What will be our breaking point (Price of Oil)

[T-Bird76]

So the price of oil is up to $112 a barrel and the national average for gas is now $3.37 a gallon. So what's going to be our breaking point? I mean even today I went to put gas in my car and I'm thinking how can I reduce the costs, drive less? Its a domino affect, I drive less means I'm not doing as much, spending less money in the economy and therefore the economy gets weaker when the public resorts to these measures. Prices everywhere are going through the roof but our income isn't on par with the increase. So what’s the breaking point? Where does it end or does our economy simply collapse under the pressure?

-Does the Gov't step in and cap the price of gas?

-Do we open the national reserves and create too much supply to lower the price?

-Does the economy simply keep getting weaker?

-Do we wait this out and suffer until Hybrid and alternative technology becomes more common to reduce our dependency on fossil fuel?

The fact of the matter is the price of fuel is affecting the disposable income we have to spend on other things. I for one feel the weakening economy is a major result of record high fuel prices.

[Midnight Mike]

Well, there are going to be several breaking points, one will be on there international scene & other will be local, right here in the USA.

People forget that oil is used for many different things & not just for go-juice in transportation (Car, Trucks, buses, Jets, etc)

When the prices start to rise & people start to spend less & less, then that will be the breaking point.

Unfortunately, I don't see either happening to soon.

Also, there is not a supply problem, meaning if OPEC was to increase production, it would not have that much of an impact. If the United States were to tap into the Strategic Petroleum Reserve, it would have a minimum impact.

There is chaos taking place in the oil producing countries such as, Iran, Venezuela, Nigeria. Not enough refineries in the international market, kind of funny that a country such as Iran has to send its oil outside the country to be refined.

Also, new wells need to be discovered, we have not discovered new wells for quite some time, ANWR has been mentioned several times & other new sources of oil such as in North Dakota, South Dakota and Montana are being touted, if only we could drill.
http://www.huliq.com/55773/massive-oil- ... s-10-times (http://www.huliq.com/55773/massive-oil-deposit-could-increase-us-reserves-10-times)

Oh yeah, I neglected to mention the US Dollar, if it does not strengthen, that will be another problem this country in the future

[PhilDernerJr]

Three words.

Start. Drilling. Alaska.

[Midnight Mike]

Three words.

Start. Drilling. Alaska.

Damn tree-huggers are blocking effort to drill!

Also the Global Warming alarmists are playing havoc with food prices, with all of the talk of global warming has pressured people into the use of biofuels, all of sudden farms can make more money selling food for fuel rather than a food source.

With the rise of food, it becomes more expensive to feed the livestock.....

And in addition, adding the rise in the price of fuel, pressure starts to add up....

[stuart schechter]

Three words.

Start. Drilling. Alaska.

But I like Alaska :(

[Tom_Turner]

It should be "possible" to drill for oil in Alaska while doing minimal harm to the environment. Of course whether those tasked to do so execute effectively is open to question.

Tom

[Midnight Mike]

VIENNA, Austria - Oil prices rose to an intraday trading record above $112 a barrel Tuesday after the U.S. dollar fell and crude oil shipments along one U.S. pipeline was said to be operating below capacity.


Crude's rally this week started with a decline in the dollar against the euro on Monday, analysts said. Crude oil's recent run above $100 a barrel has been largely attributed to a steadily depreciating U.S. currency because a weakening dollar prompts investors to seek a safe haven in hard commodities such as oil and gold.



Crude was also supported by news of disruptions to crude supplies, though analysts said the interruptions were minor.

"They only look like temporary shut downs but ... the combination of that and the fact that the dollar was off again was the key," Pervan said.

The Capline pipeline — the Royal Dutch Shell PLC conduit that carries 1.2 million barrels of crude each day from the U.S. Gulf Coast to the Midwest — was closed on the weekend, and has since resumed operations at a slightly reduced capacity.

