What is Digg?4 Comments
- lodwar, on 07/03/2008, -1/+10I have to defer to economists or my betters on this issue . But you seem to agree that the inflation issue is valid . If so isn't it in our best interest to address it? Seems to me that$0.80 reduction is a BIG Deal.
- brad3378, on 07/03/2008, -3/+12The weak dollar is only one factor.
Keep in mind that other countries (with stronger currencies) are experiencing higher costs as well.
Supplies of oil are getting tougher to find and more expensive to extract.
The first oil well in Pennsylvania in 1859 was only 69 feet deep.
Recently a well drilled by Exxon Mobile broke a record for being 7 miles deep.
Rigs cost BIG MONEY - I once read that it can cost $600,000 just to LEASE an ocean rig for one day.
And if you drill a dry well - tough luck - pay up.
The drill bits aren't cheap either. Would you believe a typical 2 mile deep well uses roughly about five $60,000 bits? I can only speculate that drilling 7 mile deep wells requires more bits and they probably cost more too.
The Quality of oil is decreasing:
The most desirable form of oil is sweet light crude because it is cheaper to refine.
Remaining supplies of crude tend to be heavier and sour (sour = higher sulfur content)
It costs more money to refine sour / heavy crude because the process is more complex.
Many refineries only have the capabilities to refine sweet crude so they pay more as a result.
Worldwide Demand is increasing:
China & India have growing economies and a growing infrastructure influences a thirst for oil.
Political Instability raises costs.
The turmoil going on in Nigeria right now isn't helping matters.
Fear & Speculation raises costs - though the amount is debatable.
Companies such as Southwest Airlines that predict higher oil prices can buy their fuel in advance and lock in a rate so they can plan their business around a known fixed cost instead of guessing.
The more fear exists, the more speculators compete for energy futures, which drives up the costs in a bidding war.
- Godwhacker, on 07/04/2008, -1/+5True - but you are not recognizing the importance of the fact that most of the world's oil is still sold in dollars.
- maxtangent, on 07/04/2008, -0/+3In Canada, Alberta was able to keep its heavy crude industry moving at $25 a barrel.
When a well, 'dries up' what they mean is that it is clogged and needs expensive re-conditioning. Or they could just drill another hole more cheaply nearby.
So called depleted oilfields have replenished and totally debunked the 'peak oil' scam, but you won't hear about it on the MSM. Oil is not a 'fossil fuel'.Try googling it.
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