US and Asia’s four largest powers voiced concern on Saturday after a record spike in oil prices, as worries grew that energy costs may derail the global economy. US, Japan, China, India and South Korea account for over half the world’s consumption of oil. They agreed that more petroleum should be produced to meet rising demand.

World oil production has stalled at about 85 million barrels a day since 2005, while global economic growth, boosted by spectacular surges in China and India, has pushed demand to unprecedented levels.

http://hosted.ap.org/dynamic/stories/O/OIL_MEETING?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2008-06-08-05-31-41

Oil prices have gone up 5-fold since 2003 and posted their highest in a one-day jump of $10.75 to close at a new record of $138.54 per barrel in NY Mercantile Exchange after bearish remarks by an Israel official on oil producer Iran.

However, there is always a close correlation (may not be exactly one-to-one) between the futures prices and spot prices of any commodity, if one understands how the commodity markets work.

Spot prices are up as well from the various oil supply sources. See tabulation below (last updated on Jun 4, 2008):

http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm

Excerpt from WTRG Economics’ Energy Economist Newsletter: “One of the most important factors supporting a high price is the level of petroleum inventories in the U.S. and other consuming countries. Until spare capacity became an issue inventory levels provided an excellent tool for short-term price forecasts. Although not well publicized OPEC has for several years depended on a policy that amounts to world inventory management. Its primary reason for cutting back on production in November, 2006 and again in February, 2007 was concern about growing OECD inventories. Their focus is on total petroleum inventories including crude oil and petroleum products, which are a better indicator of prices than oil inventories alone."

The west have realised their follies and have moved their bad habits to Asia and influenced the emerging Asian economic powers to "inherit" and continue their mistakes. Part of the big oil company's conspiracy? Case in point is the production and use of gas guzzlers in Korea and China. GM and Chrysler are trying hard to phase out production of big vehicles (SUVs and Hummers) in continental USA for sales of these big ticket items have decreased tremendously since the rise of crude oil prices and unemployment/foreclosures. China and the other Asian nations should instead develop their own strategies of using alternative energy sources and not copying wholesale from the west. Consequences of such copying have resulted in increased pollution and increase in national consumption of non-renewal energy resources which threatens national security.

Many western countries have to continue to maintain their inventories of this non-renewal energy source for many of their defense mechanism still relies on use of this product. Unless of course, other means are found for the killing machines. IN US, the amount of crude oil in reserve has a tremendous influence on the price of crude oil. Furthermore, many countries lack the capacities to refine crude oil. Iran in spite of being an oil producer, does not have the refining capacity and has to rely on Turkey for its petroleum. Similarly, in US, the amount of refining crude oil is quite limited and should a disaster happens to one of the current operating refineries, then the price of gasoline will go up. The bottom line is to get away from relying too much on petroleum products.

Crude oil is the mother of all commodities, from which many petroleum products are derived – from gasoline, distillate fuel oil, jet fuel, petroleum coke, still gas, down to lubricants, kerosene and waxes. We can’t do without many of these petroleum products and by-products. Even our toilet piping system is made entirely of uPVC, a petroleum by-product.

More price hikes lie ahead. Iran’s representative to OPEC said on Sunday the crude oil price could reach $150 per barrel by end summer. He cited the weak US dollar and the Middle East situation, without elaborating.

Iran is the 4th largest oil producer in the world.

http://uk.reuters.com/article/oilRpt/idUKDAH84904320080608

Crude oil prices are likely to stay above US$100 a barrel for the next few years, warned an oil industry expert at a deepwater drilling forum yesterday.

Mr Michael Rodgers, a partner at global oil consulting PFC Energy said deepwater sources of crude oil would become increasingly important amid dwindling supply. Deepwater oil production typically involves any oil rig operating in waters deeper than 400 metres. (It is also known as offshore oil production.)

OPEC has probably depleted its reserve base by 40%, which is predicted to fall further by 1% per year and reach the critical depletion level of 60 % in the later part of next decade, he warned.

Growth will come increasingly from unconventional sources, such as deepwater exploration and production, which will account for a combined 75% of new production.

In Asia, there are 11 deepwater players, including GHB Billiton, Chevon and Petroleum Nasional. Deepwater wells are present in China, Indonesia, India, Malaysia and more will be drilled over the next few years. As the result, the cost of renting a drilling rig for a day is expected to increase over the next few years.

