Let's look at the facts on oil prices, shall we?

[IrateCitizen]

The above is a graph of world crude oil prices, 1947-2003, in 2000 dollars.

If you note, the first big price spike is in 1973-74, a result of the Arab oil embargo in response to US support for Israel in the Yom Kippur War. What is important to note about this is that prior to 1970, there were no price spikes, because the US was still a "swing producer" that had not yet reached the peak of the oil curve. Following 1970, the US lost this ability as it passed its oil peak, and OPEC gained control over world prices as the remaining swing producer.

What caused the spikes of the 1970's to come back down was the discovery and opening of fields on Alaska's North Slope and in the North Sea. The added supply from these fields on the world market helped steady prices back down near pre-1970's levels. The attendant result was the idea of "globalization" of the world economy, a fervent belief based on the unrealistic assumption that cheap oil would be around forever.

Now, at the end of the graph, prices are starting to climb slightly. However, the graph only goes to 2003. If it were extended, it would show a spike up to $55 per barrel between 2003 and early 2005. The reason for this is simple -- there is simply no more global swing capacity due to rapidly increasing demand and flattening supply.

What does this mean? Unless there is a significant new store discovered, prices will continue to rise as we pass the crest of the oil peak. Sure, there will still be petroleum, but it will not be cheap, because the remaining stores are those that are more difficult to find and more expensive to extract.

Chances of finding new fields are not promising. Global oil companies are not dedicating much money toward exploration -- they are instead devoting their economic energies to mergers in order to maintain artificially-high shareholder values. The US is sitting on the oil in Iraq, not in order to necessarily drive prices up, but to maintain a reserve so that the "non-negotiable American way of life" can be continued for another 25-40 years. Look for the "War on Terror" to extend to Africa as oil fields increasingly come on line there, so that the United States can exercise control over them as well.

The rise in prices is NOT due to a shrinking dollar. If anything, the shrinking dollar is partially a result of the looming scarcity of oil.

[whistle]

1. Why does this chart use 2000 dollars....

...the value of the U.S. dollar has been devalued by 40% since 2000. That makes these trend comparisons like apples and coconuts. The people on fixed incomes (30 million retirees) since 2000 have lost 40% of their purchasing power just on that basis alone.

[IrateCitizen]

2. Then what do you suggest that it use?

Should it use 1947 dollars? After all, that was the first year of the trend. Or maybe it should pick 1978 dollars, as that is in the midpoint of the graph.

The graph ended before the freefall of US currency truly started. That's why it used 2000 dollars. Plus, 2000 is a nice round number.

In any event, the data still shows a significant upward tick in oil prices over the past couple of years, and this time in absence of any boycott as in the previous spikes.

[whistle]

17. Well, it could use the last peak high which according to the....

...graph was 1981 if I read it correctly or even the first peak high in 1973.

As I look more closely at this chart though, I see four (4) colored straight lines orange, blue, deep red and green which reflect mean and median averages for world and U.S. crude oil prices per barrel. I don't see any explanation for why these are constant across all years from 1947 to 2003. Are those the prices as of 2000? It might help to post the source link to see what the time series data are to create this graphic representation.

Somehow the chart is suggesting that relatively speaking I am better off paying $2.35 in current dollars at the pumps today then I was paying $.85 or whatever it was back in 1981 at the dollar values that we had back then. The figures suggest that, but my memory of my experience back then recalls a much different reaction.

[IrateCitizen]

20. The straight lines are medians and means over the entire time frame.

And regarding your last paragraph, I think you're trying to look into data that isn't necessarily there. It's not about whether you were "better off" then or now. It's about trends in oil prices, what caused spikes in the past, and trying to understand why we could be experiencing not a spike, but a neverending upward climb in the present and future.

[whistle]

21. The link please

[IrateCitizen]

22. Here it is...

http://www.wtrg.com/prices.htm

The graph I chose was the very first one on the page.

[whistle]

27. Thank you, so that graph is actually an index of the long term....

...per barrel crude oil prices from 1947 to 2003 adjusted for 2000 prices.

<snip>
"... In the post World War II era oil prices have averaged $19.61 per barrel adjusted for inflation in 2000 dollars. Through the same period the median price for domestic crude oil was $15.25 in 2000 prices. That means that only fifty percent of the time from 1947 to 2003 have oil prices exceeded $15.25 per barrel. Until the March 28, 2000 adoption of the $22-$28 price band for the OPEC basket of crude, oil prices only exceeded $22.00 per barrel in response to war or conflict in the Middle East.

