gas prices, take 2 Options

[scotty914]

okay with the hurrican i have been watching a lot of fox news. according to opec they will pump more oil to help. here is the crazy part opec is going to hold a meeting next month to figure out why gas prices are as high as they are, they stated the opec pumps and sells the oil at 12 per barrel.

so who ever is buying the oil at 12 per barrel is marking it up to a current price of 67 a barrel, i wonder if this is along the lines of enron, artificially marking up the oil.

i have read a few things lately about oil wells, some thing like 70 % of the wells that were dry 10 to 20 years ago now have oil in them again, and but that they mean full flow pumping, not partial.

right now there is a 55 billion gallon oil surpluse ( just heard it ) in storage in this country.

[lapuwali]

The main point of that graph was to show that, until very recently, the thing driving the oil prices up for the past several years has simply been the price of oil catching up with normal inflation. If the price of oil exactly matched the rate of inflation, the red and black lines on that graph would be the same. Where the black line is below the red line, oil is unsually cheap, and one should expect the price to rise eventually. Where the two lines are close together, the price of oil can simply be explained by the same macroeconomic factors that drive ALL prices up. This has been true for several years now. Very recently (the past couple of months), the price of oil has risen faster than inflation, which suggests it will either fall again, or inflation will rise and overall prices of everything will rise to meet the oil price. Since the price of oil is, to some degree, factored into the price of most everything else, the latter case is most likely.

We're basically just paying the price now for years of having excessively cheap oil, and prices have caught up with what they should have been all along. The only thing that would keep oil cheap relative to inflation long-term would be the cost of production falling for factors like technological innovation, or an increasing supply, or a decreasing demand. If you look at actual histories of proven reserves, they've actually INCREASED over the past 20-30 years (I wish I had a graph for this). Despite rapid increases in demand, we keep finding more oil OR we discover newer cheaper ways to extract oil we knew about, but couldn't reach (or couldn't reach economically). Also, as the price of oil goes up, we paradoxically increase the proven reserves, as it suddenly becomes "economic" to extract oil that was uneconomic yesterday at lower prices. Many Texas oil fields shut down in the early 80s as the price of oil fell back off the artificial peaks created by OPEC in the early 70s. This crippled the Texas economy for years. The oil is still there, it's just too expensive to pull out. Oil prices have to rise substantially above inflation for awhile before Texas becomes a major oil producer again, or we have to dream up some newer, cheaper way to get it out. It hasn't, so Texas is still sitting on a lot of oil no one is willing to pull out of the ground.

This is a fact lost on the guy that keeps trying to "prove" that we're near or just past the "peak" for oil. This same guy first predicted the peak would be in the 1970s, and has been slowly pushing his peak forward every few years. I'm sure I'll be in the ground for a long time before we actually reach this peak.