This really helps my understanding of what is currently going on! Thank you.

Lauren, I just started this. I have an email conversation going on in the background on this topic. More will come. ~WH

Thanks, Dave and Lauren. As I write, Father's Day, I await the response of the global oil markets on Monday to Saudi moves, reported above. Original reports put proposed increase in production at 500,000 barrels per day but later reports from the Gulf dropped this to 200,000 barrels. Will Saudi sheiks punish speculators by driving down price, possibly stimulating a sharp price drop? Would this discourage future speculation. Let's wait and see. ~WH

It may drive down the price temporarily, but if speculation has as much of an effect as some would believe, the funds involved will snatch up enough of the futures contracts to keep the price roughly stable.

Of course, don't let anybody tell you that the Saudis don't love what's going on; their price of production is remaining fairly stable, but they're bringing in much more. Their margins (along with other oil producers) are skyrocketing.

Dave, Sheik Yamani authored a doctrine that identifies a target price, above which long-term interests may be jeopardized by fuel-switching. ~WH

This article is really explaining clearly the problem with the oil and also make understandable for me the loss of the value of the dollar, because this is a very important subject here in Bulgaria. Everybody is sensing the a drop in the value of the dollar and it is getting cheaper for us and that is why for example everybody as the moment want to buy lap tops from USA, because it is a lot cheaper than in Bulgaria and this is caused exactly from the erosing of the dollar.

In a way, this is really sad news. Although everybody would like to see a little relief in the price of oil (i.e. gasoline), this is not the way we should go about doing that. The prices are high because the demand is high. Therefore, pumping more oil will not solve the problem – it will only prolong it before it eventually goes right back up again. In fact, pumping more oil is essentially avoiding the real problem. The only way to solve the problem is to address the actual issue. What we should be doing is looking into ways to lower the demand on the earth’s resources. We need to USE LESS, not PUMP MORE.

Exactly, Mae. And the Texas oil men in the White House have had none of that. Nor did Clinton who relished cheap oil. This conundrum will go on for quite a while. The fundamental analysis appears to recognize that the supply of oil in the ground is scarce -- this is contested vigorously -- so that high prices will persist. Fuel switching threatens OPEC interests but decreasing demand is essential. We are talking about habits and infrastructure and sunk investments that will also be disvalued. My concern also extends to a deepening recession and increasing inflation. Not good but issues of sustainability seep all through this. Notice why Brown (and Hayes) stress the immediacy of energy rather than the longer term but related issue of climate change. ~WH

I never really understood why the gas prices have gone up so high. This article help clear it up. Thanks!

The discussions and the links above describe the "oil problem" well. It's actually quite ironic that the saudi's have promised to produce a certain number a barrels more each day, the Saudi's describe this as if they have an oil making machine in the back yard!
I agree that the issue needs to be looked at differently, change the "fuel". It seems so simple, there is the solution. CNN and other news companies and the media are not telling the public this. Not offering the solution to the problem, just playing on the drama of the rising cost of each barrel each day.

I feel the same as everyone else, this has really helped me to understand why the price of oil has gone up. I also never considered what was happening to the value of our dollar abroad.

I think Michelle makes an intelligent point in saying that the news companies are playing on the drama of rising prices instead of broadcasting solutions.

I also agree that people are overlooking the decreasing value of the dollar, and instead focusing on the increasing price of gas. Many people pay attention to gas because it's something that we're constantly aware of, whether we need to purchase it or even if we're just driving by a gas station. It's also one of the only things with a price that changes every day, so we tend to look at the prices because we're more aware that they're always changing. Nobody really pays attention to the fact that the prices of other goods (groceries, clothes, etc.) have gotten more expensive in recent years as well. Even before reading this, I never really connected the weakening dollar with higher gas prices.

Notice that I have added to this page. Oil ripples throughout the economy, such as freight hauling. However, the supply of oil remains a key ingredient in any movement toward world sustainability, so much be watched carefully. ~WH

It's so true that we only focus of the cost of oil and not of the value of our dollar. I agree with Roseanne, I can't believe I never put these two concepts together before now. I feel like a lot of the problem lies in what Michelle said, the news is only interested in reporting the drama of the rising oil prices, not offering any solutions. I feel like a lamb being led to the slaughter.