Over the same period world oil prices averaged $1.51 higher at $21.12 per barrel. The median world oil price of $15.89 was only slightly higher than the U.S. median of $15.25. (See note in box on right.)"
<end snip>

That is an interesting way to calculate things. It makes the price of oil sorta like the "gold standard" and compares everything else to it. So even though my income today is actually 1.75 times what it was say in 1981, I am actually better off paying what I am paying for gas today because the relative price at $25 in 2003 compared to $58 in 1981 is 60% cheaper. I'm just feeling that it is not, because I failed to maintain or increase my standard of living from 1981 to the present time at the same rate that oil producers jacked up oil prices.

Shame on me and shame on all those other millions and millions of people who choose not to make the price of oil (indirectly) and gasoline at the pumps (directly) the entire central condition of our economic well-being! :eyes:

I believe Karl Marx addressed this 150 years or so ago among other "free trade" advocates relative to the price of "corn". Thanks again for the link, this has been stimulating.

<link> http://www.ex.ac.uk/Projects/meia/Archive/1848-FT/1848-ft.htm

[IrateCitizen]

31. Response

Shame on me and shame on all those other millions and millions of people who choose not to make the price of oil (indirectly) and gasoline at the pumps (directly) the entire central condition of our economic well-being!

Considering that you live in an economy in which every good and service you've come to depend upon in your daily life -- from agriculture to textiles to electricity to transportation and so on -- is dependent upon cheap fossil fuels, especially petroleum, the price of oil IS the central condition to your overall economic well-being. However, you can choose to ignore it at your own risk.

[whistle]

36. Spoken like a true free trade advocate......

...The windfall profits of escalating oil prices and stocks got to those who claim ownership and that is a tight-closed cartel of powerful individuals who now control what is and is not distributed. These are not available to the average man or woman on the street and barley available to small investors with modest means of saving and investing. Even the purchase of stock in oil companies is not an assurance that any of the windfall profits are equitably distributed as those can and are internally manipulated to the insiders favor.

The real rate of inflation now, today beginning with BushCo taking over the White House is as many have suspected for some time, the price of oil/energy in whatever form it is available, not the breadbasket of goods and services we depend on. Cheap imported manufactured goods are just as prone to oil/energy costs as were our manufacturers and as India and China and other economic powers we trade with pay more for energy, the cost of imports will continue to accelerate. The only thing keeping those costs in check is the pressure that the U.S. can continue to exert on labor costs, raw materials costs and profits realized in the import trading economies.

I see 1929 written all over the present economic arrangement and huge starving masses of desperate people here in the U.S and abroad. Is it any wonder that capitalism is arming itself to the teeth. IrateCitizen, you've chosen your handle well.

[IrateCitizen]

38. Railing about the inequities in the current system...

... do very little to change its reality. The fact is that we live in a society in which we have come to depend upon cheap fossil fuels for just about everything in our daily lives.

Do I think that this is a wise course of action? No. Do I deny that it is the reality under which I live, regardless of whether or not I like it? No, again. Given this, it behooves me to look at how different things, like the price of oil, would affect the world in which I live as opposed to how they would affect some idealized alternative.

The very fact that you would label me as a free-trade advocate is quite laughable, friend. Obviously you have never read any of the posts I have ever made regarding trade, which was the issue on which I initially cut my teeth as an activist. I am very much a proponent of localized means of production and moving away from the whole ideas of economies of massive scale.

[whistle]

43. Good, then we agree on that at least, no for energy dependence...

...how do those charts posted on this thread move us in that direction when in fact they suggest that we are relatively better-off with today's higher oil prices whatever their source, then we were at the peak levels of 1973 and 1981? Isn't that making the opposite case for what you have just said?

If inexpensive energy is not an option, then conservation of energy has to be in the short run and alternative sources of energy as well as uses must be found over the longer run.

For example, I recognize that now that I am rapidly moving toward the day that I must live on a fixed income, I must adjust my living standards. Driving less, making fewer trips, limiting more electrical consumption, moving to smaller living quarters, buying fewer goods and services, whatever I am able to do, in complete opposition to what our fearless leaders are telling the rest of the nation to do, buy more, consume more, buy gas guzzlers, etc.

Yet, as I decrease my consumption of fuel (gas at the pumps) the price accelerates. As I cut down on electrical consumption (wait for AC use until the house is unbearable) the power company raises the base rates. As I cook less, the price of raw vegetables goes up, up, up, up! And that isn't just happening to me or the millions of other Americans on fixed incomes, it is also happening to every working American, the hourly wage earners being the most vulnerable. Look at all of the union busting that is taking place, the headlines are full of these tactics by all sorts of companies and government agencies, not just Wal-Mart.

