aceventura3

When Congress passed the Energy Independence and Security Act of 2007 and Bush signed the bill into law, it seems the great minds in Washington were short-sighted in many ways, one being the DOD can not purchase Canadian oil from tar sands.

http://idahofallz.com/2008/03/04/ene...a-and-clinton/

Here is a link to a summary of the bill:

http://assets.opencrs.com/rpts/RL34294_20071221.pdf


Next, time you fill up think about our great leaders in Washington. The next time OPEC nations try to flex their muscles using oil as leverage, think about our great leaders in Washington. All the talk about energy independence is B.S.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Willravel

Hopefully this will motivate the free market to work a lot harder towards alternatives, as this will help grow that consumer base quickly.

filtherton

The next time I fill up, I'm going to think about how nice it will be to be able to ride my bicycle again as the weather turns warm.

I'm also going to think how much job security I will have after I get out of school qualified for jobs in the alternative energy development sector.

I also might think about the guy filling up right next to me, the one who is all alone in his denali, who is paying $60 dollars to fill up- paying $60 to fill up and be inadvertently part of a collective effort to inflate the price of gas by driving a vehicle that unnecessarily increases demand, and how the free market has a nasty tendency to stab itself in the back.

And then I might also think about how my early 90's buick doesn't get good gas mileage at all, and how that's a pretty good reason to ride my bicycle, and how it's pretty sweet that the weather is getting warm again.

aceventura3

Unfortunately the international demand for oil is not going to get smaller in the near future. During this time and as we have seen there is a re-distribution of real wealth occurring. When the international demand for oil levels off and starts to drop the US will have suffered and lost wealth to the degree from which we may never recover.

I think a better approach to this problem is to over the short run (10 to 15 years) implementation of policies that would increase the supply of oil while at the same time mandating efforts for alternatives - assuming agreement that there is a need for government to mandate any efforts in this regard.

The current approach dramatically shifts demand and supply out of balance driving up the price with the hope that higher prices will lead to a change in consumption behavior. However, while this is going on, our national wealth goes down, while the wealth of other nations goes up.


Another problem is that we treat our US based oil companies as the enemy, while other nations like China, Russia, Venezuela, and Middle Eastern countries treat their oil companies as a national treasure. It is sad that we won't recognize what is really in our best interest until it is too late.

That is a nice sentiment, but it is not shared by the folks in India and China for example. If we dramatically reduce Co2 emissions that won't change global trends because of emerging international economies. Hence it is better if we maintain control of international markets rather than give that control to other nations. Don't you agree? At least here we can have the discussion.

Do you think that will be a domestic company? It takes profits to invest in alternative sources of energy. Overly taxing and overly regulating our domestic oil companies is not going to be helpful in the long-run.

The guy in the Denali may spend excessive amounts of his earned income on gas for his vehicle, and others may spend excessive amounts of earned income to buy flavored lattes from over priced coffe shops. Why can't people choose their pleasures?

I took my motorcycle out for a spin today, 50+ miles to the gallon.
Unfortunately the ride was for pure pleasure, so perhaps I was more wasteful than the guy in the Denali.

Perhaps we need a different kind of standard, one for productive miles per gallon. In some situations a Denali may be more efficient at 12 miles to the gallon than a hybrid at 60 miles to the gallon.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Willravel

That's why it would be smart to drive demand in a different direction as soon as possible, so that we have more time for the conversation to take place. Had we started converting to alternatives in the 80s like we're trying to do now, it's likely that we'd be using substantially less oil than we're currently using. While you and I fall on different sides on several issues, I suspect that you'd agree that the US cannot indefinitely continue in it's rising use of oil, as oil is a finite substance.
Government mandates regarding oil alternatives? Welcome to the Green party! *gives you a green hat* Would you like to have a recycled pamphlet on mulch?

I've been saying this for years, but every time I bring it up I get attacked. All I want is to make the US recession following Hubbart's peak as small as possible.
It's sort of a vengeance thing. Conglomerated oil hikes up the prices, bribes government officials, essentially leads us to wars, sabotages alternatives, etc... and it pisses people off. A lot. They make it difficult to want to protect them. I do understand that what's happening in China, Russia, Venezuela and the Middle East makes sense, but it wouldn't work in the US because the public doesn't trust the oil industry at all. Some of that mistrust may not be justified, but a lot is.

