Originally Posted by aerospacepilot

Let me address a few key misconceptions about the price of oil.


It is all because of the weak dollar.

True, the price of oil rose because the value of the dollar has gone down. However, the value of the dollar is the same today (with oil at $130/barrel) as it was in the beginning on March 2008 (with oil at $103/barrel). So why has the price of oil increased $27/barrel (about 27% in 3 months) when the value of the dollar has been stable?

Drilling in ANWR is the solution

ANWR has oil predicted oil reserves of approximately 4 billion barrels. To put that number in perspective, the US consumes 20 million barrels of oil per day. The world consumes 83 million barrels of oil per day. If we drilled in ANWR, they estimate we could produce 1 million barrels per day. That is only 5% of what we consume every day. Barely 1% of the world oil supply. Oh yeah, and it would be all gone in 11 years. Do you really think that will solve our problems? Today the Saudi's announced they were increasing production by 300,000 barrels to day. Despite this news, the price of oil went up $2.30/barrel to an all-time record high. 1 million barrels a day is nothing on the global scale. It is just a short term solution to a long term problem. It is like putting a band-aid on a gushing wound, and quite frankly, I don't think that small amount of production will make a difference. Plus, you would have to be an idiot to drill in some of the most sacred environment on the face of the planet. Drilling in ANWR is not the solution to our energy crisis.

The law of supply and demand will cause the oil bubble to burst

That entire statement is so wrong. The rising price of oil defies the law of supply and demand. In May 2003, the price of oil was $30/barrel (hard to believe, huh?). In May 2008, the price of oil is currently $130/barrel. The price has increased 433% over 5 years. Demand in the world has slightly increased from 78 million barrels to day in 2003 to 83 million barrels per day in 2008. Barely a 6% increase.

Oil prices can continue to rise because there is demand for oil. The price has increased 433% in the past 5 years, yet we are consuming more oil than 5 years ago. Is oil worth $130/barrel? Of course it is! If you bought gasoline recently, you are certainly willing to pay $130/barrel. Anything is worth what you are willing to pay for it. If you continue to pay for oil when the price hits $150, $180, $200/barrel, you must believe it is worth the price.


Up until very recently, OPEC had a strategy of not letting oil prices get out of control because they thought if they drove the price too high, the world economy would crumble, and someone would develop an alternative to oil, leaving Saudi Arabia as a piece of desert atop 200 billion barrels of worthless black crap. Oil kept going up and no one has done anything about it (including the US, the worlds richest, most powerful, most technologically advanced country who is the world's largest oil consumer). So recently it seems like they have changed their strategy, and are just going to let oil prices rise, and see how much oil is really worth. My opinion is oil is worth about $200/barrel. That is gas at $6-$7 a gallon. Above that, you will start to see a significant reduction in oil consumption.


In short, the people most responsible for $4/gallon gas are ourselves, because we continue to buy gasoline and not do anything about the rising price of oil. The price of oil is only going to go up and up and up. The only thing we can do to stop it is to stop consuming a big portion of it (by developing an alternative energy) and leaving Saudi Arabia with 200 billion barrels of worthless black crap. Until we switch to an alternative energy, there is really not much we can do. Crude oil was a one time gift to mankind. It was nice while it lasted...now lets get over it.