About Oil Prices

Dylan Sun asked:


World crude oil futures prices set a new record close Tuesday on supply concern despite the world’s major oil producers decided to raise their daily output. Light, sweet crude oil for October delivery rose 74 cents to 78.23 a barrel on the New York Mercantile Exchange. The former highest-ever settlement price for a front-month contract was 78.21 dollars a barrel, set on July 31.

OPEC, which produces about 40 percent of the world’s oil, agreed late Tuesday in Vienna to boost its crude oil output by 500,000barrels a day, which would take effect on Nov. 1. OPEC officials said the agreement would add oil to current production levels over their current 25.8 million barrels per day quota ceiling.

However, the cartel’s move could not ease investors’ worries that the current oil production would not be enough to boost thinning world inventories. “The fact that OPEC indicated that it would boost oil production by additional 500,000 barrels makes great headlines, but is unlikely to achieve the stated result of meeting demand,” Wall Street Strategies’ senior research analyst Conley Turner told Xinhua. “Even though the cartel is saying that this production increase that will commence in November, the reality on the ground is that production is already at full throttle,” Turner pointed out. “In fact, many members are already producing beyond their quota so an extra half a million barrels is really not going to have a meaningful impact on satisfying demand especially as winter approaches,” he added.

The demand for oil is increasing. Oil is playing more and more important part. Oil prices have been risen 27 percent this year and have tripled since 2002 as investors buy into growing consumer demand, real or potential supply disruptions in producers such as Nigeria and Iran and infrastructure constraints such as a lack of refining capacity.

The U.S. Energy Information Administration, the Energy Department’s reporting arm, warned Tuesday in a monthly report that tight global energy supplies are expected to keep energy prices high through 2008. According to the U.S. Energy Department, global petroleum consumption will probably increase 1.27 million barrels to 85.7 million barrels a day this year while demand will rise by 1.51 million barrels, or 1.8 percent, to 87.2 million barrels a day in 2008.

World oil production is expected to average 84.64 million barrels a day this year, up 14,000 barrels a day from 2006, according to the department. Output is forecast to rise by 2.42 million barrels to 87.1 million barrels in 2008.

Roy

Pakcik Kantin asked:


The oil prices is rising again and again. Most of our daily process relies on oil. Will there be rise on properties, market, food . What can we do to prepare for this hike?

Lynn

Jordan Christopher asked:


No doubt about the pawns in this international game of chess. The general public, the six pack majority, the middle class, the poor, come to think of it about anyone without a major financial interest in oil fits the Webster’s definition of a pawn; “a person used to advance another’s purposes.

So if most of us are pawns who are the kings? Think about it. If you believe Congress, the news media (at least the broadcast news media), the administration and the analysts you can pick between the major international oil companies, oil producers, China, or the gas guzzling Americans. There is no agreement and it is almost as if there is no thought about it.

The oil companies and oil producers are making record shattering profits. Are they the only ones benefiting from the astronomical profits being made in the oil industry? Hardly! No the river of greed flows in many directions including the financial houses underwriting the oil business and managing their money who also provide the depressing analysis that seems to drive the price up every day.

So why aren’t the network news people or our elected representatives in our nation’s capitol asking questions about it? Americans have reduced their use of oil. The inventories in America are the highest in years. Future demand is certain to go down with the 40% increase in hybrid cars and reduced driving. Weather has been warmer than normal thus reducing heating oil demand. Every economic indicator says the price should be dropping, not rising to record highs.

Where are the outraged congressmen, senators, presidential candidates, governors and media, the so-called protectors of the people? Are they for real? Or are they simply in the pocket of the kings of the oil profits, the oil barons of the 21st century? Well the campaign contributions seem to indicate they have been bought off. So do the millions of dollars being spent on advertising by oil related industries.

The price of oil is set by two things primarily, the policies of OPEC, the Organization of Producing Countries, and the oil futures markets of which one of the largest is the London futures exchange. Saudi Arabia controls OPEC and Saudi Arabia has just said it will do nothing to reduce the price of oil. Thank you and goodbye.

Of course Saudi Arabia is one of the prime beneficiaries of the war in Iraq financed by the USA at a cost to date of about $500 billion, yes 500 billion dollars according to the Congressional Budget Office. The same Al-Qaeda terrorists after us hate the Saudis even though Osama Bin Laden is from Saudi Arabia. He says the Saudi kings sold out to us. More likely they sold out to the oil and finance companies.

Then there are the oil futures markets. The International Petroleum Exchange of London was one of the largest in the world but in 2001 a company that had been formed just a year earlier, a company called InterContinental Exchange (ICE), purchased it. How could one of the largest futures exchanges in the world be taken over by a relatively unknown company?

The company was taken over by 13 equity investors when it began and the gang of 13 has made ICE into one of the most profitable operations in the world buying and selling oil and other commodity futures. Who were the 13? Three of the largest oil companies in the world – Royal Dutch Shell, BP Amoco and Total Fina Elf, two of the top investment banks on Wall Street – Goldman Sachs and Morgan Stanley, two of Europe’s leading financial institutions – Deutsche Bank and Socit Generale, and six US energy companies – American Electric Power, Aquila Energy, Duke Energy, El Paso Energy, Reliant Energy and Mirant.

Now ICE claims over 300 companies are equity owners. ICE is doing what it is intended to do, making a lot of people and companies very, very rich and ICE has no responsibility for what happens to the pawns at the other end of the energy network. Note that Shell and BP both had record profits the 1st quarter of this year. No one should be denied the right to make profits, even outrageous profits, as long as they were made using fair business practices.

