June 17th, 2008
07:16 AM GMT
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LONDON, England – If you think the price of oil can't go any higher, you could be disappointed. On Monday, oil shot up towards a $140 a barrel, a record, before settling the day at $134 a barrel.

Even word that Saudi Arabia would increase production wasn't enough to keep oil from ratcheting higher. And even though it ended well off its high of the day, we're still above $130 a barrel, with predictions it could hit $150 by year end, and eventually move to $200 a barrel.

Saudi Arabia has called a meeting for June 22 to help stabilize prices. But will that really make any difference. Barring some dramatic announcement, I'm skeptical. I'm in the camp that believes what's going on in the oil market isn't just the result of a weak dollar, or speculation. It's based on the belief that there is a structural shift going on, based on a need for increased oil as developing nations continue to grow their own economies, and not enough supply.

You can point the finger at speculators, as many do, but they aren't the problem. They just follow trends, they don't create them.

Even a CNN quickvote shows the public is skeptical that a production increase by the Saudis will ease prices. 43 percent said yes, 57 percent said No.

Oil producers have lost control over pricing. And while high prices are great for producers' revenues, they always worry that if the price gets too high, it could lead to a sharp slowdown in the global economy, hurting demand, and causing a sharp fall in the price of oil.

I don't think that's a worry for the oil producers right now. The bigger worry is their inability to keep prices from rising, and the political pressures that brings. That's what's triggering the upcoming meeting, the Saudis have to appear like they are doing something.

The problem is, the market has moved beyond their ability to control it.

Tell me what you think.



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soundoff (65 Responses)
  1. abdul

    I believe strongly that the oil price is hugely manipulated by powerful speculators who feel the time is right to make huge bucks for themselves and give the impression that the supply-demand theme is at the centre of this shocking high price.The demand in this year or even the following year would not outstrip supply, so why this ridiculous high inflated price.

    June 17, 2008 at 10:34 am |
  2. Steve Harrison

    The "supply and demand" factor is easy to understand, however, the poorer third world countries' demand has not really increased, so they should not pay the penality for contries such as China, USA and other developed countries, whose demand has increased or even doubled in the case of China. Let the countries who have such higher demand pay the $140 per barrel, and leave those who do not have this increased demand to pay the $40 per barrel.

    June 17, 2008 at 10:36 am |
  3. RICHARD SHERWOOD

    I SEE OIL AS A WEAPON TO BRING DOWNTHE ECONOMY IN U.S.A. AND OTHERS, WITHOUT FIRING A SHOT.THE ONLY ANSWER FOR SHORT TERM IS RATIONING AS IN WORLD WAR2.

    June 17, 2008 at 10:58 am |
  4. HarshV

    Its a demand and supply issue plain and simple. Yes speculators are not helping but that isn't the sole reason driving prices up. And if it is then we needn't worry because the speculation will turn the other way.

    But the fact is market fundamentals are behind this. Supply is not increasing as much as demand, including supply capacity. The Saudis could help by increasing production but only so much.

    Unless we can somehow threaten, cajole, bribe or force them into opening up all that reserve.

    June 17, 2008 at 11:15 am |
  5. Sergey

    You are probably right in your analysis of the long term causes; however, your overview does not explain the dynamics of change. Why now, not tomorrow, not 10 years from now? To say that speculators do not create trends but only follow them is to read history backwards. Who knows where the trends would be today were it not for the speculators whose predictions have turned to a self-fulfilling prophesy?

    June 17, 2008 at 11:15 am |
  6. Gene Griffith

    I believe the oil prices are be driven by the speculators. I also believe we are being forced into buying smaller cars to get better gas mileage and not worry about the safety of smaller cars in an accident. The next thing that will happen is the insurance companies will jump on the band wagon and drive our insurance higher. What is going on? What have we worked for all our lives? Just so we can forget about retirement and have to work for food and lodging till we die?It's time to slow down and take a good look at what we're doing to ourselves and our Country. God bless America.

    June 17, 2008 at 11:18 am |
  7. frankburns

    I think it is a bubble driven by speculators. There is no shortage at the pump and no real justification for the skyrocketing price other than greed. The world is being fleeced right now. It will pop someday.... hopefully.

    June 17, 2008 at 11:26 am |
  8. John Steven Tomac

    Why is there market manipulation? Because of the following:

    1. Geopolitical
    a. Iran and Israel can beat its drums all it wants, but Iran needs
    all the petro dollars it can get so waging war against Israel
    would be devasting to Iran. EU placed sanctions on Iranian
    oil because of it's nuke program? There's always the pipeline
    from Iran to Russia to move Iranian oil.

    b. Valenzula; Like Iran, can beat the drum of cutting of oil to the
    US, but Chavez needs all the dollars he can get to keep his
    social programs going.

    c. North Korea; If they can't be good communists and feed their
    people then they certainly do not have a nuke program. Showing
    satellite photos of nuclear structures do not prove a thing

    d. Sudan; There's a civil war in the 8th LARGEST producer of
    crude oil? This one has been going on since 1983. You mean
    to tell me that the idiots in NY just realize this?

    2. Supply/Demand

    a. China; China is is hardly a consumer society with the country's
    per capita income is classified as low by world standards, at
    about $2,000. Hardly enough to purchase a car. Just because
    CNN shows numerours cars in Shanghi, Hong Kong, and
    Beijng does not give a good representation of the country.

    b. Chinese from the rural areas are moving into the factories and
    are only making $200 a month

    c. The Chinese do not burn OIL for their power needs, but COAL.

    d. India; A quarter of the nation's population earns less than the
    government-specified poverty threshold of $0.40 per day. In
    2004–2005, 27.5% of the population was living below the
    poverty line.

    e. Driving Season? What the hell is that? Growing up in the
    1980's I have NEVE heard of a driving season. Once again,
    the marketing ploy of oil companies.

    f. Hurricane Season; Once again, growing up in the 1980's I've
    never heard of a "Hurricane Season"

    ANSWER TO E and F? Oil didn't start trading until the early 1980's.
    What would the world be like if we were smart
    enough by not allowing this to happen? A lot
    better.

