I filled my tank up the other day and I couldn't even shove $20.00 worth of gas into it. It was a pretty grand feeling.
My joy was magnified more by the thought of what this was doing to all of the oil-rich dictators around the globe. While US oil companies sock away profits from the times of plenty to cover the lean times, thugs such as Putin and Chavez produce as much as they can and base their graft off the profits. Declining profits mean a squeeze on the trouble they are able to cause.
Reading my mind, the Investor's Business Daily has penned an editorial on Chavez's travails:
The sad thing is that Venezuela's Chavez has learned nothing from history. He's ignored every lesson from the past, confident oil would remain high forever, while claiming he'd created a new paradigm. Venezuela's "Bolivarian Revolution," built around one-man rule by Chavez, was "different," he insisted.
After posting a surplus of 12.5% of GDP this year, and spending at least 4.5% of GDP on a stimulus package of soup kitchen offerings, Chavez is now down to his last $87 billion in reserves, having created nothing of permanent value. Next year, S&P estimates a wild swing into deficit by Venezuela, forcing devaluation.
Venezuelan oil prices are now $34 a barrel. Producing 2.3 million barrels a day, down 16% from 2005, and now consuming 795,000 barrels of that, as Caracas investment banker Miguel Octavio estimated on his blog, "The Devil's Excrement," he doesn't even have enough earnings to finance imports. He's given away about 424,000 barrels of oil output, and must make do on sales of about 1 million barrels. With oil down, Chavez has entered the worst phase of the oil cycle.
Couldn't happen to a better Communist.
5 comments:
Don't rush out and buy that shiny new SUV ... it won't last.
I agree with you on how happy I am with the effect low oil prices has on governments such as Venezuela. Another big reason to vastly raise the amount of energy we get from alternative sources.
Sirocco,
After your third kid, your pride gets swallowed whole and the minivan looks better and better. And nothing you own is shiny anymore.
As far as my work vehicle goes, I will part with my Subaru Forester after one of us dies.
The transfer to alternative energy will happen, but probably not completely during our lifetimes. Too much of the world runs on oil. Even should the United state miraculously stop using oil in 20 years, the slack will more than likely be picked up as the rest of the world industrializes.
I would love to see us move to alternative energy. I just see no reason to cripple ourselves economically in a unilateral fashion to do it.
Heh. Who said anything about crippling ourselves economically?
Once oil gets above $80 or $90 a barrel, alternative energy solutions become economically competitive. Get above about $110 a barrel, and they are going to be cheaper.
There isn't a doubt in my mind oil prices will end up on the high side of those figures, even after inflation adjustments are added to them. So get the research done now, and be ready to mass produce when it happens ... and if "being ready to mass produce when it happens" involves some reasonable level of government subsidy ... well, I can live with that too.
I'm not so sure oil will skyrocket again for quite a while.
Saudi Arabia has the upper hand because they only need oil priced at $30 a barrel or so the survive and thrive. Russia, Iran, and Venezuela need it priced significantly higher to continue operation. At that price, the US will cap our oil wells and increase imports.
By keeping oil low, Saudi Arabia can winnow the market a bit by really hurting much of its competition. The three countries I referenced earlier will be in dire straits after a few years of sub $50 oil. They will need to increase production considerably to keep up with the expenditure sheet. The thing is, is that nobody with any expertise is likely to help them expand after they stole the oil wells in the first place with their "nationalization" gambits.
Additionally, the last thing Saudi Arabia wants is for America to continue to cut oil use. They will keep oil low for a while to forestall shale oil and domestic drilling pressure. I'll bet the mean gas price will be closer to $1 than $2 this year and maybe the next, unless our government does something foolish. Low fuel prices are one of the only bright spots in view right now.
Certainly, while the global economy is down, oil demand will be down as well.
However, I can't see any reason at all to think that once the economy recovers the demand for oil won't start an upward curve again.
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