Question:
Help me convince my neighbor that war in oil producing region does not cause high oil prices?
ez f
2007-11-07 19:56:16 UTC
yeah..I know I have heard this over and over again that just because the middle east is raging with warfare, and the threat of even more warfare is looming that none of this has contributed one iota the consistently high oil (And gasoline) prices we have seen.

So I would like for one of you people help me convince my neighbor that there is not speculation by oil brokers and traders that prematurely drive up prices in anticipation of possible shortages. In fact, I have even heard it call a "war premium" for the iraq war, and a"potential war escalation premium" for the possibility of war with Iran.

Ok, so none of this affects oil prices and has had had anything at all with us paying so much more for gasoline....right? My neighbor swears that war in an oil producing region either reduces supply of oil (Causing higher prices) or increases speculation of war wich increases the price of oil. Help me tell my neighbor he is mistaken.
23 answers:
avail_skillz
2007-11-07 21:05:17 UTC
umm sorry to tell ya, bt it does. Why would you wish to mislead someone by telling them falsehoods?



Here is how it works.

Oil prices are created by demand.

If that demand was only between oil companies and refiners and eventually consumers, oil prices would be far lower than they are today.

BUT, we have this thing called a stockmarket, where people buy and sell commodities, and many of them have no use for the commodities they buy except to buy them and hold onto them until they go up in value so they can sell them for profit.

This is called speculative trading, and is what is responsible for the higher oil prices. (well that and a lower US dollar but we'll ignore that for the sake of simplicity)

What happens, is any world event that traders view as a threat to oil supply, is automatically viewed as a boost in future prices and a money making opportunity.

The same thing happens to orange prices when california gets a hard ice storm at the wrong time.

Traders buy up as much as they can, in order to profit on the speculated increase in future value. When they do this, this makes demand appear to be greater which drives up the prices whether there is any real slump in supply or not.

So anytime USA gets into a heated argument with an oil producing nation, or anyone gets into a war with one, it is viewed as a possible threat to supply, so traders buy buy buy.

It is how all commodities work.

-threat to supply is always viewed as increased value and future profit.

There is also a little fact that once war breaks out, every country in the world fills their strategic reserves and keeps them full, and is reluctant to let them dwindle to lower the oil market prices. So not only does war cause speculative traders to drive up prices, but also forces competition between government for the commodity, which drives the prices up.



as far as gasoline, oil effects it price slightly, but in reality, gasoline is more affected by real supply and demand than oil is. Since refiners have bought up most of the smaller refineries and closed them down, and closed down many others for maintanance and never reopened them, they have pinched supply to drive up margins.

Since their is no economic incentive for them to build new refineries just to make you and I happy, by driving up supply, while driving gas prices and margins down, they aren't going to. They'll just blame the problem on environmentalists and laugh at the suckers who believe them, all the way to the bank.



Your neighbor is quite correct.
2007-11-07 20:06:07 UTC
If we ignore the fact that China and India now compete with us for oil and that the dollar has devalued almost 50% since 2002, then perhaps it is simply a war driven event. The fact that Hubberts peak was applied to world oil production in 1995 and it was predicted that a peak would occur between 2004 and 2008 seems to be lost on a lot of people. I am surprised that this did not occur in the late 1990's or early 2000's.
cscpianoman
2007-11-07 20:02:25 UTC
In part, your neighbor is actually right, but that isn't the complete answer. The truth is there are many factors that play into the price of oil. For the US, most of our oil comes from Canada and the Gulf of Mexico, somewhere around 25% or so comes from the Middle East. Some of the other factors involved include hurricanes, distribution, speculation, war, oil supply, temperatures, driving season, processing, increased demand by China and other developing countries, etc. As you can see there isn't one right answer, but a myriad of things that tie into the price of oil.
J H
2007-11-07 20:05:12 UTC
I'm not totally sure if you don't believe it but.... when there is a terrorist attack on a pipeline or disruption to oil supply because the oil industry gets shut down due to being bombed to pieces then the price of oil goes up. If there is less of an item that people all regularly use then people will pay more to make sure they are the ones who get it and don't miss out. So price goes up.

However, when oil reserves in America go down then the price of oil goes up, when the weather gets much colder than usual in winter then the price of oil goes up and when China and India start using so much more oil than they did 5 years ago... the price of oil goes up!

So it's not just war but that can be part of it!
2016-04-03 05:17:01 UTC
Gas has ALWAYS been more expensive in Europe and Japan. Part of the reason is from the gas taxes which are used to help subsidize public transportation - something the US needs, but doesn't really have outside of a few areas. As for war being waged over oil or food - anything is possible. We already went to war with Iraq for their oil.
rance42
2007-11-07 20:04:22 UTC
Oil goes up when a hurricane enters the Gulf of Mexico. Oil goes up if it hears the OPEC is going to reduce the flow. Oil goes up if a butterfly flaps its wings in Japan. This has nothing to do with War, the President, or the Vice President. Any excuse the Oil Corporations can use to increase the price per barrel they will.
Mike
2007-11-07 20:04:17 UTC
there is what is known as GEO-POLITICAL RISK built into oil prices. For example, a war in the Middle East puts ships going through the Straits of Hormuz at risk. Since a large amount of oil is shipped through that narrow channel, any risk to ships will cause insurers to significantly raise premiums on cargos in that area. This additional cost, RARELY IF EVER mentioned by the media, is included in your final AT THE PUMP price, as oil companies include their TOTAL costs to refiners. There is more to it than that, but there is SOME truth to your friend's thinking.
2007-11-07 20:09:05 UTC
Sorry , but you owe your neighbor a beer.



