How Have Oil Prices Affected People?

1. People
• Middle East middle class: In February, because of high oil prices in Jordan, the price of basic food items (eggs, potatoes, cucumbers) more than doubled.
• Americans: Partially due to higher oil prices within the past few years, 24% of the income of young adults has gone to pay off credit card debt. Overall, credit card debt in the United States was at $790 billion as of February of this year. Gasoline and home heating prices have risen 29.4%, transportation costs 8.3%, food and beverage prices 4.8%, and medical care 5.2%. American people haven’t been given comparable increases in income to match these historically high increases. The cost of products that use oil as a raw material, like lotions, toothpaste, plastics, etc. have also risen.
• American politicians
o Donald Rumsfeld: Normally, politicians have to divest themselves of any holdings that stand to gain or lose from political decisions. However, Rumsfeld was belligerent and never sold his stocks in Gilead Sciences. If he had sold when initially requested, he would have received $7.45 for each share. However, due to his consistent refusal to sell, he ended up making $67.60 when he left the Bush administration, a profit increase of 807 percent.
o Dick Cheney: Like Rumsfeld, Cheney was very hesitant to detach himself from his business interests as he held public office. He was pressured into selling most, but not all of his Halliburton stock for $18.5 million. However, he still kept 189,000 shares in Halliburton and 500,000 unvested options. Halliburton’s stock rose from under $10 before the War in Iraq to $41 three years later.
• Oil Companies: Removing Saddam Hussein from power in Iraq opened up many opportunities for oil companies including Exxon Mobil, Chevron, Shell, and BP. Halliburton is also included. The War in Iraq has been the single most profitable event in Halliburton’s history. Exxon Mobil recorded a record $11.68 billion profit for the second quarter of the fiscal year.
• Automotive Industry: GM, Ford, and Chrysler are all requesting a bailout. Last month, the automotive industry sold less than a million cars, the slowest the sales rate has been in 15 years. This is due to the fact that Americans, on average, spend 4.5% of their income on gasoline as opposed to 2% when oil was cheap in the early part of this decade.

Source: Bill Baer of crashburnalley.com

Some of that is just plain scary.

Oil Industry Shuts Down For Gustav

New York - With tropical storm Gustav threatening to become a monster hurricane, the oil and gas industry is starting to batten down the hatches on its giant rigs in the Gulf of Mexico.

Already, many of the companies have evacuated roughnecks and geologists and are preparing to turn off the oil and gas deep under water.

On Thursday, Shell Oil Company, which produces about one third of the oil in the Gulf, said it had evacuated 400 workers with another 600 due out on Friday and Saturday. It was in the process of turning off the equivalent of 510,000 barrels of oil.

Any disruption of the oil and gas flow could eventually result in higher prices at the pump much as it did after hurricane Katrina. In recent days, the price of oil has moved up in anticipation of the storm but fell back on Thursday after some governmental organizations said they would release oil from stockpiles if there were disruptions. - Christian Science Monitor

Just...Just as $3.50 nears...

Gas Prices Drop Again

NEW YORK (AP) -- Oil prices plunged to a three-month low Monday, briefly tumbling below $120 a barrel in another huge sell-off after Tropical Storm Edouard seemed less likely to disrupt oil and natural gas output in the Gulf of Mexico.

Crude's steep drop -- prices fell more than $5 at one point during the day -- dragged down other commodities from corn to copper and mimicked the big nosedives of the past three weeks, adding to growing beliefs that the oil bubble is at least temporarily deflating.

"What this means is that we're going to see some more relief at the pump. We're probably looking at another 10 cents of downside in retail gas prices," said Tom Kloza, publisher and chief analyst at Oil Price Information Service in Wall, N.J. A gallon of regular gas fell on average about half a penny overnight to $3.881.

