March 9th, 2012
01:48 PM ET

Zakaria: Why oil prices keep rising

Hundreds of you have submitted very thoughtful questions for me through FacebookTwitter and my blog. Over the next few days, I am going to post my text and video responses to some of the most common questions and a few others that caught my eye.

The rising price of oil is the single most serious threat to the global economic recovery, the U.S. economy and President Obama's reelection prospects. Right now, we are beginning to move into a pretty broad-based recovery. Manufacturing is rising for the first time in 25 years. Technology firms are doing very well. Retail is picking up.  The green shoots of the housing recovery are emerging and that's very important because housing has led almost every recovery since World War II. .

But all the while that you have this economic good news, you are beginning to see oil prices rise quite substantially.  They're up about 15 percent over the last few months. And that could put a damper on all this good news. Why is the price of oil rising?

Zakaria: Iran is a "rational actor"

It's happening for one reason, principally and that is geopolitical risk.  There are fears of a war with Iran and  fears that crippling sanctions on Iran would cut down Iranian oil exports almost entirely.

If you look at demand for oil, it's just not that strong.  Much of the world is in slower economic times than before.  In January 2007, oil was $50 a barrel. It's now $110 a barrel. This doesn't make any economic sense unless you factor in geopolitical risk. So for oil prices to decline, there must be some resolution to the tensions with Iran.

But there is a broader problem, which is that there just isn't that much oil on the market and demand is going to begin to rise again as many countries come out of their recessions and into recoveries.

Zakaria: Another war in the Middle East?

There isn't that much of what's called "spare capacity" - the ability to increase production quickly.  The only ones who have it are Saudi Arabia and they are operating at their limits in some ways.

So there are economic fundamentals that explain why oil prices are high - but not why they are so high.  The reason they are so high is really Iran, Iran and Iran.

Post by:
Topics: Economy • Iran • Oil

soundoff (440 Responses)
  1. Jerry

    Mr. Zakaria gives a short term reason for why oil prices keep rising. Long term, prices are rising because
    1) supply is continuously decreasing - we keep on taking it out of the ground and burning it up,
    and because
    2) demand is increasing -- the human population of the planet keeps on going up.

    Imagine how high the price will be in our grandchildren's time, or in their grandchldren's time, if we were to follow the Republican candidates' energy policy of drilling for and burning up our oil supplies as fast as possible and the Republican candidates' family values of making babies as fast possible. More than thirty times the current population competing over a fraction of the current supplies–Yikes.

    March 10, 2012 at 8:23 pm |
    • Rigel54

      You've touched on the only final answer. The population of the planet must decline, preferably to less than 1 billion. Without that, the only question is how long it will take, not what the final outcome will be. Population control, another area where the Republicans are all wrong, all the time.

      March 10, 2012 at 11:37 pm |
      • Mobius007

        Unless a "miracle" replacement for fossil fuels is discovered, like fusion, a major collapse of the global economy and population seems inevitable.

        In the near-term this will be manifested by famines, driven by high food costs. These high food cost will be a function of production and distribution costs, which are driven by the price of oil.

        I'd be very curious to see what humanity looks like in the year 2112.

        March 11, 2012 at 10:52 am |
  2. dave

    what i don't like about republicans is they don't seem to use their brains or they just don't have any. their answer is to build a pipe line to lower the price of gas. #1 china offered to pay for a pipe line to the t pacific in order to buy all the tar sands oil from canada. the canadians don't really want the cost of putting the pipe line over the rocky mountians themselves which would allow them to sell oil to anyone. question if the oil was going to stay in this country why would we not build a new refinery in north dekota and not risk an oil spill between there and the gulf of mexico? could it be because the oil companies might want to ship and sell the oil to china from the gulf? do you think that republicans would be willing to control the price of oil in their worship of a free capitalist market or regulate the oil companies from exporting oil? what other reason would you want to pipe oil to the gulf were storms can shut down the refineries or cause spills from storm damage! the republicans claim that it will creat 10,000 jobs to build it. it only took 10,000 people to build the alaskin pipline with 1970s tech accross some much much harder country. why did the republicans vote down an amendment in congress last week that stated that all the steel pipe and jobs should be made and come from american? what a bunch of daaassssss! obama and many democrats figured it out so why can't republicans at least try to figure it out?