In Nigeria, Italian energy giant ENI reported a 5,000 barrel per day reduction in production at one of its facilities.


http://news.yahoo.com/s/ap/20080415/ap_ ... oil_prices (http://news.yahoo.com/s/ap/20080415/ap_on_bi_ge/oil_prices)

[T-Bird76]

[quote="Phil D.":a06de]Three words.

Start. Drilling. Alaska.

But I like Alaska :([/quote:a06de]

Stuart where they want to drill in Alaska is nothing but flat tundra, no forest at all, hardly any wildlife. It’s totally barren. There's no reason to drill there.

[adam613]

I'm not necessarily opposed to drilling certain parts of Alaska if it were done right, but it won't have any effect on the current situation.

The price of oil isn't going up entirely because of supply issues; there's plenty of oil to go around. The price of oil, measured in dollars, is going up because the value of the dollar is going down. This has two effects:

1) Say that for a certain value X of the US dollar, a barrel of oil costs $100. Now, say the value of the dollar decreases 10%. A dollar is now worth only 90 cents, so the same barrel of oil will cost $111, even with no change in the value of oil.

2) As one of the articles Mike quoted pointed out, there is vast foreign investment in currency, especially the US dollar. The US dollar isn't the only currency getting its ass kicked right now, so investors are investing in things like oil. That increases the price, because the demand goes up without supply changing. But if the supply increased, that wouldn't stop the dollar from sucking.

The price of oil is only going to come down relative to the dollar if the dollar gets stronger.

Biofuel is also a completely separate issue. It's a much longer-term solution, and this is not a long-term problem. I don't quite understand why only global warming alarmists are pushing to reduce our oil dependency. The War on Terror people should be doing so as well, since our oil use is the primary source of terrorism funding...

I have to say, I'm curious as to what would happen if the government stepped in and capped the price of gas. It would never happen, because all of the gas companies would cry foul, but it would certainly have an effect on the oil market and the price of the US dollar...

[cancidas]

I'm not necessarily opposed to drilling certain parts of Alaska if it were done right, but it won't have any effect on the current situation.

The price of oil isn't going up entirely because of supply issues; there's plenty of oil to go around. The price of oil, measured in dollars, is going up because the value of the dollar is going down. This has two effects:

1) Say that for a certain value X of the US dollar, a barrel of oil costs $100. Now, say the value of the dollar decreases 10%. A dollar is now worth only 90 cents, so the same barrel of oil will cost $111, even with no change in the value of oil.

2) As one of the articles Mike quoted pointed out, there is vast foreign investment in currency, especially the US dollar. The US dollar isn't the only currency getting its ass kicked right now, so investors are investing in things like oil. That increases the price, because the demand goes up without supply changing. But if the supply increased, that wouldn't stop the dollar from sucking.

The price of oil is only going to come down relative to the dollar if the dollar gets stronger.

Biofuel is also a completely separate issue. It's a much longer-term solution, and this is not a long-term problem. I don't quite understand why only global warming alarmists are pushing to reduce our oil dependency. The War on Terror people should be doing so as well, since our oil use is the primary source of terrorism funding...

I have to say, I'm curious as to what would happen if the government stepped in and capped the price of gas. It would never happen, because all of the gas companies would cry foul, but it would certainly have an effect on the oil market and the price of the US dollar...
good point.

[bonanzabucks]

Adam is really the only one who touched on what's happening with oil. Oil's sky-high price has absolutely nothing to do with supply and demand. There are many other factors involved, but demand and supply issues are not one of them. For one thing, new supplies are being found all the time. Brazil just announced that they have the third largest oil reserves in the world. Equatorial Guinea has massive reserves off their coast, which could be the world's largest. New supplies are being found, so there is plenty of oil. And demand is not going up. Demand in the US and Europe has been going down for the last few years. Europe and us represent the two largest oil consumers. Many analysts and even Bush say China and India's demand is driving the price up. Bull****. Yes, China and India have increasing demand, but it isn't increasing by that much and China mostly gets their oil from limited sources (Iran, Africa and Venezuela) because they don't want to pay the market price. So, that shouldn't affect the price too much.