Also weighing on oil prices Monday was a report by the Commerce Department that consumer spending after adjusting for inflation fell in June as shoppers dealt with higher prices for gasoline, food and other items. That fed investors' expectations that a U.S. economic slowdown is sharply curbing U.S. demand for fossil fuels.

This usually starts to happen in late July and August, but has obviously stood out more this year: supply increases while demand decreases. At good old Blue Canoe in Wakefield the price is at $3.809.

Exxon Sets Profit Record

NEW YORK (CNNMoney.com) -- Exxon Mobil once again reported the largest quarterly profit in U.S. history Thursday, posting net income of $11.68 billion on revenue of $138 billion in the second quarter.

That profit works out to $1,485.55 a second.

That barely beat the previous corporate record of $11.66 billion, also set by Exxon in the fourth quarter of 2007.

"The fundamentals of our business remain strong," Henry Hubble, Exxon's vice president of investor relations, said on a conference call. "We continue to capture the benefit of strong industry conditions."

Unfortunately, I side with the Congressional Democrats on this one:

"While oil companies are earning record profits and gas prices are soaring, the largest oil companies have invested more resources in stock buybacks than U.S. production," said Congressional Democrats in a press release shortly after Exxon announced its earnings.

Other critics charge the oil companies with deliberately restricting production in an attempt to keep prices high.

Story from CNNMoney

Offshore Drilling Ban

Democrats contend that oil interest-tied Republicans are only seeking to expand oil companies' territory, and are ignoring land already available for oil exploration.

"For many Americans, there is no more pressing concern than the price of gasoline. Truckers and farmers, small-business owners have been hit especially hard. Every American who drives to work, purchases food or ships a product has felt the effect, and families across the country are looking to Washington for a response," Bush said, speaking from the White House Rose Garden. He took no questions.

Mentioning $4-per gallon gasoline more than once, Bush said, "My administration has repeatedly called on Congress to expand domestic oil production. Unfortunately, Democrats on Capitol Hill have rejected virtually every proposal, and now Americans are paying the price at the pump for this obstruction. - Fox News

Lift the ban! We need teh lower prices.

Election update

SAN ANTONIO, June 17 (Reuters) - U.S. Republican presidential candidate John McCain will call on Tuesday for energy conservation and the lifting of a ban on U.S. oil and natural gas exploration to help address the nation's "dangerous" dependence on foreign oil.

This excellent piece also contrasts McCain's stance on this issue with Obama's and Bush's. For more, click here.

I Think We're In Recession, No?

The jobless rate soared to 5.5% in May from 5% a month earlier, the highest level since late 2004 and the biggest jump in more than two decades. Economists had expected a rise to only 5.1%.

Oil, meanwhile, returned to record territory with a vengeance after an analyst predicted that crude would hit the $150-a-barrel mark by July 4. Crude futures rocketed up $10.75 to settle at $138.54 a barrel, exceeding the record price set about two weeks ago. It was the biggest one-day rise in dollar terms in the New York Mercantile Exchange's history.

Put it all together, and worries resurfaced that consumers would buckle from the double whammy of rising unemployment and soaring gasoline prices. - Los Angeles Times

Current Gas Situation = Good Old Days?

It may be the mother of all doom and gloom gas price predictions: $12 for a gallon of gas is “inevitable.”

Robert Hirsch, Management Information Services Senior Energy Advisor, gave a dire warning about the potential future of gas prices on CNBC’s May 20 “Squawk Box”. He told host Becky Quick there was no single thing that would solve the problem, due to the enormity of the problem.

“[T]he prices that we’re paying at the pump today are, I think, going to be ‘the good old days,’ because others who watch this very closely forecast that we’re going to be hitting $12 and $15 per gallon,” Hirsch said. “And then, after that, when oil – world oil production goes into decline, we’re going to talk about rationing. In other words, not only are we going to be paying high prices and have considerable economic problems, but in addition to that, we’re not going to be able to get the fuel when we want it.” - Business and Media Institute

For many that would mean spending a couple of hundred bucks at the pump.