The charts do not reflect what is happening to average citizen's buying power. Now, if the relative direct cost of energy, again say in my life ($100 to $200 plus per month for electric; $75 to $125 per month for gas) doubles now that I have cut all that I can, short of deciding not to drive and only run my AC on the hottest days (95degrees+) and not use heat in the winter, where am I with this. Sure, I'll retire here in three years maybe five if I have the physical capability and health to do so, and once on fixed earnings, opt to take a minimum wage job, which I can take to bus to to earn a few hundred extra dollars, but this was not the future America that I envisioned 20 years ago. That's all. :rant:

P.S. I'm not so sure the democrats have a solution at the moment, but I know sure as hell that Bush's answer along with Cheney and the other BushCo answers are totally wrong.

P.S.S. Sorry I called you a "free trader", I have a nasty habit of applying labels to people and ideas that I don't fully know or understand.

[rman]

45. You mis-understand

IC is not advocating, since he's not saying it's a good thing that we're all so dependent on oil. He's just saying that we are. Making a statement of fact isn't the same thing as approving of said fact.

Maybe you grow your own food and have solar panels on your roof and a wind mill in the backyard. But Western 'civilization' as such doesn't. If you don't then the fact is that you to are dependent on oil.

[orwell]

26. Mo Bettah

You would only be "better off" as you put it if your income rose faster than the inflation rate. For most/many middle income and poor Americans that has not been the case, except for a brief period during the Clinton years.

Reagan effectively skewed future income gains toward the wealthy asset holding class. This is the nature of "supply-side". So if you are part of that group, congrats! You are probably better off no matter where the inflation adjusted price of gas is.

[wtmusic]

3. it's dollars/barrel

on the world market. The graph reflects any devaluation.

[iconoclastNYC]

14. What?

The value of the dollar relative to foreign currencies is down 40% but that doesn't mean here, domestically we've had 40% price inflation.

Can anyone back me up on this?

[orwell]

32. If...

The falling dollar affects import prices IF the foreign producers raise prices commensurately. Most however choose to eat the reduction in profits to maintain market share or they have hedged against the currency losses. The dollar's fall would probably not change prices from domestic suppliers, unless they were emboldened to do so because foreign competitors are forced to raise their prices.

Since one of our largest foreign suppliers is China, and they peg their currency directly to the dollar, the dollar's fall has not changed import prices from this rising economic giant.

Where the falling dollar would have the most impact is if it changed foreign appetite for US debt, both private and public. This would change the cost of money (interest rates) which would affect the price of everything in our debt-loaded economy. In fact, it is abnormally low interest rates which have fueled the domestic consumption/real estate binge which has hidden the economic mine field that lays before us.

It could be argued that the low interest rates is what kept the Bushie Crime Family in office, not the vaunted tax cuts.

[Name removed]

4. Deleted message

Message removed by moderator. Click here to review the message board rules.

[IrateCitizen]

5. Care to offer up some factual analysis as backup on that?

Frankly, I find such assertions to be crackpot.

[Name removed]

6. Deleted message

Message removed by moderator. Click here to review the message board rules.

[IrateCitizen]

7. Once again, where are your FACTS???

They're sitting on oil in Iraq in order to maintain a reserve for the post peak oil era. The oil isn't coming out of the ground because they don't want it to.

And actually, Bush has urged the Saudis to INCREASE production in order to bring prices down.

[Jacobin]

12. Um the pipelines keep getting blown up

We have no more control of the oil production in Iraq than we have control of any other part of Iraq..ZIP.

I'll try to find the website that documents the attacks on the pipelines. The Iraqis are not happy about our theft of the oil and won't allow it.

I find it amazing that the assertion would be made that we have enough control in Iraq to export their oil

[IrateCitizen]

15. I never said we have enough control to export their oil...

What I said was that the US wants to SIT on their reserves and then open them up once they are really needed. That might help explain why gas lines are 2 days long for people to fuel their cars in Iraq, when gas cost something like $0.15 per gallon there prior to the invasion.

The Iraqis aren't getting any oil because the US wants to keep it all for itself.

As for the "control" thing, I agree that those who believe we can ever exercise sufficient control in Iraq to export their oil are largely delusional.

[Jacobin]

29. I disagree that we have any say at all in what happens to

Iraqi oil since we are not able to export it.

While its a fact that we can't get it out, the reasons for not getting it out....that's what we disagree on. From my conversations with a corp of engineer guy who has been there several times over the last 18 months, all foreigners live in bunkers and venture out only under heavy guard. All military are dedicated to 'force protection' i.e. trying to keep from getting killed. The idea that we have any control over the pipeline or can make a choice as to whether to produce it or not is absurd. We don't control Iraq at all. The insurgents do.

[IrateCitizen]

30. I'm not disagreeing with you on that in the least

My point is simply that this was the MOTIVATION for the neocons to take over Iraq, along with providing a "police station" from which to project power over the entire region.

