Oil Prices

Oil is trading above $121/barrel this morning with no end in sight. Like everything else, this is having an impact on the price of our cigars. Fuel to get these delicious imports to us can't be cheap. Add to that the stagnant/falling dollar and we'll be looking to be pay up to $.75 (maybe higher?) more per stick over the summer.

Rough times are ahead, my friends.

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kaspera79

Price increases are never a welcome thing, but for the luxury of enjoying a great cigar I will be willing to pay the price. Buy your cigars online and avoid sales tax, stock up now, or cut back a little. We will get through this too. Hey, aren't the economic stimulis checks in the mail !

kuzi16

i wrote a post on another forum about this.

im sorry if it seems a bit out of context. here it is:
We can get off the oil thing (mostly), and not use a ton of mass transit. We have to find a fuel that is PROFITABLE. People have thrown the hydrogen gas card on the table. It could work in theory, I mean, the Hindenburg (sp?) was full of it and it burned goooooood. The problem is, it still isnt as efficient as oil products are... yet. The cost would be higher, now, in fact. ...not to mention the switchover for filling stations. This lack of efficiency will change though. And necessity breeds innovation. We are gunna need it soon, one way or another.
In the meantime we do need to use oil. We need to drill for it, and we (the US) need to be a player on the world oil market, not just a buyer. (keep some money here and bring jobs state-side)
I am keeping faith that the (sorta) free market will apply its forces and MAKE it get better. It may suck for the next few years but a solution will come out of all of this. It may be a different fuel, or a more effective way of using oil, or more reserves being found, or a combination of those, but one way or another, this is a relatively short term problem. The free(ish) market will provide. It always has and always will.

Now that Im done being optimistic... in the short term, we're doomed. Damn Enviro-weenies.

to quote glenn beck: Ill drill through a baby caribous EYE if thats what it takes to get at cheap oil.

Its a frustrating situation

j0z3r

I think the situation could be a little less frustrating, and definitely easier on our wallets, if instead of relying solely on foreign oil we began to rely more on our domestic oil sources. At the very least this could help ease the strain on the gas buying public somewhat.

Granted, I don't know much about what is involved in a switch from foreign to domestic oil, but I cannot see it being a bad thing when gas is $4 a gallon and climbing. There just has to be a solution on the horizon, I just feel that perhaps the powers that be care more about the potential money to be made than they do about the people who are emptying their wallets at the gas pump.

kuzi16

j0z3r:
I think the situation could be a little less frustrating, and definitely easier on our wallets, if instead of relying solely on foreign oil we began to rely more on our domestic oil sources. At the very least this could help ease the strain on the gas buying public somewhat.

Granted, I don't know much about what is involved in a switch from foreign to domestic oil, but I cannot see it being a bad thing when gas is $4 a gallon and climbing. There just has to be a solution on the horizon, I just feel that perhaps the powers that be care more about the potential money to be made than they do about the people who are emptying their wallets at the gas pump.

all we need to do is deregulate the oil industry in the US. Let big oil do what it needs to do where it needs to do it. Drill in ANWAR, drill of the coast of Florida, Drill off the coast of texas, drill off the coast of Cali. Drill for Oil in the Dakodas (a few weeks ago they found the largest reserve in the US there) get shale oil in montana. Right now we dont let it happen. we are putting the environment in front of our economy. this makes no sence.

think of it this way:
Global warming is cancer
a failing ecinomic system is a fire.

what do you treat first ? put the fire out, then treat the cancer. if our economy fails we are doomed now. if the earth warms a bit over the next 100 years... not quite as impending doom. see what i mean?

...and you are also right about "the powers that be care more about the potential money to be made than they do about the people who are emptying their wallets at the gas pump. " do you really think that Al Gore isn't making money off of global warming? He is invested in it. That is his job...and oil is the enemy.

people keep blaming Big oil. It isnt big oil thats the problem. They are just offering a product that is so good we have become dependent on it. Wouldnt it also be in big oil's best intrest to have lower Oil prices as well (light sweet crude)? this would lower their overhead. they could lower gas prices, sell more because of it, and make a bigger profit off of it. would we complain about their profit if gas was a $1.50/gal?

