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HagiaSophia
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Why is crude oil so expensive? Why does it matter?
The price of crude didn’t rise from $12 in early 1999 to nearly $60 because the world suddenly ran out of oil. On the contrary, the world supply of petroleum has risen 10 percent since then, according to the International Energy Agency (IEA), from 65.8 million barrels a day in 1999 to 72.5 million in 2004. Cambridge Energy Research Associates estimates global oil production capacity will increase at least twice that rapidly over the next five years – by as much as 16 million barrels a day by 2010.
The truth is personal automobile use is the lesser portion of this nation’s need for crude oil. Alan Reynolds explains this is interesting detail.
"Commuter and leisure driving accounts for little more than 40 percent of the oil we consume – far less than the amount we import. The rest of each barrel of crude is used for heating oil and diesel fuel for trucks, busses, farm machinery and ships (23 percent), petrochemicals (17 percent), jet fuel (9 percent), asphalt (4 percent) and propane (4 percent). "
The real factor driving the price of crude, and therefore gasoline, is industrial production which demands the greater portion of each barrel of crude. If industrial production falls because the price of crude rises to unacceptable levels there will be more crude and gas prices will fall but the other side of the coin will be no jobs to commute to. Then we can all ride a train to nowhere.
“… It is commonplace to blame rising oil prices on industrial expansion in China, but that is a misleading exaggeration. Long before China’s rediscovery of capitalism, earlier Asian Tigers accounted for a rising share of world petroleum demand. From 1978 to 2004, oil consumption rose 28.6 percent in the world but only 8.9 percent in the United States. That difference was exemplified by a 344 percent increase in South Korea’s oil demand. …”
“…Nobody in Washington shows the slightest awareness of the global nature of the oil market, of the fact that industrial damage from high oil prices has nothing to do with whether a country imports or exports oil, or even the fact that there is a crucial two-way linkage between worldwide industrial production and worldwide oil prices. When it comes to causes and effects of high oil prices, nobody in Washington shows much interest in logic or facts. It might be sad if it wasn’t so pathologically pathetic. …”
townhall.com/columnists/alanreynolds/ar20050623.shtml
The price of crude didn’t rise from $12 in early 1999 to nearly $60 because the world suddenly ran out of oil. On the contrary, the world supply of petroleum has risen 10 percent since then, according to the International Energy Agency (IEA), from 65.8 million barrels a day in 1999 to 72.5 million in 2004. Cambridge Energy Research Associates estimates global oil production capacity will increase at least twice that rapidly over the next five years – by as much as 16 million barrels a day by 2010.
The truth is personal automobile use is the lesser portion of this nation’s need for crude oil. Alan Reynolds explains this is interesting detail.
"Commuter and leisure driving accounts for little more than 40 percent of the oil we consume – far less than the amount we import. The rest of each barrel of crude is used for heating oil and diesel fuel for trucks, busses, farm machinery and ships (23 percent), petrochemicals (17 percent), jet fuel (9 percent), asphalt (4 percent) and propane (4 percent). "
The real factor driving the price of crude, and therefore gasoline, is industrial production which demands the greater portion of each barrel of crude. If industrial production falls because the price of crude rises to unacceptable levels there will be more crude and gas prices will fall but the other side of the coin will be no jobs to commute to. Then we can all ride a train to nowhere.
“… It is commonplace to blame rising oil prices on industrial expansion in China, but that is a misleading exaggeration. Long before China’s rediscovery of capitalism, earlier Asian Tigers accounted for a rising share of world petroleum demand. From 1978 to 2004, oil consumption rose 28.6 percent in the world but only 8.9 percent in the United States. That difference was exemplified by a 344 percent increase in South Korea’s oil demand. …”
“…Nobody in Washington shows the slightest awareness of the global nature of the oil market, of the fact that industrial damage from high oil prices has nothing to do with whether a country imports or exports oil, or even the fact that there is a crucial two-way linkage between worldwide industrial production and worldwide oil prices. When it comes to causes and effects of high oil prices, nobody in Washington shows much interest in logic or facts. It might be sad if it wasn’t so pathologically pathetic. …”
townhall.com/columnists/alanreynolds/ar20050623.shtml
I thought the article interesting–the writer really brought in some good points.