We'd be a lot better off regulating the crap out of them (punishing them) for a short time, and then protecting them but keeping them on a short leash. It's like having a guard dog that bites you, though. I'm sure you can appreciate the canine analogy.

aceventura3

Currently the primary reason oil is so expensive is due to regulations. There is plenty of oil on this planet to meet our needs for hundreds of years. there is no compelling need to have the price as high as it is, even as we look for alternatives. With the price as high as it is, we are simply enriching other nations. Some of those nations don't have our interests in their thoughts.


Perhaps we would be better off if people like Hugo Chavez controlled all of the oil companies?

Or are we better served by having a healthy group of domestic oil companies?

If an oil company is corrupt or violates the law there should be consequences for that company, not the entire group of domestic oil companies, in my opinion.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Willravel

Why are they all continuing to post record profits? Regulation?
No one knows that for sure. If you have a room of scientists, and they all have different answers and different reasons for their answers, it's hard to be certain.
I'll let the results there speak for themselves, but no that wouldn't work in the US. We're too capitalist. What we need is to hold corrupt politicians and oil corporations alike accountable for conflicts of interest, bribery, and the like. Once we've weeded out the worst, things will probably be a lot better.
What, in you opinion, constitutes a healthy oil company? I'm curious.
Until there are consequences, though, there will be the mistrust I spoke of.

dc_dux

ace...are you suggesting the recently enacted Energy Independence and Security Act of 2007 is responsible for the spike in the price crude to over $100/barrel....given that none of its provisions have been implemented yet.

Where was Idaho Fallz.com between 2001-2007, when the cost of gas increased by over 100% and the cost of home heating oil increased by over 125%?

IMO, the bill is the right approach....focus on increased efficiency, lower demand, investment in alternatives....with a bonus of reductions in CO2 emissions.

Energy independence wont be achieved overnight and it wont be without short-term costs and sacrifices.

The primary reason oil is expensive is due to regulation? Explain, please.

Healthy domestic oil companies? Exxon's earnings of $10 million/hr in the 4th quarter seems pretty healthy to me. Exxon et al set new record profits with each passing quarter.

__________________
"The perfect is the enemy of the good."
~ Voltaire

aceventura3

I am saying US government policy and regulations are primarily responsible for the current price of oil. If the market forces were free to move I think the price of oil would be materially lower than it is, perhaps by half.

Reasonable people know that policy and regulation has an impact on price. Certainly reasonable people can disagree on the amount of that impact.

Oil prices today reflect a premium or a discount based on anticipated future events. As you may know many blame futures traders for some of the inflated price we current see in the market. The market has priced in some of the anticipated impact of the bill. The futures market is often wrong, the premium or discount could be significantly of the mark, time will tell. Bottom line is that the price is made up of many components.

I don't know Idaho Fallz's history. I did some research and came across many sources supporting the view in the OP. I linked Idaho Fallz because they communicated the point clearly, and took a few shots at Democrats, I like that.

Your view is shared by most people. However, my point adds something to consider. The issue of wealth distribution during our search for alternatives to oil, this is an issue worthy of discussion in my opinion - either it has been addressed and I am unaware, or we have adopted a short-sighted approach the the energy question.


I don't want to give a Econ 101 lecture, but as an example if the government says that the mining of tar sands require method A and method A is more expensive than method B, the cost of the oil from tar sands will reflect the higher cost in method A.

Certainly there may be other economic benefits to method A over method B, and I am not an anarchist - there is a role for government regulation in the market. Government has a role in making determinations on the net economic costs of issues having a macro impact.

PetroChina is the leading oil company in the world (taking the number one spot from Exxon based on market Cap.), perhaps we should start a hate campaign against PetroChina.

Perhaps they are operating more efficiently. Profits can be a measure of explotation, but they can also be a measure of innovation. From a simplistic point of view - I bet most people today have more net income in dollars today than in the past. And we know that measure is meaningless alone.

