http://online.wsj.com/article/SB121200725158327151.html?mod=todays_us_page_one

Makes you consider the validity of the peak oil theory.

In my honest yet paranoid opinion they are doing it on purpose. OPEC is a true cartel.

US just straight up needs refinery capacity... When was the last one built? Early 70's?

They raised supply and oil dropped over 4 bucks a barrel no?

Gee, making it impossible to get new energy resources (oil, coal, gas, nuclear, etc.) from our own land has a negative effect on world energy production? Who'da thought it.

Let's use our corn fields instead. Let me know how that works for ya.

In my honest yet paranoid opinion they are doing it on purpose. OPEC is a true cartel.
I'm no fan of OPEC, but there's no motive for them to do that. Spiking oil prices causes people to consume less, economies to reduce growth rates, gives incentive for their alternate energy competitors, and reduces the barrier to entry for those competitors.

OPEC is smart enough to know that. They've been bending over backward to maintain the status quo for a long time now, and I doubt they'd be purposely behind this.

US just straight up needs refinery capacity... When was the last one built? Early 70's?
How's that going to help this problem? They can't refine gasoline out of the air.

How's that going to help this problem? They can't refine gasoline out of the air. Not all countries are having this problem.
Iranian President Mahmoud Ahmadinejad said a proposal for OPEC's second biggest producer to cut crude output was under review by experts, Iran's semi-official Fars New Agency reported on Tuesday.

{snip}

The review of crude output may be connected to the growing volume of oil Iran is holding offshore in vessels being used as temporary storage, an oil industry source said. Iran would like to avoid adding to the offshore fleet, the source added.

The country has chartered a fleet of supertankers to store over 28 million barrels of crude, and booked another tanker to add to the 13 vessel fleet, shipping sources said on Tuesday.

Iran has trimmed exports by about 200,000 bpd since early April to match a fall in demand from refiners in maintenance, a top oil official said last week, adding shipments should recover during the second half of May when refiners restart production.
Source (http://africa.reuters.com/energyandoil/news/usnDAH324373.html?rpc=401&)
I find it interesting (for enron values of interesting) that enough refineries in Asia are down for "maintainence" at the same time that Iran has to cut oil production. When King Abdullah claimed that there was no shortage of oil in the world, this is what he was pointing to.

Iran produces some very high sulphur (also called sour) oil, which needs lots of refining. In the US, most refineries are only capable of processing low sulphur (also called sweet) crude. In general, the only sour crude that we import comes from Venezuela, especially since Iranian oil is embargoed and not legal to import into the US. The "shortage" of diesel fuel has more to do with the trouble our refineries have in getting the sulphur out because the standard for sulphur was dramatically reduced in 2005/2006.

There are quite a few refineries working on the ability through upgrades to refine the sour crude. I know where I work it specializes in sour crude but most other refineries do not. In california though they are doing everything they can to stop refineries from upgrading. It is a catch 22 refineries can upgrade to refine sour crude and they could upgrade to reduce car emissions but in doing these upgrades they unfortunately have to increase greenhouse emissions. And when that happens California says no you cannot upgrade and we are stuck refining sweet crude.

On another not I have found that people usually do nto think about what needs to be done to drive these cleaner burning or zero emissions vehicles. Hydrogen production in the only economically feasible mean has one bad downside very high CO/CO2 emissions. And to increase electrical production for more electrical cars what do we need more power plants. Unless solar or wind somehow have some huge gain on production which in wind generation is not likely we sacrafice one pollution for another for so called clean fuels/cars.

Ohh and just wait 30 years when scientists find that by installing tons and tons of wind turbines we have actually distrupted Earth's weather system more than global warming. Remember the first law of Thermodynamics...

"The increase in the internal energy of a system is equal to the amount of energy added by heating the system, minus the amount lost as a result of the work done by the system on its surroundings."

So arent we taking energy out of the system by using wind turbines?

