The Oil Crisis

From Texas, Randy Black questions Christopher Jones' speculation about the coming rise in the price of oil:

The reality may be higher; it could be lower. No one knows, since the future is the future. That’s why it’s called the futures market. Half of the speculators are gambling one way or the other. In thousands of locales across the US and the world, the price is still in the $20s, based on pre-existing contracts that cannot be changed until they expire. Large purchasers such as utility companies execute contracts for up to a year in advance, thus locking in their price. Of course, the price is predicated on the quality of the crude, which varies widely. August futures were $40 for Brent light crude, yet were $49 for the Port of New York. In the Midwest, the price was lower.  Christopher Jones seems concerned about the Bosphorus. The US does not obtain oil via the Bosphorus, at least not in any noticeable quantity. Oil passing through that choke point is headed to southern and western Europe, mostly. Of course, so are the pipelines. Further, Russian oil is not a significant issue to the US as only a tiny, tiny percentage of oil imports come from Russia. Neither does the US obtain oil from Afghanistan. I am not sure where Mr. Jones gets the idea that there are significant oil reserves in Afghanistan, but the contrary seems to be the case. After 40 years of exploration in the country, no significant finds have ever been reported. Gas fields have been exploited there since the 60s, but remain small and generally unsuccessful.
“If the Ras Tanura terminal is hit…”  This is speculation and of course, a big if. But in the end, the ifs side of the argument are what is adding about a $10 per barrel premium to the current prices. I have spoken in this forum several times about the reality of Saudi oil reserves vs. their claims. Since the Saudis do not allow independent verification of their reserves, we have only speculation, but in my mind, they don’t have what they claim to have. What does this mean? They won’t run dry in the immediate future, but certainly in the next 40-50 years versus some claims that they have enough for another century. For that matter, Norway will run dry, the reserves and consumption seem to confirm, in the next twenty years. And then their socialist security net that covers everything from cradle to grave, along with that mentality, is in deep trouble.
Regarding the “driving season,” Mr. Jones’ comment went nowhere. The driving season came and went, and prices were down during that period. I track my gasoline purchases for tax purposes, and after all was said and done, I paid less for one gallon in August than I did in June. September is looking about the same as August.
Source for oil price futures stats:  and

RH:  This is a highly technical subject. I wonder if Martin Storey, an oil expert, has any comment on Randy's remarks.  Certainly the US is trying to import more oil from Russia.

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Ronald Hilton 2004


last updated: October 23, 2004