Oil prices continue march to $50 per barrel

Oil it $47.40 per barrel today.  How much farther must it go up before we start to feel serious effects on the economy? Answer we are already feeling the effects.

from CNNMoney Story Link

"The U.S. uses 20 million barrels of oil a day. Prices are currently inflated by about $15 a barrel, and that additional cost is effectively a $300 million dollar-a-day tax on Americans, eating away at disposable income for people in this country," said Gheit, adding that no tax break would be able to offset an amount that large.

The new record had traders talking about how much higher prices could go.

"It seems like we're going to have to rendezvous with the $50 level," said Peter Beutel, oil analyst and president of energy consultant Cameron Hanover, predicting that crude prices would hit that price by the end of the month.

"Eventually these prices will stop the economy from growing," he said.

•  Obviously you don't understand economics

  These 'loss in disposable income' doesn't dissapear, it is going into the pockets of very oil executives.  Then these executives spend this money on stuff and it trickles down to you and me.

  Y'see, the only time money is wasted is if it is spent by the Government on social programs like education or the EPA.  That money is eaten by the socialist monster (or as some refer to it, Democrats), but money that goes to really rich people to make them ridiculously really rich makes us all better.

  ok, with that out of my system can anyone explain why no one is talking about increased oil company profits?  Exxon/Mobile makes billions of dollars every year that number be doulbed or tripled as a result of President Bush.  You'd think the liberal press would talk about that...

  by Snuffleupagus on Wed Aug 18, 2004 at 05:39:44 PM PDT

  •  bit of an exageration

    most of the differential is heading to Mexico, Venz, Saudi, Angola, Nigeria, the UK etc.  We import over half our crude.  And in many of these places, even though the majors produce the oil, they don't keep all or even most of the price.  

    Also, quite a lot of domestic production is by small time producers who are enjoying the windfall.  I have a friend who is a very small time Ohio producer.  He's spending like a drunken sailor.

    Not that I feel sorry for oilco honchos.  They're making way more than they are worth.  Judging by the ones I've met, most could be replaced by a sock puppet and the company would lumber along much the same as before.

    by HiD on Wed Aug 18, 2004 at 05:47:51 PM PDT

  •  I'm so stupid

    I didn't realize that the Saudi Royal family were American citizens.

    I feel dumb.

    by kamosa on Wed Aug 18, 2004 at 05:48:40 PM PDT

  •  Get with it Snuffy

    Oil companies need their massive profits for two reasons:

    1.  Frivolous lawsuits have caused malpractice insurance to quintuple every day for the past 50 years, and driven many oil refineries out of business in rural communities.

    2.  They need the money to do research and developement in order to find new cures for lots of diseases without using stem-cells, or importing oil cheaply from Canada.

    BTW, these two reasons also work for explaining Bush's tax cuts, health care policy,  education policy and war in Iraq.

    by PBJ Diddy on Wed Aug 18, 2004 at 05:52:19 PM PDT

•  But but but Iraq will produce 3 MMBD

  by last September.  Another Neocon fantasy.

  All the slack from the 1980 price spike is gone now.  Saudi's running full as are the rest of OPEC and non-opec.

  I agree with MB that we'll have a down wave next year to the mid 30's but it'll just be a pause on the way back to new, real dollar highs.  Energy is just too cheap and the bulk of the cheapest production (other than Saudi) is gone.

  The wild cards are:  the Saudi's start to actually explore again and find even more.  They haven't made much effort since they had half their existing production shut in.  

  Venz going hard after their heavy oil deposits.  At $50 these will be attractive.

  We get serious about conservation again and take 5% of demand off the table.

  Upside wild cards -- AQ shoves a rocket into Ras Tanura.  That would be good for a spike to $100.

  by HiD on Wed Aug 18, 2004 at 05:40:50 PM PDT

  •  one more wild card

    someone figures out a way to get oil out of the Alberta tar sands faster/cheaper.