Just a curious thought I had.

US just straight up needs refinery capacity... When was the last one built? Early 70's?


Why would they do that? If I was a CEO of a major Oil company I cannot think of single way I could justify that to shareholders.

Why would they spend the 5 billion dollars to build a refinery? Why would they add the 1500+ brand new employees to the payroll? When we go to the pump, gas comes out. Americans can buy all the gas they want. There is no supply problem on the refinary end. Read this part carefully
THE PRICES ARE HIGH BECAUSE GLOBAL DEMAND IS HIGH.


And thats not all, most of the refinaries built today are located on existing infrastructure. Any new refinary would have to be built near others, mimimizing its impact. Furthermore you would have to build it in California, on beach front property... in California... to take advantage of the supposedly massive load from magic ANWR that people seem to be so sure is there. If you build a new refinary in East Texas where the land is cheaper and the pipeline infrastructure greater, you are pulling in more Venezuela or Middle Eastern Oil because of tanker access. There is nowhere to build it to piggyback on an existing refinaries infrastructure, so a new location would have to be found somewhere on the West Coast.. and remember, the more remote it is, the greater the add on price of pipelines is going to be.
http://www.businessfacilities.com/images/0703p28.jpg

So yea.. good luck with that.

This is indicative of the problem with you Osgiliath666. You have no fucking facts, you just repeat whatever meme you hear like a trained parrot.
Sean Hannity: We need more refinaries, blame the Libruls for gas prices.
Osgiliath666: >Brawk< We need more refinaries >brawk< Blame the libruls
Never mind the fact that our production has increased 20% overall since 1976.

Why don't you educate yourself
http://www.cato.org/research/articles/taylor-050603.html

Lie, after lie, after lie... but you keep swallowing them, and they are laughing at you.

What effect does the diminishing buying power of the dollar effect our prices L2? Or is it mostly global demand that's forcing the price up?

Just curious. Thanks.

Im sure it doesnt help...

But also realize that Europeans pay

http://bp2.blogger.com/_FoXyvaPSnVk/SA56EjeEGVI/AAAAAAAAqAg/jrXRd2-RGII/s1600-h/GASOLINECARSCOOp2.jpg

Prices are up worldwide Ailwon due to rising demand all over this big blue marble of ours (China and India of note).

Plus you have every OPEC despot using every excuse in the world to hike the price.

Was at a Comic standup show lately starring Alonzo Boden. He hit it dead on when he said.

"Just once I want one of the heads of OPEC to come out (when hauled into congress) and say "we have the gas, you need the gas sooooo fuck off"

In countries using the Euro, gas prices increased 2.94x from 2002 to 2008.

Here, using the Dollar, our gas prices increased 4.91x.

Prices are not rising the same amount around the world. Inflation here is staggeringly high. SO much more so than is suggested by the damn near fraudulent "core" inflation numbers.

Yes, but before 2002, say back in 1990, when we were paying ~$1.50 / gallon they were paying the USD equivalent of $5.00 / gallon in Europe. We're up to $4.00, they're up to $8.00. Both gained in price by $3.00 since then. I'm still not sure why they pay so much more than us, other than their distance from the major gas producing nations of Canada and Mexico and Saudi Arabia and Iran is greater than ours.

Bernake says they're gonna focus on strengthening the dollar and stop cutting interest rates soon, not that it'll help the gas prices any.

We always used to have the strongest currency on Earth. So, back in 1990, no one had the buying power we did.

From everything I've read, European nations tend to have higher taxation on gas as well, which contributes to higher prices.

/nods that's true Taleren, and if you've ever driven on a German road you'd know where the money goes from those taxes.

Like driving on butter it was......../homersimpsondrool

lol @ "driving on butter".

<3 for Fanny, our Redneck Lord Byron!

