Santa Claus Arrived This Year In a Battered Bus Called "OPEC"

There it was bumping along the road, that battered beat-up bus that had seen better days just a short time back. There was King Abdullah at the wheel looking for $75 oil with his sidekick Ali al Naimi at his elbow guiding him through unknown peaks and valleys with a battered ExxonMobil road map. On board were ticket takers, the dour Mahmoud Ahmadinejad forever glum, braying at his passenger, unhappy with his far too jolly outfit. And there was Hugo Chavez, mumbling about his displeasure at working in a bus with U.S.-made tires. On board as well, forever taking copious notes, were the bus company's most accomplished apprentices, those prickly twins, Vladimir Putin and his factotum President Dmitry Medvedev .

In its meanderings the bus had lost its way ending up at this faraway place called the North Pole where a Mr. Santa Claus in a cheery red outfit hailed it to a stop. His usual transportation, a heavily loaded red sleigh pulled by a team of reindeer couldn't be budged. It was stuck in melting snow, so you can imagine how happy Mr. Claus was seeing the battered bouncing bus clambering down the road. He waved it down and climbed on board.

In his sack Santa carried a gift for all of us. It was a barrel of oil which we could buy at a special Christmas discount of $35 a barrel. It was well hidden in his sack. Had the driver and his crew known about it, I'm sure poor Santa would have been heaved off the bus and would be up in the tundra somewhere wandering about, looking to hitch a ride with whatever came along. But the bus crew didn't know, and happy to have a paying customer brought him along and delivered him among the good souls waiting for his annual visit.

Well, let me tell you, now that was a Christmas present! Spectacular! Consider that the bus proprietors, the OPEC Cartel Company had managed to get the price of oil to $147/bbl a barrel in July of this very same year. And now here was Santa bringing us oil at $35/bbl a barrel. You see, the OPEC Cartel Bus company could charge passengers whatever the market would bear whenever there are lots of passengers and few buses, or when the government's bus route administration messes up authorized bus routes to such a degree that passengers lose sight of what is what. But when all that gets fixed and real competition sets in, the OPEC Bus Company no longer has the punch to charge whatever it wants, even to the point where the buses have to wander wherever just to pick up passengers.

What does the difference of $147/barrel and $35/barrel mean to us (and just remember those OPEC Bus Company sponsors at Goldman Sachs who were predicting $200/bbl)? Well here in the United States (am rounding out numbers) we consume some 20 million barrels of oil a day. With a price differential of $112/bbl ($147-$35) that comes to slightly over $200 million/day Americans would be paying oil interests, the cartel and its members or near $800 billions a year. An enormous sum even in this age of TARPs, enough to fund a good share of President-elect Obama's economic stimulus plan in the making, toward rebuilding the nation's infrastructure.

Santa also gave us another gift. He showed us where the range of oil prices can and should be, and making us aware, in the price reaching $147/bbl on the commodity exchange, of the levels to which the oil patch and the cartel would take us if they could and would take us again, were they able to do so. That we must do whatever we can as a nation and a society to prevent that from happening. That never again can we permit ourselves to become so dependent on the oil producers. That alternative energy is essential to our economic, national security and environmental future.

Well, Happy New Year Santa! By way of thanks from all of us, before foregoing their private air fleet, General Motors should at least organize one last trip, giving you a lift back to the North Pole.

Comments

[drymartini1]

Anyone thinks that NOW is the perfect time for the Oil Companies to stop actually producing oil and just buying oil in the open market.

think about it...buy oil in the open market at 40$/barrell. stop producing oil.

demand same...supply down....prices up..sell it back in the market.

i would love it...hehe :)

[GetAbike]

Geez Raymond, your entire post sounds like Kudlow on CNBC- an awful lot of happy talk in lieu of what is actually going on in the world.
In addition to your giddy references to Santa, Christmas, and the demise of OPEC, you state, ".... That never again can we permit ourselves to become so dependent on the oil producers."
Say what?
You seriously think that we are done with OPEC? Do you think, given the current financial melt-down, the banks and governments are financing all those exotic energy projects you hope will save us?
I am also amazed that you say, ".... But when all that gets fixed and real competition sets in, the OPEC Bus Company no longer has the punch to charge whatever it wants..."

