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The truth behind oil, the failing dollar and the war in Iraq. Thoughts?

PigsOnSoma 2008/09/06 01:53:56
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What determines the cost of oil? Two factors are most important – one: how much is refined in comparison to demand, and two: the futures market.

Oil is being pumped out of the ground in record volume, far more than is needed to satiate demand. So why is this a problem? The problem here is that oil is being stockpiled before it gets refined. Worldwide refining capacity is and has been running at around 75% - just barely keeping up with demand. While US capacity has been running at around 90% consistently, no new refineries have been built since the seventies. *see edit below*

http://www.npr.org/templates/story/story.php?storyId=10554471

http://jamesreedpubs.com/blog/2006/06/lack_of_refinery_capaci...

What is the futures market? It is trading based on the future, in this case, of oil. So what of the future of oil? The trading here is based on the fact that oil will one day run out. Not that it has, or will in the immediate future, but that sometime down the line the earth will run dry.

So why is this happening now? When we invaded Iraq there was a panicked reaction to the instability of the region and the impact that this might cause the flow of oil. The instant reaction was to increase crude reserves. Around this time, both China and India were becoming more advanced, and required more of these resources.

So what about Iraq? For one thing Saddam Hussein created a furor by daring to sell his oil in Euros, not dollars. We know war causes instability and insecurity, and makes investors more fidgety. What about Iraq’s oil fields? It seems American are pushed aside in favor of lucrative contracts with China. America waged war on Iraq, but is now not the recipient of Iraq’s oil because of the loans China extended to us for fighting this war. Loans we cannot repay, hence this.

http://worldmeets.us/azzaman000184.shtml

So what of Opec, and where do they fit in? They have, to a great extent say over how much crude gets stockpiled, and how much oil hits the market. They can control the reserves and productivity of oil wells in some of the main oil producing regions. They can manipulate flow of oil, but have little say in magically conjuring up a number for the cost per barrel.

http://www.guardian.co.uk/business/2008/sep/06/oil.oilandgasc...

Furthermore the internationally weak dollar, the traditional currency for the oil trade, is viewed as weak and unstable. Oil exporters are not keen to trade in dollars, and we’ve seen what happens to those that trade in Euros. Interestingly enough, at the beginning of this year, Russia began trading oil in rubles, thus edging out the dollar. The curiosity here, of course, is the happening in Georgia this summer.

http://www.nytimes.com/2008/02/27/business/worldbusiness/27pl...

Forward to Iran. Iran has begun to phase out the dollar currency in the oil trade. They have been talking about it since 2005. Iran is a country on our hit list, for the same bucket of bs they sold Iraq to us for.

http://www.globalresearch.ca/articles/CLA410A.html

http://news.bbc.co.uk/2/hi/americas/7101050.stm

http://www.wakeupfromyourslumber.com/node/6622

Connecting the dots, it seems that war follows where the dollar no longer becomes the currency of choice, as it is increasingly viewed as weak.

http://www.eia.doe.gov/emeu/aer/txt/ptb1109.html

*Edit

It seems to me that we have closed refineries that could be put to some use here. Instead of building new ones, we could restore old ones...? A thought.

"...Between 1981 and 1994, about 145 U.S. refineries closed. In the same period, overall U.S. refining capacity fell to 15 million barrels per day, pushing utilization rates to a more sustainable 92 percent..."

http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=116&subsecID=1...


I am also including a piece by Ron Paul on the dollar value:

http://www.house.gov/paul/congrec/congrec2006/cr021506.htm


Edit: January 11, 2009 - mainstream media finally discusses the truth behind the cost of oil:


><a href='http:/www.cbs.com'>Watch CBS Videos Online
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Top Opinion

  • atmer 2008/09/06 03:50:39
    Why really need to find alternatives.
    atmer
    +8
    Man! Did you accidentially think that Sodahead was an online college? You sure did a lot of work on this one... I'd give you an 'A'!!

