[M. Espinola]

OPEC PRICE BAND

OPEC collects price data on a "basket" of seven crude oils, including: Algeria's Saharan Blend, Indonesia Minas, Nigeria Bonny Light, Saudi Arabia Arab Light, Dubai Fateh, Venezuela Tia Juana and Mexico Isthmus (a non-OPEC oil). The OPEC price — which was introduced on January 1, 1987—is an arithmetic average of these oils. OPEC uses this price to monitor world oil market conditions. The OPEC basket price averaged $36.00 per barrel in 2004, $28.10 per barrel in 2003, $24.36 per barrel in 2002, and $23.12 per barrel in 2001.

[EagleUSA]

Start drilling in Alaska, and everywhere else the left does not want us drilling to create an INDEPENDENT ENERGY PLAN for the US, getting us away from Arab oil. Screw OPEC, start drilling.

[carl in alaska]

I'm a stock market trader myself and also interested in geopolitcal events. My view on the oil market is that there are a lot of reserves out in the world that could be developed fairly soon to bring down oil prices or at least keep them under $50. But these reserves are all controlled by top corporate managers in the West and by wealthy elites in the non-Western world. The problem for oil consumers is that neither of these groups has much incentive to develop existing reserves rapidly enough to stop oil prices from increasing in the next 5-10 years.

All the top managers and wealthy elites know that oil demand is steadily increasing while supplies are finite and production will ultimately peak and decline within the next 5-20 years. This situation essentially guarantees that oil prices will be higher than today in 5-10 years. So prudent corporate managers are not going to push for maximum production in the next two or three years. Maximum production in the short run just means their companies make more profits now but lose even greater profits in the future. They would be damaging their future business prospects by pushing for maximum development and production today. The wealthy elites in Latin America, Asia, and the Middle East think the same way: they have plenty of oil revenue today to run their governments and fill their investment accounts, so they don't need to push for maximum production in the next few years as this would just diminish future revenues for their countries and their families.

This is the psychology of producers in an inflating Seller's Market where product prices are rising. Producers are in no rush to produce and sell while consumers are in a hurry to buy now before prices rise further. It's a "virtuous circle" from the perspective of producers, which encourages less cheating on production quotas and even higher prices. My conclusion is that oil prices over the next two or three years are tough to predict but will probably stay between $40 and $55 for 95% of the time. But it looks like almost all capacity that can be brought online in the next five years will probably be completely absorbed by rising demand. So the market is very likely to have a really tight supply-demand balance in three or four years and prices are going to go higher then, up to a $55 to 65 range. Then around 2010-2012 we're looking at zero extra capacity or even production below expected demand and demand will have to be reduced by much higher prices to equal supply. Those prices will have to be $75-90 per barrel or even higher. That would push gasoline up by roughly $0.75 per gallon from today's prices in the U.S. to at least $2.75 for regular unleaded. So I've been buying oil companies with large oil reserves over the last 12 months. The only thing I can think of that will stop this scenario is some big new oil discoveries that are also developed rapidly and increased production of existing reserves. That possibility appears unlikely at this time.

[alloysteel]

This just provides a growing incentive to locate, develop and adopt alternative energy sources.

And there is a HUGE deposit of one energy source relatively close at hand, virtually endless, and by all standards, one of the cleanest around. At the bottom of the continental shelf, there are deposits of a substance called Methane Hydrate, a gelatinous, amorphous substance, that is composed of methane (natural gas) and somewhat saline water. Heavier than saline ocean water, the compound sinks to the lowest level available, and collects in deposits in the ooze at ocean bottom, eventually becoming sealed in the sediment, where it becomes a natural gas reservoir, to be tapped sometime in the future as a gas well.

Instead of waiting for the sediment to solidify into a layer of rock, why do we not simply scoop up the Methane Hydrate, pump it up to the surface, and permit it to go through a phase change, which happens as the substance warms a few degrees above 38 degrees Fahrenheit? It is well know that oceans at depths of more than about 500 meters have a steady temperature of 38 degrees Fahrenheit, a fact overlooked by the global warming alarmists, and a HUGE argument against runaway temperature rises. That is just a tremendous quantity of water to warm up. And how would the warmer water get down there? Water at that temperature is at its most dense, therefore remains at the greatest depths. Water EXPANDS as the temperature dips closer to freezing, and density decreases even more as ice forms (else ice would not float).

All this time, Methane Hydrate is being formed naturally and continuously, as the small amount of methane dissolved in water (from organic decomposition) forms Methane Hydrate almost immediately under the conditions of temperature and pressure present.

