Posted on 04/21/2011 1:19:52 PM PDT by MissesBush
There's plenty of oil kept off the market all around the world.
Every time crude goes through the roof and people feel it at the pumps, they sing this song.
You want to get to the bottom of the high gas prices? How about allowing off-shore drilling again, or at least announcing that at some point in the foreseeable future there will be off-shore drilling? Or how about ending that incoherent, sad charade in Libya, and letting the people and their government come to terms with each other, either by civil war, negotiations, or their own political processes.
It’s more than easy monetary policy. Right now total excess production capacity in the entire world is at most about 6%. Meanwhile consumption is growing at about 1.2% annually, assuming that higher prices have slowed demand growth from rates above 2% in the last two years. You don’t need to be a math wizard to figure out that without a substantial increase in production capacity happening very soon, the oil market is going to be super tight in just a few more years...down to perhaps only 2% excess capacity. Those trends in supply and demand, along with the falling dollar, are why prices have been rising and will probably continue to rise for a few more years.
That makes sense. What does not make sense is the quickness of the rise w/o a sudden increase in global market. What nobody sets out is - When gas was $3.00 per gal who was getting the $3 and when it's $4, who is getting the $4.
Isn’t it interesting that the off all the quotes in the article, it is the law professor that has the stupidest most unrealistic answer?
But who gets the increase in price, - the wellhead, the oil company or the speculator?
It’s been a while since I checked this out, so I wouldn’t mind if someone else researches and comments (I have to go to work in a few minutes or I would do it), but I seem to recall the following. In Jan. of 2007 a futures market mechanism was put in place that made it much easier to purchase large positions in oil futures (and perhaps others as well). I think the price was $4 million each. This made it a lot easier for foundations, universities, unions and other institutional investors to buy big and distort the markets. This has to be pared down again. I don’t know how it made purchases easier, perhaps someone here knows the answer.
The only probe he will get is maybe by a guy named Larry.
It’s my new tag line the other one was old.
When the futures contracts settle, only the end users and investors who actually store physical oil hold the contracts and take physical delivery of the oil. So ultimately it is the end users and investors who determine the actual cash price paid for oil. All those institutions who trade futures only affect the price of futures contracts and have a negligible effect on the cash prices paid for oil.
This investigation is so dumb. It’s just a political spectacle to take some heat off the administration and divert blame onto Wall St. and “oil speculators.”
I'll tell you who isn't getting it - the people who own the stations. They make fairly low margins, and many would actually go out of business save for their beer/soda/snack concessions.
Roughly, here's the breakdown per $1 of gas sold...
13% = Taxes
08% = Dist. & Marketing
14% = Refining
65% = Crude Oil
For a more complete analysis however, you can look here.
That "crude oil" figure goes to both the oil producers and the speculators/futures holders on the oil market, and it represents the GREAT lion's share of the increase from $3 to $4 - that's the number that's most volatile in the equation.
“While that may be true, that doesn’t necessarily mean the argument is wholly without merit.”
Lots of speculators lost their shirts in 2008. If bets on oil prices do not reflect economic reality, speculators will lose their shirts again. I do not see any different arguments on energy prices than any other commodity.
The oil market is a complex mix of public and private trading activity. Private traders are undoubtedly influencing public trading. I do not see a remedy for this situation however. Lots of oil supply is nationalized outside of US jurisdiction. Many speculators are outside of US jurisdiction. We also have little control over global demand.
We should focus on the variables that we can control, primiarly domestic energy production. On this front, the Democrats have failed miserably with decades of obstruction.
Energy Racketeering: The Natural Resources Defense Council (NRDC)
See tag line.
Thanks. That 65% needs to be broken down as to got the money. It’s different people, or is it?
Congressional hearings will solve everything.
Also it doesn't cost more to make it.
All oil industry numbers are fudged.
Needs big time audit , just like the fed.
I guess they figure, if the fed can get away with it so can they.
Yes, it is different people -possibly many different people - the drillers/rig/platform operators, the large multi-national oil companies (a la BP - which sometimes can be one in the same as the drillers), and the speculators to include governments, institutions (public & private), sovereign funds, individuals and others. The percentages would break down differently at different times. During periods of exuberant speculation - like now perhaps - their percentage would likely be greater.
I don't know how those numbers break out precisely, in fact I'm not sure if I have ever seen such an estimation - and it would be just that, an estimation as it would be impossible to precisely measure. But, I'll look around to see what I can find. It is an interesting question.
Just a guess, but because there's less diesel sold than traditional gasoline, but its distribution demands are the same, the price per gallon for distribution would be more for the less plentiful commodity - diesel on a per-unit basis.
"Also it doesn't cost more to make it."
I don't know enough about the refining process, and everything that goes with it to know if that's true. But, going back to my first point, the laws of scale might dictate that the commodity that is is produced least, might suffer from increased per-gallon production cost. Most things get cheaper per-unit as the scale of the operation increases.
"All oil industry numbers are fudged."
While these are the DOE estimates, they aren't at all dissimilar to what I have seen from private economists.
I used to work with Phil Flynn about 15 years ago. Great guy, good conservative, still telling it like it is.
Btw- Jet fuel, heating oil & truck juice pretty much all come out of the same stacks.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.