    It's a travesty that the SEC has allowed the cornering of the oil market continue for so long.

    June 17, 2008 at 11:28 am |
  9. DR TCR Nair

    Dear Todd,
    You are absolutely right. The only way the oil prices can come down is through the painful process of global recession. We have to fast track research towards a cheap alternative fuel. Massive investments have to come from USA,other non-oil rich countries and developing countries like China, India etc towards research and scale up technologies. It is unlikely that the Texas oil lobby will allow that in the USA.

    June 17, 2008 at 11:31 am |
  10. Greg Atkinson

    Let me dare to suggest to readers of this blog that perhaps higher oil prices are in the longer term, good for the world and good for business. I know this may offend motorists and companies struggling to deal with the additional costs associated with higher prices, but before anyone sends me any nasty comments let’s look at the reasons for my apparently insane comment.

    1. We waste oil. Yes, that’s right, we waste oil just like we waste food and water because it has been relatively cheap. Airlines operate flights that are less than 50% full, people drive large SUV’s to work without passengers and most people have cars that are far bigger than what they need. This is wasteful and means we burn more oil than we need to. Wasting a non renewable energy source is plain stupid and in a few hundred years future generations will think we were all morons. They will also wonder why on earth anyone would burn oil for heating for example, or why everyone seems to need a 4WD urban assault vehicle to drive one child to school.

    2. Oil has been cheap. You pay a lot less for petrol at your local petrol station then you do for wine at your local liquor store. (unless you really drink some cheap wine) Wine comes from a renewable source and is a lot more environmentally friendly than oil. People do not often waste wine because it costs more, if oil costs more the same will happen. Not wasting oil is a good thing.

    3. We have become too dependent on oil. In a few hundred years people will think we are morons because we failed to use the abundant sources of renewable energy we have on planet earth. Because we have become hooked on oil we have not been forced to use these other sources of energy, however higher oil prices will change that and that my friends is a good thing. Higher oil prices will also result in more money being spent on research and development into alternative sources of energy such as geothermal, solar and tidal.

    4. We do not live in energy efficient cities. Most of the cities in the world are oil wasters. People seem to be okay that billions of dollars are spent on freeways so we can funnel more cars and trucks into the transport system, but perhaps a better alternative would be to enhance public transport, build more light rail lines and cycleways etc? Rather than our cities thirst for oil, why don’t we do something to lessen the demand for oil, not increase demand? If the price of oil remains high then maybe our minds will switch permanently to “saving oil” mode.

    5. We are becoming unhealthy and overweight. Perhaps when it becomes too expensive to jump into the “4 litre mini people mover all new SUV” to get a carton of milk people might, just might, walk to the shop instead! Maybe people will walk the 10 minutes to the station to catch the train instead of driving to the station. Maybe there might even be some safe places to park your bicycle at the station instead of just a multi layer car parking stations. Perhaps a higher oil price will means people will exercise more by walking and cycling etc and this can only help us become more healthy.

    So maybe higher oil prices are not such a bad thing after all?

    June 17, 2008 at 11:31 am |
  11. Horacio

    I quite agree. The question is, at what price would the world economy collapse ? Take into account the "third" world which supplies food, raw material, the real cost of the oil is much higher than the rich one ?
    We are all interconnected, you like or not.

    June 17, 2008 at 11:34 am |
  12. Richard in South Africa

    We have seen the middle income emerging markets increase energy consumption for decades. Now that India and PRC have joined the parade, we will see this continue – so agreed that the trajectory has changed. This is old, old news... Start looking for smart solutions from the emerging markets – where imported energy costs are giving lots of political capital to science, business and government leaders. The brainpower and capital investment vehicles now exist to change things like never before in emergent countries. The energy prices we now see are a shaking that is part of the great equalisation of the world economy. There is lots to be said for the rise of the emerging markets.

    However, the big assumption we see is that oil will not come down again – this is one of the reddest flags in the investment world – once everyone starts thinking the same way, it's time to reverse your position. Speculators, using highly leveraged investments have done a lot to encourage prices to where they are today, once the market psychology turns around, oil will head back toward $80/barrel. Maybe not to where it was ten years ago, but there are new neighbours on the block, also willing to pay the market price.

    June 17, 2008 at 11:44 am |
  13. Husayn

    It's obvious that it is not in the interests of oil-producing nations for oil prices to remain so high, or increase, due to the fact that alternatives start becoming more viable.

    This also brings up other questions, such as a possible attack on Iran. That would be disastrous for the world's economy, considering the result could be $500 for a barrel of oil.

    June 17, 2008 at 11:44 am |
  14. Frank

    I think your assessment is pretty true. I think peak oil advocates have grown larger and it's obvious some of the data from EIA and other sources from the past few years have been drastically wrong. It's hard to rely on the Saudis since they are so secretive in the oil business. Also, hearing the same old explanation of speculators and weak dollar is getting a bit old. It almost seems as if this whole crisis popped up at the start of the subprime crisis.

    On the other hand, I think it's ok to people to get used to expensive gas. I think it brings with it a great shift in perspectives and makes one think of how we all live. Posting from across europe, the high gas prices haven't really hurt since they've been high all my life. With 1.6e/liter, it's way, way more expensive than what you guys in U.S scream about and to us, your gas prices seem like business as usual.

    I'm not saying technology is saving us, but at least it's welcome that the research and development on green energy and such is being ramped up. I'm thinking of constructing a house within a few years and at the moment it would seem impossible for me to consider anything else than a house that tries to go near as possible to being green. Better insulation, solar panels and all that.

    Getting away from oil is a necessary thing we have to do. Almost like an addict on withdrawal. I would welcome a EU-wide decision that we'd roll out of gas and diesel cars within the next 10-15 years and replace those with electric/hydrogen cars. That'd send the oil price down and pave way for the future. Some people and companies would get hurt, but that'd be necessary for the world as whole.

    June 17, 2008 at 12:00 pm |
  15. HarshV

    Just another quick one:
    Poorer third world countries are a huge part of the problem. Many of their Governements subsidize oil, which makes demand growth irrationally higher than it should be. The price curb as it were is not in place.

