"Big Oil" meet the Democrats of Congress.

[owequitit]

Oh poor oil execs..Its not their fault. After all they dont have any influence in gorvernment.

Who Determines the Price of Oil?
By RALPH NADER

Question of the day: who and what is determining the price of oil and your gasoline and home heating bills? Don't ask Uncle Sam, because George W. Bush and Dick Cheney are running a regime marinated in oil that does not issue reports which explain the real determinants of petroleum pricing beyond the conventional supply-demand curves.

First, let us create a historical framework to provide some background. In the good 'ole oil days, before the producer-countries' cartel in the Third World gained pricing power, there were seven giant oil companies called the 'seven sisters' led by Standard Oil (now Exxon) and Shell. As chronicled in Robert Engler's classic book, The Brotherhood of Oil, they were able to affect pricing through extra-market means. Economists called them a tight oligopoly.

OPEC later took their place at the table in the mid to late Seventies and set the price of crude oil at highly publicized meetings of the various member countries representatives from the Middle East, South America and Africa. Adjusting, 'seven sisters' concentrated their pricing and supply power downstream at the refining, pipeline and marketing levels.

Pricing power was never total but it was always complex, occurring in the interstices of an industry few outsiders understood, and fewer regulators could affect. Besides, natural gas was de-regulated between 1978 and 1993, after which its prices really took off.

Today, a third party has moved to the table-the New York Mercantile Exchange, a similar operates in London and a new one in Dubai. There, boisterous traders buy and sell futures contracts on the delivery of oil. But as Ben Mezrich, the author of the new book Rigged said recently, the dollar amounts of these futures contracts are far far larger than the actual oil deliveries they represent as they turn over and over at the Mercantile Exchange.

So now the critical resource of oil is driven by speculation at ever higher abstract electronic levels of futures trading. Increasingly, the distance becomes greater and greater between this abstract trading (fueled by rumors of storms in the Gulf of Mexico, or some possible political turmoil in a region of the world, or some other frightful excuse for bidding up) and the physical supply and demand for oil and its refined products.

These oil gamblers in New York and London try to justify their frenetic daily bidding by saying that these futures markets provide liquidity, and a clear price for oil. Alright, but who benefits when, how and where?

Certainly, the strain between physical supply and demand in recent years does not explain such extreme volatility. With OPEC countries down to supplying only 40 percent of the world production, Chinese demand for oil growing fast, and the expansion of production by Saudi Arabia and others to meet this demand, crude oil supplies are not tight enough to explain such pricing behavior.

Old factors like inadequate oil company investment in refinery capacity, longer down times for repairs than some observers believe necessary, and the slumping dollar are factors that western governments, especially the Bush regime, have not wanted to investigate. After all, with consumers paying sky-high prices for these fuels, free market theorists are supposed to expect expanded supplies from recoverable reserves to grow. But, of course, the global market for oil is anything but a free market from the producers- both corporate and governmental- toward the downstream companies to the consumers.

In recent days, the price of crude oil escalated to over $90 a barrel, fluctuating up to a high of $96 a barrel. Yet the average price of gasoline in the United States-around $3.00 per gallon-is about what it was earlier this year when the price of crude oil was around $60 a barrel. Why the disconnect?

"It's a big gambling hall," The Washington Post quotes Fadel Gheit, an oil analyst at Oppenheimer. "This time it's just speculation," Peter C. Fusaro, chairman of Global Change Associates, told the Post, adding, "There's a large bet out there that prices will continue to trend higher. But it's detached from fundamentals because there's no shortage of oil."

Meanwhile, the government of Big Oil runs Washington, D.C. It thumbed its nose at pleas from then Chairman of the powerful Finance Committee, Senator Charles Grassley (R-Iowa) who asked the major companies, swimming in massive profits, to contribute some charitable dollars to help the poor pay for their winter home heating bills, and has smugly watched the major Presidential candidates avoid the subject in their debates and declarations.

Oil companies seem to spend more executive effort looking for oil by merging with other companies (note the unchallenged merger of Exxon and Mobil under the Clinton administration) than with developing efficient oil-producing and consuming technology or expanding their solar energy subsidiaries.

