Is OPEC following Enron's example?

Discussion in 'Politics, Religion, Social Issues' started by Saladinos, Oct 24, 2008.

  1. Saladinos macrumors 68000

    Saladinos

    Joined:
    Feb 26, 2008
    #1
    Is OPEC following Enron's example set in California?

    With Enron, the company shut down power stations to create rolling blackouts and force the government to deregulate the markets. After they did that, Enron jacked up the prices and kept limiting supply to californians as an excuse to make the prices higher.

    Isn't OPEC doing the same thing? Oil prices were high, and OPEC kept deciding to cut supply. Today, just as the price is coming back to Earth, supply's been cut again. Demand is just the same (even more, since it's winter). Supply is less. Prices go up.

    In the end, the State of California declared a state of emergency and retook control of the power stations and stabilised supply. What are the big oil consumers (USA, I'm looking at you) going to do? Energy independence is one way to do it. Another is to find some leverage against the names in OPEC (Saudi Arabia, Venezuela).

    I wanted to get your thoughts. Are OPEC following Enron? Will they meet the same fate (at the hand of renewable energy?). I don't really see much room for debate, but maybe I'm missing something.
     
  2. TheAnswer macrumors 68030

    TheAnswer

    Joined:
    Jan 25, 2002
    Location:
    Orange County, CA
    #2
    OPEC has been doing this since their founding.

    Every once and a while the Saudis decide not to play the same game and their whole plan goes awry. Look at them as a group of drug dealers but with one guy whose got some really sticky stuff and doesn't mind screwing over his friends once and a while.

    Hopefully, through energy responsibility and independence, they will have less control over our energy supply in the future.

    But they aren't following Enron's example.
     
  3. Saladinos thread starter macrumors 68000

    Saladinos

    Joined:
    Feb 26, 2008
    #3
    It's the same thing - they're manipulating the costs by adjusting supply. It's illegal to manipulate stock prices for public companies, why not for other floated goods like oil? The US is annoyed at China for not floating their currency (instead linking it to a permanent rate against the dollar). OPEC is doing the same. They're manipulating a floated cost to make money. They didn't have to push for deregulation first. That's the only difference.

    What would you like your preferred US presidential candidate to do about OPEC? Energy independence will take more than 4 years (assuming optimal congress). What action would you like them to take as soon as they get in to office?
     
  4. Ugg macrumors 68000

    Ugg

    Joined:
    Apr 7, 2003
    Location:
    Penryn
    #4
    There's too much supply, too little demand. The price of oil is falling. Also, it's not as though there is a vast amount of storage capacity around the world. If you pump it you have to find a place to put it.

    Opec's pretty flush right now, so they have some wiggle room, but if the price stays low for awhile, you can bet that a number of Opec countries will start to ignore the quotas.

    Also, it's not healthy for the global economy for oil to go so low. It needs to stay in the $80+ range. If it goes lower, alternative energy plans will be thrown out the window and all the marginal US wells will stop pumping.
     
  5. TheAnswer macrumors 68030

    TheAnswer

    Joined:
    Jan 25, 2002
    Location:
    Orange County, CA
    #5
    You're right. But, like the situation in China, there's just not much we can do about it other than be unhappy and hope that infighting inside OPEC keeps prices reasonable.

    It's politically unfeasible, but the main thing I'd like to see is a variable gas tax rate that, after it's phased in, keeps the price per gallon at the pump fixed at around $8 (not including state taxes).
     
  6. jplan2008 macrumors regular

    Joined:
    Feb 15, 2008
    #6
    There's not much he can do about OPEC. He can charge a windfall profits tax on US oil companies (which unfortunately it seems he's backed down from somewhat with the decrease in prices), and put twice as much towards alternative energy as proposed, and admit that there's no such thing as "clean coal," and put twice as much money as proposed into higher efficiency cars, and put twice as much money as proposed into public transportation.

    He won't do any of the above, however (except maybe windfall profits)

    Even in this case, I don't agree with sales taxes, that TheAnswer suggested, since they disproportionately affect poor people, but I would agree with states beginning to charge a surcharge on auto registrations based on driving over X miles in a year, and that money going towards alternative energy and public transportation. Then there's some minimum that everyone can get without paying extra, and you pay for going over that minimum -- like how electricity is usually billed. As more viable public transportation is implemented, then the allowable miles could go down.
     
  7. TheAnswer macrumors 68030

    TheAnswer

    Joined:
    Jan 25, 2002
    Location:
    Orange County, CA
    #7
    I'd agree with that proposal, as long as it also took into account the average mileage of the vehicle in question. If the goal is clean energy and energy independence, there's got to be an acknowledgement that 50,000 miles/year in a Prius ≠ 50,000 miles/year in a Suburban.
     