    So the Chinese, Indian, Malayasian, Indonesian oil demand growth does not reflect reality and can justifyably be termed as an unfair distortion.

    So if one of the entities out there deserve emotional vitriol being thrown at them its those governements subsidizing oil. This would also include the Arab nations, whose residents have not had to suffer massive inflation at the pump due to subsidized oil.

    June 17, 2008 at 12:05 pm |
  16. Adam

    "Buy low, sell high." While I'm not certain when this phrase was coined, I suspect at least the concept came about around the same time as the concept of Value was invented. Thousands of years.

    Historically, when you have an inrush of novice investors they tend to swarm around market changes. They lose sight of the concept of buying low and selling high. Happened in the 20's, happened in the 80's, it's happening now too.

    Real estate values climbed as much as 30% during the housing boom. I don't think it's coicidence that the price of oil has jumped well over 30% since January 2008.

    Has demand increased 30%? Nope. The projected global increase in demand for oil is 1.28%.

    When you have uninformed, panicky investors running about with more money than sense combined with uninformed panicky newspeople looking for a good story, you get interesting things like supply curves that magically shrink to impossible levels.

    “The world is consuming more oil than it is producing.” –The Economist, July 14-20 print edition.

    The laws of physics and economics tell us that this is completely impossible, yet it has become a popular belief and people are shifing their money around because of this rediculous prophecy.

    Even funnier than that is the fact that the US demand for oil isn't inelastic as economists had been saying. We've found that US demand is shrinking and, under pressure from world leaders, the oil suppliers are increasing output.

    When reality hits... We'll have another multi-billion bailout of investment companies and the companies and people who produce Value in this economy will bear the brunt of the load for the ignorance.

    June 17, 2008 at 12:21 pm |
  17. Mark

    Woldwide oil is a commodity traded only in American dollars. If the dollar loses value then the amount of dollars needed to buy a bbl of oil will be more. The dollar has lost approximately 40% of it's value in the last two years. Conversly, oil has gone up only slightly more then this 40% in the same amount of time. SImple math.

    June 17, 2008 at 12:24 pm |
  18. Jason

    Oil isn't just used as a source of fossil fuel. It drives the entire plastics market, everything with the word "Poly" as a prefix is made from Oil. Practically everything in the world is made from Oil. The price of this oil will affect everything. The Producers of Oil have no real incentive to lower prices, they are getting richer by the day. The scale of this problem isn't just about planes, trains and automobiles!

    June 17, 2008 at 12:27 pm |
  19. yoda

    Sorry to 'burst your bubble', but oil prices will drop dramatically in the near future. People are making significant and permanent changes to their lifestyles that will reduce their consumption of oil to extremely low levels. A fundamental change is happening.

    June 17, 2008 at 12:45 pm |
  20. Frank Coburn

    People in Quebec, Canada, fed-up with ever-increasing gasoline prices, have done something about it. 13 gas companies have been convicted of price fixing and were heavily fined by the courts. Reminds me of the John Fogerty song: "I can't take it no more."

    June 17, 2008 at 12:49 pm |
  21. Boblight

    High gas prices, everyone knew they were comming. Shame on the Auto makers who continued to push gas-guzzlin SUV's to a public that was in denial. Shame on the Bush Administration for sitting idly by while American consumers burn their cash. Shame on Congress for not passing a progressive energy bill 30 years ago. If we haven't yet reached Peak Oil, we have surely have hit the END OF CHEAP OIL! Just a little more foresight and a little less greed would have made all the difference in the world. We cannot drill our way out of this mess, we need to THINK our way with new technology and good ole American Ingenuity. Because we waited so long to make changes, the process of energy transformation will be all the more disruptive to our economy and quality of life. Shame on this generation!!

    June 17, 2008 at 12:51 pm |
  22. john

    I agree that oil speculators are only partly to blame largely because they're anticipating a future downturn in future oil productions and peak oil. If you took speculators out of the equation and sold directly to the consumers, it would surely be cheaper now, however, it would inevitably rise to $150 a barrel based on real supply and demand. The real price will always lag a little behind the speculated price. I mean, after all, why are they speculating in the first place?

    June 17, 2008 at 12:55 pm |
  23. Drew Keenan

    America has the reserves to supply its own needs for up to 100 years.

    If these resources were opened up to full development, with some fields delivering within 6 months, opening the "Naval stratigic Patrolium Reserve while, at the same time, launching a "Manhattan Type" project to develope alternate power sources, you would see the market drop over night. America would be energy independant with-in 5-7 years. This however would take leadership from Washington and that is not going to happen

    June 17, 2008 at 12:59 pm |
  24. john

    i would also like to add that if these high oil prices do not cause world war 3, it really has the opportunity to force us to make real changes about our energy policy and rethink our global carbon footprint. I'm not living in the USA and I don't have a car, so maybe that explains why I'm so optimistic, but i was to see it hit $200. :)

    June 17, 2008 at 12:59 pm |
  25. Louis

    what is the rumbling we are hearing at the big three,are they having a race to see who comes up with the first mass produced electric car.

    And who did kill the electric car anyway?

    June 17, 2008 at 1:17 pm |
  26. stephie

    Another Question also has to be asked. How much is the rise of the oilprice due to the fall of the dollar? Wouldn' t it be better to price oil in euro/barrel instead of dollar/barrel?

    June 17, 2008 at 1:27 pm |
  27. Manrico

    Oil has been monetarized. Its function in the world economy has changed from that of a basic commodity to that of a store of future value, which traditionally has been one of the chief functions of money. The degradation of the US Dollar and financial system, combined with the lack of a viable alternative has caused immense cash flows into oil related instruments of all kinds, from futures contracts to EFTs, and ancillary vehicles. Current and projected prices reflect time horizons akin to the 5, 10 and 30 year US Treasuries,, which are no longer seen as secure stores of value, and whose function is being replaced by oil in long term financial planning. Actual supply/demand does not come close to explaining these price changes; cash flows probably do. Now it is not a "hard" currency, gold, but a liquid one which is seen as the best store of future value.