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  • Silence Dogood ~ Right Wing... 2009/06/09 09:08:37
  • Go Green 2009/01/12 19:44:38
    Why really need to find alternatives.
    Go Green
    +1
    Not just the oil/gas situation but to prevent climate crisis!

    I have felt for a LONG time that oil should *NOT* be on the futures market.
    Could that be changed?
  • PigsOnSoma Go Green 2009/01/12 19:49:27
    PigsOnSoma
    +2
    I agree Nature Man - and that was one good thing about the cost of oil. It made us want to change our habits. Will we still?

    Now that it's public knowledge - or at least now that the mainstream media has reported on it - perhaps we will be a bit more outraged. I remember having a lot of arguements here about what was responsible for the cost of oil (people blamed it for the most part on either Bush or Congress) - but people didn't pay any heed to the rational voices trying to explain the situation.
  • Uncle Joe 2009/01/12 18:58:56
    Why really need to find alternatives.
    Uncle Joe
    +1
    We have all the technology and all the alternatives & the banks are sewn up tight by the federal government so don't expect venture capital from the banks or the government. It's business as usual.
  • PigsOnSoma Uncle Joe 2009/01/12 19:40:14
    PigsOnSoma
    And investors have cold feet...
  • Ric O'Shea® 2009/01/12 16:54:03
  • PigsOnSoma Ric O'S... 2009/01/12 17:55:48
    PigsOnSoma
    Not to mention those who are dependant on home heating fuel. But now that the stock market has collapsed the truth finally emerges.
  • Jcap ~ Peace ~ 2009/01/12 16:01:24
    Why really need to find alternatives.
    Jcap ~ Peace ~
    +2
    Thanks, lots of info to absorb here. I bookmarked the links to read later. We do need to begin developing alternative sources of energy, clean energy where costs won't be predicated on the futures market...and a big thank you to Bush and Cheney for deregulating the futures market - on Enron's behalf! Way to go guys!
  • PigsOnSoma Jcap ~ ... 2009/01/12 17:56:57
    PigsOnSoma
    +1
    The problem isn't so much in developing, for we do have quite a lot available in new technology - the problem is getting the greedy to manufacture things they see as less profitable.
  • Go Green Jcap ~ ... 2009/01/12 19:52:15 (edited)
    Go Green
    +1
    You make good points Jcap. Also if the feds will take away the oil & coal subsidies, fund solar panel install education, put major solar/wind tax breaks into the tax code, get the car makers to make wind turbines, fund solar power generation/distribution projects & the like we can attack two three problems at the same time: 1. Oil dependency 2. Global warming 3. Unemployment/Economy.
  • Jcap ~ ... Go Green 2009/01/12 20:46:37
    Jcap ~ Peace ~
    +1
    Yes - but i fear big oil and gas will fight it tooth and nail. I'm sure their lobbyists are already fighting it.
  • KUDABUX 2009/01/12 15:37:00
    Why really need to find alternatives.
    KUDABUX
    +4
    Terrific piece!
    But I am buying my alternative: alternatives terrific piece alternative
  • PigsOnSoma KUDABUX 2009/01/12 17:57:17
    PigsOnSoma
    +3
    Save me a seat! :)
  • flyer9753 2009/01/12 09:33:32
    Why really need to find alternatives.
    flyer9753
    +2
    well put together! :)
  • mztims 2009/01/12 04:50:44
    Why really need to find alternatives.
    mztims
    +6
    This was a thoroughly researched piece! I have always felt that we need to seriously explore alternative fuels.
  • PigsOnSoma mztims 2009/01/12 11:43:57
    PigsOnSoma
    +2
    The sad thing is that we have the technology to do it, and have had for a while. The money wasn't in it though. This is one of the more interesting 'fuels' to be invented recently - but I'm not holding my breath that this will be used for anything but specialty applications.

    http://web.mit.edu/newsoffice...
  • Jcap ~ ... PigsOnSoma 2009/01/12 16:09:27
    Jcap ~ Peace ~
    +2
    >In one hour, enough sunlight strikes the Earth to provide the entire planet's energy needs for one year.<