Now, whether or not their designs on doing what historian Emmanuel Todd describes in his book After the Empire as "maintaining a hegemony that no longer exists" is actually doable, is another matter entirely. Personally, I think the whole gang of them is quite deluded, indeed.

[Jacobin]

37. Okay. I'm slow today

:-)

I see what you are saying.

I can understand your position. I personally think they wanted to steal/control it since we are running out and high gas prices will screw up the economy for LOTS of wealthy folks, so I don't think they wanted to not produce it, but I have no idea whether I'm right or not

peace

[rman]

40. not to mention there isn't much oil to export

-

[bpilgrim]

23. "The oil isn't coming out of the ground because they don't want it to."

who are you talking about the iraqis?

peace

[IrateCitizen]

34. No, I'm talking about the United States

And I'm speaking in motivational terms here more than anything. Even if the US wanted the oil to start flowing out of the ground, it's highly unlikely they would be able to make it a reality due to the gathering strength of the Iraqi insurgency.

[bpilgrim]

39. interesting

but i disagree with that assessment.

businessmen do NOT ever wanna wreck their market with extraordinary high prices ever.

these high prices are causing this admin a LOT of pain and they would do EVERYTHING in their power to reduce them if they could, IMO.

this war is simply highlighting the fact that there is 0 room in the market for increasing demand.

they thought this war would help to stave off the inevitable for the US for a while but reality is getting in the way.

more of them known-unknowns

interesting thoughts as always, thanks IC :toast:

:hi:

peace

[IrateCitizen]

41. Here's some interesting info on the subject...

From http://www.lifeaftertheoilcrash.net

"Do World Governments Have
Plans to Deal With This?"


Absolutely.

The US government has been aware of Peak Oil since at least 1977 and has been actively planning for this crisis for over 30 years.

Three decades of careful, plotting analysis has yielded a comprehensive, sophisticated, and multi-faceted plan in which military force will be used to secure and control the globe's energy resources. This plan is simplistically, but not altogether inaccurately - known as "Go to War to Get Oil."

This strategy was publicly announced in April 2001, when a report commissioned by Dick Cheney was released. According to the report, entitled Strategic Energy Policy Challenges For The 21st Century, the US is facing the biggest energy crisis in history and that the crisis requires "a reassessment of the role of energy in American foreign policy."

That's a diplomatic way of saying we are going to be fighting oil wars for a very long time.

James Woolsey, the former Director of the CIA, practically admitted as much at a recent conference on renewable energy:

I fear we're going to be at war for decades, not years . . . ultimately we will win it, but one major component of that war is oil.

The war in Iraq, which has been 23 years in the making, is just the beginning of a worldwide war that "will not end in our lifetime." The reason our leaders are telling us the "war on terror will last 50 years" and that the US engagement in the Middle East is now a "generational commitment" is two-fold:

1. All the countries accused of harboring terrorists - Iraq, Iran, Syria, West Africa, Saudi Arabia - also happen to harbor large oil reserves.

2. Within 40-50 years, even these countries will see their oil reserves almost entirely depleted. At that point, the "war on terror" will come to an end.

While the Middle East countries find themselves targets in the "war on terror", China, Russia, and Latin America find themselves targets in the recently declared and much more expansive "war on tyranny."

Whereas the "war on terror" is really a war for control of the world's oil reserves, this newly declared "war on tyranny" is really a war for control of the world's oil distribution and transportation chokepoints.

China and Russia have taken notice of these declarations and seem to be making preparations to defend themselves.

China has also strengthened it's ties to oil-rich Venezuela while engaging in an undeclared oil-war with long time rival and US ally Japan.

This type of large-scale, long-term warfare will likely require a massive expansion of the military draft. It's probably not a coincidence that the director of the Selective Service recently gave a presentation to Congress in which he recommended the military draft be extended to both genders, ages 18-35.

The strategy - as distasteful as it may be - is characterized by a Machiavellian logic. Given the thermodynamic deficiencies of the alternatives to oil, the complexity of a large scale switch to these new sources of energy, and the wrenching economic and social effects of a declining energy supply, you can see why our leaders view force as the only viable way to deal with the coming crisis.

Of course, the US is not the only nation that needs affordable oil. Not by a long shot. France, Germany, Russia, and China all need it also. While these countries may not be able or willing to directly confront the US on the battlefield, they are more than willing to attack the US financially. The US may have the world's most deadly cluster bombs, but the EU has the world's most valuable currency, and intends to wield it as a strategic economic weapon to offset US firepower.

[bpilgrim]

49. excellent article

thanks for sharing :toast:

it's an old story, war for resources, and with peak oil afoot things are heating up and will only get worse with the neoCONs at the helm.

peace

[orwell]

44. Beep Beep

Actually...