    June 17, 2008 at 1:28 pm |
  28. Christina

    I believe the high prices are here to stay, and eventually will reach a "breaking point" for everyone. It is at that moment that some brilliant entrepreneur will release the next world-changing invention, but I think that's 2-3 years away. I don't think it's hopeless but it's going to get worse before it gets better.

    June 17, 2008 at 1:31 pm |
  29. chris

    If the people who are responsible for the continued rise in gas and heating oil are american citizens living here in the U.S., then it's time for all of us to physically show them that we will no longer tolerate what they are doing to us and for themselves.

    June 17, 2008 at 1:45 pm |
  30. Ianos

    Conspiracy to steal money? maybe...
    Supply and demand? also, maybe....

    It may also be a bit of both BUT none of these really matter in front of the bigger picture which is the following: There are so many resources in this world and most of them are much more cost efficient and environment/health friendly than oil. Yet we dare not stop the few that get richer on our demise.

    We MUST use alternative energy. We MUST become more efficient and we MUST cast down the shackles of the Oil dinosaurs. Even if production rises, demand falls or speculators/conspirators stop this madness we have to understand that oil must become a thing of the past.

    June 17, 2008 at 1:50 pm |
  31. GaryG

    In the long run higher prices will be seen as a blessing in disguise. We will be forced off oil and the need to secure it by armed conflict. The Middle East is a constant drain on Western resources driven mainly by our thirst for Oil. Technology is here for us to end our addiction and now the price is VERY attractive. We don't need Arab Oil and domestic production will give us the other products we need to sustain out way of life.

    THE HIGHER THE PRICE THE QUICKER THE SOLUTION!

    June 17, 2008 at 1:59 pm |
  32. C.R. DOWDALL

    AS I HAVE MANY TIMES BEFORE TRIED TO BRING INTO THE PUBLIC DOMAIN. THAT THE HIGH TAXES (DUTY IS ANOTHER NAME FOR TAX) ON ROAD FUELS WINES SPIRITS AND BEERS ALSO TOBACCO ARE ILLEGAL IN THE U.K.
    UNDER THE 1998 EU TAX HARMANIZATION LAWS
    IF THE GOVERNMENT BREAKS THE LAW WHY CANNOT WE ALSO

    June 17, 2008 at 2:01 pm |
  33. Tom

    The USA is 6% of the world's population, uses 25% of the world's energy, and no longer has the manufacturing base to come anywhere close to justifying those numbers. This is a much-needed wakeup call and fundamental cultural correction for the USA. Look at what Europe and the rest of the developed world does and bury those stinking SUV's, put a 1.6 liter motor in your car instead of that totally unecessary 3 or 5 liter motor, go sailing instead of water-skiing, and vote someone into office who is going to do something to make mass transit a viable, safe, and reliable alternative. None of this is rocket science, but Americans have got to come to the realization that there is no grand conspiracy, and Americans do not have a constitutional right to cheap energy. The only grand conspiracy was in the 1950's when General Motors heavily lobbied congress against rail in favor of roads for their busses to run on since they made busses, not trains. Now the USA is paying for that lunacy. It is a world economy, stupid, America does not run it, and as resources become more scarce the price naturally goes up. Sorry to burst your bubble, but welcome to reality.

    June 17, 2008 at 2:10 pm |
  34. Anthony Ribadeneira

    I think you're wrong regarding the reasons for the increased price at this time and producers ability to control it, OPEC could easily produce 30% more oil which would translate to $75 a barrel (a much more accurate description of supply and demand curves). That being said, I am glad it is where it is because it is and will continue to spur development of alternative fuels. We need to reduce our demand on oil across the board.

    June 17, 2008 at 2:13 pm |
  35. Stephen Williams

    Energy is still very cheap. To get a better handle on the value of energy, try pushing your car for 25 miles.

    June 17, 2008 at 2:13 pm |
  36. James

    Oil can't reach $200 a barrel in our economy. We can barely sustain the engergy prices right now so there is no way it can go much higher. I suspect that it will decrease after summer. We may see $150 but $200? Impossible at this point.

    June 17, 2008 at 2:57 pm |
  37. Henrik

    Bilderberg Group, a consortium of power brokers from banking, business, politics, academia and oil, met in Munich Germany in May 2005 when crude oil prices were around the $40 a barrel mark.

    During the conference, Henry Kissinger told his fellow attendees that the elite had resolved to ensure that oil prices would double over the course of the next 12-24 months, which is exactly what has happened.

    During their 2006 meeting in Ottawa Canada, Bilderberg agreed to push for $105 a barrel before the end of 2008.

    Peak oil is a scam manufactured by the oil companies to create artificial scarcity and drive up profits for transnational oil cartels. It was first originated in 1956 by Shell Oil's M. King Hubbert, who said that only one and a quarter trillion barrels of crude were left, a figure that was surpassed at the end of 2006. According to Hubbert's original calculations, the planet should already have produced its last drop over nine months ago.

    By pushing peak oil theories and tying them in with the man-made global warming fraud, Bilderberg seeks to jack up oil prices to the point where the living standards of the middle class become unsustainable and the west is lowered into second world status while fat cat elitists reap the financial and political bounty.

    June 17, 2008 at 5:14 pm |
  38. Boblight

    Has anyone read the book, Twilight in the Desert, by Simmons. Very Interesting! There may not be as much oil left in them Saudi wells as you have been told. Better to prepare for Peak Oil than be caught with our plastic pants down.

