Why the price of oil is so high? The REAL reason......

[Dover]

Why the price of oil is so high

By Jude Wanniski

"This will most likely mean a few more years of war profiteering before Iraq is allowed to be stable, but only under the control of coalition forces"-- Lawrence C. Darrah, US



Wednesday 20 October 2004, 20:59 Makka Time, 17:59 GMT

Before the US abandoned the gold standard on 15 August 1971, there had been a traditional relationship between gold and oil: One ounce could be exchanged for 15 barrels.

he relationship had held steady for decades as the US fixed the dollar price of gold at $35 and the world oil price fluctuated narrowly around the $2.50 a barrel mark.

Since 1971, the gold/oil relationship began to vary as the US dollar "floated" on international currency exchanges, but until recently it still moved around that 1-to-15 ratio.

Now, an ounce of gold at $420 (when this essay was written) buys only eight barrels of oil at $52 a barrel (bbl). Around the world, industrial and financial analysts are puzzling over why this has happened.

Does it mean a new, permanent shift in the traditional relationship? Is it the result of a coincidental series of supply interruptions due to hurricanes in the Gulf of Mexico and strikes in Nigeria, compounded by the geopolitical threats in the Middle East?

Is it the sudden demand for energy in the rapidly growing economies of China and India, where two billion people have developed a great thirst for energy? Is the world running out of easy-to-get, cheap oil?

None of these questions lead to satisfactory answers....cont'd

http://english.aljazeera.net/NR/exeres/0026A2DD-CA5E-4776-B4B4-91933C4F058B.htm

[Sinnerman]

1. I'll Give you 2 REAL REASONS.......

The Last Refinery built & completed was 1977, and in 1978 We Had 67 Oil Refineries across the US That produced Gasoline.

There are only 24 Active Refineries today (2004)

Do The Math...... 67 in 1977 and only 24 in 2004
Also Take into consideration the different blends of Gasoline, Georgia & South Carolina Require 2 Different Blends to meet State requirments.

[happyslug]

2. Bad Math.

So what if the US has less refineries than we did in 1977, we also have less gas stations, but the remaining gas stations are selling MORE gas today than the larger number of gas stations in the 1970s.

Why are gas stations selling more gas? because they are LARGER than most of the stations that existed in the 1970s. The Same with the Refineries, the ones which survive till today are all larger than they were in the 1970s. Some twice as large. The reason for this is under Texas Environmental law if you build a "New" Refinery you must meet post 1970 Environmental Standards, but if you just "Upgrade" you do not have to. Thus the Oil Companies have "Upgraded" their refineries (Including merging some of them, again reducing the total number of refineries while also increasing production).

I will not go into the increase number of refineries overseas, especially the Middle East, but you do not need a refinery if the product off the tanker is already ready for use (Kerosenes, Jet Fuel and Home heating fuel are all produces in the Mid-East for US Consumption).

My point is the Present high Price of Gasoline has NOTHING to do with the Drop in the number of Gas Stations or the Drop in the Number of Refineries. While the total numbers have dropped, the total production has NOT.



http://www.middle-east-online.com/english/?id=11641

[happyslug]

3. Economists vs Geologists

Economists always assume that if you just increase the cost of something you can increase its supply. Geologists are saying that is true but only if you have something that can be produced (an than say there are NO good prospects for oil that is not already known).

I especially liked the author's comment that Africa has barely been explored AND that the problem is the Oil Companies have taken a vacation for the last 4 years.

First why did the Oil Companies stop looking for oil? Could it be they were tired of wasting their money? Not according to the author of this article, it was just laziness. This Economist will NEVER accept the fact that the reason oil companies STOP looking for oil was that there is none to find. For the Writer to acknowledge that is to also accept that oil has or will shortly peak in production and than decline. Such a decline in production will mean massive increase in the price of Gasoline just to reduce consumption to what is being produced (and the wrecking of the Automotive Economy of the last 100 years).

The writer can NOT accept that for it means addressing the problem of increase price of oil and HOW to reduce oil consumption (Which means accepting the fact that today's life style can NOT survive the increase in the price of oil, and addressing how people's lifestyles will change, and the change will NOT be in a way Suburbanites want it to change).

Thus the writer thinks it is better to dream of non-existent oil than to address the problems peak production of oil will bring.

For more details see:http://www.peakoil.net/
http://www.gafunds.com/lp6.asp?GOoilpeak