some of their stock from consumers which lowers the overall supply. Since oil is price demand inelastic, consumers will still purchase (very often at a higher price) oil and the overall demand will be considerably higher. As long as oil companies withhold some supply of oil and maintain a bufferstock there will always be excess demand which obviously has an overall effect on the speculation of the product because it is an inferior good( a good which contradicts the law of demand).
This is frighteningly realistic and believable. To be honest, I think you're on to something here.Diesel_dyk wrote:
I have a background in economics.
I think what has happened here is the same thing that happened in the ENRON California electric deregulation where ENRON owned power plants and traded on the futures market. In one documentary there is a taped telephone conversation with an ENRON trader where the trader is asking a power plant manager to go down for maintenance. You can imagine the profits to be made where a trader can hedge that the price of a commodity is going to increase and then with a phone call they can cause the price to increase by actually causing a shortage or by making the market think that there will be a shortage. This manipulation of the market caused the prices in the deregulated market to increase wildly and also lead to brown outs and rolling blackouts.
I think that when ENRON went down, these people learned one important lesson, that is that the ENRON scam can not work when you are wholly under the jurisdiction of one country. I think that these people shifted over to the oil market where that market is global and it might be difficult to bring under regulation. The scam probably works like this. Oil contracts are written using the Euro and not the US dollar. The oil contracts are routed through China (probably) and held there. that is why the news media keeps saying that China is buying everything up. The futures traders belong to the company holding the contracts or they are in a related company. The holding company holds the oil contract while the futures trader hedges that the price will increase. Think of this like an oil tanker going in circles in the pacific ocean until the futures trader phones the tell the captain to bring the ship into port. the trader sells for a huge profit. the holding company releases the contract. here is where the price of oil should fall because the hedge was that there was an oil shortage that was never realized, meaning that the contract holder should realize a huge loss, but instead the purchasing oil refiner company just passes the cost along to the consumer and claims that its the market and not them. But in reality, the holding company, the futures trader and the oil company are probably one and the same.
And the reason why the contracts are written in Euros and not American dollars, is that there would be an ancillary profit to trading on the currency market as well. when the oil bubble bursts the Euro will fall back below par with the US dollar.
One interesting thing that I heard was that there was one line in some Congressional bill dealing with ENRON that deregulated energy traders....
HMMMMMM..... make you think doesn't it. Congress removed the legal blocks in place that would have prevented this massive manipulation of the oil market.
One thing is for sure, this is not a supply and demand issue that is driving the price of oil because there is no shortage of gas or oil. This is the ENRON futures scam gone global. If Congress re-regulates the energy traders, the oil bubble will burst and oil will probably fall back to $50 per barrel - about 1.29 to 1.39 a gallon. but fat chance of that happening with Bush in office, he and Cheney were in thick with the ENRON crooks.
If nothing else, the very possibliity that this could occur shows how there should be some international regulatory body to oversee energy, because I doubt the WTO would accomplish such a task.
Perhaps it should be remembered that the vast majority of oil companies in the world are owned and controlled by their nations' governments.
http://www.economist.com/opinion/displa … id=7276986
"WHEN activists, journalists and others speak of “Big Oil”, you know exactly what they mean: companies such as Exxon Mobil, Chevron, BP and Royal Dutch Shell. These titans have been making lots of money for their shareholders; their bosses enjoy vast pay packets; and their actions affect us all. BP's decision to shut down Prudhoe Bay, America's biggest oilfield, to repair leaking pipes is a case in point, outraging many and pushing petrol prices even higher (see article).
Yet Big Oil is pretty small next to the industry's true giants: the national oil companies (NOCs) owned or controlled by the governments of oil-rich countries, which manage over 90% of the world's oil, depending on how you count. Of the 20 biggest oil firms, in terms of reserves of oil and gas, 16 are NOCs. Saudi Aramco, the biggest, has more than ten times the reserves that Exxon does. Those with misgivings about oil—that its price is too high, that reserves are running out, that it damages the environment, that it is more a curse than an asset for countries that produce it—must look to NOCs for reassurance.
These companies are certainly sitting on a reassuring amount of oil. Saudi Aramco's proved reserves alone could keep the world supplied for several decades. But it is only exploiting ten of its 80 or so fields, so will be able to pump at the present rate for about 70 years even if it never discovers another drop of oil. In fact, Aramco and other NOCs are likely to find plenty more if they look, since their territory has not been very thoroughly explored. Only 2,000 wildcat wells have ever been dug in the countries around the Gulf, according to Leonardo Maugeri, an Italian oilman, compared with more than 1m wells in the United States.
