This Week In Petroleum {Why Are Oil Prices So High?}

Energy Information Administration ^ | November 7, 2007 | Energy Information Administration

[secret garden]

The cheapest gas in my area is $2.95/gal.

[G8 Diplomat]

Why Are Oil Prices So High?

GLOBAL WARMING! It's gotten too hot in the desert and the Saudis don't feel like going outside to drill the oil so they jack up the price! /sarc

Ok, for a real answer...the dollar is devaluating so fast that the Canadian dollar is now worth $1.10 USD. Our currency isn't worth squat anymore, so oil prices go up just like the prices of everything else has gone up. Stamps, movie tickets, a loaf of bread, you name it--they all cost much less several decades ago. Oil's not immune from the same fate.

[tobyhill]

2 reasons

Weak dollar and speculators having been fooled by the great anticipated massive hurricane season are now betting on a colder than usual winter. Get the crack-head speculators out of the market and let real supply and demand manipulate the prices then we’ll see the real market cost not just some whacked-out “fear” premium.

[rlmorel]

LOL...thanks, Yo-Yo...

Depend on an Air Force guy to boil it down for us economic philistines...:)

[BlabItGrabIt]

Lot to read, but no mention of oil futures contracts being the main catalyst for what could be a legitimate explosion of this oil bubble—right before the 2008 elections...

[thackney]

But both are rising. Both measurements are starting from the previous value, not the new increased value. It is a valid comparison.

[SoldierDad]

Actually, there’s one reason:

1) Greed

[RightWhale]

NYMEX crude is down 1.61 to 95.09
The magic 100 will have to wait a little longer.

[Yo-Yo]

Send some my way. It’s $3.16 here.

[reagan_fanatic]

Increasing production would not reduce cost but would increase cost.

How do you figure that increased production would equal higher prices? I must be missing something here.

[Diplomat]

Why? Because of the Iraq war.

[RobRoy]

>>1) Oil is priced in Dollars.
2) The Dollar is still losing value

3) Therefore, the cost of oil in Dollars goes up, even if the value of oil remains constant.<<

Yup. That’s my take as well. It is simple inlfation at work. I suspect that is also part of the reason for the current stock prices.

The only non-catastrophic way out of the housing/credit bubble is to monetize the whole thing through inflation. It is apparently happening as we speak.

[RightWhale]

This is peak oil. This is what peak oil looks like. It is not what many thought peak oil would look like, but they should not have been reading these reports in the first place.

[VideoDoctor]

Actually, there’s one reason:

1) Greed

In a single word you have IDENTIFIED the CORE ISSUE.

[thackney]

Why? Because of the Iraq war.

Iraq oil production now exceeds their pre-war levels.

[thackney]

It is simple inlfation at work.

Then why has the price of oil changed 4 times as much as the change in dollar value for the past year?

[RobRoy]

Because inflation is only part of it. Also, that inflation of oil is what CAUSED the runaway inflation of the carter years. The increase in the price of oil has barely dented our inflation but it will soon be Carter style I suspect.

We are indeed living in interesting times, but nowhere NEAR as interesting as they are going to be very soon.

[Wuli]

“Maybe if we could drill our own oil and not depend on others we could have cheaper fuel costs here...”

And if we did, then the size of the export of dollars - to the Middle East - would go down, limiting the dollars in circulation outside the U.S. and the value of the dollar would go up.

[SaxxonWoods]

It only takes half as much oil to produce a specified unit of GDP today as it did in the Carter years. That’s why increased oil prices have not affected inflation like the old days.

There are multiple forces at work pushing the price of oil upwards. I read that OPEC production is lower, and worldwide demand is higher. Perhaps Thackney will illuminate the situation after toying with us for a little while.

Blaming greed is silly, in my opinion. “Greed” operates in all supply and demand situations, there is no more greed today than in the past. Greed is a constant.

[RobRoy]

Nothin’ in that post I would disagree with.