O.k., this will be a no win issue for me. I will just say, many sources support my view - I am sure you can find some that don't.

I agree. Let's start with corrupt politicians. They hold the public trust. I would expect an oil company to try to influence the political process. If a politician sells-out to the highest bidder - I like the idea of tar and feathers.

A company that makes a profit, invests in R&D, pays taxes, follow the rules and regulations in a competitive market with other healthy oil companies. Competition will regulate profits.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Willravel

I meant in practice, not in theory. What specific regulation has been done? And are you factoring in the record profits? I see a connection between the record high gas prices and the record high profits... I dunno.
Sounds good to me, cept for the regulated profits. There's no guarantee that a free market will bring regulated profits.

highthief

IMO, the primary reason oil is so expensive is down to speculation - the economy is generally in the toilet, the stock market is a bit shaky, so investors are buying oil and pushing up the price somewhat artificially.

I imagine it will level and drop shortly.

__________________
Si vis pacem parabellum.

ASU2003

I think that the speculators are causing problems in each industry they flood into, then get out of. They pump up the tech/dot coms, housing, gold, oil, nat. gas, individual stocks, health care stocks, and a bunch of other things. It isn't so much the individual stock investors doing it, but they come in after the hedge fund/retirement fund managers start moving their billions/trillions of dollars into something.

I know that I will be riding my bike a lot this year once it gets warmer as well. It is only 3 miles each way now.

aceventura3

People who trade commodities provide a valuable service in the market.

The person you guys call a "speculator" may be giving cash today for oil producers delivering oil at a future date. So this "speculator is taking a calculated risk while reducing the risk for the other party. The process brings some order and some predictability for those who can not afford or don't want to take the risk.

If the "speculator" buys June oil futures at $107/barrel and the price drops to $90/barrel, that "speculator lost $17/barrel but the seller made $17/barrel. People often blame the "speculator" for delivering the truth about a market, i.e. - political/military risk, capacity disruption risk, currency fluctuations risk, regulatory risk, supply/demand risks, ROIC risk, leverage or finance risk...

Why don't people get excited about "speculators" in pork futures? I think it is because the pork market is not as "glamorous" as oil and certainly not as politically charged.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

highthief

Maybe because I can live without pork. If piggies are too expensive, we can eat cows or fish or chickens or ostriches.

Alas, my Toyota runs on gas.

__________________
Si vis pacem parabellum.

loquitur

Ace, I'm not sure the US govt can control increased demand by the Indians, Chinese and other developing countries.

Will's post up above (I think #2) is right on point - if petroleum gets too expensive, other energy sources become economically feasible. I eagerly look forward to the day when we can run cars off sunlight and seawater, and tell the Saudis they can go drink their oil for all we care.

Willravel

The concept has a working "saltwater to hydrogen combustion to water exhaust" engine. That's the direction we should be headed in now, so that a few years down the line when it's clear we're on the bad side of Hubbart's Peak, we have options.

I don't see us running out of saltwater.

aceventura3

Bacon is a staple - maybe you can live without pork and I am assuming you speak for yourself on this point.

The point was that "speculators" don't drive the price of oil, they just "communicate" the price of oil.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Willravel

Ace, you're not Muslim?

aceventura3

The feasibility of alternatives has a tail and we need government regulations that allow for the development of those alternatives. In the meantime, our nation is suffering needlessly.

I simply believe we can have inexpensive oil and develop alternations.

No.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

dc_dux

Again...the new law encourages developing alternatives through tax incentives and regulatory waivers.

So what regs are you referring to?

Oh...and I have never had bacon in my life

__________________
"The perfect is the enemy of the good."
~ Voltaire

Willravel

WHAT?!

dc_dux

or ham or pork chops!

__________________
"The perfect is the enemy of the good."
~ Voltaire

Willravel

Turkey bacon at least? It's halal and kosher!

dc_dux

__________________
"The perfect is the enemy of the good."
~ Voltaire

Willravel

Alright, comin in or a high five, man.

