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Tuesday, September 30 2014 @ 01:12 PM CDT

Still Waiting for That $12/Barrel Oil

News ArchiveA major decrease in petroleum prices would boost U.S. and global economic activity. Home heating oil prices would drop by at least a third. Gasoline prices would drop to less than $1 a gallon. As a result, people and business in the United States and throughout the world would spend far less for fuel. From an economic perspective, the United States and many nations around the world would clearly win. Still Waiting for That $12/Barrel Oil

Contributed by: Invictus

Should I stop holding my breath yet? In the run-up to the war (this comment from January 2003), this sentiment was all too common:

Under a free market [ed. note: The author's article was all about our liberation of Iraq], oil prices would probably fall to between $8 and $12 per barrel over the next 10 years -- down dramatically from today's price of about $25 per barrel.

A major decrease in petroleum prices would boost U.S. and global economic activity. Home heating oil prices would drop by at least a third. Gasoline prices would drop to less than $1 a gallon. As a result, people and business in the United States and throughout the world would spend far less for fuel. From an economic perspective, the United States and many nations around the world would clearly win.

Fortune chimed in with their rosy scenario (March 2003):

No one knows for sure which way things will go. But if you have to make a bet, the most likely scenario is that a year from now, with a new regime in Baghdad and long-dormant Iraqi wells finally pumping out crude, oil prices will be back in the mid-20s. "All expectations are that prices will come down," says Kuwait Petroleum's Sultan. "The only gray area is when." Deutsche Bank analyst Adam Sieminski is bolder: If the war is short and Saddam doesn't set fire to his fields, crude will hit $22 a barrel by this summer.
And the Heritage Foundation contributed this:

An unencumbered flow of Iraqi oil would be likely to provide a more constant supply of oil to the global market, which would dampen price fluctuations, ensuring stable oil prices in the world market in a price range lower than the current $25 to $30 a barrel. Eventually, this will be a win--win game: Iraq will emerge with a more viable oil industry, while the world will benefit from a more stable and abundant oil supply.

National Review predicted...gulp...a tax cut that never came:

"...markets clearly expect lower prices. On the eve of hostilities, oil was selling for about $37 per barrel. At this price, Americans would be paying $270 billion per year for oil. But once it became clear that Iraq’s liberation was at hand, the price quickly dropped to about $28 per barrel, cutting our annual oil bill by $70 billion. With full Iraqi production, the price might drop to $20 per barrel or less, giving us the equivalent of an annual tax cut of about $120 billion per year. And this is a tax cut the entire world benefits from."
The Wall Street Journal opined:

Of course, the largest benefit--a more stable Mideast--is huge but unquantifiable. A second plus, lower oil prices, is somewhat more measurable. The premium on 11.5 million barrels imported every day by the U.S. is a transfer from us to producing countries. Postwar, with Iraqi production back in the pipeline and calmer markets, oil prices will fall even further. If they drop to an average in the low $20s, the U.S. economy will get a boost of $55 billion to $60 billion a year.
Even better, they argued that the cost of containing Saddam would dwarf the cost of ousting him:

But none of this answers the real question: Is the cost reasonable given the goal? To answer that you also have to consider the cost of the main alternative to war--continuing containment of Saddam. Such an examination was done recently by economists at the University of Chicago's business school. Steven Davis, Kevin Murphy and Robert Topel added up the military expense of containment. The direct costs of troops and equipment come to about $13 billion a year, but they haven't got Saddam to bend to U.N. mandates. The authors assume, therefore, that efforts to contain Saddam might have to be increased by 50%, raising the cost closer to $19 billion a year.
The economists estimate that containment would have to be in place for 33 years--the period that a Saddam-like regime could endure (optimistic considering the lifetimes of the Soviet Union, Eastern Europe, North Korea and Cuba). In sum, when the expected value of containment is discounted to the present, the cost estimate comes to $380 billion. And don't forget more for homeland security, bringing the total cost to $630 billion. Simply put, containment costs a lot more than war--even if one doubles Mr. Bush's estimate to $120 billion.

Yeah. How are those forecasts -- on both oil and war vs. containment -- workin' out for ya?


http://www.blah3.com/article.php?story=20060420113016741
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Still Waiting for That $12/Barrel Oil | 2 comments | Create New Account
The following comments are owned by whomever posted them. This site is not responsible for what they say.
Still Waiting for That $12/Barrel Oil
Authored by: Anonymous on Saturday, April 22 2006 @ 12:14 PM CDT
if there was an alternative to oil you moron

all the alternative fuels NEED oil to even be manufactured, and then still need oil to help create more power

they use up more energy by using that oil to make new energy, so you actually LOSE more energy in the process of making alternative fuels like hydrogen cells, ethonol, etc then you'd get out of them
Still Waiting for That $12/Barrel Oil
Authored by: Anonymous on Saturday, April 22 2006 @ 08:36 PM CDT
First off yes this is true eccept you havn't done your homework either. You see oil isn't the only way to make fule cell energy as a matter of fact considerations of fule cells being made by these means are simply because of the cheapness of oil (remember it's still cheaper than water). It's likely that later fule cell tecnology will replace heavy duity power lines due to the fact that the energy storage efficancy of fule cells is 1:3 plus transportation energy expendature. And high tension power lines usualy return 1:35 (vearrys greatly) and suffer enormous power losses if they are near any conductors of electricity ie. unknown metalic rocks. If you watch I bet you'll see powerlines phased out one day for this and a few other reasons in favor of fule cells transported likely by train. Anywho. Hidroelectric dams wind and or solar power could all charge fule cells more efficantly than than the present electricity system provides them. Anyway the only problem with this is it requires people to go to school and work on becoming fule cell technologists, any volenteers? I don't think oil is as finite as some people think nowadays it is simply finding the oil that can be the painfull and arduous task nevermind taking possesion of it afterward. The only thing we should be concerned about is reducing the ammount of burnning that releses hot gasses into the air. other than that we may have been hit by a malatheausian curb prompted not illogicly by people who realised it was us and our hot air making global warming.