I need some advice on oil prices.

[Frustratedlady]

There are a couple Repug guys who are saying the oil companies are not the ones responsible for the high prices of oil and that their profits are just a return on their investment. They are NOT making obscene profits.

I want to hear it from the DU "experts" and in English an ol' woman can absorb. I know a good part of the increase is the demand of China and India for more gas, keeping investors satisfied, this stupid war plus the fact that Bush is playing with his swords again, but I want to know how much is actually going to the oil barons of the US. They do get the flak.

[hobbit709]

1. Why did Exxon post record profits?

If the oil companies ain't getting rich where are their profits coming from? That's what I'd ask them

[riqster]

2. Oh, it's profiteering all right

Wyden Report


Synopsis: Big Oil bought up, and then shut down, refining capacity in this country, in order to keep prices high.

And why, I hear you cry, did the Senate do nothing? Look at the date on the report. The Bushies had taken control and this report got buried.

Spread it around!

As a point of comparison: in the UK, where the high price of petrol is due more to taxation than to the 'free market' robber barons, the price fluctuations are far less than they are here: their government actually regulates industries, you see.

[Turbineguy]

3. The oil companies

are making a lot of profit because they sell a lot of oil. But percentage wise it's not as large as say, Cisco or Intel. Dividend yield on Shell Oil is 3.4%. When oil was selling for $10 per barrel in the late '90's (no, that was not entirely Clinton's doing), the price was insufficient to spur more exploration. This led to an imbalance in finding new oil and created a future shortage situation. As we use up the "cheap oil" near the surface, we drill for expensive oil deep down. The cheap oil has to pay the costs for finding expensive oil.

Then there is the demand by growing economies that keeps increasing.

And then there's Bush.

When he got nominated oil was $10 per barrel. By the time he got sworn in oil had gone to $30 per barrel. It dropped back down to $20 and then he attacked Iraq. Oil ultimately is a market commodity and the market behaves as markets do. Bush injects a great deal of uncertainty and the prices reflect that. Some day we may wish to add up the total cost of having Bush as President and the cost of oil will be a good size "Bush Tax" on the people of the world.

Oil should probably be priced at around $25 per barrel perhaps a bit more but will certainly go up as expensive oil will have to pay for even more expensive exploration.

That's my view.

[Ganja Ninja]

4. Don't forget that part of the increase in oil prices is ..

due to the falling dollar. Oil hasn't been rising quite as fast for Europeans as it has for us. The price of a barrel of oil in dollars has risen about 38% in the last year but the price in Euros has only risen 11%. (That's if my calculations are right.)

Dollar to Euro exchange rate 11/06 was 1 dollar to .758 euros
Dollar to Euro exchange rate 11/07 is 1 dollar to .6811 euros.

Price of a barrel of oil 11/06 $62.52
Price of a barrel of oil today $96.00

[Turbineguy]

6. And in 2000

1 Euro was $0.75 The US dollar has nearly been cut in half against the Euro in 7 years. Some of it is due to the Euro zone economy. Most of the decline is due to the US economy. The value of a currency is the only true indicator of the economy it represents.

Real US inflation has been averaging around 9 percent annually overall.

[Frustratedlady]

15. I have a grandson studying overseas...

I imagine his limp dollar isn't getting him far. He said the food was horribly expensive and they were buying groceries, rather than eating out. Unfortunately, things won't be much better when he returns.

Thanks for the lesson in Euros.

[Frustratedlady]

5. Thank you for your explanations.

There are so many factions that come into play, it is hard to understand. However, you have brought forth some good points to absorb.

One point that brought up another question is how the dollar/Euro situation is going to affect our economy when and if China and the other countries decide to convert to Euros. What is going to happen to us? Will the dollar and our economy implode? How low does the dollar have to go to be irreversible...not worth the paper it's printed on?

The other question I have is about their printing more money without anything to back it up. Am I correct that no one knows how much they have printed? Wasn't the NIE report discontinued, which would have given us this information?

[Turbineguy]

7. US currency as reserve of choice

In order for the US Dollar to be desirable as a reserve currency, the US Dollar has to be stable in value or increasing slightly, but mostly stable. A change to another reserve currency would cause the Dollar to depress in value. As a reserve a currency becomes a commodity subject to market forces. That is why a stable value is so important because if it becomes unstable (one way or the other) it starts to swing progressively worse until stablity is restored.

In a way what is happening now is good because the weaknesses of US economic policy are being exposed. Borrowing, spending, selling assets, exporting skilled jobs. You can only do this so long. Eventually the value of the dollar will settle at a real value. I think that value will be higher than it is now.

In addition, I am optimistic that things will improve.

At the risk of being corny, when things get tough, Americans go to work. At the end of the day ordinary Americans will create economic value and this value will eventually be reflected in the value of the currency. The methods and products that create future economic value will be different than today.

[Frustratedlady]

14. Thanks for your explanation.

It makes sense and is easy to understand. I pulled out of the market several months ago and put it into guaranteed savings (although guaranteed doesn't always mean much) and am putting the interest back in the market. That way, I don't risk much.

Being in the same "boat" as everyone else isn't much consolation to me, so I appreciate your help in understanding what is happening and staying on land as long as possible.

[CK_John]

8. IMO, At this point everybody but us knows that the oil will run out within the next 8 yrs.

The oil pipe lines are no longer secure anywhere in the world. The bandits worldwide will control and disrupt production and delivery. The price of gas at the pump will be at least 4.50 by turkeyday and 7.50 by election day Nov 08. The Repugs knows the end of a stable world is near and are raking in what they can before the ultimate dump hits the ultimate fan.

[Frustratedlady]

16. That's scary.

Past time to drag out the old bicycle.

[txaslftist]

9. Are you fixing to buy a barrel?

[Frustratedlady]

10. No, I am fixing to protect myself.

I am trying to make an intelligent decision on what to do to protect my assets. I am at an age where I do not feel comfortable taking risks. I do not feel the market can be trusted and, although it might be advantageous to get into the market to ride it back up, I'm afraid to do so. All I was asking for was a simple explanation of what is going on and how it is going to affect the common man/woman.

[txaslftist]

11. Buy silver. It's undervalued compared to gold.

It's going to go up for certain, while gold may have reached a temporary peak. Oz for oz, silver is your best "hold onto the money" option.

If you want a good investment? Damifino.

[Frustratedlady]

12. Thanks! That sounds like sane advice.

Do quarters count? I just cleaned out my stash so I can bury it in the backyard. :scared:

Just joshin'.

[txaslftist]

13. Don't let it get around. I'm in a buy mode.

I don't want the price to jump early.

And don't let it get around that I'm "sane" either.

Rumors like that can ruin a hard-earned reputation.