I used to work as a stock analyst and I analyzed a lot of commodities. My friend is a commodities trader and I have other friends in the oil industry. I think I have an idea of what's going on. Oil's going up because of speculation and traders putting their money in for investment purposes. It's kind of similar to what happened with the silver bubble in the late 70's and early 80's. You have people buying up oil for whatever reasons. Some just took the risk and fell into the "Peak Oil" theory. Others just don't like the Bush Administration and don't have confidence in the way he's running things, so they're taking their money out of the US and putting it into commodities (also look at gold). Then you have countries like Venezuela and Russia who have political and economic reasons to keep the price high, so they limit out put. Russia wants to screw the EU and US and show "strength". Chavez wants to screw Bush. It's also their only source of income. Whatever the case, oil traders are taking advantage of the instability in the world right now and trying to cash in as much as they can even if it screws everyone else over. It's hilarious to see what excuses they use to trade up the price of oil. A few months ago, there was a terrorist attack in Turkey that drove up the price by a few bucks. Turkey doesn't even have any oil! What the hell? I can't believe these guys can go on tv and actually spout off these explanations with a straight face.

Tommy mentioned something about a breaking point. We reached the breaking point when oil jumped over $80, which was sometime in the fall. Things have been going south since then. In my opinion, high gas is the sole reason why we're in a recession now. Subprime wasn't so widespread, but high fuel costs are and they're affecting everything, from food to transportation. These stupid analysts and economists like Lawrence Kudlow kept saying that high oil prices wouldn't affect the American consumer. That was in the summer. Oil has gone up since then and we're seeing poor consumer statistics we haven't seen since the Great Depression. And it's all tied down to people cutting back on consumption because the cost of food and other necessities going up because of the higher cost of oil. This is a consumption-based economy. When people stop buying, the economy shuts down. Oil is preventing people from buying.

Anyways, my friends tell me that demand and supply and terrorism concerns should put oil at a realistic level of around $50 a barrel. Everything else is speculation.

I actually think price capping gas is a good idea because of how integral cheap gas is to this economy. If they can cap flights at airports and bail out Bear Stearns, they can cap gas. The overall economy is far more important than Exxon's record profits. It will never happen under Bush because he's so close to the oil industry. Another solution would be to change the rules for NYMEX to end speculative investing just like they did with silver and the COMEX in the early 80's. Again, that won't happen under Bush because oil companies are making a killing based on this speculation and "instability". Everyone else is getting screwed in the end. Drilling in Alaska won't really change anything and it will take years for it all to come into circulation. Bush also said he will not tap into the national reserve.

I'm willing to bet that the price of oil will come down dramatically if a Democrat is elected. For one thing, foreign investors have a lot more faith how Democrats run the economy and they will invest more here, driving up the dollar. Secondly, Democrats will be more willing to promote alternative fuels and that alone will drive the price down (opposite speculation). I think they'd adopt a different energy policy that isn't based on sending Cheeny to Saudi and have him beg and plead them to increase production. OPEC's making a killing. Why should they listen? They have the power now. And we gave it to them. We only have ourselves to blame, really...

[Midnight Mike]

Adam is really the only one who touched on what's happening with oil. Oil's sky-high price has absolutely nothing to do with supply and demand. There are many other factors involved, but demand and supply issues are not one of them. For one thing, new supplies are being found all the time. Brazil just announced that they have the third largest oil reserves in the world. Equatorial Guinea has massive reserves off their coast, which could be the world's largest. New supplies are being found, so there is plenty of oil. And demand is not going up. Demand in the US and Europe has been going down for the last few years. Europe and us represent the two largest oil consumers. Many analysts and even Bush say China and India's demand is driving the price up. ****. Yes, China and India have increasing demand, but it isn't increasing by that much and China mostly gets their oil from limited sources (Iran, Africa and Venezuela) because they don't want to pay the market price. So, that shouldn't affect the price too much.


I have to disagree with part of what you said, in that new supplies of oil are not being discovered, meaning that they are not drilling. The speculated find in Brazil is hypothetical & may not be tapped for years.