    June 17, 2008 at 6:31 pm |
  39. Ansel

    Here is an interesting site I came across that will offer fixed price gasoline. The company is GasBankUSA and the site is located at http://www.gasbankusa.com

    June 17, 2008 at 7:54 pm |
  40. Suresh Pillai (India)

    Dear Todd,Though U.S. is the major consumer of oil,its dependent on imported gasoline and diesel b'cos of inadequate refining capacity.
    And there lies part of the answer to the ever burgeoning oil price.When one looks at the Gross refinery margins as quoted in Singapore the percentage increase has steadily climbed up from around 5% about 2 yrs. ago to 18 % currently.Stand alone Indian refineries which are paid import parity price based on Singapore gross refinery margins have been making enormous profits as a result.So,there is a cartelisation effect not only by Opec but more so by the refineries who control the availability of petrol and diesel worlwide.To this scenario one has to factor in the sinister way supply disruptions really happen and the stories that are floated about impending hurricanes and politics of embargo,etc.And to make matters worse it is not just the weakining dollar but also the reports of gasoline stocks in U.S. which again the oil companies are able to manipulate by keeping inventories on tankers in high seas knowing well that there is heavy hedging as well as speculation in the oil x'change.

    June 17, 2008 at 8:35 pm |
  41. Colin

    If the world is running out of oil as Oil Commodity Traders would like us to believe (Peak Oil), why aren't the oil majors pouring tens of billions of dollars of there profits into alternative energy -after all, there survival as a business would depend on alternative energy?

    Maybe the problem is the Oil Commodity Market – trading on fear, false rumours, and speculation, rather than facts. If some rules and controls were in place we would all be better off.

    A higher oil price is not a bad idea to move us towards sustainable resources, the problem seems to be the excessively rapid rise over the past 4+ years.

    June 18, 2008 at 2:58 am |
  42. Greg Atkinson

    Jason raises a good point above about oil being used in the plastics industry etc. However I do not think anyone says we should stop using oil for everything, but we should look at reducing demand and using alternatives.

    If you think the Romans were silly for using lead pipes, then we are even more silly for poisoning ourselves with exhaust fumes from our motor vehicles :) We have alternatives and should know better!

    June 18, 2008 at 3:28 am |
  43. Shan Saeed

    Todd,
    Oil prices will come down very soon. It will come down to US $ 97 per barrel. It is charging a premiu of $ 50 right now. I have number of predictions in 2004. On June 10,2004, I have made a TV appearence on TV and said oil will touch $ 45 after 2-months.You can check he record on August 10, 2004, Oil prices were trading at $ 45 per barrell. I have mentioned in number of artilces that got published in different newspaper that market forces are the best determined of the prices. Today, these high prices levels are not sustainable in the long run and will bring the oil prices down and easing the markets. Reasons:

    1. Most countries including developing and developed are going through a slowdown in their economies.
    2. China and India consumption will stabilize in the next 9/12 months or so bringing oil prices to market levels
    3. Oil supplies are moving into the market quite rapidly with supply concern in Venzuela and Nigeria easing up.
    4. Countries like Canada [Alberta Sand], Norway [ Statoil] , Central Asia Repulic [CAR]and Brazil will become move active in the market
    5. Middle eastern countries [ Saudi, Kuwait and Qatar] will supply more than the demand

    Thanks

    Shan Saeed
    University of Chicago
    Singapore Campus

    June 18, 2008 at 3:44 am |
  44. Andre DeSimone Alonso

    I am still inclined to believe that speculators are keeping strong hands on oil prices no matter what sort of global conjecture we´ve seen nowadays. Those prices are artificial in many ways and they are unsustainable for even oil produces in the long-term.
    I think that as long as we get recuperated the financial markets, these sort of speculations will no longer take place insofar as profits from traditional investiments, as the stock markets, will resurge and the "oil bubble" will lose its raison d'etre.
    That is why I cannot embrace Mr. Benjamin's theory at all.

    June 18, 2008 at 9:50 am |
  45. David Martin

    The amount of oil produced has been essentially static since 2005.
    Demand has risen greatly since then, especially in India and China and, most worryingly, in the oil exporting countries.
    Under these circumstances prices can only rise – and the trend will continue into the future.
    Short term recession caused by high oil prices may pause the rise in prices, but long term they can only go up.
    Oil discoveries peaked many years ago, and in spite of huge expenditure are still a lot less than consumption.
    Importantly, the cost of extracting oil continues to rise, as huge rigs are needed for very deep water and smaller fields are exploited.
    Depletion of existing fields and the increasing use by exporters of more of their oil will mean that ever smaller quantities of oil are available for export – this is called the 'Export Land Model' and is explained here:
    http://www.theoildrum.com/story/2006/1/27/14471/5832
    So enjoy cheap oil whilst you still have it!

    June 18, 2008 at 11:36 am |
  46. Boblight

    Henrik, Do you know what state was the world's major oil producer in the 1900's. No it was not TExas, it was Pennslyvania. What happened to all that Keystone Crude, it vanished? No Pa experienced Peak oil 90 years go. So maybe them old oil fields in Saudi-Arabia, Kuwait , Iraq will someday follow suite. What happened to all them Texas oil wells. Ya think Jed Clampit could shoot a hole in the ground, "and up came a bubbling crude". No it's mainly gone, Texas Peak Oil. So what makes you thin the Middle-East oil fields will never reach Peak also. Tar sands are expensive, the sun, wind, tides are free power. As renewable Tech Industry grows, alternative energy will get cheaper and cheaper. And the best part is that it is clean and ours!! No longer do we have to send our President to Saudi-arabia to beg for more of their Dirty Oil! If we don't get off the oil kick, I could almost gaurenteee you a major war fought in the middle-East over Crude! Nucleur wars are not good for buisness or civilzations. Global warming, pollution,economic depressions cancer are just an afterthought if the world starts to glow! Gulf War three would be a real mess!

    June 18, 2008 at 3:39 pm |
  47. Todd

    Some estimates put the amount of untapped, so called "conventional reserves", domestically, at around 86 Billion barrels of oil. We should start drilling for those ASAP – more high paying jobs, less dependence on foreign oil, lower gas prices – it's a no-brainer, except to the environmentalists, who want us to all ride our bikes?

    June 18, 2008 at 4:57 pm |
  48. Sadick Arthur

    Oil, as we all know is a non-renewable resource, and invariably prices will start to rise at some point in time since demand will outstrip supply due to the excessive demand of some "growing" economies .
    It's time the world economies start developing technologies that do not rely on oil.

