To all gas price conspiracy theorists - and thx 2 Democrat

You must read Democrat's insightful post in the "more gas price complaining" thread on this board. He has supplied the facts and figures to show the steady growth in global oil demand coupled with the fact that our ability to find easy-to-extract oil is diminishing.

Great job Democrat! Thank you for helping to shed light on this issue.

It's my understanding that we are not running out of oil. What we're running out of is $24 (cheap) a barrel oil. There's deep sea oil, oil sands, oil shale, etc. all available to be tapped - but it's only worth bringing up at $40 or $50 per barrel or more. I suspect the oil industry is reluctant to jump in too hard and fast until they see prices stabilize at these levels for a while. More drilling will occur and prices should soften a bit. At least that has been the history of these types of things in the past. Natural Gas sees similar fluctuations - but on much shorter intervals. It's a real boom & bust market.

So please stop buying into all the conspiracy theories. It's a tight market for a finite resource. Perhaps we'll all be better off in the long run as this will spur commercialization of alternatives.

[Terroreyes]

Still doesn't explain why every little middle east event makes the cost of a barrel of oil on the market, and gas AT THE PUMP & AT THE RETAIL LEVEL, jump higher than any other reason THE NEXT DAY!!!!!, and DOESN'T come back down. Please explain how this is REAL supply and demand and not based on speculation. Why, when the speculation is wrong, doesn't the price correct itself? At any time OPEC CAN increase that supply. They sure seem to jump real fast when oil declines. Do you honestly think they'll let oil drop below $50 again??? As soon as it drops in the 50's, watch!!!, they'll cut production.

[bigfish1965]

It's not OPEC driving the price up. It's Wall Street. Speculators are driving up the prices out of fear.
Oil is beyond the price OPEC wants for a few reasons...higher oil prices bring about two things...
A push for more domestic sources and a push for alternative fuels. Hydrogen cars are almost a certainty now that gas will soon be $5/gallon. In the long term this is not what the Saudis want.
They have been overstating their oil resources for months now trying to bring the prices down. They are all pumping at full capacity.

[Terroreyes]

Full capacity. Easy to say, hard to prove when you exclusively run the show behind a curtain.

You don't mean OPEC wants alternative fuels??? Not a chance.

What about the fluctuation at the pump less than 24 hours later for an event. Nobody seems to have a legit excuse for that! Could it be that our retailers and American distributors are price gouging? Then it trickles back into the market. I still believe we're not in a supply and demand situation, we're "what the market will bear" victims.

Terroreyes - did you read Democrat's post? Did you look at the data? What you're seeing at the pump and in the futures market are knee jerk reactions and over-reactions to every little hiccup in the market - whether geo-political or a refinery fire. Yes, we are experiencing some profiteering by hedge funds, big oil companies, and perhaps our corner gas station. What we see at the local level is only a symptom of a much larger problem though. Strap in and try to accept that your/our lifestyle may need to change a bit.

[Terroreyes]

I read it. Maybe I'm missing something, but I think it solidifies my view. 2003-2004: 3.3% increase in consumption, slightly higher increase at pump prices. 2004-2005: only 2.2% increase in consumption, BUT well over 50% increase at the pump?????

Yeah, remember, we were supposed to be completely dry of oil before 1990, then 2000. It's coming one day, but I don't think any time soon.

[The Democrat]

Well, first of all, you non-Democrats should be happy I'm blaming high gas prices on geology, not your favorite politician! I agree my post was a simplification. Oil is a very complex topic, and unless you start with the big picture, you can get lost in a confusing mass of detail. I'll link to just two articles, both recent cover stories in National Geographic Magazine:

[url]http://magma.nationalgeographic.com/ngm/0406/feature5/index.html[/url]
[url]http://www7.nationalgeographic.com/ngm/0508/feature1/index.html[/url]

It costs about $1.50 a barrel to pump oil in Saudi Arabia, about $15 in Alaska, and Canada is producing oil from tar sands at a cost in the $12-$15 range. From this, it's obvious that market prices over $60 bbl are caused by market forces, not production costs.

