The Big Squeeze

[Condor]

ON SOAPBOX

 

What's it going to be like when the world runs out of oil. I think we're finding out very quickly. Affordable fuel for transportation is becoming extinct. I just drove buy my gas station and diesel was $4.85 per gallon. Regular is a little less than $4.00 per gallon. Crude is going for $134+ per barrel. The world is being held hostage by the 'haves'. I don't know about anyone else, but I'm a 'have not', and can't afford to drive the truck any longer, and the suburban is sitting a lot. It runs the same to fill up the scoot as it did to fill up the family car a few years ago, and it's going to get worse. The big problem is a family doesn't fit on a scoot. The high cost of fuel is also costing us in other areas as well. Everything sold is going up in price. Shipping is quickly creeping up in cost. The US was considered the most powerfull nation on earth, and we're being brought to our knees by our dependence on affordable fuel. All this and wages are stagnant, and even if they weren't there's no way they could keep up with the increase in the cost of living. Our economy is in the dumpster. Have you noticed that there's no mention by the government about the cost of living lately? We used to hear about it all the time. I don't think they want to admit how bad it really is.... I pity the young family with a couple of kids surviving in this economic climate. I pity those who are retired and on a fixed income dealing with their monthly bills. I pity the business owners who are going out of business because they can no longer survive because everyone is stuffing any spare change into their gas tank. I'm not sure what the answers are.... I have my own opinions... but if we're going to survive as a country something needs to be done quickly. Sticking our head in the sand and waiting for the problem to go away just ain't going to get it...

 

OFF SOAPBOX

[Richb]

Possibly the single biggest issue of our generation...fuel. There is no easy answer, but a lot of factors. With developing nations demanding more fuel, it's only gonna get worse. Can anyone remember a significant increase in gas prices ever being followed by a significant decrease? It wont happen. My opinion...drill in the US, everywhere. Nothing is off limits. Anwar, Alaska, off the coast of California, everywhere. Also, Bush has to sign the bill to cease speculative trading on oil. Critics say that increases the proce of a barrel of oil as much as $30 - 35.00 dollars. We just studied this in a ecconomics class i'm taking. Also, start taping into solar power for ALL public buildings. The science is not perfect, but it would help. Every roof of new contruction should be solar panels. Same with wind towers, wherever the land can accomodate it. ( rural America). Ethanol. Forget corn. It's too labor intensive. Plant Switchgrass. Studies show (I just wrote paper on this) that it has more of the properties necessary for ethanol, grows like a weed, requires no fertilizer. (Also no Gov't subsidies). Partial answers are out there, sadly our leaders just aren't moving fast enough.

Sorry for the rant friends...just a family man trying to survive.

[BoomerCPO]

I hear ya Condor. Our fuel prices here in Connecticut are climbing by 25cents a gallon DAILY. Diesel is at $5 a gallon!

 

Folks in this Country need to realize that we have the oil within our own shores to take care of our fuel needs. That will require new drilling and building of new Refineries.

 

Until Congress and the Courts stop playing along with the tree huggers/Environmental-whackos and allow these things to happen we are all in for a very rough ride in the next 1-2 years.....and the picture is not pretty in the least.

 

Our situation today was predicted back in the 70's when we had the oil embargo.....Congress and the Courts did nothing then and they are doing even less now.

 

Batten down the hatches folks....we are in for one heck of a storm.

 

Note: China is preparing to drill in the Gulf of Mexico-within Cuban waters.....less than 80 miles from Florida......yet our Oil Companies are prohibited from putting any more oil rigs out in the same Gulf.

[mini-muffin]

Lots to agree with here. Unfortunately drilling isn't gonna help at this point takes too long to get oil out of new holes and we'd still need more refineries. I also read about switch grass. Unfortunately the gov't doesn't seem to be sufficiently motivated to do anything yet. They've been talking about putting up a wind farm around here. Maybe somebody will listen to us little people though I doubt it.

 

Margaret

[GeorgeS]

I heard this morning on Stock channel, big oil commodity trader, said that 40 drilling rigs have been ordered to drill the new " Deep " oil find off coast of Brazil.

