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Originally Posted by host
ace, how is a comparatively small amount of oil, not possible coming on the market until the year 2017, and not owned by the public, i.e. it will be sold, when it becomes available....at wolrd market price.....supposed to be relevant to today's situation. I already have posted that three BP Gulf of Mexico projects, complete with a pipeline to transport the oil and gas they add to the market, right to nearby south Louisiana refineries....a combined increase in US domestic production, of close to 7 percent by THE END OF THIS YEAR....has had no dampening affect on price, or on market psychology.
Can you explain, considering my points, how your points, and concerns, are relevant to any solution to high oil prices? Isn't ridiculously disproportionate US domestic consumption, vs, per capita consumption in the rest of the industrialized and post industrailized world, the area to seek reasonably rapid mitigation to high prices, from?
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Host,
In the past you have generally not accepted things that I find most obvious, and then you ask me to prove the obvious which I find to be a waste of effort. That is our pattern, and here we go again.
If the US makes a commitment to producing domestic oil it will have an impact on current oil producers. If a current producers have a virtual lock on the market and supply, they will drive the price up as much as possible to maximize profits. Changes in new supply and changes in total demand generally have relative long tails, and changes in new supply is capital intensive (takes alot of new money). Producing more from existing sources has a shorter tail and is less capital intensive. A current producer has incentive to try to maintain as much of a lock on the market as possible. Current producers realize that if prices are too high "today" (profits too high), then prices can very easily be made too low "tomorrow" (profits too low and loss of market control of supply). A smart producer will lower profits "today" to make it less attractive for new production to come online "tomorrow". Again, their motivation is too maximize profits. Theoretically, we could simply posture that we are making a commitment and prices could go down.
You know how I love pointless analogies, so here is one to chew on. If a junkie tells his pusher, that he is going to give up drugs. The pusher won't be to happy about that, so what do you think the pusher might do? Perhaps, give the junkie a few free hits, lower the price, make it a little bit more difficult for the junkie to give up the habit of buying from the pusher.
Hasn't that been the pattern of OPEC over the past 40 years? When the price goes high enough, for the US to get concerned and start to do something, the price goes down. This has happened time and time again. Now, however, not only do they have the US they have China, India and other developing nation with the addiction to oil.
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Originally Posted by hiredgun
Ace, the answer is political. The politicians you are describing would like to be seen doing 'something' about high oil prices - which are painful for constituents - but advocating new drilling would usually offend their and their constituents' environmental sensibilities. The SPR is therefore seen as a safer target, since it doesn't involve opening up wildlife reserves or threatening beaches.
Now that entire chain of reasoning is fairly wrong-headed and reflects a shallow understanding of why we are where we are with regard to oil, but I think it should answer your question as far as 'making sense' of these positions (with which, to be clear, I don't agree).
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That is what I thought. I wonder were DC is, when I state things like what you have stated, he sees it as a baseless criticism and the rantings of an extremist.