Oil Prices - The Ship Turns

I wanted to send this article which shows how the rising price of oil is causing people to adjust their behavior and possibly make the prices come down with a market adjustment. It's an article about economics which is a topic that some people find interesting and others not so much, but it is worth a read. I hope you find it interesting and if you know anyone with budget problems, do remember that our church publishes a great book which I referenced after the article.

The Ship Turns
By INVESTOR'S BUSINESS DAILY
Energy: Call it the paranoid theory of petroleum. Somehow, dark forces behind the scenes keep us from doing anything about soaring oil prices. In fact, something is being done to bring down oil prices. And you're doing it.
IBD Series: Breaking The Back Of High Oil
For some, rising oil prices prove that oil companies and petrotyrants around the world must be in cahoots to create energy shortages. By that theory, we can do nothing about it. Eventually, government will have to step in.But in fact, even as our own dithering Congress refuses to help ease the energy crunch, things are already changing — thanks to you, the consumer, and you, the producer. That's right: It's the private sector that's doing it.One of the glories of a capitalist system is that price signals are allowed to work. When the price for a good rises, that means it's in scarce supply. When the price falls, it's relatively abundant. This signals to users and producers they must change their behavior.For users, higher prices mean finding ways to do with less. For producers, they mean finding ways to produce more. The confluence of these two forces usually results in lower prices. This is what's happening now with oil.It's true that the booming economies of China and India are sucking up ever more energy. But guess what? As the price of crude has soared from $30 a barrel to $50, then to $70 and past $100, we've all changed our behavior.For oil companies, it has meant drilling for more oil. According to data from a variety of sources, world oil output has jumped by 11%, or 8.5 million barrels a day, since 2002, to 83 million barrels a day.Contrary to the predictions of petro-paranoids, private oil companies are producing flat out — even though government entities such as the Organization of Petroleum Exporting Countries and the U.S. Congress work to keep prices high.Fueled by the high prices, new sources of oil are being discovered. They include the 33-billion-barrel bonanza recently found off Brazil's coast and other huge finds in the Caribbean and Asia. The U.S. itself has 656 trillion cubic feet of natural gas and 112 billion barrels of oil on federal lands alone — there for the taking if only Congress would allow it.But even without it, we're going gangbusters. As the American Petroleum Institute recently noted, "an estimated 4,577 (U.S.) oil wells were completed in the first quarter of 2008, up 12%" from last year and the highest rate since 1986. U.S. oil companies are going back to tapped-out wells and pumping oil that wasn't economically recoverable at $25 a barrel but is at $100.That's the supply side. What about demand? U.S. fuel demand in the first three months of 2008 was down 1.4% from a year earlier — the third straight quarterly year-over-year decline in a row.Gasoline consumption has risen about 1.5% a year since 2000. But Energy Department data showed demand in the first quarter edging down for the first time in more than two decades.In short, the tide has turned.The New York Times notes that U.S. car buyers have suddenly gone ga-ga over small cars. One in five purchases is now a compact or subcompact, while SUV sales are off 28%. "It's easily the most dramatic segment shift I have witnessed in the market in my 31 years here," said George Pipas, Ford Motor's chief sales analyst.So, even as Congress twiddles its thumbs, the private sector is doing its thing — adjusting to the market to make things better. The bad news is, there's no guarantee that oil prices won't go up more. The good news, as recent trends show, is that it won't last.
http://www.gnmagazine.org/booklets/MF/