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Sunday, June 14, 2009 | 2:03 a.m.
If the Organization of Petroleum Exporting Countries can openly flout the free market to manipulate oil prices, why can’t the United States do the same?
What the U.S. needs is a second Strategic Petroleum Reserve used specifically to manipulate oil prices.
Every consumer knows that the price of oil is highly cyclical. Every winter the price drops, as driving demand lowers, and in warm winters the prices fall even more, as demand for home heating oil decreases. As Americans take to the roads for vacation every summer, the price of oil shoots up.
It is simple economics: Buy low and sell high.
The U.S. has a reserve of 722 million barrels of oil, used as an insurance policy against any oil embargoes. We need a second reserve of 600 million barrels to be used when oil prices spike. The oil would be stockpiled in the winter when prices are comparatively low. The U.S. could then release about 6 million barrels a day from Memorial Day to Labor Day, meeting about 30 percent of U.S. daily demand.
A realistically low $10 profit per barrel would net $6 billion, allowing the government to invest in oil consumption-reducing programs such as converting homes in the Northeast from oil-heating to wood pellet stoves, changing the government vehicle fleet to hybrid and electric vehicles, and investing in infrastructure and technology for electric and hydrogen vehicles.
Yes, we are a free-market capitalistic society. But if others don’t play by the rules, why should we?
One of the best non-partisan, non-inflammatory, level headed letters I've ever seen on this bent page! And It's a "Dang good" Idea.
Maybe we should charge the Opec Nations for wheat and other food products the same way they charge for oil. Remember they can't eat oil !
How about $1,000 a bushel for wheat, rice and other grain products they want and need? Let's charge them $10,000 for replacing oil rig parts that they need from us.
We need to stop selling them our military aircraft and other products.....let them use bow and arrows to defend themselves.
They'll just get their A K's and MIG's from China and Russia. Just like all the OTHER Terrorist States do! But that Idea about the food stuffs-That works for me. And how about NOT fixing their rigs at all, and just put more of our own on our OWN soil(or offshore)? At least until we can realistically reach our goal of 100% clean energy. If we stop buying their oil, then they won't have the money to finance the extreme terrorist muslim imams and their homicide bombers(whose families are compensated with huge sums of money coming mainly from the Saudis). If we refuse to sell food to anyone but people who don't hate us, they'll have to get their grains, veggies, and meat from somewhere else. I don't think the Russians, or the Chinese will give up any of their surplusses without a hefty pricetag attached. And if we can STOP BUYING THEIR OIL, They won't have any money.
Memorial Day to Labor Day Is the time americans like to go on vacation which use's more fuel,
This is also the same time our Government can Implement a Slow order on all federal and state funded right-of-ways, Reducing the speed limit by 10 MPH but not below 60 MPH.
If we all worked on this together we could save a lot of gas and that would put some of those arab's in a unemployment line.
Now with that said some will oppose this because they should be able to drive faster.
I commute 70 mile one way and the time differance is only ten min. and i save gas too.
If you think about this it could even save a few lives and the life you save may be your own.
I believe that there are five reasons why prices are so high now.
1) The value of the dollar is on a steady decline because all the money that Obama is printing to fund his spending spree. He is planning to generate trillion dollar deficits as far as the eye can see.
As the dollar gets weaker then all imported goods, like oil, will go up in cost.
This factor will get worse and will probably will last for as long as a decade.
2) If the world's economy rebounds then we will be in the same boat as last year where the marginal safety net between capacity supply over capacity demand is so small that any world event could put us in a state of fighting over oil supplies and hyper bidding for oil would occur if we enter that state.
Spectulators are betting that the world's economy will rebound and result in a significant reduction in the marignal safety net.
3) The most likely potential event is an Iranian-Israeli conflict that could shut down oil production in Iran and other middle east countries.
4) Oil is one of the few places were investors believe is a safe place to invest.
5) People are spectulating on oil futures for all the reasons above.
That is creating an oil bubble. As long as the spectulation keeps occurring then oil prices will be higher than normal.
Once the bubble burst then some investors will be burn.
Oil prices will go back down in the fall because they always do.
Oil prices go up during the summer because they always do.
During the summer more people fly and drive more often and for longer distances because of vacation travel.
That drives up oil demand during the summer.
Welcome to the Peak Oil Decline Peter.