    June 18, 2008 at 5:55 pm |
  49. Peter

    « Nature always tends to the less energetic » – whoever came up with that statement also appropriately described human nature. This principle also applies to oil and other consumables: we only go to the supermarket when our fridge is empty, and we will only seek alternative (hopefully renewable) energy supplies when oil supplies really do run out one day – which they will. The question is always how much pain we are willing to bear before we take action, before it is too late. The pain will come in the form of severe economic turmoil because too many want something that is probably already too scarce. Sooner than many of us would prefer to think.

    Our dependence on oil is a bit like having all eggs in one basket, and yet everything hinges on that very basket which is gradually threatening to shatter on the ground. Oil producers, speculators, and consumers alike will eventually be sucked down that ugly dark spiral that punishes excessive greed at all levels. Not to mention the immediate political implications of billions of Dollars accumulating in the hands of countries where the values of freedom and democracy are not rated highly at all. A future Bin Laden machine of our own making?

    When the withdrawal symptoms of oil addiction eventually manifest themselves, there will be no winners – except for those who will have sought realistic renewable alternative energy sources to ensure their future livelihoods. Let’s get more energetic in changing our natural tendencies by proactively seeking a new way forward – before the hard reality hits us all.

    June 18, 2008 at 10:20 pm |
  50. Joe Goodman, Spain

    Why does Bush blame the Democrats for high oil prices? Shouldn't he take a portion of blame with his weak dollar policy? Some honesty from him would be refreshing.

    June 19, 2008 at 8:03 am |
  51. T. Taylor

    Hi,
    The total amount of oil is like a gigantic super saturated sponge. There is oil in storage, in tanks, in oil tankers, in pipe lines, in production distillations, always in movement – always being bought and sold in present and futures and every possible type of option and derivative in an accordianic escalating dollar based movement such that all the entire movement is relative to every other part. So, any active part and any small movement will be (eventually) felt by all the other parts.
    When President Bush by his war, lowered the production of Iraq from 3.2 million a day – for 5 years (It is still not equal to before the war) to an amount averaging less than 2 million for that period – this was a total amount of oil equal to at least one million a day for five years less than it would have been if the war had not destroyed the exports of Iraq. That is a total of (at least) one and a half BILLION barrels lost to the gigantic sponge.
    Now, this gigantic “sponge” is being fed and drying up at the same moment, just as a lake would be. The sponge or lake is being flooded and drained at the same time – parts of it super saturated and parts almost bone dry.
    No one really understands this huge sponge – there is no economist and no trader who has even more than a tiny small perspective of the universe of this world wide, ocean wide, sponge lake of oil and business and dollars!
    But one thing is obvious – although you may not feel the withdrawal of a few million barrels a day for even many months, because there are ways that this can be substituted for, by shifting inventories and increasing productions – at the end of five years such a loss catches up and the great sponge is finally and seriously drying out in parts.
    The loss of one and a half billion barrels of oil is being ignored by all of your “experts” who really understand so little about this!
    It is President Bush who is responsible for the high price of oil today!
    And the stupid Democrats are letting him accuse them of being responsible, because they won’t let him go offshore!
    Actually I don’t think Mr Bush himself or even his giant oil industries economists comprehend what I have said in this email.
    Best
    T.Taylor, Paris France

    June 19, 2008 at 8:49 am |
  52. Mehdi

    Recent soaring oil prices are partly because of high demands but why no one is seeing the hands of big oil companies who wish to lift the US restrictions to drill. The only way that they and their dear friend Mr. Bush can convince the congress to ease those restrictions is to have extreme high oil prices.

    June 19, 2008 at 11:04 am |
  53. John Shipp

    I recall reading the comment made in 1931, the whole thing (the depression) unfolded with agonising slowness almost in slow motion.
    this is the same event but much much bigger, the world markets are now much bigger than 1929.
    Throughout it all Gurus kept saying we are at the bottom things are about to pick up. These guys are selling something, or smoking something, Todd is right its not over until the fat lady sings and she has not yet entered the building.
    The commodity bubble is also going to end in a cry, don't they all, what happens when the manufacturing countries cannot sell their wares. or when China opens up african indonesian and south american resources, lookout Canada and Australia! Not everyone has to fight sub zero six months of the year or searing heat and no water.
    Two more years as a conservative estimate.
    JS

    June 19, 2008 at 11:27 am |
  54. Stephanie

    I heard your report, but why are you not recognizing that gold has gone up as much or more than oil over the same time period?

    I don't believe the development of China and India have anything to do with the demand for gold which has essentially not changed at all, but the price certainly has.

    The weak dollar has everything to do with this. I know a hedge fund manager, one of the most successful out there, and he started buying up gold and oil a couple of years ago as soon as the dollar started to really take a dive. He even said it was a simple market fact.

    That simple market fact combined with "Enron Loopholes" and many others like it has lead to a crazy speculative market which is trying to lock in prices on this weak dollar. Have you seen this? http://www.msnbc.msn.com/id/21134540/vp/25217432#25252591

    I hate to rain on your parade, but I don't think supply and demand is as much of a factor as you are making it out to be. I do realize it will take a lot before the dollar strengthens thanks to the damage done by the Bush administration, but far more could be done to re-regulate the commodities market.

    June 19, 2008 at 6:42 pm |
  55. abelardo abecilla

    i think that the rising oil prices is a best challenge that we are facing right now. now is the time to find alternative energy sources and show these oil producing countries that they cannot hold the whole world hostage with their fuel.it is time that we develop solar, wind,hydro and nuclear energy sources that will put oil prices to let say $ 1 per barrel.let hugo chavez and ahmedinajad drink their oil....

    June 20, 2008 at 10:21 am |
  56. Iskandar Ibrahim

    Please guys _ No worries, economic & social machines are at work; issues in times stabilize themselves. Are you guys worried about riots, mass desperations hence destructions, economic stagnant / recession or even global collapse, let alone terrorisms, or even wars over energy crises. These are all phenomena classics. There are nothing new in there. These phenomena are nothing else but the consequences of you guys, the world administrators' decisions and actions ( good and bad ones ) over behaviors ( right ones vs wrong ones ) in the management of the world energy supply and resources. So I urge to be brave and face it; they are the consequences of you guys world administration over energy use & management _ good ones and bad ones.

