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Author Topic: $130/bbl Oil - Some Facts
Noah_Scape
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posted 23 May 2008 09:31 PM      Profile for Noah_Scape     Send New Private Message      Edit/Delete Post  Reply With Quote 
Just the facts, please. We have heard propaganda about why the price of gasoline is so high.

We are told:
"The $130 per barrel oil is the result of SUPPLY and DEMAND due to China and India competing with the USA for the limited supply of oil".

But in fact, there is only a slight increase in global demand over last year, and supply can easily cover that increase in demand - here are the facts for China, India and the USA:

China: China in 2007 used about 7 million b/d total, and is expected to rise this year to 7.4 bpd in 2008

India: 2.6 mbd in 2007 ; 2.8 in 2008

USA: 20.7 mbd in 2007, forecast to DROP in 2008 due to the economy slumping.

Total for the USA, China, and India for 2008:
= 30.9 mbd [forecast] ;
[up from 30.3 in 2007]

Global demand is steady at around 85 mbd. [that is the amount used every day]

So, no big increase.
------------------------------------------
The price for oil:
was $60/barrel in the early part of 2007 ;
$130+ in 2008.

So, with that slight increase in DEMAND, we see the price more than doubled!!

--------------------------------------------

What about supply? - it went up slightly from 2007 to 2008. Yes, UP. The Sauds increased production by about 500,000 bpd [1/2M bpd]

To be fair, another factor is the stockpiling by the USA in their "strategic reserve", but even that is not a huge factor, and is somewhat arbitrary considering the 'summer driving season' will see less people on the roads than last year due to the high price of gas and the poor economy in the USA. Bush is hoarding oil and gas to create an impression of pressure on supply, thats all.

--------------------------------------

So, the FACT is that "it is all hooey" about Supply and Demand being the reason oil is going up so fast.

The Saudis, and OPEC, have said this openly too, that "there is no shortage, and no need to increase supply". The Bush mission to the middle east last week was [partly] about keeping the propaganda going about supply and demand causing the price of oil to go up... in reality, Bush loves it that the price is so high.
------------
Now, as opposed to facts, here is some "speculation" for you [play on words there] -

Speculation accounts for the rise in the price of oil this past year. The regulators new rules allow bidders to pay just 6% ["six"] of their bid, the rest can be borrowed. It is a terrific deal for the bidding market players. They would not be willing to bid it up like that if they had to pay for it... and those new rules came into effect in 2006.

Hmmmm, more easy money for Bush buddies before he leaves office with his gravy train that makes the wealthy people wealthier at the average person's expense.

There is a factor of a low American dollar too, where Saudis do not get the full value they did when the US$ was stronger.

Note:
There is no added expense in getting the oil out of the ground when the price is $130/bbl, it still only costs about $10 to $15 per barrel to pump/explore/etc. ; the rest is pure profit: 85 million barrels times $130 per barrel [= $11,050 million a DAY, or about $11 Billion/day.]

That goes to the many and various corporations who produce oil, but a good portion of them are American corporations operating in foreign nations...ya know, Bush buddies. And ya, those corporations have to pay royalties to governments like Nigeria and whatever... sometimes in escalating amounts depending on the price of oil...maybe 5% or so. I am not sure of the arrangement with the Saudis, it is comlicated.


-----------------------------------------------
GASOLINE:
As for the rising price of gasoline, that is not a farce - refiners have to pay the $130/bbl prices for the oil to make the gasoline out of, and so there isn't any extra profits there.
What we pay at the pump is what pays for the high price of oil - that money eventually goes to oil producers.

------------------------------------------
Links:
Wiki - oil prices

India oil consumption '03 to '07

[sorry, I lost the China one - google it]

Read these articles in the "free media" -
Real reason behind high oil prices

60% of price of oil is speculation


From: B.C. | Registered: Oct 2007  |  IP: Logged
wwSwimming
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posted 25 May 2008 04:03 AM      Profile for wwSwimming     Send New Private Message      Edit/Delete Post  Reply With Quote 
I saw an article in the last few days about investment dollars pouring into broad-based commodity index funds, run by hedge funds, that buy futures in gold, oil, etc.

at the rate of: $25 billion a year ago - $250 billion at present.

