We are Doomed! DOOOOOMMED I say!

[CKay]

Oil prices around the world are climbing, because Iran is instigating tensions between the US and Europe (whom are both instigating economic sanctions against Iran.) This is all "normal" economics and finance, given Iran is forcing a confrontation with the rest of the world, over their desire to have nuclear weapons.

Here's an interesting perspective:

http://www.golemxiv.co.uk/2012/01/a-new ... of-hormuz/

For the US, it's all about protecting the petrodollar.

[Skipjack]

Skippy, what you think oil prices "ought to be" has no real world relation.

Well for one they ought to be controlled by a free market. Currently they are not.

It's the cause of international oil prices that is the real issue.

Yes and no. A crisis somewhere usually causes a short term peak, but that should go away once the crisis is resolved. But if you look at the long term trend, then oil prices have been rising disproportionally for decades now. It is not due to peak oil or anything.
Part of that is due to speculation, which in itself is an issue. Part of the problem however is that the oil producers are regulating the supply and the base price to their liking and they are all talking with each other making sure that they all supply the oil at roughly the same price. If not, then why is there nobody underbidding everybody on the market?
The whole Iran crisis is just an excuse for them to raise the prices again. If it was not that, then it would be something else.

[GIThruster]

For the US, it's all about protecting the petrodollar.

I don't think so. In my conversations over many years, I think it is all about protecting the world from Islamo-fascism. if you don't understand what Islam teaches, then you don't understand the greatest threat to world peace.

Islam has always been and will always be, the greatest threat to peace this world has ever seen. If you don't believe this, read the Koran.

[GIThruster]

Yes and no. A crisis somewhere usually causes a short term peak, but that should go away once the crisis is resolved.

You don't get it Skippy. Do you even comprehend what an international commodity is?

You're so wrong you're not really even worth answering.

[Skipjack]

Enlighten me! Because I dont see why and how oil prices can keep climbing while the prices for pretty much any other commodity than some precious metals keep falling. If you think that it is because of peak oil, then I an not convinced of that either. We have been told that this would happen for 30 years now, still not happening.

[GIThruster]

Enlighten me!

Sure.

International commodities are traded on international forums. People play that game hoping to invest in a commodity when it's valued low, and sell it when it's valued high. This trade now happens at near the speed of light, across thousands of miles with no concern for others. People are trying to earn a living, by buying and selling as middlemen, without contributing.

Get this straight--the world's economy completely depends upon investors, whom buy and sell in hopes that this alone will earn an income. This is the way life has been for more than 500 years. Hobbs Leviathan explained all this in 1651.

Investors do indeed provide a significant service, to those whom need funding for their endeavors, but at the same time, it is true, they are not creating "value added". They're simply moving money.

So when you whine and complain about things like gas prices, you need to follow the money. Investors put money where they think it will grow, and don't put money where they think it will shrink.

When a country like Iran, threatens free flow of oil through Hormuz, oil speculations become more insecure and necessarily invoke higher risk. This forces oil prices up. Every time you read in the daily news about how Iran is threatening oil movement through Hormuz, you have reason as an investor, to consider oil investments a higher risk. This means oil prices will go up.

None of this has anything whatsoever to do with oil companies forcing prices up. The only way for oil companies to force prices up, is to be involved in collusion with other oil companies, such as what OPEC did in the 1965. Because OPEC does not control all the world's oil production, they cannot mandate oil prices internationally. They merely have huge influence and this is why oil is not $3/barrel the way it was 47 years ago.

http://www.ioga.com/Special/crudeoil_Hist.htm

Try to remember, especially if you're here in the US, it costs pennies per barrel to suck oil out of the ground and ship it across the world. All cost added onto this, is the result of the free market, supply V. demand, etc. Costs on top of free market include international intrigue, like what's happening with the US and Europe V. Iran.

[Skipjack]

They merely have huge influence and this is why oil is not $3/barrel the way it was 47 years ago.

Which is my problem! Speculation adds to the base price, but the base price is made elsewhere.
And again, speculation does NOT explain the steep increase in the last 30 years. I think it has to do with the oil producers being more organized now than they used to be.
Either way, the US government could force the hand of the market by doing what I describe. Even by just threatening to be doing that.

