OPEC keeping cost of gas low to discourage alternatives like E85
OPEC wants gas prices at the sweet spot which looks a little like this: "high enough to justify its investment in future production capacity but low enough to allow economic growth and deter a flood of alternative fuels," or roughly $2.25 a gallon, according to Fox News. Good business sense or a case of irritating exploitation?
Regardless of one's interpretation, the idea seems to be that high fuel prices this summer and last stirred up the E85 pot enough that it freaked out our friends over at OPEC, who weren't thrilled to read about all of the plans to increase production of E85 and improve our infrastructure to distribute it. By reducing the price of gasoline, consumer confidence in gasoline and vehicles that don't burn it all too efficiently is back on the rise and interest in E85 and other alternative fuels has dipped once more.
[Fox News via GM Inside News and E85fuel.com]
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Reader Comments (Page 1 of 2)
Avinash Machado 8:30AM (10/25/2006)
Now let the Conspiracy Theories begin.
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Brian 11:06AM (10/25/2006)
If it's on Fox News than it must be true.
Either that, or they're helping Bush make the case for invading Venezuela.
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Paul 8:48AM (10/25/2006)
how is that a conspiracy theory?
OPEC is a cartel - they wish to protect their interests so they adjust prices to fall in line with market demand.
Hardly a conspiracy.
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Edsel 4:24PM (10/25/2006)
They aren't stupid. OPEC, like any other business will strive to maximize profits. If $2.25 is their calculated "sweet spot" so be it. However, the U.S. should be building more, nuclear power plants, mass-transit systems, and permit more oil wells in an effort to create energy independence.
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Dan from Delaware 8:46AM (10/25/2006)
The article doesn't quote an OPEC representative making any reference to alternative fuels. The link between oil prices and alternative fuels appears to be totally in the reporter's mind. This is Fox News, remember.
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Shawn 9:00AM (10/25/2006)
I don't think the Foxnews article even mentions E85.
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Bob from ALAMN 12:34PM (10/25/2006)
We do. See more at www.CleanAirChoice.org
Bob Moffitt
Communications Director
American Lung Association of Minnesota
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Howard Kerr 9:22AM (10/25/2006)
"FoxNews via GMInsider"
Yeah, now there is a great source of unbiased reporting.
Seriously, I doubt OPEC cares about any country developing alternative fuels. Let's face it, at least in this country we continue to buy more and more cars and trucks every year, build bigger and bigger homes, and eat more meals away from home. And the U.S. isn't the only place this is happening. As long as the world's appetite for oil keeps expanding OPEC has an advantage. Yes, they know that oil prices above $70 a barrel risk putting the world into recession and that means a slowdown in demand for oil, and that high oil prices eventually result in high prices for imported goods in OPEC countries...but until ANYONE in OPEC is quoted ANYWHERE as saying "we are worried about slakening oil demand due to alternative fuel production"...this story ranks right up there with "Elvis spotted at Dunkin Donuts in Cleveland".
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Johnny B 9:31AM (10/25/2006)
Nuclear power plants are not the answer. The true clean alternatives are solar and wind power. Yet, this still doesn't solve the problem of fuels for personal transportation. E85 is a good start, but an idea that is a little old in the tooth...The topic only comes up when they "need" to talk about alternatives for gasoline, just to make us think that they care and are working on it. And by "they" I mean American oil companies...
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Paul Murray 1:15PM (10/25/2006)
Except it's actually NOT FoxNews, but a Reuters story that simply appears on the FoxNews website (much like yesterday's "Detroit News story" about Civic production that was actually from Bloomberg News).
The analysis appears to be from Erin, as I can't find anything like it in the actual news story. It would nice to have a clearer distinction between what the source says and what the poster thinks about it.
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Peter 9:42AM (10/25/2006)
Anyone remember time before prices started to drop?
There were a lot of news about different companies investing into ethanol plants.
Anyone has explanation why oil prices decreased? (since there was also huge drop in europe, this would somewhat eleminate supply-demand for summer season in the US theory)
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Paul 10:18AM (10/25/2006)
Peter it is a world market a drop in demand in the US equals drops in price world wide.
IN combination with OPEC losing its grip, there is no conspiracy here.
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John B 11:03AM (10/25/2006)
It's not only about ethanol (and let's not get started on the whole ethanol debate regarding net energy) but about the entire tpoic of fuel efficiency and independence. The last thing OPEC wants to see are large numbers of fuel efficient cars sold or large scale investment in public transit. Maybe it's about time various governments turned the heat up a little on the oil ticks by either raising taxes on fuel (which must be revenue neutral overall) or on vehicles with poor mileage.
