Here is the simplest possible story of the price of oil:
- Up until 2001, it hovered around $41 per barrel.
- We invaded Iraq.
- The price has been volatile ever since, averaging about $100 per barrel.
Will we ever manage to get the price of oil back down to $41 on a durable basis? Unless we can hop in a time machine and uninvade Iraq, probably not.
I live in the part of California that the New York Times called the "Texas of California." Petroleum production is important for the local economy. politics here are very Trumpy. Two dollar a gallon gasoline implies a price for crude oil that would devastate the area. I assume it would be very bad for Texas as well. Why do so many folks here and in Texas think voting for Trump is in their best economic interest? I'm puzzled.
"Why do so many folks here and in Texas think voting for Trump is in their best economic interest? "
"Think"? They vote with their guts, at best.
from the 2006 white house correspondents dinner:
Mr. President, my name is Stephen Colbert and tonight it's my privilege to celebrate this president. We're not so different, he and I. We get it. We're not brainiacs on the nerd patrol. We're not members of the factinista. We go straight from the gut, right sir? That's where the truth lies, right down here in the gut. Do you know you have more nerve endings in your gut than you have in your head? You can look it up. I know some of you are going to say "I did look it up, and that's not true." That's because you looked it up in a book. Next time, look it up in your gut.
Still one of the greatest -- and prescient -- pieces of political satire in American history. Absolutely torched it.
Who invaded Iraq?
Two oilmen: George W. Bush and Dick Cheney.
Another alternative is that around 2001 fracking become required to satisfy demand and fracked oil is inherently more expensive. The timeline seems to fit, https://www.eia.gov/todayinenergy/detail.php?id=25372
but that would imply additional more costly to produce oil somehow supplanted cheaper oil.
Local fracked oil became cheaper than oil from a cartel located half a world away.
except most of that oil is sent overseas.
most US refineries aren't built to process "light sweet" crude that comes from fracking. that was a bush decision. so that oil is shipped overseas for processing.
so we still import that cartel oil for domestic processing and consumption
Right. We should look at the increase in fracking operations not as the cause of rising oil prices, but as a reaction to them.
Fracking doesn't become economically relevant till the end of the Bush administration. But yes, we can never get down to $41 dollars a barrel in a sustained manner because the peak oil people were right. We no longer have sufficient conventional oil to make that price possible.
Republicans permanently doubled the price of your gasoline, --is a line the Democrats could run on.
https://thinc.blog/2024/09/15/in-texas-california-solar-crushing-gas/
and
https://thinc.blog/2024/09/14/mr-global-corrects-the-record-on-oil-gas/
I would like to see a chart that begins pre 1973. Oil can be volatile it goes without mentioning since they are so many different varied expenses in extraction, processing and demand. Currently demand and supply and expenses are as high as ever, so low cost producers (SA) and energy independent countries (US) have more control. If I had to guess, in a stable environment (no Iran issues, Ukraine, etc.) a gallon could easily fall to $2 a gallon but we are a long way from there.
"f I had to guess, in a stable environment (no Iran issues, Ukraine, etc.) a gallon could easily fall to $2 a gallon but we are a long way from there." No oil on the planet can be profitably produced at that price. So no, you cannot have sustained production for that price. (More than half of oil can't even cover marginal costs at that price point.) So that price can't be sustained for anything other than a few days.
It would depend on the source of the oil. New oil cannot be sold profitably for $2/gallon which includes a lot of the US oil. However, oil from the Middle East can be sold profitably at that price even with expanded production.
You say a lot of stuff without having done any research. Are you a MAGA Troll?
Right. I did a simple Google search on oil drilling. New oil including fracking involves a lot of investment, whereas the oil in the Middle East is easy to extract with standard pumping equipment. This includes a lot of the oil in Saudi Arabia, Kuwait and Iraq. I’m guessing that you think I don’t believe in global warming and support drill drill drill. Nothing could be farther from the truth. I am merely reporting what I see. If we had my way, we would have a more robust taxing system a la Europe on gas to compensate the damage oil does. But yes, accusing someone of MAGA out of the blue makes you closer to them than you realize.