But if the amount of oil at state oil companies' disposal is not much of a worry, the way they manage it certainly is. Few of the princes, politicians and strongmen who wield ultimate authority over these firms can resist the urge to meddle. At best, that leads to the sort of inefficiencies found at most state-owned firms: overstaffing, underinvestment and so on. At worst, the business of pumping and selling oil is entirely subsumed by politics, as in the case of Petróleos de Venezuela, one of the biggest NOCs (see article). In either case, NOCs produce less oil, more expensively, than they should."
http://www.economist.com/opinion/displa … id=7276986
"WHEN activists, journalists and others speak of “Big Oil”, you know exactly what they mean: companies such as Exxon Mobil, Chevron, BP and Royal Dutch Shell. These titans have been making lots of money for their shareholders; their bosses enjoy vast pay packets; and their actions affect us all. BP's decision to shut down Prudhoe Bay, America's biggest oilfield, to repair leaking pipes is a case in point, outraging many and pushing petrol prices even higher (see article).
Yet Big Oil is pretty small next to the industry's true giants: the national oil companies (NOCs) owned or controlled by the governments of oil-rich countries, which manage over 90% of the world's oil, depending on how you count. Of the 20 biggest oil firms, in terms of reserves of oil and gas, 16 are NOCs. Saudi Aramco, the biggest, has more than ten times the reserves that Exxon does. Those with misgivings about oil—that its price is too high, that reserves are running out, that it damages the environment, that it is more a curse than an asset for countries that produce it—must look to NOCs for reassurance.
These companies are certainly sitting on a reassuring amount of oil. Saudi Aramco's proved reserves alone could keep the world supplied for several decades. But it is only exploiting ten of its 80 or so fields, so will be able to pump at the present rate for about 70 years even if it never discovers another drop of oil. In fact, Aramco and other NOCs are likely to find plenty more if they look, since their territory has not been very thoroughly explored. Only 2,000 wildcat wells have ever been dug in the countries around the Gulf, according to Leonardo Maugeri, an Italian oilman, compared with more than 1m wells in the United States.
But if the amount of oil at state oil companies' disposal is not much of a worry, the way they manage it certainly is. Few of the princes, politicians and strongmen who wield ultimate authority over these firms can resist the urge to meddle. At best, that leads to the sort of inefficiencies found at most state-owned firms: overstaffing, underinvestment and so on. At worst, the business of pumping and selling oil is entirely subsumed by politics, as in the case of Petróleos de Venezuela, one of the biggest NOCs (see article). In either case, NOCs produce less oil, more expensively, than they should."
Last edited by imortal (2008-05-24 14:06:30)
So basically, if the West decided to overthrow the Saudi regime and other NOCs in the Middle East, we wouldn't have these oil problems once a large enough pool of corporations split the resulting oil supply.
I'm not normally an advocate of war, but hey, I really don't like the Saudis or the Middle East in general, and if that actually fixed the market more towards our interests... well....
I'm not normally an advocate of war, but hey, I really don't like the Saudis or the Middle East in general, and if that actually fixed the market more towards our interests... well....
Would it be worth it in the 50-100 years whenever it all runs out, though? That is, unless you own the land. In which you can start USA2 - new and better if China decides to invade the "original" USA!Turquoise wrote:
So basically, if the West decided to overthrow the Saudi regime and other NOCs in the Middle East, we wouldn't have these oil problems once a large enough pool of corporations split the resulting oil supply.
I'm not normally an advocate of war, but hey, I really don't like the Saudis or the Middle East in general, and if that actually fixed the market more towards our interests... well....
Hey, buying more time for developing oil alternatives is cool with me... lolkylef wrote:
Would it be worth it in the 50-100 years whenever it all runs out, though? That is, unless you own the land. In which you can start USA2 - new and better if China decides to invade the "original" USA!Turquoise wrote:
So basically, if the West decided to overthrow the Saudi regime and other NOCs in the Middle East, we wouldn't have these oil problems once a large enough pool of corporations split the resulting oil supply.
I'm not normally an advocate of war, but hey, I really don't like the Saudis or the Middle East in general, and if that actually fixed the market more towards our interests... well....
As for China, they'd probably want to join in to get their piece of the oil pie.
