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Quote of the Day: Keep Burning Oil |
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From the Financial Times (via NPR and Grist):
Opec will this week seek assurances from some of the world’s biggest oil consumers that they will maintain their demand as the members of the oil cartel come under intense pressure to boost investment in production capacity.
So basically, with the price of crude oil at over $90 a barrel, OPEC is threatening to tighten petroleum output if high-energy-consuming countries go too far with this whole “alternative energy” mumbo jumbo. As though diminishing global demand for oil is really a concern, the cartel is saying it wants some sort of guarantee (from who, exactly, is unclear) that wealthy countries will not allow alternative fuels or improved energy efficiency to cut into their demand for oil. Climate expert Joseph Romm speculates that OPEC’s threats to tighten production (especially in light of the IEA’s July prediction that global oil demand will increase by 1.9 billion barrels a day until 2012) are infact a giant bluff:
A much more likely explanation for the threat is that OPEC is sending a warning to alternative fuel providers — and those who finance them — that they are prepared to increase production enough to crash prices and render the alt fuels uneconomical. Since I don’t think OPEC has the ability to increase production that fast, I think it is a meaningless threat, but I suppose it could have some impact on those companies who don’t read this blog or are otherwise poorly-informed.
Looks as though the gentlemen in Riyadh are getting a bit uncomfortable.
A quick tightening of oil exports by OPEC could be really really bad, like world war III bad. I wonder if alternative energy technologiees will put enough pressure on OPEC one day to force this overreaction.
More importantly, what’s being done to help oil rich countries invest in something other than oil?
It doesn’t make any sense. At current prices, OPEC is making money faster than they would have ever previously imagined. While China and India developing $2500 cars, alternative fuels are a completely insignificant factor. Oil demand is already outstripping supply, and it is not likely to change in the foreseeable future.
So let me understand. They want us to keep using oil and not using alternatives, or else they will raise the price of oil and force us to use alternatives?
Wow. If you ever wondered if American domestic policy would be held hostage as a result of our dependence on foreign oil, I guess you have your answer.
If the United States slashed their oil demand by 50%tomorrow, India and China would be right there picking up the slack.
Those oil rich countries, basking in the desert Sun, should be the ones investing in Solar and Wind power.
Why are we speaking about the United States and OPEC separately? One of the biggest factors in high oil prices is that investors, such as hedge funds and investment bankers, can use loopholes in commodities law to manipulate the market and drive crude oil, heating oil, gasoline and diesel fuel prices to new heights.
Unfortunately, other loopholes exist that allow energy trading on completely %u201Cdark%u201D exchanges. For example, the %u201CForeign Markets Loophole%u201D allows American energy commodities to be traded overseas %u2013 exempt from U.S. oversight. Enron… Haliburton… both have foreign subsidies that trade in Iran!
These so-called %u201CDark Markets%u201D %u2013 commodities markets that are not policed by U.S. authorities provide for an open the door to manipulation, even outright control of the markets.
For example, speculative investors can buy and sell millions of barrels of U.S. destined oil and other energy products every day in the United Kingdom and even in Dubai%u2026 but are not made subject to the transparency and accountability laws that govern exchanges here in the United States!
Additionally, through the so-called %u201Cswaps loophole,%u201D financial investors can %u201Cgame the markets%u201D for pure profit by buying up positions in the energy markets, without any limitation on the size of the positions they can take. One recent estimate suggested that they now control one third of the commodities markets, or $150 billion - a 1,000% increase in less than five years!
As much as 60 percent of the cost of a gallon of gasoline, diesel fuel, or heating oil can be attributed to pure speculation and abusive %u2013even manipulative %u2013 trading practices, yet most trading is %u201Cdark%u201D and federal authorities can neither fully police or see the data in the majority of the trading markets.