Oil, Politics, and the Truth About Gas Prices

The price of oil and gas is going up, and the story continues to take up a significant portion of the political spotlight. Since the average gallon of gasoline is hovering around $4 per gallon, it must either be some left-wing conspiracy to promote alternative energy or proof that we haven't done enough to develop our own resources, as the right wing claims.

Before we get all hot and bothered about the politics, let's look at the facts surrounding oil and gas prices. Crude oil is, after all, at the heart of this debate, since it accounts for 72% of what you're paying for at the pump, and since it's a globally traded good, I'll consider the biggest global factors driving oil.

It's not me, it's you
When anything goes up in price, we like to blame others. It's the natural thing to do. It's the left, it's the right, it's China. In this case, it's actually true that it's not your fault.

The U.S. has seen overall petroleum usage decline since it peaked in 2005, and we're producing more oil than we have since 2003. Imports have fallen from 60.3% of petroleum product supplied in 2005 to 45.1% in 2011. So if we're producing more and using less, it can't possibly be we who are driving up the price of oil, can it?

Source: U.S. Energy Information Administration.

In fact, it's the rest of the world's thirst for oil that's driven demand higher in recent years. And over time, it's supply and demand that drives the price of oil, so we should probably blame them.

China produced just 1.56 million automobiles in 1998, and by 2012, deliveries of passenger automobiles has reached 2.37 million per month. Experts are now revising 2015 forecasts of China's crude-oil consumption to 13.6 million barrels per day, a level that is triple where the country was in 1998.

China isn't the only growing source of demand, either. India's oil consumption grew 40% from 2001 to 2009, and other emerging markets around the world are more than making up for any reduction in demand from the United States. As I said, it's really not us -- it's everyone else.

Put simply, the truth is this: Global demand for oil is going up, and that's the biggest factor driving prices higher.

Fighting solves nothing
In the short term, the potential for conflict with Iran has driven oil prices higher. It hasn't necessarily affected supply very much, though, since Saudi Arabia has said it would fill any gap left by the Iran oil sanctions. But in traders' minds, there's a risk factor. As long as there's tension in the Middle East (and when is there not tension in the Middle East?), oil will reflect it.

More domestic drilling won't reduce prices
The U.S. has increased production at an impressive rate over the past seven years, and there's a price conundrum in effect here. If oil prices go down, drilling in shale and deepwater becomes less profitable, and domestic production goes down. Companies such as Kodiak Oil & Gas (NYSE: KOG  ) and Continental Resources (NYSE: CLR  ) drilling in shale are finally starting to make some real money, because prices are high, and if oil did get low enough for us to enjoy $2.50-per-gallon gas, their profits would dry up and production might stop.

Talking about offshore drilling is always popular, too, but there's a cost-and-supply issue there. SeaDrill (NYSE: SDRL  ) , Transocean (NYSE: RIG  ) , and Noble are finding work for their ultra-deepwater rigs as fast as they can build them, but shallow-water rigs are out of work. The easy oil is mostly gone, so explorers are moving further offshore into deep water, which is more expensive. Add to that a supply shortage of ultra-deepwater rigs, and turning up the heat on offshore drilling sounds great -- but the reality is that the impact would be very minimal short-term.

The truth of the matter is that the U.S. doesn't have enough oil to make a significant difference in the global oil market, especially short-term, and if prices went down dramatically, our sources of oil would prove less profitable, and we'd see reduced production anyway.

Keystone XL doesn't fix anything
Since oil's market is global, what does it matter if Canada ships oil to the U.S. or China? Canada's oil-sands exports will hit the global market somewhere, so building Keystone XL will have very little impact on global oil prices. Maybe we could feel better about buying oil from our neighbor to the north than from Venezuela or Saudi Arabia, but it's not going to bring down the price at the pump.

TransCanada (NYSE: TRP  ) and conservative commentators would like you to think otherwise, but the reality is that the impact would be minimal. And the project would do very little to affect supply for the next couple of years.

