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

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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 OpenFuelStandard.org and co-author of the book, Fill Your Tank With Freedom. 

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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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