In theory, higher prices stimulate more investment that results in increased production; the increased supply, in turn, pushes prices lower. But oil is different, because neither high prices nor market forces can create more oil. For that reason, we can't invest our way out of the oil supply limitations imposed on us by nature. Between 1996 and 1999, $400 billion of investment only replaced depleted sources and kept production flat.

In the past, high prices stimulated more production that eventually glutted the market and caused oil prices to crash. However, several things have changed. First, we are approaching the world production peak. Second, the human population is growing exponentially, pushing up demand. (Oil isn't just used for fuel; most of the fertilizer that grows food comes from oil.) Third, we are more dependent on oil than ever, making demand more resistant to price increases. So there is no guarantee that the past cycles of high prices followed by a price crash will repeat. Maybe we'll see another price crash, but maybe not.

The big picture looks like this. The planet started with 1.8 to 2.1 trillion barrels of recoverable oil. In the last 150 years, mankind has used 900 billion bbls. At current consumption of 30 billion bbls, what's left would last 30 to 40 years. But we don't have that long, because population and consumption are growing rapidly. Consumption is expected to hit 45 billion bbls per year within a couple decades.

The world has a large amount of untapped tar sands, shale oil, and coal -- many times the original oil supply. And, as noted above, the production costs are well below the current market price of oil. But the problem isn't simply one of switching to these sources. Producing conventional oil uses relatively little energy. In contrast, producing oil from tar sands, oil shale, or deep sea oil deposits uses a lot of energy -- in some cases, 5 barrels of oil-equivalent may be consumed to produce 6 barrels of oil. This means a trillion-barrel oil shale deposit may yield only 150 net barrels of oil, because the rest is used up in the production process. Consequently, the quantity of unconventional resources is actually much smaller than it looks on paper.

Before you get too excited about hydrogen cars and such, keep in mind that producing hydrogen consumes more energy than you get from the hydrogen. That may work if you can use solar energy or other renewable energy to produce hydrogen, but it doesn't work if you have to use non-renewable fuels, because all you're doing then is using up fuel to convert part of your fuel supply to another type of fuel. Nor is nuclear a cure to oil depletion, because the world has only a 50-year supply of uranium.

Finally, our biggest problem may not be the limited quantity of fossil fuels available to us, or the cost of producing them, but where to put the carbon dioxide produced by burning fossil fuels. Some scientist say we will run out of atmosphere before we run out of oil. This problem is aggravated by the rapid deforestation of the planet, especially the tropical rain forests, because trees convert atmospheric CO2 into oxygen during daylight. (The reverse is true at night and on cloudy days, when trees are net consumers of oxygen.) Dr. David Goodstein, a Caltech physics professor who has modeled greenhouse effects on computers, describes the worst case scenario this way: "The change in the greenhouse effect that results eventually tips Earth's climate into a new state hostile to life. End of story. In this instance, worst case really means worst case."

My main point is that we can't produce our way to lower oil prices forever, and possibly not any more. The high prices we're now paying at the pump will not necessarily lead to more supply and lower prices. If we've hit the production ceiling, the only way we can get lower prices is to reduce demand by consuming less. It will take years for other fuels and energy technologies to begin replacing oil, so don't expect price relief any time soon from competition by other fuels or technologies. Ain't gonna happen. I'm not saying downsize your vehicles or take a bus to work. I'm saying if we don't, you'd better expect pump prices to keep going up.

[The Democrat]

Well, first of all, you non-Democrats should be happy I'm blaming high gas prices on geology, not your favorite politician! I agree my post was a simplification. Oil is a very complex topic, and unless you start with the big picture, you can get lost in a confusing mass of detail. I'll link to just two articles, both recent cover stories in National Geographic Magazine:

[url]http://magma.nationalgeographic.com/ngm/0406/feature5/index.html[/url]
[url]http://www7.nationalgeographic.com/ngm/0508/feature1/index.html[/url]

It costs about $1.50 a barrel to pump oil in Saudi Arabia, about $15 in Alaska, and Canada is producing oil from tar sands at a cost in the $12-$15 range. From this, it's obvious that market prices over $60 bbl are caused by market forces, not production costs.

In theory, higher prices stimulate more investment that results in increased production; the increased supply, in turn, pushes prices lower. But oil is different, because neither high prices nor market forces can create more oil. For that reason, we can't invest our way out of the oil supply limitations imposed on us by nature. Between 1996 and 1999, $400 billion of investment only replaced depleted sources and kept production flat.

