Oil Under $50
10-14-2008, 04:28 PM
#1
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Oil Under $50
For all those who didn't beleive specculation was behind the lastest oil price spike...
Oct 14, 2008 (San Gabriel Valley Tribune - McClatchy-Tribune Information Services via COMTEX) -- Oil at $50 a barrel? Gasoline for $2.50 per gallon?
It sounds absurd in light of the price hikes and economic turmoil we've weathered over the past several months, but more than one industry analyst figures we're headed that way.
Fadel Gheit, managing director of oil and gas research for Oppenehimer & Co., says the nation's sky-high crude prices have been fueled solely by market speculators.
But with banks now pinched by the credit squeeze, nearly all of that speculation has fallen by the wayside.
"Oil prices are headed lower and I wouldn't rule out it going below $50 a barrel ... but I wouldn't bet on it either," Gheit said.
"I've never seen anything like it. Increases over the past two or three years have been driven by speculation. And the people who manipulated oil prices are the same ones who created the toxic financial assets that created our global financial crisis."
Oil prices clawed back above $80 per barrel Monday, rebounding from a 13-month low as a stepped up global effort to rescue world financial markets lured investors back into equity and commodities markets.
On Monday, light, sweet crude for November delivery rose $3.49 to $81.19 per barrel on the New York Mercantile Exchange, after earlier rising as high as $82.52.
Prices were also supported by a weaker dollar and expectations that OPEC countries may tighten production in a bid to slow crude's precipitous decline.
Prices have fallen about 45 percent since shooting to a record $147.27 July 11.
Last week, crude tumbled more than $16 to levels not seen since September 2007, with more than half the losses coming on Friday alone.
"At this point, you've got the Morgan Stanleys and Goldman Sachs of the world all running to the sidelines," petroleum industry analyst Bob van der Valk said. "The speculators have gotten out of the market. There have been restrictions placed on credit and that affects everything. You end up with no money to invest."
The removal of that element from the equation has put the crude oil market back on a more realistic track. he said.
"We're getting back to what we're using and what we're making ... and right now we're making more than we're using," van der Valk said.
Part of the nation's excess inventory can be tied to the fact that U.S. refineries have converted from summer-grade to winter-grade gasoline.
Refineries are able to generate more gasoline per barrel of oil when producing winter-grade fuels, van der Valk said.
"We make about 10 percent more gas in the winter," he said.
And that equates to lower prices at the pump. In fact, van der Valk figures we'll see $2.50-a-gallon gas by year's end.
"The only thing that could hike prices up again would be something like an armed conflict with Iran or Russia," he said. "But right now, everything on the horizon is looking good."
Gheit said world events would have hiked oil prices back up again if not for speculators pulling out of the market.
He cited Russia's invasion of Georgia and hurricane damage to refineries in the Gulf of Mexico as two factors that should have driven prices north again.
"But oil prices came down sharply because they were sharply inflated," he said.
Goldman Sachs cut its year-end crude price forecast from $115 a barrel to $70, citing the "extreme dislocation" in the credit markets.
The Associated Press contributed to this story.
[email protected] (626) 962-8811, Ext. 2701
Oct 14, 2008 (San Gabriel Valley Tribune - McClatchy-Tribune Information Services via COMTEX) -- Oil at $50 a barrel? Gasoline for $2.50 per gallon?
It sounds absurd in light of the price hikes and economic turmoil we've weathered over the past several months, but more than one industry analyst figures we're headed that way.
Fadel Gheit, managing director of oil and gas research for Oppenehimer & Co., says the nation's sky-high crude prices have been fueled solely by market speculators.
But with banks now pinched by the credit squeeze, nearly all of that speculation has fallen by the wayside.
"Oil prices are headed lower and I wouldn't rule out it going below $50 a barrel ... but I wouldn't bet on it either," Gheit said.
"I've never seen anything like it. Increases over the past two or three years have been driven by speculation. And the people who manipulated oil prices are the same ones who created the toxic financial assets that created our global financial crisis."
Oil prices clawed back above $80 per barrel Monday, rebounding from a 13-month low as a stepped up global effort to rescue world financial markets lured investors back into equity and commodities markets.
On Monday, light, sweet crude for November delivery rose $3.49 to $81.19 per barrel on the New York Mercantile Exchange, after earlier rising as high as $82.52.
Prices were also supported by a weaker dollar and expectations that OPEC countries may tighten production in a bid to slow crude's precipitous decline.
Prices have fallen about 45 percent since shooting to a record $147.27 July 11.
Last week, crude tumbled more than $16 to levels not seen since September 2007, with more than half the losses coming on Friday alone.
"At this point, you've got the Morgan Stanleys and Goldman Sachs of the world all running to the sidelines," petroleum industry analyst Bob van der Valk said. "The speculators have gotten out of the market. There have been restrictions placed on credit and that affects everything. You end up with no money to invest."
