On Oil Prices

[Jackpine Radical]

I think the oil price situation is a bit complicated. First, there is no doubt that oil is a finite resource, and we are having to move into more and more costly extraction situations, with an accompanying upward drift in prices. At some price point, things like shale oil will become worthwhile to recover, etc. Therefore the concept of peak oil is something of a moving target. One can use up half of the oil available by certain extraction methods without having used up half the oil that might be available if the price were high enough. Also, of course there is the possibility of new and cheaper extraction technologies, which also clouds the issue.

I'm not at all confident that we have good data on precisely what the world's oil reserves are. It is not in the interests of the industry for those numbers to be available, so they aren't, at least with any accuracy. They will give us whatever numbers best serve their interests of the moment.

Also, in the long run, of course oil prices must go up as the commodity runs low. In the very short term, however, gasoline prices seem rather unrelated to supply. I think we are being grossly manipulated, "Enron-ed," at the pumps. The economist Ravi Batra lays out some of the relevant data about the oil monopoly in his recent book _The New Golden Age_. http://www.amazon.com/New-Golden-Age-Revolution-Corruption/dp/1403975795/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1214414690&sr=8-1
Batra points out some things like the difference in the natural gas versus oil markets. Natural gas fluctuates wildly with demand--a fact Batra attributes to the fact that the NG market is divided up among many owners & is therefore fairly competitive. Oil, on the other hand, is much less responsive to supply-demand fluctuations due to the fact that the supply and the prices are controlled by a relatively few gigantic interests. US gasoline usage is currently something like 7% below last June, but the prices are much higher than a year ago.

So I see a long-term true supply-demand curve resulting in short supplies of a finite and irreplaceable resource, but I also see a lot of price manipulation, driven by forces such as speculation and corrupt monopolistic behaviors, along the way. I do believe that effective regulation could theoretically bring about a substantial drop in prices in the short run by the simple expedient of driving the forces of speculation out of the scene--but of course ultimately the physical reality of shortages will catch up with us. My real concern, though, is with the effects of unbridled use of fossil fuels and oil-based pesticides, fertilizers, and other chemicals on the environment.

To put my fears a bit more straightforwardly, regardless of the exact point of peak oil, I'm afraid that we may have enough of the stuff to kill ourselves with. We very badly need to get off the fossil-fuel habit--and quickly--in the interest of the biosphere, regardless of the ultimate availability of the stuff.