5-19-04
The Arabs/OPEC control the vast bulk of the world's oil and
natural gas and most of them are now producing flat out. Even the Saudi's
who are politically highly unstable, will need to spend a pile of money to
increase flow rates much more. It just so happens that most of
the world's oil and natural gas reserves are located in the world's
most unstable area. Just perhaps may this be why our armed forces
are there now-to guarantee the flow of oil at market prices?!
The problem isn't "BIG OIL", it is supply and demand. The major
oil companies have very little of the power they had before OPEC
nationalized (abrogated their contracts) in 1973, all of the oil
reserves which the Americans and British had discovered in their
countries. All consumers want everything as cheap as possible. By
definition! Nobody complains about the price of a pint of water, that some
consumers will pay $1.50 for. Translate that price to a 42 gallon barrel price
(I doubt the unknown author of this crazy proposal could do it).
One gallon of water hydrates you and can be recycled once you are
done with it. Another gallon will sooner or later just fall from the sky. One
gallon of gasoline will take you and a lot of your stuff in the
average car for twenty miles, to do whatever you want.
Finding oil and natural gas is very difficult and expensive, must
be transported, refined into the stuff you actually use, and once it is
burned, it is gone, never to return, because even though no
matter is ever created or destroyed, it is broken down from the complex
hydrocarbon molecule, into other stuff that's pretty useless. IT
IS A NON-RECYCLABLE RESOURCE.
Oil and natural gas are used for almost everything, at the end of
the day, it is the most valuable material in the world. Think about it!
The Chinese, Indians and most of the rest of Asia is growing by
leaps and bounds and the rest of the world economy is coming
around. Oil and natural gas, fuels the world economy.
Just think about the U. S. and how shortsighted we have been in
letting the shortsighted, self-centered environmentalist zealots rule
politics. Since Two Mile Island, not one nuclear plant has been built in
the U. S. Not one new oil refinery has been built in the U.S. since the
1970's (Has this country grown since then?). They refuse to allow the
damming of any river to create additional hydroelectric power. They
complain about burning coal, because it's dirty and expensive to burn for
power cleanly. There are only a few places where there is magma close
enough to the surface to increase geothermal energy production very
much. Cold fusion doesn't work. There is no perpetual motion machine.
Most people don't want big huge windmills in their yards. Photoelectric cells
are very expensive and most people don't want mirrors on their
houses. Hydrogen fuel cells are not economic. So what the heck is left?
Oil in most of the rest of the world is what they are using more of,
because it can be put into a barrel, ship or tank to transport. Here natural
gas has been what we've defaulted to for additional energy over the
last twenty years, because it burns cleanly, but it is a gas and thus it
must be transported by pipeline or frozen to greater than <-250
degrees and compressed to import from overseas-"read expensive". So a
bunch of natural gas burning plants have been built here recently and the
demand for natural gas has increased markedly, hence my economics/
business major friends-as does the price.
Further, nobody wants an oil and gas platform to "ruin" their
view of the ocean sunrise or sunset, so it is illegal to drill looking for oil
and natural gas off of the entire east coast of the U. S., all
around the state of Florida, off Washington, Oregon, almost all of
California, and most of offshore Alaska. Onshore, there are huge federally
owned areas in the American west that are off limits, all because of our
environmentalist "friends", who are looking out for us-"read
themselves".
SO-demand is rising, and supply is falling as old fields deplete,
and everybody sees prices rising and it hurts all of us in the
pocketbook-yet they won't let us drill and then they complain
about "BIG OIL" manipulating prices-it makes me sick! Are people
so ignorant as to not see this? I realize that the press plays along with all
this environmental hoopla, because people typically become writers to
try and change the world with their words, but they haven't a clue!
Further, after the last major price spike from 1979-82, when
because of high prices (which accounting for inflation were 78% higher than
now!!!!!) a lot of new oil was discovered around the world and
people conserved, and prices tanked-again that darn supply and
demand thing. World economies flourished and politicians looked like economic
geniuses because inflation was low, hence interest rates as well.
The oil and gas industry in the U. S. lost >700,000 mostly high-
paying white collar jobs-more than the steel and auto crises of the
1970's and 80's combined-and you never heard a peep about it in the press!
The press camped out at the doorway of the fired steel and auto
workers and commiserated with their moaning and groaning about their
ruined lives, but not at the doorway of the oil and gas workers! Nobody gave
a hoot!! The oil and gas industry went through a twenty year very bad
cycle. As a result, VERY few people wanted get into the oil and gas
business, even if they could find a job. So now, there are least two generations
of missing talented people in the oil and gas industry. Ask anyone
in the industry, the experienced people are not available. Yet anyone
that was stupid enough to get into this crazy cyclical business and
survived over the last twenty years during which the price of oil got as low as
$8/barrel and natural gas $0.98/Mcf is in demand. Actually in
many places in the American West, gas prices were much lower than
even this price, if your gas was far from a major-I know of several
instances where producers actually HAD TO PAY for the pipelines to take
there gas-because if they were to shut in their wells, it would ruin the
reservoirs.
So demand has been rising rapidly as the world population and
standards of living across the world continues to grow (can you blame
them for wanting to improve their lives), supply has been falling because
of low prices over the last twenty years and the inability to drill in many
areas. Hence prices are starting to rise. It is very simple.
What is not simple is how amazingly shortsighted our
government is. All they care about is getting reelected, not what is best for the
country. Everything here works on a short reelection cycle. Finding oil
and gas fields frequently take much longer than this from the original
thought to look in a given area, to drilling (with hoped for success), to
production and sales.
Farmers here are paid not to produce when there is a surplus
(they work on a yearly-"read reelection" cycle. Nobody was willing to pay
U.S. oil and natural gas companies not to produce when there was an
oil and gas surplus over the last twenty years. So those of us in the
industry saw our incomes dry up or the pink slip arrive. There is no
guaranteed floor-minimum guaranteed price, to keep the risk down-so
future price projections are very difficult and bankers have as a result, been
historically nervous to lend into the industry sector. For goodness
sakes in the early 80's THE BANKERS were forecasting the price of oil to
be $100/barrel and natural gas $15/Mcf( in 1980 dollars), by 1990.
Instead prices were below $10.00/barrel and gas below $1.50/Mcf (in
1990) dollars. How do you bank something like that!! You don't
easily, hence very little money came into the industry in the late 1980's
through 1990's. Hell, there's very little money out there even today
looking to drill risky deep expensive wells that have the best shot to find
big reserve volumes of additional oil and gas.
As in a lot of things, the media-because of laziness to do the
research and a profound liberal bias-does not tell the whole truth, much
less part of it as in the oil and natural gas case, so people are
ignorant of what is really going on. They will continue to complain about "BIG
OIL" because it appears to be an easy faceless scapegoat (Heck, if
people thing it is such a great business that is getting filthy rich, then
buy oil company stock and try to ride the wave). Prices of oil and
natural gas will continue to be regulated by the law of supply and
demand. Price controls if tried will not work, as they never do for any product,
and would only lead to further shortages.
People need oil and gas and it would be best to let the industry
do what they do best-quietly go about the business of finding the energy
that the world needs-badly!
I regret that this hasn't been prepared more cohesively, but I do
not have the time, because I am so busy looking for new oil and gas
reserves.
Go ahead today and have your B*%*!!! session about gas prices,
but it is a complete waste of time and energy, do something about solving
the country's, world's energy shortage problem!! It will get worse-
you will
see.
J.M.
