June 29, 2008

Why there's no market for oil price conspiracy theories

Back in the 1970s, it was popular to believe that oil company manipulations were behind the rises in the price of oil. I remember a fellow I played golf with when I was 14 explaining that there was a flotilla of oil tankers lurking beyond San Clemente Island, just waiting for the price to hit $14 per barrel. You heard that kind of thing all the time.

Even though oil prices are an order of magnitude higher, conspiracy theories aren't popular these days. There's no market for conspiracies theories. The left wants high oil prices to prevent global warming, and, more importantly, to punish SUV drivers, while leading voices on the right have all been bought off by The Conspiracy.

No, just kidding! Nobody believes in conspiracies anymore. Not even when there is a 48-year-old international oil conspiracy that has its own website.

Nobody has ever tried to drive up the price of a natural resource. (Well, except for the Hunt Brothers cornering the silver market in 1979-1980. And Jay Gould cornering the gold market in 1869. And, of course, as commenters point out, DeBeers and diamonds.) Nobody has ever used an environmentalist theory to drive up prices. (Well, except for the media panic in the 1990s over how America was about to run out of places to dump trash, which never made any sense -- if there's one thing America isn't in danger of running out of, it's holes in the ground. The frenzy turned out to be a hoax engineered by the PR department of Waste Management Inc. to get higher dumping rates from municipalities.) So, just forget about it!

Seriously, I don't know anything about the oil market. I'm just saying that an era when nobody wants to believe in conspiracies would be the best time to try one.

My published articles are archived at iSteve.com -- Steve Sailer

27 comments:

Bill said...

I'm of two minds about it. Yes, we do need some motivation to find a replacement, but we already have a lot of "unconventional" oil in North America.

Using solar energy to create syngas seems feasible. I really don't see why we can't set up a system using solar energy, whether harnessed in space or elsewhere, to crack atmospheric (or emitted) CO2 and produce synthetic liquid fuel.

Maybe it's unpopular to use this example, but the Nazis managed to run their war machine far longer than they should have due to synthetic fuel production. This was in the 1940s!

If we are so pathetic that we can't do better than they did under intensive bombardment, then maybe we deserve to suffer at the hands of greedy, oil-rich Arab kingdoms.

jody said...

i'm somewhat knowledgeable about this topic, and i'm still thinking this is a simple matter of demand increasing while existing oil fields deplete.

not sold on any other ideas right now. pretty easy to see what's happening in my opinion. north sea in decline, cantarell in decline, russia in decline. very simple stuff.

most people do not understand energy at all, and think there is still a lot of easy to access oil everywhere. there isn't.

it's kind of scary how little the people in congress understand about this issue. their legislation borders on nonsensical.

Muswell Hillbilly said...

What about DeBeers and diamonds? Though I guess that's not a "conspiracy" properly, as it's one semi-monopolistic entity and not a cartel.

Anonymous said...

DeBeers?

Anonymous said...

Does OPEC have its own intelligence service to let it know if its members are cheating on quotas?

AMac said...

> Well, except for the media panic in the 1990s over how America was about to run out of places to dump trash, which never made any sense

Yeah, that was definitely a fad that was tres environmental and tres nonsensical. First time I've heard it explained this way, though. Any reliable links?

testing99 said...

The untold sequel to the Hunt brothers and others is that their attempts to corner the market busted them. It usually does unless the cartel, which is obvious, can get people to limit production.

Chronic instability/rebellion in Nigeria and Venezuela, along with Chavez in the latter, limit production. Mexico's corruption and nationalization have led to declining production, as has Russia's. Meanwhile millions of new drivers in China and India need fuel (and gas for generators). Global increase in wealth = global increase in energy demand. With limits on supply here at home and abroad by a combination of short sighted politics and general idiocy.

DeBeers fell apart when Russia and Australia started cheating, and they could no longer count on the South African military to police neighboring African states (the ANC could care less about DeBeers). OPEC fell apart in the mid 1980's due to endemic cheating in Venezuela and Saudi. That's always the problem with cartels -- someone can always cheat and has incentive to do so.

It's true that Leftists/Enviros want high energy prices, but won't like the resource grabbing world it will create. Real wars for oil, and plenty of blood.

Anonymous said...

T.Boone Pickens thinks says Peak Oil has been reached...

David said...

The real problem with conspiracy theories is not that are based on the assumption that human beings are human and selfish and therefore often enter into less-than-forthcoming combinations to promote themselves at the expense of other humans (a truism); the problem is that many of the theories as actually propounded remain theories, i.e., they are not proven or even provable. They are mostly pulled out of thin air.

In such cases, resorting to Occam's Razor remains the best course of action.

The theory is simpler that the price of oil is going up in dollars because the value of dollars is going down overall. Traders in oil futures are, by this simple theory, basically honest: they expect the bang to cost more buck because the dollar is (or will become) toast.

This is too depressing, though, and upon analysis reveals real complexities having to do with bad monetary policy, bad loans, and other subjects. It's a drag. Much more juicy and sexy, in the absence of evidence and in a personal condition of inability to change the situation anyway, to restrict thought to the span of two or three years and reduce motivations to short-term mustache-twirling.