Supply and demand still rule
There are still limits on how high the price of oil, and thereby gasoline, will go. Once gas reaches $4 per gallon, people start to cut back, and demand diminishes. When oil climbs over $100 per barrel, oil producers from miles offshore to shale plays find more oil that they can drill profitably, and supply increases. Supply and demand will balance each other out; it's just going to happen between $3 and $5 per gallon instead of between $1 and $2 per gallon as we might prefer.

A sure solution to the problem
There isn't one magical silver bullet to fix what we don't like about the oil market, but a massive global recession has proved to be an effective way to reduce oil and gasoline prices. That's not a solution I think anyone really wants to see, though. Aside from that, unless China decides to switch to horses and buggies, I just don't see an easy solution.

Who's really to blame
If you want to blame someone for the price of oil, blame China or India -- or Russia. Or, you could look in the mirror and ask why you still pay $4 per gallon for gasoline if you can't really afford it. The laws of supply and demand indicate that demand should drop if prices go up as much as they have in recent weeks. If you aren't cutting back, then you're just as much at fault as anyone else.

Fool contributor Travis Hoium has no position in any company mentioned and uses only about 10 gallons of gasoline per month. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Transocean. Motley Fool newsletter services have recommended buying shares of SeaDrill and TransCanada. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 26, 2012, at 12:37 AM, AgeOfRobots wrote:

    "The laws of supply and demand indicate that demand should drop if prices go up as much as they have in recent weeks. If you aren't cutting back, then you're just as much at fault as anyone else." -- well said, the truth that many do not want to hear...

  • Report this Comment On March 26, 2012, at 3:18 AM, seattle1115 wrote:

    Excellent article. Expect to be excoriated for it.

  • Report this Comment On March 26, 2012, at 9:25 AM, cmstripling wrote:

    US is a net importer of crude oil, but a net EXPORTER of products (including gasoline). Supply and demand it is... we can refine crude to gasoline and sell it for greater profit overseas to emerging markets (and even Europe).

    Only way to fix it domestically would be to regulate the export of gasoline like we do crude oil. Not saying I agree with that action, just stating it. Granted that does not take into effect the global ripple effect of that sort of unilateral action.

  • Report this Comment On March 26, 2012, at 9:53 AM, baselineace wrote:

    It seems you failed to mention the impact of the U.S. dollar and the Federal Reserve, the PRIMARY culprits.

  • Report this Comment On March 26, 2012, at 10:25 AM, TMFGortok wrote:

    You've discussed one half of the equation (the commodity itself), but what's missing from this article is a discussion on the *other* half of every financial transaction: The price of money itself.

    Since energy and food prices are kept out of the CPI (paradoxically, since those areas are most susceptible to price inflation), we have to use alternative stats, and according those stats, inflation is up 10% in 2012 alone.

    10%!

    http://www.shadowstats.com/alternate_data/inflation-charts

  • Report this Comment On March 26, 2012, at 2:26 PM, mwm102 wrote:

    You are wrong about our consumption not going down. According to MasterCard SpendingPulse over the last year we have dropped consumption by 3% or 4.2 billion gallons of gas. Also check out this link because the article about the oil futures market still holds true today as when this was published.http://www.cbsnews.com/2100-18560_162-4707770.html.

  • Report this Comment On March 26, 2012, at 3:09 PM, ibuildthings wrote:

    When a Republican was in the White House, it was his conspiracy with the oil companies that kept the prices up. Now that a Democrat is there, it is market forces.

  • Report this Comment On March 26, 2012, at 3:11 PM, TMFFlushDraw wrote:

    You're right, I could have included "printing" money as another driver.

    Travis Hoium

  • Report this Comment On March 26, 2012, at 3:12 PM, ibuildthings wrote:

    Perhaps the pipeline TODAY would ONLY create a bunch of construction jobs and refinery jobs for the Canadian oil. But it would give America a chance to buy oil from our neighbors if we chose to keep, rather than forward to China.

  • Report this Comment On March 26, 2012, at 3:14 PM, ibuildthings wrote:

    Perhaps the pipeline TODAY would ONLY create a bunch of American construction jobs and American refinery jobs for the Canadian oil. That so bad? But it would also give America a chance to buy the refined oil from our neighbors if we chose to, rather than forward to China. If we don't have the pipeline, then we don't even have the option.