I would like to comment on the fact that this is an election year and the energy issue is on everyone’s mind! The Enron Loophole is obviously playing a negative role in our energy problem and should be eliminated. I’m not particularly thrilled with President Bush’s idea to veto the farm bill, I’m even less thrilled that McCain seems to be agreeing with Bush as a result of his economic advisor. Presidential candidates cannot afford to be clueless on issues, McCain has got to get it together.

The cost of a barrel went up again and again and again. If the newscaster says it and projects a new high sure enough it happens. How depressing. It seems to be a game of lets guess the new price. No news about how to change these runaway costs. No one is offering any solutions.

The dollar is not worth a dollar anymore. Go shopping and see the items in Shop Rite go up 10-20 cents. Doen't sound like much it matter when the bill gets totaled. And people respond I guess its because of the cost of gasoline. Trucks use more gas to get the food here. It is a vicious circle. Recent news is natural gas and home heating oil will skyrocket this winter. Sue makes a good headline. And still no suggestions on how to change it.

Travel is out of the question because of the oil prices. Air fares are higher with less customer service. Going out of the country is not an option. Prices are much higher in Europe. It is becoming cost prohibitive to travel outside the US.
I am disappointed because visiting other countries and interacting with different cultures is part of attaining world
sustainability. How can all the people of the world work together if we don't know much about each other?
The price of oil is having a domino effect experienced not only at the gas pump. It effects the food on the table.
People have to make serious choices of what to do with the little money left after filling the gas tank. There is very little money left for anything but the necessities.

The company I work for is a dental wholesaler; therefore we are constantly receiving new shipments and sending out new shipments...generally we do not charge much if anything above our freight; however we have dedided to change that becuase so have our vendors. Normally we pay 2% of an entire shipment for an overseas delivery and today the freight charge was 5%! Makes a big difference when you are talking about a $25k shipment!

I am seeing notices everywhere that prices are increasing due to an increase in freight charges ocurred (even the pizzeria had a notice posted)!

The only solution is the same as it always is when faced with rising prices (especially when supply is fixed/semi-fixed): reduce demand. Here's how it would look, in a very simplified view:

Reduce oil consumption by whatever margin.
Wait for the news of reduced consumption.
Watch as futures contracts on [the commodity] trade at lower prices due to potential for excess supply due to decreased demand.

Demand must be reduced on both fronts; the physical consumption aspect as well as with futures contracts (speculation). What speculation really means is that traders are betting that the price of oil will go up in the future, and by making those bets, they actually slightly raise the price of oil futures. (A future contract is a contract for delivery of a specific good at some point in the future; they are traded amongst people and when they are about to come due is when they are sold to those who are actually looking for physical oil). This is similar to how buying a stock works; going long on a security is a bet that the price of that security will increase, but because you added demand by buying the stock, you're contributing to a price increase.

If physical consumption decreases, the price of futures contracts will decrease, which will lead to a decrease in the price of physical oil/gas/etc.

Evidence of this happening: http://www.dot.gov/affairs/dot8408.htm http://www.cnn.com/2008/US/06/18/driving.cutbacks/index.html

Less driving does not have to be the only method of doing so, but short term it seems to be the best way.

-D

I certainly agree that we need to limit our demand on oil, but how? There are many obvious answers (walk or bike when possible and use mass transit if not) but can we make it a law or soemthing? My older brother is a commuter at Fordham and commutes 5 days a week to the Rose Hill Campus in the Bronx. He spent approximately $8000 on gas, car repairs and tolls last year alone. But what is he supposed to do? How do we limit his need on gas? He can't just stop going to school and commuting is still cheaper than living there (it's $12,000/yr.)

Veronica, short-term, only slight declines in demand can be expected, but Dave, above, illustrates that this is happening. Longer term, as investment decisions occur, such as switching to higher mileage automobiles, the demand will stabilize, if not decline. China raised prices on fuel 18% two days ago, which will dampen demand. Read Dave's insightful comments about energy futures. Investors will move away quickly in they see a decline in demand in the near future. This will amplify the decline in price, which can presumably move down as quickly as it moved up.