Not saying there aren't villains cashing in all over the place. That's a truism, too. Just saying we don't know if they caused the spike.

Oil field depletion is relative. We could get oil from certain fields but not nearly as cheaply as we got it from those fields before. Is this principally because of 1. a reduction in the absolute volume of petroleum deposits, or 2. a reduction of real wealth? What about the fields in which drilling is not permitted, and the fields theoretically in existence but not yet discovered because less wealth means less exploratory activity? Is black goo drying up, or is purchasing power? Where did the wealth go? According to Pat Buchanan, forty trillion dollars worth went to wealth transfer schemes. A lot of other money goes into war (some of that, into refined petroleum). A lot of real wealth has been destroyed...

none of the above said...

There was also a large, distributed problem in many different places with siting any new dumps. It's not that there was no space for new dumps, it's that everyone's NIMBY about them. (This is also essentially the only really hard problem with nuclear waste. It's not that it's impossible to dispose of stuff that toxic, because in a large industrialized nation, we produce a lot of really, really nasty chemicals which we manage to mostly not eat or drink. It's just that nobody wants nuclear waste close enough to drop their property values or creep them out.)

anony-mouse said...

1/ You mean the Hunt Brothers lost their fortune failing to corner the silver market. And Debeers is losing its status with the increase in supply coming into the market (when was the last time you actually saw one of their diamond ads-even though you may remember the music?)

2/ The Trilateral Commission has its own website (or that's what they want you to believe), but the Bilderbergers don't. Hmmmmm

The Freemasons (stonecutters) also have their own website (to tell you that is why they sent me to post here)

3/ Actually there's a big market in conspiracy theories. Look at all the money that's been made selling books and movies about the tragic but historically unimportant JFK assassination alone (he had Addison's disease and would have likely died in office if he was re-elected-anyhow-he had been given last rites twice before).

Anonymous said...

Nowadays, OPEC isn't really a cartel. There are ll nations producing all the oil they can, to ride the gravy train, and Saudi Arabia, which may or may not have the ability to expand its production another million barrels per day.

J. said...

Nice insight. High oil prices are killing the world economy but speculators are not being tried and shot thanks to the "Green" movement. The Greens's religion says that fossil oil is sacred, we are sinning when burning it, and we should go back to "natural" transport (horses? bycicles?), natural food (berries, nuts, roots) and high oil prices are Nature's revenge. It is punishment we deserve.

Of course, burning witches and shooting speculators never improved supply nor did any good, except as distraction (entertainment) for the public.

A credible conspiracy theory "explaining" that good, pure, cheap SOLAR energy is being hid from the public by evil conspirators could easily take roots. You could start accusing the Government (the neoconservatives?) conspiring against solar energy. (Did I read somewhere that a Government agency forbid solar panels on public lands? Why is that?)

Anonymous said...

"A credible conspiracy theory "explaining" that good, pure, cheap SOLAR energy is being hid from the public by evil conspirators could easily take roots. You could start accusing the Government (the neoconservatives?) conspiring against solar energy. (Did I read somewhere that a Government agency forbid solar panels on public lands? Why is that?)"

Try this: "U.S. Halts Solar Projects Over Environment Fears."
http://tinyurl.com/4puaov
I don't know if it's conspiracy so much as environmentalism run amuck, but it's inane.

-Vanilla Thunder

nox said...

DeBeers were behind the assassination of Savimbi because he was financing his civil war against the MPLA in Angola with uncut diamonds which are a deal-breaker for DeBeers.
MPLA were doing in Angola what Mugabe is doing in Zimbabwe. They never won an election but have stayed in power through cheating and the barrel of a gun. In that sense Savimbi was justified in fighting them. In addition the US oil companies wanted "peace" in Angola because of the oil there. Of course they give a shit about democracy. Israelis helped the MPLA track down Savimbi with satellites and also trained the hit-team which killed him. The DeBeers-IDF link stares in your face.

nox said...

testing99 wrote:
"DeBeers fell apart when Russia and Australia started cheating, and they could no longer count on the South African military to police neighboring African states (the ANC could care less about DeBeers). "

If this is true its so ironic because nobody did as much to get the ANC into power as Harry Oppenheimer (the Jewish family which owns DeBeers).

Anonymous said...

To be fair, of course neo-cons want to maintain the US need for Arab oil. It keeps the US entangled in the middle east and thats good for a small country out there - who just happen to want the US entangled there.

The Hunt bros - I thought their failure was the story.

One difference between silver and oil is that a lot/most of the silver extracted through history is still around. If the price goes up people will be cashing in old coins/necklaces/electronics/cutlery etc. Very difficult to corner that market.

With oil one only has to control the current supply.

SFG said...

he had Addison's disease and would have likely died in office if he was re-elected-anyhow-he had been given last rites twice before
I thought they just replaced the missing hormones--or did they not know how to do that in 1962?

To be fair, of course neo-cons want to maintain the US need for Arab oil. It keeps the US entangled in the middle east and thats good for a small country out there - who just happen to want the US entangled there.
Huh? The Arabs' main leverage over us is the oil, and they hate Israel. If we didn't need Arab oil anymore we'd have a lot more leeway to support Israel.

