Bob, maybe you should reread my post. One of my main points was that limitations on the supply of oil are forcing up the price.
The question is how much of that supply limitation is artificial and how much of it is not.
If you think that at least a part of the current spike in prices is not due to producer manipulation, you're wrong.
Opec's very existence is for the purpose of limiting supply to match demand with the purpose of achieving whatever price they determine as the "target price." In addition, the fact that big oil controls a relatively small percentage of the market is not critical since it is on the margins (the last barrel) that the price is set.
So I'd guess that part of the price spike is because world demand is increasing and producers are making such profits that they're not willing to pump more or to invest more to bring more online. I'd guess that over time those same producers will decide to bring more reserves online but none of them will kill the golden goose by flooding the market with a supply that kills the price.
Our former best buddy in the Middle Eastern oil game, Saudi Arabia, had, in the past, upped it's oil production to create a more palatable price for us. I suspect one of the reasons they did this was because we were the big brother that protected them from the Soviets and, later, the big bad Saddam. As you know, they're not too worried about needing protection from an aggressive Iraq since we meddled there.
But oil reserves are finite and we are, by definition, running out. With increasing demand and a finite supply of oil, eventually the actual demand and supply curves will create a critical spike in price and we'll be forced into an increasing combination of conservation and alternative energy.
That MIGHT be beginning to occur now but it's certainly not the full cause of this price spike. There are appreciable fields out there that are not being accessed.
And of course since we pay for oil in dollars and the dollar is becoming less and less valuable, the price of oil in dollars is rising.
There are, therefor, many reasons for a rising oil price but the artificial limitations on supply are a material factor. Ed |
