Sunday, March 06, 2005

Of Black Helicopters and Big Oil

A quick story.

Whilst teaching economics at the local community college where they accepted nothing but the best the public schools had to offer, prices for a gallon of gas were persistently over $2 a gallon.

My students, the savvy geopoliticians they were, were all lit up about the high gas prices and were even more ecstatic about a boycott that was coming up that was "going to stick it to big oil."

"Huh," I said to myself, "that's interesting. I'd like to see how they boycott oil."

Upon further investigation I heard that there was this movement all across America for everybody to boycott oil on the same day and that would show those corporate executives at Exxon Mobil!

If you cannot see the weakness and stupidity in this boycott, you are at a loss, for I am too busy to berate you right now.

Anyway, I said, "Well, there are several reasons for the high prices of oil, but big oil is not one of them." I then went on to discuss how what was considered "big oil" were really more transporters and refiners and had to buy the crude oil on the market from primarily OPEC, and that they really didn't control the price of oil as much as forces of supply and demand.

Of course, this is not as romantic or exciting as being oppressed by big oil, so they did what any brainwashed students would do and believe what they wanted.

So, it was a pleasure when I saw the following chart.



In addition to OPEC tinkering with supply, on the other side of the equation is China's voracious demand for oil. I knew this, in combination with other things, was one of the contributing reasons for the increasing price of oil, but I didn't know just how much.

Unfortunately, if forecasts of Chinese economic growth prove correct, and the correlation holds, they aren't just joking or trying to make headlines with the $70 barrel of oil.

2 comments:

Peter Thurley said...
This comment has been removed by a blog administrator.
Peter Thurley said...

If you cannot see the weakness and stupidity in this boycott, you are at a loss, for I am too busy to berate you right now.Captain, I think we have finally found some common ground.