Kol Kavod! *high five*

loquitur

um, will, that's Kol ha-Kavod.

Don't forget the definite article.

Willravel

My usage was informal.

loquitur

b'tayavon.

ASU2003

A few speculators don't drive the price, but when there are enough to buy up any new source of commodity right when it hits the market, they can set the price they want to sell it at. Which is usually the highest price people are willing to pay.

And if you get big companies talking to big finacial institutions that control lots of money, it doesn't seem to hard to guess that both of them want to make as much money as possible anyway they can.

This is the way I see it happening, which may or may not be exactly right. In the past you had one oil company producing so many gallons of gas a day at $1, and people bought every gallon of gas that was produced at $1.25. Then some finanacial people came in and said, let's sell this on the open market. So they came in and started buying gallons at $2 (which the oil companies loved), but they weren't going to use it, and as long as demand for oil stayed constant or went up, everyone else would have to pay $2.25 because that is what the financial institutions would sell their gas at. However, they could easily say, we don't want to sell our gas yet, and since we are limiting supply entering the market, the price will go up. And then they can just sit back and watch the price go up, since it doesn't look like there is much oil coming into the market, but demand will still be high for quite some time.

aceventura3

"The highest price people are willing to pay." I would think that to be the market price.

I want a new Lexus for free, the highest I am willing to pay is still lower than what my dealer is asking. Therefore I don't own a new Lexus. However, others are willing to pay the price the dealer is asking, hence setting the market price. If you introduce "speculators", that won't change what I would pay or what the dealer would sell the car for after his expenses and profit margin.

I am not sure I want to get into this trap. Are you suggesting by your question that there are no regulations driving up the price of oil? Or are you simply suggesting that the trade off on the cost of the regulations are off-set by the benefits in other ways? If you are suggesting, the second, I agree there are trade-offs, but the measurement is subjective. You can safely assume that I think the market is overly regulated.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

dc_dux

ace....its not a trap.

You are the one who suggested:

"I am saying US government policy and regulations are primarily responsible for the current price of oil."

Of course regs have an impact. And there are trade offs for environmental protection, worker safety, etc.

I simply asked what regulations are primarily responsible for the current price of oil as suggested in the OP and how is the current price impacted by a law that was enacted last year that has yet to be implemented and wont be for several more years at a minimum?

Its like Rove saying the price of gas will rise to $5 if we "cut and run" from Iraq...while ignoring the fact that the price of gas more than doubled in the 5 years of our invasion and occupation.

__________________
"The perfect is the enemy of the good."
~ Voltaire

ASU2003

So have you slowed down and reduced the amount of gas you use, or hasn't it hit your upper limit yet?

Imagine you had to buy a Lexus (or any other car) for $50,000 or you wouldn't be able to go more than 5 miles away from your house in a day. And there is no limit on the number of people who will buy them, no matter the price, until it gets to $200,000. What happens if you couldn't buy a Lexus from a dealer, but you had to buy it from Bank of America let's say. The dealer has made a deal with BoA to sell them cars for $75,000, it is a lot more than they would make if they had to deal with consumers. BoA knows that the demand curve is very linear, and will offer cars for $100,000. BoA now makes $25,000 as well. Individual investors see that they can make money buying cars and then reselling them for higher amonts, so they will buy-and-hold until they hope to make a few bucks off the consumer that wants/needs a car.

Baraka_Guru

While U.S. policies might play into the cost of oil, I doubt it has an effect that would effectively double oil prices. Are we talking about global prices? How would American policy have that much of an effect?

Much of it is beyond American influence and control. For starters, many believe Saudi Arabian production is dropping. Their primary oil fields are aging and might be costing more to draw from. This in itself would raise prices. Also, demand is skyrocketing in places like India and China. This is something else out of American control.

Saudi Arabia won't be able to fulfill global demand.

The only role America plays with any significance is in consumption.

Extracting oil from the tar sands in Canada is still expensive.

Conservation and alternative sources of energy are a must.

