Oil hits $100 a barrel

[fondybrewfan]

For the first time ever oil hit $100/barrel in the futures market. I believe this is about 60% higer than at this time last year when a barrell was about $65-70/barrel. I am not extremely knowledgible about these markets but isn't this getting a little ridiculous? Even though commodities are in general much more volatile then say a stock on the NYSE, 60% in one year is a little extreme. The middle east was just as volatile this year as it was last so I dont buy that as a significant reason. Obviously demand is increasing to due nations like China and India but they didn't have a significant change in growth trends that would result in a sudden spike. We had no hurricanes this year to shut down the gulf coast refineries and I cant think of many major issues that halted or limited the supply of oil. I believe a Minnesota pipeline and maybe an Alaskin pipeline got shut down at one point but I cant remember

If anyone else has any ideas as to what the heck is going on I sure would like to hear them.

[sbrylski]

Good thing I ride a bike. A bike-cycle, a bicycle...

[davego]

Funny Avatar!

[TooLiveBrew]

Given how honest the oil industry is and always has been, I suspect nothing out of bounds.

[Schlitz001]

It's a combination of things, the biggest being that crude inventories dropped for the 7th straight week and on top of that OPEC released a statement saying that it's member nations probably won't be able to meet demand by 2024. Inventories are down worldwide as well as domestically, so don't be so quick to point fingers at the oil compannies. As oil demand increases so to the prices of exploration, production and refinment. Any predictions on the price per barrel this summer.

Another likely culpret is increased trading today because of the holidays.

[fondybrewfan]

It's a combination of things, the biggest being that crude inventories dropped for the 7th straight week and on top of that OPEC released a statement saying that it's member nations probably won't be able to meet demand by 2024. Inventories are down worldwide as well as domestically, so don't be so quick to point fingers at the oil compannies. As oil demand increases so to the prices of exploration, production and refinment. Any predictions on the price per barrel this summer.

Another likely culpret is increased trading today because of the holidays.

No doubt that oil companies are facing more exploration, production and refinement expenses but Exxon Mobil 12% Profit Margin (Most Companies would love a margin like that, unless you are a hospital) and a EBITDA (Earnings before Interest, depreciation, Amortization and taxes) of 71 Billion dollars. Sure maybe they have less control over oil prices than we may think but I doubt they are doing a whole lot to get them to go down. And I for one think they have a large hand in the oil prices via speculative buyers

[Crazyk1294]

This could all be taken care of if we drilled in our OWN country instead of relying on the Middle East, the worlds central city, for as much oil as we do....

[mothershipconnection]

When prices spiked before for (possibly) legit reasons, they saw that people still bought oil. Why let prices drop when people will still buy it? We're eventually gonna pay big-time for being so myopic and not doing something for the past 25 years.

[And That]

MSC typed exactly what I was going to type. Everyone is charging more because they can, which is more or less the same thing every other for-profit business does. Gasoline has no replaceable counterpart on the market, so the market has no reason to charge anything less than they'll get maximum profit for.

 

I don't agree whatsoever that the price of oil would see any dramatic change if the U.S. attempted (must... resist... urge... to... make... political... statement...) to turn its property into an oil field. The only thing that will make the price of a barrel of oil drop is the development of competition to oil, i.e. alternative fuel sources and technologies.

[homer]

To piggyback on what others have said....it amuses me that people get up in arms when oil companies make money. It's not like low gas prices are a constitutional right or anything.

[dadofandrew]

It's probably about $20 over where it should be because of the unrest in many oil rich nations. However, I do not see that unrest going away anytime soon.

 

We might well see $4.50/gallon during the prime driving season. We'll have to see if that leads to some refineries being built and more drilling in Alaska and offshore or not. Right now, the enviromental concerns are adding an unnecessary premium to the cost as well.

[endaround]

Its this high for a few reasons:

 

1) China and India are driving demand at a record pace. The US has actually slowed its rate of increase.

 

2) We are at or very near peak production. Which means that supply is pretty much fixed on the upside

 

3) The USA has been threatening to bomb a major oil producer while also trying to make sure they have to consume more of their own oil for their energy needs.

 

4) General instability in other oil producing nations.

 

Don't expect to see any huge changes for the foreseeable future.

 

And oil is on a worldwide market. If Texas producers could get more money selling their oil to China they'll do so.

[T B0NE 10]

http://forum.brewerfan.net/images/smilies/wink.gifthis is good for some texas towns isnt it?

[DHonks]

to go with what homer said, oil prices only seem high now. The lack of inflation hitting the petroleum industry in the last 20-30 years seemed to catch up 3-5 years ago, yet people seem to see gas prices today and expect that they'll one day return to levels from the 90s when the price was well below its inflation adjusted estimates.

