Experts say There's No Fuel Shortage; Reduced Demand; and "Energy Militants" are a Big Factor in Price of Fuel

For non-expert mortals like this blogger, the factors affecting gas and oil increases can be a confusing and complex mix of information. We often hear about the huge growth in the Chinese and Indian economies, and how their demand for oil and gas is continually rising. We also relentlessly hear about how world conflicts affect oil prices, because it could disrupt the supply of oil. Oil is close to $100 a barrel now. Local fuel price prognosticator, George Murphy, provides a regular heads-up on price changes. His forecast for the coming winter and summer is, not surprisingly, dismal. On his blog he outlines factors that influence prices - one of which is international political volatility. However, according to this Globe & Mail article, the overall international demand for energy has been reduced three times in recent months by 901,000 barrels a day. One might wonder, "shouldn't prices be falling?"

In the Globe story, and it's no big surprise, several oil industry analysts say that the current environment of rising fuel costs is largely generated by geopolitical fear speculation. Michael Economides says that "Energy Militants" such as Iran's mullahs, Russia's Putin, and Venezuela's Chavez, use their energy resources as weapons, as their economies are "based on high oil prices". (3 years ago Economides predicted that oil would reach $100/barrel)

"He also dismissed as irrelevant refinery and other shutdowns that news reports sometimes cite as contributors to rising prices." (Globe article)

Tim Evans of Citigroup Global Markets Inc. says that

"we are not in a situation of tight inventories or imminent supply disruption here." (Globe article)

Oil analyst Fadel Gheit at Oppenheimer & Co. in New York dismisses the current environment as a bubble.

“It's a farce, ... The speculators have seized control and it's basically a free-for-all, a global gambling hall, and it won't shut down unless and until responsible governments step in.”

“The players have solved the riddle, ... They know what is coming next...so they can make a bet on that. It's almost like fixing the score in a sporting event.” (Globe article)

Michael Ecomonides even speculated that you would see oil at $150 a barrel if a headline read, "Israel Attacks Iran."

That area of the world has been in a continuous state of combustion for decades, so even the suggestion of events like this can certainly be used to fuel rising fuel prices. It's quite plausible for leaders like Putin and Chavez to cryptically promote through any channel that helps, like the media, suggestions that there are immediate threats to energy supplies. We've been hearing that for years, and now the price of oil is just about $100 a barrel. It certainly benefits oil selling nations and oil companies.

The huge profits from bloated oil prices won't be money in the bank for average consumers, but rather directly more money out of pocket, and less spending power for other things. For the individual it is financially hard. Someone will benefit though. The only compensation, which comes with mixed emotions, is knowing that there is a silver lining for Newfoundland and Labrador in the much higher than expected oil revenues the province will benefit from.

Oil analyst Fadel Gheit mentioned responsible government stepping in to shut down the rising price trend. In the past, there have been calls for federal and provincial governments to cut taxes on fuel. The trend sadly looks like oil will top the $100/barrel price. There may be a renewed pressure on governments to give people a break at the pumps, but with overflowing tax profits, it may fall on deaf ears.

In the meantime, here's a suggestion. For Christmas, that spending/giving time of year, wrap up a gas station gift certificate for that special someone. It's a gift they're sure to use, and it just keeps on getting more valuable. So don't be embarrassed when you tell someone, "this Christmas, I gave my better half gas" - they'll thank you at the pumps. One way or another, it's hard to avoid getting gas.

Here are some fuel-saving tips from a 2006 post.