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icarusSaudi Arabia's Madani says, "There is no justification for the current rise in [oil] prices."
That's right. There isn't.
Excuse: China's demands for oil are frequently cited as reasons for the price hike.
Fact: However, other than a spike in demand in 2004, China has grown steadily and gradually over the last 12 years. 2006 had a lower than average increase in China's oil use, yet US prices lept dramatically in 2006 and 2007.
China's gradual growth is not the reason for the sudden spike in US oil prices this past week or over the past two years.
Excuse: The lack of oil refineries is frequently cited by oil companies as the reason for high gas prices. The oil companies say that environmental restrictions keep them from building more refineries.
Fact: Every single oil refinery the oil companies applied to build passed with no problems. How many did they request? Only one, despite the fact that the oil companies say they need more. The oil companies own the lion's share of the current oil refineries and control refinery production levels.
Oil companies have complete control over how many oil refineries they want to build, yet high prices give them every reason not to build them.
Excuse: Someone suggested that oil refineries are too expensive to build for dwindling oil resources.
Fact: Oil companies are willing to spend vast amounts to explore and drill under the rapidly melting polar cap in Arctic Circle. This is far more expensive than building an oil refinery, with less certain results.
Given the amounts oil companies spend on oil exploration, the costs of building refineries is not why the oil companies refuse to build them.
Excuse: An MBA grad suggested that not being allowed to drill in the Alaska National Wildlife Refuge caused prices to be high.
Fact: A study by Senator Maria Cantwell revealed that it would take 20 years to build the infrastructure to extract oil out of the ANWR. The kind of oil in the ANWR is expensive and difficult to extract. The total amount of oil in the ANWR is ridiculously small, not enough to supply even 10% of US needs for a year. Oil companies balked at provisions that ANWR oil only be sold to the US, demonstrating that their only interest in drilling there was an increase in net profits.
The ANWR has never been a solution to our oil needs. The oil companies know this.
Excuse: Oil is becoming more expensive to extract.
Fact: The costs of extracting oil did not suddenly spike or change. The US is still getting its oil from the same sources (Gulf of Mexico, etc.) it has for the last 15 years. Russia and China both recently found new oil resources.
The cost of extracting oil has not suddenly changed and is not the reason for the sharp upturn in US prices.
Excuse: Gas prices were bound to go up anyway because oil isn't a renewable resource. We should have dealt with this problem decades ago.
Fact: The fact that we need another energy source is inarguable, but irrelevant, shifting the topic away from oil companies raping consumers for as much as they can possibly get. The oil companies insist they find new oil resources all the time, and this much is true -- the picture of world oil supplies is very different from what we knew back in the 1970s. What really happens is more of a jagged line concerning supply and demand. Demand is still winning, but supply increases in gluts with new oil field discoveries, such as Russia and China's in the last couple years. Even if oil supplies remained steady however, the prices would only gradually increase as oil depleted.
The current prices are artificially high.
Conclusion: Saudi Arabia is right. There is no reason for the sharp increase in oil prices.
That's right. There isn't.
Excuse: China's demands for oil are frequently cited as reasons for the price hike.
Fact: However, other than a spike in demand in 2004, China has grown steadily and gradually over the last 12 years. 2006 had a lower than average increase in China's oil use, yet US prices lept dramatically in 2006 and 2007.
China's gradual growth is not the reason for the sudden spike in US oil prices this past week or over the past two years.
Excuse: The lack of oil refineries is frequently cited by oil companies as the reason for high gas prices. The oil companies say that environmental restrictions keep them from building more refineries.
Fact: Every single oil refinery the oil companies applied to build passed with no problems. How many did they request? Only one, despite the fact that the oil companies say they need more. The oil companies own the lion's share of the current oil refineries and control refinery production levels.
Oil companies have complete control over how many oil refineries they want to build, yet high prices give them every reason not to build them.
Excuse: Someone suggested that oil refineries are too expensive to build for dwindling oil resources.
Fact: Oil companies are willing to spend vast amounts to explore and drill under the rapidly melting polar cap in Arctic Circle. This is far more expensive than building an oil refinery, with less certain results.
Given the amounts oil companies spend on oil exploration, the costs of building refineries is not why the oil companies refuse to build them.
Excuse: An MBA grad suggested that not being allowed to drill in the Alaska National Wildlife Refuge caused prices to be high.
Fact: A study by Senator Maria Cantwell revealed that it would take 20 years to build the infrastructure to extract oil out of the ANWR. The kind of oil in the ANWR is expensive and difficult to extract. The total amount of oil in the ANWR is ridiculously small, not enough to supply even 10% of US needs for a year. Oil companies balked at provisions that ANWR oil only be sold to the US, demonstrating that their only interest in drilling there was an increase in net profits.
The ANWR has never been a solution to our oil needs. The oil companies know this.
Excuse: Oil is becoming more expensive to extract.
Fact: The costs of extracting oil did not suddenly spike or change. The US is still getting its oil from the same sources (Gulf of Mexico, etc.) it has for the last 15 years. Russia and China both recently found new oil resources.
The cost of extracting oil has not suddenly changed and is not the reason for the sharp upturn in US prices.
Excuse: Gas prices were bound to go up anyway because oil isn't a renewable resource. We should have dealt with this problem decades ago.
Fact: The fact that we need another energy source is inarguable, but irrelevant, shifting the topic away from oil companies raping consumers for as much as they can possibly get. The oil companies insist they find new oil resources all the time, and this much is true -- the picture of world oil supplies is very different from what we knew back in the 1970s. What really happens is more of a jagged line concerning supply and demand. Demand is still winning, but supply increases in gluts with new oil field discoveries, such as Russia and China's in the last couple years. Even if oil supplies remained steady however, the prices would only gradually increase as oil depleted.
The current prices are artificially high.
Conclusion: Saudi Arabia is right. There is no reason for the sharp increase in oil prices.