Questions About Oil......

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I have no knowledge about the oil industry, and a lot of questions. In regards to the message that was posted yesterday, titled "Crude Oil Futures Advance On Y2K Concerns" by Matthew F. Gallagher, Dow Jones Newswire, it stated that oil climbed to a 34-month high of $25.75 a barrel. I remember someone on this forum mentioning this week that if oil reached $30.00 a barrel it would equate to $2.00 at the pump. So, here are my questions: 1. Is $25.75 considered high? 2. What is the highest cost of a barrel of oil? 3. What is the lowest cost of a barrel of oil? 4. During the oil embargo of the 1970's, what was the cost per barrel? 5. During the 1970's oil embargo, when gasoline was rationed on the odd/even plan, how much did the cost per gallon go up? (I remember the odd/even plan and the long lines, but can't remember what the cost difference was.) 6. What can the consumer expect if the cost per barrel goes up to $28.00 per barrel by the end of the year, as the article suggests it will?

-- Linda Hitchings (lindasue1@earthlink.net), November 18, 1999

Answers

I can comment a bit about historical oil prices. About a year ago oil prices were at or near the lowest level in about 30 years not even taking inflation into account! They dropped to just below US$11.00 a barrel. Now they are sitting at about US$26.00 per barrel.

They hit $40.00 per barrel during the oil crisis I believe and taking inflation into account would likely have to be somewhere in the $60.00 per barrel range to even come close to what they were then.

It's very easy to class it as a 'Good thing' when oil prices are low. However that is very a localized opinion. When oil prices were ridiculously low those of us in oil producing areas suffered.

The West does not have a God given right to purchase all the worlds raw materials at give away prices. Unfortunately we have come to rely on doing so and when prices get in a range where they should be we find it unbearable.

-- Craig (craig@ccinet.ab.ca), November 18, 1999.


Quick reminder. In Britain, we pay $5.35 a gallon at the pump. YOU CAN LIVE WITH IT. ;)

-- Colin MacDonald (roborogerborg@yahoo.com), November 18, 1999.

"The West does not have a God given right to purchase all the worlds raw materials at give away prices... "

True. We're also not obligated to lend billions of dollars to third-world ratholes, & yet we do so, over & over & over, only rarely getting any of it back.

If they owe us billions, & can't or won't pay it back, then who's to say we're not justified in getting what we can out of them...?

-- a reactionary (in@div.idual), November 18, 1999.


Jeez Collins, give it a rest. Yes we have the benefit of low oil prices. You can stop beating us over the head with it. Anyhow, as was pointed out in a previous thread you are paying for a lot more than the oil. Also, the oil consumed here is used for a lot of products other than "petrol", which is pretty heavily taxed here as well.

-- wondering (wondering@nottoo.far), November 18, 1999.

Colin... You have to remember that here in the states, some people have to travel 150 kilometers or more each way to work. I believe the price would have a bigger impact here due to that difference alone.

-- franko (franko@home.com), November 18, 1999.


Linda,

1. $26 is historically at the high end of the oil scale. Between 1988 and now, oil has typically ranged from $15 to $22.

2. During the buildup to the Gulf War, oil spiked to $42+, then came down after a few months (actually when we began the ground war)

3. In 1998 it had gone to $11+. At this time, OPEC cut back production and made the decreased production stick to a large extend.

4. During the 70's oil spike, oil was in the 20s and 30s as I recall. (Pardon a senior moment if I missed this one......my charts don't go back that far. I can't tell you exactly what it was before the oil spike, either. Memory says less than $10

5. When I left the USA in 1970 I was paying about 30 cents a gallon. When I returned in 1974 I was paying from 90 cents to $1. Don't know how much it spiked during the biggest part of the contrived shortage.

-- de (delewis@XOUTinetone.net), November 18, 1999.


Colin:

If its just price, yes the US could afford $5.00, $6.00, even $10.00. But there are other costs for higher oil. General higher costs for all goods (inflation, if your <30 look it up) which would hit the stock market, which would hit the retirement accounts which would hit the US consumer which would hit the worlds exports to US which would lower employment in China which would cause unrest in China...

The second is the price shocks would hit the US psyche like a ton of bricks. we function on cheap oil. Expensive oil is not going to make buildings collapse or "planes fall from the sky" but the effects would be felt economically, politically and socially.

And as to the ealier discussion about taxes plowing back into the economy. I would suggest that not all taxes are recycled into productive uses. Just how does a study about cow flatulence and world greenhouse gases (true study) provide a benefit for individuals or the economy. Socialists like government control because that allows fewer people to make the enlightened decisions for the "ignorant" masses.

-- squid (Itsdark@down.here), November 18, 1999.


Oh, yes,

During the 1970s we imported a lot less oil, both in terms of total barrels and in terms of percentage total used. As a result, that spike was the result of about a 4% (some say 7%) decrease in supply.