So long as the price of crude oil is set by speculators on trading floors, so long as the oil-indentured politicians are not challenged by new candidates standing tall for people and environments, so long as we do not protest for change and press ourselves to prevent wasteful habits and uses, get ready for higher oil prices.


Not that I agree with CW Waters(definetly not) or this article I posted, but I think it would be good if people could identify their positions not based solely on what fox news says.

Ralph Nader is a douche. This is the same guy that came up with all kinds of safety statistics that "PROVED" a 55MPH national speed limit would save lives.

All of which were 100% blatantly false, because the number of fatal accidents continued to increase. In fact, they didn't decrease again until the speed limit went back into the control of the states.

He is also one of the douches that is against expanding the highway infrastructure to cope with demand, so instead of a nice efficient highway system at all times, we are stuck with urban gridlock in most cities, where our cars idle and run much less efficient than how they were designed to run.

Same with airports. We don't want to add runways and capacity, because then our airplanes might be able to actually get off the ground and run efficiently at full power, like they were designed to, instead of idling on the ground and spewing tons of pollutants everywhere around them.

And OF COURSE big oil has a say and influence in government. But then again, so does every other big business, and "special interest group" in the country. They all push THEIR agendas, so why should the oil companies not?

And I have news. EVERY organization has an agenda that doesn't benefit everyone, or even most of the common masses for that matter.

[owequitit]

but you see scott. back then, and im pretty sure you remember, gas used to be under a 1. shit before 9/11 it was like what 1.50 PER gallon. now its over $4. so i just dont get it. they lived through those times, and they had good money and salaries, and now, what its not enough for them? the reason we want more money from our jobs is because we go through $50 or more per week on gas only. back then, 20 bucks would get you through a week and a half.

there so much oil in the US (yes the land we fucking live in) that could last us over 100 years. and im pretty sure in a 100 years some fuckin genius can thing of something else we could run off of.

Because you assume that the oil companies are the only ones in play here. The system is much, much more complex than that.

1) The market has been extremely volatile for the last 6 years or so. Not just because of the war and speculators, but also because nobody knows what India and China are going to be doing. All we know is that they will grow, and even a very small % of a growth rate = a HUGE increase in demand. Don't forget, there are 10X as many people in China as there are here. So realistically, since growth is a compound number, the 10-15% China is expected to mobilize per year for the foreseeable future will very quickly put them in the #1 demand seat. People hear 10% and think "well that isn't THAT much", but when you are dealing with 3 BILLION people, it is HUGE. Even if China demands more efficient cars, they are STILL going to grow, and overall demand is STILL going to increase very quickly.

2) Have you checked to see what new gas taxes have been added lately? I bet you would be surprised where some of that extra cost is coming from. A $.10 gas tax here and an $.08 gas tax there add up quickly.

3) The oil companies are still running a reasonable profit margin of 8.5% on average, not the 50-100% some politicians would lead you to believe; so that tends to indicate to me that they are not the ones gouging. Considering that oil is now around $130 a barrel, when 1 year ago it was around $70 a barrel, indicates to me that there are other forces at play. $130 isn't what WE pay, it is what the oil companies pay. In the end, one way or another (higher prices in capitalism, high taxes in socialism) the cost gets passed onto the consumer.

4) Americans want to bitch about gas prices, but they don't want to do anything to stop it. Like not buy an SUV. No offense, but this has contributed greatly to our fuel demands, and our increasing prices. Private vehicles don't make up the majority of consumption, transportation (semi's etc) do, but we do still have a large effect. When people are buying 9MPG Suburbans, to carry their 1.5 kids, when a midsize family sedan would do the same job with less attention, for 1/3 of the gas, or a minivan would do it for 1/2 the gas, you have what amounts to people getting what they wish for. Same goes for 4WD Diesel trucks that never pull, offroad, or carry anything heavy.

Now that prices are going to be pushing $5 a gallon, they are finally STARTING to see the error of their ways. Too bad they didn't get it when gas was $3 per gallon.

As long as demand increases, and supply stays the same, the prices WILL increase. You can take that to the bank. Demand is global, NOT local.