  8. jplan2008 macrumors regular

    Joined:
    Feb 15, 2008
    #8
    We're in agreement on the basic idea. Like the leaded/unleaded gasoline change, it would have to be phased in, I think. There shouldn't be incentive to get rid of cars that have already been built, because of all the materials and energy that went into building them, but there should be incentives in the present for buying more efficient vehicles, and disincentives for buying guzzlers. And in the long-term, incentives and infrastructure for not driving at all.
     
  9. Desertrat macrumors newbie

    Joined:
    Jul 4, 2003
    Location:
    Terlingua, Texas
    #9
    OPEC is made up of governments. Thus whatever they decide is by definition legal. If you don't like what they do, drop by the Chaplain's office and get your Tough Stuff card punched.

    Governments own or control some 93% of the world's oil outside the U.S. Oil companies control the other 7%. The U.S., SFAIK, is the only country where the landowner owns the oil and gets paid a royalty. The major oil corporations own very little of the on-land oil, and the U.S. government claims offshore oil beyond the states' offshore ownership. And, approximately, OPEC controls half the world's oil supply.

    This drop in prices is only temporary, resulting from the worldwide recession and drop in demand. When economies pick back up, so will demand and thus prices. Even now, the rate of use is greater than the rate of new discoveries, and all the world's oilfields are in decline.

    For Venezuela, Chavez' socialism balance of spending vs. income relies on oil at $90 for break-even. Venezuelan gasoline, refined at the Citgo refinery at Corpus Christi, Texas, is sold at 18¢ per gallon; people cannot afford higher prices.

    Iran has done little in the way of expansion or even maintenance of its oil-supply infrastructure since the fall of the Shah. They import gasoline from across the Gulf; gasoline, while sold at (again) 18¢ per gallon, is rationed.

    Mexico is in a world of hurt. We import 1.2 million bbl/day from their Cantarell field, which is declining at a rate of some 12% per year. We use one million bbl/day, and refine 0.2 million bbl/day as gasoline/diesel for northern Mexico. By 2012, this import won't happen. 40% of Mexico's income is from Cantarell oil, which means they'll be in near-riot condition by then. A change in the law to allow foreign investment in oil production has passed their Senate and is in their House, but it's a bit late. If it passed today, some five to seven years would pass before meaningful amounts of production could be had.

    Indonesia is dropping out of OPEC as it has become an importer instead of an exporter. If you'll recall, one of Japan's goals in its Greater East Asia Co-Prosperity Sphere was access to Indonesian oil. Ownership by war, taking it away from Royal Dutch Shell. Oil fields are not forever.

    So, figure maybe two or three years before oil is back above $150/bbl. Even more, as the dollar declines in buying power. Figure gasoline at $8/gallon at some point in the not-too-distant future.

    Any way you slice it, oil is the lifeblood of the world. Add in "food and water" if you like. Economics 101 rules, as it always does.

    One of the few bright spots insofar as oil production is resulting from our success in Iraq. Iraq is up to roughly 2.5 million bbl/day output--almost half that of Saudi Arabia--and that number is increasing at a goodly rate. That income is allowing all manner of improvements within that country.

    Interesting times...

    'Rat
     
  10. Saladinos thread starter macrumors 68000

    Saladinos

    Joined:
    Feb 26, 2008
    #10
    It isn't legal by definition just because it's decided on by an assembly of governments. The rest of your post is very insightful, though. Thanks for posting it.

    I'm not sure whose jurisdiction it's under if a foreign government inflates the price of a floated commodity. If maintaining the integrity of the price on an American exchange (NYMEX) is the responsibility of the SEC, then the American courts have an legal influence on the decisions of sovereign countries, which is absurd.
     
  11. Desertrat macrumors newbie

    Joined:
    Jul 4, 2003
    Location:
    Terlingua, Texas
    #11
    "It isn't legal by definition just because it's decided on by an assembly of governments."

    Sure it is. Whatever agreement any governments make is fully legal. Who's to say it is not? Not you, not I. Are you going to tell Congress that a law it has passed is somehow illegal? Are you going to tell a Congressionally created agency that its Congressionally-authorized regulations are somehow illegal? No outside government has any say in OPEC's decisions. And the UN has no actual authority over any member government, other than what that government agrees to--absent force majeure.

    "I'm not sure whose jurisdiction it's under if a foreign government inflates the price of a floated commodity."

