Is cheap gas OPEC’s way of robbing Obama of his clean energy initiative? 11

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1. 

   Jon Rynn Posted 5:54 am
   03 Dec 2008

   Naahhh...Since I argued that the rise in the price of oil was not the result of a conspiracy (or at least, the vast bulk of it), I'm not about to argue that the decline is the same.  You'd have to explain why it went up in the first place -- the summer spike has probably put a permanent chill on gas guzzlers; most people, I think, are expecting the price to go back up.
   And here's the other problem with the theory: the Saudis, etc. opened up the faucet in the 1980s do do just what your friend is suggesting, and they could do it because they had spare capacity.  Global oil output has been stuck around 85 million barrels per day for a few years now; nobody's got a spigot to turn on, quite the contrary, big fields are declining.
   No, the financial crisis has made the purchase of oil difficult, and the global recession has lessened demand.  We should use this opportunity to build electric trains, wind turbines, solar panels, and electric cars so that when the screw tightens again, we're better prepared.

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2. 

   Biodiversivist Posted 7:08 am
   03 Dec 2008

   I'm with Jon
   
   In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world

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3. 

   ssn139 Posted 7:18 am
   03 Dec 2008

   No ConspiricyI agree with Jon. OPEC can't even keep their own members from ignoring quotas, let alone control global prices, which are determined by the global market in the same way that the price of other commodities is determined. Prices went up because demand spiked in developing nations such as China and India. Now that many nations are in recession, and others are not growing as fast, the price has come down.
   
   
   
   The Finite World. A resources and energy blog.

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4. 

   GreyFlcn Posted 7:59 am
   03 Dec 2008

   Well consideringWell considering we here at Grist don't think too highly of biofuels, I kind of find this position weird to begin with.
   But I would argue that the reason for the collapse of the oil price is because of the collapse of speculation.
   Speculators would take out a LOAN, and then bet on the price of oil.
   But if they can't get that loan, guess what, all the speculation dries up.
   _
   Actually back to my original point, it's rather annoying how people equivocate Getting off Oil, with Getting off Coal.
   Unless we build ourselves a fleet of electric cars, (Or engage in a gigantic Liquid Coal project) then Coal and Oil are almost entirely mutually exclusive from each other.
   
   -David Ahlport

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5. 

   racc Posted 8:07 am
   03 Dec 2008

   Get RealUh, no. Prices went high due to speculation and demand. When the bubble burst and the economy tanked, demand and prices went down.
   Please use your creativity to find solutions rather than create conspiracies where none exist. It is just an annoying distraction.

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6. 

   Bob Wallace Posted 11:47 am
   03 Dec 2008

   The '70s oil crunch...Back then, long lines and scarce oil started people working on biofuel and hybrids.  And then prices dropped and we quit working on finding oil alternatives.  (At least we quit working hard.)
   This time I think we got too far down the road to stop progress.  We've got essentially every car manufacturer introducing hybrid models.  We've got full-on BEVs announced.  We've made very significant progress with battery technology.
   I'm guessing a few more months of very cheap gas while the oil companies get their surplus inventory out of their pipes and then a rise back to the $3 range.  Probably by summer.
   I'm guessing research/development for transportation alternatives goes on 'full speed ahead'....

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7. 

   Tom Philpott Posted 12:40 pm
   03 Dec 2008

   Hard to sayThe drop in oil prices does seem puzzling. no doubt falling demand puts downward pressure on prices -- but has demand really fallen steeply enough to drive prices from $140 to $50 in a few months?
   Part of it could be that the financial panic swept speculative cash out of commodities -- both because some investors needed to raise cash to cover margin calls and the like, and also because people lost appetite for risk and diverted funds into Treasuries and the like.
   Also, Opec discipline is hard to enforce when prices fall -- the individual countries are tempted to open taps to make up on volume what they're losing on price. The collective has an interest in cutting production, but the individual countries don't, at least in the short term. (Commodity farmers operate under similar conditions, but don't have a cartel to help organize production decisions.) But this scenario assumes Opec nations lack spare capacity, which the hardcore peak oil folks deny.
   Then there is the possibility that the Saudis realize that oil at $100+ works against their long-term interest, and have, as Adam's friend suggests, merely flooded the market. I  posted on that theme back in mid-September: http://gristmill.grist.org/story/2008/9/11/20630/3547
   Whether they still have the spare capacity to to accomplish that is, I guess, the key question. At any rate, a 60+ percent drop in prices over a few months seems too extreme to blame on a demand drop.
   
   Victual Reality

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8. 

   amazingdrx Posted 3:40 pm
   03 Dec 2008

   Bubbles and insider tradingAnd illegal collusion?  Oh my.  Then the bubbles always pop.
   And taxpayers are left to clean up the mess.  Nothing new under the sun, unregulated markets are scammed.  The scammers flee with the loot, honest consumers are lefty holding the bag.
   Politicians get kickbacks for enabling the deregulation.
   But then again, as long as oil demand goes up and supply is constrained by monopolists with a finite supply, the price shocks are bound to debilitate the global economy.
   If demand is reduced gradually year after year price will stabilize, consuming nations will have some leverage to regulate markets and prevent scamming and profiteering.  So all of us on planet earth that consume oil have to get together and use less.  Simple.
   
   http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

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9. 

   Pangolin Posted 4:56 pm
   03 Dec 2008

   The free money hypothesisMy hypothesis is that at the initiation of the financial crisis last fall the Fed offered short-term loans at an extreme discount. In an effort to prop up their mortgage market losses money was borrowed and speculated on oil futures.
   The problem with this extremely rapid and exclusive ponzi scheme is that the high oil prices made it ever more likely that expenses strangled the building industry and workers were idled; reducing demand.
   The suckers at the top were left holding oil contracts that they had to sell in order to cover short term positions. Financial panic idled demand even more, forcing more short sales on contracts, lowering prices and lowering demand.
   I think the oil market and financial market have touched on some sort of resonant feedback that knocked the stable regime off the charts. Until a new stable resonance is found oil prices and financial markets are a pure crapshoot.
   
   Put the Carbon Back

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10. 

    archigeek Posted 11:43 pm
    03 Dec 2008

    Weeell...Since OPEC decided recently--I read this within the last week--to drop production 1.5 MIllion barrels a day, I think this whole argument is rather moot. I don't have links. I don't hover around my computer copying and saving links to stories which will magically dovetail with stories Grist publishes.
    
    The mellotron is your friend.

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11. 

    Tom Philpott Posted 1:24 am
    04 Dec 2008

    But Archigeek....since when do Opec members comply with production cuts? They do sometimes, presumably, but they're hardly models of compliance.
    
    Victual Reality

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