Notice that we focus attention on demand, not supply. Off-shore drilling is a bit of a red herring, since over 80% of off-shore lots can be tapped now -- not so more sensitive outer continental shelf off NJ, CA, FL, for example. Even T. Boone Pickens, the prototypical Texas oil tycoon, is talking about Peak Oil (see above). ~WH

There was an oil summitt in Jiddah, Saudi Arabia today and they have agreed to produce 9.7 million more barrels of oil beginning in July...here is the link to an article that goes into more detail: http://www.optimum.net/News/AP/Article?articleId=430356

Adriene, this move was expected. The other news is that Saudi Arabia will enter a joint venture to build a new refinery, which will not be on line for many years, but addresses a critical bolltleneck. This is good economic development policy by Saudi Arabia.

Combined, will these announcements drive down the price of oil? We will see this week. My guess is "No." Dave has a good handle on all this, above. Good link, thanks. ~WH

9.7 million barrels a day is (if my memory serves me correctly that current daily output is appx. 90m barrels/day) exceptionally significant; ~11.1% increase in output. I would expect to see some price decrease -- the Bloomberg article I caught (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agZ1gqbuhxpo) says estimated increase in daily demand is appx 800k barrels... so the substantial increase will replenish dwindling reserves (which has been a huge part of the reason in the spike in pricing, on the speculation side) and most likely shift the equilibrium price back down to the left. Estimate on price? No idea. Lower -- I would assume that the Saudis did some math and expect that the price per barrel will level out around $100 (as they have mentioned that is what they think is a proper price), so I would not be surprised if the 9.7m barrels/day figure comes from that. Also, by July other consumption numbers should be out, so if there is another large decline, like was seen in April, expect that there will be a lowering of demand to complement the increase in supply.

Interesting stuff.

The Saudi have the oil and they determine how much to pump. Are they being generous by pumping more per day? I don't think so. It is good business for them to up production and get paid more per barrel. Simple math. Sell high. For the consumer the choice is to use less. I know I have. I do errands coming and going from work. No back tracking. I think twice about driving. My husband had to go to Old Bridge which is about 50 miles from Mahwah. Aa an alternative he took the train.
It worked really well. No wear and tear on the car, no gasoline and no tolls. So alternative methods of transportation ar out there you just have to make the effort. His comment was that there were many passengers on the train.

I agree public transportation is the right way to go, especially in cities where subways and buses can be a lot faster than just taking your own car, but some public transportation systems are so underdeveloped they're mostly useless. The other day on the news on TV I saw that in a Midwest city (I think either Detroit or Chicago, but I forget exactly which city) that there's a horrible cycle going on. What happens is that people are already more inclined to take their own cars instead of the city's public transportation system. The high cost of fuel wastes much of their money, and as a result sales of products across the entire city, in almost every sector of business, have fallen. The problem is that the city's public transport is funded by the city's sales taxes, and less sales mean less money from taxes. The problem has caused the public transportation system to be so underfunded that they have cut bus routes as well as increased bus fares, which makes the system less convenient and more expensive for commuters, which only makes them want to take their own cars even more. If commuters had just taken mass transit to begin with, the prices would be much lower and there would be more routes to take, offering greater convenience.

Well, by pumping more the Saudis are looking to oversaturate the market (have more product than will sell) to bring prices down. So they won't see $140/barrel (most likely, we will see) for all the barrels they're going to be pumping.

Just to play devil's advocate on taking the train as a more economical alternative: you're paying insurance, lease/payments, etc. no matter what, and the value of the car is depreciating but to no benefit if taking mass transit.

I know there was a time everyone was tooting the ideals of carpooling. Gas and toll money saved, companionship - it has its advantages. Then, when you consider the amount of time one has to wait for someone to close shop at the end of the day, or the amount of wait-time for someone to get into the car in the morning, I didn't think it was an idea that was going to stick for too long. I am sure there are some that still favor it, but the benefit of being the only one to smell your rancid breathe in the AM, or to deal with the fact that you woke up on the wrong side of the bed again...driving solo also has its merits. The problem of course, is the inevitable issue of transit time. NYC must make it on the top 5 list for the longest transit time to work in the world! It seems there is nothing we could do about it. A concept that replays itself in our reading is valuation: humans can never know the value of their products (commons or other assets) unless a price tag is attached to it. We feel that there is an endless supply of clean water or air, until we pass through Newark or visit the Ganges. We feel that we would always find new sources of oil, or could count on our domestic reserves in emergent cases, until we pay $10-$14 at the pump. It sometimes takes a rude awakening - I believe money pinches worst of all - for changes to occur. Increase tolls, increase parking fees, increase tickets ($$) for motor vehicle infractions, make public transit more accessible and cheaper. I have to ask myself how other countries in South America (Columbia, for example) and EU managed to achieve a more sustainable transit system. What are we doing wrong?