    Absent an outside invasion in force, nobody has any jurisdiction. FWIW, China has the highest percentage of the world's supply of rare earth minerals. Those are absolute necessities in exotic metal alloys for space, aircraft and computers. If they wish to raise the price, who's to stop them? How?

    It's quite simple, really. OPEC operates under that dictum developed by Sam Rayburn and taught to LBJ: "When you've got 'em by the short and curlies, their hearts and minds are sure to follow."

    "Insight"? No, not me. I'm just sorta passing along what I've learned from reading folks with the real insight. Google for Matt Simmons, for instance. I've been reading his stuff and some dozen other folks who actually have the insight and understanding of the "awl bidness". I've a reasonably good memory for synthesizing, is all.

    'Rat
     
  12. Rodimus Prime macrumors G4

    Rodimus Prime

    Joined:
    Oct 9, 2006
    #12
    it is good business. Almost all businesses do that. They want a balance point between supply and demand. They will reduce supply to get more demand and there for increase profits. It is a balance point. Business all the time cut production so they can increase prices.

    You do not keep producing things if cost more money to produce it then you are making off of each item. You would cut production and increase cost. Just this time profits are not high enough so they are cutting production to increase cost.
     
  13. eclipse macrumors 6502a

    eclipse

    Joined:
    Nov 18, 2005
    Location:
    Sydney
    #13
    What amazes me is that we sit here in the full open knowledge that the "half" of the oil world we can see is well past peak oil, and that we are completely relaxed and trusting the other "half" of the oil producing world even though we are actually totally BLIND to how much oil they might have! How many 'barrels' of oil in Saudi Arabia are actually paper barrels? How come they've pumped billions and billions of barrels over the last few decades, and yet their reserves stay the same? :rolleyes:

    Wake up. Yes OPEC might be agreeing to cut oil to maintain the price, this time. But what about 2012, 2013, or 2014 when they announce cuts ... no matter what is going on with the price or world market. What happens when they "announce cuts" because in reality they cannot produce enough.

    Time to face some facts. 54 out of 65 of the top oil producing nations have already peaked, and are now in permanent decline. America peaked in 1970 and produces about a third less than it did back then. (You guys were the OPEC of the world until just after WW2... so the larger the oil producing nation, the slower the peak). Australia peaked in 2000 and we are producing about 1/3 what we pumped just back then!

    The reality is we "just trust" that OPEC's oil books are honest and they're not just filling them with "paper barrels". It's time for an international oil audit.

    http://oildepletionprotocol.org/
     
  14. Desertrat macrumors newbie

    Joined:
    Jul 4, 2003
    Location:
    Terlingua, Texas
    #14
    eclipse, you're surely correct. That's why so many of us stay irate at our various "anti-drill" policies here. Folks in Congress seem to think that the real world is like a TV show, where Good Things can come about instantaneously. They refuse to accept that it takes years to achieve meaningful amounts of new production. Alternatively, there are those with the attitude, "It will take too long, so why bother?"

    Oil will remain our lifeblood through this multi-year transition period to other sources of transportation fuels and methods of transportation. In the meantime, augmenting the world supply makes the transition more affordable for the poor and the middle class.
     
  15. jplan2008 macrumors regular

    Joined:
    Feb 15, 2008
    #15
    Well, before becoming McCain's running mate, for example, Palin thought that ZERO federal money should be put towards alternative, renewable energy,and that oil and natural gas domestically could keep us going until we improve technologies for other energy sources. That isn't credible -- we don't have enough oil, and it will take too much time to exploit it. I could make the same argument about waiting on drilling. Our domestic supply in the present is meaningless in the big picture, and at our current consumption levels, will remain that way. The Department of Energy agrees, and thinks at most the price would go down a few pennies a gallon before 2030. So, why not wait on drilling until the technology is in place to do it more safely, and until we've lowered our consumption so that the very small supply we have will make a bigger impact? If our solution is to drill, baby, drill, we're not facing the bigger picture of climate change, the decreasing supply, and increasing demand. We're just putting it off, which eclipse's links show that we can't. So I don't see how that is a preferable alternative. McCain scoffs at Obama's plan for $15 billion/year for 10 years in alternative energy as being excessive. I think it's woefully inadequate.
     
  16. eclipse macrumors 6502a

    eclipse

    Joined:
    Nov 18, 2005
    Location:
    Sydney
    #16
    Sorry, but even if every last offshore field and pristine wildlife refuge were opened up for oil drilling it wouldn't really help. It's time for transport to go electric, and city zoning from here on in to be New Urbanism (reducing the need for the calamitous killing machine that is the car).

