Story Comments

This is Bush's fault. Before the invasion of Iraq, gas was $1.30/gallon. He went to go find WMD's & the price hasn't been under $2.00 for any sustained period of time since. Soon $4/gallon will be normal.

Interesting article! However, many of the comments added more correct insight re the difficulties faced in adding more new oil production capacity than those in the article. Hopefully, the author just gave us a typo with her heating oil and crude oil costs. With oil averaging $86.93/ barrel (not per gallon), oil costs, ex conversion cost and losses and distributor's margin, are only $2.07/gallon with 42 gallons per barrel. A far cry from $86.93/gallon and again less than people pay for bottled water, much less Coke or Pepsie.

Under the subheading 'Home Heating Costs', $86.93 per heating oil gallon seems a bit excessive. The dollar may be falling, but it has a ways to go before it hits that level. However, a gallon of stove oil was 3 cents in the depression. So, who knows?

The statement 'How come? A primary reason is that the oil-production companies have not invested enough in exploring new oil resources, says Chris Lafakis, associate economist at Moody's Economy.com.' is very simplistic. There are a multitude of reasons why oil is at $100, but here are some of the main ones:
Seventeen years of declining oil prices to a low of $9 per barrel in 1999 caused the infrastructure of the energy industry to be decimated. The employment in the industry decline over that time by almost 2/3rds. Almost no new drilling rigs, new refineries, service equipment or many other investments were made during this time. It was a long period of contraction. It will take a long period of time to rebuild this infrastructure, particularly the experienced human resources. This is on a global basis and not just the US.

Secondly, access to potential resources has been restricted by national governments, land rights and environmental regulations. Particularly...(Read more of this comment), the largest potential areas are in countries that have not allowed outside companies to invest and they have not invested in their own countries. Even now with the economic incentive, there is not enough infrastructure to respond adequately.

Third, it was uneconomic to make significant investments in much of the infrastructure until the last several years in much the same way that the alternative energy programs did not have significant investment during these years of low energy prices. It will take time to reverse this trend. The long lead time is why the energy industry has always been cyclical and it is likely to always be cyclical.(Show less of this comment)

Hartman and aquaquant......... this morning it is reported that Brazil just found a 5-8 billion barrel oil reserve of light crude off the coast of Rio de Jenerio........ I thought we had no more oil?... But unlike the idiots here in the USA.. they are actually going to drill it and suck that puppy dry for every drop and make a crapload of money in the process.. and with all that new supply in the system.. the price will come down... so lets stop with the doomsday nonsense and go back to reality shall we?... oh.. by the way... Alaska has a crapload of oil too.... as in more oil out there that we could use?...

Not to mention the known reserves that we are forbidden to harvest in ANWAR and the Gulf of Mexico. And the shale in our own Western states - which all become economical as the price of crude rises. The fact is we need to harvest all of these resources while we find our way to the fuels of the future. That transition to the future must be seamless and as tranquil as possible to avoid world strife and possible conflicts. Those with an extreme green agenda somehow expect the government to solve this problem which is typical liberal wishful thinking. The problem will be solved by free-market economics working in a capitalist society.
Socrates

No new reserves? what about oil sands? what about coal bed methane? It's all economics. The only way you can force people to use less or find new means of energy is higher prices. Supply and demand. What makes capitalistic countries great is their ability to see problems, change behaviour, and capture opportunity. These markets are efficient. There is no price gouging. Look at refinery margins, refiners and oil companies are posting lower earnings because there is less demand for gasoline and heating oil. Thank god for higher prices, otherwise one day I'll wake up and we'll be out of crude and no one will have a clue what to do then.

Chris Lafakis, associate economist at Moody's Economy.com needs to see a film called 'A Crude Awakening' (2005) in which geologists explain that they had already used the latest technology to search for oil throughout the world and found no new reserves. The only unexplored places are at the poles and in Siberia. That's why oil companies don't invest in new explorations. The world oil output has peaked and speculators are well aware of that. The only clueless consumers are North Americans who continue to consume twice the amount of energy an average Brit does, or eight times the energy consumption of an average world citizen.

I found the article answered a lot of my questions regarding how the price per barrel, economy, refining profits and speculators fit into the equation.
Now that the formulation of oil costs is known, hopefully the weather, alternative fuels, conservation and what I see is price gouging by the industry can be tamed.
Our nation does not benefit from too much of its earned dollars being shifted to energy costs.