Would you like to know why oil prices are high?

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Simple economics, supply and demand no political demagoguing. Rant and rave about alternative fuels all you want but the simple fact is at this point in time it has nothing to do with high fuel prices. Maybe in the future but not now. Today the cost of oil is determined by OPEC and what the market will bear.

Opec has ‘no plans’ to raise output

By Javier Blas and Ed Crooks in Vienna

Published: March 4 2008 13:03 | Last updated: March 4 2008 13:03

Opec, the oil producer’s cartel, was on Tuesday set to maintain its current official production limits in spite of record high prices and calls from consuming countries for an increase in output.

Chakib Khelil, the cartel’s president, said Opec had “no plans to raise production” at its meeting in Vienna which starts on Wednesday.

Shokri Ghanem, Libya’s oil minister

“The world has changed. The dollar is down, $100 is not what it used to be”

Other Opec ministers echoed his statement, adding that high prices were the result of speculation and the falling dollar, not a shortage of oil.

The price of oil hit a high of $103.95 a barrel this week as the dollar plunged to fresh lows against the euro and a basket of leading currencies.

On some measures, oil closed higher in inflation-adjusted terms than its previous peak in April 1980 – the height of the second great oil shock. Then, oil prices surged to the equivalent today of $103.76 a barrel.

Robert Laughlin of MF Global in London said: “[An] unchanged scenario with a May meeting is my favoured outcome.”

As he arrived for the Opec meeting, Shokri Ghanem, Libya’s oil minister, said: “The world has changed. The dollar is down, $100 is not what it used to be.”

Oil and the dollar have tended to move in opposite directions because commodities are seen by some investors as a haven from weakness in the US. On Tuesday, West Texas Intermediate crude oil was 3 cents up at $102.48 a barrel.

Some Opec members fear that current oil prices will damage the world economy. However, with energy demand set to weaken at the end of the northern hemisphere winter, no member country is pushing for a production increase.

Iran and Venezuela are pushing for an output cut later this year to support the price when demand is expected to dip.

David Kirsch, of the Washington-based consultants PFC Energy, said a cut in official output seemed unlikely because it would be politically damaging to defend openly $100 a barrel.

Instead, Opec could agree to covert cuts. Saudi Arabia, the biggest oil producer, last month produced 9.2m barrels per day – 300,000 b/d above its official Opec limit. The kingdom could return to that limit in coming weeks.

Ali Naimi, Saudi Arabia’s oil minister, at the weekend told Petrostrategies that he was going to the meeting with an “open mind” but said producing countries, and Opec in particular, should not be blamed for high prices.

He said “a vision of tightness in the market, which is unfounded”, had created an opportunity for hedge funds and other financial investors to make money. He added: “It is driving up the price, it is creating paper demand and influencing the price.”

He also suggested that there was now a floor of $60-$70 a barrel “below which the [oil] price cannot fall,” because that was the cost of alternative sources of supply such as biofuels, even including subsidies, or oil from Canada’s tar sands.

If Opec does agree to leave output unchanged, some members are likely to insist on an extraordinary meeting as early as next month to monitor the market.

http://www.ft.com/cms/s/0/6da9ca36-e9e8-11...?nclick_check=1

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I've been reading a lot on this lately as I was curious why diesel prices went up so high compared to gasoline since I drive a diesel truck. From what I've gathered, although gas consumption in this country is indeed falling due to increased prices and more efficient vehicles, the world's gas demand is increasing dramatically. Countries like India and China which house much of the world's population have an expanding middle class that can afford things like automobiles. They also have expanding industrial economies that require things like diesel and gas for trucks, trains, and boats to move the goods. The petroleum economist I read, more or less placed blame on the expanding middle class in india and china.

[CCTAU 3,346]

I've been reading a lot on this lately as I was curious why diesel prices went up so high compared to gasoline since I drive a diesel truck. From what I've gathered, although gas consumption in this country is indeed falling due to increased prices and more efficient vehicles, the world's gas demand is increasing dramatically. Countries like India and China which house much of the world's population have an expanding middle class that can afford things like automobiles. They also have expanding industrial economies that require things like diesel and gas for trucks, trains, and boats to move the goods. The petroleum economist I read, more or less placed blame on the expanding middle class in india and china.

Another theory is that diesel is used primarily by transporters in this country. And the average guy only cares about gas. Therefore, they can charge what they want for diesel and the truckers will just add the price back at the store. So everyone is payingfor the high cost of diesel. It's just guys like you and me that pay twice. Diesel is the least refined of the auto fuels.

Also, if OPEC tried to operate in this country, they would be shut down as a monopoly. They are the worlds largest monopoly.

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Here read some articles from this page:

http://www.wtrg.com/index.html

Let's not forget the demand factor. Just for laughs.

Trans-Atlantic flight arrives in London with just FIVE passengers on board

Last updated at 10:26am on 5th March 2008

Furious environmental campaigners have hit out at an airline that sent a plane on a 4,000-mile journey with just five passengers on board.

With enough room to fit 245 passengers, the American Airlines flight made the nine-hour trip on 22,000 gallons of fuel - a total of 4,400 gallons per passenger.

http://www.dailymail.co.uk/pages/live/arti...in_page_id=1770

Actually the prices are supposed to be set by market forces, but there is another middle man, the IMF and World Bank help set the market price for crude. These guys are the ones making the real money.

But honestly:

http://www.marketwatch.com/news/story/surg...743709DE47E9%7D

http://www.bloomberg.com/markets/commoditi...ergyprices.html