The point at which the world oil production peaks.
No I'm not saying we're running out of oil, I'm saying we've reached the upper limit of how much oil we can produce at any given time. The light sweet crude of the Middle East is running low. The energy required to get more oil is going up.
Tar Sands and Off Shore oil is available but at price.... Tar Sands are only profitable if Oil Costs $80 bbl
Everyone in America needs to educate themselves of the limits to Available Energy.
Through this crises people will scream Drill Baby Drill! In reality what we need is conservation and sustainability.
Educate yourselves -> http://peakoil.com/peak-oil-reports/avai...
OPEC was formed in 1960 because U.S. Congress was using imports of cheap foreign oil to keep West Texas Intermediate, the world's marker crude, under $3/B. In addition to causing foreign oil producers to form OPEC, Congress' action destroyed the U.S. oil producing industry's infrastructure during the 60's causing U.S oil production to peak in 1970 and world oil supply and demand to come to balance in 1973 setting off the 70's energy crisis.
It should also be noted that OPEC has been a great ally of the US in the past. OPEC actually helped end the Cold War by destroying the USSR economically making their oil production unprofitable. OPEC dropped the prices so low USSR could not compete, their oil was heavier and more difficult to refine. The Cold War has been over for nearly two decades and as of the past few years oil has come back to levels where Russia can now make money on their oil exports.
It seems ironic to me that by the US pushing OPEC to drop prices in the 80's to destroy the USSR, they actually helped Russia in the long run by preserving their energy rich resources. Now with the US scrambling to make friends we find many of our enemies are the one with the resources we so greatly desire"
Blowback is a b1tch!!!
The letter shows good outside-the-box thinking. Not to throw cold water on the idea, but increasing demand for oil by 600 million barrels (winter or summer) will push the price of oil higher, so we won't be buying at the formerly "low" winter prices. And increasing the supply of oil by selling 600 million barrels (again, winter or summer) will drive the price of oil lower, so we won't be selling at the formerly "high" summer prices. It's uncertain how much of the gain predicted by the letter writer could be captured, but it is certain it wouldn't be the entire amount, and may not be any. In addition, the cost of building storage facilities for another 600 million barrels may not be recouped by any gains captured.
The only certain way to fight OPEC is to bring more oil to the surface. As the increased supply depresses the price of oil, less efficient (and less rich) OPEC producers will be induced to cheat on their quotas to make enough revenue to pay their bills. Saudi Arabia will cut back to make up for the cheating, trying to hold the price of oil steady, but they don't have unlimited capacity to do that. Eventually, the increased supply of oil worldwide will break OPEC's hold.
In addition, we need to move forward with efficient energy alternatives, primarily nuclear, to reduce demand for fossil fuels. Lower demand will also bring down the price of oil.
One final point. With lower oil prices, financial support for terrorist organizations will decrease. The price of oil is more than an economic issue. It's a national security issue.
the goverment cannot manage s***. they will end up losing money and we the tax payers will pay for higher gas prices and our goverment losing money.we live in an expanding world. everyone wants to be an american and have all the latest things. Oil is going to continue higher and there is only one thing we can do and thats use less. we need to wean ourselfs off the crap. but that is going to take a long long time. get use to it we will be $4.50 a gallon by next summer.
"With lower oil prices, financial support for terrorist organizations will decrease."
People really need to stop worrying about the terrorist... You sound like a frick'n sheep. The sheeple are afraid of the terrorists!
The terrorists aren't the problem; the problem is we use TOO MUCH OIL!!! Even if there were not a single terrorist in the entire world we'd still be screwed because of oil depletion would still be present.
Lower oil prices don't support the exploration and development of fields. Maintenance on current fields drops to a minimum causing them to go into a greater decline. If you want more oil you need to put more money into it. Guess what? We're broke!
Prepare for gasoline shortages coming within two years to a neighborhood near you.
"But there's so much oil on the market"
China's buying it with the toilet paper USD$
I hope you own an energy efficient vehicle!
While a lower limit might seem like it makes sense to some that don't have to cross any distance it's a ridiculous idea to me . I drive coast to coast several times a years . And across the west , mountain west & mid west weekly . Lower limits means less distance crossed in a day .