Cartels are far more unaffected by final pricing than non-cartel enterprises. The prime motivator of all investment is total risk-adjusted return over time. In the case of the energy cartels, it has been "managed" quite well thank you for over a hundred years.

This misadministration has payed very little for any of its folly. That is because the true costs have been kept well hidden or delayed. Add a compliant corporate media, a devastatingly effective propaganda apparatus, an "entitled" consuming public, and you have the equivalent of Wile E. Coyote running off the cliff. His momentum took him rather far before the bottom dropped out.

Beep Beep

[bpilgrim]

47. huh?

any business will be effected by HIGH prices.

energy is being discussed DAILY in a negative light. remember how this war was sold, 'it will pay for itself'... and have you seen the chimps poll numbers lately? they are paying a price for HIGH energy costs and it will only get worse.

peace

[IrateCitizen]

48. Poll numbers don't mean jack...

IIRC, the Chimpenator was re-elected this past November. Well, the legitimacy of that election is still being debated by some, but he is still in office nonetheless.

Furthermore, the Republican Party doesn't seem to be paying too high of a price for this either. Last I checked, they increased their hold on both houses of Congress.

The thing that you're ignoring is the effect of an "entitled" populace that believes that the "American way of life" is a God-given right. Such a populace tends to be apathetic, uninquisitive, and caring about little more than maintaining an over-inflated standard of living. The 9/11 attacks have given the Republicans a cudgel to shamelessly hammer the American public with, keeping them in a constant state of fear in order to maintain their grip on power. The fact that the American public is so far gone does not bode well for any efforts by an opposition to appeal to them on terms of hope -- especially as people's economic footing worsens.

[bpilgrim]

53. individual polls maybe. but trends are relevant

also we haven't had sustained, over 2 a gallon gas, till after the election - not to mention it was stolen, again - and the 'honeymoon' is definitely over.

but perception is everything and they are doing everything in their power to assure us that everything is just fine but, as i said, reality is crashing through their programming.

extremely high prices is not in this regimes interest but they can't do anything about it. (invading iraq failed, anwar is a joke) and they are scrambling to come up with solutions (that wont solve anything) to try to keep the pressure off them and make it appear they are doing something.

preserving OWOL has been the theme since WWII that is a permanent plank in american politics, left and right, and is what gets them elected and keeps us placated.

if things continue as they are they know they are gonna really need the PA and they are terrified.

Bush Is Blowing Smoke on Energy (BusinessWeek)

"Our dependence on foreign energy is like a foreign tax on the American people," he declared in a speech to a gathering of small-business owners and entrepreneurs in Washington. What the country needs is "a national strategy," Bush said. "And the most important component of our strategy is to recognize the transformational power of technology. By harnessing the power of technology, we're going to be able to grow our economy, protect our environment, and achieve greater energy independence."


Powerful sentiments, indeed. But the words are largely hollow. Sadly, the plan Bush proposed would do little to increase existing supplies of oil, gas, or electricity, or decrease domestic demand for energy --the two steps that would really make a difference. Charges Frank O'Donnell, head of Clean Air Watch, a Washington-based environmental group: "The new Presidential energy plan seems mainly to be a public-relations stunt aimed at trying to reverse some of the latest polls, which show a growing public discontent with high gas prices -- and the President."

more...

peace

[orwell]

51. Liberty, Justice, Progress

Not every business, only business that operates in a competitive environment. Has health care demand been affected by 10+% per annum price rises that span decades. Health care costs have risen far more in real terms than energy costs. Why hasn't demand fallen?

Because health care demand is inelastic, at almost any price. It is similar to energy demand. Both operate in cartel environments. Health care is dominated by the AMA and ADA cartels that eliminate competition in both pricing, and entrance into the "cartel". Add to that the lack of competition because of political decisions about things like drug re-importation or derisive talk about nationalizing health care and you have a recipe for constantly rising prices.

You only have business being affected by pricing/demand/supply considerations when the demand/supply has elasticity. In other words, that people can do without, that the good or service is not essential. For instance, people have to eat. Demand for BTU's to fuel your body is essentially fixed, whether you choose to get those BTU's through steak or rice. The costs of fueling your system could be substantially different because you can choose between the two.

But there is very little competition when it comes to fueling your car. This is partially due to the nature of the fuel and the lack of differentiation among product. Gas is gas. As of yet you can not get to work on burritos, unless you use them to fuel your body and ride a bike to work. For most, this is not an alternative because our transportation/community infrastructure has been unwisely built to offer few cost effective alternatives to the car. We are now paying for that. BTW this was no accident, but a direct result of political/cartel decisions.