I could see this move by OPEC a mile away. Totally predictable. Meanwhile the Saudis pump oil for $3 a barrel and sell it for $50 with the proceeds going to your local madrassa. Sleep well.
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Koba 10:17AM (10/25/2006)
E85 in itself is a conspiracy. Why does it cost more than regular gasoline? It is only freakin' corn alcohol for christsake! To think, a product the U.S. govt. subsidizes for our agri-giants to dump on other countries could actually work towards our energy independance. This country makes way to much money off of gas to get away from it. You want energy independance? Look to Brazil, there's a country that isn't willing to bend over for oil prices to maim their economy.
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WolfgangNC 10:28AM (10/25/2006)
my $0.02 are fossil fuels will be used until they run out, and I don't think that will be anytime in the near future. Now I'm not saying it is good for the environment or smart to use up all of a non renewable resource; but we the consumers won't move towards any alternative from fossil fuels unless it is at least as convenient as what we are used to.
As far as cars, E85 is good, if it were cheap, hydrogen is the answer in my opinion if the infrastructure was in place; but to be honest with ourselves we still want what is easy and convenient and until we either run out or find alternatives that are as easy and convenient we ain't changing from fossil fuels.
My only conspiracy theory question is, if the E85 takes off, will the government still have to support the farms in the US like they have been for decades?
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roadside observer 11:07AM (10/25/2006)
OPEC controls only 33% of the world's oil supplies. Someone explain how controlling only 33% of the supplies gives it complete price control over 100% of the world's oil markets. Even GM didn't have that kind of power when it controlled 50% of the car market.
If OPEC has that kind of control over prices, why wouldn't they keep it at $70/barrel? Or $75/barrel? They'd make a whole lot more money than they would at $60/barrel, since oil demand is, in many ways, inelastic - and given that ethanol supply is constrained due to time necessary to build a plant, the increases in corn prices due to higher demand for corn, the fact that ethanol cannot be transported by pipeline like gasoline and oil, and other concerns, the competition question is basically moot.
Tinfoil hats, anyone?
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Toy Yoda 11:25AM (10/25/2006)
What a financial analyst told me, the reason for the drop in oil prices had to do with futures market of oil. What happened was that Goldman's Sach reweighted some index on commodity futures to put less emphasis on oil. The market (mostly intitutional investors) reacted to the new reindexing, by taking out alot of money from the oil futures market. The money moved out, the oil futures market dropped, the price of gasoline fell. In other words, the spike in gasoline prices is largely due to institutional money managers jumping on the band wagon of oil.
If anyone can make sense of what I just said, I'd really like to know. :)
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Paul 11:38AM (10/25/2006)
roadside observer- you are missing a key component here - it is a world market and they have the largest control over a single percentage of it. You said it yourself, oil demand is inelastic so they can push it higher and higher until it breaks - it is simple economics. Not to be a jerk but you are totally wrong. How is recognizing the actions of a self stated cartel tinfoil time?
Toy Yoda - i made sense of it and that did have a HUGE impact.
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Rob 1:08PM (10/25/2006)
OPEC didn't indicate that it was keeping oil prices low for that reason - that was determined by the Fox News article.
Autoblog...I've seen you posting stuff from leftlane and straightline blog right after they do. is there a possibility you're actually trying to get your own stories for this blog and in the process don't make the effort to actually find out the facts? oh and, great source...fox news! fair and balanced (NOT).
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loikll 1:19PM (10/25/2006)
Peter: oil prices fell because supply caught up to demand. "Peak Oil" hype was, er, premature -- oil cos and OPEC pumped up production to take advantage of high prices, meanwhile demand growth was slower than expected (running at only 5% per annum now in China; probably not growing at all among the shrinking populations of Japan and Europe.) That is why OPEC is now trying to restrain itself and cut production.
Roadside: "If OPEC has that kind of control over prices, why wouldn't they keep it at $70/barrel? Or $75/barrel?"
For one thing, we're ignoring that oil was so high partly due to the risk premium as a perfect storm of bad news hitting the markets (Nigeria, Iran, BP's pipeline, Peak Oil hype). Besides, oil demand is NOT inelastic -- we're talking supply and demand at the margins here. A little less demand can make a big difference.
Moreover, in a cartel when prices are high, every individual is tempted to cheat and produce more. A few too many do that, and prices fall -- no matter what the cartel's official policy may be. It's hard to control that.
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