    Just for fun, download Ira Flatow's science weekly at NPR podcast all about drilling for oil independence. It's not going to happen.
     
  17. Desertrat macrumors newbie

    Joined:
    Jul 4, 2003
    Location:
    Terlingua, Texas
    #17
    "So, why not wait on drilling until the technology is in place to do it more safely..."

    Safer in what way? Have you been around a drilling operation, as done in today's world? We don't bulldoze "mud pits" and go away and leave them in place. We don't spill drilling mud over the side at offshore platforms. The whole deal is self-contained. On land, after a few years, even the grass has come back around the pump.

    "...and until we've lowered our consumption so that the very small supply we have will make a bigger impact?"

    The reason for drilling is to make this transition period affordable. What's so hard to understand about that? You cannot jump overnight from System A to System B. If you rely on that "very small supply" to bring about the change, you've ignored economic realities. (I grant that ignoring economic realities is the National Sport of the U.S. of A.)

    Nobody has figured out how to get around the fact: In developed nations, the absence of oil means that millions of people die. Nobody knows how to farm, mine, or transport without liquid fuel. And at the moment, the movement of people in a 140-million workforce ain't gonna get done via the Prius--not when only a couple of hundred thousand are available and half the commuters are in vehicles worth less than 1/6th of a Prius.
     
  18. takao macrumors 68040

    takao

    Joined:
    Dec 25, 2003
    Location:
    Dornbirn (Austria)
    #18
    no offense desertrat but this "transition period" has been promised since when exactly ? i remembering hearing about it when i was a little kid and yet 20 years later people talk like it's already underway

    fact is: there is no transition going on currently


    personally i think having 100 years more of plastics is going to be much more of an economic impact than having 10 years more of burning up the same fluid

    believe it or not that transition is going to be much more painful than the "oil as transportation fuel"
     
  19. jplan2008 macrumors regular

    Joined:
    Feb 15, 2008
    #19
    No, I haven't been around a drilling operation. But I've seen damage to coastlines and I've seen the reports of oil spills from hurricanes and other natural and man-made disasters. The calls for drill baby drill would be logical despite safety concerns if it would really make a significant difference for anyone but the oil companies.

    What transition period? If we were in a transition period, there would only be Priuses as the guzzling alternative, and plug-in hybrids for the efficient alternative, I'd see public transportation in my suburban area, and more in urban areas, I'd see solar panels throughout the "sunshine state," the legislature in my state wouldn't have tried to reverse a proposition that the voters passed calling for a high-speed train in the state, ...

    Like takao, I remember dire claims that oil was running out decades ago. I remember gas rationing, and that everyone was going to start conserving and figuring out how to use less. In that time we went from the suburban sedan to the suburban SVU. What a transition.
     
  20. eclipse macrumors 6502a

    eclipse

    Joined:
    Nov 18, 2005
    Location:
    Sydney
    #20
    Historical fact 1: Hubbert mapped USA oil discovery trends against consumption trends, and in 1956 stood up at a Shell conference and boldly stated that American oil would peak in 1970 and then enter a period of decline. Discovery had peaked in 1930 and was declining while consumption was rising. Hubbert predicted production would peak in 1970.

    Historical fact 2: 1970 the oil industry laughs "we've never pumped so much oil!" (not quite understanding the word "peak"). Ironical statement of the century!

    Historical fact 3: American oil peaked in 1970 and started its irreversible decline.

    Historical fact 4: Political turmoil over the Arab Israeli war confused the issue, making people believe they were "running out of oil!" but the fact was American oil production had peaked and was now in decline. Enter the age of America importing oil instead of exporting it. Now America imports 2/3rd's of your 21 million barrels a day!

    Historical fact 5: WORLD discovery peaked in 1965.

    Historical fact 6: WORLD discovery fell behind CONSUMPTION 25 years ago. We've been eating into oil our grandparents discovered and it is now at about a consumption to discovery ratio of 5 to 1


    [​IMG]

    Historical fact 7: 54 out of 65 oil producing nations have already peaked and are in permanent decline.

    Historical fact 8: Even Exxon Mobile admits this, and they don't want to believe in peak oil... and keep talking about "tar sands" and "Shale oil" meeting all our needs. :rolleyes:

    Historical Fact 9: The Australian Federal Senate inquiry into peak oil basically said that the peak-oilers were asking questions that big oil could not answer!

    THis is the projection for world oil production by Uppsala University's ASPO.

    [​IMG]
    Note: See that green "mountain peak" at the bottom? That's USA oil.
     

Share This Page