Who Controls Gas Prices and What You Can Do About It!
Oil prices are reaching $150 per barrel with no end in sight. Why is this occurring, and who is responsible. In response, many are considering alternative fuel sources, including Water.
Market theory says that as demand for a product drops (as is our consumption of gasoline), that prices should drop as well. Clearly this is not happening. Why?
The question on everyone's mind is who is controlling oil prices. In a perfect market, the forces of Supply and Demand would prevail. Let's briefly review the market to determine why the market is not working.
On the Supply side, the disparity between growing oil resources (new oil discoveries) and oil production has been increasing since 1980 as the growth in production outpaced the growth in oil resources. Economists are predicting that oil prices will continue to rise until a new market equilibrium is reached where supply satisfies world demand. Also, the turbulence in the Middle East, especially in Iraq, and the instability in West Africa, has led to a reduction in oil exports.
Looking next at the Demand side, emerging industrial nations are having a significant impact on oil consumption. China and India are the two largest consumers of oil in this group. Energy usage for these two countries has soared due to industrial growth, rapid urbanization, and the rising standard of living. For example, China's consumption of oil doubled over the last decade. At its current consumption rate of 8%, China will again double its oil consumption in 8 years.
Transportation accounts the largest share of oil consumption, reflecting the growing rate of vehicle ownership. China and India are experiencing rapid growth in vehicle ownership which now accounts for 75% of total oil consumption. This compares to the USA at 70% consumption by vehicles.
Also, as world population increases, so will the demand for oil. Production per capita peaked in 1979 when population growth exceeded oil production. Since then it has been declining. World population in 2030 is expected to be double that of 1980.
But still the question remains: who controls gas prices? Is it OPEC that controls the supply of oil exports? Is it the large integrated oil companies such as Exxon Mobil Corp and ConocoPhillips who are experiencing record profits? Or is it in the distribution chain with the refiners and gas stations?
Most would answer who controls gas prices by pointing to the large integrated oil companies. The production units of these companies actually sell their oil to the highest bidder, and purchase oil for their refineries from the lowest cost sources. And there's the problem.
The answer to who controls gas prices is the Institutional Investors. They set the spot price for oil. Hedge fund manager Michael Masters went before Congress to testify in May of this year. During his testimony, he said "What we are experiencing is a demand shock coming from a new category of participant in the commodities futures markets: Institutional Investors...". The general media emphasizes the emerging industrial countries (China and India) as the primary cause for price rises over the last five years. But little attention is given to the Index Speculators (Institutional Investor) whose demand for oil, over the same five year period, was equal to China.
Abdullah al-Badri, OPEC's Secretary General, indicated that there is rampant speculation in the spot market for oil. He provided data that the 'paper market' for oil is 15 times larger at 1.36 billion barrels per day compared to the 87 million barrels per day of worldwide consumption.
Without proper oversight (most of the oil market remains unregulated), Institutional Investors are free to manipulate the market by pushing prices higher. Hence, they are the group who controls gas prices.
So, what can we do about it? Short of waiting for Congress to implement legislation, or the Chairman of the SEC to take action, we can take action and effectively be the one who controls gas prices. How? We can effectively control prices by dramatically improving the gas mileage of our cars and trucks.
Within the near future the auto manufacturers will be providing high mileage vehicles. GM will introduce an electric (EV) car with a small engine for recharging the batteries. This technology reflects a radical change in design, eliminating the big engine and drive train (transmission, driveshaft, and rear axle). Introduction is scheduled for 2010, and its expected to get approximately 150 mpg.
There is also the Hydrogen Fuel Cell car, which is at least a decade away (I don't hold much promise for this design).
And there will be the next generation of the current Hybrid car: the pluggable Hybrid. With advances in battery technology, this next generation Hybrid will average over 100 mpg. It is slated to be introduced in 2010.
But there is something we can do today with existing technology. It is not expensive, and it's easy to implement. It is not harmful to the engine (it is actually beneficial) and it promises to increase your gas mileage by as much as 50%.
Like the Hybrid car, this system relies on capturing wasted energy and reapplying it as needed to improve gas mileage. Wasted energy occurs when the vehicle is at a standstill or coasting down a hill, and the engine is not contributing to moving the vehicle forward. Unlike the Hybrid car which stores wasted energy in batteries, this technology stores the energy by converting water to a highly combustible gas called oxyhydrogen (HHO). It is like running your car on Water.