Just because we wish (even with all our might!) that our dependence on oil is in the past, doesn't mean it is true, will happen, or ever will happen.

Any celebration of our current good fortune is delusional at worst and premature at best, given the uncertainty of world events and economic realities.

[KillTheMessenger]

OPEC is far from battered. They made more money this year than ever. And they will make more money than that in the years to come, still. If anyone got beaten with a stick, it was the US. We exported hundreds of billions of dollars more for our oil purchases than in previous years. And unless we want to repeat that experience in the near future we better get more energy efficient fast.

[BBackSoon]

Great idea but I fear the ‘Powers that be’ will do their damndest to stop any meaningful mainstream energy efficiency campaign. Same thing when it comes to health care.

[KillTheMessenger]

I don't really see what energy efficiency has to do with "the powers to be". I have a Prius and ride the bus and train every day to get to work. The cost of oil is simply not a huge factor in my daily life. It would be a minor inconvenience, at best, if oil went for $500/barrel.

[avahome]

Strategic Oil Reserves........ we haven't heard a peep about them. Might be a good time to begin the filling process. There has got to be a method behind GW's madness and manipulation of these reserves.

[IndianaJohn]

Lower oil prices do not automatically result in benefits to the U.S. economy, in the same way lower car prices don't necessarily help the economy. It is generally a good thing to send less money to OPEC, but most of our imported oil comes from Canada. Some Canadian oil companies hire U.S. citizens to work in the oil fields and some of the money spent in importing Canadian oil comes back to our economy as exports of U.S. goods to Canada. A lot of our oil is still produced domestically and money spent on domestic oil continues to flow through our economy. I haven't completely worked out all of the numbers, but in general it is not possible to save our way out of a recession. Savings result in lower velocity of the money moving through the economy effectively reducing the supply of money, exacerbating our liquidity crisis. Commodity prices do generally act as a counterweight to the current trend in the economy, but the effect is not a simple calculation.

[Horus45]

Here's a conspiracy theory for you.

Oil going over one hundred dollars a barrel was the plan to get the Republicans back into the White House.
If you remember the Republicans whole election strategy hinged on the price of oil, they had nothing else planned as a backup strategy, all of their talking points and slogans were about the price of gasoline.
The price of oil was clearly being manipulated and now with the whole Bailout of Wall Street we know who was manipulating it, or rather we will know once the new administration takes over because Paulson is not telling anyone who he gave the money to, yet.
Manipulating the price of that much oil was very costly to the firms who were doing the manipulating and the bailout was their payoff for what they did.

The Republicans did not anticipate the fallout on the economy, they did not believe that paying over $4.00 a gallon for gas would bankrupt many people and small businesses.
When the demand for oil dropped a lot of these firms who were manipulating the price were stuck holding a lot of Oil contracts that were now worthless, even they did not anticipate the effect it would have on the economy.
Once they saw how much money they lost they got pissed off and told Paulson that it was now time to "Pay the Piper", hence the bailout.

Like I said, this is just a conspiracy theory, but it makes sense.

[marijam]

I believe there was a conspiracy, but I think it was financial terrorists.I don't remember ever hearing what the findings were, back in September, on the investigation into the rise in prices. Some said that it was speculators - what speculators, where?

[Horus45]

Optiver Holding, Optiver US, Optiver VOF and three senior company officers, including the chief executive of the Chicago affiliate, Bastiaan van Kempen.

The complaint also charged two of the executives with covering up the scheme by lying to the compliance staff at the New York Mercantile Exchange, known as the Nymex, where the trading occurred.

[jbatch]

Don't celebrate too soon, Ray. The problem -- despite your head-in-the-sand focus on OPEC, is peak oil.

Remember how oil went from the ten incredibely high price o $37/b to $12/b in 1997 -1998 as a result of the Asian currency crisis? As I wrote in the Washington Post then, what comes down must go up.

In the short term, oil is incredibly sensitive to economically induced blips on supply and demand. The crash in prices in 1997 was a result of a mere 2% in demand.