/chuckle

Don't ask me why I put that line together, just came out ;P

What effect does the diminishing buying power of the dollar effect our prices? Or is it mostly global demand that's forcing the price up?
Part is global demand being up.
Part is global supply being down due to war, insurgency, oil running out or embargo.
Part is due to the dollar sinking.
Part is due to Saudi Arabia saying "f*k you"

List of major suppliers of petroleum to the US (http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html) The top table is crude oil only, the bottom table is crude oil plus natural gas plus refined petroleum products.

The global supply being down due to war, insurgency, oil running out and embargo part:
I pointed out on page 1 that Iran's customers seem to be not buying as much oil as they used to purchase. Iraq's oil production has never recovered since the invasion in 2003. Almost all oil leaving Iraq has to leave via the Shi'ite port of Basra (Iraq's only port). Some leaves via a pipeline through Turkey, but the Kurds (or at least PKK) tend to blow such a pipeline up reasonably frequently, since PKK and Turkey are about this > < close to a full blown war. The 2003 (http://www.guardian.co.uk/world/2003/apr/20/israelandthepalestinians.oil) schemes (http://www.commondreams.org/headlines03/0825-03.htm) of rebuilding/replacing the old Mosul-Haifa pipeline have all fallen flat.
Iraqi oil pipelines:
http://www.iags.org/iraqpipelinewatch.htm (note the weasel words at the bottom: Iraq Pipeline Watch is now being updated only sporadically and may not be a complete log of attacks).
http://en.wikipedia.org/wiki/Baku-Tbilisi-Ceyhan_pipeline (shows the Turkish part of the pipeline leaving via the Kurdish regions)

Ali Allawi, Iraq's finance minister, estimated that insurgents reap 40 percent to 50 percent of all oil-smuggling profits in the country. Offering an example of how illicit oil products are kept flowing on the black market, he said that the insurgency had infiltrated senior management positions at the major northern refinery in Baiji and routinely terrorized truck drivers there. This allows the insurgents and their confederates to tap the pipeline, empty the trucks and sell the oil or gas themselves.

"It's gone beyond Nigeria levels now where it really threatens national security," Mr. Allawi said of the oil industry. "The insurgents are involved at all levels." Source (http://www.nytimes.com/2006/02/05/international/middleeast/05corrupt.html?_r=1&hp&ex=1139115600&en=d78e496194281952&ei=5094&partner=homepage&oref=slogin) Did you notice the bit about Nigeria?

Nigeria has a somewhat protracted civil war that has reduced Nigerian exports by 500k bbl/day to 2500k bbl/day depending on who you listen to. My understanding is that they've reduced official oil production in Nigeria by about 1000k bbl/day and are selling on the blackmarket about 500k bbl/day. I've got no clue how they can launder that much oil per day (bunkering is the fancy word used to describe this). The people purchasing that much bootleg oil have to know that they're doing something illegal. Something like 98% of Nigeria's oil production comes from the delta region. There is no possible way that the country could permit this region to gain independence, to do so would be suicide. I expect this civil war to escalate into a genocidal war again.

The civil war in Nigeria is a rehash of the war of independence fought in the late 1960s. The new name of the rebel alliance is called MEND (http://en.wikipedia.org/wiki/MEND). If you're an old fart like me, maybe you'll remember the word "Biafra (http://en.wikipedia.org/wiki/Biafra)." That was the name of the predominantly Christian and Jewish delta region that was trying to gain independence from the predominantly Muslim Nigeria. The Biafran war has the dubious dishonor of being the only Cold War conflict where both the US and USSR were on the same side of the conflict.
Some articles about the Niger Delta conflict:
Global Guerrillas article (http://globalguerrillas.typepad.com/globalguerrillas/2006/01/nigerian_evolut.html)
Another GG article (http://globalguerrillas.typepad.com/globalguerrillas/2005/04/piercing_the_co.html)
Piercing the Corporate Veil (http://globalguerrillas.typepad.com/globalguerrillas/2004/07/long_term_gg_ta.html) (another GG article)
War Nerd article (http://www.exile.ru/articles/detail.php?ARTICLE_ID=7490&IBLOCK_ID=35) (caution, NSFW)
http://en.wikipedia.org/wiki/Igbo_people