I can't find the article right now, but it did make the case conclusively. The author also talked about some of the games involved, such as paying tankers to sit in the harbor on the expectation that prices will rise further (so, for the investor, it's a trade-off between the expected gain vs. the cost of another week's lease on the oil tanker.)

Oil is becoming a primary new investment bubble.


From: LASIKdecision.com ~ Website By & For Injured LASIK Patients | Registered: May 2006  |  IP: Logged
Noah_Scape
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posted 25 May 2008 11:19 AM      Profile for Noah_Scape     Send New Private Message      Edit/Delete Post  Reply With Quote 
Good tip! - I Googled it and found a few quotes that agree that a large part of the rise of the price of oil lately is due to Index Funds speculation.

Who are these Index Funds anyhow?

quote:
"Specifically, these are Corporate and Government Pension Funds, Sovereign Wealth Funds, University Endowments and other Institutional Investors. Collectively, these investors now account on average for a larger share of outstanding commodities futures contracts than any other market participant."

quote:
“Index Speculators’ trading strategies amount to virtual hoarding via the commodities futures markets. Institutional Investors are buying up essential items that exist in limited quantities for the sole purpose of reaping speculative profits.”


Analyst on oil price

more quotes, same link -

quote:
“Index Speculators’ trading strategies amount to virtual hoarding via the commodities futures markets. Institutional Investors are buying up essential items that exist in limited quantities for the sole purpose of reaping speculative profits.”

Politicos created this situation :
"the CFTC has given investment banks a loophole, in that they can sell unlimited size positions in the OTC swap markets if they hedge the positions."
"So, a hedge fund could buy $500 million worth of wheat, which would be way beyond the actual market position limit, through a swap with a Wall Street bank, without having to worry about position limits. And there is no doubt that large purchases of any commodity will drive up prices, at least in the short term."


From: B.C. | Registered: Oct 2007  |  IP: Logged
Noah_Scape
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posted 25 May 2008 12:15 PM      Profile for Noah_Scape     Send New Private Message      Edit/Delete Post  Reply With Quote 
Here is a perfect example of the PROPAGANDA the media is telling us [which is the spirit of this particular forum, after all]:

the National Post Dianne Francis tells us that the price of oil is due to Supply and Demand - LIES, ALL LIES, DAMNED LIES!!
Oil Price Rise PROPAGANDA - National Post article

She does not give one statistic about China or India having increased demand for oil - lots about coal though, but that is not oil. She also points to the growth in China, but that is also not "the price of oil".

Of course, in the usual Right Wing Elite tactic, she says that opinions that say otherwise "is a conspiracy".

She claims we have hit "Peak Oil" - which is a farce, there are several new discoveries and the supply is holding up just fine.

Where she mentions demand, she fails to note that the USA demand is dropping [due to the poor economy there].

She says "supply is tight" - but read this from Qatar's oil minister, saying that Commodity speculators are exploiting geopolitical tensions to put a "fear factor premium" on oil prices:

Qatar oil minister - Don't Blame OPEC


So we are seeing here in the National Post a clear example of propaganda, helping the Fear Factor along. People who read this and believe it are the problem, nearly as much as the perpetrators themselves.


From: B.C. | Registered: Oct 2007  |  IP: Logged
Toby Fourre
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posted 25 May 2008 03:24 PM      Profile for Toby Fourre        Edit/Delete Post  Reply With Quote 
Stock promoters love a bubble. They will push it as much as they can. Eventually, the bubble bursts and a lot of suckers are left holding empty promises.

What is sad about this bubble is that it is playing upon real fears about a real problem. Peak oil is real. That the price of oil is going up faster than peak oil would dictate has more to do with promotion than reality.