    This does sound promising - If Exxon/Mobil could figure out a way to claim ownership of the sun, we'd have this technology widely available - tomorrow.
  • PigsOnSoma Jcap ~ ... 2009/01/12 17:59:13
    PigsOnSoma
    +1
    They're also working on fussion reactors which are awesome works of physics - of course tapping into the sun's power is a goal among nerds, less of profiteers.
  • mztims PigsOnSoma 2009/01/12 16:39:57
    mztims
    +1
    I know, and that is one alternative that I would really like to see them explore!
  • just me 2009/01/12 04:48:28
    Why really need to find alternatives.
    just me
    +2
    Great post. Saw the 60 minute run tonight. Really isolates the cause of inflated oil prices. Shows how much wall street speculators in the futures market and lack of regulation was the major cause.
  • Warren - Novus Ordo Seclorum 2009/01/12 04:32:25
    Why really need to find alternatives.
    Warren - Novus Ordo Seclorum
    +2
    Lots of great information, nicely compiled with links. I agree that you have hit the nail on the head as to the real reason for the war on terror. Namely, propping up the U.S. dollar while opening up access to Mideast oil for the western multinationals (Shell, BP, Exxon-Mobil, etc.). The CBS 60 minutes spot looks like corporate propaganda designed to obscure the real agenda. Since when is corporate America skeptical of the rationality of markets? The whole point of the futures market is to smooth out prices by factoring in long term trends, so why are they surprised that the futures price doesn't always reflect current supply and demand? The real reason, I believe, for the turn around in oil prices is that there was skepticism about the ability of U.S. and British oil companies to develop Iraqi oilfields given the uncertainty there. When the Iraqi government signed no bid contracts with Exxon, Shell, Total, Chevron, BP in July, oil futures dropped like a rock. Precisely when crude toppd $147/bbl:

    bp july oil futures dropped rock precisely crude toppd 147bbl
  • PigsOnSoma Warren ... 2009/01/12 11:40:24
    PigsOnSoma
    Yes - and fortunately our hands were tied with Iran. I've been reading rumors that Israel had approached the US for assistance in bombing Iran, but Bush rejected their request. I guess the master plan had been crumbling at that point.

    http://www.guardian.co.uk/wor...
  • nada 2009/01/12 03:38:19
  • Bring it ~STS~Freewill Dirt... 2009/01/12 03:36:49
    Why really need to find alternatives.
    Bring it ~STS~Freewill Dirty Pheonix
    +3
    I seen that tonight.....hmmmm I am a bit skeptical....lol
  • PigsOnSoma Bring i... 2009/01/12 03:39:09
    PigsOnSoma
    +2
    How so?
  • Bring i... PigsOnSoma 2009/01/12 03:41:52
    Bring it ~STS~Freewill Dirty Pheonix
    +3
    All the links you posted....there was a special on TV tonight excluding the Ron Paul link..lol
  • PigsOnSoma Bring i... 2009/01/12 03:44:24
    PigsOnSoma
    +2
    This was the special. :)
  • Bring i... PigsOnSoma 2009/01/12 03:46:19
    Bring it ~STS~Freewill Dirty Pheonix
    +2
    Yes..Thats what I said..your video.. it was on tv tonight..
  • thewrit 2008/10/16 01:54:43
    Why really need to find alternatives.
    thewrit
    +4
    flex fuel engines already exists. the problem it raises commodities prices like maize and sugarcane and steal lands used for food. but in the short run we wont suffer from energy black out. what we need now is to find clean energy.
  • PigsOnSoma thewrit 2008/10/16 02:10:26
    PigsOnSoma
    +3
    I tend to agree that the commodities costs will increase pretty quickly if we rely on them as the only source. Electric cars, by independant manufacturers are going a long way right now - and gaining quite a following. The solar fuel cell that was just invented looks extremely promising as well, but that is years from viable implementation.
  • brob1969 2008/10/15 21:57:29
    Why really need to find alternatives.
    brob1969
    +3
    We have had the alternative right here since long before we had fossil fuel. Read as much as you can about the prohibition or the Volstead Act then let me know what you think. alternatives alternative fossil fuel read prohibition volstead act
  • PigsOnSoma brob1969 2008/10/16 01:31:08
    PigsOnSoma
    +3
    Also the heavy tax on alcohol (to my understanding) which makes (made) burning alcohol prohibitive (more recently).