  • Report this Comment On March 26, 2012, at 3:17 PM, Investor612 wrote:

    I agree with the article, though there's some selective cognition regarding the political nonsense. It isn't the greedy oil companies driving prices up like some of the left wing claims either.

    Ramping up US production will have only a small effect on gas prices in the US because oil is a fungible commodity in a global market.

    However, ramping up production in the US will mean that some of the dollars that currently are sent abroad to purchase oil will instead be sent to US oil producers who employ US workers and whose success benefits their mostly US shareholders. As those dollars percolate through the economy it's a big stimulus.

  • Report this Comment On March 26, 2012, at 3:26 PM, Merton123 wrote:

    Japanese Toshiba is building the next generation nuclear reactor. This nuclear reactor has already received approval from Nuclear Regalatory Commission. The supply of oil is limited. As China and India come online demand increases while the cost of extraction also increases. Now is the time to buy Toshiba Stock !!!!!!!

  • Report this Comment On March 26, 2012, at 3:36 PM, ETFsRule wrote:

    "You've discussed one half of the equation (the commodity itself), but what's missing from this article is a discussion on the *other* half of every financial transaction: The price of money itself.

    Since energy and food prices are kept out of the CPI (paradoxically, since those areas are most susceptible to price inflation), we have to use alternative stats, and according those stats, inflation is up 10% in 2012 alone.

    10%!

    http://www.shadowstats.com/alternate_data/inflation-charts&q...

    2 points:

    1. Food and energy are not kept out of the CPI. You are thinking of the "core" CPI.

    2. Shadowstats makes up their numbers out of thin air. If you disagree, then please, prove me wrong.

  • Report this Comment On March 26, 2012, at 5:39 PM, xetn wrote:

    The one are where the Keystone XL pipeline would have an effect is on the production of the Bakkan shale fields in the Dakotas. There is limited pipeline capacity from that area as well as Canadian sources. As it stands, the existing pipelines end in the Cushing, Ok area where there is very limited refining capacity. There are pipelines that run from the Gulf northward toward Cushing, but not southward toward the Gulf.. There is work going on to re-engineer the flow, but the real solution is a new pipeline (Keystone).

  • Report this Comment On March 26, 2012, at 5:40 PM, Fonz56 wrote:

    Gambling is what's driving oil prices up. No ordinarily gambling by gambling by investors in Futures. Only reason. Once again Wall Street!!

  • Report this Comment On March 26, 2012, at 9:14 PM, TOGASB wrote:

    All the folks quoted here have a peace of the problem. I enjoyed reading those that were submitted.

    We need to hold out for afew years until the Gas is made available for disspersing. Their working hard to setup stations and fuel holders are being ready for sale to the car manufactures. Then who knows what might pop in the mean time? It's American ingenuity that has always astounded the world when challenges face it!

    Tog

  • Report this Comment On March 26, 2012, at 9:50 PM, tommy2cat wrote:

    The pushing up of oil and gasoline prices is all about speculators at energy commodity trading desks owned by most of the oil companies and on Wall Street. This trading over the last 12 years has not being regulated by the CFTC due to Sen. Richard Lugar, Senator Phil Gramm, his wife, Wendy and others oil lobbists who inserted a secret rider known as Senate Bill 3283, also,called the Commodities Futures Modernization Act of 2000, to an 11,000 page appropriation bill.which most congressman were unaware of. It never came to the floor for debate because most congressman were not aware of it. Clinton, unaware of the rider, signed the bill into law. Now traders had an officially deregulated market for energy futures. Sen.Bernie Sanders and 69 other members of Congress signed a letter on 3/7/12 urging regulators at the CFTC to obey the new laws in the Dodd-Frank Wall Street Reform Act by enacting "strong positions limits" to make sure that the price of oil and gasoline reflects the fundamentals of supply and demand.The CFTC has yet to obey the new laws. This entire 12 year scam on the American public has been known as the "ENRON LOOP HOLE". Google it and learn the real true.

