Could conservation of oil lead to higher prices? read on.....?

Question

I was reading a story recently about the towns in Georgia that had endured the severe water shortages. Now that they have ended, people are using LESS water (i.e., they're conserving), so the water companies decided to charge more for the water to make up the loss in revenue. Might the same thing happen with oil? After all, oil is controlled by a cartel that controls the prices, and my understanding leads me to believe that, at least for now, no true shortage exists (i.e., supply can meet demand). In other words, most of the high prices right now are due to speculators and the pointless war in Iraq and not because of simple supply and demand factors. Thgughts?

Answer 1

Not likely.  OPEC only controls less than 40% of the worlds oil supply, unlike that water utility in Georgia that controls 100% of Atlanta's water.  So oil prices are affected much more by supply and demand.  

And by the way, currently there is BARELY enough supply world wide to meet demand.  Most likely any oil that the US is able to conserve will just be offset by rising demand out of places like India and China.  

As much as politicians like to blame "speculators" for the price of oil, they have very little to do with the price.

Answer 2

of course it will.  the less we buy, the less profits are made, so they raise the price to make up the difference.  the prices are so high because of the unregulated speculators-everyone should call or write their senators and congressmen and tell them we need stricter laws regulating oil speculation.

Answer 3

It already is.  The high price is due largely to the shortage of refined oil in the US, and a new refinery has not been built in 20 years.  Nobody will spend $Billions to build a refinery when they believe the U.S. and world will turn to alternate energy sources.  Given that growth in use of oil could exhaust the world's supply in a lifetime, this is probably a good thing.

Answer 4

we had a similar experience in the early 70s during the first oil crisis. the gov. asked us all to turn our thermostats down to the upper 60s that winter.

then because of reduced use the natural gas company said they could no longer meet their production & transportation costs & raised their rates.

we ended up paying the same money for less gas while we sat around & shivered.

I'm more worried about what the various state governments will do to cover the lost tax revenue from reduced gasoline sales. in California the state gets 69 cents from every gallon sold, many times what the oil companys get from the same gallon.

other states get less but they will still have to cover the lost revenue somehow.

Answer 5

Loose reins on government leads to higher oil prices. Oil is a lovely excuse.

Answer 6

Yes and no.  The oil companies have all kinds of tactics they use they artificially drive prices up and bring them down.  But ultimately, the remaining supplies will be in areas that cost more to extract, so prices will go up just on that basis alone, assuming the companies can get permission to extract the oil in those areas. Witness the ongoing battle to drill in the Arctic National Wildlife Refuge.  We revisit this every 10 years or so, because one day they know the battlefield will shift and they might get this through!

But now, there's a lot of research underway for alternative energy sources.  Even the oil companies are diversifying and hedging their bets.  Which means that they still want to be able to keep the money rolling in even after the oil is gone.  But a lot of other companies have stepped into the field, so I expect competition may help keep prices down in the not-so-distant future.

There are a lot of uncertainties here, such as terrorism, and politics, and the ability of some countries to truly conserve.  On a personal level, I have to buy premium gas for my car, and I will make sure that is not the case for my next car, which I'm fairly sure will also be a hybrid.

Cool question.