My economics professor says the main reason petroleum is so expensive

[shortylickens]

is China and India are HUGE and they are now becoming industrialized nations.
They will need as much if not more than we do.

He said it has very little if anything to do with how much we consume or how we get it. He also says cheap gasoline is a thing of the past and even if the earth has massive amounts of it, the first and second largest nations in the world will keep consuming it at an increasing pace.
Price will never come down. We will burn it up eventually and then move on to something else.

My thoughts are: If thats true, I bet we figure out something better and as the price of gasoline moves up we will slowly move off it and the U.S. wont even be the country to gobble up the last drop. We will have left it for 3rd world nations to finish off.

Your thoughts?

 

[EagleKeeper]

It is speculation.

2 years ago; the price was a lot less.

China and India have not doubled in size or demand.

While they are causing storage supplies to be tighter; it is the political unrest and traders' greed that has contributed more than anything.

 

[manimal]

He is partly right. We have a finite source that has seen large increases in demand in the last three decades. His opinion sounds overly simplistic though and doesnt take into account the 40-50 cents that speculation has inflated the price. We also have opec and other oil producers lowering their output so further manipulate prices.

I always wonder how much oil Saudi Arabia has left at this point. If I remember correctly Eqypt now has the largest amount in reserve right?

 

[Zebo]

There is no one reason and we will take it if oil ever runs out.

Easy to do - false flag operation accusing Saudi meanwhile people here are starving because we don't have fuel to run tractors.

 

[MomentsofSanity]

He is partly right. We have a finite source that has seen large increases in demand in the last three decades. His opinion sounds overly simplistic though and doesnt take into account the 40-50 cents that speculation has inflated the price. We also have opec and other oil producers lowering their output so further manipulate prices.

I always wonder how much oil Saudi Arabia has left at this point. If I remember correctly Eqypt now has the largest amount in reserve right?

Venezuela upped their proven reserves to 297 billion barrels in January putting then ahead of Saudi Arabia and Canada. Egypt is just a drop in the bucket so to speak when it comes to world proven reserves. 4.4 billion proven reserves in 2010 but I believe that's been upped to 15 billion or so recently.

 

[the DRIZZLE]

As others have said there are a bunch of reason that oil has gone up, demand and expected future demand in India and China is certainly one of the reasons. Remember that demand for oil and gasoline is relatively inelastic, so small changes in supply or demand levels can result in huge changes in price.

 

[Engineer]

Don't forget...there's lots of money at the top and they are looking at making even more. Trading oil like stocks seems to be the newest fad with these folks.....and that also means shorting it on the way back down (see oil traders indicted thread for this type of behavior).

 

[wirednuts]

we just need good batteries. that would solve so many problems its crazy

 

[sactoking]

America's consumption of oil will be similar to America's production of greenhouse gases when looked at globally: the US can do everything scientifically possible to reduce consumption/production and it will help the citizens but won't make a lick of difference globally.

China, India, and other emerging economies will not allow the US to set global policy on energy any more. They view the US as having had "its turn" to be wasteful and polluting, which led to the US being the #1 economy. Developing countries view massive energy usage as the only way to economic prosperity and nothing will stop them in their pursuits.

 

[Texashiker]

My economics professor says the main reason petroleum is so expensive

Your thoughts?

Speculation
Increased demand
Decreased value of the dollar
Increasing production cost

And the ever popular Greed

 

[Doppel]

is China and India are HUGE and they are now becoming industrialized nations.
They will need as much if not more than we do.

He said it has very little if anything to do with how much we consume or how we get it. He also says cheap gasoline is a thing of the past and even if the earth has massive amounts of it, the first and second largest nations in the world will keep consuming it at an increasing pace.
Price will never come down. We will burn it up eventually and then move on to something else.

My thoughts are: If thats true, I bet we figure out something better and as the price of gasoline moves up we will slowly move off it and the U.S. wont even be the country to gobble up the last drop. We will have left it for 3rd world nations to finish off.

Your thoughts?

What he says is substantially true but not the entire picture. Some will say the current run up is all speculation but they are incorrect.

China and India have not doubled in size or demand.

Others have tried to break down how much the oil increase is real demand vs speculation but as an example:

I sell 80 syringes/day of a medicine that 80 people need. If they do not get this they die by sunset. It doesn't cost me much to make and my 80 customers pay about $5/day for it. Tomorrow I drop a syringe by mistake in my lab and I have only 79 doses. Somebody is going to die. What do you think of those 80 people they'll be willing to pay? This is what happens with oil. There is _very little_ excess production (2-3M/day in a market that drinks 80M+/day), so anything that lowers it or increases demand can impact prices substantially until the demand and production are back in balance again.