Seems to me alternative energy would be good for the Jews (and the USA!)

Anonymous said...

Inflation + speculation + monopoly = higher oil prices (QED)

Anonymous said...

I've never heard that allegation about Waste Management before. Are there any web sources for it?

albertosaurus said...

Steve, it's odd that you a movie reviewer doesn't recall the most famous and best documented oil conspiracy in US history. I'm speaking of Who Framed Roger Rabbit? and the Nationality City Lines Conspiracy.

The convicted conspirators were Standard Oil, Phillips Petroleum, General Motors and Firestone Tire.

They set up a long term plan to train a generation of city planners who would aid them in removing mass transit street car systems across the country. GM bought several municipal railways.

In Los Angeles and here in Oakland citizens awoke one morning to find that crews were tearing up the tracks. There had been no notice.

Today we hear about mass transit as a future utopian remedy for traffic congestion and oil consumption but America's mass transit systems were torn out by an oil and car compant conspiracy in the forties.

Yes Steve, there really have been oil company conspiracies. I doubt if there is a hidden agenda by oil companies today but if there is it might be to raise the price of conventional sweet light crude until it's high enough to justify the exploitation of oil shale.

Shale oil has a few disadvantages compared to sweet light crude - it's full of rocks, and it's not really oil at all. On the other hand there's a lot of it and almost all of it is in America.

Estimates of how much shale oil sits in the Ameriacn West vary all over the place. At the low end the amount recoverable with today's technology is said to be only about the same as all the Saudi reserves. On the high side, it is estimated that 98% of all the planet's liquid fossil fuel lies under Colorado, Wyoming, and Utah.

The US Congress would never have been decisive enough to rip up the trolley tracks and force America into cars and busses. That took an oil company conspiracy. Maybe today there is another conspiracy afoot to force us to tap into our own fossil fuel resources.

Svigor said...

The Arabs' main leverage over us is the oil, and they hate Israel. If we didn't need Arab oil anymore we'd have a lot more leeway to support Israel.

Seems to me alternative energy would be good for the Jews (and the USA!)


Maybe. (well, obviously energy independence would be good for these USA), maybe not. It's an interesting question.

But if I was a Zionist Jew I'd be more inclined towards "not." If America achieved independence from oil, the ME would remain interesting only due to American Jewry's attachment to Israel. This would mean that there'd be no other excuse. Doesn't sound like the AIPAC ideal to me; not only would actual interest in Israel decrease, the obfuscations available would all die (no more "no war for oil").

rast said...

Huh? The Arabs' main leverage over us is the oil, and they hate Israel. If we didn't need Arab oil anymore we'd have a lot more leeway to support Israel.

We'd also have a lot more leeway to withdraw from the region entirely and let them all go back to killing each otehr without our help.

Anonymous said...

And on the subject of conspiracy theories and oil, here's one I heard last week. The powers that be in this country, the U.S. oil industry and financial interests, the power brokers in Government, and, I don't know, maybe the Masons, are quite content to fight the bad fight regarding increased domestic production of oil forseeing a day when the rest of the world;s pumps start running dry. THEN who's in the cat bird seat, huh???
Given that however much oil is left in the ground that's all there will ever be and that we aren't close to an alternate fuel source, it is an appealing theory.

SFG said...

We'd also have a lot more leeway to withdraw from the region entirely and let them all go back to killing each otehr without our help.
Sure, but the Christian and Jewish Zionists are pro-Israel. Not needing oil would make us less pro-Arab if anything; needing the Arabs' oil is the only thing that makes us friendly to them at all.

But if I was a Zionist Jew I'd be more inclined towards "not." If America achieved independence from oil, the ME would remain interesting only due to American Jewry's attachment to Israel. This would mean that there'd be no other excuse. Doesn't sound like the AIPAC ideal to me; not only would actual interest in Israel decrease, the obfuscations available would all die (no more "no war for oil").
Huh? Interest in Israel doesn't exist because we need oil from their enemies, it exists because of Zionists, Jewish and Christian. With no oil dependence the Zionists would be even more free to support Israel.

Why would the Jews want to give us a reason to cater to their enemies the Arabs? Seems to me they'd want to weaken the Arabs' hand as much as possible.

If we didn't need oil, Israel would just be another land part of the country has sentimental and family ties to, like Ireland, Germany, or Italy. (The German tourism website has a separate page for American tourists trying to track down German roots!)

Heck, look at Thomas Friedman ranting about geo-greens on the NYT editorial page. I hate the guy for completely different reasons from you (he's a globalist and free-trader), but he doesn't seem too eager to have us dependent on oil.

Half Sigma said...

It's a lot simpler to believe that increasing foreign demand from countries like China and India (both fast growing economies with massively huge populations) is growing faster than the supply of oil.

King Hubbert explained in the 1950s why oil supply can't keep increasing forever.

There's a huge difference between oil and silver. Silver is a tiny market compared to oil.

Anonymous said...

"The frenzy turned out to be a hoax engineered by the PR department of Waste Management Inc. to get higher dumping rates from municipalities."

Citation?