Deepwater production for the major oil players is expected to peak in 2011 and 2012.

Source: Yang Huiwen, Straits Times reporter, Friday, Jun 13, 2008

"When I was your age"

Source: Joke of the day.com

So where do we go after all the off shore drilling? An alternative fuel supply must be found. Like the cartoon indicates, perhaps it is time we need to return to the old days of stretching our legs and walk the few miles instead of using the cars.

I was told by a friend in Toronto that the longest street in the world is Yonge Street in Toronto.

How long would it take then to walk from the start of that Street shown below?

It's a pity that huge suburbs nowadays are not planned with "walking" in mind, eg, walk to shops, walk to school, walk to the park.
With the heavier traffic and monstrous SUVs sharing our previously quiet side streets, it is no longer safe for children to play and walk unsupervised.

Why are oil prices so high?
Are we reaching peak oil and running out of the black gold?
Are supplies disrupted, or is the high price a reflection of oil company greed or OPEC greed?
Are Hugo Chavez and the Saudis conspiring against the rest of the world?
Actually, the two biggest factors in oil’s high price are the recent weakness in the US dollar’s exchange value relative to other major currencies and the liquidity tsunami that the Federal Reserve has unleashed in the global banking system.

The Fed is literally pouring out liquidity just to sustain the speculation in oil futures market, while the dollar is weak due to the twin deficit : Trade and Budget.

The prospect of an Israeli/US attack on Iran has also increased current demand in order to build stocks against potential disruptions.Given the fact that Obama has recently pledged allegiance to AIPAC and adopted Bush’s position toward Iran, the high oil price could be a forecast that US/Israeli policy is likely to result in substantial supply disruptions, and the recent Israeli statements that an attack on Iran was “inevitable” also spooked oil speculation to dizzling heights....

Nonetheless, the Saudis, Hugo Chavez and the rise of China/India make perfect scrapegoats!

Little Egret:

Quote:

I was told by a friend in Toronto that the longest street in the world is Yonge Street in Toronto.

Well take this long tale with a grain of salt. Yes, Yonge Street is a pretty long street in Metro Toronto and is a good place where you find vagrants and run aways from other smaller towns and other provinces. The name of the street will change as you get out of Metro Toronto and it becomes Provincial Highway 11. If one considers Main Street, it can be considered one of the longest streets too like what your friend believes. You see most Main Streets are part of the main Trunk Highway and we named it the Trans Canadian Highway, once the street ends at the city boundary.

GooBai brings out some interesting ideas for a change. There is no doubt the OPEC members are concerned about their revenues as they are based in USD. The falling USD is no consolation if the price is no more at the level you have been quoted a while back. The Iranians are smarter to have their oil revenues in appreciative Euros. Nevertheless, the people hurting the most are those in poor countries of Africa and Asia.

Crude oil price has rocketed to US$140 a barrel yesterday, despite news that Saudi Arabia is ready to raise output to help cool soaring energy costs for consumers.

NY oil futures reached US$139.89 for light sweet crude against its previous all-time high of US$139.12 on June 6.

As a consumer, the way to react to high energy costs by giving up driving cars, where possible, is not only a good suggestion, but, a common sense as well. But walking everyday to work, to school or anywhere you go regularly is counter-productive, as you may collapse due to dehydration or exhaustion. Walking this way also takes so much of your time that you might as well stay at home, because you’re not on a walking or hiking trip every day.

A better solution is to follow examples in some countries (Denmark, Holland, etc) where many people cycle to work instead. A Danish managing director of a large engineering and construction firm once told me more than 30 years ago that he always cycled to work every day and enjoyed the countryside as well. The oil price at that time was nowhere near what it is today.

With a bicycle, one may still be able to cycle the longest street in Toronto and reach its end near ‘North Pole’ where Yonge Street is supposed to end, said my friend in Toronto.

I'm not sure if it would be pleasant or even safe to ride bicycles on the congested roads of big cities. Bicycle tracks in parks perhaps, but no dressed in office attire or school uniforms, fighting the crowds in the sweltering heat and breathing in smog. Thanks but no thanks. Buses and trains are better options.

I've observed an interesting banter in another discussion board and thought of sharing this with forumers here.

