Is oil a bubble or not? Thoughts?

Discussion in 'Politics, Religion, Social Issues' started by dukebound85, May 7, 2008.

  1. dukebound85 macrumors P6

    dukebound85

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    #1
    Im in one of my crazy moods where I am looking up stuff that just is well problems to our economy

    I cam across this article which I thought was interesting
    http://www.star-telegram.com/ed_wallace/story/541726.html

    What are your thoughts on it? I have always thought that the media is largely responsible for rising prices to some extent. I mean serioulsy, nothing good can come from forcasting higher prices and doomsday reports. It just demoralizes the people

    When these writers say oil will go to 200 and the like, well doesnt that help drive it to those prices? would it have gotten there if they didnt forecast it?

    In my opinion, doomsday articles should be looked at....i dont know about illegal but something should be done

    My other question/thought/hatever is that while i believe in capitalism, oil is a matter of national security in the sense it is what fuels our economy. Should the government step in and make the oil industry a "state" institution? much like how public utilities are in a sense?


    What are your thoughts?
     
  2. Keebler macrumors 68030

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    #2
    i agree. i find it suspicious that oil becomes a big deal and it suddenly goes way up. i think the war in Iraq doesn't help b/c they're using a ton of fuel over there.

    i also remember a quote from a good buddy after we had just finished talking about the news:

    "ya know, if you don't read, listen or watch the news, the world is an a-ok place."
     
  3. herr_neumann macrumors 6502

    herr_neumann

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    #3
    Oil will continue to rise as developing nations demand for oil continues to rise. The days of cheap oil are over. Nationalizing the oil industry will do nothing to change this as we do not have the capacity to meet out demand.

    You want to save money at the pump then buy a more efficient car.
     
  4. dukebound85 thread starter macrumors P6

    dukebound85

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    #4
    did you read the article? its talking about speculation. demand in the us is decreasing as reports have shown

    once we figure out how to get a cost effective way of getting oil out of shale and such, the oil industry will change to accomodate that
     
  5. bigandy macrumors G3

    bigandy

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    #5
    The increase in demand for oil, and therefore increasing prices can't be blamed on developing nations. Last I heard, the USA was by far the largest consumer of oil, at over 25% of the world's production.
     
  6. Desertrat macrumors newbie

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    #6
    Maybe $20/bbl of today's price is speculation and possibly "bubble".

    Yeah, the U.S. demand is down: Slightly. To offset that, China's demand is continuing to grow at a great rate. They've overtaken Japan as a net importer. India, also, is right in there for a growing economy.

    U.S. inventories are up: Slightly. But the summer driving season is just ahead.

    In the meantime, oilfield production is declining. New discoveries aren't keeping up with demand or with the rate of increase in worldwide demand.

    There is a squib in this link, http://www.lifeaftertheoilcrash.net/ :

    "The real reason no new refineries have been built for almost 30 years is simple: any oil company that wants to stay profitable isn't going to invest in new refineries when they know there is going to be less and less oil to refine."

    Maybe so, maybe no, but it isn't all that far-fetched.

    Mr. Wallace, IMO, has taken disparate and unrelated facts and tried to weave them into a tapestry.

    'Rat
     
  7. KingYaba macrumors 68040

    KingYaba

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    #7
    The military will burn a lot of fuel regardless if they are engaged in conflict or not.
     
  8. Ugg macrumors 68000

    Ugg

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    #8
    Sure, speculation plays a part but to think the rise in oil prices is only due to speculation is short sighted.

    As already mentioned, it's a demand issue. As long as we and everyone else on this planet demands more of it, prices will continue to rise.

    You also have to remember that due to over production in the 80s, oil prices were artificially deflated. Part of what we're seeing is a correction of that.

    Shale oil and the tar sands of Alberta will have no substantial impact on oil prices.

    The US uses roughly 25% of the world's oil, a 1% reduction in America's consumption doesn't come close to the increase in demand from India and China.

    Americans can whine all they want but if anyone thinks that oil prices are ever going to go down....

    The days of cheap oil are over. Period.
     
  9. miloblithe macrumors 68020

    miloblithe

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    #9
    price increases are due to the marginal increase in demand relative to the supply. US demand may be relatively stead, but other demand is increasing. Also, as you point out, the US only consumes 25% of production. If demand among the remaining 75% is increasing, price will go up.

