The Price of Oil/Gas and why

[robwbright]

It hasn't really risen - the dollar has dropped in value thanks to the fed printing more and more paper money that's not backed by anything - from the American Geological Institute:

""The steep increase in the price of crude oil in the United States remains a headline issue, along with the falling US dollar. The drop in the dollar has caused concern in oil-producing countries which use it as the economic basis for the commodity, and often their currency. The chart below shows the spot market price of crude oil per barrel (BBL) in US dollars and in euros from 2001 to today. The price of oil has grown faster relative to the dollar than to the euro. Yet, a portion of the rise in oil prices is due to the fall of the value of the dollar. The graph also shows the number of barrels of crude oil per cost of an ounce of gold, demonstrating the parallel growth in commodity pricing.

If the US dollar had remained strong in the global economy, oil might, in theory, be around $65 per barrel. However, oil is priced in dollars, and oil prices continue to rise. The impact of increased oil prices can not be ignored in the US economy, and, in turn, can further weaken the dollar. Resource economics is a complex feedback loop where today’s resource boom is driven by many external factors."

Republican longshot candidate Ron Paul has talked about how monetary policy, as much as energy policy, is behind inflationary problems like the run-up in oil prices."

My comment - if the dollar was backed by gold (as it was decades ago), we would be paying the same amount for oil as in 2001 - see graph for proof.

Thanks for the $3.50 regular unleaded, Federal Reserve! :bang:

 

[BigRedAF]

Lots of oil in Iraq that's supposed to be paying for the "War on terror".

Were we lied to again? :bang:

 

[XRpredator]

My comment - if the dollar was backed by gold (as it was decades ago), we would be paying the same amount for oil as in 2001 - see graph for proof.

Thanks for the $3.50 regular unleaded, Federal Reserve! :bang:

So, you're saying it's all Nixon's fault.

 

[Ol'89r]

So, you're saying it's all Nixon's fault.

:cool: You betcha big guy. :nod:

We can all thank 'Tricky Dick' for eliminating the gold standard. :(

 

[knowiam]

and then there's this....

Diesel Fuel- $4.29/gal. Lake Forest, CA. 4/16/2008

Fed Tax: $.24/gal
State Tax: $.18/gal
Local Tax: $.34/gal

I have to ask...What's in it for me?.... My roads are still as bad as ever!

At least I got my MPG [13mpg] :rotfl:
Ken

 

[rickyd]

Thanks for the $3.50 regular unleaded, Federal Reserve! :bang:

Where???? I just paid $3.93 regular unleaded. Saw Diesel for $4.39 :think:

 

[mudronin]

I live in an oil producing state! yet I still pay the national average or maybe a penny or 2 less. Much of the problem is not the oil as the refining capacity. In Tulsa, they shut down 4 refineries(I think that is what was reported mid-year '07) in the lat 70s early 80s and were moved to the Houston area for the port access.

You can never fully trust any news cast though. Point being its been years since the EPA allowed a new refinery to be built after the moves.

I agree on the gold standard and its impact on the dollar value. I trade currency on occasion and it has been very drastic over the last 2 years.

 

[MSB22]

its all bs everyones getting poorer and the oil companies are building palaces :D...


im about to start riding a bicycle to work and the only thing there gonna get from me is gas for my ktm, getting a little ridiculous

 

[J-man]

i told my family that its about time we all get little honda trail 90's to ride to work everyday.

 

[ignition retard]

Consequences of the nature of man. Perhaps learning about sustenance farming would be a prudent choice for the future. I'm still hoping Ron Paul will win.

 

[tyler_43]

gas is still cheap when you consider how much people pay for a bottle of water...

 

[XRpredator]

gas is still cheap when you consider how much people pay for a bottle of water...

or a case of beer

 

[robwbright]

If you recall, FDR confiscated all gold from Americans. The Fed Gov's tearing down the gold standard started long before FDR. The initial problem was the creation of the Federal Reserve in 1913.

