Monday, June 9, 2008

Oil Prices aren't going down

I really hope that it sinks into people, and soon, gas prices are going nowhere anytime soon. Too many factors contribute to the price for us out in the West. Fighting in Nigeria, Increasing Demand from China and India, a weak US dollar, Iran doesn't like us over here, an increasing human population, there is still war in Iraq, Hurricane Season and trade speculation.

I'll accept now more than I did before, that the supply-demand relationship is playing a role but only to some extent. For oil prices to fall there would need to be a dramatic increase in production along with serious alternatives being injected into the mix and a friendlier international political climate.

The political climate is going to stay high as long as there is war in Iraq and Israel and Iran are at it. That isn't going to change within the next 9 months, the US is going through an election and policy changes need to be made to achieve some of this. That isn't even assured, the policy changes could make it worse.

Fighting in countries with Oil isn't likely to come to a halt any time soon either and with hurricane season coming, at least for this year, that is another factor to cause the speculators to stay nervous.

Alternatives to fossil fuels are not going to drop out of the sky. We are not going to wake up tomorrow or next week or next month and all have Solar Panels on our roofs and be driving cars that run on e85 or some variant. Actually if we did wake up tomorrow to e85 cars that would mean all the worlds corn or sugar cane went into it and the food crisis would be made worse in some countries. It will take time to sensibly build up a system of alternative fuel that wont cause an equal amount of harm. There will have to be wind farms built, hydro-electric plants, solar panels will have to go on hundreds of roofs and cars will have to become extremely fuel efficient.

The developing countries won't stop growing either so that is another issue where they will have to hit walls with respect to fuels costs and try to build their industry around a less oil dependent model.

The rest of us will have to buy cars that are more fuel efficient, spend less money on luxury items, be more mindful of energy use in the home, turn on a fan rather than the A/C or open a window rather than turn on the fan. Generally, much like the rest of the factors involved with gas being affordable, I think we have to try harder to level the wealth playing field. Work hard, continue to study maybe say goodbye to the stay at home parent but things have got to change.


Anonymous said...

It is interesting that you mentioned that Iran doesn't like us. It has been revealed the Cheney was trying to start an aerial assault against Iran last year. Now it has also been revealed in Denish Kucinich's articles of impeachment against Bush, that in 2006, the Pentagon has been using Sunni terrorists (the same type as al-Qaeda) to cause strife in Iran (which is a Shia state). It is alleged that the recent bombing in Iran, in April, was funded by the CIA. So we would have to wonder ... why would Iran not like the US? From what I've read, the US is sitting on millions of barrels of oil up in Alaska, but won't touch it for whatever reason. The thing is, as the value of the US dollar falls, why would countries output more oil when the value of currency used to trade oil with is falling? Iraq says that it has lost over US$5bn in revenue for not being allowed to diversify their assets into stronger currencies. Everyone looks towards India & China as the reason for a rising demand in oil, but from what I've read, speculation is what is driving prices, not actual demand. The price of oil has doubled since last year, and by over 20% in the past 6 months. I am not aware of demand jumping near those percentages in the past year.

Majatt said...

I'm not saying Iran doesn't have a reason, I'm not saying they don't have a good reason. I'm simply saying that the relationship isn't a good one and that is not going to change.

On the issue of supply vs demand being a driving force. As I was trying to say there is more than one factor and I'll have to go dig up some links but I think oil production is actually up and there are plenty of theories now to support oil may not be as scarce as we may think

From what I understand speculation accounts for 30% of the currently bloated price of oil. Regardless of the nuances and props holding up the oil prices. My personal opinion is that the prices won't be going down and people should be adapting, as most people are.

With respect to poor people, its my sincere hope that Governments can step in and help them.

Oh and on Alaska the reason is that there is plenty of wildlife in the region and the US public and environmentalists would cry out. For a US politician to suggest drilling there, no matter how good the plan it, to me, it seems like political suicide.