    Look at the growth in demand from a country like China:

    http://tonto.eia.doe.gov/country/country_energy_data.cfm?fips=CH

    from roughly 4.1 million barrels a day in 1998 to 7.2 million in 2006.

    In the same time, US demand rose from 18.9 million to 20.7 million. Therefore China's total increase is nearly double the US increase.

    India 1.8 million to 2.6 million.
    Indonesia .9 million to 1.2 million.
    Vietnam's has doubled from .135 to .27

    so on and so on.

    Here's another way of looking at it:

    http://tonto.eia.doe.gov/cfapps/STE...QuarterChanged=false&loadAction=Apply+Changes

    US demand increased from 19.7 million barrels to 20.7 million barrels from 2000 to 2007, or a 5% increase. World consumption grew from 76.66 to 85.40 million barrels, or a 9% increase. Non-US consumption grew from 56.96 to 64.7, or a 13.6% increase. Non-OECD consumption grew from 28.79 to 36.43 million barrels, or a 26.5% increase.

    The developing world is driving the increases in oil prices.


    From the article:

    What is the cost of increased production and the estimated cost of future production? We are recovering oil from more and more expensive places to recover it from. Oil production in Saudi Arabia costs something like 1/5 what it does in Northern Siberia, for example.
     
  10. zap2 macrumors 604

    zap2

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    #10
    Guess we know what that means we need to do!
     
  11. Eraserhead macrumors G4

    Eraserhead

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    #11
    Oil is definitely not a bubble, as has been excellently explained above. Remember the US != the World.

    The cost of oil does however have little to do with the cost of production, except that if the oil price dropped enough some production might become uneconomic.
     
  12. Music_Producer macrumors 68000

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    #12
    I am not sure about that - yes, demand is increasing but there is actually plenty of supply still available, at least for the next 30 years or so. Speculation is playing a big part in prices for commodities - from oil, to gold, to food products.

    Interestingly, due to the sharp hike in food prices in India (rice, chickpeas, potatoes, etc) they have actually banned trading in food futures! I was amazed at that action - I wonder what would happen if they banned trading in oil futures...
     
  13. Ugg macrumors 68000

    Ugg

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    #13
    There's a big difference between an increase in the supply of refined oil products and oil itself.

    One of the biggest reasons for the current speculation, is the speculation that went on for the last 8 years in US home prices. All that money that started flowing into the world's coffers by the American consumer had to go somewhere.

    We are our own worst enemy.

    The US spends ~10% of its income on food, Europe about 14%, in countries like India, it can go as high as 70%. Since food is essential, it's not hard to understand that "futures trading in food" has been banned. Trying to compare India to the US is simplistic.
     
  14. Music_Producer macrumors 68000

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    #14
    No, I was trying to make a point that like India has banned trading in food futures, maybe the US should ban trading oil futures. We do spend a significant amount on energy - yes, refined oil is different from oil but there's a rush of speculators right now investing in oil. It's just madness.
     
  15. Ugg macrumors 68000

    Ugg

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    #15
    The only real comparison between India and the US is that both are former British colonies with all the baggage that goes along with that.

    What if I said that the best thing the US could do was to nationalize the transportation industry? Trains, planes AND automobiles; as well as all the associated infrastructure.

    How would you react to that?

    We'd definitely see a massive drop in the price of oil, but we'd also see an enormous rise in the cost of transportation, as well as a massive slump in economic activity.

    The US has created its own mess and now it's time to pay the price to clean it up.

    Much of this thread is very reminiscent of an ostrich that sticks its head in the sand.

    The US has made its fortune on the backs of the less fortunate of the world. Now that the rest of the world is beginning to prosper, many Americans seem to think that the best thing to do is circle the wagons and turn the US into the USSR. It's pretty funny that the US can dish it out but can't take it.

    Were you clamoring for US government intervention during the dot com boom? What about during the recent housing boom? Both have enriched the US in a phenomenal way. Wouldn't it be simpler to discourage bubbles in the US before we start attacking other countries?
     
  16. Desertrat macrumors newbie

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    #16
    "The US has made its fortune on the backs of the less fortunate of the world."

    ????

    We certainly invented and/or created much of the technology that's enabled other countries to develop and modernize. We invented the oilfield gear that enables incomes of hundreds of billions of dollars per year to oil exporters--and in many instances it was our geologists who found the formations.