If you look at the table from the Department of Energy link above, you may notice that Mexico dropped from being the #2 supplier to the US to third place. This is partly due to the rise in domestic oil consumption in MX as well as the decline of the Cantarell oil field (http://en.wikipedia.org/wiki/Cantarell_Field). Cantarell is a super-giant oil field. It produces about 60% of Mexico's oil (PEMEX provides about 40% of the revenue for the MX government, making this single oilfield 25% of the MX government's income). Cantarell is declining at about 15-18% per year since production peaked in 2004.
Oil Drum article on Cantarell (http://www.theoildrum.com/story/2006/7/12/10421/4972) (has lots of graphs).


The Dollar sinking part:
This chart (http://www.econbrowser.com/archives/2008/06/oil_prices_in_o.html) shows the price of oil in dollars and euros.
http://www.econbrowser.com/archives/2008/06/oilp_oc.gif
One can see that the price of oil is trending upwards, my guess is almost 1/2 of the spike is due to the dollar's decline. Measured in euros, oil is only up 2x since the peak of 2000. Measured in US dollars, the price of oil is up about 4x since the peak of 2000.

The Saudi saying "f*k you" part:
Back in the 2006 State of the Union speech, the president said: Breakthroughs on this and other new technologies will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025. Source (http://www.whitehouse.gov/stateoftheunion/2006/)
Here is a hypothetical scenario for you to ponder:
1 - Drilling new fields takes a number of years to accomplish, and more than a decade to recover the costs of drilling and pipeline to bring it to market.
2 - The currency your biggest political partner has been paying you is declining in value.
3 - Your biggest political partner has made a statement claiming that one of their biggest goals is to stop buying your product. Or at a minimum, reduce purchases by at least 75%.
4 - The longer you leave the oil in the ground, the more it is worth measured in the currency that oil is sold in.
Question 1: why would you bother drilling for new oil?
Question 2: would you say something like the following: 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. One source (http://content.ksg.harvard.edu/blog/jeff_frankels_weblog/2008/05/21/fed-modesty-regarding-its-role-in-high-commodity-prices/) Inshallah indeed.

Opec has maintained the same production levels for several years. The cost of a barell of oil has doubled in one year. So which part of supply/demand has changed by a factor of 2 in one year? Neither. Gas prices are high because of speculation in the oil futures market, and because oil is bought and sold in dollars and the dollar has been intentionally devalued to help shore up the big financial institutions that are falling apart.

Smidg...

GREAT post!
Please post more...

It really brought out the no win situation oil has placed us. When the final chapter has been written, Oil could very well the new version of the Visigoths. We need and rely on what will eventually destroy us.

SA is playing serious hardball... my only hope is that they have overplayed their hand. I look out the window of my classroom and I see that gas is $4.30/gallon for regular unleaded. There is credible talk of gas hitting 5.00/gal by July 4. This is game changing. This will cause us to change or die. If we approach what could be a perfect storm of circumstances with a really hot summer, driving way up energy prices with a early bitterly cold winter.... people are not going to be able to heat their homes. Not just the poor, this will be into the middleclass.

We need to pour the energy, resources, talent and spirit of this country into this. We need to innovate and originate. This will take us 15 years most people estimate. But in the meantime, that oil in the ground will find its way out as the Saudis and friends realize there is no tomorrow, and the value of their product isnt going to be worth much in 15 years.

"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. Hey, we do that here too. God willing, always do it for the children, or the climate, or the polar bear, or the carribaeu, or whatever else can whip up emotions.:rolleyes:

Apologies if this was covered here already, but I haven't seen speculation as a (not the) contributing factor on the oil markets. After oil first broke $100 / barrell, I read an article were the speculator did it just so he could have bragging rights. Granted he could only drive up the cost a few cents (it was under 50c I think), but that seems significant to me. I'm a rank amateur in the stock market right now, but I do appreciate threshold limits and the effect they have on stocks after they're crossed.

