gotta love those energy companies

Discussion in 'Current Events' started by tybalt, Mar 30, 2004.

  1. tybalt
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    tybalt Guest

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    We have the oil industry in the white house. Our public (and private) lands are open to new exploration and extraction. Our foreign policy has secured vast oil-producing capabilities in the Middle East. Environmental-protection regulations have been rolled back to help refineries. So why is gasoline at record highs?



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  2. MtnBiker
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    MtnBiker Senior Member

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    What's Up With Oil
    A guide to why prices are so high.

    Tuesday, March 30, 2004 12:01 a.m. EST

    But current prices do raise an interesting question: What has happened over the past 10 months to ruin forecasts of oil at $22 per barrel? The short answer is plenty.

    Most important, demand has skyrocketed. Not only in the U.S., where economic growth has been gangbusters, but also in China, which has leapt ahead of Japan to become the second largest oil market in the world. While there is some debate about whether China is consuming oil or using it to build a strategic stockpile, the result is the same strong demand. China's growth has also sparked an economic recovery and higher oil demand in the rest of Asia. Count India, too, as an increasingly oil-thirsty economy.

    This roaring demand has not been met with increasing production. Blame that mostly on OPEC. The oil cartel has been smarting over the fall of the dollar against the euro. That, of course, reduces dollar-denominated oil revenues and increases the incentive to keep supplies tight. With prices at or above $28 per barrel--the upper-bound of OPEC's target range--the Saudis, for example, ran a budget surplus for the first time in decades.

    Inventories are also low. The U.S. has not yet recovered from the disruption in crude and refined products from Venezuela last year. And tight inventories exaggerate any changes in supply at the margin.


    As the market got tighter, several events have injected uncertainty. Russian President Putin created some political risk by clamping down on the oil industry and arresting the former head of Russia's largest oil company, Yukos, and accusing a second company of tax fraud. There has been continued instability in Venezuela, Nigeria and Indonesia. It also hasn't helped that Royal Dutch Shell announced it was lowering, by 20%, its estimate of reserves. And there have been questions raised about the size of Saudi reserves and the possibility that Saudi production might be peaking.
    Now throw in a big bunch of uncertainty ahead of tomorrow's OPEC meeting. Although OPEC only has a 33% market share, history shows it is able to generate more than its share of speculation. Several weeks ago, OPEC announced it would cut production, then two members balked, and now OPEC is hemming and hawing. Speculators have been going nuts.

    And that brings us back to the U.S. Strategic Petroleum Reserve, which was created after the Arab oil embargo in the early 1970s. The idea was to stockpile oil to cope with any future emergency shortfall in supply--not to mitigate short-term price spikes. As part of the run-up to the Iraq war, the Bush Administration decided to add to the reserves--now about 650 million barrels.

    But hundreds of millions of barrels of oil is a seductive target for political manipulation, as Bill Clinton proved when he released reserves to tame gasoline prices before the 1996 election. We hope President Bush resists that temptation, because in the long term such a response would be dangerous.


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  3. MtnBiker
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    OPEC to Cut Oil Production by 4 Percent

    By SUSANNA LOOF, Associated Press Writer

    VIENNA, Austria - OPEC (news - web sites) will cut its production target by 4 percent as scheduled, several oil ministers said Wednesday — a move that analysts say could drive crude oil prices higher even as U.S. customers are already facing high gasoline prices.
    The Organization of Petroleum Exporting Countries, which pumps about a third of the world's oil, will reduce its output ceiling by 1 million barrels per day.


    A recent surge in oil prices had led some of the group's 11 members to suggest postponing the cut, but OPEC's most influential oil minister, Saudi Arabia's Ali Naimi, prevailed in his effort to press ahead.


    The rise in crude prices has seen gasoline prices climb to record levels in the United States. The nationwide averaged rose to $1.80 a gallon, according to the latest Lundberg survey of 8,000 stations across the United States.

    OPEC had agreed last month in Algiers, Algeria, to make the cut on April 1, but recent discomfort with rising prices in the United States and other importing countries had led some OPEC members to reconsider.
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    OPEC was forced to balance consumers' desire for lower oil prices with its own fears that swelling inventories and a seasonal lull in springtime demand could cause prices to plunge.


    Most OPEC members are taking advantage of the current high prices by pumping as much oil as they can. Excluding Iraq (news - web sites), which doesn't participate in the group's quota agreements, OPEC is already exceeding its target by an estimated 1.5 million barrels.


    If individual members have the discipline to reduce their actual output in line with their lower target, crude prices now could reach $40 per barrel, said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.

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