    March 10, 2012 at 8:42 pm |
    • question

      I know a lot of Democrats that don't use their brains either. Unfortunately, our country is full of all kinds that don't use their brains.

      March 10, 2012 at 10:11 pm |
      • Mohammad A Dar

        hindu criminal christian pagan fundamentalist have no brain, while other do not use it, Problem of America are not created by the one, having a brain and not using it but of brain less Republicans, like a hindu, stupid monkey.

        March 10, 2012 at 10:21 pm |
      • Najda

        That is correct Abdul, in America people can disagree openly with each other. They are not afraid that some big brute called Abdul will chop off their heads.

        March 12, 2012 at 5:47 pm |
  3. Texas Coyote

    If anyone asks yet again, why the OCCUPIERS (OCCUPY is a worldwide permanent protest movement for justice and more equity for the working class) all over the United States and World are protesting. Listen up!“You control our world. You've poisoned the air we breathe, contaminated the water we drink, and copyrighted the food we eat. We fight in your wars, die for your causes, and sacrifice our freedoms to protect you. You've liquidated our savings, destroyed our middle class, and used our tax dollars to bailout your unending greed. We are slaves to your corporations, zombies to your airwaves, servants... to your decadence. You've stolen our elections, assassinated our leaders, and abolished our basic human rights as human beings. You own our property, shipped away our jobs, and shredded our unions. You've profited off of disaster, destabilized our currencies, and raised our cost of living, while lowering our wages. You've monopolized our freedom, stripped away our education and have almost extinguished our flame. Now you (international and domestic corporations) are trying to cripple/sabotage the internet by making our U.S. Congress create and pass SOPA/PIPA type legislation to end our ability to communicate and/or protest online effectively!! We are hit...we are bleeding... but we ain't got time to bleed. We will bring the giants to their knees and you will witness our revolution! WAKE UP AMERICA! SUPPORT OCCUPY!

    March 10, 2012 at 10:37 pm |
  4. Jeremy Horne, Ph.D.

    The answer to why oil prices keep rising is twofold – speculation and profiteering. Prices don't rise, as if there is Adam Smith's "invisible hand".; that's just bad metaphysics. The solution is sixfold: 1) outlaw speculation; 2) nationalize all major energy industries; 3) embark on a Manhattan-style alternative energy programme based on tidal – remember Passamaquoddy?, geothermal, wind, and solar; 4) mandate meaningful fuel economy standards; 5) embark on a coherent Manhattan-style national public transportation system; stop adventurist imperialist wars and warmongering. These are necessary, but, alas, there is no National will.

    March 10, 2012 at 11:25 pm |
    • Waleed

      If the bad guys loved their children as much as we love our children, the "National Will" would be to work together, for the good of the people.

      March 11, 2012 at 12:48 pm |
  5. Ron

    Zakaria, you need to bone up on your politics, WE don't depend on Iran for our oil, also, if we are so worried about Irans oil, Why are we exporting our gas reserves? IF we may not be able to get oil in the future, Does it make sense to sell what gas we have? Try to fool someone else, The American people are not buying Washingtons bull anymore!!!

    March 11, 2012 at 12:03 am |
  6. mmi16

    The speculators that drove oil prices up in 2008 are at is again.

    March 11, 2012 at 1:23 am |
    • Toby

      You are off a year it was 2007! I know because of travel it cost a lot of money that year...

      March 11, 2012 at 3:37 am |
  7. aJ

    Why don't you wait for things to happen then raise the price instead of speculation. We saw what happened in Libya. price gone up so high, how come the prices didn't go down because Libyan crisis is almost over. It is just greed. the American investors don't' take.

    It is how it is and we can't do a thing about it. how sad.

    March 11, 2012 at 3:41 am |
  8. Realist

    How can Iran effect oil this much when 75% of our oil is produced in the Western Hemisphere? Alaska/Canada/North Dakota product 5 times the oil Saudi Arabia/Kawait/Iraq and yet that small percentage is the driving force for Oil prices? no it isn't Iran, it is a political joke, Gas prices are paying for miss management by our goverment.