My point was that the vast majority of oil supplies and production capability are controlled by governments; since they are, the oil supply of those nations can be altered by the government for political reasons; reduction in supply, raising the prices, and straining the economy of other nations. That can have poilitical implications. I am not making accusations, simply raising a point I feel is valid.Turquoise wrote:
So basically, if the West decided to overthrow the Saudi regime and other NOCs in the Middle East, we wouldn't have these oil problems once a large enough pool of corporations split the resulting oil supply.
I'm not normally an advocate of war, but hey, I really don't like the Saudis or the Middle East in general, and if that actually fixed the market more towards our interests... well....
Agreed... which is why I'd like to remove the governmental connections to oil altogether, but I can't think of anything short of war that would accomplish that...imortal wrote:
My point was that the vast majority of oil supplies and production capability are controlled by governments; since they are, the oil supply of those nations can be altered by the government for political reasons; reduction in supply, raising the prices, and straining the economy of other nations. That can have poilitical implications. I am not making accusations, simply raising a point I feel is valid.Turquoise wrote:
So basically, if the West decided to overthrow the Saudi regime and other NOCs in the Middle East, we wouldn't have these oil problems once a large enough pool of corporations split the resulting oil supply.
I'm not normally an advocate of war, but hey, I really don't like the Saudis or the Middle East in general, and if that actually fixed the market more towards our interests... well....
Yup, life sucks. How does it feel to be an imperialist, turq? j/kTurquoise wrote:
Agreed... which is why I'd like to remove the governmental connections to oil altogether, but I can't think of anything short of war that would accomplish that...imortal wrote:
My point was that the vast majority of oil supplies and production capability are controlled by governments; since they are, the oil supply of those nations can be altered by the government for political reasons; reduction in supply, raising the prices, and straining the economy of other nations. That can have poilitical implications. I am not making accusations, simply raising a point I feel is valid.Turquoise wrote:
So basically, if the West decided to overthrow the Saudi regime and other NOCs in the Middle East, we wouldn't have these oil problems once a large enough pool of corporations split the resulting oil supply.
I'm not normally an advocate of war, but hey, I really don't like the Saudis or the Middle East in general, and if that actually fixed the market more towards our interests... well....
In all seriousness, I have no problem with imperialism if the majority of the world benefits from it. The thing is... most imperialism in the past has only benefitted a particular country or multinational corporations. This is a rare case where, if done properly, this imperialism would actually benefit most of the industrialized and industrializing world....imortal wrote:
Yup, life sucks. How does it feel to be an imperialist, turq? j/kTurquoise wrote:
Agreed... which is why I'd like to remove the governmental connections to oil altogether, but I can't think of anything short of war that would accomplish that...imortal wrote:
My point was that the vast majority of oil supplies and production capability are controlled by governments; since they are, the oil supply of those nations can be altered by the government for political reasons; reduction in supply, raising the prices, and straining the economy of other nations. That can have poilitical implications. I am not making accusations, simply raising a point I feel is valid.
Unfortunately, I am one of those self-centered, greedy individuals. I am just completely honest about it. The value I assign to someone or something is directly related to how it affects me and those close (closer) to me. Greater good? pah!Turquoise wrote:
In all seriousness, I have no problem with imperialism if the majority of the world benefits from it. The thing is... most imperialism in the past has only benefitted a particular country or multinational corporations. This is a rare case where, if done properly, this imperialism would actually benefit most of the industrialized and industrializing world....imortal wrote:
Yup, life sucks. How does it feel to be an imperialist, turq? j/kTurquoise wrote:
Agreed... which is why I'd like to remove the governmental connections to oil altogether, but I can't think of anything short of war that would accomplish that...
*nods* I know what you mean, but I guess I see the majority of the world's interests as being basically the same as my own. This is why I support imperialism in this one case but not in many others...imortal wrote:
Unfortunately, I am one of those self-centered, greedy individuals. I am just completely honest about it. The value I assign to someone or something is directly related to how it affects me and those close (closer) to me. Greater good? pah!Turquoise wrote:
In all seriousness, I have no problem with imperialism if the majority of the world benefits from it. The thing is... most imperialism in the past has only benefitted a particular country or multinational corporations. This is a rare case where, if done properly, this imperialism would actually benefit most of the industrialized and industrializing world....imortal wrote:
Yup, life sucks. How does it feel to be an imperialist, turq? j/k
Surely it would make far more sense for the US just to put pressure on Canada and Mexico to ramp up production. The US has a lot of diplomatic influence with both nations, which are both neighbouring and neither of which are members of OPEC despite having massive oil reserves. Russia would be another potential avenue.Turquoise wrote:
So basically, if the West decided to overthrow the Saudi regime and other NOCs in the Middle East, we wouldn't have these oil problems once a large enough pool of corporations split the resulting oil supply.
