About Oil Prices

Waylan Johnson asked:


Austin, TX – (January 22, 2009) Oil is the lifeblood of modern civilization and almost has single-handedly made industrial civilization possible. We are more than just dependent on oil, we are addicted to it. And despite countless attempts to render it less important, no suitable energy substitute is anywhere close to being found.

The roots of our dependence on oil go much deeper than our reliance on gasoline, fuel and heating oil. Petrochemicals, or substances derived from petroleum, are important in almost everything we eat, wear and use. Here are just a few items to consider: pesticides; fertilizers; detergents; food additives; tires; nail polish; lipstick; pillows; and even ink.

Global Demand for Oil

With the global demand for oil continuing to grow, have you considered investing in oil and gas with a self directed IRA? It could be an ideal way to grow and produce yields for your retirement with a producing well. It’s no wonder global demand for oil continues to rise, year after year. And amidst this incessant thirst for more, the leading producers around the world are watching their production levels steadily decline. As this occurs, the basic economic forces of supply and demand take charge. This fundamental economic principal has been the principal influence over prices throughout history and remains the driving force behind rising oil prices of late.

Increasing Demand

The United States is the third largest oil producer in the world. But we’re the single largest consumer, producing 8% of the world’s oil and consuming 25%. The United States consumes much more oil than we produce – a trend that is expected to continue well into the foreseeable future. As our demand continues to rise while our production simultaneously continues to decline, the ever-widening gap creates an inexhaustible rise in our dependence on foreign oil imports. And the United States’ crucial dependency on foreign oil imports makes us very vulnerable. Unfortunately, there are but two viable means of reducing our dependency on foreign imports. The first is to reduce our oil consumption. So far, this one shows very little promise. The second is to increase domestic production. This one does have potential.

Tax Incentives

In an effort to stimulate domestic natural gas and oil production financed by private sources, Congress provided tax incentives in the 1990 Tax Act that significantly enhance the economics of investing in oil and gas. But these incentives are not “loop holes.” They were placed in the Tax Code by Congress to make participation in oil and gas ventures one of the best tax-advantaged investments available. Of course, the primary reason to invest in oil and gas drilling ventures isn’t for the tax benefits. It’s for the profit potential.

Profitable Ventures with Your Self Directed IRA

The ability to extract oil and gas from the ground at a fraction of today’s market prices can make drilling ventures very profitable. And that can have a substantial impact on a portfolio’s overall performance – especially self directed IRAs.

Many investors are surprised to discover they can invest in oil and gas drilling projects through their IRAs. And Equity Trust Company makes it easy through self directed IRA investing. A number of our partners have begun to allocate a portion of IRAs toward drilling projects with notable results.

After all, in today’s environment of plummeting stock prices and failing financial institutions, generating solid portfolio returns can be extremely challenging. It seems like bad news looms around every corner. But drilling profits are not affected by interest rates or stock prices. The kind of bad news that tends to drive stock prices down tends to drive oil and gas prices higher. It can be an ideal hedge against inflation and tragedy, as well as a primary source of income and profits. And the revenue from a good well can pay for many, many years. This can make it an ideal investment for IRAs.



Larry

Duncan Freer asked:


Despite the doom-laden economic picture of a worldwide economy in meltdown, our love affair with oil has not been diminished. In fact, the oil and gas industry is one of the biggest growth industries globally, and the race to find more reserves of black gold continues 24 hours a day.

The price of a barrel of oil has plummeted by more than 60% since July 2008, which is good news for consumers at the pumps but was initially bad news for the oil industry. However, in the UK that cut in profits may have been softened somewhat by new government proposals including tax changes and incentives published as part of the Chancellor’s Pre-Budget Report (PBR). Many North Sea fields have been failing to attract investment as investors tighten their economic belts, leading to a decline in the UK’s production rate and driving the price up. However, the world’s appetite for all things oil-based is constantly growing, so a more pragmatic approach is being taken by oil companies. Their positive attitude flies in the face of the initial knee-jerk reaction to the economic downturn, where panic caused companies to halt exploration projects in anticipation of tough economic times ahead. The oil companies have now realized that this was a short-sighted reaction, and production has geared back up again, prompting an upsurge in offshore drilling jobs and other oil careers. People will always need oil…

The surge in oil prices to a record high of $147/barrel benefitted high-cost areas such as the North Sea. Since then prices have fallen by almost $100/barrel, partially due to a drop in world demand as oil-hungry industries geared down for the recession. This drop in prices meant that the industry could benefit from a fall in the cost of raw materials such as steel, but it may take a little while for those reductions in cost to balance the loss in profits faced by oil companies making only $50 on a barrel.

Despite all this initial negativity, the oil industry is bouncing back. Contrary to popular belief, the oil isn’t running out. New fields off the coast of Brazil, Africa, the Gulf of Mexico and in Asian waters mean that investment in new platforms and methods of extraction are gearing back up. New deepwater drilling technology is making it possible to tap into oil fields that were previously unreachable. Even the North Sea is yielding up new fields, and all of these precious reserves need to be mined by capable and skilled workers. The oil industry is bucking the trend, meaning that jobs throughout the industry are being created daily.