  • Report this Comment On March 26, 2012, at 11:06 PM, TMFGortok wrote:

    @ETFsRule: No, Shadow Stats does not make their stats up out of thin air.

    "Proving you wrong" is pretty easy, since the graphs themselves label how those numbers are derived.

    The stat I used for inflation was how the *government* calculated inflation in the 1980s.

    These days, the government has gone away from calculating inflation as what it costs to maintain the same standard of living towards the idea that when prices rise, you'll just change from steak to hamburger, so you're no worse off (in a nutshell).

    Here's an excellent primer by Walter Williams (economist at George Mason University here in the DC Metro area) on that subject: http://www.shadowstats.com/article/consumer_price_index

  • Report this Comment On March 27, 2012, at 1:18 AM, F111epilot wrote:

    sorry, missed a lot of facts, appears your letting politics drive this article, printing money, inflation, act all are factors, work with the oil companies, not to drill, but tax breaks, energy breaks, regulation relief to keep our oil in america, it requires talk, not painting them out to be the bogey man, or going after speculators. much can be done, it requires a full effort and understanding of the entire problem. not a few numbers

  • Report this Comment On March 27, 2012, at 9:26 AM, TMFGortok wrote:

    Note: Walter *J* Williams is not an economist at GMU, Walter *E* Williams is.

  • Report this Comment On March 27, 2012, at 11:17 AM, ETFsRule wrote:

    ""Proving you wrong" is pretty easy, since the graphs themselves label how those numbers are derived."

    No, they are not labelled in this way. They provide no raw data and no mathematical derivations.

    "The stat I used for inflation was how the *government* calculated inflation in the 1980s."

    I assume you refer to the "alternate inflation charts", found here, which you linked to earlier:

    http://www.shadowstats.com/alternate_data/inflation-charts

    This is a number pulled from thin air. That is why Shadowstats refuses to post their raw data, or any of the calculations they have used.

    In one article on the Shadowstats website, they claimed that they would release their calculations to an independant source, I believe it was a university, to let them audit the validity of those calculations.

    It never happened. Or, if it did happen, Shadowstats never published the results (this would be even worse).

    "These days, the government has gone away from calculating inflation as what it costs to maintain the same standard of living towards the idea that when prices rise, you'll just change from steak to hamburger, so you're no worse off (in a nutshell)."

    Entirely false. This myth has already been addressed by the BLS, as well as the myth that the CPI does not include food and energy (for someone claiming to know so much about inflation, it's hard to believe that you would not know what is actually in the CPI).

    This is all addressed here:

    http://www.bls.gov/cpi/cpiqa.htm

    "Here's an excellent primer by Walter Williams (economist at George Mason University here in the DC Metro area) on that subject: http://www.shadowstats.com/article/consumer_price_index&quot...

    I am familiar with their claims. I am still waiting for them to back up those claims with some substance.

    Shadowstats claims:

    "Once the system had been shifted fully to geometric weighting, the net effect was to reduce reported CPI on an annual, or year-over-year basis, by 2.7% from what it would have been based on the traditional weighting methodology. "

    This 2.7% number, of course, is pulled from thin air. It's a clever bluff. They know that most "skeptics" will latch onto any of their criticisms, without demanding any transparency or support for their numbers.

    The truth is: "BLS calculations have shown that the geometric mean formula has reduced the annual growth rate of the CPI by less than 0.3 percentage points. "

  • Report this Comment On March 28, 2012, at 12:29 PM, moneytrail wrote:

    This article should be renamed: OBAMA 2012!!

    Your lack of understanding about commodities markets in general and supply and demand, specifically, qualifies you to become a senior spin doctor in the Obama re-election effort.

    Of course increasing oil supply by encouraging drilling in the US will have a substantial, depressing effect on gasoline and oil prices. That is precisely why nat gas prices are at 10 year lows and still dropping. Ironically, the Obama Gang is trying to moderate prices by releasing a few drops, maybe 1 day US consumption, from the Strategic Petro Reserve, while blathering about the pointlessness of promoting US drilling as a solution to high and volatile petro prices. It’s either one or the other!