I'm not normally an advocate of war, but hey, I really don't like the Saudis or the Middle East in general, and if that actually fixed the market more towards our interests... well....
The practical ability of a country to increase its oil production and refinement rates are also an important factor. It's no use talking about increasing production if it is beyond the capability of the producing country. Then you have to look at ways of assisting them with their oil production to increase the speed it is produced at. Even then you've got to consider that we are rapidly approaching peak oil point, which is the point at which oil production peaks. Beyond that point oil production will go into decline, not from political pressure, but from difficulties involved in extraction and refinement. Even the very most optimistic estimates place this point about 20 years in the future, more realistic estimates place it around 5 years in the future (some dates commonly thrown around are 2010 and 2012). After oil production goes into decline, demand will continue to rise, at an ever increasing rate. If you have a rapidly increasing demand and a dwindling supply, prices will get totally out of control. We are not talking about something in the distant future here, not like running out of oil altogether, but something that may well mean that petroleum ceases to be economically viable for consumers within the next 20 years.
I also think you're looking at the whole China buying up lots of oil point in the wrong way. China aren't buying lots of oil to stockpile it. They are buying it because their oil consumption is going through the roof and they are using it. The same is true of numerous other developing countries - look at India's oil consumption. This demand from developing countries is only going to increase, whilst the supply is only going to decline, at least in the mid-to-long-term. Short term, supply could potentially be increased to reduce prices, but that's not going to make any real difference.
Given the scenarios you put forth here, would it not be reasonable to assume that the pressures many economies will face from the peak oil situation will lead to a strong desire to take the Middle East's oil through force?
I guess what I'm trying to say is... If peak oil really hits in 2010, I'd rather not have the Saudis hold onto a large portion of the world's oil as they please. If they continue to be inefficient in their extraction methods, they will only drive up the price of oil further -- which could lead to a lot of suffering worldwide.
Why not just amass a coalition of major military powers to take the oil? For example, if the U.S., China, and the EU all agreed to conquer OPEC, would there really be any force that could stop us?
Granted, I realize what you mentioned is far more likely to happen, since it's extremely rare for the U.S., China, and the EU to all agree on anything.
I guess what I'm trying to say is... If peak oil really hits in 2010, I'd rather not have the Saudis hold onto a large portion of the world's oil as they please. If they continue to be inefficient in their extraction methods, they will only drive up the price of oil further -- which could lead to a lot of suffering worldwide.
Why not just amass a coalition of major military powers to take the oil? For example, if the U.S., China, and the EU all agreed to conquer OPEC, would there really be any force that could stop us?
Granted, I realize what you mentioned is far more likely to happen, since it's extremely rare for the U.S., China, and the EU to all agree on anything.
Almost all the OPEC countries, particularly Saudi Arabia, are extremely efficient at their extraction. They just like to hold oil back to inflate the price. That's the biggest problem I have with the OPEC cartel. It is places like Russia that could benefit from more foreign investment.Turquoise wrote:
Given the scenarios you put forth here, would it not be reasonable to assume that the pressures many economies will face from the peak oil situation will lead to a strong desire to take the Middle East's oil through force?
I guess what I'm trying to say is... If peak oil really hits in 2010, I'd rather not have the Saudis hold onto a large portion of the world's oil as they please. If they continue to be inefficient in their extraction methods, they will only drive up the price of oil further -- which could lead to a lot of suffering worldwide.
Why not just amass a coalition of major military powers to take the oil? For example, if the U.S., China, and the EU all agreed to conquer OPEC, would there really be any force that could stop us?
Granted, I realize what you mentioned is far more likely to happen, since it's extremely rare for the U.S., China, and the EU to all agree on anything.
None of this matters that much, because in 50 years (or it could be as few as 5-10 years) oil will be too expensive for use to fuel cars and alternative fuels will be needed. Oil has increased in price dramatically recently, I can't see how any further increase can be avoided. Any measures to seize oil militarily would simply delay the inevitable and would, in my opinion, be unspeakably foolish.
In 1998 oil was less than $20/barrel. It is now $130/barrel. It has increased in price by 6.5x in a decade. If prices continue to rise at that rate, which they are likely to do, in 2018 oil will be almost $1000/barrel. It is clear that a commodity that has increased in price to that extent will not be viable for average consumers.
People need to get used to the idea that driving cars running off petrol or diesel will simply not be possible, unless you are exceedingly rich, within a shockingly short timeframe.
