Current Events — HabitableZone

Current Events » in reply to Oil companies

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I didn't make myself clear. By owners, I meant the owners of the wells, not the companies that distribute the oil. They (the well owners) set the price based on what they think they can get.

Most products cost a certain amount of money to produce. If you want to produce more, you have to spend more. But all the oil is already there, all you have to do is pump it and refine it, it is these costs which are negligible compared to what we have to pay for the crude to the owners.

The oil companies are not the villains, they just take their X% off the top like any business, and the more they sell the more that X% comes too. The oil owners (Opec and a few others) want to keep supply just short of demand so they can charge as high a price as possible without discouraging demand. Their profit is the product of profit per barrel and # of barrels sold, and these parameters react in opposite ways to changes in price. The oil companies want to sell as much as possible, so their X% returns a maximum profit, providing their price does not discourage consumption.

In fact, the market is working just the way it's supposed to, the price of oil is low (a gallon of gas costs ten times as much now as when I started driving in '64, but salaries have gone up tenfold too, at least for us boomers!). The problem is we have confused "supply" with "production", the day will come when we will not be able to increase production to meet demand because the resource is finite. Not just here, or the middle east, but world-wide. With India and China coming on line, that day may already be here.

The big problem is that the whole system operates as if we could always get more oil by simply investing in more production or exploration. Who's going to tell us otherwise, the Arabs? They don't want to provoke conservation, they are as addicted to the income as we are to the oil. The oil companies are certainly not in the business of conservation, they sell the stuff.

When that day will come is a question you can't get a straight answer for out of anybody, but all the people who know aren't talking, and the ones who are talking have every incentive not to change anything.

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