Monopolies/cartel economic structures distort the market to the point where price has very little effect on demand, as it would in a more normalized market. Economists refer to as elasticity of supply or demand, the ability of one to affect the other. That being said the current price of gas has far more to do with refinery constraints than an immediate oil shortage.

As far as political fallout, I see precious little, other than Bush's recent slide under 50%. Is there any talk about the transportation infrastructure which demands constantly growing gas supplies? Bush is out in '08 no matter what. He and his cronies could give a crap, which should be painfully obvious to anyone after his first term. He is a lame duck after the '06 elections no matter what he does and he knows it. Where is the groundswell to increase CAFE standards? Don't hold your breath. But GM has announced a "baby Hummer..."

For real political change to occur it must begin at the micro level. Our political/social assumptions need to be directly challenged around our dinner tables, in forums such as this, with friends as well as those we don't agree with. To do this, we need to shed the myopic vision that views politics as a spectator sport (poll numbers). Fundamental politics involve the decisions each and every one of us makes in our daily lives.

I drive less. I don't have any debt. I am very aware of my energy consumption. And I am always trying to focus my/our efforts to sustainable solutions instead of crisis management.

That is what it means to be a liberal and a progressive. Liberty, Justice, Progress.

Peace right back at ya...

[bpilgrim]

54. "I drive less." bingo

business (all of em, cartels included) ain't try'n to hear that and is why they wouldn't wreck their market with extremely high prices.

as the baby boomers age demand will increase and since it is health-care that will be the last thing folks cut back on.

FYI: the trend since 911 has been down for bush and high gas prices ain't helping, bet.

peace

[orwell]

57. Missing the Point

Forgive me but you are missing the point entirely. It is my assertion that demand does not have as much to do with pricing as it would in a normal, elastic, non-cartel dominated supply/demand market. In other words, price is not that sensitive to my reduction in demand. It only benefits me in reducing my personal energy costs.

If oil demand was curtailed significantly, due let's say to recession, OPEC has already announced that they would cut supply to bring the price into what they call a "band". This is how a cartel operates.

What does this tell you? It tells you that price is not purely a function of supply or demand in the classical sense. The per barrel price of oil has been driven more by speculation at the Merc than supply/demand. It is true that demand is up and OPEC no longer has the ability to make this up by swing production as IC has stated. But this in and of itself does not tell you the real story.

My change in demand has been around five or ten percent. But I work from home (I trade markets for a living) so the only reason I really need to leave is to buy food. If I had to commute to work everyday like the bulk of Americans, barring a switch to a carpool or mass transit, my demand would be, for the most part, essentially fixed.

If you want to prove this to yourself, find a graph showing oil/gasoline demand over time superimposed with price per gallon. The results will surprise you. You will come to the same conclusion that I am asserting. Demand grows every year regardless of price, even, surprisingly, despite efficiency. In fact, even though we are far more efficient at energy use than we ever were, our demand keeps growing, regardless of price.

Can price have an effect eventually. Yes, but it would require oil/gasoline prices 2 or 3 times what they are now to have a real effect. I believe this is implied in IrateC's inflation adjusted graph. This may also explain the lack of increases in exploration budgets at many of the majors. Per dollar invested they will not receive the same returns, as oil is becoming more expensive to find and less profitable (until very recently) in inflation adjusted return.

Think of it this way. Diamonds are ruled by a cartel (deBeers). They have set prices at absurdly high levels. Why would they do this if it lowers total demand...because they can. This makes your blanket assertion demonstrably false. They are not wrecking their market with extremely high prices. They are creating it. They are a cartel. They have reasoned that it is more important to maximize total return on investment if they keep the price of diamonds high as a marketing tool. ie. Diamonds are special, ergo expensive. It is all crap in reality, but they are a cartel so they can get away with it.

Is total demand for health care up? In dollar volume, probably, due to inflation. But in doctors per patient, I doubt if its changed much. That would be an interesting line of study. But explain why many industrialized nations with "socialized medicine" have longer life expectancies and are delivering health care for 30-40% lower cost per citizen than the US with its supposedly "free market" system. And the US has roughly 30% of its population uncovered. It is because the health care is a fundamentally inelastic commodity. If you are sick, you have essentially no choice.

9/11 was the height of Bush popularity because of the rally round the flag effect. To use that as a starting point demonstrates only that the mighty (poll numbers) are always transitory. As per my earlier statement, Bush as far as poll numbers is irrelevant. He is finished as a politician and he knows it.

Peace right back at ya

[bpilgrim]

58. What does this tell you?

it tells you that by restricting supply you can effect prices. (ie the diamond market)

and the band you mention is not $50-$60 a barrel.

what this means is that the 'cartel' has lost control.

