I always find it a mystery why we tolerate it -
I have the greatest respect for Chris, but I find his failing to discuss the only real controlling factor of oil prices disconcerting - the avg. global cost of producing a barrel of crude. Clearly the cost of a barrel of crude will vary from well to well, from the type of well, depth, technology required and other characteristics of the field and not to mention the age of the field. Even so there is a mathematical global avg. production cost of crude - where is that number?
Ifwe don't have a clue what it cost to produce the over all avg. barrel of crude - we have no way of knowing how badly producers are gouging us. I challenge anyone to provide a credible reference that discusses the actual avg. production costs of crude. The difference between the cost of a barrel of crude and the market price of crude - is an indicator how badly or the not the consumer is being taken advantage of by producers. As recently as 1998 the price of a barrel of crude had dropped to below $13.00/barrel and crude dropped to less than $30/barrel in just 2008. If they could produce it 2008 for $30 a barrel - and demand has fallen since - so why are we paying over a $100 now?
It would seem that these low crude price numbers are a far more accurate indicator of the actual and real cost of crude than any artificial contrivance of market/marketing factors (OPEC cartel), or spare capacity in crude production, or refinery production, or speculators that occur after the crude has been purchased. The avg. production cost of crude sets a base price for the commodity. The price of few essential commodities are allowed to vary 300% by producer manipulation above production cost - diamonds (another cartel manipulated commodity) for example are not essential, but when have you seen the price of wheat triple? It would seem consumers are being remarkably abused - because why... because like most abuses that are caused by the powerful few on the many, it's because they tolerate it. So, where are those global avg. crude production costs?