    And we bought and sold at market prices, mostly. We didn't make a career of the invade-and-take as did the European countries a century before our turn on top. Not claiming simon-purity, but our overall record is most generally benign. By the numbers of people voting with their feet, this ol' US of A is still a pretty damned good place to be.

    Aw, well.

    I see that Goldman/Sachs predicts $200 oil by 2010...
     
  17. takao macrumors 68040

    takao

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    #17
    just like austrian VOEST Alpine invented the Basic Oxygen Steelmaking Process in 1952 which now responsible for more than 70% of the steel produced world wide ?

    hm you invaded pretty much everything west of your east coast didn't you ? compare your imperialism to that of russia not to that of spain or great britain
     
  18. solvs macrumors 603

    solvs

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    #18
    You could have posted this in one of the other 3 threads about this. ;) As a matter of fact, I knew that looked familiar, I actually already did. :p Pointing out that while consumption is up 2%, production is up 2.5%, and we could be even better off if they were to build more refineries. Which, even though most of the roadblocks have been cleared, they still haven't. Don't feel bad, no one actually read it when I posted it either. :eek:
     
  19. Eraserhead macrumors G4

    Eraserhead

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    #19
    The problem with that is that in a few years (say 5-10) the oil production will have dropped enough that consumption will have dropped too so it'll be a waste of money.

    Oil is nowhere near 70% of US consumers costs. Its probably closer to 5-10%. India have shelved trading in food futures mainly so that a) the government can control the price. b) it doesn't fluctuate.
     
  20. takao macrumors 68040

    takao

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    #20
    if oil companies really don't want to build more refineries then the situation is obviously worse than you hear

    i know that plenty of companies are still planning on expanding on their earth gas business with new pipelines/factories so could it be that the oil reserves go faster the way of the Dodo ? (with faster i mean before 2030)
     
  21. bigandy macrumors G3

    bigandy

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    #21
    Ok, I see your point - and I agree with you there. However...

    "only 25%" :rolleyes:

    The United States is the third biggest country in the world by population, with 4.56% of the world's residents. It consumes 20,730,000 barrels of oil per day.

    The other top ten countries in the world by population make up 54.19% of residents of this fine (but buggered) planet. Put together, they consume 21,029,000 barrels.

    That's a difference of 299,000 barrels, or put in perspective, around about the same that Nigeria gets through in a day. Another example: the states of Oklahoma or Maryland get through (the 21st and 22nd in the list of US states by oil consumption) roughly the same.

    If Texas were a country, it'd be fourth on the list of oil consuming countries, eclipsing Germany and Russia by almost half a million barrels per day.

    Regardless of oil prices, the US needs to reduce it's dependancy. Hell, California uses more oil than the entire United Kingdom does - and we've gotta change our ways too!

    Where developed nations set an example, developing nations will follow.
     
  22. Cromulent macrumors 603

    Cromulent

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    #22
    I hope not, I make money from spread betting on oil. Although I guess that is slightly different from futures I guess. Still, trading oil is a great money maker at the moment.
     
  23. solvs macrumors 603

    solvs

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    #23
    That's what they said a few years ago. They could start by better upgrading them now. But they do little upgrades and it just gets worse. I don't know, they have to do something. Until then I'm just going to keep complaining, using as many alternatives as I can, trying to conserve as much as I can, and then complain some more.
     
  24. Music_Producer macrumors 68000

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    #24
    :confused: What are you talking about? Or were you targeting that post to everyone in general? I wasn't saying anything about attacking other countries.. to protect the country's interests or the other bubbles. I am of the opinion that the recent spike in oil is mainly due to speculation - funds are jumping in and buying oil futures - add to that Goldman's forecast that oil will reach $200 a barrel - that makes other funds jump in even more.

    The increase in oil price is affecting everyone - globally. I wasn't restricting it to the US, I was talking about the reason behind the spike. You didn't seem to think that speculation played a major part, but I do. I trade the currency markets and watch other financial markets (commodities mainly) and the rush of investments into oil is seriously terrifying.
     
  25. miloblithe macrumors 68020

    miloblithe

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    #25
    Sounds like we're coming from the same angle more or less. The only major way the U.S. has to reduce the price of oil is to cut our demand. Realistically it's not possible because the rate at which we can cut our demand isn't fast enough, but in theory as the largest consumer, if we could cut our demand in half, prices would fall.
     

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