The US contributes to unrest and uncertainty in the Middle East, but the countries there are perfectly capable themselves of stirring things up enough to impact oil production. There are several kinds of perpetual conflicts.
If you want stability in oil production you would have to go back to the time when big US and some other countries' oil companies really had a grip on world oil production. In other words to a time of economic imperialism.
Do we even WANT oil to be substantially cheaper? Shouldn't we be using less of it?
Yes. More costly oil means other energy sources can be profitably developed.
In the long term, yes; in the short term, higher oil prices pinch household budgets and make people unhappy.
Yes, addressing climate change involves some short-term pain, no way around that. Still better than the alternative.
+++
Yes, we want oil to be substantially cheaper. If we are using enough less of it, it will be substantially cheaper.
um, why would we want oil to be $40/gal?
$40 a *barrel*, not gallon. A barrel is 42 gallons. Barrels are the standard measure for crude oil, which has to be refined and separated into its various components to make it useful. Gasoline is the lightest component of crude; asphalt is the heaviest, and the medium components include kerosene and the stuff we use to make plastic and other various chemical products.
"Barrels are the standard measure" Only in NA and it is a very bad measure since gasoline is 30% less dene than oil. This let conservative idiots falsely claim we were petroleum independent because we exported more gasoline and light oil than heavy oil was imported.
So people will quit BURNING it.
Yes, we should be using less of it, but tell that to the guy driving his brand new super duty 3/4 ton single occupant pickup to the local grocery store.
Cranking up the price would discourage that guy. Fuel is MUCH too cheap in the US.
Even if we did uninvade Iraq, the price of oil would still go up, just a bit later. You'll notice Iraq has re-stabilized at this point, but oil prices are still high. It's supply and demand: Chinese demand, inelastic supply.
Kevin seems to be implying that the 2001 invasion of Iraq, is a primary/significant cause of global higher oil prices. Kevin also knows that correlation is not causation.
Other material events
- global demand for oil has materially increased since 2001. Many countries have industrialized or significantly increased their pace of industrialization (India, China, Vietnam, Brazil, Indonesia etc)
- global, per capita, usage of electricity has materially increased. Think about the increase in the use of the internet, EV cars, AI, Bitcoin etc. Yes, oil is used to create electricity, move goods etc
- environmental regulations. While many may say the regulations are still not adequate, certainty the global regulatory environment is more difficult today, than say 2001. For example, oil refinement in most OECD countries, is much more expensive, and cleaner, today than is was at the turn of the century.
I could probably come up with other potential factors/ possible explanations. My point, I am not convinced that a single war in 2001 caused a large, and seemingly permanent, shift in a broad based, global, commodity.
"Yes, oil is used to create electricity" The only people who significantly use oil to produce electricity are isolated islands ( or people north of roads in the artic.)
memyselfandi - thank you for the correction. To refine my comment/adjust my error, natural gas, an oil derivate, is used to create electricity.
And people with crap electrical infrastructure. Sub-saharan Africa generates 9% of their electricity with diesel back-up generators.
Younger people don't recall that gasoline was routinely below $1.00 a gallon through early 2000s. But this is one reason why older people feel like inflation is hitting their wallet, you know? If only we would have invested in an EV charging network 10 years ago and slashed tailpipe emissions to zero by 2025, maybe the price of gasoline wouldn't matter and everyone would have cheap EVs.
We should hope not. Consumption must decline to epsilon.
I assume this is tongue-in-cheek. Otherwise, I'd enjoy another post explaining the causality as to how the US started to control the price of oil three years after invading Iraq. In the meantime, what's the relationship between China's growth, their oil demand, and the price of oil.
We will hit $41/barrel sooner than you think. Demand has fallen slightly from it's peak, and will drop more swiftly with each passing year.
China oil consumption rose from 3 to 17 Million Barrels per Day from 2000 to 2023. Not quite 20% of global demand.
Meanwhile, we long ago reached peak cheap oil. The rising demand pushed us into more expensive fields. Which was allowed by the rising price of oil. Until oil demand falls far enough to be satisfied solely from the cheap oil fields, it's going to stay at this higher level.
George W. Bush was the best thing that could have happened to Putin and Saudi Arabia.