So what about the investment banks and financial institutions owning part of ICE? Could that cause any problem? It depends on whether these institutions use their own analysts to try and manipulate the oil futures market and elevate the price of crude oil. When an analyst specializing in oil goes on TV and says the weather or war or the unstable economy in America is driving up the price of oil and we should brace ourselves for $4 a gallon gasoline, the oil price goes up.

If that analyst is from one of the many investment banks or financial institutions owning equity in ICE, and their analysis sends the oil price in an upward spiral, then one wonders if a conflict of interest may be present. What is Congress or the FTC or SEC doing to check on the potential for conflicts of interest between oil producers, financial institutions and the futures market? Does anyone even care?

Well hopefully when the presidential candidates are accepting the millions of campaign dollars from these industries they are not making promises to continue to ignore what is devastating to the Pawns across America and the world.

Karen

Entrepreneur asked:


So the oil price fell today to 69.50 as I predicted it would go back down. But what do you think about the oil will it go down or up. I am predicting up with hurricane season coming up and we are on the brink of going to war with iran. The question is how high do you think it will go? $80 $100 dolars a barrel?

Johnny

dragonfly9151974 asked:


A law just passed the house that would impose heavy fines on oil companies for price gouging.

Jeanne

Richard Stoyeck asked:


It has been announced that British Petroleum had to shut down an Alaskan oil field providing 8% of US crude oil production. Oil prices on the world market immediately surged to within pennies of their all-time high. What’s really going on? For an answer I look back to former President Richard Nixon. Privately Nixon who was smart, and as shrewd a man as any President in history use to talk to his friends about if there is a dollar to be made somewhere, than somebody is making it.

It does seem strange that for two consecutive years, the large multinational oil companies have had greater earnings, and free cash flow than in any period in history. At the same time, giant British Petroleum is clueless that they have corroded pipes that are about to take down 8% of America’s oil production. There is a dis-connect here of massive proportions, and nobody is thinking about it.

We all know the airlines are suffering. When you are hemorrhaging money, and the revenue just isn’t coming in, it’s really tough for a company financially to maintain the maintenance programs that are vital to keep an airplane flying. This however is not the situation that British Petroleum or the other major multinationals find themselves in. The oil companies are PRINTING MONEY. They don’t call oil “BLACK GOLD” for nothing.

Why would any oil company choose to skimp on maintenance? Why would BP be this dumb in their managerial policies? They have allowed a massive, and important pipeline to experience corrosion to the point where it has to be shut down? Listen up, when airlines fly a 747 airplane; each and every plane has to have its oil changed every so many miles or hours. The engines have to taken off the plane, and rebuilt every so many miles or flight hours. This is why planes are far more reliable than cars. The airlines make sure that this maintenance gets done or the Federal Aviation Agency will shut them down, no questions asked.

The President of the United States tours the world in Air Force One, which is a glorified version of a 747. The President actually has two of these planes identical to one another.

The President’s planes are put on what’s called a “White Glove” maintenance program. What this means is that the manufacturer, in this case Boeing wants the oil changed, and the engines ripped down every so flight hours. There are also scores of other items that must be done as well. Whatever the schedule is for whatever procedure, White Glove maintenance means the schedule is chopped in half. If Boeing wants an engine ripped apart every 500 hours, for Air Force One it’s every 250 hours.

What’s British Petroleum’s excuse for not maintaining the pipeline in a period of unprecedented earnings power, and monstrous unrestricted FREE CASH FLOW? It’s certainly not stupidity. I have been involved with oil and oil stocks since 1978, and I am telling you that the people in the oil business are some of the smartest people on earth. Do you know how much oil a supertanker holds? These tankers can hold up to 2 million barrels (that’s barrels, not gallons) of oil. The typical loss or spillage loading, and unloading a 2 million barrel tanker is no more than ONE TEASPOON of crude, that’s how efficient these processes are.

It is unthinkable that a modern management team would allow a segment of the Alaskan pipeline to corrode. Corrosion is like metal fatigue in a helicopter. You don’t wait for metal fatigue to become critical before dealing with replacing parts on helicopters. Today’s chemical engineers know exactly how long it takes a pipe to corrode. The oil industry has more PhD chemical engineers than any industry on earth, and these guys are not asleep at the switch. It is up to you the reader to figure out how this happened, or could have been permitted to happen?

Oil is priced at the margin. This means, today’s price is determined by the price of the last barrel that needs to be sold. It is not an average price, it is a marginal price. We are right now at the cusp of where demand equals supply. Even if you could bring another ten million barrels onto the market daily, we don’t have the refining capacity to refine it. The last refinery in this country was built in the 1970’s.

The Wall Street Journal reported in its cover story of August 8, 2006, that the oil industry “….has been stymied in putting in ….new refineries, by intense public opposition”. This is absolutely untrue. I have not met an oil man (including CEO’s of the majors) in the last ten years, who has expressed any interest whatsoever in creating a new refinery in this country. Big oil doesn’t want to create new refineries.

As far as our leadership in Washington DC is concerned, this country has not had an oil policy in 30 years, thank you very much. If anything, America’s policies on oil, have been dictated by oil lobbyists paid to do oil’s bidding. The oil companies are not responsible for the high price of oil. OPEC sets the price, and big oil just tacks on their piece, and oh what a piece.

Francis