    Are you trying to tie alcohol prohibition in with the death of alcohol fueled cars? I haven't heard that before, but it's an interesting theory. Much like the paper industry and hemp. So much for free markets. :)

    Personally I'd rather not burn. MIT just invented a solar fuel cell, which to me holds the most appeal, but in the meantime, should we need a new car we probably will do electric - since we're planning a solar array for our house.

    But I don't think we, as a nation, should limit ourselves to any one fuel that puts us at the mercy of one industry. Especially in an unregulated free market - where money is made on future's markets, short trading, and other devious angles that have nothing to do with productivity.
  • brob1969 PigsOnSoma 2008/10/16 02:17:52
    brob1969
    +4
    When you really read into the whole of the circumstances surrounding the Volstead Act you begin to see that it had little or nothing to do with drinking; the WCTU (which incidentally was funded by John Rockefeller, founder of Standard Oil) was the proverbial lipstick on the pig of prohibition. At the time there were a number of vehicles in production worldwide that were designed to run on clean-burning renewable alcohol fuel; among these was the Model-T. Henry Ford was a big proponent of agricultural based fuels and products; his idea ultimately was to usher in alcohol as the main source of fuel for the world. The Volstead Act conveniently prohibited ALL production of alcohol including ethyl-alcohol used for fuel which was the main source of energy on most farms at the time.

    A few times since then alcohol has almost made a resurgance but was quickly put to bed by oil interests; most recently the myth that biofuels were causing food shortages put a damper on the re-emergence of alcohol for fuel. The truth behind this propaganda is that the byproduct of alcohol production from non-cellulose sources is a food that is more easily digestable by animals actually producing about 1.4 times the amount of food per acre than raw corn crops. Cellulose based alcohol production leaves a m...

    When you really read into the whole of the circumstances surrounding the Volstead Act you begin to see that it had little or nothing to do with drinking; the WCTU (which incidentally was funded by John Rockefeller, founder of Standard Oil) was the proverbial lipstick on the pig of prohibition. At the time there were a number of vehicles in production worldwide that were designed to run on clean-burning renewable alcohol fuel; among these was the Model-T. Henry Ford was a big proponent of agricultural based fuels and products; his idea ultimately was to usher in alcohol as the main source of fuel for the world. The Volstead Act conveniently prohibited ALL production of alcohol including ethyl-alcohol used for fuel which was the main source of energy on most farms at the time.

    A few times since then alcohol has almost made a resurgance but was quickly put to bed by oil interests; most recently the myth that biofuels were causing food shortages put a damper on the re-emergence of alcohol for fuel. The truth behind this propaganda is that the byproduct of alcohol production from non-cellulose sources is a food that is more easily digestable by animals actually producing about 1.4 times the amount of food per acre than raw corn crops. Cellulose based alcohol production leaves a mash that is excellent for compost and soil building that increases food crop production and actually helps restore soils depleted by monoculture (industrial farming). Mash used by an animal (manure) can be put into an anaerobic digester and used to produce methane gas which can be used to fire a turbine to generate electricity.

    Alcohol burns readily in internal combustion engines, it is now much cheaper than gasoline to produce, it extends the life of an internal combustion engine as there are no hydrocarbons to leave deposits on the inside of the engine, and it produces almost no emissions. These facts are exactly what the oil industry does NOT want us to know. I agree that we should not rely on only one technology, look where that has gotten us with oil, but we can transition to alcohol immediately and produce ALL of our fuel supply domestically.
    (more)
  • brob1969 brob1969 2008/10/16 02:19:45
    brob1969
    +4
    BTW: Alcohol fuel is solar energy.

