I've got a question. How are oil prices determined? I think I know but want to make sure before I start to make inflammatory statements
Jim

quote:

Originally posted by Jim and Tere:
How are oil prices determined?

Department Of Energy standard blurb.

My take: Greed of speculators forcing the price to spike WAY higher then it should be.

If you try not to be emotional about oil prices and that is very hard to do, I really believe it is as simple as supply and demand. T. Boone Pickens was on the business channel this week and his analysis was that the total world wide demand is currently 87,000,000 barrels a day and supply is 85,000,000 barrels a day. China and India have growth rates on their oil needs that are growing at a rate of 20% or more a year. Oil will continue to go up to a price that people will no longer pay. We can only guess at what that price will be. I think oil will go to $200.00 a barrel and gas will be $6.00 a gallon, diesel $7.00. We had guessed diesel here in Georgia would be $5.00 a gallon by this weekend but we were wrong it is only $4.91. Our Regency has a fuel capacity of 135 gallons. Thats only $675.00 to fill an empty tank. Looks like we will be camping in the yard.

Sure hope I'm wrong.

Nick

there is the value of oil, and the value of the dollar as well coming in to play.

http://europe.theoildrum.com/node/3753

The first graph there will show you that in 1999, a barrel of oil was pegged at 10 dollars, and 10 euros. Now a barrel is at 110 dollars a barrel as of march 18, and 70 euros. So, not only is oil getting more expensive in all currencies, it is moreso more expensive in dollars.

The relationship with the Saudis to keep a stable dollar value is gone, and in addition, US deficit spending is weakening the value of the dollar.

I feel so "smart" tanking up this spring at $3.20 a gallon.

Matt

quote:

Originally posted by Nick Cagle:
I really believe it is as simple as supply and demand. Nick

Yup. Most things are.

This'll be of little comfort...when I worked for Shell Oil in the late '60s and early '70s, a barrel of mideast light was $1.75.

HI all

I was reading about oil prices over there and thought you might like to compare them to what they are over in the UK. Taking the Barth out is an expensive hobby over here with petrol proces at £1.15 per litre, YES thats per litre so if you work on the dollar as $1.8 to the £ that means is is $2.07 per litre. Still she is worth it.

Luv Paula in the UK

The problem with the supply and demand theory is that it's right. The oil producers, like the Saudis, and the refineries, conspire to limit the supply. That's what OPEC is all about. And the US government's anti trust department has turned a blind eye to the price fixing going on between Exxon, Shell, etc. Add to that the fact that the US refinery capacity hasn't grown in decades, and you have control over supply. On the demand side, people need cars to get to work, to go grocery shopping, to go to school, to church, or to see friends. Except in big cities like New York, public transportation is non existent. Everything in our economy has been built on an unlimited amount of cheap fuel. Those days are gone. It will take decades to build the infrastructure needed to take the place of zillions of cars running around on cheap fuel. And we've spent ourselves into debt so far that we don't have the money to do it anyway. $165 billion on the Iraq war next year? 20 million with no health insurance? The priorities in this country are upside down and the leadership in Washington only does what corporate America tells it to. My daughter and son-in-law rented a place at the beach a year ago. I can't afford the $300 of gas to get there. So I called Greyhound. Guess what? $152 per person, round trip,from Knoxville to Wilmington, NC. Two trips per day, 12:15AM or 6:15Am, 18 and 26 hours respectively.
Who will be the new super powers in the World? China and Russia. Our bubble has burst

This problem is real simple, but few seem to get it. If you can't drill (Congress will not allow-P.S.-they want the price to go much higher)to increase supply off the coast of Florida, California, and yes ANWAR, prices will go up. Demand from China, India, and other emerging markets around the world has driven the price up. The Government never runs out of money it just gets more from your pocket and prints more in a pinch. If the government would announce tomorrow that drilling could commence-prices would drop drastically overnight.

And if that isn't enough, I opened the monthly report from the electric coop serving my area of east Tennessee today and the chairman reported we will quickly see the most significant run up in electricity prices in the history of the United States. Because wise government regulations won't let the power companies build coal fired plants, and nuclear takes forever to get going because of government regulations,the electric companies will have to begin to import liquefied natural gas from guess who? The Arabs, THAT'S WHO!!! Seems like our biggest supplier, Canada, will cut back on what they ship us because of their own needs and we're tapped out domestically. So, in addition to the soon to arrive $5/gallon gas price, get set for your electric bill to double before the end of the year. What do you all think it's going to take to turn this around? My own thought is since we can't control supply, we CAN control demand. CUT BACK!! Or are we too spoiled as a nation to do that?

Mr Pickens said that there is a shortage. If I were a producer I would say the same thing to justify raising prices. I was involved a bit with secondary oil recovery in a last life. The assumption is that there is still more oil left in depleted fields than was taken out the easy way.

Also there is enough oil shale in Canada to supply the world for 100 years and there is enough Coal in the USA to run all the power plants for a hell of a long time.

Atomic Power (like iron man) could have, but has not, suppled 70% of the usa power had it not been stopped in the early 70s. France did not stop it and they are in good shape, and also they did not have mushroom clouds on the horizon. The Russian operations were all F,,,,ked up and had nothing to do with the source of power.

The oil/environmental lobby stopped Atomic power because of ????? And now the environmental/oil lobby wants to sell CO2 credits because of global warming. Wonder if that was the plan all along.

Not that I have any opinion.

Tom

Fact # 1 - Petroleum is a finite resource, & world-wide demand is escalating with the economic rise of the world's two most populous nations, China & India.

Fact # 2 - Businessmen, be they auto manufacturers, your neighborhood grocer, international oil companies, or oil-rich desert sheikhs, will charge what the traffic will bear. Today the oil people don't have an excess of supply, & they're charging what the traffic will bear.

Fact # 3 - Our national government has been on a quarter-century binge of cutting taxes while increasing spending, then borrowing to pay the bills. Too many of us have followed our government's example on mortgages & credit card debt.

Fact # 4 - Our fiscal profligacy, both public & private, has thrown the world economy out of equilibrium, & the dollar is losing value. That, plus limited supply is going to make petroleum very expensive indeed for the foreseeable future.

Stopped at Starbucks for a coffee (6 oz?) and left a fiver; later got a liter (quart) of bottled water for $2.25. Stopped for gas and -HORRORS!- it's almost $4.00 per gallon, including the 60cents tax.

quote:

Originally posted by Gunner:
later got a liter (quart) of bottled water for $2.25.

Last weekend we were at an event where every concessionaire was charging $3.50 for a 10 or 12 oz bottle of water. Beer was $7 to $8 for a not-very-cold and foamy cup.

As long as people are willing and able to pay these kinds of prices for discretionary (and, arguably, luxury) items, the oil companies will have no trouble raising their prices even higher.

As Roy said earlier, they are charging what the traffic will bear. They will raise prices until the balance between amount of sales and profit per unit of sale equalizes. In other words, if the price is so high as to cause resistance at the pump, the extra profit from the higher prices will compensate.

Well, the price of oil dropped to a little over $126 from $135 due to a perceived drop in demand. Let's see if prices follow. I know that my "demand" sure has dropped.