A poster (let's refer to him as Mr T) attempted to use mathematical arguments to "prove" that oil price increase isn't such a big deal as people made it out to be. His calculations are as follows :

Quote:

1955 Gasoline .29 a gallon Median home price 10950.00 Median personal income 1913.00 GDP 2509 2008 Gasoline $4.05 a gallon Median Home price $243,000 Median personal income 39,774.55 estimate GDP 45819 (2007) 1955 gas price/1955 median income = 1 gallon of gas costing 0.01516% of that year's median income... 2008 gas price from the estimated median income 2008 Gas price/2008 median income = 0.01018% of this year's estimated income... If you want to freeze income at least years median income (38617) and use today's gas price in the equation a gallon of gas costs 0.01049% of 2007's average personal income... Lesson learned: gas is SLIGHTLY cheaper today in today's dollars than it was in 1955 in 1955 dollars. I did the same for housing... and found that in 1955 a house cost 5.72 times a years pay... in 2008 a house is 6.11 times a years pay. Housing is more expensive by about .4% and gas is roughly the same though slightly cheaper... The rub on gasoline is that over the past 20 years gasoline prices stayed roughly the same... until about 2002 or 2003... I remember seeing 89 cents for a while in late 1998... So the question is... is the economy REALLY doing that bad... You could compare GNP in 1955 dollars to GNP in 2007 dollars to find out... GNP in 1955/avg personal income = 1.31 GNP in 2007/avg personal income = 1.19 The economy is doing slightly worse than in 1955... .12 units (I thin thats .12 trillion... We really need to be complaining about housing... We really need to increase our productivity...

Surprisingly, there were at least two other posters who agreed with Mr T's thesis.

This reply was posted by a sole detractor :

Quote:

"In the old days, most people rode the bicycle or took the public transport. For the rich, paying a few dollars more for petrol may not hurt them. It is always the poor that gets hurt disproportionately and it is hard for the rich people to understand when they look at the math of the average. What about a comparison of the rich-poor gap today with the top dogs earning an obscene amount of money and they deserve their private jets, don't they?

My first guess is most of the posters are in the payroll of speculators and analysts on the take of oil suppliers who have a strong stake to keep price of oil high. Another guess is that these posters must be filthy rich and are unable to understand the economic crunch and pain that the average income earner and poor families are going through currently - putting sufficient food on the table, basic transport costs to work, cutting down all all accessories, making mortgage repayments, utilities bills, cost of education, etc. Many of the big ticket items are tied to the abdominable price of oil. We can't go back to the stoneage and would have to live with the minimum payments even if we want to keep expenses down to survival mode. What do you think?

Iran's Ahmadinejad says oil price artificial
http://www.todayonline.com/articles/260098.asp

Quote:

Ahmadinejad, who is president of OPEC's number two producer, has repeatedly said that the current high price of oil is not based on fundamentals and driven largely by the weakness of the dollar.

Iran urges oil exporting states to use alternative currencies instead of U.S. dollar
http://english.people.com.cn/90001/90777/90854/6431919.html

Stop the Oil Speculators
http://www.nader.org/index.php?/archives/1276-Stop-the-Oil-Speculators.html

Geez this is spooky...did the Iranian leader just read my previous post that high oil prices is due to weak US$ and speculation????

[quote="XP"]

Quote:

Goobai, much as I would like to credit you and us for doing a good job here, I really doubt it. If you sincerely wish to ensure we could reach out to a larger audience, one way might be to tell your friends what a great discussion platform we have. With more readers and visitors, we can get our message out to the world. Pass the word around.

No worries mate, just keep the martini free-flowing!

I can see vast differences in : James Bond, KGB spy, speculators on the payroll of oil sheiks.

The first is imaginary, perhaps, the dream of every man.

The second was feared in the past, but no different from present day CIA or MI6.

Finally, the most feared are these spineless and moral-less manipulative stooges on the take who don't care much about the welfare of the majority.

For some fun on the facts and fiction of spy stories, please follow the link :

http://oneworldtalk.freeforums.org/spooky-coincidences-of-cloak-and-dagger-t1296.html#4128

The history of oil shocks tell us that whichever country exerts a significant influence on the major oil producing regions, that country also controls the distribution of this precious mineral and determine its price....
Geopolitics plays a big role in the price of oil. The US directly and indirectly controls the major oil-producing regions(Middle East) and its distribution channels, thus enabling her to control oil prices in US$.
Since manufacturing only takes up 13.6% of the US GDP, in which the lucrative weapons sector constitute 7%,
the rise in oil prices will have a small effect on exports competitiveness.

