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Why are oil prices so high right now?

Why are oil prices so high right now?

  • OPEC is not increasing production to meet demand

    Votes: 0 0.0%

  • Obama has banned oil drilling and exploration in key areas for seven years

    Votes: 0 0.0%

  • It is an extremely cold winter and worldwide demand is higher than usual

    Votes: 1 8.3%

  • We are still recovering from the Deep Water Horizon rig explosion

    Votes: 0 0.0%

  • Currency values are dropping relative to commodities due to loose monetary policy

    Votes: 3 25.0%

  • A combination (explain)

    Votes: 8 66.7%

  • Who cares? I drive a Volt, heat my house with wood, and use only recycled paper based products.

    Votes: 0 0.0%
  • Total voters
    12
  • Poll closed .
F

friday

Well-known member
Joined
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Location
Florida
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Political Leaning
Very Conservative
Oil is up in the $90-$95 range per barrel and it is causing winter time record gas prices. Opec has announced that they are not increasing production because they believe $100 is a far price. Obama has just instituted a seven year ban on offshore oil drilling in large areas of the gulf of Mexico. We are experiencing record conditions this winter. The oil industry is recovering from the Deep Water Horizon rig explosion and the six month moratorium on drilling and exploration. And the value of the dollar and European currencies is dropping relative to commodity prices due to loose monetary policy, deficit spending, and money printing. So which is most to blame for the oil prices being so high?
 
Mostly supply and demand...with a bit of irrational exuberance from speculators thrown in for good measure.

Supply - The supply has mostly been flat-lining for several years now. We are reaching peak oil production, if we haven't already. We can probably expect the supply to stay the same or slowly begin to decline in the coming years.

Demand - As the global economy continues to recover, and emerging economies continue to develop at a breathtaking pace, the world needs more energy than ever before. We are not yet to the point where there are any economical substitutes for oil, so the increased demand for energy translates into increased demand for oil. This will continue to be the case for several years, and the underlying value of oil (minus speculation) will probably continue to increase.

Speculation - I'm of the opinion that although supply and demand are the main driving forces, they are not enough to justify $95 a barrel. There are a lot of people speculating on oil, using it as an inflation hedge. However, the actual evidence does not warrant such an aggressive approach. Deflation is the more immediate risk for the US dollar, which is what oil is priced in. Although we may or may not have another bout of inflation once the US economy picks up, that is highly speculative. Oil investors are getting over-eager IMO.

The Deepwater Horizon explosion or Obama's ban on drilling/exploration have virtually no impact on the global price of oil. These are parochial issues that only affect the United States, and oil is traded on a global market. Furthermore, neither of those issues are very important in the grand scheme of things.
 
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Kandahar said:
Mostly supply and demand...with a bit of irrational exuberance from speculators thrown in for good measure.

Supply - The supply has mostly been flat-lining for several years now. We are reaching peak oil production, if we haven't already. We can probably expect the supply to stay the same or slowly begin to decline in the coming years.

Demand - As the global economy continues to recover, and emerging economies continue to develop at a breathtaking pace, the world needs more energy than ever before. We are not yet to the point where there are any economical substitutes for oil, so the increased demand for energy translates into increased demand for oil. This will continue to be the case for several years, and the underlying value of oil (minus speculation) will probably continue to increase.

Speculation - I'm of the opinion that although supply and demand are the main driving forces, they are not enough to justify $95 a barrel. There are a lot of people speculating on oil, using it as an inflation hedge. However, the actual evidence does not warrant such an aggressive approach. Deflation is the more immediate risk for the US dollar, which is what oil is priced in. Although we may or may not have another bout of inflation once the US economy picks up, that is highly speculative. Oil investors are getting over-eager IMO.

The Deepwater Horizon explosion or Obama's ban on drilling/exploration have virtually no impact on the global price of oil. These are parochial issues that only affect the United States, and oil is traded on a global market. Furthermore, neither of those issues are very important in the grand scheme of things.
Click to expand...

Do you think that the seven year ban, which will limit future supply, might be one of the factors driving speculators to inflate the price?
 
A combo, of course.
Our political spectrum is far too conservative, we are years behind the true world leaders(France,Germany,Japan).
I have yet to read about our nuclear powerplant start ups.
We have yet to build an automotive Diesel - pushing 50 years behind Germany.
So OPEC smells our fear of innovation and charges whatever the market will bear.. And we continue to drive over-sized trucks on the way to work, just like our fathers and grandfathers did.
When we finally do modernize(metrics,health care, communications, education,etc) and gasoline costs ten dollars for a liter, maybe something will give..
The conservatives will blame this on President Obama as well.
 
friday said:
Do you think that the seven year ban, which will limit future supply, might be one of the factors driving speculators to inflate the price?
Click to expand...

