Posted on 04/02/2008 3:00:45 PM PDT by TLI
There Is No Gas Shortage
But Washington, Wall Street, and ethanol and oil and gas companies want you to think there is, says automotive expert Ed Wallace
Demand Is DOWN, Yet Prices Are UP
Just so we can all get on the same page, here are the verifiable facts on oil supplies, production, and gasoline demand.
In January of this year, the U.S. used 4% less petroleum than we did a year ago. (Oil demand was down 3.2% in February.) Furthermore, demand has been falling slowly since July of last year. Ronald Bailey of Reason Online has pointed out that worldwide production of oil has risen 2.5% in the first quarter, while worldwide demand has grown by only 2%.
Production is expected to increase by 3.3% in the second quarter, and by as much as 4.1% by the third quarter. The net result is that the U.S. daily buffer for oil production against demand, which was a paltry 1.5 million barrels as recently as 2005, is now up to 3 million barrels in excess capacity today.
Why would our Energy Secretary say there's a supply and demand problem when none exists?
But we are being told this...
"They see speculation in the market, I see decline in global inventories. I don't think this is a big surprise, that we've had a jump in price when there has been a decrease in crude inventories."
— Energy Secretary Sam Bodman, Bloomberg News, Mar. 5, 2008
"It should be obvious to you all that the [gasoline] demand is outstripping supply, which causes prices to go up."
— President George W. Bush, Associated Press, Mar. 5, 2008
(Excerpt) Read more at businessweek.com ...
The author fails to make a distinction between gas and crude oil.
Poor title but I put it in as written. The complete article refers to oil inventories as well as gas inventories.
I believe that is stated in the article.
"The record run in oil prices is related more to speculation and a weakening dollar than supply and demand in the market." He added, "In terms of fundamentals, fear of supply reliability is overblown."
As for the speculators, in 2000 approximately $9 billion was invested in oil futures, while today that number has gone up to $250 billion. Now, if any publicly traded company had an additional $241 billion put into its stock in the same period, its stock would rise out of sight too—even if the company was not worth anywhere near that amount of market capitalization.
You are right - the complete article is rather good. The excerpt makes the author look like a moron, on the other hand.
Another unintended consequence of government regulation, BTW - which is the only point the author seems to have missed (botique formulation effects on price).
I thought the title of the article throws off the real point but the info in the body of the article really is good.
BTW I wonder just how good those other speculative funds would hold together in today’s market if the investors knew how overvalued the crude market really is. The long term value of a barrel of crude was only recently raised to $60 bbl. What with newer technology and more fields being found some pretty smug folks could stand to loose big-time. Of course, the fed-gov would have no problem sticking us taxpayers up to bail them out.
What’s the solution? Do we have to wait for the speculation bubble to burst on its own? What’s going to be the catalyst for that to happen?
It has to correct itself eventually, and I’d prefer it did so without Washington getting involved. But reading an article like this, it sounds like the burst in the futures market is long overdue.
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