Yo Gumjob,

You suck...............

What a fucking Idiot.

Best thing that explains why oil is over $125 a barrel would be for you to look up the increase in the number of cars in both China and India over the past 10 years.

But $125 currently is primarily speculation. A lot of the money that otherwise would be going into real estate is now flowing into oil because that is the next "sure thing". Like all bubbles it will eventually pop and then drop down to a more "natural" number which currently is thought to be around $80-$100 a barrel. When this "pop" will occur is anyone's bet, I know better than to try to "time" the market.

Are you taking into account the speculators known as Saudi Arabia, Iran, Kuwait, Venezuela, Russia, the people fighting the state and the oil companies propping them up in a number of desperately poor regions of Africa and Asia?

I think they are speculating that the rest of the world doesn't offer enough new oil fields of importance to reduce their market share, so by not increasing production, the price of oil will remain at or above $125 a barrel for a decade or more.

And one consideration is speculation that the US, the nation that consumes about 25% of the world's oil and gas, just can't come up with any alternative that cuts US consumption by enough to shift the world demand curve left and force the oil suppliers to compete for market share and thus drive down prices.

Certainly if you listen to most conservatives, the American people just aren't inventive enough, are willing to invest in the future, and just won't change in response to the market. That means that the US will just keep paying higher and higher prices for oil, and the Persian Gulf states would be foolish, and damn anti-capitalistic if they didn't do everything possible to charge Americans every single dime they can for oil, and not leave a single penny on the table.

If you think of oil in the ground in Saudi Arabia, then why would they "spend" more than they need by payng more for their needs then they have to. To imagine that they would do that is like your having $100 in your pocket so when you go into Dunkin Donuts you tell them you want $20 worth of donuts, and by the way, you'll only eat three of them, so please hold the extras for you until you come back next week. I think the rational person will instead by two donuts for a buck and keep the other $99 in his wallet, maybe putting $75 into savings for the future. What you are doing when you don't spend $20 on donuts you don't want today is speculating that the price of donuts won't go up enough to make eating stale moldy donuts a good investment.

Not sure I follow what you are saying. If you are suggesting that the majority of speculation is from oil producers, I would disagree. The global markets are
merely too big for any one player to manipulate. No, while there might be some active manipulation, for the most part it is merely natural speculation. Cash flows follow the money. Oil is the latest "sure thing", after internet stocks and the US real estate market. As the latest thing (real estate) dies, the money flows to the next sure thing (energy). The media then builds on the speculation by hyping it. Its a story as old as time.

As for increasing production, it is not in SA interest. They did so back in the 70's, and once the speculation ended, oil prices collapsed. They are not about to make the same mistake. Nothing evil there, just plain common sense.

As for alternatives. Only high prices will encourage innovation. You are seeing the benefit of this now. The trouble simply is that oil is really really cheap, really really clean, and really really convenient compared to ALL known alternatives. Makes it really hard to knock off.

We aren't talking about control.

We are talking about speculation.

Saudi Arabia is shipping 9.45 million bpd, so speculating for them is deciding to not raise production as the price rises above $125, and lowering production to 9.25 million bpd when the price drops below $125 for two months.

If Saudi Arabia increased production to 12 million bpd, they would presumably be speculating that the world will increase consumption by 2.5 million bpd at $125 a barrel instead of falling to $80 a barrel. If the were speculating on oil staying at $125 at 9.45 million bpd and falling to $80 at 12 million bpd, then the Saudi's would be screwing up:
They would sell an extra 2.5 at $80 at the cost of selling 9.5 at a $45 loss, for a net loss of $225,000,000 a day.

Let's say that another nation adds 2.5 million bpd to world production, then Saudi Arabia would lose $425,000,000 a day, unless they acted. At that point, Saudi Arabia might speculate that if they cut their production to 7 million bpd, the price would rise to $165, so Saudi Arabia would break even. The Saudis don't have any control, but their speculation on the demand curve would be what drives their production.

This is in fact what Saudi Arabia did in the late 80s until they had cut their production by more than half, but the price had fallen to 30% of what it had been. At that point Saudi Arabia speculated that if they increased production massively, they would bankrupt many US oil companies. We don't know what the Saudis were betting would happen, but we do know what did happen: the US killed off most of its domestic oil exploration, development, and rework capability. Lots of oil workers were laid off, lots of companies went under, lots of oil rigs were sold off or scrapped.

Bush the elder went to Saudi Arabia about 1988 and begged the Saudis to cut production to increase prices to save the US oil industry from the drastic cuts. The response was the same as Bush got a month ago.

Saudi Arabia has trillions of dollars in wealth in the ground, so their production curve requires speculation to find the maximum profit over time. Ideally, Saudi Arabia would not have had the baby boom of the past two decades so the Saudi need for oil revenue allowed the much more flexibility on where the production curve was at any point in time.