In my town there is this new thing that if you take public transportation they give you a great discount. I know that from where I live it colst about 5 dollars to take a bus into the city and now they are running this special that its 2 for 1. I do not know if it is NJtransit of just my town but it seems like a great idea. Its amazing how many people take the bus now. however, I do think it is a little ridiculous that some people drive to the bus stop. Doesn't that defeat the purpose? I just h ope that when this deal is over people still stick to taking the bus or train, rather then drive and pay the crazy tolls to cross the bridge or tunnel.

Vicki,

As far as I know, tolls go into the same general fund as fares on buses and trains (to the extent that they exceed costs) -- so presuming operating costs stay the same (remember, bridge upkeep, for instance, is going to cost roughly X regardless of if 1 car or 1,000,000 cars cross), the difference will have to be made up somewhere. Either higher taxes, higher fares, etc.

When I take the train somewhere I'm forced to drive to the train station (or a bus station, if I was to take the bus) as the closest is about a 15 minute drive. Beats driving all the way to Manhattan, of course.

http://www.mees.com/postedarticles/oped/a47n33d01.htm

interesting

Sometimes public transportation works very well. I have a friend that travels in and out of Manhattan on a daily basis and has rarely encountered problems with the public transportation system they have. Although tickets aren't always cheap, it definitely beats driving there by car. Subway and bus costs average about the same per month that the fees for a car do in an entire day, mainly because of the additional costs of tolls, gas, and parking fees. I know that even parking a car there can have astronomical costs, sometimes even $40 for an entire day alone. Though I do understand that public transportation does not always work in favor of everyone. It depends a lot on how much time you have to spare (as there are usually always wait times involved in any public transportation system), and where you are in relation to available public transportation systems.

It's also hard to switch towards public transportation when you are so used to being in control and getting yourself from point A to point B...I know this is true for myself, alot of things I could be doing that are better for the environment I don't do becuase I have to break a habit! I finally jsut bought several canvas bags the other day to use when I grocery shop from now on.
I grew up in a part of NJ where public transportation is pretty much out of the question; however now I live in area where public transportation is everywhere...I still am so used to taking my car that I forget...I took the train across the street from my house once to the airport instead of driving besides that I rarely take it ( I dont really have anywhere to take it,but thats besides the point!).

I definitely agree with Adriene about it being difficult to make the switch but I certainly think that it can be achieved. I feel that in my community at least, our town officials have to make public transportation more appealing and convenient. In my town there are bus stops that run locally to places like our public library and the train station which is great. However, there are only a few that are conveniently located near residential areas meaning that we have to drive or bike to these stops that usually have minimal parking. On top of that these bus stops arent always clearly identified and unfortunately some of them arent kept in good condition either. (The one nearest my home isnt well lit at all and has weeds growing all over it.) If our town would invest more in the public transportation system instead of things like developing our increasingly scarce farm land, perhaps more and more people would be inclined to take the bus.

http://abcnews.go.com/Business/PainAtThePump/story?id=5253022&page=1

Here is an article about the market and the price of oil.

Oil prices surged into record territory today, boosted by a report predicting that gas prices will hit $7 a gallon in the United States within two years. The market didn't like the news.

Less than 6 months have passed, oil is around $37, gas $1.50.

My, how things change.

I know that I cringe everytime I have to fill up my car with fuel. Everyday I feel like it gets more and more expensive. Reading everyone's comments regarding the high prices of fuel, I know understand why that is. I agree that lowering the prices will not help the issue of sustainability. The high prices should be used to get everyone to conserve more, and find other ways to get around. By lowering the prices, we are just using more of the resource without any care in the world.

This page got a lot of national attention. Dave Calotta showed what impact a wiki could have. I will post to a new page on energy a policy a follow through: http://worldsustainability.pbworks.com/Energy_Policy.