Ray, you still don't get it:
1) the price will go up;
2) cheap oil is a problem, not a blessing. It keeps us from getting off of a toxic material that is killing us.
3) We are either at -- or within a few years of -- passing peak production. And while that leaves lot's of oil, over the long term, the price will go up and up and up, for as long as we depend upon it as a primary fuel.

So don't celebrate yet. The only sure way to lower the price of oil and keep it low is to make it irrelevant to our economy by switching our transportation infrastructure to ultra- efficent PHEVs and EVs.

When we do that, you can celebrate.

[jsarets]

For a second there I thought I read that Santa Claus arrived in a battery-powered bus called "OPEC". Now that would be news...

[IntrepidReader]

Too bad Clinton isn't around to look into heating oil prices now, since they are currently 2.61 per gallon in NC, and kerosene ( a necessary fuel for many poor people) is an outrageous 4,85 per gallon, two dollars MORE than it was last year. Kerosene is actually 1.30 per gallon more expensive than it was last week. OPEC can't be blamed for those prices and I don't hear anyone making a fuss about it. It's nothing short of criminal. The folks who live in a mobile home or a drafty house with a kerosene heater as their sole source of heat are being gouged to the breaking point, and as long as nobody aims a bright light at this situation, the oil companies will keep doing it.

[MoeJava]

Why hasnt Big Oil come to Detroit's recue?
Detroit is Big Oil's #1 Fan, and Big Oil has seen it's share of huge profits, which could take care of Detroit in a heartbeat, without stripping the Autoworkers of their pensions and living wages.

[toypiano]

Whenever that suggestion came up, pundits usually laughed it off and didn't treat it seriously. I finally heard one of them say that the largest customers of Big Oil were industrial corporations and that cars actually accounted for a small percentage of oil use.

That, and the fact that Big Oil's $hareholders would never approve of using their profits in that way.

[Pero]

Well - not a word about all the oil companies and oil speculators...

Prices will go up again -- whenever a pidgeon poops within 5 miles of a refinery gasoline price increases...

[yappnmutt]

the alt energy dream will end with 35 dollar oil.

[KillTheMessenger]

Not at all. The world seems to have decreased its oil consumption this year. It is projected that it will decrease it even more next year. And if we keep doing that for a couple more years, peak oil will take care of the rest by throttling supply for good. That won't mean we will be using less energy. It will simply mean we will rely less on a fluke of nature called fossil fuels.

[swellsoire]

Gas prices may go down to $1 per gallon. This will be temporary. Prices will go up again. Petroleum is a finite resource. We are at, or beyond, the halfway point for petroleum supplies. We will burn through the remaining petroleum supply in short order.

[B-Dog]

The difference between wasting energy dollars and investing energy dollars? Short-sighted public perception.

[TRYKER]

That "supply and demand" peak oil hocus pocus has been laid to rest with $35 oil.
Just as soon as the futures traders were put on notice that there would be "regulators" looking into suspicious trading...magically all the prices fell and fell and fell. No one wanted to get caught with their hands in this cookie jar.
It wasn't OPEC, it was de-regulation, Wall Street traders and no oversight that brought us to $147 oil. Our govt was complicit in the deception and theft from the American people. It still hasn't brought charges against anyone in this grand rip off.
The new administration could probably get some big bucks back by turning on the enforcement police.

[legalgirl]

Thank you! I knew it then and we see it now.

[jeffrey678]

The same thing happened when President Clinton started looking into rising heating oil prices in the 90's . $10 a barrel oil.

[toypiano]

Exactly!

[DasBoot]

Another smart posting by you, TRYKER. I am impressed.

I also thought: yes, demand went down after prices skyrocketed, but by 300%? Hard to believe. Rather, now that all the free-floating, virtual credit has been sucked up, speculators got scared and prices got back to normal. At least that's a much more credible theory.

[flatus]

Oil seems to be tracking the stock markets and, at it's current price, has become a fairly good indicator of how crappy things have become. I wouldn't advise going out to get that slurping V-8 just yet. When (if) the markets recover, so will oil.