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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.
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no subject
Date: 2008-06-10 07:20 pm (UTC)no subject
Date: 2008-06-10 07:24 pm (UTC)no subject
Date: 2008-06-10 08:30 pm (UTC)no subject
Date: 2008-06-10 08:52 pm (UTC)no subject
Date: 2008-06-10 10:30 pm (UTC)You can only refine the oil that you've got. So they're going to be spending bucketloads of money looking for new oil to keep the refineries running when the current fields dry up. It may very well not be cost effective, if looked at with a sensible (i.e. low) discount rate to build new refineries that would have to shut down relatively shortly if the supply of crude oil could not keep up (peak oil!).
Costs of extracting oil are increasing. New exploration is in much more extreme environments - not only the Arctic, as mentioned above, but in extremely deep water, as in the Gulf of Mexico and the North Sea (see [West of Shetland], and also [Bourbon Dolphin] because that's as expensive as it gets). Stuff gets expensive once you put it in water. Stuff gets a lot more expensive once you can't use jack-up rigs, say water past about thirty metres deep. Then there's the North Sea sort of stuff, fixed platforms, goes out to a couple of hundred metres or so, I think (500 m according to Wikipedia). Then it gets complicated. Google tells me that the Atlantis platform is moored in 2000 m of water. Two kilometres, that's I don't know, definitely more than a mile. It's going to take quite an expensive bit of string to keep that in the right place.
Costs are also increasing for the decommissioning of a lot of infrastructure that's coming to the end of its working life; when those rigs and platforms were built, any thoughts about decommissioning tended to go 'screw it, the sea's a big place, nobody'll notice if we just scuttle them somewhere out of sight' - these days, people notice. See [Brent Spar].
But yeah, I don't doubt that while there is a certain element of oil companies going 'Oh crap, this is expensive', there is currently a greater element of 'Muahahahahaha!!!!! Let's fleece the peasants and blame the dirty foreigners!'.
no subject
Date: 2008-06-10 11:22 pm (UTC)(also, very well written, in an easy-to-understand format. any time I see a political post from you, I get excited :))
no subject
Date: 2008-06-11 02:48 am (UTC)But that's the whole point of the post. If you don't know anything about what's going on then how can you... Look. Prices for oil have skyrocketed in the last week for no apparent reason. Not one of the reasons you support here can explain such a sudden jump:
At least read the article (http://news.yahoo.com/s/afp/20080610/ts_afp/commoditiesenergyoilpricesaudi_080610040811).
In the US prices have gone from $2.65 a gallon to $4.39 a gallon in just two and a half years. To put this in perspective, US gas prices went from $1.35 in 1996 to $2.65 in 2005 - nine years. We're looking at a price hike that's outdone in about two years what we normally see in a decade. With no plausible explanation. Last week, the prices jumped 14 cents a gallon in one fucking day.
The US Dow Jones dropped 400 points on Friday, badly shaken by hikes in oil prices. This has added to a looming recession in the US. Oil costs have increased food costs all over the country, sending the country deeper into a spiral as more people's budgets are dedicated to food and service sector contracts on top of the current housing crisis.
Families who own SUVs are stuck because dealerships won't accept them back. I know one woman in Texas who's had to take second job to pay for the increase in gas prices, and she can't get rid of the SUV (where she lives there's no public transportation, like much of suburban America). Gas prices are adding to the housing crisis because people are moving into the cities. City apartment prices are rising while foreclosed suburban homes are caught in a limbo between the lender who can't sell them and the previous owner.
Across the world, out of control oil costs are increasing prices and causing food shortages in Indonesia and other countries that were previously able to feed their people.
How such a sudden and dramatic is the result of gradual changes in oil production? C'mon. Even Saudi Arabia says the soaring prices "are not justified by the reality of the oil sector or market fundamentals (http://news.yahoo.com/s/afp/20080610/ts_afp/commoditiesenergyoilpricesaudi_080610040811)." You're quoting 2005 Katrina arguments that were never true (http://www.consumerwatchdog.org/energy/articles/?storyId=12156) and applying them to the situation in 2008.