Word on this, is about 25,000 ft. below the ocean floor.

 

I read couple weeks ago, that there is Known huge Reserves in Northern Montanna going up into Canada, its been Off Limits due to the Enviornimist movement.

Info was there is some really large deposits there.

 

Not to mention the Coast of Calif.

 

Also, Russians have hit lots of Oil below 30,000 feet, getting Rich Selling the crude into Eastern and Central Europe. Comeing from Central Russia.

Also, they have hit big on the Northern tip of Sakahalin Island, ( off east coast of Siberia ) 1st Well came in, there last Oct. One Well, 250,000 barrels a month.!!

 

 

Also, Chevron, and BP, each have one rig in the Gulf, that will be drilling to below 30,000 feet.

 

I am patiently waiting for our News Media to start Talking about all the Wells being drilled Everywhere " EXCEPT" in the U. S. to below 30,000 feet.

 

There is a lot more Oil down there, and it Ain't Dead Dinasors, and rotted Jungles from 20 million years ago !!!!!

 

However, a big problem with all this is that it costs about 10 times as much to drill these 30,000 ft. Oil wells.

 

OH, one more item: There can't be any oil below 15,000 ft. cause then it would NOT be FOSSIL Fuel !!!

But !--- the Russians have found lots of it down there! Hmmmm ??? something must be rottin in Denmark.

[Tom]

I think drilling would help now..If we would have gotten the bill to pass in I think 1991 to drill in Anwar we would have had oil pumping today..that was the argument in 1991 that it would not help us because it would be at least 10 years to go online. Also if we started drilling our own I THINK it would make the oil producing countries wake up and figure out that we will not be held hostage by them any longer. I also agree that yes we need to findother energy sources but we candrill SAFER than ANY other countries yet they are already drilling off our coast right now. This is in no way meant to start a political debate because alot,the majority of the oil prices are the people on Wall Strret speculating the prices driving it up. As Conder says I pity the poor family just starting out as it has hurt us also. Tom

[Squeeze]

I'm not gonna play Devil's Advocate here, but what makes you believe that the Oil which comes from US Soil would cost less than all the other Oil ??

 

I'd rather believe the Companies would argue that the World Market Prices also apply to US Crude and wouldn't sell under that.

 

Why ??

 

Because the Shareholders rather wants to make BIG Profit than making big Profit. And they are paying a Lot to the Directors to make the most out of it.

[Tom]

OH One more thing..Quit turning our FOOD into Fuel..Just got back from the grocery store...OUCH..Rice is being limited to only 4 bags at Sams Club..good think zI am not that crazy about rice. Anyway its all good to share ideas.

[BoomerCPO]

Feed prices for beef animals here is sky high and so is the price of beef......lucky for me I have a lot of woodchucks available........

[Condor]

I'm not gonna play Devil's Advocate here, but what makes you believe that the Oil which comes from US Soil would cost less than all the other Oil ??

 

I'd rather believe the Companies would argue that the World Market Prices also apply to US Crude and wouldn't sell under that.

 

Why ??

 

Because the Shareholders rather wants to make BIG Profit than making big Profit. And they are paying a Lot to the Directors to make the most out of it.

 

It's a supply and demand thing Squeeze. US oil for US consumption only. How long do you think the world fuel prices would continue to sky rocket if the US, the worlds largest consumer, stopped buying foriegn crude. Maybe we should take a few lessons from SAM's Club.....

[Squeeze]

It's a supply and demand thing Squeeze. US oil for US consumption only. How long do you think the world fuel prices would continue to sky rocket if the US, the worlds largest consumer, stopped buying foriegn crude. Maybe we should take a few lessons from SAM's Club.....

 

I doubt that. You think under the Assumption that the US Crude would be sold and processed only in US and only under the Influence of Production Costs plus some Earnings as a traditional Price Building Procedure. This sure doesn't apply here. Big Oil would sell the US Crude to the US Refineries at the same Price as they could buy foreign Oil.