5) We will NEVER tap our unused reserves for 3 reasons.

a) The lefties will never allow it. We might hurt the moss on a rock. Personally, I think it is nothing more than a temporary measure anyway. Even if we drill, it is still not going to last very long. I would rather see the time and effort put into alternative fuel research. With the advances the hybrid is going to see in the next 5 years, and the promise of hydrogen right around the corner, the pursuit of those makes a lot more sense to me, than just drilling for oil.

b) Strategically, we need to KEEP that oil. Until we are oil independent, that oil is what is going to keep us in a strategic position if the world goes to hell in a handbasket, which lately, is looking more and more likely. If we just burn it now, and still need oil down the road, when shit goes sour, he who has the oil wins. It cost Germany WWII, and it will cost us WWIII.

c) Even if we pump the ground dry, we don't have the capacity to refine it. Since it has to be refined before it gets to the pump, drilling and pumping the ground isn't going to do a damn bit of good. I am not even totally certain that refinery capacity is back to 100% of what it was before Katrina hit. Oh, you thought it only damaged New Orleans? Nope. It wiped out the largest refining region of the country too. Those refineries can take YEARS and YEARS to rebuild.

The lefties don't want us to build new refineries.

There is an old saying "be careful what you wish for, you just might get it."

We have special interest groups that don't want drilling, they don't want refineries, and they don't want to expand the infrastructure to make things more efficient. They also want cheap gas prices.

Can't have both.

They have no way to control demand, so the end result is increasing demand, and decreasing and or steady supply, either one of which leads to increasing pump prices. Instead of taking responsibility for their actions (something that is increasingly common among this belief structure) and understanding that the two are mutually exclusive, they try to pass the buck and blame "big oil" for fixing prices, lobbying etc, when arguably THEIR lobbying has done the majority of the damage. They refuse to admit that the opportunity cost for keeping oil in ground and not building refineries is higher costs. They pass the buck, they pass the blame, and they pass the excuses. They do not however, stand up and own up to what they outcome of THEIR agenda is.

It isn't rocket science.

For the record, I am not saying we should go drill holes everywhere and litter the countryside in refineries. My position was clearly stated above. However, I am also not unrealistic about the opportunity cost of our present course of action. And it is only going to get worse as China and India expand.

[Pandemic]

It's $9/ gallon in europe. Granted they have socialized medicine and education but still.

PS, it's not OPEC screwing us, we get somewhere around 75% of our oil from Canada. Go figure.

[F22HB]

Plus the dollar is becoming worthless in the global market..

[owequitit]

Plus the dollar is becoming worthless in the global market..

That doesn't help either unfortunately.

[Fake Thug]

Speaking of gas tax I heard or read somewhere that the gorvernment pulls in 2.7% in $$ more than the oil companies profits. Dont know how true it is,but if thats the case why the hell is congress drilling oil execs?

[owequitit]

http://news.yahoo.com/s/ap/20080529/...kIERCVsxCyBhIF

Notice that the drop in price TODAY will affect the price at the pump in JULY!

That is because of the delay time from when it gets sold, and transported, to when it appears at a gas station near you.

That is a futures market at work. Commodities are bought and sold in the future, so when they buy a barrel of oil today, it is actually for July. As such, price predictions can't be 100% and there is a delay in the system.

[owequitit]

Speaking of gas tax I heard or read somewhere that the gorvernment pulls in 2.7% in $$ more than the oil companies profits. Dont know how true it is,but if thats the case why the hell is congress drilling oil execs?

Well, think about it from the perspective of a politician.

They have 2 choices.

1) Admit they are a big part of the problem, which will surely focus the wrath of the public on them, and their incremental gas taxes that end up costing as much as the gas itself, if not more, or:

2) Make it look like a conspiracy of the oil companies, hold some hearings, publicize it, and make it LOOK like you are actually doing your job for the common good of the average citizen.

Politicians will sway with the wind 100% of the time, while also taking the path of least resistance, and minimal negative feedback.

It is as certain as the sunrise. You can bank on that too.

[NAiL05]

Supposedly OPEC wont open up until after September so dont be surprised if gas prices keep on soaring for now. Shit I am kinda undetermined to go back to IL for my summer semester thats gonna kick my ass. Need to make my car run on corn damn it since there is plenty of that where I go to school. Gas prices are already covered also I am awaiting for that oil rigging show thast gonna be on History channel. Katrina and natural disasters took out quite a bit of refineries in the south so that will be something to see.