    Regret _ the world leadership, greedy including corruptions over wealth , power, & global resources; you guys supposed to be the smartest group of people residing over the global landscapes, have learned a lot ? but nothing of use to be proud of. Check you guys, what errors you have committed over the realm of excellence required by the global energy management ??

    Oil & Gas energy crisis ? _ Take it easy guys, irony I don’t see it becoming a problem. The Law of the World Energy _ supply and demand have been at work; things will line up adjusting themselves. Remember we get used to issues of shortages of resources notable as supply related to energy: OPEC Oil embargo; Nationalization of Foreign Oil Companies; PSC _ Production Sharing Contracts with most profits are maximized to the Oil Producing Companies etc. See Shell & Chevron operations in Nigeria; do you guys see anything wrong with their operating philosophy ? thence what had happened with the Nigerian blowing up the crude oil pipelines ? Hope you guys will be able to comprehend hence see the amazing ways systems will take care adjusting themselves to one of the law of universe _ the law of earth of world energy supply. The scope of world energy supply will not be limited to earth only. See the scope beyond earth in the Solar Systems for example. The Sun it self has been there forming unlimited resources of energy supply _ notable in terms of radiations of nuclear fusions _ so why not human on earth had been at work priority to maximizing harness that ” Unlimited Supply of Energy ” as main supply or center of energy resources rather than narrowing down the scope of energy supply on Crude Oil found only on earth.

    Next ask NASA progress in their efforts with the development in the Solar Systems _ Space exploration. NASA recent report _ according to NASA space exploration: Bulk Chunks of Ice made of Methane Gas forms massive landscape on Saturn Moons, estimate surface temperature << minus ( – ) 180 deg C. These reports are results in preliminary status of space probes released by Cassini at the Saturn Moon atmosphere; Further exploration by NASA _ hence support by “ Oil Companies “ will be required to assure confirmation. Compare to LNG technology, the following excerpts are copied, as follows :

    “ Quote
    Titan has an atmosphere. This can be seen faintly in the image on the left as an outline, and more clearly in the following image xx; taken by Voyager looking back at Titan and showing sunlight scattering in the atmosphere. The atmosphere of Titan has several layers of haze. It has a pressure at the surface of 1.6 times that of Earth, and is made up primarily of nitrogen, with about a 1% concentration of methane. The temperature on the surface is very cold, about -180 degrees Celsius. The atmosphere is extremely opaque because of thick smog that appears to result from sunlight interacting with hydrocarbons, much as smog forms on the Earth.
    The clouds are probably composed of liquid nitrogen and methane drops, and it is speculated that Titan may be covered with hydrocarbon lakes or oceans (specifically, methane and ethane). Although many of the organic chemicals thought to have been the precursors to life on Earth are present on Titan, it appears to be too cold for life as we know it to have evolved there. Here is a movie of infra-red images of Titan made with the Hubble Space Telescope. The structure shown in this animation represents heat variations in the atmosphere and surface of Titan.
    Unquote “

    Proposals_ Will it be possible for the World Oil & Gas Global Companies to get together to include in its GameChanger a consideration in Scenario 2010 _ 2080 to get methane bulk ice from the out side _ from Saturn Moons for example. Scientists and engineers gas industry will strive to develop methods of outer space bulk pick up & transport of gas ice in the extra super cold of super lower cryogenic _ temperatures; to be work around _ about the use of development of rocket technology, space ship _ bulk container & transport, electromagnetic radio & remote controls tech. applications, etc.

    The World Oil & Gas Global Companies will assume responsibility to strive with ingenuity, global power scopes & resources harnessing potentials that extend across technology & business boundaries _ human energy, treasures, finance, world energy with in the planet earth : fossil fuel _ oil, gas, coals, bio; heat _ geothermal, wind, tides; fusion radiation _ nuclear & solar wind. Get energy & resources from outer space planet earth in the universe : closest example _ methane gas from planet Saturn & Moons; Heat from Solar Nuclear Power Fusion & Radiations.

    What the irony _ the NASA spent billions in terms of R & D outer space rocket, nuclear, space techs & sciences; had successfully developed space transports Columbia & Discovery; but the World Oil & Gas Global Companies on earth remain behind struggling upon savings of incremental pennies searching for and producing fossil fuel Oil & Gas 3000 meter beneath / out of earth crust _ in access deeper than 2000 _ 3000 meter upon sea bed, at ever increasing cost hence prices to be supported and paid by consumers, which are nobody else but the human in the community themselves. NASA will strive forward development of the need for better, advanced and improved transport technology to cater with requirement of the extra super cold bulk ice movement of methane gas from the outer space with in Solar Systems _ the Universe.

    It will be coming time for human & man kind in the community _ to get together, rather than competing each vs one against another in the business of harnessing fuels oil , gas & energy; they are still abundant on earth and untapped on space in the universe. Make sense ??? Yes why not, this is consistent with the Shell _ the member of the World Oil & Gas Global Companies ideas of putting the concept of GameChanger up front. I would personally suggest to go forward by looking upon immediate, the big pictures of energy laid out ahead cut and clear view up front human eyes, brains & knowledge.

    Good Luck & Thanks Iskandar Ibrahim.

    June 23, 2008 at 4:25 pm |
  57. Curtis Bratcher, Arkansas

    My question is why does gasoline only cost 12 cents per gallon in Venzeula? Why is gasoline only $2.90 per gallon in China? Simple the govenments there stepped in years ago and came up with plans to stabalize prices while our elected officials gave in to big business and did little to control pricing and enabling the oil industry to go wild.