    Plants store solar energy as sugars and starches; alcohol production is one method of utilizing this energy.
  • PigsOnSoma brob1969 2008/10/16 02:32:47
    PigsOnSoma
    +4
    Good points - thanks for the info. Two points -

    One it is said that the Congo *could* singlehandedly supply the world's food needs - so in that regard the shortage thing seems rather overblown - but with markets trading the way they do, and what they have sold the public in misinformation - begs the obvious question: how do we control costs in a future's and scam driven marketplace? We know they will use any excuse, such as drought, to hyperinflate costs.

    Point two - is what if ethanol production where severely impacted, by drought/disease/etc...? The way farms operate is to generate as much income as possible, thus not overproducing any particular crop. As a result an event could trigger a shortage, which in turn would end us in the same situation we are in with oil today.
  • flyer9753 PigsOnSoma 2009/01/12 09:50:10
    flyer9753
    +3
    I see you mention hemp above in relation to the volsted act.

    One thing to remember about hemp is that hemp makes a wonderful biofuel and can grow almost anywhere in almost any soil and actually will turn normally non-farmable land into farmable land, and takes no fertalizer and few if any pesticides to do it. It also does it in 90 days instead of corns longer season times. Corn and other crop farmers would like to use hemp to be able to rebuild the soil between corn and other crop plantings (crop rotation).

    With this in mind a large amount of our energy demand could be met with hemp and have little if any impact on food production land, corn prices, etc... with little affect from drought/disease/etc... because it can be grown in such diverse areas.

    I saw the Solar Cell you mentioned and while I think we will get there for transportation eventually we are not there yet, which means we will still have to keep some form of fuel.

    I like solar for homes and grid energy production but not transportation, although I do like your idea of an electric car recharged from the house solar grid.

    I am also putting a house together that will be solar :)
  • PigsOnSoma flyer9753 2009/01/12 11:48:42
    PigsOnSoma
    +2
    I agree hemp has a lot of potential - and fortunately the public attitude is turning around on that one.

    MIT just unveiled a solar fuel cell, but it's not demand that will hold this back - it's investors and their ilf.

    http://web.mit.edu/newsoffice...
  • flyer9753 PigsOnSoma 2009/01/12 21:10:19
    flyer9753
    +2
    yes slowly it is

    I like the fuel cell technology and you are right, it's lack of investment that is keeping it from being viable right now.

    That is really the case with all the alternatives right now. If we spent a quarter of the money that has been spent on a war for oil we would have a big step up on making that and other alternatives viable.
  • Warren ... PigsOnSoma 2009/01/12 13:32:30
    Warren - Novus Ordo Seclorum
    +1
    I'm skeptical of claims that the Congo could supply the world's food supply. Maybe by wiping out every nonhuman organism and ecosystem in Africa while doing so? I have heard that there is not enough arable land on the planet to feed the existing population a typical Western diet. I believe at some point, destroying an acre of tropical rainforest for cropland will indirectly through climate change cause the destruction of 10 acres of dry range land used for grazing animals into desert. At some point in the near future, Earth reaches its carrying capacity.
  • PigsOnSoma Warren ... 2009/01/12 18:56:54
    PigsOnSoma
    +1
    Land-wise, I believe. The problem, of course, in Africa has little to do with land, but rather war. Most of fertile Africa has naturally two growing cycles - which is unusual for much of the world.

    But you're right - we would probably do a lot of damage if we implemented such a thing - and I could never support such a ridiculous idea, as I tend to favor as much local grown produce as possible. The point I was trying to make is that the food shortage is a man-made constraint.

    As far as the rainforests go - Brazil needs to be stopped. The havoc they're wreaking to the planet is immeasurable. Of course it might behoove us to consume less from that part of the world.

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