More US production doesn’t lower gas prices:
Article here.
And bombing Iran certain won’t lower them, either.
Certain people are immune to reality checks.
::::waves hand:::: we aren’t drilling more. We’re drilling less ::::jedi mindtrick:::
Truth is, there’s nothing anybody can *do *to change the trajectory of gas prices by a large enough margin to matter.
What is actually needed is an economy not dependent on fossil fuels. Any other discussion is a total waste of time…
But hey, let’s all mow the grass one last time as the drought settles in shall we?
Why is it that sound bites about the price of gas never seem to mention speculators? I’ve never taken an econ class and I don’t entirely understand commodities markets, but it seems to me that those who buy up “futures” or whatever it is they do seem to mess with prices even tho they’ve never seen a drop of crude in the wild.
But then, what do I know…
Because they have money and can’t possibly be at fault for anything.
Blessed be the Job-Creators. :rolleyes:
While anybody who says that increases to domestic oil production will lower gasoline prices to a significant degree are liars, there are many benefits to more oil coming from the US (and Canada):
-Jobs
-Energy Security
-Less (American) money to unstable/oppressive regimes
-Price Stability (to a degree)
Oil price futures generally serve to stabilize prices. Demand customers are able to lock in long-term prices and reduce price volatility. The primary reason for price volatility is political or natural. When revolutions happen or hurricanes happen or whatever, prices spike. This is because these are pretty unpredictable and companies have been unable to hedge against such risks. This also why prices can sometimes climb higher than the ‘price fundamentals’. Because there’s unknown stuff that can happen and companies are willing to pay more as an insurance against those disruptions.
Do you people have no hearts? There must be thousands of birds and seals out there without their coat of oil to protect them from the cold. The drill people are doing the very best they can to remedy this terrible situation.
This isn’t true. Changes in domestic production can have an impact on domestic prices. However, this assumes that changes in domestic production are noteworthy to the global supply / demand balance of crude oil. Outside of that, the only way it could have a big impact is if domestic production outgrows domestic consumption and export controls are in place creating a glut in the U.S. This would be like the current situation with natural gas. Certainly the U.S. consumer of natural gas benefits significantly from the significant domestic drilling of natural gas coupled with an inability to export.
While speculation can result in price movements (up or down) in contrast to the fundamentals, realize that the futures market is a zero sum game. For every buyer of a contract there is a seller of a contract. Speculators can, therefore, essentially make just as much money speculating that the price of oil will decline. The presense of speculators also serves to make the market that much more liquid which should translate into lower costs for the “legitimate” hedgers.
So, you’re saying that increasing supply of oil makes no diference to the price?
Okay… so long as you concede, then, that reducing demand for oil doesn’t make any difference in the price, either.
Right?
That’s explicitly not born out by the evidence, astorian.
To spell it out to remove all pedantic argument points: The United States is not capable of affecting the price of oil to a significant degree by drilling for oil. You don’t have enough to recover to affect the world market. Moreover, if the US did discover a heretofore unknown reservoir of oil that could lower prices, OPEC could easily shut off its taps in order to keep the price constant (they might or might not want to, but that’s besides the point).
That’s just simply not true. Libya affected the global price of oil significantly when the world lost 1.2 million barrels a day. Japan is affecting the global price of oil with their consumption growing .5 million barrels a day due to shutting in of their nuclear facilities. U.S. production growth from just the Bakken and Eagle Ford has been 1 million barrels a day in the last few years. The U.S. is projected to grow production 2.6 million barrels per day by 2015 at current pace. Canada is projected to grow production 1.3 million barrels per day by 2015 at current pace. Mexico is projected to grow their production by .5 million barrels per day by 2015 at current pace. Simply put, North America has been the fastest growing oil and natural gas producing area of the world for the past five years. This trend is continuing.
The North American energy industry is going to be the worldwide economic story for the next decade. Economic expansion in the U.S. will be driven by growth of this industry. The resurgence of the chemical industry in the U.S. will be driven by low natural gas prices in the U.S. No stupid slogans like drill baby drill are needed. No politician of either party will make a big difference. This is going to happen. The U.S. will again be the largest oil producer in the world surpassing Russia and Saudi Arabia within a decade.