Lastly, I'm glad to see the Putinista is reading Cato/National Review - though I'm sure that's just a freak of nature ;) There were quite a few holes and questions I had about that article.

So we're getting 20% more production out of the existing refineries. Ok ... I have to ask, how much do we need? From 1975 to 2008 I'm quite certain we'd need more than a 20% increase in production to keep up with demand. I'd need that number to be persuaded that we don't need more refinery production.

Secondly, the article discussed some previously existing government regulations that forced small refineries to exist. Some politician had a hard on for the small company I guess thinking more competition was good. Anyone going to learn a lesson there? Probably not.

Arrogance and foolishness abounds when it comes to lambasting a company for making a profit and thinking you or your like-thinking politicians can actually do it better. Frankly it's retarded and the mess our oil and gas situation is in right now, we deserve it all. I mean wtf, if you want a say in how to run an oil company, buy stock in Exxon. Government doesn't have much business meddling.

Even if we 100 percent move off oil for energy and transportation, don't we still need it for lubrication and plastics and so on?

I believe they're working hard on alternatives to those things too, with some successes. Like foams made from soy oils instead of petroleum.

I will ask one more time since everyone seems to be glossing over it.

Which part of supply / demand has changed by a factor of 2 over the past year to justify the cost of a barrel of oil going from 60$ to 120$?

Ironically, I found this on Foxnews.com

http://www.foxnews.com/story/0,2933,166038,00.html

I'm sure there's some component of speculation, but it's only one of many factors. People who stopped being able to make money off securitized mortgages have definitely been jumping to oil recently.

However, because they're flat out lying to us about how bad inflation is, I think people don't realize what a huge impact that has had in recent years.

Even if we 100 percent move off oil for energy and transportation, don't we still need it for lubrication and plastics and so on?
I find myself disturbingly paranoid and pessimist these days (I guess reading articles about Oil Peak, Money as Debt or South America feeding China didn't help), but I really wonder how, even with focusing on it (which will cost "oil" anyway), we will manage to do that, *just* replacing oil for transportation. And when I say transportation I don't think cars, I think planes, boats, trucks and the billion tons of goods they are transporting across the world daily.

We won't only need to learn how to "change", I'm afraid we will need to learn to accept how to "regress".

So we're getting 20% more production out of the existing refineries. Ok ... I have to ask, how much do we need?
Obviously 20%. Does anyone not have gas? They will give you all the gas you want at the gas pump. It is not a shortage of gas or oil, its the price has gone up. If we didnt have enough refinery capacity people would run out, thats pretty obviously not the case.
There ARE shortages in some parts of the World. Australia and Venezuela are notable right now. Also many Asian countries are experiencing shortages because they do not have the refinery capacity to keep up with demand.

That is NOT the case here. It was very briefly after the series of Hurricanes in the Gulf of Mexico a couple years ago knocked some refineries off line.... but since then our refineries can very easily keep up with American demand.
Its the price of oil per barrel that is skyrocketing.

From 1975 to 2008 I'm quite certain we'd need more than a 20% increase in production to keep up with demand. I'd need that number to be persuaded that we don't need more refinery production.

http://www.nytimes.com/2008/05/14/business/14refine.html?_r=2&hp&oref=slogin&oref=slogin

If the price were still what it was when those refineries were built, there would certainly be shortages here. Unless price fixing (like in Venezuela), it's rare to find actual long-term shortages of a commodity.

Demand would certainly increase with the supply from additional refinery capacity, since the price would drop. People are just scrambling to use less (which is a good thing), which avoids shortages.

