Friday, October 10, 2008

Big Oil now at $80 a barrel


I've said it a hundred times before. The price of gas can be controlled by the simple rules of supply and demand. The less the demand the greater the supply thus the price will fall. This is also based on the premise that Saudi Arabia will hold true to it's own mandate to produce enough oil to keep the prices down so as to keep global economies afloat.

Now my manner in tackling this on a personal level has been only to use the gas that I need. What I mean is that I do not fill my gas tank up every time I go to the pump. If I fill my tank completely, it would probably last me a week and a half. So I just put in a third of a tank. That way the gas sits in their tank and not mine. In theory, this creates a glut in the market, the gas companies end up sitting around with a bunch of product on their hands and you keep the money in your wallet a little longer.

So here we are immersed in a global recession. People are tightening up their purse strings and not filling up their SUVs or their boats. They have not been jet setting all over the county and the world like they had in previous years. The airlines have cut flights. People just aren't spending money on gas. So one can see that due to the lack of demand, the price of oil is plummeting. Today the price per barrel fell just below $8o and has endured an over all loss of 40% since July. That is great! I paid over $4 a gallon in July and now it is down to $3.50 and less in some spots in our region. Just six months ago we were looking at the end of cheap gas as we know it. And for the most part that still remains true, but it is not dire situation that OPEC and big oil companies had us believing. I am saying that there is no need to pay $140 a barrel for gas. Unless it was the goal of all thees entities to curtail the demand as to preserve supply for our own good. I doubt it!

OPEC is starting to panic. They are meeting soon to determine whether or not to reduce oil production in order to rid the market of excess product and to drive the price up again. This (cartel), these bastards, are the same guys that were getting nearly $140 a barrel not six months ago. Now I understand that oil producing countries need to get their share and be duly rewarded for the natural resources that they extract and produce. Personally I think that they should be happy with $80 a barrel at this point. Fifteen years ago they were getting $10 a barrel and although I concede that oil prices must go up in order to meet demands and to compensate for other increased expenses, that doesn't mean that they (OPEC) and the oil companies should gouge us. We've already seen a market shift in the U.S. economy towards alternative energy sources and more efficient use of petroleum products. This is bad new for the cartel. The drop in demand means less money for government and private coffers. Once again, I understand that they do need to get good value for their diminishing supplies but I also understand that it is inevitable that the oil will run out and that we'll have to look somewhere else for all of our energy needs. So it seems that it would behoove OPEC to not cut production too drastically and to not drive up the prices too much. At 80$ a barrel, one would think that should be enough money for a county like Saudi Arabia or others to invest in their own future without sticking it to us. I guess we'll just have to wait and see.

1 comment:

JBW said...

I'm actually a fan of high gas prices, I mean extremely high; I've said it before but I think we need a multi-dollar per gallon gas tax to be used as incentive for private industry to develope new alternative fuel sources. It will be painful for a while but I think it's neccessary for the long term benefit of our country.