From: Death Valley, BC | Registered: Oct 2006  |  IP: Logged
Doug
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posted 25 May 2008 09:26 PM      Profile for Doug   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Paul Krugman here raises a fairly good question: if the problem isn't supply, then where is all the excess oil going?
From: Toronto, Canada | Registered: Apr 2001  |  IP: Logged
Noah_Scape
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posted 26 May 2008 08:34 AM      Profile for Noah_Scape     Send New Private Message      Edit/Delete Post  Reply With Quote 
Here is the US Dept of Energy website, with their own stats on US consumption and supply of oil.

Note that there is no big increase in demand, and that supply is steady. Also, what little demand increase there is would be offset if the govt. was not stockpiling crude inventories, and they can afford to do that because Americans are not driving as much this year, due to the economy and the high price of gasoline!!

US Dept of Energy stats on oil supply and demand

Krugman asks "Where is the excess oil being stored?" after pointing out that there is some oil out there that is not accounted for.
For one thing, it could be on those tankers that Iran is leasing and storing oil in ;
Or maybe it is "just on paper", a trick of the speculators??
...but ya, interesting article there.


From: B.C. | Registered: Oct 2007  |  IP: Logged
Stephen Gordon
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posted 26 May 2008 01:38 PM      Profile for Stephen Gordon        Edit/Delete Post  Reply With Quote 
Oil price fundamentals:

quote:
Although I believe ... speculation has gotten ahead of fundamentals in the last few months, there is no question in my mind that market fundamentals are the main reason for the broader 5-year move up in oil prices. Here I review those fundamental factors.

A good summary of the relevant data follows.


From: . | Registered: Oct 2003  |  IP: Logged
Pogo
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posted 26 May 2008 02:59 PM      Profile for Pogo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
It was a great conspiracy theory, why did you have to ruin it!
From: Richmond BC | Registered: Aug 2002  |  IP: Logged
Noah_Scape
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posted 08 June 2008 11:02 PM      Profile for Noah_Scape     Send New Private Message      Edit/Delete Post  Reply With Quote 
It seems I have made an error, once again. This data shows that a small increase in a large market like China means a huge jump in overall demand.

Speculation is not the reason for high oil prices after all.

Still, it is good to explore these ideas, my shame is not complete, just a significant part of the overall psychological makeup.

Bring on the electric car and use the rails more and that will help bring down demand. Renewable energy is cost efficient, but slow to happen. There really is some resistance to using less fossil fuels.


From: B.C. | Registered: Oct 2007  |  IP: Logged
Fidel
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posted 08 June 2008 11:29 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Are such projections plausible from the point of view of potential demand? During 2006, China used about 2 barrels of oil per person. For comparison, Mexico used 6.6-- Chinese oil consumption could triple and they'd still be using less per person than Mexico is today. The U.S. used almost 25 barrels per person. According to the data collected for a new research paper by Max Auffhammer and Richard Carson, there were 3.3 passenger vehicles per 100 Chinese residents in 2006, compared with 77 in the United States. Yes, I would say that these astonishing numbers for potential future Chinese oil demand are not at all inconceivable.

So if Asia/Oceania and North America continue consuming oil at today's rates, price of oil could soar to a gazillion dollars. I can see it all now, rich and privileged people will drive down pothole-riddled roads in their armour-plated SUV's on the way to their places of employment and leisure and billowing smoke from tailpipe exhaust. And they'll gawk out porthole-like windows at the desperate humanity before them. It's a great bourgeois middle class fantasy.

But what if the big oil consuming nations decide to cutback?


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
wwSwimming
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posted 09 June 2008 11:35 AM      Profile for wwSwimming     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Toby Fourre:
[QB]Stock promoters love a bubble. They will push it as much as they can. Eventually, the bubble bursts and a lot of suckers are left holding empty promises.

I suppose there are some people who are buying stocks as an investment but "they" (the speculator class) are running out of ways to make money.

Buying oil and food are reliable ways to "make money". Most of the people who are investing in these funds are making money.

Some of them get caught on the occasional downtick.