their profit isnt the problem. the "problem" is the world market. China and india are industrializing. this is sending demand through the roof. The US dollar is in the tank right now. since the dollar and the price of crude oil are tied together the price goes "up". It takes more dollers to make a barrel of oil when the doller is worth LESS. ...again this is a shor term problem. and is going to suck. (as if it doesnt already)

so how does the US solve the world market problem... same as above: DEREGULATION. Let the market dictate. When oil is used up or too expensive to drill the market will force another product to take oil's place.

pilot711

Kuzi16 I totally agree with your line of thought on this. Good post. Unfortunately there are environmental groups fighting tooth and nail to keep any progress on these issues from happening. They will let us burn first. A group of Duke scientists just came out with a long study that found humans are contributing 2% to global warming. They said we would have to cut world wide pollution in half to decrease global warming by 1%! I am all for working to leave a clean beautiful environment for our kids but our priorities are a little out of wack these days.

jlzimmerman

Drilling in the ANWR is almost moot. The total projected output of ANWR would not be enough to sustain the U.S. for one year. The U.S. goes through 36 Billion barrels of oil per year. ANWR is projected to yield only 10-20 Billion barrels total. With that said, drill anyway, the footprint is supposed to be very small and I'm sure the environmentalists will make sure of that. And although there is enough oil in the world to sustain humans for another 500 years, getting to it is much harder these days. It wasn't too long ago when oil was bubbling out of the ground on its own. Now, companies have to dig miles under the surface to get it, or extract it from shale and other materials. It is much more expensive to get oil these days and the cost of extracting it will continue to increase exponentially.

Our economy does need attention but I think we can fix it without the expense of our environment. We have one home, one planet, and no other place to go if we trash this one. Until we colonize another planet we need to pay attention to how we absorb/consume resources here.

The price of oil is BS. There are tentions in Nigeria and Iran, yes, but that should not be the reason for such high prices. Of course, others contribute the high prices on the growth of China and India, similarly to that of our increased concrete prices, etc... I read the other day that oil imports to China in 2004 was 40% of their total consumption. During the first quarter of 2008, it only rose to 42%. Hmmmm. Unless India is drinking lots of imported crude the Arab nations are raping us blind.....which they have been for years of course.

We are the world leader in wheat and corn like the Arabs are the world leader in oil. The U.S. should jack up the price of exported wheat and corn to match the prices of imported oil.

kuzi16

jlzimmerman:
We are the world leader in wheat and corn like the Arabs are the world leader in oil. The U.S. should jack up the price of exported wheat and corn to match the prices of imported oil.

and starve people world wide?

... and everyone says the world hates us NOW.

jlzimmerman

^ I wasn't serious about that last point. We need emoticons.

kuzi16

jlzimmerman:
^ I wasn't serious about that last point. We need emoticons.

oh ... i got it.
im not the quickest car on the street.

on that note... gas in my town hit 3.75/gal. This is a high never seen before in this town. To keep myself from going crazy, i have to keep repeating in my head "the higher the price the faster the solution. the higher the price.... "
im torn though. I would like to see it lower so i can survive the short term better, but i do want to see other options for fuel just to create compitition in the energy industry. I still have faith in capitolism.

... a bit of devine intervention woulndt hurt though...

jihiggs

hydrogen would not be hard to do right now, it would take almost no modification to service stations. dont make cars with built in tanks, make them to accept tanks that can be exchanged, just like they do for propane. you drop off your empty tank and get a full one. all they would need is a bit more storage area, or locked cages outside the stores. this could even be done at home depot type stores, hell, some guy could set up a coffee stand and sell these tanks at the same time. trying to make a refilling system that will pressurize tanks as they are needed in hydrogen cells is foolish.

kuzi16

hydrogen still isnt as efficiant as oil based products. once the efficiancy of it goes up ot the price of oil gets so high that the two are on the same field then we will se hydrogen cars.

