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September 21, 2007

Comments

Matt Dalio

Hello - I just wanted to let you know that we featured this post on TheIssue.com's Issue of the Day on Peak Oil Theory. This post was a fantastic outline of OPEC's role, both as a player and as an example, in Peak Oil. You can see the post here: http://theissue.com/issue/3121.html

Steve LeVine

I wouldn't say that OPEC's greed is the primary driver in oil prices. How about the western industry's short-sightedness? The Saudis in fact produce a lot of oil that simply can't be used fast enough by the West because it's too heavy to be processed by most U.S. refineries. So one might ask -- why has there not been accelerated construction of these refineries? The Ambanis of India, for instance, managed to build a 1-million-barrel-a-day heavy refinery in a year. Is the U.S. not as capable as India?

Steve LeVine, author
The Oil and the Glory (Random House)
http://www.oilandglory.com

Paul Roberts

Hi, Steve: Good points, but I wonder if the answer isn’t a little more complicated than mismatched oil grades. It is absolutely the case that the US hasn't built a new refinery in decades, largely because of NIMBY politics; India, by contrast, is far more welcoming of industrial development generally, and of refining capacity in particular—and its political system, unlike ours, doesn’t give much voice to communities which might object to a new refinery in their backyard. So on that score, the United States isn't as capable as India. But as you know (and by the way, I am anxiously awaiting my copy of “Glory,” which looks very interesting) there are a great many other drivers for price. OPEC has long blamed the lack of US refining capacity, but the truth is that there is a lot of spare refining capacity overseas, and we’re already importing more than ten percent of our gasoline. I’d be more inclined to look at the combination of a tight market (driven by hot Asian demand) and rampant speculation.

Shane Allen

It's amazing how relevant this post is, more than a year after it was made...

Paul Roberts

Shane--
Just more of the same, actually. The trends that were already visible last year are even more pronounced today. Recession is giving us a temporary breather from high oil prices. But assuming an eventual economic recovery, there's no reason not expect a return of higher oil demand--and higher oil prices.

drilling rigs

it is definitely about greed. they are trying to get every penny out of us.

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