 

Nowadays, the Market Price is driven by Speculations a Lot more than it ever occured. Hedge Fonds going into the Market with a huge Pile of Cash and with their Attitude and Size of the Wallet, they can make the Price go where they want it. My Guess would be, fourty Percent of the Market Price is only Speculation.

 

These is only my personal Opinion, feel free to ignore or dump it. :rotf:

[BoomerCPO]

I would think that if we are using our own oil for our own use there should be legislation in place that would prohibit the importation of foreign oil and also the exportation of our oil. Good luck getting the bums in Congress to accomplish THAT...... Remember we are talking about career politicians who can't even put a Federal budget together on time....and load the very same budget with enuff pork to feed the the world.

[1BigDog]

I agree that we need to start drilling NOW. No more pussyfooting around. The Arabs are laughing their asses off at us. We want them to increase production but our bleeding heart politicians cant do what is right for OUR country. And yes, im talking about Republicans as well as Democrats. I mean, along with the Dem reps here in Fla, our former Gov, Republican Jeb Bush (W's brother) and Republican Mel Martinez voted against drilling off the Florida coast. That NIMBY attitude has got to stop. The claim that it would hurt the tourism industry here is a crock. Last time I stood on Ft Walton Beach in the Gulf I could not see any oil rigs with the naked eye. Also, think of all the hurricanes that blasted across those Gulf rigs without any oil loss. So whats the problem????

[Squeeze]

BoomerCPO[/left];207759]I would think that if we are using our own oil for our own use there should be legislation in place that would prohibit the importation of foreign oil and also the exportation of our oil. Good luck getting the bums in Congress to accomplish THAT...... Remember we are talking about career politicians who can't even put a Federal budget together on time....and load the very same budget with

enuff

pork to feed the the world.

 

Well, even if such Laws would find a Way. The Supreme Court would stop them. Big Oil would shout out loud "Socialization of an whole Industry" ...

[Steve S]

If the Alaska oil fields were opened to drilling there would be an immediate increase in oil production by the OPEC countries. The countries that collectively determine how much oil is pumped and released do not want the U.S. fields to be opened. Opening the U.S. fields would stop our dependence on foriegn oil in just a few short years.

 

Along with drilling in U.S. fields there would need to be an increase in the number of refineries in the U.S.. These could be built within the time frame that exploration and drilling is done. However, we, the citizens of the U.S. have not yet lynched enough POLITICIANS and BIG OIL executivies to make this process start.

 

The one problem that we have that would stop the drilling and refining from being the immediate answer is the weakness of the American dollar. Until the U.S. dollar regains it's buying strength we will continue to suffer with the high cost of ALL of our products. And you can sure bet that our employers will not match the increase of our wages to the increase of inflation.

 

Just my penny's worth.

[BoomerCPO]

Well, even if such Laws would find a Way. The Supreme Court would stop them. Big Oil would shout out loud "Socialization of an whole Industry" ...

 

Well the Courts allowed NAFTA to slide through and look how many Americans took it in the ear because of THAT......

[Condor]

I doubt that. You think under the Assumption that the US Crude would be sold and processed only in US and only under the Influence of Production Costs plus some Earnings as a traditional Price Building Procedure. This sure doesn't apply here. Big Oil would sell the US Crude to the US Refineries at the same Price as they could buy foreign Oil.

 

Not unless it's mandated that it be USonly. Doing what you suggest would only add fuel to the fire, and it would be business as usual. I'd suggest you look around.... it ain't working.

 

Nowadays, the Market Price is driven by Speculations a Lot more than it ever occured. Hedge Fonds going into the Market with a huge Pile of Cash and with their Attitude and Size of the Wallet, they can make the Price go where they want it. My Guess would be, fourty Percent of the Market Price is only Speculation.

 

Big money speculation is driven by a perceived 'easy' profit. If demand disappears, prices will fall, and speculators will bail out like rats leaving a sinking ship.. They'll move on to something else that looks like easy money. Remember a few years back when the Dot Com crazy's hit. There aren't many speculators in that field now are there? Why, because a lot of them lost their a$$ets when the demand fell....