    March 11, 2012 at 7:38 am |
  9. Tailgator

    When Bush was President and gas prices were this high the UAW organized a semi-truck caravan to protest through Washington DC. The media kept telling us people had to choose between their next meal or a gallon of gas. Yes Obama is getting a free pass.

    March 11, 2012 at 7:45 am |
  10. Andrew

    With so many liberals reading CNN, I'm surprised more are not commenting on the need for alternative energy sources, public transportation, bicycling & walking. Petroleum is a finite resource, after all.
    Andrew
    Bicycle Commuter, Wilmington, North Carolina

    March 11, 2012 at 8:57 am |
    • Mobius007

      Yes, the general population is clueless about the finite nature of oil.

      It's one of the reasons that my oil investments have been so incredibly profitable, and will continue to be.

      Drill baby drill. 😉

      March 11, 2012 at 9:37 am |
      • Ala

        Learn baby learn
        There is a lot of talk about oil and gasoline these days – and of fear premiums and even the ability of supply to match the pace at which demand is rising. To many I’m sure this may seem a fleeting moment brought on by “excessive” growth in demand. As before, Chicken Little’s cries will fade as investments are made to upgrade and expand pumping infrastructure on known fields and find new ones, just as in the early 1970's. Oil-dependent nations resolved the issue then by finding and developing oil supplies in the North Sea, Gulf of Mexico, and Alaska. The most recent assessment of world petroleum resources by the United States Geological Survey (USGS) provided support for the idea that we can develop current prices away (via its mean estimate of the three trillion barrels of oil for the world’s volume of extractable oil originally present) (Ahlbrandt 2000). Based upon these numbers, the US Energy Information Administration (EIA) projected that worldwide crude oil production wouldn't peak until between 2020 and 2030 (Wood and Long 2002). Others believe that when conventional oil does actually become harder to find that the market will ensure a transition to alternative fuels – liquified petroleum gas (LPG), tar sands, deep-water oil, etc. (Adelman and Lynch 1997).

        March 11, 2012 at 9:49 am |
  11. Bonnie Wilhelm

    It's the Republicans that want to go to war with Iran. The Republicans that are the oil kings and the Republicans that want to make President Obama a one term president. What better way to discredit him than to make tthe public angry about the price of gas. The Republicans are behind this. They can't even prove Iran is making nuclear weapons. However the Saudis have opebly admitted they are starting a nuclear program to make nuclear weapons and yet you don't hear anyone going after them or threatening war with them. It is all a political game by Republicans.

    March 11, 2012 at 9:00 am |
    • Ala

      Hey Bonnie Hitler or Bonnie Mohammed, we know your tactics. Create problems between factions and then sit back and watch them fight. This only works with brainless morons like those in your tribe.

      March 11, 2012 at 9:23 am |
  12. TexDoc

    The price is in DOLLARS. If the dollar is worth less, then it will take more of them to buy things from people around the world. We print them everyday–and the 16 trillion in debt this country has, makes them worth less and less. Inflation is just around the corner, with hyperinflation not far behind.

    March 11, 2012 at 9:04 am |
    • Ala

      On a matter as important as energy supply, it is crucial that policy-makers are paying attention when there is a potential for concern, and that they are asking the right questions. The most important question to ask now is, “how much longer can oil production increase and how quickly”. What is the range of possibilities? Once we identify this range we can grapple with the equally challenging, “what alternatives are there or could there be to oil, and how much can we realistically expect them to contribute and how soon?” The first question is the most pressing, for its answer indicates the urgency of the second set of questions. The most immediate option for answering the first question is to assemble from the recent literature the range of estimated dates at which world oil production may peak. This gives a range from 2004 to approximately 2100 or so (some estimates based on more likely resource estimates than others). This approach is not ideal, in that these estimates were generated using a wide range of methods and assumptions and are thus of questionable comparability.