Oil careers, jobs in drilling and ‘downstream’ oil jobs are directly influenced by the number of ‘upstream’ jobs within the industry. These upstream jobs (geologists, drilling engineers, exploration and development engineers) drive the industry forward. Once reserves and new methods of extraction have been developed, the momentum filters down through to mid-stream jobs - those actually involved in working on the rigs themselves. Luckily for everyone involved, the upstreamers have never been busier. Consequently, drilling jobs and other oil careers, both mid-stream in transportation and refining and further down the line in retail and wholesale are boosted by a knock-on effect. The oil industry is a self-perpetuating business, which in an economic recession makes it more resilient to external market influences. In fact, it is the oil industry that will be one of the spearheads that points the world economy out of recession and back into a productive future, post-2009.

Strange as it may seem, there has never been a better time look for a career in the oil industry. The upsurge in exploration and the rapid development of technology has put the oil industry at the cutting edge of worldwide business development. Even in the current economic climate, the oil industry is one market sector that is set to expand.



Gina

Thunderhammer of Shocking asked:


If you pay attention to the lowest values of oil in each particular trough on a typical line graph, you’ll note prices have been rising slowly.

I acknowledge that oil prices fluctuate, but i’m paying specific attention to the lowest values in each particular year.

Shane

8***L asked:


I heard people giving Obama credit for the drop in the price of oil - fine, what did Obama do specifically to drop the price of oil.

I think most people will say that the President had nothing to do with the drop in the price of oil - that’s fine - then what specific act or decision did Bush take to increase the price of oil?

I’ve heard all the generalizations before, about Bush being an oil man, etc and all the fancy bumper sticker slogans - but what one specific action did Bush take to raise oil prices over the last few years?

Bryan

hmmmmmmmm asked:


Do oil prices go up with a weakening dollar because imports are more expensive? Also, what do people mean when they say oil is traded in dollars (as in what are the ramifications of that)?

Derrick

Jason Birnbaum asked:


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Volatility

Due to a record demand for oil throughout the world, increasing political tensions surrounding Iran’s nuclear program and various other global and local issues, crude oil prices have been breaking new records on a quasi-daily basis. In recent years, the high volatility of crude futures has made crude oil trading an investment with an extremely interesting potential return.

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Francis

Parisa B asked:


How serious of a threat do you consider the rising oil prices to be for the US global status as the strongest economy in the world?

Todd

Christopher Smith asked:


Tired of getting hammered every single time thanks to crazy high gas prices? Me too! The current price of oil is front page news with headlines screaming about the latest record in oil prices. And most worrisome of all, according to the headlines, this is just the tip of the iceberg. How much will it be then?

So who is responsible? Lets examine some of the reasons why you are getting the raw end of the deal and having to shell out more at the pumps.

The oil price shell game is wrecking the lives of millions of people. Is the pressure in Middle East at fault? Is it Big Oil companies who are laughing all the way to the bank while your budget runs on empty? So who do we have to thank for these wild price swings? Is it due to a battle between traders going short or long on oil futures contracts at Big Banks? Is it all connected to the Alberta Oil Sands?

The most frequently heard answer is that there has been a huge increase in the demand for gas thanks to China and India’s explosive growth. Countries that produce oil can’t keep up with demand. Even Saudi Arabia recently announced that it was increasing supply to counter demand, and the market yawned.

Is an ounce of truth to this argument? For sure. Is it the Absolutely not.

The economies of amazing during the last 6 years which has lead to an increased demand for oil. The truth is, the US accounts for about 4.5% of the world’s population, and 25% of the world’s consumption of oil. Though, that’s not the real explanation for oil’s price increase.

The demand for oil of course hasn’t increased by 100% like the price of oil has over the last 12 months. What’s wrong with this picture?

For nearly a generation, the US dollar has influenced the price of commodities. A strong US dollar usually resulted in lower gold and oil prices. The dramatic weakness in the price of the US dollar has lead to commodities hitting new highs. Commodities are priced in US dollars and move to balance changes in value of the US greenback.

A lower US dollar has resulted in both oil and gold shifting up in price, resulting in you getting burnt at the pumps. Since September 2007, Fed Chairman Ben Bernanke has dropped interest rates 7 times, with the largest cuts happening in 2008. During that same timeframe, the price of oil has moved from $69.26 in September 2007 to $110 in April 2008 when the last cut was made. Today, oil is around $130 a barrel.

This provides an explosive mix for drivers. Hard working Americans are paying the price at the pumps for a devalued dollar thanks to Mr Bernanke. Lower interest rates were meant to help the banks in light of the housing crisis. Instead, it helped to lower the value of the US dollar and by effect, increasing the price at the pumps.



Allen

Did You Get That Memo? asked:


What happened? Why did those price fixing fat cats in the executive suite at Big Oil and those evil speculators buying oil futures contracts take their foot off of the neck of poor little consumers and let oil prices collapse? Surely prices haven’t come down because economies in recession use a whole lot less oil, right? Like in 1998, when oil prices collapsed together with Asian “Tiger” economies?

Eddie