As I recall, over on the political forum I predicted serious problems with oil prices as a result of Fed monetary policy and the Iraq war 3 years ago - and I was ridiculed by some.

Refusal by the government to obey sound financial principles will continue to degrade the value of the dollar and will - if continued long enough - lead to a depression in this country.

its all bs everyones getting poorer and the oil companies are building palaces. . .

True - everyone is getting poorer. However, that's not the oil companies fault - you need to look elsewhere for that - you might want to try starting with your Congressman.

From here:

http://mises.org/story/2940

The profit margins of a few selected industries are as follows:

Periodical Publishing 24.9%
Shipping 18.8%
Application Software 22.5%
Tobacco 19%
Water Utilities 10.2%
Major Integrated Oil and Gas 9.5%
Hospitals 1.4%
Drugstores 2.8%

My comment inserted: While it's true that they sell A LOT of gas, the profit margins are not that high.

Article continued: Gas prices are up and oil executives are once again testifying before Congress. Clearly, many politicians, pundits, and consumers lament the rising cost of gas. Before we join them in their chorus, let us take a step back and ask this question: Are gas prices really all that high?

A change in price can be a result of inflation, taxes, changes in supply and demand, or any combination of the three.

First, we need to take into account inflation. The result of the Federal Reserve printing too much money is a loss of purchasing power of the dollar: something that cost $1.00 in 1950 would cost about $8.78 today. (Note: That's caused by the dollar not being backed by anything - i.e. gold, silver, platinum, whatever. . . Increase the money supply, decrease the value of each dollar.).

As for gas prices, in 1950 the price of gas was approximately 30 cents per gallon. Adjusted for inflation, a gallon of gas today should cost right at $2.64, assuming taxes are the same.

But taxes have not stayed the same. The tax per gallon of gas in 1950 was roughly 1.5% of the price. Today, federal, state, and local taxes account for approximately 20% of gas's posted price. Taking inflation and the increase in taxes into account (assuming no change in supply or demand) the same gallon of gas that cost 30 cents in 1950 should today cost about $3.13.

Neither have supply or demand remained constant. The world economy is growing. China and India are obvious examples. At the same time, Americans continue to love driving SUVs and trucks. As for supply, we are prohibited (whatever the reasons may be) from using many of the known oil reserves in our own country. Furthermore, due to government regulation, the last oil refinery built in the United States was completed in 1976. In addition, the Middle East is politically unstable which leads to a risk premium on the world's major source of oil. It is obvious that the demand for oil has grown while supplies have been restricted.

(Again, thank the Fed Gov for restricting the supply.).

The average price of gas in the United States today is approximately $3.25. The question is, why are gas prices not higher than they are?

The water utility industry has higher profit margins than major oil and gas firms! Why isn't every CEO with profit margins above that of the oil companies made to testify before Congress for "price gouging"? Clearly, greedy corporate profits are not the issue.

Again, while just over nine percent of the price of a gallon of gas goes to oil company profits, approximately twenty percent of the price of a gallon of gas is composed of federal, state, and local taxes.

Those who want the government to step in and do something about the high price of gas are either forgetful of recent history or too young to remember the oil crisis of 1979. During that time, restrictions on the price of gasoline led to the inability of some to find gas at all. Price ceilings always lead to shortages. The only thing worse than having to pay "too much" for gas is not being able to find gas at any price.

Let us not be swayed by politicians out for power or by reporters out to create news where none exists. Facts and economic logic should prevail rather than rhetoric.

 

[Shaw520]

or a case of beer

Case of beer - $15 = have fun all night
4 gallons of gas - $15 = almost getting to work.
:bang:

 

[ignition retard]

If you recall, FDR confiscated all gold from Americans. The Fed Gov's tearing down the gold standard started long before FDR. The initial problem was the creation of the Federal Reserve in 1913.......

.........

Let us not be swayed by politicians out for power or by reporters out to create news where none exists. Facts and economic logic should prevail rather than rhetoric.