Over the years, drill sites have been capped, but, none or very few drillings site have been excavated.

As to the price of a barrel of oil, the problem is complex & not just one reason?

Speculators have driven oil prices to record highs
International political tension
Weak dollar
Conflict with the the oil generating regions.
Political instability in other regions.
Lack of refineries.
Rising oil field expenses.
Global Production constraints
There is a fear that the supply of oil can not keep up with demand, same supply with additional customers.

Somebody said there is plenty of oil, problem is nobody is drilling for it.

There was a article in the Wall Street Journal 15-April edition that talks about that Russian Oil production & that is down the first 3 months of this year, they are worried about the aging Siberian oil fields. Which of course throws more problems into the system

Here is another article that will impact a future rise of oil:



Saudi King says keeping some oil finds for future
Sunday, April 13, 2008

Reuters -- Saudi Arabia's King Abdullah said he had ordered some new oil discoveries left untapped to preserve oil wealth in the world's top exporter for future generations, the official Saudi Press Agency (SPA) reported. "I keep no secret from you that when there were some new finds, I told them, 'no, leave it in the ground, with grace from god, our children need it'," King Abdullah said in remarks made late on Saturday, SPA said.
http://uk.reuters.com/article/oilRpt/id ... 7720080413 (http://uk.reuters.com/article/oilRpt/idUKL139687720080413)

[bonanzabucks]

The Brazilian find is not speculative. They said they will be one of the world's leading producers. This is significant and gives the world another Saudi or Venezuela in terms of oil reserves. Even if this is speculative, as you say, Brazil's oil reserves, not including this recent find, have always grown each year. PetroBras is one of the leading companies when it comes to oil drilling and discovery and they're willing to make the investment. Looks like it's paid off and they'll be reaping the rewards.

A lot of the reasons you're listing for the increase in oil price are due to speculation, or they lead to speculation. People are speculating because of "political tensions" or "bad relations" or when "Nigerians kidnap oil workers". When Nigerian militants kidnap a couple of rig workers, does it really clamp down on production? Convince me that it has that big an impact. It doesn't. "Weak dollar" is the same thing as speculation. All of them are investment tools and have nothing to do with fundamentals. Even oil baron T. Boone Pickens, who's made billions from oil speculation, said himself that the fundamentals don't support oil prices at their current level. He's betting against oil staying at $100.

As for the lack of refineries, that's something that oil companies aren't willing to invest in. They have tens of billions in profits, but won't invest in increasing capacity. And why should they? They make these record profits from the instability of the commodities markets. It's not in their interest to increase refining capacity.

As for the Saudis, their oil reserves are considered national secrets. With oil being as expensive as what it is, you think it's in their interests to pump more of it? Same with Russia. Their economies are solely based on oil exports. It's to their advantage to keep things the way they are.

By the way, if I were to invest in any stock or country in the future, it would be Brazil. I think their time has finally come. They deserve it!

[Lezam]

Remember, oil in europe and asia is over $6 a gallon.

If people wouldnt waste so much gas we wouldnt be in such a deep hole. You cant say "I can do whatever I want, its my money" because not only are you hurting your own pocket book... your hurting the entire us. The next time you think of idling your car for over a minute, do the world a favor and shut it off. Dont just piss away gas because its yours, your hurting the rest of us as well.

[bonanzabucks]

Europe and Asia don't rely on cheap gas as much as we do and their public transportation systems are much better than ours. Not to mention, they don't have huge SUVs and all drive smaller and vastly more fuel-efficient cars than we do. Remember, Congress tried to pas a law to raise the fuel standards and it was shot down. It's been shot down to our peril now. Our competitive advantage was that we had cheap gas due to lower gas taxes and fuel inefficiency didn't matter so much. That no longer applies.

