Greed.

That's the idea I couldn't get out of my mind for the last week. For several of my readers, that's what the higher gas prices come down to. As one reader put it: "The oil rush is on."

I completely agree. And it seems that everyone wants a piece of the action.

But should we expect anything less?

Think about that for a minute. Oil is the most precious commodity in the modern world today. Anyone who says otherwise is fooling himself. It's the lifeblood of our society. We can even push the need for fuel aside for a moment. Picturing a world without oil, we'd have to take a few other things out, namely buildings, cars, paint, toothbrushes, insulation and even the clothes you're wearing right now! It's in the detergent you use to wash your clothes and everything that's plastic. Now factor in the massive quantities of oil we use to transport these products.

I could go on for hours, but I think you understand how important it is.

So please forgive my lack of surprise when I see people exploiting the record oil prices. I'm not even talking about OPEC's daily revenue of $1.8 billion per day. Rather, I'm referring to the new group rushing to get a slice of oil revenues: governments.

I understand that governments making a few bucks on oil is nothing new. But here's my problem: How will their greed affect our future oil markets?

Before we get into that, let's take a look at what's going on.

Sure, we're seeing countries like Russia and Venezuela nationalizing their resources (in many cases forcibly booting foreign companies from the oil fields) in an attempt to gain more control, even at the expense of hindering future production. The question is now: Do state-run oil companies like Petroleos de Venezuela SA (PDVSA) have the ability to develop those natural resources, particularly the heavy oil located in the Orinoco Tar Belt?

It appears that Alaska is now getting in on the action. Alaska's legislature passed a bill this week placing a 25% tax on the net profits of oil companies operating in the state. That'll come out to a hefty $1.5 billion pouring into the state's coffers every year.

As Alaska Governor Sarah Palin put it, "This is the time where the state takes back its sovereignty. This is the time where we say we get our fair share."

Here's the problem . . .

The more money we take out of the hands of oil companies, the more damage we're causing. That money needs to go right back into developing infrastructure, as well as new reserves and technology.

As oil prices today push over $98 a barrel (again), we're going to see more people looking for their "fair share."

Peaking Oil Production

So what has changed?

I mean, everyone's looking to get a piece of the action.

Personally, I think people are starting to understand what I've been telling you for long time, that oil markets are about to get much tighter.

The International Energy Agency (IEA) has predicted that global oil production will rise to 120 million barrels per day by 2030. Interestingly, I have yet to meet one of my readers who thinks production will ever rise that high. In fact, I don't think we'll make it over 100 million barrels per day. I understand that many of you are skeptical we'll even make it to 86 million barrels per day!

At a conference last month, Christophe de Margerie (chief executive for Total SA, a French oil company) said that increasing production to 100 million barrels, even by 2030, would be hard. ConocoPhillips chief James Mulva repeated the same sentiment, saying "I don't think we are going to see the supply going over 100 million barrels a day . . ."

I know what you're about to say, "Don't be ridiculous, Keith, we're finding new oil fields all the time. Brazil just found that massive offshore oil field."

That may be true, but think about this: How long will it take to get that field to full production? Petrobras, the state-run oil company, doesn't expect to start production until after 2010. Now tack on a few more years before they can achieve full production.

By then, my answer will still be, "A day late and a dollar short." That's assuming, of course, the dollar is still around.

Until next time,

Keith Kohl

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I think this video says it all

http://www.youtube.com/watch?v=X1xm8NH4tak

Energy waste in America is omnipresent, sinful, horrendous, and fixable.
(1) We over heat and over cool our homes, businesses, offices, schools, churches, etc...
(2) 10's of millions of outdoor lights burn during the day.
(3) Most Americans do not minimize their driving.
(4) Over packaging is the norm. Recycling is inadequate. Our landfills are busier than ever.
(5) America's obsession with road construction is the ultimate contradiction.
The ONLY way to reduce energy waste and over demand is by using the economics of taxing energy in lieu of Federal Income Tax. Until the price of gas is $6 to $8 per gallon, America will not reduce over consumption and energy waste. Federal Gas Tax should be $4 to $6 per gallon and offset by making Federal Income Tax begin at $60k. Only with a tangible/dollar reward will Americans care to conserve. In the mean time the USA continues to give away its economic and political wealth to the Middle East, so we can continue our hedonistic energy waste. Know that the Islamic dominated OPEC cartel is eager to allow supply and demand market forces to drive gas prices to $8/gallon. $100+ barrel oil enables those who want to annihilate us, the money needed to buy the weapons to do so. Growing geopolitical unrest is linked to global competition for energy and natural resources. If global demand for energy is not dramatically reduced; World War is inevitable.