MY point is that PEAK OIL is here and there is nothing the elite or oil cartel can do about it and it is threatening THEIR way of life as well as ours.

the longer they refuse to deal with the issue the more painful the effects will be.

to learn more about PEAK OIL start here...
http://www.hubbertpeak.com

peace

[rman]

42. The oil isn't coming out of the ground because it doesn't want to.

Because the pressure drops as the fields get depleted.

[bpilgrim]

55. not to mention the iraqi resistance

i think they play a large role in iraq right now and is what i was referring to.

peace

[wtmusic]

9. Oh, and all of his friends, family, and acquaintances

stand to profit IMMENSELY from a spike in gasoline prices. Nothing unusual here, move along... :eyes:

[Bridget Burke]

10. No, you don't believe that.

Try a bit harder. Perhaps you will convince somebody.

[Name removed]

18. Deleted message

Message removed by moderator. Click here to review the message board rules.

[maxsolomon]

8. i believe the shrinking dollar contributes

isn't oil traded in Petro-dollars? i have read that OPEC is thinking of abandoning the dollar for the euro for just this reason.

if bush has done anything to contribute to the high cost of gas, it is his policy of deliberately lowering the value of the dollar. if he thinks it helps our exports, he's forgotten one important factor: we don't make anything anymore.

and the sauds have no spare capacity.

[Jacobin]

11. Good post

Facts are handy things to have. Also, the shrinking value of the dollar which we have to use to buy overseas oil increases the price.

What will probably get the price back down is a worldwide recession. We are about due for one. When demand slacks way back, there will be a glut and the see saw will swing down again.

[IrateCitizen]

13. I think you're operating on a dangerous assumption here

What will probably get the price back down is a worldwide recession. We are about due for one. When demand slacks way back, there will be a glut and the see saw will swing down again.

I don't think there will ever be another "oil glut" on a global level. With each passing year, supply is decreasing from here on out. Therefore, a significant recession would actually only be keeping up with trends in lowering demand to be more commensurate with supply, not lowering demand to the point that there is suddenly excess supply.

The significant fluctuation in oil prices over the past year is a good indication that peak oil has arrived, IMHO.

[orwell]

24. The Car Cartel

It is very difficult to make final price assumptions in the marketplace when you are essentially dealing with cartel economics. Remember we are dealing with a monopoly cartel with very little competitive product or service differentiation.

In some respects the demand for gas is in a large part structurally inelastic. Your point, if I read it correctly, is that supply constraints are the dominant market force. I would argue that this is still not enough information to predict future pricing. My point would be that supply/demand analysis is tricky when price at the margin is being set by speculation, and speculation in what is essentially a cartel environment.

Do I think a recession would change the clearing price. Absolutely. But you are most probably correct that the "floor' is rising due to supply constraints. It is difficult for me however to determine where that floor is.

[Jacobin]

28. It was $12/bbl in 1998 when the Asia recession was in full bloom

That wasn't very long ago.

If China and India hit a big snag, it'll plunge.

However, you are right, the drops will be less and less and supply runs thin of easily produced wells.

[orwell]

16. Apocalypse Later

Thanks for the chart.

I posted something along the same lines this morning, mentioning that in real terms the price of gas was not at an all time high. In fact I would posit that it needs to be significantly higher before the current supply side demagoguing is threatened. After all, a heroin addict is always looking for another fix, not a detox program.

As far as the Cheney Administration's policies and their contribution to the "crisis", an argument can be made that their total disdain for addressing energy inputs on the demand side has at the very least contributed to the current spike at the margin. Peak oil concerns aside, the only way to meet the coming global energy crisis is on the demand side.

Energy inputs are the foundation of economic growth, but more than that, the foundation of physical survival. As we began the slide down the other side of the bell curve, the possibilities for political and social upheaval become rather apparent. The grave "miscalculation" from my perspective is that the world, post peak oil, will not be one which is pleasant to live in no matter how much oil we control. But when you calculate using an abacus that is dripping with profitable self interest, it becomes difficult to see the beads.

I believe the Iraq charade involves more than "banking" the oil under the ground, it is primarily aimed at establishing bases in a strategic part of the ME and providing a "chokepoint" on China's and India's growth. This is folly in my estimation. The only way we will make it to the end of this century is to begin a Manhattan Project to develop radical new forms of energy generation. But that would take enlightened leadership which looks beyond the next quarter of profits.

The bridge to that future must be paved through conservation and technological efficiency. As more and more of the developing world demands energy, and the first world struggles to maintain its current lifestyle, the byproduct of neglecting the serious global climate and energy problems will be the sound of the approaching hooves of the Apocalypse.

[orwell]

19. One Other Thing

I don't think that the dollar's malaise has much to do with oil supply. It has far more to do with speculation at the margin. It is stunning how much of the global currency trade is raw speculation, having nothing to do with international trade needs or hedging, the two components which should dominate the price at the margin.