Not one iota. It's a drop in the pan, that's about it.
 
earthworm said:
A combo, of course.
Our political spectrum is far too conservative, we are years behind the true world leaders(France,Germany,Japan).
I have yet to read about our nuclear powerplant start ups.
We have yet to build an automotive Diesel - pushing 50 years behind Germany.
So OPEC smells our fear of innovation and charges whatever the market will bear.. And we continue to drive over-sized trucks on the way to work, just like our fathers and grandfathers did.
When we finally do modernize(metrics,health care, communications, education,etc) and gasoline costs ten dollars for a liter, maybe something will give..
The conservatives will blame this on President Obama as well.
Click to expand...

Do you really think it is conservatives who are holding back energy innovation such as increased nuclear power plant startups?
 
friday said:
Do you really think it is conservatives who are holding back energy innovation such as increased nuclear power plant startups?
Click to expand...

No. It's Big Oil and King Coal.
 
As long as it doesn't go up as much as it did under Bush, I'll be ok. It was like 45 dollars to fill my tank. OMG!
 
100 percent speculation just like the last time prices spiked. Anyone that uses the supply and demand excuse is very naive or just plain ignorant.
 
There are too many factors to narrow it down to just one, but a major one would be, at least over here, the near-monopoly of a few multinationals controlling the distribution of petrol. So would be the terrible perspectives of Western society in the middle east as a result of the perceived aggression of the US and its allies. So would be the dwindling supply: oil is a non-renewable resource that's running out, while demand increases.

Offshore oil drilling is near insignificant in the grand scheme of things. The US simply requires too much oil. I don't know why people list issues as "Obama did this... Obama did that", he can do very little without the support of Congress/the rest of the government. Then again, this is your country not mine, so point out if I'm wrong on this.
 
friday said:
Oil is up in the $90-$95 range per barrel and it is causing winter time record gas prices. Opec has announced that they are not increasing production because they believe $100 is a far price. Obama has just instituted a seven year ban on offshore oil drilling in large areas of the gulf of Mexico. We are experiencing record conditions this winter. The oil industry is recovering from the Deep Water Horizon rig explosion and the six month moratorium on drilling and exploration. And the value of the dollar and European currencies is dropping relative to commodity prices due to loose monetary policy, deficit spending, and money printing. So which is most to blame for the oil prices being so high?
Click to expand...

That's what happens when you auction off a product because it should be available to everyone worldwide regardless of production - when quantities are limited and when much of that comes from countries who don't have the greater good in focus.
 
EnigmaO01 said:
100 percent speculation just like the last time prices spiked. Anyone that uses the supply and demand excuse is very naive or just plain ignorant.
Click to expand...

Damn those evil capitalists pigs to hell!!! You go comrade!!!!​
 
SirPwn4lot said:
There are too many factors to narrow it down to just one, but a major one would be, at least over here, the near-monopoly of a few multinationals controlling the distribution of petrol. So would be the terrible perspectives of Western society in the middle east as a result of the perceived aggression of the US and its allies. So would be the dwindling supply: oil is a non-renewable resource that's running out, while demand increases.

Offshore oil drilling is near insignificant in the grand scheme of things. The US simply requires too much oil. I don't know why people list issues as "Obama did this... Obama did that", he can do very little without the support of Congress/the rest of the government. Then again, this is your country not mine, so point out if I'm wrong on this.
Click to expand...

There are some here who naively believe that off-shore drilling is the answer to oil independence.
 
friday said:
Do you think that the seven year ban, which will limit future supply, might be one of the factors driving speculators to inflate the price?
Click to expand...

Doubtful. The amount of oil that is potentially being limited is miniscule compared to the global oil supply. Furthermore, once we start talking more than about 10 years out (or possibly even 7 under optimistic conditions), all bets are off regarding our energy needs. It seems likely to me that solar energy will become cost-competitive with oil toward the end of this decade, and once that happens the price of oil will begin to fall.

While speculators may be able to profit if oil prices continue to increase for a few more years, buying and holding oil for long-term speculation seems like a bad idea.
 
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Dutch said:
Damn those evil capitalists pigs to hell!!! You go comrade!!!!​
Click to expand...

Is this a random comment, or did you just not at all understand what you quoted?
 
Part of the explanation in US dollar terms is the depreciation of the US dollar. For many currencies, there has not been a significant rise in the price of crude oil...
 
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