Definitely using less is best. I wish people I worked with who lived near me would consider car pooling. Unfortunately the cost hasn't gone up enough for some. Though I do see some new compacts and less SUVs in the parking lot. I don't think everyone is feeling the pinch yet, it's just hurting those who aren't making very much. Frankly I hate seeing so much money from my wallet to gas to make my car go, I could do so much with that money.

Alas, I just read that $4/gallon is predicted thru to 2009. Or so sayeth the Energy Dept. http://finance.comcast.net/www/news.html?x=http://absorigins.comcast.net/data/news/2008/06/11/983515.xml

Though I do see some new compacts and less SUVs in the parking lot. I don't think everyone is feeling the pinch yet, it's just hurting those who aren't making very much.


Along the line of more mileage-friendly vehicles being driven, I have been seeing a lot more of those sweet Chrysler 300's sitting in the used car lots of the local dealerships. And yet, they are still producing the new line of muscle cars and advertising them on the covers of the auto mags. /boggle

Those who aren't making very much and feeling the pinch the most are unfortunately also the ones who can least afford the hybrid cars, or even being able to afford moving to a newer more economical vehicle.

We are seeing more people becoming amenable to light-rail as an alternative to bus rides in our area, and the system is being expanded.

"The International Energy Agency predicts global demand for petroleum products such as gasoline, diesel and heating oil will grow by 0.9 percent, or 800,000 barrels a day, in 2008. That's down from the 1.2 percent, or 1 million barrels, the IEA forecast earlier this year."

http://www.msnbc.msn.com/id/25127525/

I still don't get it. I hear and read people harping that high demand and low supply are causing the high gas prices. I am having a hard time finding a chart of opec production levels, but I believe they have not changed significantly in the past year.

PheloniusRM: http://www.eia.doe.gov/ipm/ (http://www.eia.doe.gov/ipm/) other than that, there are lots of charts and stuff at the oil drum (http://www.theoildrum.com/). Another table (http://www.worldoil.com/INFOCENTER/STATISTICS_DETAIL.ASP?STATFILE=_WORLDOILPRODUCTION ) from an oil industry magazine site.
That is NOT the case here. It was very briefly after the series of Hurricanes in the Gulf of Mexico a couple years ago knocked some refineries off line.... but since then our refineries can very easily keep up with American demand. According to this (http://epa.gov/OMS/models/ngm/facafueleffects.pdf) (pdf) document, there are 146 different blends/formulations for gas in the US (and 69 for diesel) that the EPA is tracking. All slightly different so that one can't ship gasoline from, say KC to NY. The deal with the refineries after Katrina was that the EPA issued a waiver eliminating restrictions on gas and diesel formulas (so that one could ship gas from KC to NY). It is my understanding that these formulas were mostly lobbied by the refineries. Sample letter (http://www.sigma.org/publications/legal-memos/Emergency-Fuel-Waiver-50-State.pdf) (PDF). More letters and stuff (http://www.sigma.org/publications/Legal_memos.html). When they talk about 500 ppm of sulphur, that is the standard for diesel and is now only legal (for only a few more years) for off-road use, which is why red dye is added to it (to mark that it is off-road only). Winter gas has more "oxygenating (http://en.wikipedia.org/wiki/Oxygenate)" stuff (usually ethanol or MTBE) added to reduce ozone during the winter months, while summer gas has other stuff added to reduce "volatiles" (the stuff that evaporates), which is frequently ethanol. The Environmental Protection Agency has granted a nationwide waiver for fuel blends to make more gasoline and diesel fuel available throughout the country. Source (http://www.whitehouse.gov/news/releases/2005/08/20050831-3.html) The waivers allowed any gasoline formula to be shipped and sold around the US.

http://www.epa.gov/otaq/gasoline.htm
http://www.clean-diesel.org/nonroad.html (chart showing max sulphur levels for diesel)
http://www.api.org/Publications/diesel-labels.cfm (pictures of the labels you've most likely seen and ignored at gas stations)