Saudis Might Push Oil Price Even Lower

Tuesday, December 30, 2014

Saudi Arabia’s oil minister, Ali al-Naimi, said recently it was “not in the interest of OPEC producers to cut their production, whatever the price is...”

Naimi also said the Saudis might even raise their output to improve their market share (which would also lower prices further). "The best thing for everybody," he says, "is to let the most efficient producers produce..."

What exactly does he mean? Olivier Jakob, an oil analyst at Petromatrix Oil in Switzerland, spells it out in plain English. Jakob writes: the OPEC oil ministers “basically want oil prices to move lower to reduce production in the U.S.” There it is.

That's what monopolies do. If a monopoly can produce a commodity or product cheaper than anyone else (and Saudi Arabia has the cheapest oil in the world to produce), their best bet in the long run, if they can get away with it, is to drop the price so low it puts all the competition out of business.

Oil prices are low and getting lower, and that's great. It will boost the U.S. economy while it lasts. If the Saudis get their way, eventually most of its competition will be dead and they can go back to gouging the world. The only way to get our economy off their roller coaster is robust fuel competition. It can be done now, and when they raise their prices again, our economy will keep humming. Let's hope enough of us see the wisdom to keep pursuing it while oil prices are low.


Low Fuel Prices Create Winners and Losers

Monday, December 22, 2014

In late November, in Vienna, OPEC decided not to do what it normally does when oil prices get too low: They chose not to cut their production levels. Some OPEC members can afford this because their oil is cheap to produce. Some countries like Venezuela will be hurt badly by this decision, but they don't have the same clout within OPEC. This is a quote from an article in USA Today:

In Vienna, Venezuelan Oil Minister Rafael Ramirez effectively conceded defeat when he appeared to angrily storm out of the OPEC meeting once a no-cut decision was signaled.

Over half of officials from OPEC countries — the poorer half — were consistently on-message that the market is over-supplied and that something needed to be done. Nothing was done.

Shale-oil producers in the United States and Canada could also be hurt. Low crude prices make it harder for them to launch new drilling projects or expand operations because they count on high returns to finance the costly penetration and oil harvesting.

These are interesting times. We'll see how it all plays out. In the meantime, the lower fuel prices will immediately ease the financial burden of hundreds of millions of people around the world because the artificially-induced high oil prices we've experienced around the world have functioned like a regressive tax on the whole world.

What we're getting now is a taste of what could happen if we had true fuel competition in America. It's a goal worth fighting for. In the meantime, enjoy the low prices while they last.


Will Oil Prices Rise Again?

Friday, December 19, 2014

Gal Luft, an advisor to Fuel Freedom’s board, doesn’t know if or when oil prices might start rising again. For all the predictions out there lately, few experts can say for certain what the market will do in 2015.

“I started working on this when oil was $20 a barrel,” he says, referring to an era roughly between the mid-1980s and late ’90s when oil was at that threshold or even below it.

“I don’t think that we should aim to bring the price of oil to any specific place, because sometimes the price will be high, and sometimes the price will be low,” he adds. “That’s what commodities do: They fluctuate. It’s true for oil, it’s true for cocoa, it’s true for soybeans.

“And I think the question is not, ‘How high is oil or how low it is.’ The question is, ‘Why is oil the only commodity in the transportation sector?’ … The issue should not be to look for a sweet spot for oil or a certain target price for it, but to talk about the lack of competition and the lack of choices and the need to diversify our sources of supply in the currently monopolized market.”

The above is an excerpt from an article on Fuel Freedom Foundation's web site. Read the rest: Oil's Monopoly More Important Than Prices


Monopolies Think Long-Term

Friday, December 5, 2014

OPEC has traditionally cut its production when new sources of oil were added to the global total output. It has always been done to keep the world price of oil high.

Only once has OPEC chosen to overproduce oil in order to lower oil prices (in the late 1980's and early 1990s). The cheap oil hit Brazil's bold ethanol infrastructure investments hard, and put half the U.S. ethanol production facilities into bankruptcy.

In other words, it was a classic monopoly maneuver.

And for the second time, OPEC is doing it again. For a year now, against the expectations of the experts, OPEC has decided not to reduce its output even though Iran's oil has been added to the global total, and so has a new bonanza of American oil. Everyone seemed to expect that OPEC would do what it has always done: Cut its production to keep the price of oil high. But it has not.

OPEC is trying to kill off its competition.

The good news is that lower fuel prices are always good for the economy, so as long as fuel prices remain low, we can expect to see a significant economic uptick, as we did in the late 80s and early 90s. But we can also expect to see a drop in new oil investments and a drop in interest for fuels that could compete with oil.

When it has cleared the field of its competition, OPEC will raise the price of oil again and continue gouging the world.

If you'd like to see OPEC lose its power, if you want lower fuel prices permanently, and the healthy economy it always brings, never stop working toward fuel competition. Here's how.

Author: Adam Khan, the co-founder of and co-author of the book, Fill Your Tank With Freedom. 


Keep the Focus on Fuel Competition

Thursday, December 4, 2014

In an article in USA Today, Jonathan Fahey says the dropping gas price is so surprising, people are sharing photos of it. He writes about the reasons it's getting cheaper, and fails utterly to give the fundamental cause of the lower price, or what we might do to keep the prices low. Here are some excerpts from the article, starting with the reasons:

...demand isn't rising as fast as expected, drillers have learned to tap vast new sources of oil, particularly in the U.S., and crude continues to flow out of the Middle East.

Seasonal swings and other factors will likely send gas back over $3 sooner than drivers would like, but the U.S. is on track for the lowest annual average since 2010 — and the 2015 average is expected to be lower even still.

Oil fell from $107 a barrel in June to near $81 because there's a lot of supply and weak demand. U.S. output has increased 70 percent since 2008, and supplies from Iraq and Canada have also increased. At the same time, demand is weaker than expected because of a sluggish global economy.

In the past, a stronger economy in the U.S., the world's biggest consumer of oil and gasoline, typically meant rising fuel demand. No longer. Americans are driving more efficient vehicles and our driving habits are changing. Michael Sivak of the University of Michigan Transportation Research Institute calculates that the number of miles traveled per household and gallons of fuel consumed per household peaked in 2004.

The drop will save the U.S. economy $187 million a day, and also boost the profits of shippers, airlines, and any company that sends employees out on sales calls or for deliveries.

Whenever fuel prices drop, the economy does better. Five of the biggest airlines reported very strong quarterly earnings mostly because fuel prices have dropped 15% since September. When fuel is less expensive, almost everything becomes less expensive. That's one of the biggest selling points of the Open Fuel Standard. Right now, global commodity prices are falling around the world.

The real cause of the global drop in oil prices is an overabundance of oil on the market, caused by OPEC's surprising move to keep their production high regardless of new sources of oil on the market. Another way to describe the cause is that American oil producers are adding more oil to the market and OPEC is not responding the way it has traditionally responded (cutting its production to keep oil scarce and the price high).

Why do you suppose they haven't cut their production?

"At a recent oil industry event in London," writes anchorwoman Trish Regan, "OPEC's Secretary-general Abdullah al-Badri told reporters, 'If prices stay at $85, we will see a lot of investment going out of the market. About 65% of the producers, they have high costs. Not OPEC.'"

OPEC is playing monopoly with the world's economy. Once they've killed off interest in new oil investment, they can safely raise prices again.

If you'd like to end our vulnerability to OPEC's manipulations, keep working toward fuel competition while oil prices are low. There are many reasons to achieve fuel competition besides the economic ones, although those would be reasons enough. Here's a summary of why its worth fighting for: Fuel Competition Will Change The World.


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