      March 11, 2012 at 9:53 am |
  13. jack

    Yet more propaganda ....we have more oil than we know what to do with...prices are up because big oil wants it up...how about an article explaining that they have closed a very large number of refineries to keep gas prices propped up...gas is almost $4 a gallon and they are closing refineries because its "not profitable" keep drinking the kool aid

    March 11, 2012 at 9:19 am |
    • Ala

      A growing cadre of researchers, oil industry professionals and even economists are not so sanguine. They believe that the potential to find more oil and produce oil at ever increasing rates is more limited and doubt that either the oil or alternatives will be found in time to avert near- term supply disruptions (Duncan 2003, Bentley 2002, Deffeyes 2001, Campbell 1997). Each side insists they are right, in spite of the fact that neither can provide definitive evidence to support their case until after the fact – after the oil is found or not, after tar sands can or cannot ensure adequate supply at today’s prices, after it’s feasible for hydrogen to take over from oil or not.

      The good news is that rising oil prices are promoting discussions of oil-supplies, and even occasionally "peak-oil" among the public and policy-makers . The bad news is that both the discussion and the information on which decisions can be made is incomplete, and decision- makers are stuck in the middle between the two camps of “experts” who may seem equally qualified to the layperson. Given that oil accounted for 40% of global energy use in 2000, and supplies essential raw materials for products from plastics to fertilizers, we are dealing with a resource on which billions depend mightily. Choosing the contention we like the best is not the best means to decide policy when economies, livelihoods and more may be in the balance.

      March 11, 2012 at 9:51 am |
  14. Manfredo Coello

    The Do-Nothing Repugs in congress are to blame to kill the economy and blame Obama, they only care for their oil baron contributors; oil is too expensive for everybody, why don't the corrupt repugs push for natural gas pipe lines for Americans who don’t have access to it? As of today’s market prices: natural gas is 10 times cheaper than oil per BTUs, the equivalent price for a gallon of gasoline/heating oil would be 40 cents; these are real facts, educate yourself. I would love to heat my house and drive my car with natural gas and save a lot of money and stimulate the US economy instead of using expensive oil from countries who hate us. Millions of jobs would be created by using this inexpensive energy source if 50% of American households get it to heat their homes plus US drivers, just look at the Russians, Brazilians and Arabs: they are using it and smartly they are selling their expensive oil to us. Save by heating your house and hot water with electricity which is now cheaper than oil because electric power plans use it, also drive less, don't fill-up your car or heating tank; let those wall street blood suckers and Arabs choke to death with it.

    March 11, 2012 at 9:22 am |
    • Ala

      blah blah blah, both wheels are off your wagon Abdul.

      March 11, 2012 at 9:35 am |
  15. Mobius007

    I really feel sorry for most of the posters here, who simply can't comprehend why oil's price is rising.

    It's no speculation.

    To put it in simple terms that you can understand, the world is running out of easily accessed "cheap" oil.

    We saw this is 2008, when oil price spiked before the economic crash, and now that global GDP has recovered we have reached that demand level for oil again.

    So, it's unfortunate that you don't comprehend what's happening, and those who deny market fundamentals are just kidding themselves.

    March 11, 2012 at 9:25 am |
    • Ala

      The International Energy Agency estimated in January 2009 that oil demand fell in 2008 by 0.3%, and that it would fall by 0.6% in 2009. Oil consumption had not fallen for two years in a row since 1982-1983.[31]

      The Energy Information Administration (EIA) estimated that the United States' demand for petroleum-based transportation fuels fell 7.1% in 2008, which is "the steepest one-year decline since at least 1950." The agency stated that gasoline usage in the United States may have peaked in 2007, in part due to increasing interest in and mandates for use of biofuels and energy efficiency.[32][33]

      The EIA now expects global oil demand to increase by about 1,600,000 barrels per day (250,000 m3/d) in 2010. Asian economies, in particular China, will lead the increase.[34] China’s oil demand may rise more than 5% compared with a 3.7% gain in 2009, the CNPC said.[35]

      March 11, 2012 at 9:45 am |
      • Mobius007

        Ah, so there is one person here who DOES understand the situation.

        That's reassuring.