We all know that with every dollar increase in oil price, Bush/Cheney and their oil buddies would be laughing all the way to the banks.

Furthermore, as oil price continue to rise, bio-fuels suddenly becomes economical, creating new value chains for the oil and agricultural industries. However, this result in rapid global inflation( especially food prices) hitting many new economies and developing nations, such as Vietnam (inflation rate 20%) and Russia (14%)...therefore, despite the 'credit crisis', the US will maintain its world economic superpower status.

Kissinger once mentioned:
"Control oil and you control nations; control food and you control people."

Controlling oil is at best a wishful thinking on the part of the American leadership. They won't have suffer from severe military and financial losses if they had the gold in the bag. The world has evolved into a sophisticated financial and political networks that it would be futile to point to one single factor especially for a complex issue such as oil involving many stakeholders.

Extracts from :

http://www.smh.com.au/news/national/rudd-fingers-financial-speculators-in-oil/2008/06/19/1213770827377.html

PM Kevin Rudd blamed financial market speculators for contributing to high oil prices on 19 Jun 08, while continuing to reject Opposition calls for a cut in the fuel excise to ease petrol prices at the bowser.

Rudd told Parliament there were increasing concerns in the international community about the role of excessive speculation by financial institutions trading oil as an investment like shares and currencies.

He pointed to moves by United States regulators to impose limits on hedge funds and other investors trading in oil futures contracts and by the International Monetary Fund to examine the role of speculators in recent surges in oil and commodity prices.

Political leaders around the world, ranging from the Iranian President, Mahmoud Ahmadinejad, to the European Union energy commissioner, Loyola de Palacio, have blamed financial market speculation for high crude oil prices.

But many economists say politicians are using speculators as scapegoats. They say the oil futures contracts traded by investors cancel each other out and do not affect physical supplies of oil.

The Minister for Resources and Energy, Martin Ferguson, will fly to Jeddah tonight to attend an international oil summit called by Saudi Arabia. He said the meeting would be an opportunity for oil-producing and consuming nations and industry to tackle the complex factors driving uncertainty and volatility in oil markets.

Australia would push five issues at the summit: boosting foreign investment in oil-producing countries; encouraging OPEC countries to increase production; improving transparency in oil markets; increasing refinery capacity for diesel, jet fuel and kerosene, which are in especially short supply; and helping poor countries to reduce fuel subsidies.

Mr Ferguson has expressed concern that oil prices are being driven up by several complex factors including instability in exporting countries, threats of terrorism, a lack of investment and the emergence of a new form of "resource nationalism" where consuming countries are scrambling to strike exclusive supply deals.

High oil prices are also feeding into the US political debate where President George Bush is pushing to lift a 27-year-old ban on offshore drilling for oil.
Mr Bush challenged Democrats in US Congress to drop their "obstruction" of proposals to expand domestic energy production.

Again it is not as simple to generalise and try to fit every single ïncident into a preconceived theory :

Quote:

Western oil companies such as Exxon-Mobil, Total, BP, Shell and Chevron are in the final stage to "partitioning" the Iraqi oil pie.

- according to Goobai.

I won't totally dispute it. Oil was a motivation for the invasion of Iraq but US had to pay heavily for the venture and it didn't turn out according to plans.

What do you expect with oil continually rising to unaffordable levels? This is the one of the practical ways the western companies could do to ease the pain. Of course, it is also a good pretext and timing to get into the picture with limited damage from fingers pointing at ulterior motives and greed.

Every avenue is being considered to increase supply of oil, including thedrilling of US oil deposits which faces strong resistance domestically. Iraq is just one of them.

That's call making scraps out of a terrible situation. It was certainly very different from what they pictured when Bush removed Saddam. No free flow of oil at US command and it was no easy walkover. Iraq war has caused a reduction in oil output, oil prices to sky rocket, a drain on US coffers, and the political backlash on domestic and international fronts. What caused the US dollar to plummet?

Seems like the recent strengthening of the US dollar(leading to drop in oil price) and the rallying of the US stockmarket has send a very strong signal to investors....the Fed has began to "pull back the net" as the US$ starts to strengthen (attracting funds back to US).
What better way to distract the crowd from recession?.......start the war against Iran!