[StatPipes]

well I live in Texas and my parents also happen to have worked for Exxon for over the last 25 years...It hasn't exactly hurt Texas too much I would say, although paying 80 dollars to fill up every time gets old

[Fatter than Joey]

This could all be taken care of if we drilled in our OWN country instead of relying on the Middle East, the worlds central city, for as much oil as we do....

 

As others have indicated -- We could drill in Alaska to see all that oil sold to China. I would wager a guess that any company that would get to drill in AK could well be a foreign company as well.

 

Probably the one thing our country's leadership could do, to see a drop in prices -- is make sure that the US is not adding to the instability of the middle east -- whatever that would be.

[fondybrewfan]

And ethanol is not the answer either, it costs more to make a galloon of ethanol than it does a gallon of regular unleaded. The farmers are making out like bandits because of the high corn prices, and growing up on a farm I like to see that the hard working farmers are getting rewarded, but I just don't see ethanol ever really taking over for regular gasoline, I just don't think it is feasible.

[homer]

One guy has stated he can get something like double the amount of ethanol out of corn than what is currently produced. Can't recall his name but he's a venture capitalist that started a few companies in Silicon Valley (maybe NEC?). He's no lightweight. I'll see if I can find a link.

 

EDIT: His name is Vinod Khosla and he founded Sun Microsystems. Below is a NY Times story about his involvement with ethanol and the risks involved.

 

From the article:

- The current excitement over ethanol derives from research that has cut the cost of converting nonfood plant matter like grasses and wood chips into alcohol. Mr. Khosla says he believes that such ethanol, called cellulosic ethanol, will eventually be cheaper to produce than both gasoline and corn-derived ethanol.

 

- But cellulosic ethanol, the kind produced from nonfood plant matter, has some advantages over food-based ethanol. Because cellulosic ethanol is derived from plant waste, wood chips or wild grasses like miscanthus and switchgrass, it would not require costly cultivation; that would mean savings on labor, pesticides, fertilizers and irrigation. And it is superior to corn-derived ethanol in reducing greenhouse gas emissions, Professor Kammen said. He expects cellulosic ethanol to catch on quickly. "I think you can really see ethanol comprising 25 to 30 percent of gasoline consumption within 10 years," he said.

http://www.nytimes.com/2006/03/26/business/yourmoney/26etha.html

[Fatter than Joey]

And ethanol is not the answer either, it costs more to make a gallon of ethanol than it does a gallon of regular unleaded.

 

Well --- This is not really a fair comparison -- Ethanol does not have the infra-structure built up that gasoline does. Drilling for oil is cheaper today because people have been doing it for decades. Like Homer alludes to we probably should wait until some serious R&D gets thrown into the ethanol arena before dismissing it altogether.

 

The farmers are making out like bandits because of the high corn prices, and growing up on a farm I like to see that the hard working farmers are getting rewarded

 

Well -- the point for a lot of people is to "remove our dependency on the Middle East" and not "what is the cheapest fuel". If it costs a little more, but we aren't dependent on the Middle East, isn't that better than cheaper fuel with all the Middle East headaches?

[homer]

"Well -- the point for a lot of people is to "remove our dependency on the Middle East" and not "what is the cheapest fuel". If it costs a little more, but we aren't dependent on the Middle East, isn't that better than cheaper fuel with all the Middle East headaches"

 

I agree but I think the market as a whole would more readily respond to lower cost.

[Fatter than Joey]

I agree but I think the market as a whole would more readily respond to lower cost.

 

Fair enough -- but once ethanol becomes a viable alternative -- that will drive down the cost of oil one way or the other.

 

I guess what I am saying -- If we are truly interested in "not being Middle East dependent" as consumers we should spend more money on ethanol (or whatever alternative fuel), but you may be right Homer that at the end of the day -- people really don't care about being Middle East dependent as much as they care about cheap fuel. Really if people really cared, they'd already be riding the bus to work more.

[homer]

How much oil do we get from the middle east as a percentage of all our oil? I know we get some from Venezuela.

[fondybrewfan]

So are pretty much all new cars/suvs/trucks compatible with E85? I know everyone can use E10 and in many states you have to but I dont know if it is required that all new cars be able to use E85.

[bork]

The problem isn't ethanol, just there is too much emphasis on corn-based ethanol. It costs more to produce, requires a lot of fertilizer to be imported from other countries, is driving up food prices, and doesn't burn as efficiently as gasoline.

 

In the end, the solution probably won't come from just one place. Things like viable cellulosic ethanol, much improved gas mileage in cars, and better electric cars will all be needed, and who knows what other ideas may come out in the future.

[Fatter than Joey]

How much oil do we get from the middle east as a percentage of all our oil? I know we get some from Venezuela.

 

Venezuela is not exactly on our Xmas card list. I believe they offered free oil to Katrina victims and we told them to sit on it.