So....You Want to Blame the Oil Companies?

I have noticed a recent rash of comments and articles on ATS complaining how the price of oil just keeps going up and up and how these "EVIL" oil companies are behind it. I and many other informed ATS'ers find this somewhat comical. While it is easy to blame the oil companies for high prices due to their bad "big business" image, there is in fact another reason why oil prices have in fact skyrocketed.

If one take a trip over to the realm of reason and logic he/she will see that in fact the price of oil is going up because the purchasing power of our dollar is going down. This applies to all forms of currency except *drum roll please* GOLD. While not exactly a currency, gold has been considered the perfect money so to speak for 1000's of years until the recent advent of central banks. The price of oil has remained steady if onces of gold per barrel are used. 1 oz. of gold in 1950 will just about buy the same amount of oil now as it did then.

Gold to Oil Ratio

So what did we learn?

1.Our governments have basically stealing our buying power for years

2. Big Government is the problem NOT Big Oil

3. Nothing is as it appears on the surface



[edit on 17-2-2008 by BlueRidge]

Are you sure this is a cause and not merely a correlation? I'm asking because this still puts the blame on something or someone other than ourselves. You know, personal responsibility an all that.

reply to post by Beachcoma


When the U.S. government went off the gold standard our dollar lost its intrinsic value. The only thing our money and all the other fiat currency is backed up by is faith. The Feds. loose monetary policy allowed our government to print more money without any backing since they did not have to have 1oz worth of Gold for every dollar they had. This enabled central banks and the Fed to print dollars to pay for government programs i.e. welfare/warfare without having to directly tax the people. The process of printing money without any backing further dilutes the "value" of the money everyone else has. This dilution is a stealth tax. This is the reason why food/oil/gold/basic materials go up in price.

Unlike paper money, gold has the same buying power as it had a 100 years ago. The reason is that you can't "print" gold. Gold must be mined, ,refined, and transported. This is a sunk cost. It is much easier to cut down a tree and turn it into paper and call in a billion dollars than it is to mine a billion worth of gold. Thats why gold has kept its value for so long. This is also why 1 oz. of gold will buy about the same amount of oil going back 50 years or more.

reply to post by BlueRidge


Okay, for the most part that made sense. But what about the cost of extracting the oil itself? Hasn't that increased due to reserves being in harder to reach locations? What about the fact that demand has also increased? There are more vehicles on the road, more products manufactured that require hydrocarbons as a raw material... these things should increase the demand and therefore the price, even if it were purchased with gold.

What I find the most laughable about people who think the very old conspiracy about "Big Oil" controlling the price of oil is the completely outdated image they have of the industry. What used to be called the "Seven Sisters" are no longer the powerhouse they once were.

www.economist.com...

Big Oil is pretty small next to the industry's true giants: the national oil companies (NOCs) owned or controlled by the governments of oil-rich countries, which manage over 90% of the world's oil, depending on how you count. Of the 20 biggest oil firms, in terms of reserves of oil and gas, 16 are NOCs. Saudi Aramco, the biggest, has more than ten times the reserves that Exxon does.

Others include the national oil companies of Venezuela, Russia, Iran, Mexico, China etc...

Yet people still think the US oil companies or the White House controls it all.

As for the price in recent years?

Don't forget peak oil and the growing demand from the BRIC countries.

Some people claim peak oil is a conspiracy theory, but I firmly believe that they will be proven wrong when Bush leaves office and the price of oil doesn't come back down to $20-30/barrel.

My current signature says it all IMO:

"The increase in China's energy demand between 2002 and 2005 was equivalent to Japan's current annual energy use." This nugget of information, buried in the International Energy Agency's latest World Energy Outlook, tells one almost all one needs to know about what is happening to the world's energy economy. - Financial Times 11/13/07

.

[edit on 2/17/2008 by Gools]

Originally posted by Beachcoma
reply to post by BlueRidge

 

Okay, for the most part that made sense. But what about the cost of extracting the oil itself? Hasn't that increased due to reserves being in harder to reach locations? What about the fact that demand has also increased? There are more vehicles on the road, more products manufactured that require hydrocarbons as a raw material... these things should increase the demand and therefore the price, even if it were purchased with gold.

Yes you are correct in that there is more demand for oil, but even with that demand gold has lost very little of its purchasing power as compared to paper currencies. In response to the sunk cost of extracting oil, those cost have in fact decreased as technology has improved. If or when peak oil does occur then gold will buy significantly less oil than it has in the past, the chart above suggest we are not there yet. The above graph illustrates my point. To give credit it was taken from the "GoldMoney Alert - 2 January 2008" at www.goldmoney.com...

reply to post by BlueRidge


Or the chart could suggest that the *actual* value of gold has increased slightly, hence why the price of oil in goldgrams remain steady.

Originally posted by Beachcoma
reply to post by BlueRidge

 

Or the chart could suggest that the *actual* value of gold has increased slightly, hence why the price of oil in goldgrams remain steady.

The value of gold and other metals have gone through the the "roof" so to speak when compared to all fiat currencies. In reality those currencies have just lost value because central banks print more money making everyones dollars worth less. It just like adding water to lemonade, add enough water and you cant taste the lemons . It is much much easier to print money than to mine gold.

The article states, "Note how the price of crude oil has risen in terms of these national currencies, but remains essentially unchanged in terms of gold. Crude oil is not becoming more expensive; rather, the purchasing power of national currencies continues to diminish. In fact, the price of crude oil has remained essentially unchanged for decades, when measured in terms of gold."



[edit on 17-2-2008 by BlueRidge]