        March 11, 2012 at 9:48 am |
  16. evil taxpayer

    Strange how when gas was high for bush after 2 months the media was howling but after 3 plus years of high gasobamnas name is rarely mentioned.
    No it cant have anything to do with his bans on drilling or the keystone pipeline-
    The media bias is shocking-

    March 11, 2012 at 9:29 am |
    • Ala

      As countries develop, industry and higher living standards drive up energy use, most often of oil. Thriving economies, such as China and India, are quickly becoming large oil consumers.[27] China has seen oil consumption grow by 8% yearly since 2002, doubling from 1996-2006.[25] In 2008, auto sales in China were expected to grow by as much as 15-20%, resulting in part from economic growth rates of over 10% for five years in a row.[28]

      Although swift, continued growth in China is often predicted, others predict China's export-dominated economy will not continue such growth trends due to wage and price inflation and reduced demand from the United States.[29] India's oil imports are expected to more than triple from 2005 levels by 2020, rising to 5 million barrels per day (790×10^3 m3/d).[30]

      March 11, 2012 at 9:43 am |
  17. Mobius007

    China's crude imports last month hit an all-time high:

    Crude imports at record 5.95 mln bpd, +18.5 on yr (Reuters)

    up 18.5% YOY.

    Global demand growth is robust, estimated at about 1 million BARRELS PER DAY above last year's average.

    Where will this extra oil come from?

    That's the question. (and NOT from Iran). As demand increases and supply stays stagnant, prices rise.

    Comprende?

    March 11, 2012 at 9:33 am |
    • Ala

      Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. This concept is based on the observed production rates of individual oil wells, projected reserves and the combined production rate of a field of related oil wells. In order to understand physical Peak oil, the growing effort for production must be considered. Physical Peak oil occurs earlier, because the overall efforts for production have increased in the past few decades.[1] [2]

      The aggregate production rate from an oil field over time usually grows exponentially until the rate peaks and then declines—sometimes rapidly—until the field is depleted. This concept is derived from the Hubbert curve, and has been shown to be applicable to the sum of a nation’s domestic production rate, and is similarly applied to the global rate of petroleum production. Peak oil is often confused with oil depletion; peak oil is the point of maximum production while depletion refers to a period of falling reserves and supply.

      March 11, 2012 at 9:38 am |
  18. evil taxpayer

    ala-
    Your points are valid but theres no excuse that we as americans should be cowering to a minority of hippies working for the epa that refuse to allow us to drill the 500 years of oil we have in this country in order to save a mythicle animal-
    We really need to stop paying to ship oil here when as said we have so much right under us.

    March 11, 2012 at 9:52 am |
    • Ala

      How will oil production increase, what will cause it to peak and how will it decline? These questions determined our choice of methods. The history of oil production and demand shows that they match each other very closely. It seemed reasonable to assume that oil production would increase with demand if possible, else prices would increase to the point of stifling demand (as in the case of the recession of the early 1980's), and decreasing oil revenues. Data from many individual oil fields and nations shows that production tends to peak when approximately half of the original oil resource present has been extracted (unless extraction is aided by gas or water injection). Given these basic drivers, our methods increased oil production in individual countries until they had extracted roughly 50% of their oil before decreasing production. We adjusted the potential range of outcomes by varying, 1) the total oil resource present prior to extraction (often termed extractable ultimate resource, or EUR), 2) the rate of demand increase, 3) the maximum rate of increase in annual production, and 4) the percentage of original oil resource extracted at which peak/decline point occurs.

      March 11, 2012 at 9:57 am |
    • Mobius007

      Hi “Evil” – I'm all for more domestic drilling, but why would that lower gas prices? Some facts:

      – US gasoline consumption is at 15 year lows.
      – Gasoline exports FROM the US are at RECORD highs
      – US oil production is higher now than anytime in the last 6 years.
      – Multiple US refineries have been closed due to lack of gas demand.

      So, I would suggest to you that even if we had more US production, it would be exported as refined product (like gasoline), since that's the most profitable outcome for the oil companies.

      March 11, 2012 at 10:01 am |
      • Ala

        While the advent of a peak in world oil production may, as some say, force reassessments of some of our regulatory requirements, rushing to discard laws heretofore beneficial to public health, welfare and quality of life may be as questionable as hitching economies to pyramid schemes fueled by finite resources. If nothing else, a peak in oil production will underline the finite nature of the resources on which humans depend. After whatever changes (if any, of course) are deemed necessary, societies will continue to depend on sustainable resources of soils, forests and water. Our children, and many of us, will still be around after any transitions we have to go through – so another task will be to minimize the environmental impacts of any proposed transition strategies.

        These are challenging questions which should be demanding the full attention of everyone, but especially our best engineers, scientists and economists. Right now these issues have the attention of precious few.

        March 11, 2012 at 10:09 am |
      • Ala

        Extracting oil from the shale is no simple task. The earliest attempts to extract the oil utilized an environmentally unfriendly process known as “retorting.” Stated simply, retorting required mining the shale, hauling it to a processing facility that crushed the rock into small chunks, then extracted a petroleum substance called kerogen, then upgraded the kerogen through a process of hydrogenation (which requires lots of water) and refined it into gasoline or jet fuel.

        Read more: Oil Shale Reserves http://dailyreckoning.com/oil-shale-reserves/#ixzz1oosiAWw9

        March 11, 2012 at 10:46 am |
      • Ala

        Extracting oil from the shale is no simple task. The earliest attempts to extract the oil utilized an environmentally unfriendly process known as “retorting.” Stated simply, retorting required mining the shale, hauling it to a processing facility that crushed the rock into small chunks, then extracted a petroleum substance called kerogen, then upgraded the kerogen through a process of hydrogenation (which requires lots of water) and refined it into gasoline or jet fuel.

        But the difficulties of retorting do not end there, as Byron King explains:

        “After you retort the rock to derive the kerogen (not oil), the heating process has desiccated the shale (OK, that means that it is dried out). Sad to say, the volume of desiccated shale that you have to dispose of is now greater than that of the hole from which you dug and mined it in the first place. Any takers for trainloads of dried, dusty, gunky shale residue, rife with low levels of heavy metal residue and other toxic, but now chemically-activated crap? (Well, it makes for enough crap that when it rains, the toxic stuff will leach out and contaminate all of the water supplies to which gravity can reach, which is essentially all of ‘em. Yeah, right. I sure want that stuff blowin’ in my wind.) Add up all of the capital investment to build the retorting mechanisms, cost of energy required, cost of water, costs of transport, costs of environmental compliance, costs of refining, and you have some relatively costly end-product.”

        March 11, 2012 at 10:49 am |
  19. Ala

    The answer to the question, “how much longer can we increase oil production?”, seems to be probably not much more than 30 years, and perhaps less than five. The problem is it is impossible to say whether our early or later forecasts of conventional oil decline-point will be more accurate. 2004? 2037? The prudence of the precautionary principle seems self-evident here – especially so because most of the oil necessary for the peak to occur in 2037 has not yet been discovered. No one wants to be “Chicken Little”. No one wants to be the proverbial ostrich, either. Until information to the contrary becomes available, the only logical conclusion seems to be that it is only a matter of time before alternative energy sources, and perhaps changes in behavior and commerce systems are needed. It is highly doubtful that energy policies dependant on conventional oil supply, no matter the source, will be effective.

    March 11, 2012 at 10:06 am |
    • Mobius007

      A predicted shallow decline in the short run should give way to a steeper decline after 2016.

      However, deep water and non-conventional oil production are growing strongly, turning a slight decline into a plateau for total crude oil (non-conventional oil is heavy and viscose or indeed tar-like oil). Given the growth in deep and non-conventional balancing the shallow decline in conventional production, it is predicted that we have entered about 2006 onto a slightly upward slanting plateau in potential oil production that will last only to about 2016—eight years from now (2008). For the next eight years it is likely that world crude oil production will plateau in the face of continuing economic growth. After that, the modelling is forecasting what can be termed ‘the 2017 drop-off’. The outlook under a base case scenario is for a long decline in oil production to begin in 2017, which will stretch to the end of the century and beyond. Projected increases in deep water and non-conventional oil, which are ‘rate-constrained’ in ways that conventional oil is not, will not change this pattern.

      Reference: Bureau of Infrastructure, Transport and Regional Economics (BITRE), 2009, Transport energy futures: long-term oil supply trends and projections, Report 117, Canberra ACT.

      Full report
      aie.org.au/StaticContent%5CImages%5CReport_120106.pdf

      March 11, 2012 at 10:11 am |
      • Ala

        Several factors affect both the long-and short-term oil supply conditions, and these conditions, in turn, affect the U.S. economy. The first factor is what the world's oil reserves look like and what the prospects are for adding to those reserves. The second consideration is where those reserves are and who has access to them. The final component is U.S. refineries' ability to refine oil and get it to market.

        March 11, 2012 at 10:18 am |
      • Mobius007

        “The second consideration is where those reserves are and who has access to them.”

        Let’s explore this a bit. It’s often stated the US has more oil reserves than Saudi Arabia. What isn’t mentioned, however, is that these reserves are largely comprised largely of “oil shale”. Oil shale, unlike “shale oil”, involves the extraction of something called an “oil precursor” named kerogen, which may then be processed into synthetic crude.

        No one has yet figured out how to make oil shale profitable, since it currently takes more energy to get oil from oil shale than you can eventually use.

        It’s called EROEI – just simple economics.

        March 11, 2012 at 10:35 am |
      • Ala

        Extracting oil from the shale is no simple task. The earliest attempts to extract the oil utilized an environmentally unfriendly process known as “retorting.” Stated simply, retorting required mining the shale, hauling it to a processing facility that crushed the rock into small chunks, then extracted a petroleum substance called kerogen, then upgraded the kerogen through a process of hydrogenation (which requires lots of water) and refined it into gasoline or jet fuel.
        But the difficulties of retorting do not end there, as Byron King explains:

        “After you retort the rock to derive the kerogen (not oil), the heating process has desiccated the shale (OK, that means that it is dried out). Sad to say, the volume of desiccated shale that you have to dispose of is now greater than that of the hole from which you dug and mined it in the first place. Any takers for trainloads of dried, dusty, gunky shale residue, rife with low levels of heavy metal residue and other toxic, but now chemically-activated crap? (Well, it makes for enough crap that when it rains, the toxic stuff will leach out and contaminate all of the water supplies to which gravity can reach, which is essentially all of ‘em. Yeah, right. I sure want that stuff blowin’ in my wind.) Add up all of the capital investment to build the retorting mechanisms, cost of energy required, cost of water, costs of transport, costs of environmental compliance, costs of refining, and you have some relatively costly end-product.”
        Why not just go solar or wind farming?

        March 11, 2012 at 10:53 am |
  20. Steve in Iowa

    No mention of the devaluation of the dollar (inflation)? No mention of speculators? Iran is making up the shrinking sales of oil to Europe by selling it to China.

    March 11, 2012 at 11:00 am |
  21. jeff Hoffman

    First it was IRAQ, Then LYBIA, now IRAN, The oil companies/commodities brokers always find some reason other than their greed to use as an excuse

    March 11, 2012 at 11:30 am |
    • Mobius007

      Jeff – can you think of ANYTHING more vital to our modern society than oil?

      Modern agriculture is dependent on oil and oil-based products, as is almost every other product that we use in this world.

      It's no surprise that we'll be at war in Iran over oil, since the global economy can't survive as we know it without cheap, plentiful oil.

      March 11, 2012 at 11:56 am |
  22. slippery

    Big oil is exporting 600 THOUSAND barrels of finished gasoline A DAY. Go figure. Check out iea.gov weekly imports and exports. There's no refining shortage.

    March 11, 2012 at 11:37 am |
  23. Joyce

    Every dollar spent on gas at the pump is taxed by the feds. The higher the price, the greater the tax. This provides incentive for higher gas prices....and little incentive to reduce them by drilling in the gulf or otherwise taping US sources of oil. We are being screwed by our own government. Thank you Obama.

    March 11, 2012 at 12:01 pm |
    • SilverHair

      Gas at the pump is taxed by the gallon – not like a sales tax that is more as the price goes up.

      March 11, 2012 at 12:12 pm |
  24. Kedar

    Govt should give more subsidy for hybrid cars so that they can use solar power and producce more solar energy to control the oil price.

    March 11, 2012 at 12:20 pm |
  25. hp

    It's very simple, GREED! NBC news recently reported that gas consumption in the US is at a fifteen year low. The oil companies don't want to loose money. By the way, lets stop the subsidies for big oil. Record profits quarter after quarter and we still give them breaks? How stupid do they think we are.