Here here. I'm with you 99% accept that oil supply is of course decreasing much faster than new reserves are found. The ability to extract it has however become more efficient offsetting the decrease. Search "Huberts Curve". Other than that you are right on, but I think your waisting your time on a lost cause, the federal reserve will ruin this country. It can't be stopped, Ron Paul was our last hope now there's none, were just along for the ride.

 

[knowiam]

The profit margins of a few selected industries are as follows:

Periodical Publishing 24.9%
Shipping 18.8%
Application Software 22.5%
Tobacco 19%
Water Utilities 10.2%
Major Integrated Oil and Gas 9.5%
Hospitals 1.4%
Drugstores 2.8%

I am thinking that if the profit margin [for oil] stated above were a dog....that dog would not hunt.

How is it possible that the margin could be so low [and expenses so high] for an industry whose collective profits are measured in 100's of BILLIONS? [2006 major integrated Oil and Gas profits reported as $101 billion]

Either, I don't get it.... or, I'm not buying it!

Ken (tired of EXPERTS P'n on my back and telling me it's raining)

 

[XRpredator]

Either, I don't get it.... or, I'm not buying it!

No, you *are* buying it. Along with everyone else in the world.

 

[Jaybird]

Unless we stop bowing down to the environmentalist lobbying groups, and pull our heads out of our asses, this thing will have no end.

It is simple to me...reduce regulations...ridiculous regulations. And allow oil producers to actually invest their profits in ANY WAY THEY SEE FIT. Just like other industries do.
And stop looking at the profits of an oil producer and screaming how much they make, and how bad they are raping us, unless you actually have a grasp of their industry.

And the gov stepping further into the muck and mandating 40 mpg automobiles is a big mistake. Only fools advocate such mandates. Fools, or those who haven't the slightest clue as to what supply and demand entails.

The free market, a TRULY free market, is the only answer.
Government regulation, mandates, taxation,and left wing lobbying are the downfalls of our society, be it the oil industry or any other industry.

This stuff gaulds my ass. Especially when I see a presidential candidate run a commercial on TV throwing down on an oil company by name, and trying to create more unrest by explaining how bad it is that they make so much profit. Good grief.
Pinheads speaking to pinheads is all I can say. That particular candidate couldn't explain one bit of the industry to you or I. But then, none of the current ones could.
Pinheads one and all.
SO, I feel we are in deep fecal matter, for a few years anyway.

And no, I didn't read any of the previous posts.

 

[kiwijohn]

I heard a recent radio article on a Kiwi woman living in Iran who said the locals were up in arms as the petrol price had doubled in the last 2 months to .... wait for it........ 11 cents a litre (thats about NZ$1.00 a gallon or US$80 cents a GALLON.)

Our gas is just on NZ$2.00 a litre or NZ$8.00 a gallon so that mkaes it about US$6.40 a US Gallon. NZ prices have always been high for gas as we live in the middle of nowhere, but still - it makes me very pleased I have a company car! (for now.....:( )

The oil situation has creases and folds that we will never ever know about, but one thing is for sure - it's not going to get any better.

 

[Isobareng]

a couple of gas/oil trivia items

15% is the amount of oil the USA gets from all the Arab states combined

the bulk of our imported oil comes from Canada

oil is traded on the world market just like rice or wheat as a commodity

speculators at the stock exchanges have driven the price of oil nearly 30%

oil companies make 5 to 9% profit margin

In the top 10 oil companies none are owned by USA firms

hope this helps

D

 

[KRTRider]

4,29 $/gallon for diesel fuel???

We pay 8,25$ per gallon.... :(

 

[jasonent0613]

i want the black dude to win.

 

[2-Strokes 4-ever]

^^^ Stewart should be back for the Outdoor Season. ;)

 

[KRTRider]

:rotfl:

 

[kiwijohn]

Oil price hit US$122.00 per barrel today.....