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The Reason for High Oil Prices

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page 11 of 13

Michael Lewis May 14, 2008 1:33 PM GMT The Algiers declaration March of 1975:A major portion of the planned or new petrochemical complexes, oil refineries and fertilizer plants be built in the territories of OPEC Member Countries with the co-operation of industrialized nations for export purposes to the developed countries with guaranteed access for such products to the markets of these countries. [Read sections 10 and 11]In 1977 Representative Benjamin Rosenthal of New York produced secret Internal Revenue Service documents going back to 1950. They showed that the tax laws of Saudi Arabia were drafted with the help of Aramco to call the added price of oil not a "royalty" or "cost of doing business," as was proper, but an income tax." The Saudis did this knowing that income tax paid to a foreign country is deductible from the income taxes an oil company pays the United States on all income received in the United States by the parent firm. From Pgs. 61-64 The Media Monopoly by Ben H. Bagdikian 5th edition paperback color emphasis added"Since that time the major multinational U.S. oil companies have paid hardly a penny of U.S. income tax on their foreign income." page130 BANKS. BORROWERS, AND THE ESTABLISHMENT
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twin May 14, 2008 1:12 PM GMT Doesn't take an economist or a finance expert to understand the rising price of gas/barrel of oil has anything to do with supply/demand -- look at the net profits these oil companies are raking in. The greed de jour has not only made it difficult for most Americans to balance their monthly checkbooks/cashflows, it has also driven speculatives in other essential commodities. We cannot prevent China, India and other emerging economies from consuming more natural resources; it's just that we do not have a national policy to to force for alternative sources including less dependency on commodities in demand. Big businesses (auto, petro) and their lobbysts are driving our future in the ground by raking in tomorrow profits, today.
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Ben May 14, 2008 1:02 PM GMT A lot of the oil trading happens from all over the world. In fact UK and US companies also outsource active trading to small companies in India and young kids sit on these terminals buying and selling on headlines. India itself has banned futures trading in many commodities including rice, wheat etc. It is time the SEC looked at the huge market distortion happening right now. Even as we are in a recession oil prices are rising. Both Indian and Chinese economy is slowing too. Everyone wants to load the camel and thinks one more straw wont make a difference. We now need to wait for the camel's back to break.
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Ash May 14, 2008 12:45 PM GMT I agree.Wall Street is driving Main Street.Watch out for the back lash. Hardly a day goes by without the markets showing up red and strategists are trying all they can to milk the masses - and succeeding at that. Maybe it is a good thing. This artificial crisis may or may not smooth out the wrinkles caused by mortgage and credit foolishness and rule-bending. But it certainly has upped the ante on more important things like Fuel-cell research and go-to-market on electric vehicles. Two things that the US needs to crawl out of this disastrous mess!
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cparjb May 14, 2008 12:44 PM GMT In regard to Chinese and Indian consumption: You state that "Last year China imported 3.2 million barrels per day, and its estimated usage was around 7 million b/d total." That's double, to me it is material. What was China's daily usage in, 2003, say? Why has China's and India's usage increased in the last 5 to 8 years? Because their economies have been growing? Why? Because we sent our dollars to India for cheaper outsourcing and sent our dollars to China for cheaper goods. We Americans have only ourselves to blame since we gave these nations the spark to jump start their economies and no one thought of the implications of outsourcing or moving manufacturing or buying cheap products from China. As always, Americans are looking to put the blame somewhere else, and now we are paying for cheap outsourcing and Chinese made products through the high cost of gas/oil and energy. I'm sure no one looked at this issue before since no one wants to hear it.
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Stu W. May 14, 2008 12:35 PM GMT Excellent article.
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Asian Brotherhood May 14, 2008 12:28 PM GMT If Asians with Oil (Arabs, Iranians) sell their oil for $$$ and DONT give it away free. The Asians without Oil (Chinese, Indians) earn $$$ by getting outsourcing & manufacturing jobs from the West and buy Oil from the Asians with Oil. So if the Asians with Oil give the Asians without Oil, FREE Oil, then that would be a GREAT example of Asian brotherhood & generosity and you wouldn't have to blame the West for your problems anymore ! ha ha
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Ed Wallace May 14, 2008 11:59 AM GMT As for China. Reuters reported Monday that their April imports fell by 3.9%.As for Allen's position on what Peak Oil is - you should read Dr. Hubbert's theory. Additionally, Allen claims not to buy the information in the article, but agrees with me that commodity traders are the problem. As for the dollar-oil equation, read There Is No Gas Shortage Parts 1 & 2 here at BusinessWeek.As always with my columns, it is based on oil analysts and their positions that are ignored by the media, government data and in this case, going through hundreds of pages of Congressional testimony.By the way, it was a surprise to me that oil is being stored offshore also. But it is. Thanks to everyone who took the time to write and comment.Ed Wallace
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JAS May 14, 2008 11:56 AM GMT The most concise and correct expalnation to date
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Tom May 14, 2008 11:02 AM GMT Einstein, you sort of got it right. The circus is America. The big money is oil that came to town. When everyone got so happy and secure, the oil pulled by US dollars traveled to the next town in China, now growing faster. So clear and simple due to limited oil.
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