    Since the US may be the richest hydrocarbon reserve bank (oil, gas, coal) in the world, we can have a profound impact on global petro prices by changing course and encouraging, rather than vilifying American energy companies. Just look at what has happened to nat gas prices with the introduction of advanced, economic horizontal drilling and fracking techniques in oil and gas recovery. Nat gas prices are at a ten year low. Is your and the Obama Admin’s proposition that supply effects nat gas but not oil? Is oil the only commodity that is exempt from the affects of supply and demand?

    Also, when President Bush announced the opening of drilling on Federal lands the price of petroleum plummeted from $148/barrel to below $40/barrel in 9 months. Maybe the price fairy caused that drop?

    Regarding Keystone, I’m not sure how an 800+ mile pipeline gets built with 3 thousand to 4 thousand workers. But, I guess if one wants to postulate that building an 800+ mile complex of pipeline, pumping stations and countless support facilities along the route, is a minor economic event, one is forced to find and put forth silly numbers. Claiming that bringing down 800 thousand to 1 million barrels of oil from Canada, as well as the additional supply from fields in North Dakota, Nebraska and other states that will be able to feed the pipeline with additional product, will not drive down the price of oil in the US is exactly the tripe Obama is trying, unsuccessfully, to sell Americans.

    In short, this is Obama-nomics at its core: productive, private economy projects – say “NO!”

    In case you haven’t received the news yet: the reason Americans pay substantially less at the pump than most of the rest of the world is because we produce a significant amount of the hydrocarbons we consume close-by: either the US, Canada or Mexico. So, why is it that bringing more petro product from Canada, with the transport costs substantially less than oil we import from foreign sources, doesn’t help moderate US prices for petro products? Let me help you: back here on planet earth it does!

    One of the big lies of the Obama Gang is that increased hydrocarbon production will not dampen prices for US consumers. And, you bought into it or, happily reiterated it. That’s not analysis, it’s political spin. It appears that more politically motivated articles are finding their way into MF investment analysis. These bogus political agenda “analyses” hurt those of your readers who are new to investments and are turning to SA for sound investment advice. Please be more responsible in your investment reporting.

  • Report this Comment On March 28, 2012, at 7:04 PM, ETFsRule wrote:

    "Also, when President Bush announced the opening of drilling on Federal lands the price of petroleum plummeted from $148/barrel to below $40/barrel in 9 months. Maybe the price fairy caused that drop?"

    Yup, it was the same price fairy that caused housing prices and stock prices to drop, and also caused US manufacturing to plummet at the exact same time that the oil price dropped:

    http://research.stlouisfed.org/fred2/graph/?g=63l

    Quite a coincidence there.

    "One of the big lies of the Obama Gang is that increased hydrocarbon production will not dampen prices for US consumers."

    Did he ever say this?

  • Report this Comment On March 28, 2012, at 8:02 PM, moneytrail wrote:

    Yes. Obama has said again and again and again that increased drilling won't bring oil prices down.

    About what one would expect from a community organizer.

    The point wasn't about Bush but about how even the perception that long-term supply will increase results in lower oil prices. Having said that I believe it's Obama and his cronies that have been trashing the US economy for the past 3 1/2 years with its vicious war on private invesment and private sector job creation, which is why the US economy is in its worst shape since the Great Depression, with few real signs of improvement.

    Remember, next year, if Obama is re-elected health care and soaring taxes will tank the economy in a way that few people alive today have ever seen, making the Depression look like boom town.

    I hope if you are a serious investor you understand what Obama is doing to America's economic future. If your response to my Post indicates your level of financial and economic sophistication you may seriously want to find your self a financial advisor who does understand and who doesn't invest with his or her heart.

    Good luck!

  • Report this Comment On March 29, 2012, at 12:32 PM, moneytrail wrote:

    Dear ETFsRULE:

    My competence level isn't the concern here; it's your President's antagonism toward success and economic growth that is the plague he has unleased on America. If you are an investor rather than a political blogger who is using an investment site to spew ideological rants, as too many MF "analysts" seem to do, you would understand that this exchange isn't about politics, it's about the ability of those of us who produce benefits for our society to protect our earned assets from the Takers and beggars among us who are defined by envy of those of us who have earned what we have.

