Let's talk oil and gas while the price of gas isn't killing us. What controls the price of oil? At what price,?

does the cost of a gallon of gas start to really hurt your household if married and you individually if not?





Is there an oil shortage or not?





What part do Wall Street oil speculators play in the price of a barrel of oil?





I see that gas is once again creeping up for no apparent reason. With demand at worldwide lows what has caused oil to go from thirty four a barrel to now over fifty?





Is oil the one commodity that can insure we stay chained to a bust and boom economy?Let's talk oil and gas while the price of gas isn't killing us. What controls the price of oil? At what price,?
I'll try to provide some background but first let me clarify the refinery issue. Perhaps half of the US Refineries have closed and no new ones built in the United States. The reason for closure was due to combination of efforts for economic reasons and environmental concerns as some were really outdated. Part of the reason new ones have not been built is environmental constraints and public approval. Not in MY Back Yard!





At the same time many refineries have been built overseas especially in producing countries. While they can be built cheaper and with less constraints in other countries, it adds importation cost to the US consumer as domestic refineries can't keep up with maximum demands.





Oil production and costs begin with an Oil Company buying a lease to extract product from the country owning mineral rights. In times of stable fuel prices, pre-70's, Oil Companies owned the leases and obtained their profit between there and the Refineries. The Gas Stations were basically seen as an outlet for the refined product and not essential in company profit. That changed when Countries nationalized their leases and opened them to Oil companies by competitive bids.





Cost at the 'Well Head' is relatively fixed by cost of the lease, exploration and production infrastructure. There is some valid speculation in this because prices may rise between acquisition of the lease and producing. One of the factors in today's increases is the cost of Exploration and Production Equipment have risen three-fold in the last 5 to 6 years.





Part of this increase, not justified in my opinion, is supply of exploration equipment in the United States is effectively monopolized by one company, 'National Oilwell Varco'. Due to the magnitude of their market you have to order equipment 2 to 3 years in advance. Additionally during the same period, Exploration resources have been consolidated into just a few companies that can name their own price. Transocean alone probably controls more than 60% of the floating Drilling Rigs. Seadrill is another in Deep-water Drilling.





As to the supply of oil, we are depleting known and easy to recover fields. This has increased Deep-water efforts requiring new technology and significantly more cost. The Deep-water costs encouraged increased costs in operation of existing rigs. Units making a profit thirty years ago at USD 75,000/day could, until the economic downturn, demand prices above USD 400,000 per day.





Oil exploration and recovery at depths exceeding 5,000 feet is only profitable when oil is at or above USD 75/bbl. Essentially oil is more expensive if derived at greater depths but the suppliers are not going to differentiate when they sell it, so the higher price applies.





Volatility of the Oil Market increased during the transition period of rising costs. Any market that fluctuates radically offers the potential of profit on speculation. The more speculators, the higher the prices.





Personally I think we should concentrate on alternative sources.Let's talk oil and gas while the price of gas isn't killing us. What controls the price of oil? At what price,?
Basically it is about greed. Big profits for the oil companies translates into big political contributions. Remember the last ';shortage';? Remember the investigative report on all those oil barges in a holding pattern at sea? In order to avoid the problems created with these so called ';shortages';, officials look the other way when the price get manipulated for no apparent reason ( except to boost their profits).
There is no oil shortage, quite the opposite, a glut of oil that forces the Middle Eastern oil cartel (OPEC) to keep lowering production and forcing the price up and that is Supply and Demand at work.


