U.S. has few options as oil nations tighten grip - Reuters

[Eugene]

Alternate Reuters headline: Oil nations corner U.S.

Source: Reuters

U.S. has few options as oil nations tighten grip
Fri Jun 6, 2008 3:32pm EDT

By Chris Baltimore - analysis

WASHINGTON (Reuters) - Resource nationalism in oil
producing countries is cordoning off valuable supplies
and the United States has precious few options to battle
the trend amid a looming supply crunch.

As U.S. oil prices CLN8 marched above $135 a barrel last
month -- and settled up 8.4 percent at a record-high
$138.54 on the New York Mercantile Exchange on Friday
-- international firms have found themselves faced with
tougher terms and shut out of the globe's most promising
oil basins, a trend known as "resource nationalism."

The United States -- the world's biggest oil consumer --
stands mostly powerless as national oil companies like
Venezuela's PDVSA and Russia's Gazprom block access to
key oil reserves and demand a larger share of the profits
in exchange for allowing international oil companies to
drill.

"There are few good foreign policy options because oil
really is our economic jugular," said Anne Korin, co-
director of the Institute for the Analysis of Global
Security, a nonprofit energy think tank.

-snip-

Read more: http://www.reuters.com/article/reutersEdge/idUSN0642853020080606

[DJ13]

1. Oh, but we DO have options

There are basically two commodity exchanges for setting the price of oil in the world, the NYMEX in NYC, and ICE in London.

If those two governments really wanted to address the cost of oil (not likely in the corporate owned governments in the US & England) they have the authority to audit those commodity exchanges to ensure theres no market manipulations taking place.

If they would do those audits its likely the price would collapse back to a rational profit on the cost to produce a barrel of oil.

Dont believe the MSM who wants people to think theres nothing that could be done, as they are lying.

[DCKit]

2. I hope the peak oil apologists don't read what you just said...

or you're in for one hell of an argument.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x3396088

[bhikkhu]

5. what's a "peak oil apologist"? n/t

[DCKit]

6. Someone who denies any other reason for the incredible run-up in oil prices.

It's all because of peak oil - no commodities traders, greedy oil companies, government interference/manipulation, etc... to blame. It's peak oil, and we're going to run out by September.

[bhikkhu]

7. No "doom" is needed, and there is a difference between running out and running short

The day to day price jumps and falls are in fact the actions of large traders...but the long term trend is of a commodity which is in growing demand and shorter supply.

There may be severe shortfalls - lines at the pump - this summer, but I think a decline in demand based upon high prices may solve that problem. The problem is that the solution includes local recession. If our economy shrinks while others do not, then our global position shrinks as well. That's the "big game".

Personally I am fine with it, talking about global realignment with my kids; and I am walking and bicycling more and expect more of the same to come.

But running out by September is ridiculous, I have to say. Look at ASPO for a gauge of the most realistic scenarios: http://www.aspo-ireland.org/contentFiles/newsletterPDFs/newsletter90_200806.pdf

Real decline in net flows is not even predicted for two years or so. Economics may give us a smaller share by then, but that is another matter.

[DCKit]

10. Thank you for explaining my explanation.

It was you who asked what a peak oil apologist was, and, though I may have been a bit dramatic in my description, it seems you have mistaken me for one.

While I do believe we are at the summit of oil production, I do not believe that the excuses we've been given for the 600% increase in prices have much to do with peak oil. Any excuse will do, as we have seen over the past five years - Trouble in Nigeria, the THREAT of a hurricane, the THREAT of ME unrest, the THREAT of unrest in IRAQ/IRAN, the THREAT that Chavez is going to cut us off, the THREAT of another terrorist attack, periodic reports of "lower than expected" gas supplies and a sudden increase in demand from China and India. Yet, while the prices jump at every MSM news item and every pundit's revelation, it takes weeks or months, if ever, for even a partial pullback at the pump.