Some of this was already mentioned, but it is worth bringing up again. Stephen Leeb, the author of The Coming Economic Collapse predicted $100/barrel within the decade as early as 2004 in his book The Oil Factor. Even in 2006 with the former book, he spoke of $100/barrel as inevitable even though it hadn't happened yet. In 2004, people called him "the $100/barrel guy" because it was such a sensational claim when oil was only as high as $50.

He speaks of these things I've mentioned.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

aceventura3

D.c.,

Like I suggested, you can easily do a search. I did a search on Google, I typed:

"government restrictions preventing oil drilling in US"

This was in the link from the fourth item:

http://findarticles.com/p/articles/m...08/ai_n8956160

Now that you have the above bit of trivia, what do you want from me? I don't have the time or inclination to do a descriptive scientific study to quantify the impact of government regulation on the price of oil. Like I wrote earlier, I speculate the impact of regulation to be about 50%. If you think it is 0%, there is no point in continuing the discussion. If you think it is grater than 0% but less than 50%, perhaps you can give me your proof. Otherwise, we both speculate.

The US military policy of preemptive war in Iraq added a premium to the price of oil, how much?

The US policy against certain types of domestic drilling has added a premium to the price of oil, how much?

US deficit spending has artificially increased the demand for oil and has added a premium to the price of oil, how much?

Etc.

Etc.

Etc.

Again I say our policies add about 50%, what do you say since you clearly think I am wrong?

We are the largest consumers of oil. It is even worse if you factor in the use of oil used in products imported to the US.

I would bet NASCAR is responsible for the consumption of more oil than some small developing third world countries.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

dc_dux

ace...the last I recall, around 40% of the cost of a gallon of gas is refinement, distribution, taxes and record high profits..and around 60% is the cost of crude.

Could we lower the refinement cost with fewer regs...sure, if you want to make the trade-off for dirtier air.

Could we lower the cost of crude by drilling in national parks or offshore....sure, if you value marginally cheaper gas over a pristine wilderness and offshore ecosystem.

I prefer a focus on improving energy efficiency, developing alternative sources and reducing demand which is what the Energy Independence and Security Act does.

Bottom line...EISA is not responsible in any way for the current $100/barrel price of crude...which I thought was the issue raised in the OP.

Its hard to measure the direct impact...but the price of barrel at the start of our invasion and occupation was $36/barrel.

When the country with second (or third) largest oil reserves is producing at far lower levels for 4-5 years....there is an impact on the supply that OPEC puts on the market.

__________________
"The perfect is the enemy of the good."
~ Voltaire

Baraka_Guru

dc_dux has already spoken a bit to this point.

The Iraq war has an impact on oil prices, but not anything near 50%, and the policies you mention would have such a minimal impact when compared to the activities of the rest of the world. I'm sorry, but you aren't convincing me on this angle. Do you have any figures on U.S. oil production, or imports/exports, you would like to focus on compared to global numbers?

This is what I'm getting at. But demand won't spike in the US like it will in China and India. Demand for oil in the US will continue to rise, but it will look like a plateau compared to these other two highly populated countries.

Saudi Arabia is a huge factor, since they produce so much oil to begin with. There are other major players as well, and this is even before we consider the U.S. Why do you think the U.S. has such a huge impact on prices when you take all of this into consideration? The U.S. economy is huge, but it isn't that huge, and they aren't even close to being the largest producers of oil.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

aceventura3

You folks are full of contradictions. DC stated that the price of oil pre-war was $36 per barrel, now it is close to $110, and at the same time you argue that American policy and regulations can not have an impact anywhere near 50% on the price of oil yet give no basis for your view. On its face your position is absurd and shows that you have given the issue little thought.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

dc_dux

LOL....OK, if you say so.

/end of discussion

__________________
"The perfect is the enemy of the good."
~ Voltaire

Willravel

You still don't seem to be taking into account the record profits for all the oil companies. At least part of that $110 per is going into those trillions of dollars that are being posted.

Baraka_Guru

Are you assuming that the Iraq war was created and has been carried out in a vacuum? It's been going on for years now. The world hasn't stopped turning to stop and watch it.

It might seem absurd on the surface. What evidence would you like presented? I might be able come up with some hard data if you wish.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot