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Author Topic: Oil price cartel  (Read 295 times)

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Rods2

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Oil price cartel
« on: 09 June 2018, 14:28:28 »

Australian competition authority has announced it is investigation Deutsche and Citi banks for operating a cartel to keep oil prices high. Deutsche bank is already in enough financial trouble where there floating share price is going like a lead balloon. :o :o :o
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Sir Tigger QC

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Re: Oil price cartel
« Reply #1 on: 09 June 2018, 14:49:47 »

It's always amazed me that there has never been any international action against OPEC.  ::)

Cartels are pretty much banned across the world and yet here is an organisation that openly acts to keep oil prices high.  How can it be that this dosn't contravene any sort of international laws.  :-\
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Re: Oil price cartel
« Reply #2 on: 09 June 2018, 19:46:11 »

Probably because they wrote the rules :-\
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Lizzie Zoom

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Re: Oil price cartel
« Reply #3 on: 09 June 2018, 20:09:04 »

Probably because they wrote the rules :-\



...........and they have the product, coupled with they can sell it for what the markets will allow. ;)
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Re: Oil price cartel
« Reply #4 on: 09 June 2018, 21:17:35 »

Your missing the point though Lizzie, as they manipulate the market by cutting or expanding supply thus controlling the price. They could cut supply to a trickle which would result in uber high oil prices.  ::)

Of course it's more complicated than that, but I find it strange that it seems to be OK under international law.  :-\
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Re: Oil price cartel
« Reply #5 on: 09 June 2018, 21:24:27 »

Look were most of the oil comes from, and then do you really think they care about international law, also oil prices are high because a certain American keeps tweeting, Iran has cut supply because of it, Saudi's know they can pretty much do what they like because of there place in the middle east politics and the west..

So Australia is going to try and take a German bank to court, good luck with that.
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Re: Oil price cartel
« Reply #6 on: 09 June 2018, 23:58:28 »

Are they worried about the future.?

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Lizzie Zoom

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Re: Oil price cartel
« Reply #7 on: 10 June 2018, 10:38:08 »

Your missing the point though Lizzie, as they manipulate the market by cutting or expanding supply thus controlling the price. They could cut supply to a trickle which would result in uber high oil prices.  ::)

Of course it's more complicated than that, but I find it strange that it seems to be OK under international law.  :-\

But that is the point Sir Tigger; we live in a capitalist system where companies/organisations and virtually everyone else manipulate the element of supply and demand with corresponding prices and profit. That is why Rollex watches sell for 10,000 and a can of beans for 50p.  If the demand is there and the people are prepared to pay for a particular product then a good sales and marketing department will shape their offer accordingly. If there is a shortage of a product that everyone wants then the producer will price accordingly to maximise profits taking full advantage of a situation. On an international basis this happens with oil, just as much as what the USA did in WW2 with the supply of desparetly needed munitions, aircraft, ships, and everything else, to Britain. Britain paid a (heavy) price that reflected the country's desperation and no alternatives available.  The seller, the USA, did very nicely thank you.

So, in brief, the rules of the game in a capitalist system is the production of product to meet market demand, selling at a price that the market will sustain, whilst making maximising profits. That is what the likes of OPEC are doing, and we the capitalist consumers don't like it.  Well, tough, if we subscribe to the system we have, which I do, and don't want a communist world, then we have to live with it.
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Re: Oil price cartel
« Reply #8 on: 10 June 2018, 11:07:24 »

I think you both have a point.

If you talk in terms of a basic commodity say the last orange on sale anywhere in Britain then the vendor could command a good price for it.

When it comes to the necessities of life then it is different. How would it be if the electric companies in the uk all got together and decided to roughly double the price of electricity? You could cut back on usage and save some money but you couldnt get it from say Algeria . You would be held over a barrel. That is why , quite rightly,  competition is governed nationally. 

The question to ask is ...Is the price of oil artificially high?  If it is then a cartel is operating.
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Re: Oil price cartel
« Reply #9 on: 10 June 2018, 11:42:39 »

Is the price of oil artificially high?  Yes of course it is because OPEC more or less determines the price, not the market.  ::)  They do this by getting together and making sure that supply never quite meets demand and so prices are kept high.  ;) 

The Yanks upset the apple cart a few years ago when the fracking wells came on stream, they flooded the market and the price of crude dropped drastically as a result!  :y  Now that is capitalism and the markets working in the true sense, not where you have a bunch of beardy old guys in robes, sat in a tent in the desert, working out how much oil they will produce in the next 6 months to maintain the price artificially.  ;)

Your analogy of the UK energy firms getting together to determine the price of electricity is a good one and the fact that the big companies always seem to raise their prices in step raises suspicions that there is in fact a cartel operating.  :-\
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Re: Oil price cartel
« Reply #10 on: 10 June 2018, 18:26:49 »

I think you both have a point.

If you talk in terms of a basic commodity say the last orange on sale anywhere in Britain then the vendor could command a good price for it.

When it comes to the necessities of life then it is different. How would it be if the electric companies in the uk all got together and decided to roughly double the price of electricity? You could cut back on usage and save some money but you couldnt get it from say Algeria . You would be held over a barrel. That is why , quite rightly,  competition is governed nationally. 

The question to ask is ...Is the price of oil artificially high?  If it is then a cartel is operating.

But that is the thing Varche, I think they do, but, to be fair, they are also at the mercy of the costs passed onto them by the generating companies, who in turn have to pay whatever the market is ruling for the price of oil being used, or the costs of "renewable" generation / development.  We, the consumer, in our capitalist system, will always pick up the tab at the end of the chain.

The Government, and governments of the world are also at the mercy of political events which dictate market forces on the price of oil.  Currently the war in Syria, the emborgos / threats being placed on Iran, Russia and China by the USA, coupled with the instability of the whole of the Middle East, is, as I see it, pushing up the price of crude and it is not going to come down anytime soon.  No international body will ever overcome all that and rule against a "cartel".  Who is going to do it, and risk even higher prices due to more instability and revenge tactics; the answer no-one! ;)
« Last Edit: 10 June 2018, 18:30:00 by Lizzie Zoom »
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Varche

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Re: Oil price cartel
« Reply #11 on: 10 June 2018, 19:02:51 »

I think you both have a point.

If you talk in terms of a basic commodity say the last orange on sale anywhere in Britain then the vendor could command a good price for it.

When it comes to the necessities of life then it is different. How would it be if the electric companies in the uk all got together and decided to roughly double the price of electricity? You could cut back on usage and save some money but you couldnt get it from say Algeria . You would be held over a barrel. That is why , quite rightly,  competition is governed nationally. 

The question to ask is ...Is the price of oil artificially high?  If it is then a cartel is operating.

But that is the thing Varche, I think they do, but, to be fair, they are also at the mercy of the costs passed onto them by the generating companies, who in turn have to pay whatever the market is ruling for the price of oil being used, or the costs of "renewable" generation / development.  We, the consumer, in our capitalist system, will always pick up the tab at the end of the chain.

The Government, and governments of the world are also at the mercy of political events which dictate market forces on the price of oil.  Currently the war in Syria, the emborgos / threats being placed on Iran, Russia and China by the USA, coupled with the instability of the whole of the Middle East, is, as I see it, pushing up the price of crude and it is not going to come down anytime soon.  No international body will ever overcome all that and rule against a "cartel".  Who is going to do it, and risk even higher prices due to more instability and revenge tactics; the answer no-one! ;)


No they cannot. Energy in the Uk and other European countries is quite rightly overseen by government appointed bodies. There would be a hue and cry if the share dividends went into say the 40% return at the expense of the consumer by doubling prices. No such control exists over global oil prices. It is governed purely by price we get today for selling the family silver versus price tomorrow. That is why Russia has suffered and also Venezuela when the USA flooded the market with cheap fracked products. If it was a more visible reserve like say the worlds oceans then it would be governed by the G9 or similar.

I do agree with you that after everyone has had their fair cut, we the consumer pick up the tab.
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Re: Oil price cartel
« Reply #12 on: 10 June 2018, 23:49:50 »

Governments have a monopoly on legal violence and also rule (law) making in countries and with other countries globally. Oil, gas, coal and wood consumption continue to rise where it is currently the only practical continuous supplier of energy on this planet with a very high energy density to boot. EROEI ratio is about 5:1 for. You have the OPEC cartel largely controlling the world's oil and gas supply with a few independents like the US and Canada, but their EROEI from fracking and tar sands are much worse, which is why you are looking at a production cost of about $50 per barrel.

The only non-continuous supply of energy that currently works globally is our daily energy input from food with an EROEI ratio of 1:10 against. If this ratio could be made better with all of the convenience we currently enjoy it would be as it would give a price/profit advantage to suppliers. Where the whole supply chain is low margin you are in many areas like growing under glass looking at a ROI of about 20 years and in many countries with the EU CAP being the classic with their subsidies to ensure continuous supply which is why the West doesn't suffer from famines. There has also been evolving technology to help with this to store and preserve things for when we need them. This is everything from strategic grain reserve, frozen meat warehouses, temperature and atmosphere controlled fruit and vegetable storage, to things we are familiar with at the consumer level of dried ingredients, salted like cured ham & beef, sweetened like sweets and jam, chilled, frozen, pre-cooked and tinned to name but a few but all of these storage method make the EROEI much worse. The cost of producing food is reflected in their price which is why cucumbers and radishes per kg are cheaper than tomatoes which in turn are cheaper than sweet peppers.

There are to 2 reasons for the current oil and gas price rises, supply and demand and where electricity always goes up by a bigger percent that is where the government forces them to use a percentage of expensive renewables which is currently without any significant non-fossil fuel backup. For a daily reserve per household you are currently looking at lithium batteries that cost about 5000 per household with a global shortage of lithium being the biggest part of this cost so for 20m UK households this would cost 100bn about every 5 years or 1000 per household per year. Batteries big advantage compared to other energy storage methods is that they are very efficient, so you typically only lose about 5% of total energy input. Then you need to look at strategic reserves which needs to be much, much bigger as is currently being illustrated by the UK's current shortage of wind and their current poor power output if we are to keep having a continuous supply. (Some people may be happy to have 3rd world type intermittent electricity supply with power a few hours a day, but personally I'm not).

To go over to an entirely renewables energy system you need a strategic and stored continuous reserve which hammers your EROEI, which if as planned happens in the 2030's will mean probably a ratio of 1:1 at best but maybe up to 1:10 against. Where electricity current cost ~15p a unit with an energy bill for an average gas/electricity household of 1700, this equates to 1kwh of electricity costing from 75p to 7.50 and an annual bill of 8,500 to 85,000 per household with similar x5 to x50 for your food bill as well. Good luck to those on fixed incomes.
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