 

 

...

[Redneck]

I can tell you for a fact the oil company's are producing every drop they can get there hands on they are spending all they can to drill new wells. The problem is there is not enough infrastructure to do all the work the oil company's want done. the oil company's are no different than any other company they are in business to make money. In the 80's oil was selling for $9 a barrel it was costing $17 a barrel to produce the anti trust laws prevented them from cutting production so the oil company's lost billions of dollars. Now that they are making a lot of money every one calls them thieves. The oil company's do not set the price of oil they produce a product and sell it on the open market. If any of you have ever made a dollar you did not absolutely have to have you have done the same thing all company's do you get the most you can for the product or service that every one of you sell. What you have now is a demand that is higher than the supply that is aggravated by a normal business cycle slow down. the price of oil world wide is based on the US dollar and the dollar is week so the price is even higher. The only way to control demand is price that is how the market regulates itself. the high price will decrease demand decreased demand will lower the price. If any of you believe the government can pass laws to solve this problem try to find anything the government sticks their nose in that they have not screwed up. The good news is this will give business's the incentive to invest billions of dollars to develop other sources of energy so that they to can one day be called greedy thieves and get grilled by congress and the media. The US has been spoiled with low energy prices and those days are gone. Its our own fault because we are energy hogs and we have emptied the trough. keep in mind I am a redneck and I don't know squat.

[friesman]

Well the Courts allowed NAFTA to slide through and look how many Americans took it in the ear because of THAT......

 

About the same number of canadians got it on this side.

[Eck]

Condor,

Like many here, I remember with $5.00, we could get gas in our car and go to a drive in movie..

Yesterday, I payed $14.85 to fill up my bike gas tank in northeren Florida on my way to Sarasota..

I too dont have an answer and I really dont think anyone will have the solution..

But I plan to enjoy what I can when I can and make the best of what I have while I am in this world....

[Moose]

Well, I guess someone has to represent the tree-hugging fanatics if this is going to be a balanced discussion. Okay, I'll do it.

Drilling for oil only postpones the inevitable: oil is not an infinite product. There will come a time when it is gone. Now, we can go on destroying all of what's left of our natural environment to feed our need for speed or we can begin to change our habits. I agree with Redneck's assessment that we are energy hogs. Everyday I drive the tollway to and from work and every morning I am blown off the road by pickups and Minivans, many of which sport plates from a neighboring state. The car industry has not produced more fuel efficient vehicles because the public doesn't want them. Detroit began producing small cars in the early 60s, but they went out of fashion once the muscle cars began to appear. Nowdays it's minivans, pickups, and faux humvees. Of course, while we've been buying gas-guzzling cars and trucks, we've also been systematically dismantling our railroad and public transportation systems. $300,000 - $500,000 homes are being built on every inch of available land further and further from the cities and people are buying them as fast as they can get their hands on a 50 year mortgage. That's right, 50 year mortgages! Of course, this makes us more dependent on fuel. Listen, I'm not against the "American dream", but where's the responsibility for the future?

I don't know what the answer is, but I'm pretty sure it's not in continued drilling and ravaging of our land. I would like to see a major race to figure out how to safely dispose of fuel rods from reactors. One of you asked us to name one thing the government put their noses in that worked. Well, I would begin with the space race. That worked out pretty well. If we got behind R&D to figure a way to dispose of those fuel rods, we could develop sustainable energy and remove the grip of oil dependency.

[Condor]

Condor,

Like many here, I remember with $5.00, we could get gas in our car and go to a drive in movie..

 

Yesterday, I payed $14.85 to fill up my bike gas tank in northeren Florida on my way to Sarasota..

 

I too dont have an answer and I really dont think anyone will have the solution..

 

But I plan to enjoy what I can when I can and make the best of what I have while I am in this world....

 

I used to get a pizza, a quart... you remember a quart.....of soda, and a drive-in movie with that $5 bucks too Eck...