I hope its sooner than later. as soon as hydrogen becomes popular the efficiancy will go through the roof. this will make it very cheap to run. as soon as that happens oil will be done for ( at least as a feul)

vankleekkw

Ok, I'll toss my 2 cents into this subject since it is a sore spot for me. The issue that we are running into right now is NOT, I repeat NOT due to a shortage in supply. OPEC sets their production rates based on the price point that they want to see, not capacity. I feel that the issue with the price increase is due to the futures trading on the open market. The open market is a representation on what the analysts think will happen over the course of a set time frame. So if you think about the details you can see that it is a viscous cycle. The market thinks that OPEC will cut back production because they can sell for higher pricing, futures increase, cut production, futures increase. WHEN WILL THE MADDNESS STOP???? My suggestion is that all commodities (i.e. oil, soy, corn, copper, alluminum, etc...) should be taken off of the futures market to stop the maket swings and actually have true market pricing. True supply and true demand should set pricing, not investors on wall street. Again, just my 2 cents.

kuzi16

vankleekkw:
Ok, I'll toss my 2 cents into this subject since it is a sore spot for me. The issue that we are running into right now is NOT, I repeat NOT due to a shortage in supply. OPEC sets their production rates based on the price point that they want to see, not capacity. I feel that the issue with the price increase is due to the futures trading on the open market. The open market is a representation on what the analysts think will happen over the course of a set time frame. So if you think about the details you can see that it is a viscous cycle. The market thinks that OPEC will cut back production because they can sell for higher pricing, futures increase, cut production, futures increase. WHEN WILL THE MADDNESS STOP???? My suggestion is that all commodities (i.e. oil, soy, corn, copper, alluminum, etc...) should be taken off of the futures market to stop the maket swings and actually have true market pricing. True supply and true demand should set pricing, not investors on wall street. Again, just my 2 cents.

your 2 cents are a good point. im starting to lean this way as well. I red an article where some market expurt was saying that there is no reason for oil to be so high right now. if im not mistaken he said that oil AROUND $60 A BARREL was where it should be. one of the causes in his mind was the falling dollar. the other causes were a shortage or REFINEING POWER. This is and always has been a speculative market. when the dollar is having a bear run (due to the credit crunch that some say is comming to an "end") and there are rumors that gas will be in short supply because nobody can refine that fast enough, that means we are S.O.L. ... all on SPECULATION

That doesnt change the soulution. DEREGULATE. Let big oil in the US build refineries.

NOT cutting the intrest rate would help as well. cutting taxes on big buisness will stimulate the economy here by making it cheaper to do buisness here (and attracting it). both of these moves will make it more profitable for forgin buisness to invest in the US thus raising hte value of the dollar.

Edit: here is the article:
http://www.breitbart.com/article.php?id=D90HHK0GC&show_article=1

a little over 1/2 way down the page is the quote im talking about.

"There is no reason why oil prices should be above $60," Gheit said, noting that domestic crude supplies are at average levels, and that refineries are cutting gasoline production as high prices cut consumers demand for fuel. "The physical supplies do not justify the price, it just doesn't make sense."

vankleekkw

One thing that I disagree with on this statement is the fact that we should deregulate to increase the production capacity in the US. There are 2 major reasons for me to disagree with this statement 1. A new production facility would take ~ 3 years to start up if started on today. From design, core samples, construction, and so forth... This is just not that feasable for a market that is not in a shortage due to realistic reasons. If there truly was a shortage, more companies would be trying to start up new production to take advantage of the super high prices that people are willing to spend. 2. Pricing is currently being set by a speculative market. No changes in supply would cause a dent in a market that people are already paying a price that is higher than the market demands. If you were a company and people were willing to spend 3.50/gallon, would you lower your price just because you felt like it? 3. The only way to shock the market in the opposite direction would be to lower your personal demand for oil? If everyone were to reduce their consumption by making slight changes in your lifestyle, it would be enough to shock the market into reality. Think about the ramifications if everyone in the states reduced their consumption by 10%. 1 million barrels a day at $120 per barrel. $120 Million dollars every day. That might wake everyone up.

kuzi16

in order:
1) we have not built a production facility in over 30 years. You cant tell me that we dont use more oil than we did 30 years ago. it may not be a shortage but if onr refinery goes down the price spikes big time. most people dont want to build a new one because of fear (the same thing that is driving the market). Who wants to build a new one (reguardless of profit) if the billion + dollar building is useless 10-20 years from now?

2) yes.... and no. if the prices were lower more people would buy more gas more often. wouldnt that lead to more profit?

3) Gas is inelastic. we all need it. I cant go to work 10% less. and i cant exactly dictate where my job location is... and i cant afford the neighborhood that my job is located in so i cant move much closer. if everyone went out 10% less in their lives there would be a drastic ecinomic fall out. 10% eating dinner on the road. 10% less vacations. 10% less trips to the mall. 10% less trips to the cigar shop, and so on...
There is no growth in an economy where there is conservation.