 

[Ape]

we just need good batteries. that would solve so many problems its crazy

Batteries are not the answer, hydrogen cell is.

 

[Doppel]

Batteries are not the answer, hydrogen cell is.

I think he means in the next decade or two, though. Hydrogen has been in development for many years and all 99% of us have ever seen about it is articles in Popular Mechanics. It's like saying flying cars are the way to resolve things. Yes, in the future, but not one that we can really rely on.

 

[apathy_next2]

It is speculation.

2 years ago; the price was a lot less.

China and India have not doubled in size or demand.

While they are causing storage supplies to be tighter; it is the political unrest and traders' greed that has contributed more than anything.

I agree,
2 years ago when prices hit over 4$ we were told china and India (among other things) and then prices when down a lot again in a matter of months, so all of a sudden their demand went down and they lost all that industry? And that have built it back up in a matter of a couple of years?

Are China or India to blame for rising food prices as well?

 

[dmcowen674]

My economics professor says the main reason petroleum is so expensive is China and India are HUGE and they are now becoming industrialized nations.

I was told it's my fault especially for the higher prices than the rest of the country here in Chicago.

 

[Ape]

I think he means in the next decade or two, though. Hydrogen has been in development for many years and all 99% of us have ever seen about it is articles in Popular Mechanics. It's like saying flying cars are the way to resolve things. Yes, in the future, but not one that we can really rely on.

They have been using them for years in California.

http://automobiles.honda.com/fcx-clarity/

Batteries are dangerous to the environment, have a limited range and long charge times. Hydrogen cell cars allow us to keep our lifestyles and improve the environment as well.

 

[spidey07]

Supply and demand. Your professor is a fuck stain removed from how us chimps operate. Were animals and to deny our core instincts is to go against natural law.

 

[shira]

It is speculation.

2 years ago; the price was a lot less.

China and India have not doubled in size or demand.

While they are causing storage supplies to be tighter; it is the political unrest and traders' greed that has contributed more than anything.

You demonstrate a vast ignorance of the elasticity of prices. It doesn't require a doubling of demand to double prices. Ignoring the effects of speculation, all that's needed to produce a price spike is for the increase in demand to exceed the ability to increase oil production.

 

[HomerJS]

As others have said there are a bunch of reason that oil has gone up, demand and expected future demand in India and China is certainly one of the reasons. Remember that demand for oil and gasoline is relatively inelastic, so small changes in supply or demand levels can result in huge changes in price.

Are you telling us if demand for oil suddendly went down 5% the price/barrel would go down by 50%? I don't think so.

 

[the DRIZZLE]

Are you telling us if demand for oil suddendly went down 5% the price/barrel would go down by 50%? I don't think so.

Yes that's exactly what happened in 2008. If you don't understand why reread Doppel's thought experiment.

Also keep in mind that a significant portion of the recent increase in oil prices is due to the decline of the dollar.

 

[Acanthus]

Speculation
Increased demand
Decreased value of the dollar

These are the big 3 i was going to post.

Speculation and Inflation are the big two though. Demand is low now, yet prices remain artificially high.

 

[theeedude]

US produces 2% of world's oil and consumes 25%. So increased production is not going to help us. Even if we double our production, it's just going to turn our 2 drops in the bucket into 4. Cutting our consumption can have a much bigger effect on oil prices.

 

[wuliheron]

Investment in renewable energy has skyrocket worldwide since 1995 and between 2007 and 2008 alone went from 76 billion to 115 billion. It is this kind of investment that will fund the necessary research to find better alternatives to oil. Note that this also coincides with the US initiative in nano technology. Although most people think of nano tech in terms of miniature robots it also applies to such things as catalysts used for refining oil, bio fuels, plastics, etc. and is being researched extensively now for solar power and hydrogen fuel cells.

 

[halik]

is China and India are HUGE and they are now becoming industrialized nations.
They will need as much if not more than we do.

He said it has very little if anything to do with how much we consume or how we get it. He also says cheap gasoline is a thing of the past and even if the earth has massive amounts of it, the first and second largest nations in the world will keep consuming it at an increasing pace.
Price will never come down. We will burn it up eventually and then move on to something else.

My thoughts are: If thats true, I bet we figure out something better and as the price of gasoline moves up we will slowly move off it and the U.S. wont even be the country to gobble up the last drop. We will have left it for 3rd world nations to finish off.

Your thoughts?

China and India were equally huge in 2007 and 2008. Commodity prices swung by a factor of 4.

 

[brencat]

It is speculation.

2 years ago; the price was a lot less.

China and India have not doubled in size or demand.

^ This. Even the U.S. is not using the amount of oil or gasoline we used pre-Lehman Brothers blowup. We still have 7mm people unemployed.

It is commodity index speculation (primarily) and the falling dollar.