They also mean more time wasted crossing the plains making the trip more dangerous over the last few added hours . And less money in my pocket from the extra money that I will have to be spend on hotel rooms . More nights in a hotel from the added weeks each year behind the wheel at the lower speeds . Slower means more money out of my pocket and weeks a year extra behind the wheel , No F....Way..........
And the biggest issue I have with this no one will slow down . But we all will have to buy new radar/laser detectors to avoid the new speeding tax this idea will create .
A bad idea that didn't work the first time and will not work today . It never saved a drop when we tried it before , no one I knew ever slowed down during the 55 era . We all replaced our gas guzzlers of the day in short order during the first energy shock of the 70s . Everyone I knew had an Asian fuel efficient car within 6 months the first time in 73 . And none of us ever drove any slower than 65-70 mph during the 55 era .
If your vehicle is costing you too much at the pump replace it with a more efficient option . Like the current VW TDI Jetta sedan or wagon . It returns mid 40s to low 50s mpgUS ( EU rated 38 city / 53 highway / 49 mixed for the 6 spd man version ) tank after tank . Or one of the many other smaller more fuel efficient options now on sale today .
And on the price of crude going up , I see that as a good thing as it will force all in their lower mpg useless unneeded over sized SUVs & pickups to get out of them . And replace them with much more fuel efficient car options .
I've been driving 40-50 & higher mpgUS diesel powered cars @ 70-80 mph for almost 30 years now . So a few extra $'s a gal at the pump are at worst an inconvenience to me . I'm hoping for $4-5 a gal for gas long enough to put an end to the low mpg SUV & Pickup phase of American history .
Lowering the limit would only allow clueless people in these wasteful loophole vehicles to afford them ( not ) for a while longer . And I'm not for encouraging that fallacy in any way .
I say Raise the rural limit across the west to at least 80 mph like Utah has just done . And encourage Americans to buy a smaller more fuel efficient car through high oil prices . And we should push for sending all the wasteful SUVs & over sized pickups that fill our roads today to the crusher under the trade in a lemons for cash program that congress just passed . And watch oil demand/useless waste drop in the US and the price will soon follow .
Although many here have some valid points, SGT ROCK hit it on the head as to why oil prices are high today and it's the same reasons why oil went ballistic before it crashed. Until they close that loophole that allows hedge funds and speculators to drive up the price, the price of oil will never reflect the laws of supply and demand. Many speculators trade the same contracts back and forth to keep the price climbing along with their profits. Even OPEC has demanded that loophole be closed.
Dieselrat,
If we include the tractor trailer rigs in the extinction along with the duplicate airline flights we can reduce more distilate (diesel and jet A) use. Put the freight on rail for distance and truck for local and not have the 20 flights a day from one city to the other half full.
The only problem I can see is "people don't want to" for most of these ideas.
SgtRock and odeman:
Where were the speculators when the price of oil fell from $147 last summer to $32 in the winter? Did they all take a leave of absence? Or were they still there, betting on a decline in price? Supply and demand will always determine the price of oil, whether the supply occurs naturally in the free market or artificially through cartel actions. Speculators simply bet on future supply and demand conditions. Sometimes they bet on higher prices, sometimes on lower prices. By the way, they serve a useful purpose in the markets by providing a way for oil producers to lay off their risk and build more stable revenue and income projections.
Try learning something about the markets before you criticize them out of ignorance. There are real ways we can combat OPEC and its offspring, terrorism, via the oil market. We have simply blinded ourselves to them, whether out of political correctness or complacency or economic ignorance.
All of investing is speculation.
If I suspect inflation is going to destroy my savings I would purchase gold for instance to "hedge" myself against inflation. If I believed the US was going to bomb Iran, I would by oil stocks to "hedge" myself against high oil prices. Airlines are known for doing this, most notably South West which was a brilliant move saving them an incredible amount of money last year while all the other Airline companies were being destroyed by high oil costs.
I highly recommend everyone familiarize themself with Peak Oil.
I completely agree that speculators contributed to the geometric rise of oil prices last year but that is because easy oil is a dwindling resource. What we will continue to see is huge spikes and crashes. Every attempt our economy makes to recover will cause oil prices to spike. Then our economy will crash again and oil prices will crash too.
It is a vicious cycle. It will destroy the dollar exacerbating the problem more.
We as a nation should be prepping for high energy costs but you won't hear a peep of this from the MSM or our political leaders.
Store the 600 million barrels at Yucca Mtn. lol