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blessedinnyc -> RE: Gas Prices Going Up!! (3/24/2008 5:29:24 PM)
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ORIGINAL: FurGodWurLivin
Thank you OPEC... Basically, they are little more than a cartel.
In the past five years, OPEC production has increased. This pushes the supply curve out, and as a result, the price is lower than it would be if it weren't for OPEC's production increases.
What's really gotten us is consumption. Voracious consumption from India, China, and the US has driven up oil prices significantly.
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As for the US oil capacity. We haven't built many new refineries because we have environmental activists.
Actually refinery capacity has increased dramatically in the past five years, due to on-site expansion.
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Why do we not get rid of oil-burning power plants and build nuclear to reduce our consumption of oil? Because it makes too much sense.
Because it takes $2.5 Billion and seven years of design, construction, and safety testing to build a safe nuclear power plant. Sure, we can do things like the USSR did them, but when you have a design as ill-conceived and cheap as the RMBK, you run into problems (Chernobyl was an RMBK.)
The concrete containment dome- which reduces the risk of a disaster like Chernobyl by a factor of roughly 100 (reducing the risk of an above-ground breach of containment at a nuclear reactor from roughly 1 in 500 reactor years to closer to 1 in 50,000) used to take about 18 months alone to build back in the '70s and '80s. GE and Westinghouse claim their designs allow for reduced construction times, but still, building a nuclear reactor isn't simple.
Also, last I checked, 17 reactors were under early site approval. This number has likely gone up significantly; the NRC expects along the lines of another 70-80 early site approvals to be filed by 2020.
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No, we are not being run by "big oil", but we are too dependent on oil. The problem is that we have exploding demand thanks to emerging economies in India and China, and we have shrinking exports thanks to OPEC reducing production.
The problem is also that we have a market that can't see more than three years into the future. Any utility that decides to build a nuclear plant today has to take accounting losses- losses that go out on the 10Q's and 10Ks- for five to ten years before they see a dime out of the plant. In the meantime, the foolish CEO who approved the project is likely long-gone.
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So the price of oil is artificially inflated, but not by Haliburton or Exxon-Mobile.
Not necessarily true. This comes from someone who owns oil stock and follows the oil and energy industry very carefully.
Confidential documents from the API, for example, made it to mainstream news sources about two years ago detailing how the API had worked to reduce refining capacity during the '80s and '90s. During that time, there was a huge glut of oil capacity, and as a result, the crack spread (think of it as the difference in cost between a gallon of crude oil and a gallon of 87-unleaded gasoline) widened significantly between 2000 and 2005.
When Katrina hit, that just exacerbated the problem. However, in the wake of Katrina, new capacity has come online at existing refineries in the US. Additionally, refineries worldwide are also manufacturing more gasoline that can be used in the US.
Another interesting fact is that Chevron currently holds the patent to a technology that can extend battery life in Hybrids from ~20 miles of gas-free driving to ~40 miles. I should know, because I was a Chevron shareholder for two years! Both Honda and Toyota made offers to license or buy the patent, but Chevron was interested in sitting on it.
So, while in most cases, oil companies haven't worked to increase demand or reduce supply, it's not totally fair to say that Big Oil is a great wonderful institution that demonstrates how capitalism brings about the greater good in the oil markets. In all honesty, the major oils are businesses interested in maximizing profits. If reducing supply in a way they could get away with would be a way of increasing profits, most oil majors would do so in a heartbeat. Indeed, when it comes to the refining industry, many refiners have done just that.
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