    If Obama is re-elected, huundreds of billions will leave our economy to supplement the trillions of American dollars that have already left the country. This will leave less investment capital to create wealth and feed the Takers. Who will Obama punish then?

  • Report this Comment On March 29, 2012, at 4:29 PM, ETFsRule wrote:

    "If you are an investor rather than a political blogger who is using an investment site to spew ideological rants..."

    It sounds like only one of us is spewing political rants.

  • Report this Comment On March 29, 2012, at 6:13 PM, BuyCake wrote:

    "It sounds like only one of us is spewing political rants"

    I'm too ignorant to take a side on this, but the title of your post is "Oil, Politics, and the Truth".

  • Report this Comment On March 29, 2012, at 6:15 PM, BuyCake wrote:

    Whoops, my bad. I confused ETFsRule with the author of the article (TMFFlushDraw).

    Just forget I said anything.

  • Report this Comment On March 30, 2012, at 12:51 PM, dgagen1 wrote:

    If supply and demand are the factors that determine the price of oil, any addition to supply anywhere in the world should affect the price. At the current price of oil, the US must have sources of oil that are economically viable. Is it not better to develop those sources in the US, at least, to create jobs here than to give money to other countries to develop resources there?

  • Report this Comment On March 30, 2012, at 6:41 PM, donvesco100 wrote:

    Not a nonpartisan article. Typical GIGO/ Bidenspeak.

  • Report this Comment On March 31, 2012, at 7:45 AM, voelkels wrote:

    Lots of truths, and half truths in the article & comments, IMHO as a retired petroleum engineer. Back when I started in the oil industry, the “official price” of a barrel of “new oil” was something like $3.60/bbl. A gallon of regular gasoline was selling for around $0.25, depending upon the area, and hamburger (ground round or 85% lean as its called now-a-daze) was around $0.35 or $0.30/pound. That was around or slightly after Nixon’s wage & price controls. The price controls were dropped on wages and most other things except crude oil & natural gas. Turns out that those price controls were counter-productive. If I had an old well that was producing say 12 bbl/day oil it was classified as “stripper oil” and I could sell it’s oil for $14 or $12/bbl. If I acidized the well and, after spending $10,000 or $7,000 on the job, the well started producing say 40 bbl/day, I could only sell that oil for $3.60/bbl. Can’t make no money that way, no. I was digging through & dumping some of my production files from the 70’s and came across a list of allowable prices for natural gas produced on the Federal Outer Continental Shelf (OBS). It ranges from $0.34/MMBTU for “Old Gas” to $4.38/MMBTU for “New Deep Gas”. I can’t tell y’all how much gas we bypassed because the original discovery date was in the 1960s or early 70s, no.

    ;-(

    Its true that if the selling price of oil (or gas) declines, drilling for them will also decline but what isn’t mentioned is that from the time a block is leased offshore, an exploratory well is drilled, production wells are drilled, production facilities are installed and a pipeline is laid to transport the oil (or gas) to shore to be refined usually takes between 7 and 12 years. Drilling a bunch of wells today won’t “fix” the price of $5 or $4/gallon gas at the pump today but it just might keep you from paying $50 or $35/gallon in 10 or 7 years. The same is true of the XL Pipeline, etc. When the price of crude dropped to below about $16/bbl in the 1980s, drilling and production of oil from the North Slope was shut in. That oil was still there and when the price of crude increased, they turned the valves clockwise and restarted pumping & drilling.

    C.J.V. - gotta go now, me

  • Report this Comment On March 31, 2012, at 7:48 AM, voelkels wrote:

    Oh, by the way, in case y’all don’t know, a barrel of oil contains 42 U.S. gallons nor 55 gallons that is in a standard U.S. drum.