Market theory says that as demand for a product drops (as is our consumption of gasoline), that prices should drop as well. Clearly this is not happening. Why?
The question on everyone's mind is who is controlling oil prices. In a perfect market, the forces of Supply and Demand would prevail. Let's briefly review the market to determine why the market is not working.
On the Supply side, the disparity between growing oil resources (new oil discoveries) and oil production has been increasing since 1980 as the growth in production outpaced the growth in oil resources. Economists are predicting that oil prices will continue to rise until a new market equilibrium is reached where supply satisfies world demand. Also, the turbulence in the Middle East, especially in Iraq, and the instability in West Africa, has led to a reduction in oil exports.
Looking next at the Demand side, emerging industrial nations are having a significant impact on oil consumption. China and India are the two largest consumers of oil in this group. Energy usage for these two countries has soared due to industrial growth, rapid urbanization, and the rising standard of living. For example, China's consumption of oil doubled over the last decade. At its current consumption rate of 8%, China will again double its oil consumption in 8 years.
Transportation accounts the largest share of oil consumption, reflecting the growing rate of vehicle ownership. China and India are experiencing rapid growth in vehicle ownership which now accounts for 75% of total oil consumption. This compares to the USA at 70% consumption by vehicles.
Also, as world population increases, so will the demand for oil. Production per capita peaked in 1979 when population growth exceeded oil production. Since then it has been declining. World population in 2030 is expected to be double that of 1980.
But still the question remains: who controls gas prices? Is it OPEC that controls the supply of oil exports? Is it the large integrated oil companies such as Exxon Mobil Corp and ConocoPhillips who are experiencing record profits? Or is it in the distribution chain with the refiners and gas stations?
Most would answer who controls gas prices by pointing to the large integrated oil companies. The production units of these companies actually sell their oil to the highest bidder, and purchase oil for their refineries from the lowest cost sources. And there's the problem.
The answer to who controls gas prices is the Institutional Investors. They set the spot price for oil. Hedge fund manager Michael Masters went before Congress to testify in May of this year. During his testimony, he said "What we are experiencing is a demand shock coming from a new category of participant in the commodities futures markets: Institutional Investors...". The general media emphasizes the emerging industrial countries (China and India) as the primary cause for price rises over the last five years. But little attention is given to the Index Speculators (Institutional Investor) whose demand for oil, over the same five year period, was equal to China.
Abdullah al-Badri, OPEC's Secretary General, indicated that there is rampant speculation in the spot market for oil. He provided data that the 'paper market' for oil is 15 times larger at 1.36 billion barrels per day compared to the 87 million barrels per day of worldwide consumption.
Without proper oversight (most of the oil market remains unregulated), Institutional Investors are free to manipulate the market by pushing prices higher. Hence, they are the group who controls gas prices.
So, what can we do about it? Short of waiting for Congress to implement legislation, or the Chairman of the SEC to take action, we can take action and effectively be the one who controls gas prices. How? We can effectively control prices by dramatically improving the gas mileage of our cars and trucks.
Within the near future the auto manufacturers will be providing high mileage vehicles. GM will introduce an electric (EV) car with a small engine for recharging the batteries. This technology reflects a radical change in design, eliminating the big engine and drive train (transmission, driveshaft, and rear axle). Introduction is scheduled for 2010, and its expected to get approximately 150 mpg.
There is also the Hydrogen Fuel Cell car, which is at least a decade away (I don't hold much promise for this design).
And there will be the next generation of the current Hybrid car: the pluggable Hybrid. With advances in battery technology, this next generation Hybrid will average over 100 mpg. It is slated to be introduced in 2010.
But there is something we can do today with existing technology. It is not expensive, and it's easy to implement. It is not harmful to the engine (it is actually beneficial) and it promises to increase your gas mileage by as much as 50%.
Like the Hybrid car, this system relies on capturing wasted energy and reapplying it as needed to improve gas mileage. Wasted energy occurs when the vehicle is at a standstill or coasting down a hill, and the engine is not contributing to moving the vehicle forward. Unlike the Hybrid car which stores wasted energy in batteries, this technology stores the energy by converting water to a highly combustible gas called oxyhydrogen (HHO). It is like running your car on Water.
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Fight back against the oil companies. A simple inexpensive system will show HOW TO RUN YOUR CAR ON WATER
posted by Frank Potter at 4:43 PM
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