Fuel prices are driving us into the dumpster, and unfortunately enjoying it while we can ain't gonna get it any more. It's happening too fast. The only way we can reverse the upward cost spiral is reduce the demand. If having unaffordable fuel is the only way anyone can think of to reduce demand, so be it. Once we past the threshhold of unaffordablity for the masses.. if we haven't already haven't... the price will continue to increase as big oil, that is now used to earning big profits, raise prices to maintain their earnings. It's all supply and demand economics. Maybe the movie MAD MAX wasn't so far off....

[Guest Swifty]

I can tell you for a fact the oil company's are producing every drop they can get there hands on they are spending all they can to drill new wells. The problem is there is not enough infrastructure to do all the work the oil company's want done. the oil company's are no different than any other company they are in business to make money. In the 80's oil was selling for $9 a barrel it was costing $17 a barrel to produce the anti trust laws prevented them from cutting production so the oil company's lost billions of dollars. Now that they are making a lot of money every one calls them thieves. The oil company's do not set the price of oil they produce a product and sell it on the open market. If any of you have ever made a dollar you did not absolutely have to have you have done the same thing all company's do you get the most you can for the product or service that every one of you sell. What you have now is a demand that is higher than the supply that is aggravated by a normal business cycle slow down. the price of oil world wide is based on the US dollar and the dollar is week so the price is even higher. The only way to control demand is price that is how the market regulates itself. the high price will decrease demand decreased demand will lower the price. If any of you believe the government can pass laws to solve this problem try to find anything the government sticks their nose in that they have not screwed up. The good news is this will give business's the incentive to invest billions of dollars to develop other sources of energy so that they to can one day be called greedy thieves and get grilled by congress and the media. The US has been spoiled with low energy prices and those days are gone. Its our own fault because we are energy hogs and we have emptied the trough.

WOW, I agree with him ...this time. And with Moose too!!

[Stoutman]

There are several theories about why prices are so high that have little to do with supply and demand.

 

This article talks about a commodity "bubble", much like the housing bubble:

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article3980797.ece

 

This article has a similar theme, but blames it on the traders buying to cover their short positions.

http://www.bloomberg.com/apps/news?pid=20601109&sid=amO.EpcDfEls&refer=exclusive

 

This article as a similar theme and says the current prices are not justified:

http://www.bloomberg.com/apps/news?pid=20601103&sid=aBtudv0GyD3M&refer=news

 

This article is by a Fort Worth, Texas author, explains why the International Commodities Exchange is to blame:

http://www.star-telegram.com/ed_wallace/story/659081.html

 

This article blames it on pension funds and soveriegn wealth (International Investors) funds:

http://www.businessweek.com/bwdaily/dnflash/content/may2008/db20080520_524455.htm?chan=top+news_top+news+index_dialogue+with+readers

 

The Wall street Journal this morning blamed it on the Fed's easy money policy deflating the dollar. Given all the above it looks less like we're running out of oil, and more like the market can't decide how much it is really worth.

 

So, my observation is: even with prices near $4.00 per gallon Americans have reduced their consumption by less than one percent. Must not hurt as bad as everybody is saying. The ones that feel it in my family are the college students trying to get buy on part time jobs and my generous nature. But even they drive 5 miles to buy a 99 cent burger instead of planning ahead and cooking at home. I don't think we've seen real pain yet. IMHO

 

Hank, where are you buddy?

PS. I edited the header to be more precise. I would also add that demand for a commodity as an investment is only indrictly linked to demand for the actual commodity. Demand for commodity futures is only linked to what investors believe will be future demand. In the case of a "bubble" the market turns out to be wrong in retrospect and the bubble bursts, reducing the price, much like the current housing bubble.

Edited May 23, 2008 by Stoutman
Clarify

[Condor]

I'm kinda confoosed here. Every one of the links you posted is based on demand which in turn creates short supply, yet your header says it has nothing to do with supply and demand????????????? Demand is created many different ways. Stockpiling by investors is one way to reduce available supply. Buy direct, don't buy from the investor. If the price is too high direct, don't buy, live on what we have. Believe me, prices will come down. And as long as we're posting links, here's an up-to-date report.

http://www.energybulletin.net/44075.html