America can no longer continue to 'do business as usual'. Ford and General Motors must transition to the lucrative business of building solar and wind energy 'producers' for the world's 6,700,000,000 people reason$. Otherwise, Ford and GM are headed for bankruptcy, which will leave 100 million Americans unemployed, ruin our economy, and lead to anarchy. The world cannot continue to support all the automakers. We are running out of petroleum. Wake up !
Mass transit must reward those who reduce their driving and thereby become FREE, safe, clean, and convenient.
The ONLY way Americans will significantly reduce energy waste and over consumptions is by the economic incentive of taxing energy - not income!

I'm tired of all the money hungrey assholes out there looking to rip off society. Whomever was involved in putting oil on the futures exchange back in 1985 should be put in a room with those who are as pissed off as me as to what they have put on us with the prices that we are now seeing. IS THERE NO END TO THIS ABSOLUTE CRAZINESS? Fair market value for something the world needs is fine but this idea of speculation and any time a bomb goes off or an Arab country shiek farts the wrong way leads to an increase in oil is absurd. I hope people come to their senses and throw the world economy into a tail spin by not going out and buying things as the price of oil reaches $100.00 a barrel. Save your money as you will need it to fill your tank just to get to work to pay your mortgage. Wake up people. We still have the power to change things. Tell your investment fund to stop buying oil!!!!!!!!!!!!!!

I can understand the desire of countries to keep the benefits of oil
at home. I thought that, aside from Russia, countries such as Venezuela were adequately supplied with technical expertise. Maybe I'm wrong.
After all. many of these countries send people to Western Schools to get current training.

Dear Mr. Kohl,

I appreciate your concern about government greed run amok on our future oil markets. This is, no doubt, a very legitimate problem globally these days. However, here in Alaska, I believe our state government's motivation is considerably more noble than most, if not all, the others, and with good reason.

By implementing this 25% tax rate on oil companies doing business here, the State of Alaska is looking out not only for its own interests, but the interests of all the inhabitants of this incredibly vast, sparsely populated frontier as well.

You see, because of our extreme environment, it's terribly difficult to maintain a year-round full-time workforce that continually produces all the goods and services a healthy economy normally requires to operate effectively, to the mutual benefit of all.

Therefore, as an inducement to remain in this state, the much-needed skilled, technically qualified, and well-educated opportunity seekers who've migrated here in order to take advantage of our higher-than-average paychecks - and who are CRITICAL to making this economy thrive - are lured to stay here by 2 main incentives.

First - the Permanent Fund Dividend check, issued annually by the state, to every man, woman, and child over the age of 6 months - as a financial reward for stabilizing our economy. This year it was $1653.00. If you have a family of 5 x $1653 = $8265.00. For a lot of people, this is not bad for JUST LIVING HERE!.....beats Mississippi.

These dividends are extracted from revenues generated by a myriad of investments owned by the Alaska Permanent Fund Corp., a state-mandated $35-$40 billion dollar business entity created from profits derived from the oil that started coming out of the Alaska pipeline back in the `70's.

At that time, the state legislature felt that by putting cash into the hands of its citizens could they motivate these qualified personnel to physically remain here in the state to greatly reduce Alaska's traditional "boom or bust" economic tendency.

Second - oil revenues pay for the overwhelming majority of our state's governmental expenses (i.e. no state personal income nor state sales taxes). This means very, very few taxes imposed on the citizenry, and they get to KEEP more of the wages they have earned, which is why Alaska has become a top destination for retired seniors strapped with a fixed income. THIS is also a very powerful motivation for keeping talented people on the job here.

So, you can see, that the combination of state-financed personal individual income, and low tax obligations, serve BOTH the government AND the population by greatly reducing the transiency of these workers. These 2 concepts have worked brilliantly for many years!

This is why Governor Palin made her particular "fair share" statement. Oil (and soon, natural gas) is the chief commodity anchoring Alaska's population to its economy.

I'm 1000% sure this is what Governor Palin had in mind, and why the near landslide majority of voters in Alaska condoned her sentiment.

Greed might have been a small contributor to our state's rationale - but social and economic self-preservation and stability were MUCH LARGER influences!....Guaranteed.

Daniel Kiewit
Anchorage, AK

8 Billion Barrel field......
current global daily use =8 million+ barrels =100 days to deplete field .........not gonna save us.......

one has to remember that wars need massive finances and other states are stopping the wealth from leaving thier countries this is another reason why bush is targeting iran thankyou for bringing this to my attention.

The Oil and Mining industries have a terrible record of leaving environmental disasters behind when the mine or well runs out. These environmental clean up costs and the social costs have to be factored into total operating costs globally. Every state, province or country needs to have these total costs factored into the well head é mine head price of oil, gas and minerals.

i can recall back 20 or more years in casper wyoming ther were 3 refineries working 24-7,gulf standard and an idependent whose name i cant recall---whoops it was little america.they are all gone now and have been for quiet some time.the cause, by people who new in casper was the explorers and drillers werent going to do anymore of it untill the price got right.wyoming was loaded with oil rigs.now there is hardly any---natural gas rigs yes.in 1955 i worked for a company who banded drill pipe,covered 7 states,all oil rigs---no rigs no need to band.