As I stated in an earlier post on the subject, 47% of our oil production is (as yet) domestic and our domestic producers/refiners are cleaning up. While production on the north slope of Alaska is declining, much of that decline - as well as the declines in Iraq, Mexico, Saudi Arabia and elsewhere - is due to a lack of ongoing investment. In the meantime, the domestic producers have been given pass after pass on paying what they owe to the U.S. for their leases in the Gulf of Mexico - and that goes back well into to the Clinton administration. And that's before the tax breaks.

Further, refinery capacity has not only not increased, but there have been several instances over the past few years where refineries were taken off-line - and kept off-line - for protracted periods during periods of peak demand. They are currently running at 80%-85% of capacity. They're not producing a drop more gasoline than they need to prevent actual shortages. Have YOU seen any lines at the pump? Any stations closing early because they have no gas to sell? Oh, and we're still exporting gasoline. There is no shortage, and there hasn't been at any time over the last seven years. It's all hype.

Commodities traders, hedge funds and investment banks have increased their investments in oil contracts and futures immensely (over 20x) over the past three years as they moved from specious mortgages and derivatives to the commodities of food and oil. And God knows what the huge foreign "Sovereign Investment" funds are doing. They're all chasing easy money in an unregulated market thanks to Phil Gramme (sp?), the Republican Congress of 1992-2006 and this administration. They bought and paid for the right to screw us to the wall with their campaign contributions, the sElection of Bush to the WH and Cheney's illegal energy cabal. The current Congress doesn't have the votes to set these issues right. But they will.

The single concession I will make to a rise in gasoline and diesel prices is the devaluation of the dollar. However, that should account for no more than 30%, yet we're paying 600% more. You can thank Alan Greenspan and two complicit administrations for that. The only beneficiaries of artificially and irresponsibly low interest rates through the 90's to date were the banks - borrowing at rates below inflation and making sub-prime loans with OUR money. Now they're broke? Where did all that money go?

Not only is the cost of fuel and food harming the working class, the poor, the elderly (as well as others on fixed incomes) and destroying businesses, but it's rapidly becoming a domestic security issue. At these prices, people are going to be freezing to death next winter, starving, or both. We have no infrastructure to deal with the people who have gone - and are going - homeless due to the manufactured, sub-prime mortgage crisis, let alone those who may still own their homes but won't be able to afford both food and heat next winter.

Yeah, I believe in Peak Oil, but I don't believe that the sudden realization that we're actually there is responsible for what we're seeing at the gas pump, the grocery store and on our utility bills. We've been set up and we're all being violated at the most basic level: our personal security.

[tom_paine]

11. I tend to agree. While a strong believer in Hubbert's Peak and the theory of Peak Oil

(in my opinion the overall mathematics of it and population growth, etc., is too powerful to deny, IMHO, and it sounds like you agree also)

I also believe that it is exactly as you say. The International Oil Market and most particularly the Amerikan Oil Barons are now a thoroughly corrupt Wild West and they are indeed "taking advantage" of the onset of Peak Oil.

The wild card here (and it is no wild card to my mind, the mathematics and trend of Chinese and Indian population and per-capita economic growth is already a given) is the growth in Oil usage by the rest ofthe world, particularly China, India, and the Third World.

But in any case, yes, the Bushie Royalty, the Saudi Royalty, and their Oil Baron chums are now feeling that rush of the joy of being able to walk away with trillions in stolen loot. Their own private tax on the peasantry. Reinstatement of the REALLY Good Old Days for Bushies and Saudis...you know... 1400 AD, but with penicillin and DVDs for every Bushie and Vassal!

At the same time, Peak Oil pressures, building for the first time in earnest, are contributing to a "natural" rise that comes from China, India, et al, coming on line. But as significant as that (for the moment, as time goes by it will be less so) is the "Bushie-Saudi Cut" on the top of the actual price of the gasoline that we also pay.