Those of you who believe the premise of the OP are either so blinded by their political ideology they ignore any evidence that disagrees with their belief (kinda like creationists, come to think of it) or just do not pay any attention to world affairs.
Domestic drilling and domestic oil production has spiked in the past year or two. Interesting, particularly since drilling in the GOM has been essentially been shut down. Where is this drilling occurring? On land. In long-depleted oil fields. Recent developments in technology has discovered that beneath the depleted oil reservoirs are geologic formations called shale plays that produced the oil that filled those reservoirs and these shale plays can contain 10 to 100 times the amount of oil that the reservoirs held. Formation fracturing techniques, known as ‘fracking’ allows the petroleum in those plays to be released and pumped to the surface. This means these fields, once believed to be worn out and worthless, are now producing more oil than they did when they were first discovered.
Well, if we have so much more oil, why isn’t the price dropping? In case you haven’t been paying attention, Asian countries (particularly China and India, but only particularly those because of their large populations, all Asian countries are contributing) are entering the modern world. The citizens are buying and driving cars. They are getting electricity, and liking conveniences like TV, air conditioning, and refrigerators. Furthermore, the EU has banned oil imports from Iran (the US has for a while, now). These developments have increased global demand to make up for the decrease resulting from increased domestic production. Don’t forget OPEC, who openly engage in collusion that would be considered illegal in the US. While OPEC does not control the majority of world-wide production, with the increasing world demand, they control enough to be able to control prices. So, the increase in US production is being absorbed by increasing world consumption and decreased output by the middle east.
As has been mentioned, futures really only act to lower long term prices. Sure, speculation over the short term can cause short-term spikes, particularly when investors want to switch their money from equities (stocks and bonds) to the futures markets and you have too much money chasing too few commodities, and you get temporary “commodity inflation”, but this is a short-term effect, because many of the investors aren’t buying the commodity futures for a guaranteed supply, but just on speculation that the commodity will be worth more (or less) in the future. What happens then is the commodity gets “over sold” and the holders of these futures have to sell them at a loss because they really don’t want the commodity and when the futures comes due, they have a responsibility to take possession of the commodity or sell it on the open market. You get burned a few times on this and you go back to trading Ford stocks or municipal bonds.
If you think this increased oil production has not kept prices down, what do you think the price would be if the US oil output was at the level it was in 2007/8? It would be much higher. Look at the price of Exxon stock. In Dec 2007 it was trading around $90-95 a share, and the price of crude was nearly the same. Today, XOM closed at $85.33 while the spot crude was $105. That’s over 20% higher than XOM. Why do you think this is? It’s because there is a (perceived) glut of oil on the market and it’s being reflected in the perceived value of the stock. The spot price for oil is higher because it is more world-demand driven than the price of XOM.
I’ve never voted for Republican for a federal office and have voted for every Democratic presidential candidate since Carter (my first, you never forget your first), but I have lived the oil business for nearly as long. I mention this just as a preemptive strike against those who will want to call me just a Rush-loving dittohead who shouldn’t be listened to. Don’t listen to me if you don’t want to, but understand that I dislike what the Republicans are doing as much as you.
People love to hate big oil, love to complain about how it is destroying the world, but they turn around and complain about how much it costs to fill their tank and how much their power bill is. I’ve discovered that people just like to complain. When it rains, they complain about the flooding and when it stops, they complain about the drought.
excavating (for a mind)
excavating (for a mind), that was one of the single best posts I’ve ever read here. Thanks for sharing your insights
In the grand scheme of things it’s absolutely the case that fossil fuels are a limited resource and that over the very long term demand is going to continually increase. However individuals like forecasters from ExxonMobil who have the strongest motivation in the world to get these things correct, predict that fossil fuels will represent 50% or more of world energy sources up until 2070 based on estimates I read in 2007/2008.
Eventually, when all of us are long dead and so too are most of your children and even grand children, we’ll have to have adopted some different technology to replace fossil fuels. We’ve already started that to a very small degree, but in the meantime, during our lifetimes, there are many benefits to expanded oil and natural gas production domestically.
Newt Gingrich is simply retarded to make grandiose claims such as “with me as President gas will be $2.50/gallon”, but the underlying argument that we should drill for more oil here in America is extremely sound and beneficial for both the wealthy and the middle class.