In November of 1999, in a speech to the Houston Oil Forum, Saudi Oil Minister Ali al-Naimi bragged that the "all inclusive" cost to the Saudis to produce a barrel of oil was less than $1.50 a barrel. Costing $1.50 then you can make your own extrapolation as to what it may cost today. My estimation is it is less than three dollars today, and probably a lot less. My reason for putting forward this tidbit of information is to give one a comparative benchmark of production costs of other OPEC member states be they Libya, Kuwait, Iran, Algeria, etc. All would be comparable to Saudi production costs. As to the argument that today's oil price reflects a rapidly declining resource, I have long argued that OPEC's and especially Saudi Arabia's reserves have been purposely understated and are vastly greater than we have been led to believe (among other posts please see "Peak Oil" RIP: Official Obit Front-paged In the New York Times," 3.8.07)
With the current rout of speculators pulling in their horns from the commodity markets and the economy's impact on oil and oil product consumption, and finally the growing and widespread realization of the environmental and national security dangers inherent in fossil fuel consumption, the price of oil is collapsing. Or is it?
With the price of oil retreating from its high of $147/bbl we heard from the oracle of oil patch baloney, Chakib Khelil, OPEC's President and chief cheer leader. Khelil, who had called for an emergency OPEC meeting for November 18th, a month ahead of schedule, was quoted by Bloomberg on October 9th that prices have fallen "dramatically" and "The decision will very likely be to cut production."
Now consider this. Even with oil prices' recent tumble to $80 a barrel, using Al-Naimi's 1999 Houston Oil Forum's formulation (all-inclusive production costs of less than $1.50 then, extrapolated to $3.00/bbl now), we are still dealing with a breathtakingly obscene markup of 2500% -- this while the world's economies are on the brink of depression. But having tasted the nectar of a 5000% markup when prices were at $147/bbl while holding the industrial world and the world's economies to ransom, the OPEC cartel has lost all bounds of reason and simple commercial common sense, which dictates a shared responsibility and communal well-being between industrial consumer and materials supplier. In their actions, and OPEC's volition to keep prices at artificial and egregiously high levels at a time of potential economic disaster for their customer base, they have forever lost all semblance as suppliers who can be relied upon in good times and bad. No matter how inexpensive and accessible their wares become and how tempting for us to become hooked all over again it is long past due to get the oil monkey off our back once and for all.
Greed may well be a universal human failing. Its contribution to the dimensions of the present world financial crisis does not diminish the outrage we feel in its numbing excess. It is an outrage that now needs be extended to the OPEC cabal and their oil patch allies as well.
Brandon Friedman: Support Terrorism: Call Obama's Fuel Plan a "$1,300 Car Tax"
For all his bawling on TV about how much he loves his country, you'd think a guy like Glenn Beck would be eager to do whatever is necessary to combat terrorism. Same for Michelle Malkin.
Raymond J. Learsy: Why are We Paying $50 a Barrel for $20 Barrel Oil??
To continue transferring our wealth and well-being in these times of crisis to the oil industry and to the petro despots is madness.
Michael T. Klare: Repudiate the Carter Doctrine
Twenty-nine years ago, President Jimmy Carter adopted the radical and dangerous policy of using military force to ensure U.S. access to Middle Eastern oil. "Let...
WE are their dependent consumers - They know this.
THEY are sitting on a a limited supply (whatever that supply may be) of oil/natural gas - They know this.
Basic ecnonmics, coupled with an understanding of their own self-interest vs our self-interest, dictates that they will seek to maximize their profits for as long as they can continue to do so.
OPEC and associates have a vested interest in keeping us using as much of their product, at a price they get to mostly dictate, for as long as possible.
Of course OPEC is going to run up the prices for as long as they can. To NOT do so (from their standpoint) would make no sense.
Maybe this time, as oil falls it will be different and we really will turn to nuclear power and other power sources but don't bet on it. We could soon forget how bad things can be and stop supporting the vast alternative energy sources as we once again guzzle down cheap oil energy. Liberals will go back to keeping us from the nuclear power we need and the economics will keep us from bringing on alternative sources and we will get nowhere again. I hope I'm wrong and it's different this time....but we have been down this road before.
9/11 - don't forget this. Bush Admin is lying about the insurgents in Iraq, the ones getting caught
are mostly Saudis and remember we just sold the Saudis like 20 billion arms deal, and
Ahmedinejad constantly gets misquoted to suit their purpose.
Does anyone even know that the US is exporting 1.5 million barrels of oil per day? If we want
to become energy independent, then let us not export our oil!
:-)
U.S. DEPARTMENT OF ENGERY ADMITTED IN 1989 THAT IF THE USA COULD HARNESS THE WIND ENGRY FROM JUST 3 STATES WE HAVE THE TECHNOLOGY TO PRODUCE 2 MEGA JEWELS OF ELECTIRC POWER PER YEAR.
THE USA ONLY USES 0.5 MEGA JEWELS PER YEAR NOW !!!!!!!!!
BUILD WIND MILLS AND BUILT A NEW POWER GRID. ELECTRIC POWER AT 1 /3 THE PRICE.
NO MORE BURNING COAL TO CREATE ELECTRIC POWER.
NO NUCLEAR EITHER !!!!!!!!
Oil prices dropped starting in July at the "HIGH of the DRIVING SEASON." WHY?
It Coincides with two simultaneous investigations in late June:
1. Congress investigation of "Crooks" doing "ILLEGAL LEVERAGING of OIL" -pennies on a Dollar!
2. Finally under pressure from Congress SEC began investigating "ILLEGAL NAKED SHORTING" of Financials and other stocks!
As soon as these two investigations began the OIL MARKET BEGAN TO TANK 23% and FINANCIALS went up 22.5% in about one MONTH.
This shows the level of corruption in these markets and lead to LOSS of CONFIDENCE!
We could see prices below $50 for crude!
Of course, it makes me absolutely angry thinking about how much money we waste on the military and this stupid war on terrorism. The kind of infrastructure investment we would need to get off our oil addiction to oil.
And yes, after years and years of cramming structural adjustment down the throats of developing nations around the world, I'm afraid that OPEC should be able to charge whatever the hell they want for oil. We deserve it.
The Saudis will have to cut back on their imported concubines and there will be hell to pay.
Rule 2. The lower the supply the higher the price.
The Iraq War shut down Iraqi oil production and a huge trandsfer of wealth happened to allow the Sadui's to collect enough money to build themselves a Military and get businesses setup in thier country. The time of living of interest and oil has passed.
Complaining about expensive oil reminds me of a heroin addict whose habit has hit $100 a day blaming his dealer for the price of his junk.
Better to kick the habit! Life will be okay on the other side, better in fact. There's plenty of sunlight readily available. It isn't OPEC's problem that we're not using it.
If they charge too much and "force" into alternatives are you going to complain that we should give them charity?
It's their natural resource and they can charge whatever the heck they want for it if we're stupid enough to pay.
And, no, OPEC isn't the whole problem.
After Bush orchestrates the greatest transfer of wealth in history--your words and mine--to the oil producing companies and countries, in addition to the continued job meltdown of the late nineties--we were told we were to become a "service" economy, but then they started to move service jobs (along with the usual industrial) overseas too--what's left? Market meltdown.
Oh those bad boys at OPEC, why can't they be nice!
Rule 2. The lower the supply the higher the price !
By the way:
-The US with 5% of world population uses 25% percent of supply, so maybe someone else has a right to complain about US energy use?
-What makes you think you are entitled to that oil? Are you Dick Cheney?
No. We should have raised them ourselves while there was time. It's called a gas tax and works really well to curb consumption.