The reason that gas prices are escalating so steeply, I think, is because of the "natural" pressures we are talking about above, the Bushies can no longer hide their ill-gotten price fixing frauds as well as they used to in the climate of excess oil production. BUT, they still need to give us the Phony Even-Year Election Steep Gas Price Drop from September to December.

This is what they have done (check a graph of nationwide avg. gasoline prices to confirm this) in 2002, 2004, and 2006...doing the opposite in 2000 to damage those in power, Clinton/Gore. The reason for this, and it is keeping with your theory you just posted, is to give a general wash of "good feelings" of the nation like that is like unto a heroine junkie getting a bunch of dicount hits from the dealer.

This will help make people less pissed off when it comes time to "vote", making it close enough to steal, combined with the dozens of other front in the Bushie Gestalt of Propaganda and Attacks on the Republic, is to get McBush onto the throne, where he can keep the festival of crime and corruption going on.

So, I do agree with you (I think) that Peak Oil is real, very real, but that we are also being gouged by criminals.

They must be backing the Cayman's Islands Money up to the loading docks in 18-wheeler semis these days, eh?

[4dsc]

13. So the markets will provide is your advise??

"is due to a lack of ongoing investment".. Sorry but tell us how the oil industry is NOT investing billions in oil exploration?? Tell how the US's refinery capsity has expended by a couple of millions of barrels per day over the past couple of decades too..

[depakid]

8. Sounds like you don't know much about peak oil

Almost everyone with any sense of what's happenening understands that there are multiple, interrealted causes for the short term volatility- but also knows full well that the underlying problems rest with geoligical and phyisical limitations on the supply of cheap, high quality oil.

Emphasis on "cheap" both in terms monetary inputs and energy returned on energy invested AND quality, meaning light sweet crude.

[DCKit]

9. Y'know, you and I have already had this discussion.

If you don't remember, then check your own damn posts and get back to me when you "know" my position and mind. Your attitude is, at best, pretentious and haughty - on many different energy matters. Yet I find you to be ignorant in so many areas.

Nobody likes a know-it-all, especially with a superior attitude.

Back to what I posted, my frame of reference was extremely narrow - the peak oil apologists. You know, the people who don't consider all the things you brought up to tear me down.

[depakid]

12. "my frame of reference was extremely narrow - the peak oil apologists"

I guess I don't see many of those folks, but I do see a LOT of people in denial or who are so Americanocentric that don't realize petrol prices have been rising dramitically in other countries quite independently of the decline of the US dollar.

Most people I talk with also reckoned some time ago that once the traders reached a critcal mass of acceptance of peak oil and its implications, the markets would respond with even more volatility than one would expect from a "normal" situation where supply limits match up with demand, and where realtively small disruptive events (or prospects of such events) cause historically disproportionate price hikes.

IMO, that's precisely what's occurring- and the main driver is the fact that geological limits have been reached. Not sure whether that makes me an "apologist" in your view or not.

[hunter]

3. Or the market might move elsewhere...

Dubai, or someplace like that. Oil doesn't have to be traded in New York or London.

[Strelnikov_]

4. "block access to key oil reserves and demand a larger share of the profits"

Damn them for wanting to profit from a resource within their borders. Damn them.

[4dsc]

14. Will resource nationalism bring resource wars??

Oh the implications from just mentioning resource nationalism are a bit overwhelming for the sheeple at this time.. It looks like the press is setting up a new boggyman here just in time for the next round of resource wars..

Klare analyzes the most likely cause of war in the century just begun: demand by rapidly growing populations for scarce resources. An introductory chapter sets the scene, laying out the complexities of rapidly increasing demand as the world industrializes, the concentration of resources in unstable states and the competing claims to ownership of resources by neighboring states. Succeeding chapters look more closely at the potential for conflict over oil in the Persian Gulf and in the Caspian and South China Seas, over water in the Nile Basin and other multinational river systems and over timber, gems and minerals from Borneo to Sierra Leone.

http://www.amazon.com/Resource-Wars-Landscape-Conflict-Introduction/dp/0805055762