Why are oil prices so high?

[StClone]

Neal Conan had a guest on NPR's "TALK OF THE NATION" today that talked about China's increased consumption, India's increase in demand and both attempting to develop and fill strategic oil reserves. Another reason is increased hedging by Asians on oil prices because they figure the dollar will weaken and the hedge price will be less than the real future price.

Neither the guest nor the callers made the connection between the middle east (Iraq) and high oil prices.. Maybe I missed it, but wouldn't that be the number one reason?

Any links to oil prices?

[Warpy]

1. No, there are several factors

The main one cited for the present buyer panic is the collapse of Yukos Oil in Russia and the threat of the loss of that source of supply, at least in the short term. This is a panic situation in the futures market, and these prices won't last forever.

The long term upward pressure comes from developing markets in China and India, mostly. Imagine a billion plus people in both countries on gas powered scooters, let alone cars, plus increasing energy demands to run all the industries we've gifted them with. This pressure on fuel prices is not going to go away.

Then there's the continued disruption of the supply from Iraq, plus the potential meltdown in Saudi Arabia when the old king finally dies, plus the mild reforms Chavez is instituting in Venezuela, all minor pressures.

The oilmen are scared, and this is what is driving prices. Some of these factors will ease. The developing market factor will not.

Dollar a gallon gas is a thing of the past. However, we may not have to pay over three dollars for long.

[fertilizeonarbusto]

2. There's also

the Arabs cashing in before * and Dick leave office.

[lapfog_1]

3. Iraq some some impact

but not much. The world has, for the most part, done without
Iraqi oil for well over 14 years. The "oil for food" program,
even with the well documented cheating that was going on, didn't
put that much oil into the world market. So the fact that Iraqi
oil production is still limited hasn't caused a huge run up
in oil.

The culprit(s) here are

a. speculation - people see something going up and jump on the
bandwagon, buying futures contracts and selling those contracts
in the next few days when oil hits another high.

b. increased world wide demand - China, India, etc all need refined
oil products to meet the demand of their expanding economies.

c. Worry over Iraq insurgents, Saudi terrorists and the possibility
of disrupted gulf region oil supply

d. The ongoing soap opera that is Yukos (which barely gets a mention
in the news here)

e. The very real possibility that the world has reached peak oil.

f. The increased popularity of SUVs and other low mileage vehicles.

And... finally...

g. The US (and maybe other nations) are buying oil on the open
market and filling strategic reserves, even while spot market
prices reach record highs. One has to wonder why? The last
time the world had a speculative oil crunch, Clinton released
oil from the strategic reserve, Bush is still FILLING it, without
even a slow down in purchasing.

[Seggie]

4. Link to petroleum prices

Note: This site is updated every Tuesday. These figures are from last week, updates tomorrow or Wednesday.

http://tonto.eia.doe.gov/oog/info/twip/twip.asp

[newyawker99]

5. Hi Seggie!!

Welcome to DU!! :toast:

[MallRat]

6. Refinery margin is a big reason why prices aren't even higher.

I just learned about this from ABC last week. Oil refiners tack on a margin, and will adjust that margin based on demand. US demand for gasoline has already peaked for the summer, so the oil companies have started to drop their margin just as crude prices are skyrocketing.

This is just about the only reason why gas prices have stabilized in the $1.90-$2.00 range. However, the seasonal cycle of the refinery margin downturn is just about over, and some refineries are switching over to heating oil in preparation for the winter. This will cut gasoline supply, and the demand will catch up pretty quickly.

Pretty soon, those $50/barrel prices will start being reflected at the pump. Unless Uncle Bandar has something up his sleeve, we could see $2.20-$2.30 a gallon, nationwide, by Election Day.

-MR