So if we mine the ocean floor for Methane Hydrate, we shall have an endless supply of RENEWABLE energy, which is forming as fast as more organic material continues to drift to ocean bottoms.

In fact, there is a continuous turnover of the Methane Hydrate, as there is microscopic life that takes whatever small amount of free oxygen available in ocean depths and combines it with the methane fraction, forming CO2 and free water. At those temperatures, carbonic acid, H2CO3, is a stable solute in water, and acts to break down deposits of other minerals, forming carbonate salts of those minerals, resulting in sediment layers of limestone. And the limestone is what keeps the Methane Hydrate deposits trapped until the gas well is tapped. So you see the process has been going on a long time. Billions and billions of years, and it is continuous.

Sometime soon, in the not too distant future, it shall become economically feasible to tap this energy source. It may be already, in some locations. By cooling the methane to the point it becomes liquid, LNG may be transported anywhere in the world, offloaded at a port that opens into natural gas pipelines, and be further transported to end users. By keeping it in liquid form, and filling smaller portable tanks, it would be possible to make LNG a feasible substitute for both Diesel oil and gasoline, as it combusts much more efficiently, with less particulate matter, NO sulfur, and at a much higher octane rating (about 130) than the best of refined gasoline.

I see a potential win-win for the US on this matter.

[Route101]

Why?....He wants to buy three more yachts???...

[Malesherbes]

Look at the names of the 11 countries on the OPEC chart. Of the 11, 9 are Muslim. Nigeria is half-Muslim and unstable. And then there is Venezuela, run by an insane Marxist. We'd better start drilling in Alaska big time.

[ken21]

the problem is this a cartel which works like a union. they raise the prices to suit their fancies. they are opportunists.

the only difference between a cartel and a union is that the union doesn't own the "means of production" to use their marxist stuff.

cartels and unions are at odds with free market economies.

[snowsislander]

I find it interesting that this current price for this non-seasonal commodity is nowhere near the cost of production for the large majority of current sites.

[FreedomNeocon]

OPEC can suck it.

Seriously... We'll drill elsewhere, or someone else will pick up the slack, or investment in alternative fuel will be more 'attractive' to the private sector...

They'll just 'accelerate' the evolution of our energy policy. As long as we are flexable and stay true to our free market and entrepreneurial systems and keep gov't out of the way... we'll be fine.

[JasonC]

And in other shocking news, the sky is blue, trees do not grow to the sky, birds fly south in winter, bears...

Of course an oil cartel wants high oil prices - what are we, daft? High oil prices will nevertheless bring increases oil production. Particularly if we react to that price rationally, allow all possible development, economize uses and alternatives, etc.

Chart output and stockpiles as well as prices. They aren't going down...

[JasonC]

Three noticable things on the chart itself. First there is the 3 month valley right at 9-11. That is the airlines shutting down and the Arabs pumping like mad in the immediate aftermath. Then there is a brief "mesa" out of the band immediately before the actual invasion of Iraq. That is war jitters as it becomes clear the attack will take place and people do not know if Iraqi facilities will be destroyed during the war. The rapid recovery back to the middle of the band is due to the quick victory over Iraq's regular forces. Then there is the long slow accelerating move from 25 to 45, which is fears over the US election and with it the prospect that the US might fail and withdraw. When Bush wins anyway you get that collapse to the mid 30s, followed by a half size retracement.

Now, I don't doubt OPEC would like the keep prices up at the level they touched on fears Bush would lose. But the objective political conditions on which those prices were based have largely evaporated. It will take a superheated atmosphere of fears over Iran and nukes etc to maintain them. Minor production cuts etc will not get it done. In the absence of anything remotely threatening US defeat or withdraw from the region, oil prices will retrace to the mid 30s within a year, and probably back under the 30 level within three years.

[Chgogal]

BTTT

[q_an_a]

Time for President Bush, via Secty Rice, to let the Saudi family know that if oil is going to be 50.00 we might as well have people we don't like as the sellers i.e. a democratic Saudi government, as to have a royal family. We might offer some economic help to the democratic leaders of a new Saudi Arabia and we may help break up the country into smaller states. OR You might start to get the price of oil back around 30.00.

[Dustbunny]

We need to start drilling.

[Zuben Elgenubi]

Any substance to the rumors that OPEC will want to tie in oil pricing to the Euro rather than the dollar? Seems to be an awful lot of internet blogging on this point.