BTW, we do not need addition oil refineries, but if we do they are $30 billion each and take 10 years to construct so I am sure if there was a need someone would build them and reap the profit, right?
Oil company, car maker, government. Exchange money, power and money. Make money, give money, bribe with money, money is power.
It really is all about OPEC. They are able to artificially raise and lower prices as they see fit. They are a monopoly, and they hold all the cards. Until we're able to become energy independent, this won't ever end.
Here is Michael Greenbergers' statement to the Senate Commerce Committee, it may give you some insight on who really controls oil prices.
Obama's Saudi master controls the price.
Supply and demand, basic economics.
with gas prices where they are at now, nobody cares!!!
The demand for gas in the US is not very flexible in the short term but over a period of years when we have time to replace old cars it will drop substantially if the price of gas increases. The oil companies are aware of this so they do not increase their refining capacity to adjust to price increases as simple economic analysis predicts they should. Everyone in the market knows the the world demand for oil will increase over the next decades because of the improvement in the economies of India and China, but no way for new oil discoveries it increase supply to keep up, so they see higher prices in the future. This means most oil producers, not just OPEC do not want to deplete all their oil now by pumping as fast as the can. There is an economic theory about how they will behave tat explains part of what is happening in the markets for oil. see http://en.wikipedia.org/wiki/Hotelling%2鈥?/a>





their is also speculation and risk premiums for weather or trouble in the middle east that causes short term fluctuations in prices but if you account for the complications in the real world the price of gas is most determined by supply and demand.
you are trying pretty hard and i understand your dilemma, but the reason there haven't been any refineries built in well over 30 years has more to do with the envirowackos than the oil companies trying manipulate the price of oil. next would be since there is a small number of refineries they have to change the process of refining to meet the commitments of the government and the envirowackos as to the numerous blends they have to refine across the nation(not all gas is gas, if you know what i mean...i think there is something like 15 different blends they have to refine to satisfy all the cities, envirowackos and government). then you have the speculators, then all the foreign nations controlling output...look, this is getting tiresome...this is basic economics that can be researched in a plethora of information...i've gotten you started, now continue on with your research...if you have additional questions, we here on YA will be more than happy to help!!!!!





my point exactly...why pay the millions to research and apply for permits when you aren't guarenteed it'll be approved, and if the small number of people controlling capitalism want to impede growth in this country, i see no reason for the oil companies to build, they just sit back and listen to all the whining about fuel prices and laugh all the way to the bank. when american wakes up and realizes that oil is available and usable, only then will we produce what is needed and wanted. in the meantime, it gives us a buffer to research other usable products so we CAN get away from oil. i understand oil is a finite commodity, but there is enough around to provide years of research for a suitable substitute.
There are many factors.





First of all, there is the undeniable fact that this is a finite resource. Most of the easily extracted oil has already been extracted which leaves oil which is harder and harder to extract. This costs more and more to produce. (I actually think that Peak Oil is the real looming catastophe causing governments to push global warming legislation so hard because the solutions to the problems are so similar)





2nd, there is supply and demand. The producers can control how fast they extract the oil they control and bring it to market. They walk a tightrope between pricing themselves out of the market by producing too little and loss of value for their finite resource by producing too much.





3rd, we have dozens of special blends of gasoline to combat pollution. This is inefficient because refineries have to start and stop all the time to produce the various blends. This is why there is always a price spike in the spring when the various blends come online and a drop in fall when we go back to only a couple of them.





4th, there are speculators who drive the price rapidly up and down in ways which make it hard for the consumer to predict their costs. Sometimes this ends up with a massive price spike like last summer's.





5th, there are massive taxes on oil and gasoline. They are already the largest part of the price and some people want to raise them dramatically to make gasoline so expensive that competing technologies will replace it.
Right now, supply and demand is less of an issue as far as raising the price of oil. The demand is lower, so the price of oil is lower. The futures market effects the price. People have eased off on speculating on oil but there is still some of that going on. When there was too much gasoline flooding the market in the US, some oil companies closed some refineries which made the price of gas go up .20 to .30 per gallon. Also the price goes up on the weekend when there must be more demand for it. Its probably a good idea to fill up the gas tank on a Wednesday to get a better price. The price of gas will probably go up around Memorial Day and stay up all summer because of more demand.





The US stopped building refineries because of environmental issues and probably will not build any in the future since the use of oil will be diminished in the years to come. When people start going back to work, the price of oil/gas will go back up unless the Congress changes some laws about speculating in the oil markets. That is unlikely to happen because this administration appears to want the price of oil as high as possible to restrict use so people will transition from gasoline engines to alternative energy vehicles.