Thursday, February 23, 2006

Big Oil companies are not the problem.

Nor are they the solution.

It gets brought to my attention every time I talk about oil prices that "the big oil companies are making billions of dollars." That's absolutely true. I never argue.

So what?

Why does a company making a profit matter? Why, in this present state of wealth animosity and class warfare, do we care so much about other people becoming rich? No one complains about how much freaking money the pope and the queen of England have. And they're not even providing us with the energy that's so vital to our economy. Why do we need a queen of England and a pope, anyway? We should take their money and use it to finance biodiesel research, wind power and advanced solar cells.

Kinda like what the oil companies are doing.

Now, am I saying that we should let them have all this money because they're going to provide an alternative to their own product that will save our future? Hell no. A lot of what people are saying is true. They're a bunch of greedy fatcats that are rolling in cubic money. But that's not where the problem is.

The problem is that nobody sets the price of oil anymore. Back in the good old days when the price got too low, you turned down the spigot, when it got too high, you turned the spigot back up again. But that was then. Now everyone is pumping as much as they can and the price continues it's rise. We can't keep up with depletion. We can't feed demand. Price is found where supply meets demand. It's that simple. So the price goes up. Profits go up. The problem is not that the profits are up.

It's the shortage of oil.

If we were to "force" the price of oil back down, people would use more of it than they do when the price is higher. That's just how it works. How much less gas are you using today as compared with last year? If you are using just as much, what items have you been going without to make up for your increased fuel bill? I bet those items are made of oil, by oil, or at least tranported by truck.

The point is, the higher price exists when the supply goes down relative to demand. The only way to bring the price down is to reduce demand or increase supply. We know (if you've been paying attention) that we can't increase supply. We must reduce demand. That's what the high price does. It just so happens that the oil companies are there to take in a bigger profit. So what?

Q: So, why don't we just force them to lower the price by cutting their profits?

A: That would result in shortages due to overuse of oil relative to price. People would continue to live the way we have and use as much oil..... almost. There wouldn't be enough. Someone, somewhere would have to go without. I'm not expert enough to know who, but my guess is it would be the people the furthest away from sources of oil. Michigan perhaps? Nebraska? I'm not really sure, just guessing on that part. The point is, who goes without? The free market system decides that for us. If we tamper with that, then who decides who goes without? You? Me? The pope? The queen of England?

-LORD gotwa

Tuesday, February 21, 2006

Cantarell is dying

What does this mean to you?

Well, for starters, don't buy that SUV.

In plain English, the decline in production of oil means that there is less supply. Less supply means higher prices. Higher prices mean economic troubles.

Kinda like the ones we're having.

It is a very common opinion amongst traditional thinking economists that increased prices will encourage companies to find new supply. This is partly true. What they're not taking into account is that there is a great deal of decline to make up for in order to even break even, let alone to come out ahead. And where will all this supply magically come from? Ghawar, the first largest oil field, is dying too, according to most experts.

Let's put it this way. We have a family of Six. Mommy makes 250k / year as a lawyer and Daddy makes 300k /year as a doctor. Mommy dies and Daddy goes insane. It's up to the highschool-ages kids to earn their own living. Four kids can make enough cash to hold up a 550k / year lifestyle, right.

So, Mommy is Cantarell, Daddy is Ghawar. The kids are all the other fields, tapped and untapped. There just isn't going to be enough to make up for the loss of the big ones.


So, what, you ask is the point of all this?

We're all F.U.B.A.R.'d, run for the hills. It's all over. Park your SUV and pass the ammunition.

-LORD gotwa

Thursday, February 09, 2006

So much to say, but I don't actually say anything.

I haven't been good an pissed off enough to blog in the last few days. I'm sure something will get me riled up enough sooner or later.