What we're getting into is a situation where the reserves in the oil industry are being drawn down (a lot is being stored in tanks somewhere) at the same time that we're approaching a potential where the industry may have production capability snipped several places.

The $28 to $30 range in the article was not based on problems, just on normal use and on anticipated stockpiling. A glitch here, a glitch there, and you could see prices jumping to $40 again easily.

-- de (delewis@XOUTinetone.net), November 18, 1999.


SQUID-- I had just begun driving when the "oil shortage" hit in the early 70's. I remember everyone saying "the so-called oil-shortage". One of the effects of it, I my memory serves me well, is that the automobile manufacturers here in the states began to design cars that weren't gas hogs. That was the first time in my memory that there were 4 cylinder engines. I was driving a 73 mustang that had a standard 6 cylinder engine. The following year's design was a whole lot smaller, didn't look sporty at all and had a standard 4 cylinder engine. I wonder what impact a new "oil-shortage" might have on our economy and way of life.

COLIN-- why IS it so much more expensive there? Taxes?

beej

-- beej (beej@ppbbs.com), November 18, 1999.


My Dear Mr. Colin McDonald

Sir if you have ever been to the united states, you would find that we have very much further distances to travel to get some where that you do in the UK. Second, if gasoline prices go to the prices you suggest. We will go into a depression. And should our economy go into said depression...Your country, and the rest of the world will go into the stone age.(economy wise). This is because, of course, because every one sells to us their goods. To put it this way sir. "what ever is good for the US is good for the world tradng partners" When it comes the day, that we do not import the world's products...

You have belabored that you pay much more for your gasoline. Might I suggest that that is because you as a people have elected to live in a partial, if not total socialistic society.

I feel sure, that should you re-view your stance about "how good it would be for us to pay such fuel prices, when seen under that light". You might very well change your "hopeful" tenor. And begin to worry a little.

Regards

~~~~~~~~~~~~~~~~~~~~~Shakey~~~~~~~~~~~~~~

-- Shakey (in_a_bunker@forty.feet), November 18, 1999.



For a good history of oil prices visit: http://www.wtrg.com/prices.htm

They have pricing from 1947 forward both nominal(actual) and inflation adjusted (to 1996 $'s). Based on their information:

1. $25.75 is toward the high-end as "average" inflation adjusted pricing has been around $15.00 or so over time.

2. The highest they mention is around $53/bbl (inflation adjusted) around the Iran/Irag War (1980).

3. Lowest Cost (nominal) - prior to 1972 oil was $3.00/bbl or less.

4. During 1973-74 oil rose to $12.00 bbl and then to $14.00 by 1979.

5. Gasoline at the pump was average 25 cents/gallon prior to 1972. Rose to 50 cents in the mid-70's and then to $1/gallon or more since then with a few exceptions such as last year (1998).

6. $28.00/bbl should produce a pump price (in the US Midwest) of between $1.25 and $1.30 or so for regular unleaded based on the historical economics. Current price is around $1.13/gallon with oil at $25/bbl. Historically, gasoline at the pump has cost between 4%-5% of the per bbl price of oil all other things being equal.

-- Kris Gandillon (krisg@y2kactiongroup.org), November 18, 1999.


ok, Colin. We get it about the petrol. However as someone posted on the thread, if the U.S. catches cold other countries get pneumonia. High petroleum prices, jit supply issues on imports and scattered ugly outages could make us all sick.

About the same time that someone decided to scrimp on year digits to save space in computer coding, the U.S. was in a huge post war expansion that created the road systems, reduced public transportation and the reliance upon the automobile. Its a little like having sex with a gorilla. You might not like it, but you can't very well stop. Unless we run low on fuel...

-- Nancy (wellsnl@hotmail.com), November 18, 1999.


Colin,

Most of your posts are logical and well developed - but give the oil price a rest.

If the US was so cheap and Britain so expensive, we could all be millionaires playingthe arbitrage.

Tell you what I'll buy here and send it to you I'll undercut your FOB London price by 25% FOB Baltimore you pay the freight.

Of course this won't work because yours is so heavily taxed. The world price of crude is the same for all buyers and sellers only taxes make the difference in delivered gasoline costs.

-- XYZ (X@Y.Z), November 18, 1999.


Kris Gadillon,

Where do you get gas for 1.13? Ours is 1.36 and hasn't been below 1.17 since summer.

JER

-- JER (I_get_it@this.time), November 18, 1999.


You think they pay a lot for petrol in the UK - here in Sydney it's currently around Aus 80cents per litre (much more in the bush) and that's about US$4.50 a gallon.

Of course, we do live in a full-on socialist/welfare state, similar to Sweden, where the Government interferes in every aspect of our lives. Roll on the post Y2K revolution!!

-- Ocker (Sydney@Ocker.com), November 18, 1999.



JER

$1.13/gal at Mobil station on Manchester Road just west of Clarkson in Ellisville, MO. (as of 11/18/99).

-- Kris Gandillon (krisg@y2kactiongroup.org), November 19, 1999.


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