The price of crude increased to $96 a barrel from $60 on SPECULATION by oil futures traders of possible shortfalls and interruptions in supply due to unrest in oil producing regions.



The cost of gas is a direct result of the cost of R&D, crude oil per barrel price, refining, transportation, markup and taxes.



Simply stated, the crude oil futures price has EVERYTHING to do with the cost of gasoline.
Captain Canuck
2007-11-07 20:07:01 UTC
You are BOTH mistaken - it's a conspiracy between the oil companies, and groups such as OPEC. War is just one of the excuses that they use to justify raising prices (and filling their wallets with cash)





Haven't you noticed - the second that oil prices go up, so does the price you pay at the gas pump. But when oil prices go down, they CLAIM that it takes SIX MONTHS for oil prices to affect the price of gas...



>:(
2007-11-07 20:00:17 UTC
Ultimately no matter what facts you present to your neighbor they will continue to believe it's a war for oil and that is why oil prices are as high as they are and that Bush has something to do with oil prices.



Most liberals are too blinded by their hatred to know that it's actually the speculators that are causing the high oil prices.
xyz
2007-11-07 20:07:41 UTC
I find it very hard to believe that the cost of producing products from oil can rise as much as it has in one or two years..are they making equipment out of gold and silver instead of steel...and then the oil company's brag about those high profits...



I have a great fear that there will be a world war lll, so I want my wages to go up four times tomorrow..
frank r
2007-11-07 20:07:55 UTC
You are both fooled into the belief that economics and free trade are the master and that the wars only an influence on them at best.

The manipulation of the price of oil one of many strategies for maintaining and growing power.

The stability of powers is the only way that people have enough confidence for any economy to exist at all.



Drive up oil. Middle east power profits, get comfortable and dependant. Drive it back down, their power and comfort destabilizes.



Drive up oil. US companies inovate new energy sourses, makes the Greenies happy with a share of power, drive it back down at the right moment.... middle east faulters, and we have the new energy inovation for sale worldwide.



Many many more viable cases for a reasonable and rational control of the price of oil.



Your opinions don't count.

Maybe your votes..... maybe.
2007-11-07 20:12:08 UTC
You can't because your neighbor is not mistaken. Strife in oil-rich countries lowers their stocks and causes tension with invading countries(like the U.S.). Both of these factors have affected the prices of oil and gasoline. (If you have watched the rise and fall of oil prices, a pattern is apparent. They were rising steadily until 2001, when they ran out of control.)
ugh192
2007-11-07 20:01:13 UTC
As long as your neighborhood station isn't gouging...it has to do with the price of the barrel on the market. Mostly it's been our own refineries shutting down for maintenance and other things like recession. Tell your neighboor that people who live in those nations only pay like maybe 27 cents for a gallon.
barristiababe
2007-11-07 20:02:30 UTC
I live in Canada, one of our provinces (Alberta) produces more than half of our oil, through the oil sands, yet gas here in Canada is more expensive than in the states. The Alberta oil sands have enough oil to last for hundruds of years so it's not like they are going to be short on suply
2007-11-07 20:05:17 UTC
(For Americans, if you aren't just listen then...)



Well, I guess you could tell them it's the oil addicted president living in WA. Thats the only thing I can think of. Because I think I know I am right. :D



Everyone else knows it's true too. I wish we would hurry up and elect someone else. Damn wars and politicians. They can all go to hell. Money hungry F*ckers
bilbobagsend
2007-11-07 19:59:37 UTC
demand for oil drives up prices, demand is caused by speculation that war will cause oil to cease production
2007-11-07 20:00:29 UTC
how exactly is he mistaken?



laws of supply and demand... if supply is even put into question, concerns will causes raises in prices...



and war in a region will obviously make some concerned over supply...



it's all the same... the speculators are driving up prices due to war fears?
lisa s
2007-11-07 20:00:39 UTC
why do you need to convince anyone of what you know to be the truth.

Opinions are just like bellybuttons.....

She probably thinks that she is right too!

Why not just agree to disagree and live in harmony.

If you 'force' your neighbor to agree with you, they might agree just to keep the peace but you can win this battle and lose the war.

Allow your neighbor her constiutional right to be wrong and hope that he or she will respect your right to the same thing....
Track1
2007-11-07 20:05:04 UTC
Oil prices seem to be like cancer, anything and everything causes it! I think the oil company exects have daily meeting and laugh about the new "excuse today". (As their excuses are used, they get big bonuses)

This site lists some reasons and a poll:



http://www.gallup.com/poll/27709/Oil-Company-Greed-Seen-Major-Reason-High-Gas-Prices.aspx
2007-11-07 20:00:43 UTC
honestly unless your over in middle east and you know wuts going on, then you cant prove anything, but a quick thought the war has passed more than 400 billion in cash, dont you think their getting that money back from somewhere?
J T
2007-11-07 20:07:11 UTC
Maybe you are listening to your neighbor after all. You contradict yourself in your own statement.

.
DaveNCUSA
2007-11-07 20:02:24 UTC
His not incorrect -- you are.


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