Price of Oil Counterpoint

 

Oil prices have passed $143 a barrel for the first time. The reason for the sharp increase has been speculated:

 

  1. Supply concerns-tight oil supplies
  2. Fragile global economy-the FED won’t raise interest rates
  3. Tensions in the mid-east (Iraq, Iran, Israel)
  4. Global demand
  5. The large oil companies interests
  6. Speculation led investors to seek higher yielding investments 

In the 1970s, Big Oil companies controlled 80% of the world oil reserves, but now those numbers are reversed, with local government-owned oil companies holding 80% to 94 % of the block. Within recent years, independent oil and gas companies have become the companies providing a wide range of technology, project management, and developing new technologies, rather than Big Oil.  The break-even price (the amount of money it takes to extract 1 barrel of oil) is the first thing oil companies establish in order to determine if drilling a new well makes financial sense.

 

Who are the “largest oil companies”, what are their interests, who do they represent, and how are they ranked?

 

How much oil is produced in each country?

 

Is a large price of today’s oil price pure speculation of a large financial market? Some say it is driven by large trader banks and hedge funds that control the oil and its price. A June 2006 US Senate Permanent Subcommittee on Investigations reported, “…there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.”

 

Others say, “Blame governments, not speculators for high price of oil.” An increase of oil imports results in the increase of oil costs.

 

A tabulation of global oil production and consumption is tabulated here.

 

The EIA (Energy Information Agency) lists the annual oil market chronology of 1970-2006.

 

The WTRG (West Texas Research Group) gives an oil price history and analysis.

 

The Econbrowser web site gives an analysis of current oil conditions and policy.

 

The Wikipedia web site gives oil price increase facts since 2003.

 

The New York Times article suggests, “As oil prices soared to record levels in recent years, basic economics suggested that consumption would fall and supplies would rise as producers drilled for more oil.”

 

These three articles suggest that oil gas prices will drop:

 

  1. CNN web site, “Why oil prices will tank.”
  2. Reason Online- “Oil Price Bubble?” Supply is up, demand is down, yet the price is soaring. Here’s why.
  3. CATO Institute web site, “Get ready for the oil price bubble.” 

Of interest are the candidate’s views on technological issues: Energy, Climate change, Space program, skilled worker shortage, and technology.

Conclusion:

 

After reviewing the above articles, history and analysis the following is noted:

 

  1. Today there are not tight oil supplies.
  2. The global economy doesn’t appear to be in as bad a shape as reported.
  3. There are tensions in the mid-east, but it is under somewhat control without effecting oil.
  4.  There is a global oil demand, but today it is adequate.
  5. The large oil companies are willing to provide enough oil.
  6. Speculators and government’s regulations appear to be the ones causing higher prices for oil.
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