I have to disagree with Berster7 on a couple of pointsBertster7 wrote:
Almost all the OPEC countries, particularly Saudi Arabia, are extremely efficient at their extraction. They just like to hold oil back to inflate the price. That's the biggest problem I have with the OPEC cartel. It is places like Russia that could benefit from more foreign investment.Turquoise wrote:
Given the scenarios you put forth here, would it not be reasonable to assume that the pressures many economies will face from the peak oil situation will lead to a strong desire to take the Middle East's oil through force?
I guess what I'm trying to say is... If peak oil really hits in 2010, I'd rather not have the Saudis hold onto a large portion of the world's oil as they please. If they continue to be inefficient in their extraction methods, they will only drive up the price of oil further -- which could lead to a lot of suffering worldwide.
Why not just amass a coalition of major military powers to take the oil? For example, if the U.S., China, and the EU all agreed to conquer OPEC, would there really be any force that could stop us?
Granted, I realize what you mentioned is far more likely to happen, since it's extremely rare for the U.S., China, and the EU to all agree on anything.
None of this matters that much, because in 50 years (or it could be as few as 5-10 years) oil will be too expensive for use to fuel cars and alternative fuels will be needed. Oil has increased in price dramatically recently, I can't see how any further increase can be avoided. Any measures to seize oil militarily would simply delay the inevitable and would, in my opinion, be unspeakably foolish.
In 1998 oil was less than $20/barrel. It is now $130/barrel. It has increased in price by 6.5x in a decade. If prices continue to rise at that rate, which they are likely to do, in 2018 oil will be almost $1000/barrel. It is clear that a commodity that has increased in price to that extent will not be viable for average consumers.
People need to get used to the idea that driving cars running off petrol or diesel will simply not be possible, unless you are exceedingly rich, within a shockingly short timeframe.
First, when the 1973 oil crisis occurred there were predictions that the price of oil would continue to increase exponentially. This did not occur. It only took a 5% decrease in demand to cause the price of oil to decrease to around $10 per barrel. This occurred because the decrease in demand affected the revenue streams of oil producing countries who were dissatisfied with their oil allotment under OPEC. When these dissatisfied countries broke from OPEC and began over producing the result was a plummeting in the price of oil. I would not predict that the price of oil will continue to increase at an exponential rate. this is assuming that the price of oil is not subject to massive market manipulation which I actually do think is occurring.
Second, if China is a major competitor to the US for resources, then why did US officials lobby Canada 3 or 4 years ago on behalf of China for Canada to permit Chinese investment in the tar sands project in Canada. This makes no sense if China is a competitor. Why should the US officials want China to be involved in the supply of oil from the US's safest oil supplier. As you probably know most oil from Canada is pumped by pipeline to the US, not taken by tanker to China. Any ownership of Canadian oil by China would be in the form of oil contracts that would be sold to US oil companies - not taken to China. So why have China involved at all in this process if they are only going to act a middle man between Canadian suppliers and US oil Companies.... Which leads to my point that the oil contracts are being funneled through China for the purpose of market manipulation.
As I understand the deal between the US and Canadian officials, the US horse traded the softwood lumber trade dispute with Canada in return for Canada opening up the tar sands to the Chinese. I fail to see any benefit to the US except for benefit to Cheney.
That all being said, I do see one way in which this could all be in the national security interest of the US, Europe, China and Japan.
If the middle east and Russia becomes comfortable with the idea of $150, $200 or more from oil, these countries will begin to borrow heavily from the IMF and the world bank for mega projects based on the ability to pay back the loans using high oil revenues. While the Suadi's might not fall into this trap I think Venezuela, Mexico, Russia and others are vulnerable.
This would
1. create incentive in domestic markets for increased investment in alternative fuels and decrease dependency on these oil producing regions
2. create an economic club in the form of debt owed to the IMF and world bank where an impending collapse in the oil market would crash these economies. The inability to pay back loans would lead to demands by the world bank and the IMF for these countries to open up their oil markets and oil reserves. It would result in smashing OPEC and opening these markets to foreign investment by big oil without the need for an imperialist conventional war as you state Turquoise - but the result would be the same with having to put boots on the ground. If this is all true then the price at the pump we pay now would be worth it as it would be al ot cheaper that a full out war with the middle east nor a war with Russia which we can't have with anyway. and in the long term we would have a more stable supply and price for oil.
just food for thought -if we had smart leadership with long term goals in mind
Last edited by Diesel_dyk (2008-05-25 14:10:18)