For an interesting observation, note that the dollar's recent top was coincident with the day of Bush's "Axis of Evil" SOTU address. The next day the dollar began its precipitous slide.

The dollar was overvalued, partially due to a flight to quality after the 9/11 fiasco. The truth is that the US hegemon hides the growing lack of competitiveness for the US empire, which had probably peaked in the late 90's. But the trigger event became Bush's brash revelation of Pax Americana, "with us against us" rhetoric which essentially told the rest of the world to go to hell - heady stuff when you rely on these "vassal" states to fund exploding internal and external deficits.

Ah..the hubris of empire...

[bpilgrim]

25. Discovery of VERY LARGE fields Peaked in the 60s

"Chances of finding new fields are not promising."

bet

peace

[G_j]

33. gas guzzler/ SUV sales are way down

best thing that could happen!

[rustydad]

35. What's different now

Is that for the first time in the industrial age the fuel of choise is running low and demand is outstripping supply. That is a fact of geology not politics. It will not change. Demand will be brought down by pricing up until someone drops out of the biding, by war that takes away demand (death) or by efficiencies of use. Most observers give little chance of the latter coming on in time to prevent the formers, at least in the US. The average German uses 1/4 the transport fuel as an American. We built our modern country on the premise of cheap fuel forever. We are screwed. Bob

[CWebster]

46. It means occupation of Iraq until the wells run dry

And a SOA style trained Iraqi security force to keep the thumb on the lid.

[Jacobin]

50. One tiny little fly in the ointment:

These are just the attacks on the pipelines and oil facilities in IraqNam since February, 2005:

199. February 2 - attack on oil pipeline connecting Bayji refinery to Daura refinery. The attack took place near Samarra.
200. Fabruary 5 - attack on a cluster of eight pipelines west of Samarra connecting the Bayji and Daura refineries.
201. February 6 - attack on pipeline carrying crude oil from Kirkuk to Bayji.
202. February 9 - attack on a gas pipeline before dawn in Fatha, about 15 miles north of Bayji.
203. February 9 - rocket attack on a pipeline linking Kirkuk to Bayji.
204. February 13 - 10:00pm attack on oil pipeline at the al-Dibbis oil field 31 miles north of Kirkuk.
205. February 14 - another attack on oil pipeline at al-Dibbis.
206. February 16 - attack on pipeline carrying crude from Kirkuk to Bayji near Fatha.
207. February 16 - attack on pipeline carrying crude from Kirkuk to Daura refinery.
208. February 16 - another attack on pipeline near Fatha.
209. February 16 - attack on pipeline in the Bajwan area, northwest of Kirkuk.
210. February 16 - gunmen killed Colonel Ibrahim Ahmed in charge of pipeline security. The killing took place at Ajeel west of Kirkuk.
211. February 25 - late night attack on a pipeline connecting the Dibbis oil fields with Kirkuk.
212. March 2 - 10pm attack on gas pipeline to Bayji near Al-Safra 30 miles west of Kirkuk caused the shutdown of two of the Bayji power station's four turbines.
213. March 3 - attack on a gas pipeline that links Kirkuk to Dibbis.
214. March 7 - attack on pipeline near Samarra, 60 miles northwest of Baghdad.
215. March 8 - 1pm attack on oil pipeline feeding Al-Daura refinery near Jorf al-Sakhr, 35 miles south of Baghdad.
216. March 9 - attack on oil pipeline feeding the Daura refinery in Jorf al-Sakhr, 46 miles south of Baghdad.
217. March 12 - attack on oil pipeline connecting Bayji and Daura in Al-Tharthar, near Samarra.
218. March 12 - Rocket-propelled grenades were launched at a pipeline running from Kirkuk to Daura.
219. March 15 - attack on oil pipeline in Fatha which carries crude from Kirkuk to Bayji.
220. March 25 - attack on oil pipeline which connects Iraq northern oilfields with the Daura refinery.
221. March 27 - 9:00am attack on oil pipeline which carries crude from Kirkuk to Bayji. Repairs on the line had just been completed the day before.
222. April 4 - attack on pipeline running through the Riyad area near Bayji.
223. April 13 - bomb on oil pipeline near Kirkuk killed an Iraqi oil security chief and eight of his men, who were in the process of defusing another explosive device, and sparked a fire on the pipeline.
224. April 17 - attack near Fatha on oil pipeline from Kirkuk to the Bayji refinery.

http://www.iags.org/iraqpipelinewatch.htm

[CWebster]

52. Well then, we will have to bomb them back to the stone age

again.

OR

Reinstate another police state.

Simple, huh?

[Jacobin]

56. Guess they weren't shocked and awed by ShockNAwe(tm)