In the past, high prices stimulated more production that eventually glutted the market and caused oil prices to crash. However, several things have changed. First, we are approaching the world production peak. Second, the human population is growing exponentially, pushing up demand. (Oil isn't just used for fuel; most of the fertilizer that grows food comes from oil.) Third, we are more dependent on oil than ever, making demand more resistant to price increases. So there is no guarantee that the past cycles of high prices followed by a price crash will repeat. Maybe we'll see another price crash, but maybe not.

The big picture looks like this. The planet started with 1.8 to 2.1 trillion barrels of recoverable oil. In the last 150 years, mankind has used 900 billion bbls. At current consumption of 30 billion bbls, what's left would last 30 to 40 years. But we don't have that long, because population and consumption are growing rapidly. Consumption is expected to hit 45 billion bbls per year within a couple decades.

The world has a large amount of untapped tar sands, shale oil, and coal -- many times the original oil supply. And, as noted above, the production costs are well below the current market price of oil. But the problem isn't simply one of switching to these sources. Producing conventional oil uses relatively little energy. In contrast, producing oil from tar sands, oil shale, or deep sea oil deposits uses a lot of energy -- in some cases, 5 barrels of oil-equivalent may be consumed to produce 6 barrels of oil. This means a trillion-barrel oil shale deposit may yield only 150 net barrels of oil, because the rest is used up in the production process. Consequently, the quantity of unconventional resources is actually much smaller than it looks on paper.

Before you get too excited about hydrogen cars and such, keep in mind that producing hydrogen consumes more energy than you get from the hydrogen. That may work if you can use solar energy or other renewable energy to produce hydrogen, but it doesn't work if you have to use non-renewable fuels, because all you're doing then is using up fuel to convert part of your fuel supply to another type of fuel. Nor is nuclear a cure to oil depletion, because the world has only a 50-year supply of uranium.

Finally, our biggest problem may not be the limited quantity of fossil fuels available to us, or the cost of producing them, but where to put the carbon dioxide produced by burning fossil fuels. Some scientist say we will run out of atmosphere before we run out of oil. This problem is aggravated by the rapid deforestation of the planet, especially the tropical rain forests, because trees convert atmospheric CO2 into oxygen during daylight. (The reverse is true at night and on cloudy days, when trees are net consumers of oxygen.) Dr. David Goodstein, a Caltech physics professor who has modeled greenhouse effects on computers, describes the worst case scenario this way: "The change in the greenhouse effect that results eventually tips Earth's climate into a new state hostile to life. End of story. In this instance, worst case really means worst case."

My main point is that we can't produce our way to lower oil prices forever, and possibly not any more. The high prices we're now paying at the pump will not necessarily lead to more supply and lower prices. If we've hit the production ceiling, the only way we can get lower prices is to reduce demand by consuming less. It will take years for other fuels and energy technologies to begin replacing oil, so don't expect price relief any time soon from competition by other fuels or technologies. Ain't gonna happen. I'm not saying downsize your vehicles or take a bus to work. I'm saying if we don't, you'd better expect pump prices to keep going up.

[rock2me]

This is a complex picture that none of us fishing knuckleheads has a full grasp on. I know one thing, when prices go up, follow the money. Who has the most to gain with high priced oil?

I believe the farming lobby and ADM is a major contributor to these price increases. There is no way to continue to produce more ethanol without more tax dollars. With the price of gas where it was at, ethanol is bad business - undeniable. However, with gas prices exceeding three dollars a gallon, all of a sudden ethanol has new-found wealth. Hmmm, another stick on the fire.

[rock2me]

This is a complex picture that none of us fishing knuckleheads has a full grasp on. I know one thing, when prices go up, follow the money. Who has the most to gain with high priced oil?

I believe the farming lobby and ADM is a major contributor to these price increases. There is no way to continue to produce more ethanol without more tax dollars. With the price of gas where it was at, ethanol is bad business - undeniable. However, with gas prices exceeding three dollars a gallon, all of a sudden ethanol has new-found wealth. Hmmm, another stick on the fire.