The Manipulation of Oil Prices and What Can Be Done!

What Can Be Done About the Price of Oil?

There is no end in sight to the rising oil prices, and it often feels like there is price manipulation in the market place. Is there a cheaper energy source available today that we can use instead of gasoline? Can I run my car on Water?

With gas prices rising and gas consumption in the USA dropping, one would expect that prices would stabilize and eventually drop. Yet this is not the case.

In an efficient market, the forces of Supply and Demand would lead to equilibrium rather quickly. Let's take a look at the market to see if we can determine who controls oil prices.

On the Supply side, the disparity between growing oil resources (new oil discoveries) and oil production has been increasing since 1980 as the growth in production outpaced the growth in oil resources. Economists are predicting that oil prices will continue to rise until a new market equilibrium is reached where supply satisfies world demand. Also, the turbulence in the Middle East, especially in Iraq, and the instability in West Africa, has led to a reduction in oil exports.

On the Demand side, the most significant factor affecting oil prices has been the increasing demand worldwide by emerging industrial countries: India and China, specifically. These two countries are becoming huge oil consumers as rapid urbanization, growing industries, and higher living standards dramatically increase energy usage. China has seen a doubling of oil consumption over the last 10 years, and expects another doubling in less than a decade, as oil consumption has been increasing by 8% per year since 2002.

The largest component of oil consumption is Transportation, reflecting our love affair for big cars and trucks. In China and India, the rapid growth in vehicle ownership is driving oil consumption rapidly higher, accounting for 75% of the increase in the consumption of oil. In this country, that compares to 70%.

World population growth is an additional factor pushing demand higher for oil. In 1979, production of oil per capita peaked. Since that time, per capita has been steadily declining. It is expected that by 2030, world population will have doubled since 1980.

So, who controls gas prices? Perhaps OPEC by controlling exports. Or the large integrated oil companies like Exxon Mobile and ConocoPhillips who are making record profits. Or even the companies in the distribution chain: the refiners and gas station owners.

Most would answer who controls gas prices by pointing to the large integrated oil companies. The production units of these companies actually sell their oil to the highest bidder, and purchase oil for their refineries from the lowest cost sources. And there's the problem.

The answer to who controls gas prices is the Institutional Investors. They set the spot price for oil. Hedge fund manager Michael Masters went before Congress to testify in May of this year. During his testimony, he said "What we are experiencing is a demand shock coming from a new category of participant in the commodities futures markets: Institutional Investors...". The general media emphasizes the emerging industrial countries (China and India) as the primary cause for price rises over the last five years. But little attention is given to the Index Speculators (Institutional Investor) whose demand for oil, over the same five year period, was equal to China.

Rampant speculation in the spot market for oil is responsible for the sharp rise in oil prices, says OPEC Secretary General Abdullah al-Badri. In June '08, he presented his findings showing that the 'paper market' for oil has reached 1.36 billion barrels daily. This is 15 times the 87 million barrels per day that is consumed worldwide.

Without proper oversight (most of the oil market remains unregulated), Institutional Investors are free to manipulate the market by pushing prices higher. Hence, they are the group who controls gas prices.

So, what can we do about it? Short of waiting for Congress to implement legislation, or the Chairman of the SEC to take action, we can take action and effectively be the one who controls gas prices. How? We can effectively control prices by dramatically improving the gas mileage of our cars and trucks.

The automakers will be introducing high mileage vehicles in the near future. GM has announced its Chevy Volt, an EV (electric) for 2010 with a small engine for recharging the batteries. The Volt is expected to average over 150 mpg.

There is also the Hydrogen Fuel Cell car, which is at least a decade away (I don't hold much promise for this design).

And there will be the next generation of the current Hybrid car: the pluggable Hybrid. With advances in battery technology, this next generation Hybrid will average over 100 mpg. It is slated to be introduced in 2010.

But there is something we can do today with existing technology. It is not expensive, and it's easy to implement. It is not harmful to the engine (it is actually beneficial) and it promises to increase your gas mileage by as much as 50%.

The system improves gas mileage by capturing wasted energy from the engine and then reintroducing it to the engine as needed. This is same approach that Hybrid car technology applies. Wasted energy occurs when the engine is idling, usually when the vehicle is at a standstill or when it is coasting down a hill. The system captures the wasted energy by converting water to a highly combustible gas, oxyhydrogen (HHO) through electrolysis. It's like running your car on Water.

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Fight back against the oil companies. A simple inexpensive system will show HOW TO RUN YOUR CAR ON WATER

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