Sunday, March 23, 2008

Something's got to give...

I've been following rising oil prices carefully over the past few weeks and by carefully, I mean to say that I've read numerous economic reports on the specifics of what might be causing the price jumps (both immediate and those more far flung).


We haven't built a new refinery in the U.S. since 1976

There have been a number of unplanned outages spurred on by new sulfur reduction demands (see linked article)

A frenzy of buyers have entered the market and have been investing in oil as the dollar waivers

The Long Haul:

Now, that accounts for maybe a 10-20 cent fluctuation and no one can complain about that small amount very much, but the real trouble that I see is the nonlinear rise in price ever since Hurricane Katrina. The plain fact is that gas prices spiked after Katrina and in spite of a number of increases in supply over demand, prices have continued on a completely nonlinear rise. Why?
Some tell me that Katrina destroyed oil rigs and infrastructure. From what I read, most of the infrastructure has been rebuilt. Prices keep rising anyway. But even if (as some have said) we lost half a million barrels of domestic oil production per day permanently, how does that account for a tripling in price since Katrina, especially since we consume roughly 40 million barrels a day (a far larger amount)? Is the dollar so weak that inflation has tripled since 2004?

Or perhaps it's true, oil's just running out. We also know that can't be true as MIT, Stanford, and the University of Maryland all agree the between 70-80% of our energy demands will continue to be satisfied by petroleum products throughout the 21st century (i.e. there's still an enormous amount of oil in the ground{see linked article}).

I just can't figure it out. With everyone in the petroleum market making record profits, why has no one considered the thought that the industry itself is helping hike the price? Of course, I heard people say that they wonder about this possibility, but I think there ought to be more than wondering about it. There should be a sincere discussion about slow and methodical price gouging. It just isn't fair to the average American family. Something's got to give...

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