    March 11, 2012 at 12:26 pm |
  26. Nick

    There isn't that much of what's called "spare capacity" – the ability to increase production quickly. The only ones who have it are Saudi Arabia and they are operating at their limits in some ways. Do developed countries like Canada, Norway, U$A, ect not have the ability to increase production quickly? This "spare capacity" sounds more like a general way of saying lets get our hands even more bloody with another war in a country that has lots of oil, i.e Iran, Iraq. I live in an area that has the ability to increase producitivity but has had to run pipelines and sell their "spare capacity" to other countries. Correct me if I'm wrong but thats the way I see all of this!

    March 11, 2012 at 12:44 pm |
    • Waleed

      Abdul, let me correct you because you are wrong. Its not the oil stupid, its the war mongering from Iran stupid.

      March 11, 2012 at 12:57 pm |
      • Nick

        Actually Im from Alberta, and Im referring to US not taking the pipeline that was offered to get clean oil to your country not another dirty war.

        March 11, 2012 at 1:06 pm |
      • Nick

        Ironic that an American is calling the kettle black...... hhhhmmmm and Im not a muslim.

        March 11, 2012 at 1:08 pm |
      • Khaled

        Sure thing buddy, if that's your story, then stick with it.

        March 11, 2012 at 4:40 pm |
    • Mobius007

      Hi Nick – you make a good point, that global spare capacity is about zero given that Iran's exports are now being eliminated through sanctions.

      BTW, my understanding was that the pipeline to the gulf was to allow for the oil to be exported FROM North America, and NOT to be used by the US.

      If the intent was to burn your oil as gasoline, you should just build a refinery in Canada and export the final product (gasoline) directly to the US – no transcontinental pipeline needed.

      March 11, 2012 at 1:44 pm |
      • Khaled

        The Keystone Pipeline System is a pipeline system to transport synthetic crude oil and diluted bitumen ("dilbit") from the Athabasca Oil Sands in northeastern Alberta, Canada to multiple destinations in the United States, which include refineries in Illinois, Cushing oil distribution hub in Oklahoma, and proposed connections to refineries and export terminals along the Gulf Coast of Texas.

        March 11, 2012 at 4:53 pm |
      • Engineering Student

        From an interview on NPR a couple weeks ago it was explained that the US can produce gasoline cheaply because of our reserves of natural gas. Because we can produce it cheaply, it could be traded to other countries for extra profit.

        March 11, 2012 at 4:56 pm |
      • Khaled

        Engineering Student –hehehe, what are your references? No fair pulling facts out of thin air, its called lying.

        March 11, 2012 at 5:10 pm |
      • Khaled

        http://wikimania2012.wikimedia.org/wiki/Main_Page
        Here is my reference, show me yours big boy.

        March 11, 2012 at 5:12 pm |
      • Khaled

        Engineering student - where are you???????
        Try this link, it will explain the whole thing.
        http://en.wikipedia.org/wiki/Keystone_Pipeline

        March 11, 2012 at 5:18 pm |
  27. jb

    Zakaria may as well be working for the oil companies. In fact I wouldn't be surprised if he or someone in his family recieves some sort of compensation from them. He uses the same old excuses the oil industry always rolls out. It goes like this; it's because India or China are demanding more, there might be a war somewhere, which basically does nothing to affect the world oil supply, that is the problem. One tanker went down in some remote part of the world and that caused the increase, a pipeline broke in Arizona, etc, etc, etc. The fact is that there never has been, and no where in the near future will there be a shortage of oil. It's all about the greed of the people who control the oil markets. They rake in millions of dollars into their own personal pockets each year and could care less what the rest of us have to pay. It's pure greed and nothing else. Everything else is the same lies the oil industry has been passing around since the so called oil shortage in the 1970'S.

    March 11, 2012 at 12:47 pm |
  28. Waleed

    Jamil, it's not China or India, its the Muslim world.

    March 11, 2012 at 12:55 pm |
  29. Texan

    Texan
    How about: The major oil companies have a monopoly and the US doesn't have a energy policy for independence. Plain and simple. Everyone knows this and we are tired of the smoke and mirror's by so-called experts with their intellectual explanations. As if they are smarter and the problem is way more complicated than anyone but they can understand.

    March 11, 2012 at 1:22 pm |
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