Posted by: drgeophysics | July 6, 2009

The price of oil, price manipulation, and peak oil.

People have been using oil for a long time.

People have been using oil for a long time.

The average American uses over 60 barrels of oil equivalents of 3 hydrocarbon based fossil fuels, oil, coal and natural gas per year. This is the equivalent of hundreds of “energy serfs” working for a single individual. Our industrial society is dependent on these energy serfs. The New York Times has an interesting article today detailing the (very) wild swings in oil costs.

Follow this link to the article.

So why is this important? The global economy runs on hydrocarbons, there are no comparable energy sources. Wild swings like this can easily sink any economic recovery and arguably were responsible for the collapse of the most recent bubbles. As stated in the article:

While the movements in the oil markets have been similar to swings in most asset classes, including stocks and other commodities, the recent rise in oil prices is reprising the debate from last year over the role of investors — or speculators — in the commodity markets.

Government officials around the world have become concerned about a possible replay of last year’s surge. Energy officials from the European Union and OPEC, meeting in Vienna last month, said that “the speculation issue had not been resolved yet and that the 2008 bubble could be repeated” without more oversight.

I would suggest that the word “concerned” be replaced with “terrified”. The up-ticks on the graph below can potentially destroy governments.

The most important curve in energy analysis.

The most important curve in energy analysis.

The take-away here is that nothing has changed since 2008
with respect to monitoring and oversight.

It has been well documented that a single trader successfully spiked an increase in the cost of oil. One single trader.

Here is the article from the Financial Times.

60 minutes also had an excellent piece on this topic, with respect to the large 2008 price run up. When Steve Kroft I listen closely. He did a great job.

Did Speculation Fuel Oil Price Swings?
60 Minutes: Speculation Affected Oil Price Swings More Than Supply And Demand

You can check the price of oil in real-time here. At this site there are also Java-Applets you can place into HTML, check the Oil Dashboard.

Here it is in action. What a great script! Add it to your webpage and start to learn about hydrocarbons.

To get the oil price, please enable Javascript.

Unfortunately this widespread market manipulation is making the fact of depleting oil reservoirs unclear to most people. Keep this list handy, you’ll need it in the next 10 years as oil resources become restricted and prices, because of real-shortages, go sky high.

he Five Stages of Peak Oil

*DENIAL — Driving from suburbia to your downtown job every day in your Chevy Tahoe.

*ANGER — “%$@^##& Exxon!, gouging me at the pump. I demand you lower your prices or I will boycott you!”

*BARGAINING — “The Chinese need to stop using so much oil. My, they’re burning six million barrels every day.” “We need to get corn farmers to make more ethanol, a 5 % blend would really help.” “Maybe we can invade Iran and take control of their oil reserves.”

*DEPRESSION — “Oh God, civilization as we know it is going to be destroyed. What are we going to do without oil? How can farmers possibly grow any food? Think about the big box retail industry! Oh the calamity!”

* ACCEPTANCE — “You know what, my ten minute commute by bicycle is far nicer than my hour long commute from my old place.”

Here is this site.
One of the best sites to follow hydrocarbon and energy discussions.


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