Price of Oil per Barrel today, at the level of the producer from the respective reserves:
$19 - Accessible fields
$20-60 - Shallow water drilling
$60 - Deep water drilling
$30-50 - Shale
$50-60 - Oil sands
Price of Oil per Barrel today, selling on the market
$135.50
*Please note discrepancy, and try, just try to do the math in your head re: oil co. profits
As an environmentalist, I am not sad that the price of oil is going up. But what I am sickened by, is that the understanding of economics is nil amongst consumers at large, and we are buying into the game...what game? Being a University of Chicago alum, I learned the simple principles of supply and demand. There are still too many of us buying gas...and the companies, perhaps by collusion although one can not tell because Bush won't set up an investigatory committee, are incrementally raising the prices. Why did gas spike today? simply because Memorial Day is coming up and the gas companies count on people driving their SUVs and boats IN SPITE of the raised prices; and they won't be disappointed. There is only one thing that will lower prices. STOP DRIVING. It really is simple economics...have the prices raised as high as possible so as to milk the consumer without exhausting them balancing the lost consumer who was cost-prohibited (like me) with the increased revenues from the raised prices.
Airlines are jumping on board. American Airlines just announced that they will charge $15 for the first bag checked. (i have a personal complaint for this one...if they would let me bring my facewash in my carry-on, i would never check baggage)...$25 for the second bag and $100 for a third bag. A guy on the news said that he saw these charges as reasonable - and in fact stated, "they should be charging me extra because I am fat". I don't disagree.
America as a nation is calling for a "gas tax holiday" and "government subsidy"...why is it that we spit on government intervention in important areas (such as healthcare), but cry uncle when we want to irresponsibly and frivolously use our income? (housing mortgage bail-outs included)
The consumers are in control of these decisions - it is just easier to complain, less easy to take the train.
What do you think?
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2 comments:
Oh Dana - you started out so well. But you are mixing gas and oil. Oil refiners are actually struggling with the high price of oil, and are not making the high profits that the oil companies are, even with the high price of gas. Check out the refiners on Google Finance or Yahoo Finance - Tesoro is a good one to start with. It's profits have gone down with the rise in oil prices so much that it has lost over half its value.
The real reason oil prices are high, and you hit on it in your post, is because our government feels the need to spend our money and then some to bail everyone out. Now they want to sue OPEC to try and get them to lower prices, as if we have a divine right to their oil at low prices. The house even passed a measure calling for it, because they all want to get re-elected on the basis that they are "doing something about the high price of oil!"
If our government (through the Fed) wasn't flooding the world with dollars, inflation wouldn't be so high, and neither would oil. That, plus the instability of the oil countries and little to no investment in infrastructure in several of the major oil producing countries, is causing the prices to rise. We'd probably be better off writing our congressmen and/or firing them all for not being very good at running the country. I guess that's what we get for electing a bunch of lawyers that don't understand fiscal discipline. You can only spend more than you make for so long - why should they be allowed to?
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