The U.S. supply is up. On Wednesday, the U.S. Energy Information Administration reported that commercial inventories in U.S. of stored crude rose by 3.2 million barrels to 346 million, the highest level in nearly eight years, since 1998.
Compare the $70 something we're being charged now for a barrel to the $15 a barrel in '98, and we're left with nothing but the Bush wars to blame for the price of gas today.
Can anyone really show that demand has increased at such a rate to justify the price increase from 2005 when oil was about $28 a barrel? Do we really believe that the price of gasoline jumped so high from glut levels of 2005 due to 'demand'? Even with all of the profit taking?
I don't. That's the 'demand' lie, in my opinion. I understand refinery pressures, and I understand the problems with production in Nigeria and elsewhere that would affect the supply.
What I don't understand is $70 a barrel. All of the factors like demand should have been sustained by $50 a barrel oil. How did it get to $70? Doesn't profit-taking play a large role here? Isn't the market using 'unrest' as an excuse?
How could the oligarchy not be enthralled with knowing that their profits can be enhanced by stirring up trouble with Iran? It would be silly to think they didn't plan this all along. Virtually nothing gets done in America that doesn't enhance their wealth. If war wasn't good for their profits they wouldn't go there.
In 1998 we had a worldwide oil glut. OPEC didn't seem to want to do a thing about it. Prices fell to amazingly low levels, rising a bit in 2005. Then OPEC scrambled to slow production to keep the price from falling again. There was the view that if OPEC produced all they could the glut would continue and worsen, driving prices down further. OPEC was quoted at the time saying that, even if they wanted to produce more oil, they would have trouble finding buyers.
In the markets that was a bad thing. To the consumer, it rocked. Now we have demand in the U.S. increased by about 2% from the 2005 level, according to the International Energy Agency. Would a 2% increase in demand support a $40+ rise in a barrel of oil?
I don't believe that oil is running out so fast that we can see the tail of the dragon, even though it is obviously a finite supply. Some, most notably those who believe the world's capacity to find and produce oil has reached a 'peak', claim that high prices are the only way we have to curb demand. The argument carries that until we find a way to replace or supplement oil and gas the prices will continue to rise. Increased production, it's said, will not work anymore to drive prices down because the world supply is now heading unabated toward its permanent state of extinction.
It's been said that this is a good thing. Folks should use less, and high prices will force them to do that. That's true, of course, but I wonder what will happen if and when we reach the point where consumption has been whittled down to nothing but necessity. Many have stated that there will be a recession at that point, or a depression. Oil prices as high as $100 a barrel and the rumored $4 a gallon would devastate most of the working-class American's budgets. Not to mention the devastating effect on all of the goods and services which rely on fuel.
I believe that oil producers have figured out how to manipulate production levels to make it appear that they can't keep up with demand. I don't think that we can blame the gas price on 'Peak Oil" at this point. But, I realize that many disagree.
There is a view that cheap oil encourages waste. I think there is an obvious truth to all of that. But, I don't think that it's fair or prudent to rely on crippling gas and oil prices to force reform of our energy infrastructure. Consumers aren't in control of the market; they are almost completely at its mercy, save their own efforts to use alternatives and conserve.
Its not like oil executives are clucking their tongues at increased consumption and demand. It not like they are going to use the increased profits to undermine their own industry. Indeed, the oil industry often invests in alternatives just to prevent them from seriously competing with their main cash-cow.
If we were really serious about forcing the industry to reform we would tax them and use the money to undercut their monopoly by investing in available alternative energy resources and developing others. Instead, many are sanguine as high gas and oil prices threaten drive the most vulnerable among us into financial catastrophe, because of this notion that it will curb demand and somehow force the switch to alternatives.
But, I believe there is a point where there can be no further sacrifice from consumers for an industry that is more than content to take the increased profits from expensive gas and oil and put it in their own bank accounts. If production is the problem with prices then we should find a way, at least for the time being, to increase it. If we want to force a shift in our energy resources then we should make certain that is established and underway before we abandon consumers to what is clearly profit-taking and greed from an industry which has little reason to shut down the good thing it has now.