Gerry is right; there is a significant amount of speculation driving up the price of oil. The world is undergoing an economic slowdown, but the value of oil keeps going up and up because the demand is still there. Thus, people are not investing in things that don’t earn returns anymore and are searching for somewhere to put their money. This might actually be a good sign, because when the housing market bottoms out, and the “credit crunch” begins to dissipate, the economy will begin to grow again and the oil bubble may burst, resulting in lower prices quickly.

Estimates about the impact of speculation range as high as $60 per barrel…that is more than a bit of froth. And the weakened dollar is a double edged sword…not only does the declining dollar mean that $1 doesn’t buy the same amount of oil as it did a year ago, it also means that investors who once put their money in other areas now put their money into oil commodities because those other areas (measured in dollars) are no longer attractive.

I am annoyed with big oil and their $40 billion in profits, but I don’t blame it nearly as much as I decry the pure idiocy of the Bush administrations policies that have led us here.

It is all related.

The most obvious result of Bush’s weak dollar policies is it translates into a cut in the real spending power of American consumers–in effect, a reduction in real income.

But that’s only part of the problem. The weaker dollar also weakens the role of the U.S. dollar as the world’s reserve currency so investors and central banks around the world invest in other areas rather than US assets (which because of the weaker dollar are declining).

Also, we’ve heard the Bush administration extolling a weaker dollar because it will lead to a reduction in America’s trade deficit. Nonsense–this flies in the face of Bush’s policies that have lead to outsourcing at outrageous levels. More importantly, since 40% of the current trade imbalances is due to oil imports–imports that are denominated in U.S. dollars, the low dollar has no impact. Add in the fact that at least 20% is due to trade with China, which controls the value of its currency and this prevents the trade imbalance from improving.

What a weaker dollar really does is to encourage American and international investors to invest in non-American markets and commodies like oil–with all this money chasing oil (since traditional US investments are devalued), the demand for oil spikes to outrageous levels.

So why is Bush pushing a weaker dollar?

Because Bush and the people who support him are getting what they can now before he gets booted from office and the glorios GOP trainwreck comes to a screeching halt for the next two decades. Investors like a weaker dollar since the profits of American multinationals get a boost from foreign earnings being translated into U.S. dollars.

Short term, greedy thinking from the people who don’t give a damn about the average person. That’s what 8 years of Bush has meant.

I swear, I know a lot of people who call themselves “conservative” and voted for this guy twice and they are hurting, but still think they’re better off because a “tax and spend” liberal is not in office. Arggh!

The oil companies are pumping as fast as they can. The fundamentals are: world supply is stuck at 85 million barrels per day, has been for three years. World demand has grown over that time, obviously…and it’s grown to the point where it is outstripping supply.

So, there is a supply and demand story here…there is little supply coming online anytime soon–but demand will keep growing from abroad.

Demand will be destroyed at some point, but I have no idea if we’re even close to that number yet. $4.50 a gallon? $5?

I hope you’ll check out The Oil Drum to learn more about peak oil. http://theoildrum.com

There can be no honest discussion of the problem as long as you propagate the belief that taxing the big bad oil companies will fix all our problems. By disseminating the lies and demagoguery of Congress, you have become part of the problem. You stand with Congress against finding a feasible solution to our energy problems.

The point is: you want to tax oil companies more, fine go ahead.
But you will have solved nothing and prevented discussion of a real solution.

The government would then offer that money up to the private sector to develop green technologies…of which the oil companies are a part of and can bid for. So they can get the money back, but only as a part of the competitive free market…not corporate welfare.

Everybody following me still? Anybody think I’m proposing something that’s ignorant of the facts or is designed to incite some sort of misguided populist passions?

The point here is that they’re not doing enough to develop green technologies on their own, and at the same time they’re making these crazy profits. Something has to give, and what we can ask for as taxpayers is that they pay their fair share just like the rest of us. That’s not demagoguery folks, that’s just common sense.

Once again, you’re cherry picking you’re info to make an argument, leaving things out completely, or just plain don’t know the facts.

In 2007, ExxonMobile made $390,328 billion dollars before expenses. Now, it is fair to say that $400 billion is not profit. The cost of crude oil to ExonMobil in 2007 alone was $199.4 billion. Other costs and expenses brinngs Exxon Mobile’s expenses to $334 billion

Any reasonable person would say that is a good chunk of change, and we cannot punish oil for having huge operating expenses.

Saying they only made 11 billion in profit and then paid 28 billion is grossly misleading–in fact it is inaccurate

Exxon’s profits were $70.4 billion before taxes, then their tax bill ON THAT PROFIT was $29.8 billion. Big oil needs to play by the same rules as everyone else. The government taxes profits (you can argue against the high corporate tax rate if you like–that is fair)

That leaves a profit of $40.6 billion.

Where did you get $11 billion? They made about $11 billion in the last quarter alone.

Finally, while I cannot find the numbers for 2007, the government gave (read, WE THE FREAKING PEOPLE) gave about $8 billion in incentives and subsidies to Big Oil in 2006–I am not sure what Exxon’s cut was.

Now, if you don’t want to blame the big oil companies for the gas prices, you can make that argument since we know the real culprit is speculation. It’s fair to say that the Oil companies are buying oil on the open market and their expenses are high, even though most people would argue that $40 billion in profits is obscene. (I would also argue that “holy GOP free market is broken)

But you can make that argument.

But for you to come here crying for poor big oil–it just shows that you have completely lost touch with reality.

And if you do take their windfall profits, they will cap their wells domestically and move more internationally to avoid the tax. That will dwindle supply, raise oil costs for us, and hurt the tax coffers because they won’t be paying any tax.

Now if you want to take about subsidies. Go after big agriculture. Then you’d have an argument.

Also, U.S. Oil companies have relatively mediocre profit margins compared to computer, clothes and food companies. Most of the stock from oil companies is owned by investors’ personal retirement accounts, pension funds and mutual funds, not corporate executives. Though your IRA or pension doesn’t get taxed until you take out the money, when the government taxes oil companies close to 40% of what they earn, that means less money for you if you have an IRA or a mutual fund or something – not to mention those costs passed on to the consumer at the pump.

Though Exxon made about 11 billion in profit last year (again, most returns going to retirement accounts and mutual funds), it payed 28 billion in corporate taxes last year, which is more than the bottom 50% of American taxpayers combined – just one company!

Yeah, tax the shit out of’em, then the second they try and raise prices, nail’em to the wall for price gouging and levy a 40 billion dollar fine.

Bastards.