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Drilling for Oil - The 10 Year Myth!
Tweet Topic Started: Jul 16 2008, 10:17 AM (515 Views)
boilergrad01 Nov 11 2008, 03:00 PM Post #61
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The people keep electing them. It is not just the Dems i could name a few Repubs that suck ass also.
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eelbor Nov 11 2008, 03:09 PM Post #62
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hoosierinhogville
Nov 11 2008, 12:58 PM

Oh, and speaking of gas prices, I don't know what you guys are seeing up there, but at Kroger's down the road it is 1.87.
It is $1.75 most places around me. One year ago it was $3.09.. The last time we were this low was 2/20/2005.
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brumdog44 Nov 12 2008, 10:43 PM Post #63
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This is the stupid part: has demand dropped to half of what it was when gas over $4 per gallon? Absolutely not.

So were the prices of gas in line with actual costs? Absolutely, 100% not. Those who believe that big oil is making a 4% profit on a barrel of oil are simply believing in something that isn't real. Did we suddenly improve drilling techniques that cut the costs of drilling for a barrel of oil in half?
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HoosierLars Nov 13 2008, 12:24 AM Post #64
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brumdog44
Nov 12 2008, 10:43 PM
This is the stupid part: has demand dropped to half of what it was when gas over $4 per gallon? Absolutely not.

So were the prices of gas in line with actual costs? Absolutely, 100% not. Those who believe that big oil is making a 4% profit on a barrel of oil are simply believing in something that isn't real. Did we suddenly improve drilling techniques that cut the costs of drilling for a barrel of oil in half?
It's pretty simple Brumdog, when demand starts to get too close to supply, suppliers can jack up their prices, and the buyers have to pony up the money. When there's a reasonable supply surplus, competitive pricing pressure causes the price to be a strong function of the production costs.
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HoosierLars Nov 13 2008, 03:47 PM Post #65
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brumdog44
Nov 12 2008, 10:43 PM
This is the stupid part: has demand dropped to half of what it was when gas over $4 per gallon? Absolutely not.

So were the prices of gas in line with actual costs? Absolutely, 100% not. Those who believe that big oil is making a 4% profit on a barrel of oil are simply believing in something that isn't real. Did we suddenly improve drilling techniques that cut the costs of drilling for a barrel of oil in half?
It's pretty simple Brumdog, when demand starts to get too close to supply, suppliers can jack up their prices, and the buyers have to pony up the money. When there's a reasonable supply surplus, competitive pricing pressure causes the price to be a strong function of the production costs.
I'm going to explain this with a simple example with some numbers. Let's say there are ten oil producers in the world, and each can produce one barrel of oil per day. There are also ten consumers in the world who use one barrel of oil per day. Much of the customers' oil usage is inelastic, e.g. they really need to drive to work, haul their kids around, and heat their homes, so the price doesn't effect their habits very much. It costs the producers an average of $10 per barrel, and they make a handsome profit by selling at $15. Because the supply matches demand and the oil demand is relatively inelastic around the current price point, a couple of the suppliers realize that they can get much more, and the buyers will still buy their oil. Before long, all of the suppliers increase their prices, and the buyers are upset, but still pay.

At some price point, the market displays more elasticity, and demand drops an appreciable amount, say to seven barrels. Also, a couple of new suppliers jump into the market producing more expensive oil. Now there is a surplus, and the suppliers drop their prices because nobody is buying all of their oil. With an ample supply, the equilibrium price will tend to follow the production cost plus some "reasonable" profit that allows efficient suppliers to stay in business.

The shortage problem can be solved by increasing supply or decreasing demand. So we need to drill more, conserve more, continue to develop alternative energy sources, and anything else that helps satisfy our insatiable desire for affordable energy.
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