A dumb question about oil.

Maybe someone smarter than me can explain why, If there is a huge oil boom in canada right now (Alberta) and The war going on is securing oil over sea's, then why is the price for the consumer continuing to sky rocket? It's getting so bad that The big rigs will just have to park it pretty soon. seems odd.

Canada can't supply the world. OPEC does not want to make more oil then it does. I don't know why...maybe the sanctions on Iran....maybe the hate that Venezuela has for the US I don't know. It could be a combination of both.

canada cant supply the world, but cant canada atleast supply canada? I mean i guess not but why?

reply to post by Equinox99


Because if they increase the supply, it will drop the price.

They don't want the price to drop and care nothing about consumers

reply to post by tasteslikethunder



All gasoline, diesel, kerosene, heating oil are refined from crude oil.
Crude oil is extracted from the ground by companies who then sell it to refiners at a price per barrel. But there is a middle man...the commodity trader. The commodity trader buys large quanitities of oil from the producers for future delivery and the price they are willing to pay is based on speculation. Speculation regarding future supply, demand, economics, geo-politics , weather, etc. This speculation drives the free market price.

Then the refiners are stuck paying this price to get crude to turn into gasoline. They must then pass along the increased cost of the crude to the motoring public in the price of the gasoline.

That's it in a very small nutshell. It's vastly more complicated, but that's the general idea.

reply to post by tasteslikethunder

Earlier in the day, the members of OPEC declined to raise or lower its production.

OPEC president Chakib Khelil of Algeria said the world's oil market is being affected by "the mismanagement of the U.S. economy."

"If the prices are high, definitely they are not due to a lack of crude. They are due to what's happening in the U.S.," Khelil said at a meeting of oil ministers in Vienna. "There is sufficient supply. There's plenty of oil there."
CBC

Venezuela has suspended oil exports to Exxon, escalating the country's fight with the U.S. oil firm over compensation for an nationalised oil project. Venezuela has also threatened to cut exports to the United States.

Financial Post

Oil: Draining Canada
Even though the Canadian economy is no less dependent on hydrocarbon energy than ours, Canada has been drilling as many wells as necessary to keep the high-maintenance American economy humming. If this pedal-to-the-metal production policy were applied to a non-strategic product like, say, maple syrup, few people would care about the consequences. But there is nothing on the horizon to replace the nonrenewable high-density energy sources that Canada so generously sends our way.
Canadian Spectator

So because US is showing Canada money, Canada is drilling to the max to feed the US habit. It will leave our side with a limited supply and the US side with a limited supply. It is all about business, show me the green and I'll show you the black.
I hope that helped.

reply to post by tasteslikethunder


The biggest reason for the increases in prices is one you didn't mention: booming economic growth in developing nations like China and India. As a result, world oil demand has increased signficantly over the last few years (by about 6 million barrels per day in just the period from 2003 to 2007!) Currently, global consumption stands at about 85 million barrels per day.

The world's oil production simply has not kept pace. The production from the oil fields in Canada are just a drop in the proverbial bucket. Iraq doesn't really produce that much oil in the grand scheme of things, either; the maximum sustained rates of production for Iraq are estimated to only be about 3 million barrels per day.

reply to post by vor78


This is true, but one must also remember that Iraqi oil production is not what it could be on account of the instability.

Originally posted by Equinox99
Canada can't supply the world. OPEC does not want to make more oil then it does. I don't know why...maybe the sanctions on Iran....maybe the hate that Venezuela has for the US I don't know. It could be a combination of both.

OPEC hasn't significantly upped production for one simple reason: they're getting filthy rich.

They have no incentive to increase production and lower prices. The only reason they've done so in the past is for fear of a drop in demand, but that hasn't happened (in fact, demand is also rapidly increasing).

I think another reason the Canadian "boom" has not effected oil costs is based on the type of oil mostly available in Canada. My understanding is that the vast majority of oil in Canada is shale oil, which is bound with sand and rock, not sitting in vast underground pools like in the ME. Shale oil is EXTREMELY expensive to extract, and that extraction requires a lot of energy and lastly the oil is not as clean a grade as the stuff from the ME.
This is my memory serving me and I am not a geologist so if I am way off someone please correct me!

Obs out

reply to post by vor78


That is true as well. If the Supply is low and the demand is high they won't necessarily make a profit now but in the long run. They will start to sell less but since the price has increased it makes up for the people who stopped purchasing oil. In the long run they will have more oil to play with.

reply to post by chromatico


Actually, 3 million barrels per day is just about it. Even on its best day prior to the war, Iraq struggled to consistently stay above that mark (the best they ever did was 3.5M, I believe). The country simply does not have the oil infrastructure in place to pump much more than that.

It would take a massive investment in the country's oil fields over a period of years, if not decades, to see any significant gains.

reply to post by Equinox99


Actually, I think they're screwing themselves in the long run. They'd be much better off trying to keep the price in the $50-60 range. All OPEC is doing is giving companies and investors an incentive to develop alternative technologies that are now cheaper than a comparable amount of oil. We haven't seen that investment happen just yet (the oil industry is still afraid of another early 80s oil crash), but it eventually will. If someone ever develops a cost-effective means of producing oil from oil shale, for example, OPEC is finished.

reply to post by vor78


I believe OPEC is only doing a little bit less than production than they can...prices were still quite high when they were not restricting supply.

I agree, to a point. OPEC certainly doesn't have the excess capacity it once had and their ability to influence the markets is not what it once was. Still, if I were them, even if it didn't work I'd at least try to keep the prices more reasonable.

On the other hand, perhaps all of these oil exporters have caught wind of a viable alternative in development that will be on the market fairly soon and one that they know will make oil largely obsolete. In that case, it makes no difference what their prices are. They may as well make as much money now as they can, because, regardless of their own actions, their product is more or less doomed.

Canada is supplying most of their oil to American they are our number ones seller, followed by Saudi Arabia, Mexico and Venezuela as the fourth in the line.

The OPEC as vor78 mention, is the one to be looking into for the oil hike and the prices of gas.

[edit on 12-3-2008 by marg6043]

Originally posted by marg6043
The OPEC as vor78 mention, is the one to be looking into for the oil hike and the prices of gas.

Well, I agree about the oil hike, but gas prices are our own dumbass fault. How many refineries have we closed since the 1980's? I think we had 300+/- back then. We have about 150+/- now.

As the dollar becomes worth less... it takes more money to pay for the same amount of goods.

Inflation!

Plus a lot of the stuff said above.

I believe, also, that in order to separate the oil from the sand costs a bit extra money - so Canada had to wait till crude was selling for more $$ so they could actually make some profit.

[edit on 3/13/08 by Angry Danish]

Also all the tree huggers stop the US from drilling in Alaska. We also have lots of reserves in Texas and other parts of the southwest that no one wants to tap right now.

Hi tasteslikethunder. As long as the dollar remains weak in relation to most major currencies, OPEC producers will manipulate production levels to compensate for their loss in purchasing power. It's their only defense.

To highlight RGReventlov' comments...you can divide the market players into three basic groups:

Sellers of oil.

Buyers of oil for delivery.

Speculators.

Specs have no direct interest in the underlying commodity, they simply trade paper (futures contracts) placing bets on prices for profit...they influence direction and cost. People like T. Boone Pickens, Jim Rogers...hedge funds...investment banks would be considered 'big' speculators.

GL