triple balance beam scale

triple balance beam scale

Most folks do not really understand much about oil barrel prices or how the price of gasoline gets so high in the summer each year – although most everyone does realize that events around the world are a huge factor, so let’s discuss this for a moment, shall we? Not long ago, an acquaintance of mine asked me several questions about these issues

“Do you understand how this whole oil thing works? In the summer when demand is higher, they raise the prices, and in the winter when they are selling more – they raise the prices. Now because of a lack of demand in a poor economy, they have not been able to invest in production and will have to raise prices. So, if they don’t sell it, the price goes up versus if they do sell it the price goes up. Aren’t these merely manufactured problems?”

Well, consider if you will that at $35 per barrel in the current global economy, the nations who own oil fields and production cannot make money. In some ways that is good for us – for instance – Iran, Venezuela, and African Nations which are not such good human rights folks. Of course, next door in Mexico, which is at about their peak oil challenge right now, Pemex cannot make money, and that translates to nearly 30% of their economy. Bad for us, as a collapsed economy in Mexico, anarchy, or an out of control lawlessness will spill over the borders.

Consider if you will that Mexico sends folks here to work and perhaps you are in an industry which has seen your job disappear to some aspect of this job migration. Mexican workers in the US can send money back to their families struggling in tough times in Mexico, see, how this effects us? In times of high employment, that wouldn’t be too catastrophic for our US economy, but in times of recession, completely a problem for economic recovery in many sectors in our economy.

When we have above $70 a barrel we definitely see the effect in our economy, as it becomes similar too and mimics a huge burdensome tax on our overall economy as everything is effected by transportation costs. Next, I’d like you to consider politics of World Oil Supply – for instance, we have levers in Saudi Arabia, UAE, Kuwait etc, to get those OPEC members to see our way when oil gets too astronomical, as in above $80 or $90 (currently – that will indeed change in the future as India and China etc grow and demand more, build more cars etc.).

Meanwhile the huge oil fields in Iraq are even bigger than Saudi Arabia, but we don’t have a good control on that, and even if we did, it will be a good 3-7 years before that oil is flowing in large quantities anyway. Also, on the world oil consumption front, we have even more challenges and we need to worry about China doing what they are doing with iron ore, industrial metals and rare earth elements in the oil sector, we SHOULD expect them to do that.

Perhaps, a recent clue to illustrate this point was the Tar Sands bid in Canada, which was so high that oil would have to be $100 per barrel to make it worthy of a decent ROI or even a break-even point. Wow, $100 oil is in our future, and the Iraq supply is not even online yet. Nor are the planet’s Northern Most oil deposits anywhere near available to be harvested, that is way off, along with Argentina, Brazilian, and Cuban coastal oil. Those deposits are massive when put together.

The environmentalists have made a mockery of production, supply, distribution, drilling, and usage. They propose more taxes, meanwhile we have a Cartel “OPEC” which we would never allow in the US, remember anti-trust law history, but we are deeply involved in that as well. The USA should have seized the oil in Iraq to pay for the war and removal of Saddam, then used that as a lever to control OPEC, and worked production to keep oil at $45-65 per barrel, thus, just under the amount needed for our enemies to turn a profit, but high enough to garner capital investment. Meanwhile, the lever against that abuse could be alternative sources of fuel, a percentage of electric cars, etc.

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