    C.J.V. - iffen y’all wants to do some math

  • Report this Comment On March 31, 2012, at 2:37 PM, 1022ThirdAvenue wrote:

    #moneytrail

    You asserted that:

    "Also, when President Bush announced the opening of drilling on Federal lands the price of petroleum plummeted from $148/barrel to below $40/barrel in 9 months. Maybe the price fairy caused that drop?"

    It is amazing how many of the comments to articles on Motley Fool have become seriously disconnected from either facts or reality. Rather, many of these comments have become political rants full of tempest but of no value. With regard to the comment made by moneytrail and quoted above, let us consider the following facts:

    During the epoch over which the rapid price decline, to which "moneytrail" eluded, occurred, the S&P100 index, the S&P500 index and the DJIA all dropped a commensurate amount as did the price of West Texas Intermediate Crude. Remarkably, the price of North Sea Brent Sweet Light also dropped a commensurate amount. A reasonable explanation for the rapid drop in the price of West Texas Intermediate has nothing to do with W opening federal lands for drilling. Rather, the drop might have had something to do with the little financial crisis that was in full swing.

    A second inconvenient fact is that it takes many years to develop a large swath of land as oil fields and to bring that oil to market. In support of this assertion, I point to the time that it has taken to bring the North Dakota fields into operation and marketing of that oil. The boom times for drilling has occurred over the past few years but developing those fields from zero has taken a long time. To further back up my assertion, I point to the well thought through articles and commentaries on the recent findings of oil in Northern Kenya.

    For the argument that "moneytrail" makes to be anywhere near valid requires that the market believe that the commodity is overpriced by a factor of four and that information regarding the possibility of more oil coming online in a decade will immediately drive the price from the neighbourhood of $150 to $38. I am no expert in the markets, but even I can see that such an argument makes no sense. Also, if the argument that "moneytrail" makes were correct, then the price of West Texas Intermediate should have remained in the neighbourhood of $38/bbl rather than increasing to the neighbourhood of $105/bbl and that the price of North Sea Brent Sweet Light would have remained above $128/bbl the entire time since late 2007. The facts just do not align with the argument made by "moneytrail"

  • Report this Comment On March 31, 2012, at 7:29 PM, bobbyk1 wrote:

    Thank you 1022.I didnt have the energy.

  • Report this Comment On March 31, 2012, at 8:58 PM, tomjtoon wrote:

    Interesting article. I agree with the analysis. I traded in my Camry Hybrid @35 mpg for a Prius Hybrid @ 50 mpg, a 43% increase in mileage, and a resultant savings in my transportation expense. As a real estate sales person on the road most of the time, the savings are significant.

    If folks are not willing to modify behavior at a micro level, we will never achieve our macro goals.

  • Report this Comment On March 31, 2012, at 11:23 PM, geezer27606 wrote:

    We should fire OPEC. The world oil market is rigged by and for the benefit of OPEC.

    We have enough domestic oil resources to be self sufficient for a century or more if we choose to develop them. We do not have enough to supply the whole world. We can use tariffs to control oil imports and exports to isolate the US from the OPEC controlled market. A free US oil market can deliver gasoline for less than $2.50 a gallon by 2020.

  • Report this Comment On April 01, 2012, at 8:30 AM, Woshinsky wrote:

    Waste not - Want NOT

    We need to waste and use less - lots of ways to make this happen. We need more companies to allow "work from home" - with the technology now available a lot of professionals do not need to be in the office to do what they need to do and likely be more productive.

    Also we need to eliminate stopping during commuting to work. Regulate main roads to heavy work areas so that red lights are eliminated during "rush" hours.

  • Report this Comment On April 07, 2012, at 11:16 PM, fractalshift wrote:

    While it is true that any drilling, transporting or technology breakthroughs would have no effect of the short term supply of oil, they would have an immediate affect on market sentiment. Emotion (yep, good greed and fear) are powerful drivers in both economics and...dare I say...politics.

    Opening up the shale fields, the trans Canada pipeline or Anwar would cause a shift in traders sentiment...and since a large part of the price runup is based (not on the credits and debits of global demand vs available oil reserves) on sentiment and the activities of algorithms leveraged by speculation the shift in prices could be instant and irrevocable.

    There's gold in them thar hills!

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