    June 27, 2008 at 4:57 pm |
  58. Bob L

    There is a serious deficiency in the US energy policy that is inextricably linked to national security as well as foreign policy. It is obvious that we are too dependent on foreign, unfriendly sources for our energy needs but there are some steps that can be taken now that would allow us to get through the "tough times": for those areas that have a robust public transit system, companies should be provided more incentives to give their employees mass transit credits or monthly stipends to encourage use of commuter services; the Federal government should encourage the practice of telework, especially since most employees have computers and broadband at home, this greatly cuts down on fuel use/cost, traffic congestion, company overhead, etc. This type of thinking is not routine for the Feds but is one step in moving toward a philosophy of energy efficiency and independence on foreign resources.

    July 1, 2008 at 1:37 pm |
  59. frank

    OIL prices are high because we have a weak dollar and a high deficit
    and a b demo house that wants to do nothing
    and deregulation and oil company s that bid on oil prices it all adds up to greed

    July 2, 2008 at 12:41 am |
  60. Joe-Las Vegas NV

    If the Saudi's don't feel the price of oil is to high, then are we selling our exports to the saudi's at and inflated rate ie rice,wheat,corn or other exports with an inflated rate to them? If not why. If they feel the pinch like we do maybe it will take affect.

    July 8, 2008 at 8:40 pm |
  61. Jay L

    It looks like oil price trends are reversing now. Today's $136.00 may be $130.00 tomorrow, when higher inventory number are released.

    A slew of shrill investment management talking heads are covering for profit-takers with noise about hurricanes, wars, China, etc, to help keep small investors in the market and losing money, as long as possible.

    I expect that prices we will bet down to the $97 to $107.00 range with 3 weeks. Unfortunately, average consumers are about to get another shock when they are told that thousands of their pension dollars were invested in oil-indexed securities, and lost to the early sellers that are now talking prices up.

    But, on the bright side consumers can begin saving a modest retail price decline of 25-30 cents per gallon in a few weeks.

    July 8, 2008 at 9:08 pm |
  62. Tonia Becker

    Today I, along with thousands upon thousands of other airline customers, received an e-mail from United Airlines signed by the CEOs of essentially all of the major and some of the smaller airline carriers.

    This e-mail asked for support in helping to stop oil speculation. Even if there is a problem in the oil speculation market, I am reticent to do anything to help the major airlines.

    There are precious few industries that are run as poorly as the airline industry. The rules of effective business management that apply to most members of the business community simply do not apply to the major airlines—the government is there to bail them out. Or, maybe a more accurate statement is that we, American taxpayers, are there to bail them out.

    Of course the same rules of government bailouts do not to apply to the smaller airlines.

    I have traveled extensively for my entire career. I have always greatly enjoyed travel. For me business travel has historically been, on good days very enjoyable and at worst tolerable.

    Today, traveling is unbearable. Yes, some inconvenience was created by 9/11. This is what it is. However, most of the unpleasantness has been created by major airline carries that simply do not care and are not dedicated to managing well-run companies. Front-line employees are working under horrible conditions created by the poor management of senior-level airline executives. Working under unpleasant conditions has created indifference for most front-line employees—they simply do not care.

    I only have one feasible idea for fixing the industry. It is a game called “welcome to real life” and the players are the C-level airline executives. The following are the rules of the game:

    1.All C-level airline executive must take 30 air travel trips in 30 days on commercial aircraft.

    2.They must travel in disguise—they cannot be recognized by counter, gate or in-flight employees

    3.They must travel in economy class

    4.At least 15 of their 30 trips must involve connections

    5.They are required to check at least one bag for 15 of the 30 trips

    6.Their salaries must be reduced to a “modest” $200,000 per year until the problems of their companies (many of which will become glaringly apparent during their 30 days of travel) are fixed. When the problems are fixed, then go back to multi-million dollar comp. packages.

    The inefficiencies and poor management of the major airlines are out of control. The only way for the problems to be fixed are for the executives running the major airlines to actually experience their own products—ground the private jets and figure out how to fix the problems of their companies.

    I guarantee that if airline industry executives agreed to participate in the above outlined game, the airline industry will look a whole lot different in two years.

    The final comment that I will make is that if the airlines cannot figure out how to reduce the enormous inefficiencies that exist within their operations—raise the rates add value. Raise the rates so that acceptable service can be delivered to business travelers (and any other travelers that can afford the increased rates). Raise the rates, stop nickel and diming passengers and provide service.

    July 11, 2008 at 3:52 am |
  63. Josepe

    Blaming the speculators or suppliers is being hypocritical. They are just helping us to price in the future uncertainity so that we may make the right decisions now on the car we buy, which will also influence the manucturer's approach.

    My worry is whether the market has already price-in the uncertainity over Iran which if worse come to worse as it seems now $300 a barrel would not be one year's away. The belicourse mentality being displayed by Iran, US and Israel is appalling.

    The only viable solution which the developed world can take control of is demand by leading in change in consumer behaviour, investing in technology, investing in reliable and modern public transport (particulary US)

    To blame Opec and other Oil producers or even looking for more supplies eg Alaska drilling will only fools the people while enriching Oil companies and Opec Countries. It is like fighting supplies of Cocaine in bushes of Afghanistan or Colombia's forest instead of demand in the streets of London, New york, LA which is driving up its prices. Disrupting supplies only ensure it receives a premium price.
    hence its attractiveness to criminals.

    July 11, 2008 at 8:18 am |
  64. Jimbo

    Who cares who’s is to blame. What are we going to do about it. From my viewpoint, there are 2 or 3 options. Sell your car, buy a bike and take mass transit. Drive less or buy an electric car or a car powered by hydrogen. And option 3 is buy a pair of comfortable Nike’s and get ready for some walking. Since all of these options are out of the question for me, I decided to try and do something about it. While looking around, I stumbled across GasBankUSA, located at http://www.gasbankusa.com. The site talks about fixed price gasoline and locking in at a fixed price. An interesting concept and a little better than my magic 8 ball which continually tells me “try again later” everytime I ask it where are gas prices going OR will gas prices continue to rise. Looking through this site, it looks like a way to take control over something we had no control over in the past.

    July 21, 2008 at 10:13 pm |
  65. andrew

    high oil prices will contibnue to stay as long as Government around the world do not change their policies

    September 16, 2008 at 4:55 am |

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