Since they are bidding up the prices of essential commodities, it reminds me of the movie Total Recall where the Evil Corporation sells air & responds to dissidence by cutting off the air. (then Arnold rescues them by creating an atmosphere.)

"Sorry, some things we don't trade on" sounds like a good social policy to me.


From: LASIKdecision.com ~ Website By & For Injured LASIK Patients | Registered: May 2006  |  IP: Logged
jester
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posted 09 June 2008 08:32 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Doug:
Paul Krugman here raises a fairly good question: if the problem isn't supply, then where is all the excess oil going?

Demand may also be understated for political reasons in counties with large domestic subsidies.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
Fidel
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posted 09 June 2008 09:11 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
Oil futures. They're stockpiling oil because they think it's more profitable to sell next month, next year or the year after that.

eta: I think I'll write an automated script for googling "oil bubble" and "bust" and do my part to put a scare into the "herd"

[ 09 June 2008: Message edited by: Fidel ]


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
Doug
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posted 09 June 2008 09:20 PM      Profile for Doug   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by wwSwimming:

I suppose there are some people who are buying stocks as an investment but "they" (the speculator class) are running out of ways to make money.

Buying oil and food are reliable ways to "make money". Most of the people who are investing in these funds are making money.


Speculators here are ultimately constrained here by the fact that they are trading in physical goods. In order to make money, they have to sell those commodities contracts on to the firms that actually distribute and use them. Otherwise some investment firm gets stuck either having to find somewhere to store 10 million barrels of oil or, more realistically, sell it on for a loss.


From: Toronto, Canada | Registered: Apr 2001  |  IP: Logged
Fidel
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posted 10 June 2008 11:27 AM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
Sounds like Harper and Dion have a plan for building up a decent Heritage Fund for Albertans. OilSands WunderLand It's a strange sort of theme park with no swimming signs and barbed wire everywhere.
From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
HeywoodFloyd
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posted 10 June 2008 11:44 AM      Profile for HeywoodFloyd     Send New Private Message      Edit/Delete Post  Reply With Quote 
Typical Ontarian. No idea who the Premier of AB is.
From: Edmonton: This place sucks | Registered: Jun 2003  |  IP: Logged
remind
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posted 10 June 2008 11:49 AM      Profile for remind     Send New Private Message      Edit/Delete Post  Reply With Quote 
The story never said a word about Klien being Premier, just alluded to the fact that he created the mess.
From: "watching the tide roll away" | Registered: Jun 2004  |  IP: Logged
kropotkin1951
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posted 10 June 2008 11:50 AM      Profile for kropotkin1951   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by HeywoodFloyd:
Typical Ontarian. No idea who the Premier of AB is.
It doesn't say he is the Premier. Typical right winger shoot off mouth before reading carefully.

From: North of Manifest Destiny | Registered: Jun 2002  |  IP: Logged
HeywoodFloyd
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posted 10 June 2008 12:00 PM      Profile for HeywoodFloyd     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by remind:
The story never said a word about Klien being Premier, just alluded to the fact that he created the mess.

Sorry, you should have picked door number 2: Ernest Manning; or door #3:Harry Strom.


From: Edmonton: This place sucks | Registered: Jun 2003  |  IP: Logged
kropotkin1951
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posted 10 June 2008 12:12 PM      Profile for kropotkin1951   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Remind don't you know that Klein has now resigned to that land where all good corporate shills get desert whether that is just or not. And we should all turn our eyes away from his Texas size payoffs now that he is out of politics. After all he has done for the oil industry he deserves to be rich as well as famous.
From: North of Manifest Destiny | Registered: Jun 2002  |  IP: Logged
Fidel
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posted 10 June 2008 12:45 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
The "E.G.A.D. Protocol"
From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
Fidel
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posted 10 June 2008 02:27 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by HeywoodFloyd:
Typical Ontarian. No idea who the Premier of AB is.

I'm bad with names of pliant petro-stooges. Anyone else?


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged

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