[Midnight Mike]

Europe and Asia don't rely on cheap gas as much as we do and their public transportation systems are much better than ours. Not to mention, they don't have huge SUVs and all drive smaller and vastly more fuel-efficient cars than we do. Remember, Congress tried to pas a law to raise the fuel standards and it was shot down. It's been shot down to our peril now. Our competitive advantage was that we had cheap gas due to lower gas taxes and fuel inefficiency didn't matter so much. That no longer applies.

Can't really compare one country to another as they are all different.

Don't forget in Asia & Europe they use aircraft for many short haul flight, while in the USA, we would drive.

We can drive from Manhattan to Niagra Falls in 10 hours & never leave New York, a drive like that in Europe & you could have visited 6 countries :lol:

Also, in Asia, they use 747 & 777 aircraft for 1 hour flights.

Yes, in Asia they have a good train system, but, their highways, though not as complex as ours, are congested & have traffic worse than ours.

It is this same highway that connects the country & is what makes this country rich, unfortunately, same highway that allows many cars on the roads.

Take the cars off the roads & the economy in this country would come to a standstill.

The solution to the problem is to find an alternative energy source, which is easier said than done.

In the meantime, domestically, we need to get our drill tip sharpened & allow drilling.....

[bonanzabucks]

Europe and Asia don't rely on cheap gas as much as we do and their public transportation systems are much better than ours. Not to mention, they don't have huge SUVs and all drive smaller and vastly more fuel-efficient cars than we do. Remember, Congress tried to pas a law to raise the fuel standards and it was shot down. It's been shot down to our peril now. Our competitive advantage was that we had cheap gas due to lower gas taxes and fuel inefficiency didn't matter so much. That no longer applies.

Can't really compare one country to another as they are all different.

Don't forget in Asia & Europe they use aircraft for many short haul flight, while in the USA, we would drive.

We can drive from Manhattan to Niagra Falls in 10 hours & never leave New York, a drive like that in Europe & you could have visited 6 countries :lol:

Also, in Asia, they use 747 & 777 aircraft for 1 hour flights.

Yes, in Asia they have a good train system, but, their highways, though not as complex as ours, are congested & have traffic worse than ours.

It is this same highway that connects the country & is what makes this country rich, unfortunately, same highway that allows many cars on the roads.

Take the cars off the roads & the economy in this country would come to a standstill.

The solution to the problem is to find an alternative energy source, which is easier said than done.

In the meantime, domestically, we need to get our drill tip sharpened & allow drilling.....

As you mentioned, Asian and European train systems are so much better than ours and they mostly rely on those to connect from place to place, even to different countries. At least in Europe. Asian highways are bad, sure, but European ones are as sophisticated as ours. Don't tell me that Paris and Frankfurt have worse traffic than Atlanta and LA because they don't. This is just the lifestyle we chose here and we're getting pummeled because of it and our reliance on cheap gas without investing in other transportation infrastructures. If we kept up with the reliable train system we had in the past, we wouldn't be facing as big a problem as we do now.

I'm not saying we should take cars off the roads. But look...the price of gas is $3.30 right now, people are driving because they have no choice and our economy is not only in a standstill, it's reverting.

Actually, we have oil lots of oil, but not just in Alaska. The Colorado oil shales are the biggest reserves in the world. Yes, it's expensive to extract, but it's very profitable with oil being the price it is now. It's just like the tar sands in Canada. With oil being as high as it is, it makes extracting oil from the Alberta tar sands profitable. These oil companies don't want to invest in extracting it. I say revoke their tax breaks unless they invest money in extracting oil shale or invite foreign companies who would be more than happy to do it. Letting Exxon or people like Matt Simmons influence our energy policy hasn't worked.

[adam613]

In the meantime, domestically, we need to get our drill tip sharpened & allow drilling.....

Mike, you're ignoring the actual problem. The increasing price of oil (and gas) right now has very little to do with the supply of oil. As such, coming up with more oil from a domestic source isn't going to decrease any prices. Remember, it's not just Americans who have to pay $115/barrel for oil; it's the entire world. It just hits us harder than it hits the Europeans because our currency is losing value in comparison to theirs.

Increasing the supply won't change prices. Increasing the value of the dollar will.