« Tip Calculator | Main | TSP vs IRA »
$100 Oil Is Here To Stay
By JD Bluefield | April 21, 2008
If you're new here, you may want to subscribe to the BluefieldMoney.com Feed so you'll never miss any posts on Engineering your Personal Finances and Investments. You'll also want to register and login to see what individual stocks I invest in by clicking on the Private Category. Thanks for visiting!
Today crude oil has reached another record of $117.76. Why is oil still rising?
- OPEC (Organization of Petroleum Exporting Countries) has stated that they will not increase production. They said that there is a “balance” in the supply and demand of oil above $100 and that increasing production will not bring down the price of oil dramatically.
- Unrest in Nigeria is also contributing to a decrease in supply. Shell projects this will reduce production by 169,000 bpd.
- Although China is now the #2 consumer of oil, the Chinese government currently artificially keeps gas prices low ($2.90/gallon) to keep their growing economy on track. Although imports of oil rose 12.3%, Chinese oil companies have been banned from profiting on the recent run up in oil prices, and are instead being given subsidies by the government. These low gas prices will keep Chinese demand surging.
- US oil production still at all time low, with refineries operating at only 81% capacity. As a reference, we haven’t seen production this low since post-Katrina levels.
This increasing demand and a refusal to increase supply will keep oil over $100/barrel for quite some time. There are many other articles, but these are just a few plucked out of today’s headlines. Cry about it, or check out “How to make money from oil“.
Will oil go up forever? It will increase as long as people are willing to pay a premium for it. The Laws of Supply and Demand dictate that everything finds it’s own level. Currently, companies are encouraged by these high oil costs to improve existing technologies (solar, wind, wave, clean coal, etc) or come up with new ideas (hybrid vehicles, ethanol excreeting microbes, better battery systems). Unfortunately all of these are years away from decreasing our use of oil appreciably.
Topics: Investing |
2 Responses to “$100 Oil Is Here To Stay”
Comments
You must be logged in to post a comment.
April 21st, 2008 at 2:15 pm
I think its good that oil is rising, since it forces the switch to other forms of energy and healthier peoples cause now they got to start walking and riding bike.
It reminds me of those grandpa stories where they say, back in my day we never had cars and we used to walk 15 mile to school everyday. Maybe we are going to revert to those days.
I can see Hawaii turning into like how Japan people live. I live in Japan now and noticed almost every house here has a vegetable garden and don’t eat that much meat either which cuts the cost of food and promotes better health.
The people here also don’t have big cars and a lot of people walk and ride bike to work and school. For the people that do have cars they have kei cars. These cars a great and I don’t know why America doesn’t have any of these yet.
- The engine is about the same size as a motorcycle engine, so it gets something like 60mpg. Even though the engine is small its still fast enough to go on the freeways
- Its small and compact so its easy to drive and park anywhere
- These cars are super cheap, I bought one for $3000 and it looks pretty new.
- The cost to maintain these cars is cheap too. You pay less road tax than a regular car and pay less insurance. The cost to repair the car is cheaper too since its easy to swap parts out. I’ve been told the cost to repair stuff is the same as a motorcycle or moped.
Its seems strange that Hawaii has those Gem electric vehicles on the road and not these kei cars. Big companies like Toyota, Nissan, Toyota, Daihatsu, Suzuki, and Mitsubishi make them. But I’m sure that they are holding out on importing them into the states since they make way more money selling the bigger cars. It probably wont be seen in the states until they see a major decline in sales of the bigger cars.
April 21st, 2008 at 10:05 pm
Oil will get costlier because of rising demand with out an increase in supply. OPEC can’t increase production. Their wells have passed their prime. New discoveries are costlier to produce.
Dump your gas guzzler immediately and buy a moped.
There will be a role reversal. China will go to cars and we will go to mopeds.