[hanelyp]

High oil prices are among the strongest motors of inflation, at least here. A responsible government would seek ways to buffer against high oil prices, e.g. by buying reserves during times of low prices and then releasing them to the public, undercutting the regular providers in times of high prices. That would force providers to lower their prices again, or they wont make any business. I have yet to see a government that does that though.

A BIG problem with that proposal: prices are a market signal indicating abundance or scarcity. Rising prices signal shortages, attract more production, relieving the elevated price, which signals production to level off.

[Skipjack]

A BIG problem with that proposal: prices are a market signal indicating abundance or scarcity. Rising prices signal shortages, attract more production, relieving the elevated price, which signals production to level off.

As we know this is not always true. They signal the speculation of a possible price increase or decrease on the stock market that could be due to a shortage or abundance, but could just as well simply be due to an artificially created panic.
The responsible government from my example could buffer these short steep price hikes that are usually completely unfounded with their release of cheaper oil to the gas stations across the country. I think that even the pure announcement of that happening would cause speculators at the stock market to sell and thus to lower the prices again.

[GIThruster]

Skippy, why do you insist on continuing to give advise on subjects you obviously know nothing about?

NORM!!!

[choff]

The problem with rising oil prices is the global economy can only tolerate so much more and then it caves. If things get out of had with the Iran situation and Syria the oil situation could get very ugly.

[CKay]

For the US, it's all about protecting the petrodollar.

I don't think so. In my conversations over many years, I think it is all about protecting the world from Islamo-fascism. if you don't understand what Islam teaches, then you don't understand the greatest threat to world peace.

Well, I wouldn't claim to understand 'the greatest threat to world peace'. Not even sure that there is one single greatest threat - over-population, competition over scarce resources, environmental degradation, adherence to extreme ideologies of all stripes (include neo-liberal economic fundamentalism amongst that), irreconcilable cultural differences/xenophobia, amygdala politics, greed, stupidity ... etc... all compete for that title.

And, as with any country, the US is only concerned with protecting its own interests, interests which may or may not coincide with 'world peace'. Ensuring that the dollar remains the reserve currency is arguably the US' greatest single interest. Lose the dollar as reserve currency and the US economy would be sunk and US hegemony with it.

So the war drums began beating shortly after Saddam signed a deal to sell all of Iraq's oil in Euros (and there was little threat of Islamo-fascism from Iraq). And so they begin beating as Russia, China and India move toward adopting a different currency of settlement.

The petrodollar theory explains 40+ years of US foreign policy as well as or better than any other theory I've yet come across. Certainly better than the 'it's a Just struggle against communism/islamo-fascism/evil-ideology-of-the-month' notion (which doesn't anyway fit with the US' continued support for the world centre for Islamic/Wahhabi extremism, Saudi Arabia).

[ScottL]

Oil/Gas prices are on the rise due to a panicked emotional response by speculators to conflict with Iran. The truth of the matter is Iran provides no oil to the U.S. and very little to Europe (less than 0.01%) which it has cut off. The fear and therefore price rise is in the misunderstanding of the impact of conflict on western societies. Speculation is like gambling, if you play statistically, you might break-even or make some money, but people can't help but speculate or gamble emotionally here and there.

[hanelyp]

While Iranian oil may not be sold to the US and EU, it still impacts oils prices there through the world market. If those buying Iranian oil find themselves unable to buy from that source, they then buy from someone else, and the ripples spread through the world oil market.

In addition, Iran is threatening to cut off the Strait of Hormuz, a waterway through which much Iraqi and Saudi oil travels, multiplying the potential impact on world supply.

Instability in Egypt, threatening the Suez Canal, may also contribute to oil supply uncertainty. If open war breaks out between Iran and Israel, I would not be the least surprised if Egypt joins in.

[Skipjack]

But again, something like this is a short term, time limited event, not a permanent change. They happen all the time and they are responsible for short spikes, but traditionally the prices have been increasing.
I do not see the harm in a government working to dampen these spikes by throwing some oil from the reserves on the market. It could also help fighting price raises that are controlled by countries like OPEC members (traditionally the prices go up, when they decide to lower the production).
The oil prices are a major motor of the inflation. That is a fact. Personally I consider it a matter of national security to prevent that. More than all the TSA crap, for sure.