Oil, Oil, Oil: What Should the Price Be?

Before we begin, remember that before there was the cost of oil, there was coal, before coal it was wood and somewhere in between there was gas, not to mention electricity and who knows in the future, we may be complaining about windmill rates.

The reality is that there is some purpose to almost every form of energy, although the man made one -- nuclear seems to always be a problem because it can also be used to breed a weapon and we don't know how to protect ourselves and our environment from its most toxic waste.

Back to oil.  Well, we, the public, have been dealing with the price of oil in one way or another for the last eight years and it hasn't been pleasant.  If we didn't know it before, we now know that it can wreck a home budget overnight, can do the same to the travel and hotel industry, not to mention the cost of good, and every other product, goods or services we consume.  Yes, no having a fix on oil will keep us rocking as we begin the hard work of putting the economy back in balance.

So, what should be the real price of oil?

Well, news agencies are reporting that OPEC wants a price of $75 a barrel.  That would mean that the price at the pump would be closer to $3 per gallon.  For those nations that are listening, I can tell you that $3 is too much and won't work here in America.  Sounds like I'm negotiating a price?  Well, I am and I think we can negotiate a price or a price range that is acceptable to our economy and to OPEC.

Last year, the chairman of the National Bank of Kuwait suggested that the price range might be in the $35-$50 range.  At the pump, that would mean a price not higher than around $2.25 per gallon.  Even that is high but closer to reasonable given our current situation.  What would work is around where the price has been over the last 60 days, somewhere between $30 and $45 per barrel.  That would keep the pump cost below $2.00.  The price needs to be kept below two dollars per gallon.

Now at that price, do the OPEC countries make money?  Yes, they do.  In a variety of interviews at the close of 2008, it was reported that the cost of oil at the wellhead in the Gulf was still around $2,00, which it has been for some time. When you add costs, expense is around $18-$20 a barrel, OPEC will still be a profit margin of 50-100%.  That is more than fair.

What I learned from my time in Saudi Arabia, working with a company that had a major American oil concession, was that the companies make a profit, but collectively, it might not be enough to meet their own government's budget needs. That to me is a whole other situation.  I think that it is important that our government actively work to seek some level of stability in oil prices, so that we can better plan our lives in an effort to make a more predictable economic recovery.

Copyright 2009 WBSeebeck