    I read somewhere that it becomes economical to extract it at $28-30/barrel, but IIRC output is still pretty low. There's a heck of a lot of oil in those sands - 1.6 trillion barrels is an estimate I saw, which is like seven times the proven reserves of SA (and from a country I'm a lot happier about the US being cozy with at that). At $50 a barrel a lot of people are going to be working on extraction.

    by cyclopatra on Wed Aug 18, 2004 at 05:47:55 PM PDT

    •  Alberta Sands

      Output is bigger than you think.  Shell just completed a 150 MBD unit.  They make plenty off this stuff at $30.  But capital expense is huge and companies are scared to invest the money and then have oil crash back to $10 like it did in 1984 after the oilcos spent a ton on things like the North Sea.

      This production will ramp up fairly quickly if Saudi stays maxed out.  This sort of thing is why I just shake my head at the dieoff theory buffs.  We're gonna pay more and sacrifice std of living, but I don't see half of us dying off due to lack of energy.

      by HiD on Wed Aug 18, 2004 at 06:24:39 PM PDT

      •  i don't know about the numbers....

        so, i hope you'll enlighten me.

        aren't there about 2 billion people who live on 2 $/day or less?  and don't they already spend about 70% of their income on food?  and won't increases in energy prices also cause food prices to increase?

        i'm worried about what a 2x increase in food costs would do to those 2 billion.

        are you telling me there is nothing to worry about?

        by selise on Wed Aug 18, 2004 at 07:01:09 PM PDT

        •  Eating oil

          Long-term, it's not really about money and who can afford what at a given price. Worldwide, energy is a closed system. It's a balance sheet of how much energy is available to spread around how many users of energy.

          Our agriculture is incredibly energy-intensive -- about 10 calories of oil per calorie of food consumed. Without abundant energy, agriculture reverts to a local, much-smaller scale. The trouble is, abundant energy has inflated the population of the planet way above its "natural" carrying capacity.

          The exact figure is subject to a great deal of debate -- by some estimates, we have a threefold excess. Others consider what the world population was before the predominance of oil and ask how we could expect to support a population much greater than that.

          Whatever the planet's natural carrying capacity turns out to be, a large percentage of human beings simply won't be able to eat. The sustainable level is certain to decrease dramatically as oil goes out of the picture, with corresponding loss of human life.
          

          by Terry in Austin on Wed Aug 18, 2004 at 07:20:51 PM PDT

    •  Not just economics

      Tar sands are more like open-pit mining than drilling. Extraction is very energy-intensive, so the energy "profit ratio" is a key factor for longer-term viability.

      According to Walter Yongquist, "The most significant trend in the US oil industry has been the decline in the amount of energy recovered compared to energy expended. In 1916, the rate was 28 to 1, a very handsome energy return. Today the rate is 2 to 1, and dropping."

      And that's for conventional oil.

      Tar sands extraction is labor- and water-intensive; it also produces a lot of troublesome by-products like heavy metals.

      Finally, the rate of production is much slower than with conventional, so it could not keep up with even a fraction of current demand.
      

      by Terry in Austin on Wed Aug 18, 2004 at 07:04:21 PM PDT

  •  highly unlikely

    that Iraq will export enough to make any kind of difference on the world market, especially given events such as this and the inevitable sabotage to follow.

    by mitch2k2 on Wed Aug 18, 2004 at 07:56:16 PM PDT

•  well even a Kossack can make money

  betting on the incompetence of this administation.I did today.

  by ctkeith on Wed Aug 18, 2004 at 05:53:13 PM PDT

•  That shit is running out!

  and no amount of anything will stop it.  Yes, oil prices are currently inflated due to speculation and unrest in Iraq and with Yukos in Russia.  But the market fundamentals are ominous.  China and India are at break points in their development right now, and their demand increases are astronomical- China's oil demand increased 40% last year.  As global demand surges and supplies dwindle, prices will soar.  I believe this is the beginning of that.  

  One of the worst lies that this country has given the world is that if we all submit to the free market and our version of democracy, the whole world can be as prosperous as the United States.  There is not enough oil in the world for that.  Or copper.  Or anything.  And if we don't start to fix this stuff fast, $50 a barrel oil will be a fantasy.

  And the GOP doesn't seem to care.  The reality is simple- pretty heavy progressive taxation to build a national energy infrastructure, solid public transportation, and investment in biofuels, renewables, and nuclear power.  But they'd rather let the oil companies keep sucking at the pipe for a while longer.......

  by tubalefty on Wed Aug 18, 2004 at 05:53:23 PM PDT