UN Freaking Over High Prices

Rome—World rice prices that have tripled in Asia over the course of the year may come down but overall food prices will remain high for years to come, leaving millions more hungry, a U.N. food agency warned Thursday.

High oil prices, growing demand, flawed trade policies, panic buying and speculation have sent food prices soaring worldwide, trigging protests from Africa to Asia and raising fears that millions more suffer malnutrition.

On Thursday, tens of thousands of workers in Senegal -- from teachers to tax officials, fishery and port workers -- stayed home as part of a strike staged by unions to protest the spiraling cost of rice, fuel and other basic goods.

Surging food prices have also sparked riots in Haiti and fed worries about supplies in the Philippines. - Associated Press

Looting is imminent.

Iraq update

Iraq oil production decreased in March, along with OPEC as a whole, as Baghdad was pressed by Washington to spend more of its revenues, United Press International’s Ben Lando reports.

Oil flow has been steady at as much as 350,000 bpd according to Iraq’s Oil Ministry. Exports from the south have been around 1.6 million bpd. The rest is consumed domestically.

During hearings this week on Capitol Hill, General David Petraeus, commander of multi-national forces in Iraq, and U.S. Ambassador to Iraq Ryan Crocker, have been scolded by members of Congress for not requiring Iraq to spend more of its funds.

But wait! There's more!

Iraq, however, not only lacks the institutional capacity to spend the money, but is hampered by politics, fears and reality of corruption, and violence and spends only a fraction of its capital budget.

Academic Application - 11/8/07

In Calculus, we learned that demand and revenue can be expressed as functions, and how to use the demand function to calculate revenue. Today, C.N.N. reported the current demand for oil...

HOUSTON -(Dow Jones)- The chief executive of ConocoPhillips' (COP) Thursday said oil demand will be constrained by supply, adding that it will be "very difficult" for the world to produce more than 100 million barrels a day.

Also today, Reuters reported the current U.S. oil price...

WASHINGTON (Reuters) - Energy Secretary Sam Bodman said on Thursday the Bush administration will not change its policy of using the government's oil reserve only for major supply problems and not to curb prices, in spite of record high oil prices and market fears about tight winter supplies.

Bodman also said at an energy conference that the Energy Department's plan to keep about 12 million barrels of crude oil off the market and begin delivering it to the Strategic Petroleum Reserve in January won't "materially affect" oil prices.

Bodman said he was "very concerned" about soaring oil prices, which he said suggests more supplies are needed from OPEC and other major oil producing nations.

Though the U.S. oil price hit a record $98.62 a barrel on Wednesday at the New York Mercantile Exchange, Bodman declined to say whether $100-a-barrel oil was inevitable.

Let's pretend for a second that ConocoPhillips can meet the demand for oil, which is 100 million barrels. How much money would they make? The function for calculating revenue, given the demand, is R(p)=pD(p), where p is the price charged per unit, D(p) is demand, and R is revenue. In this instance, p=$98.62 and D(p)=100,000,000. So R(p)=98.62(100,000,000). Multiply that out, and ConocoPhillips's revenue is $9,862,000,000, or $9.862 billion. The lesson is that you should get into the oil business.

Oil prices hit a new record

NEW YORK -- Oil futures jumped to a new record above $90 a barrel Thursday on news that OPEC production increases aren't coming as fast as expected and that the cartel won't announce new output quotas when it meets next month. Light, sweet crude for December delivery rose $2.74 to $89.84 a barrel on the New York Mercantile Exchange after rising as high as $90.10 earlier, a trading record just above the previous mark of $90.07. Source: abcnews.com

Grapeseed oil powers cars

Call it the biofuel boomerang. Valentin and Nanette Humer sell their gourmet grapeseed oil to upscale Napa Valley restaurants. Then, they pick up the used oil to run their company cars.

Thanks to this approach, Valentin Humer says, "We haven't seen a gas station in two years."