The removal of that element from the equation has put the crude oil market back on a more realistic track. he said.
"We're getting back to what we're using and what we're making ... and right now we're making more than we're using," van der Valk said.
Part of the nation's excess inventory can be tied to the fact that U.S. refineries have converted from summer-grade to winter-grade gasoline.
Refineries are able to generate more gasoline per barrel of oil when producing winter-grade fuels, van der Valk said.
"We make about 10 percent more gas in the winter," he said.
And that equates to lower prices at the pump. In fact, van der Valk figures we'll see $2.50-a-gallon gas by year's end.
"The only thing that could hike prices up again would be something like an armed conflict with Iran or Russia," he said. "But right now, everything on the horizon is looking good."
Gheit said world events would have hiked oil prices back up again if not for speculators pulling out of the market.
He cited Russia's invasion of Georgia and hurricane damage to refineries in the Gulf of Mexico as two factors that should have driven prices north again.
"But oil prices came down sharply because they were sharply inflated," he said.
Goldman Sachs cut its year-end crude price forecast from $115 a barrel to $70, citing the "extreme dislocation" in the credit markets.
The Associated Press contributed to this story.
[email protected] (626) 962-8811, Ext. 2701
10-14-2008, 08:53 PM
#2
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Nobody would argue that speculation wasn't a problem, but it was only part of it.
People speculated that as the price went up and people would continue to drive --- that is until a breaking point was reached. Well, we hit that point and demand dropped sharply. Because of the strain high oil prices put on the markets, economies worldwide failed and/or are failing.
Had the US been producing its own oil and flooded the market when the speculators tried to get the price up, the price of oil would have gone back down.
But don't worry, the likely next administration isn't very oil friendly, so, watch for oil to go back up as the markets stabilize and recover and as a result demand goes back up.
-Fatty
People speculated that as the price went up and people would continue to drive --- that is until a breaking point was reached. Well, we hit that point and demand dropped sharply. Because of the strain high oil prices put on the markets, economies worldwide failed and/or are failing.
Had the US been producing its own oil and flooded the market when the speculators tried to get the price up, the price of oil would have gone back down.
But don't worry, the likely next administration isn't very oil friendly, so, watch for oil to go back up as the markets stabilize and recover and as a result demand goes back up.
-Fatty
10-15-2008, 04:02 AM
#3
Libertarian Resistance
Joined APC: Feb 2007
Position: 757 FO
Posts: 1,057
Remember about 3 weeks ago it was speculators that were driving prices DOWN in the financial markets (it was all the wailing about the short sellers). I'm sure that could never happen in the oil markets.
Be careful what you read--the media is filled with people who weren't smart enough to major in something productive and don't write well enough to get published on their own.
WW
Be careful what you read--the media is filled with people who weren't smart enough to major in something productive and don't write well enough to get published on their own.
WW
Last edited by Winged Wheeler; 10-15-2008 at 04:05 AM. Reason: clarity
10-15-2008, 04:36 AM
#4
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Posts: 243
Nobody would argue that speculation wasn't a problem, but it was only part of it.
People speculated that as the price went up and people would continue to drive --- that is until a breaking point was reached. Well, we hit that point and demand dropped sharply. Because of the strain high oil prices put on the markets, economies worldwide failed and/or are failing.
Had the US been producing its own oil and flooded the market when the speculators tried to get the price up, the price of oil would have gone back down.
But don't worry, the likely next administration isn't very oil friendly, so, watch for oil to go back up as the markets stabilize and recover and as a result demand goes back up.
-Fatty
People speculated that as the price went up and people would continue to drive --- that is until a breaking point was reached. Well, we hit that point and demand dropped sharply. Because of the strain high oil prices put on the markets, economies worldwide failed and/or are failing.
Had the US been producing its own oil and flooded the market when the speculators tried to get the price up, the price of oil would have gone back down.
But don't worry, the likely next administration isn't very oil friendly, so, watch for oil to go back up as the markets stabilize and recover and as a result demand goes back up.
-Fatty
Oil played a part in the downturn, but only a part. Take a look at the regulatory changes to the Community Reinvestment Act in 1995 -- that strengthening of the CRA encouraged a loosening of lending standards throughout the banking industry, and in my view led directly to this crisis. And once it was done, no one could stop it because if they tried to weaken the CRA, they would be attacked as "stopping poor people from achieving the American Dream".
Apparently, the American Dream means owning a house you don't have the resources to afford. I guess I missed that day in civics class.
More on the CRA: http://mises.org/story/2963#
Last edited by Marvin; 10-15-2008 at 04:46 AM. Reason: Added link
10-15-2008, 04:44 AM
#5
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I always thought the oil bubble was speculation driven, and it now as if the speculators are getting some of the fruits of their work thrown back their way. Many scholars say however that the production of oil in the world will peak soon if it hasn't already and a gradual decline in oil reserves will eventually occur and most certainly drive up the prices up for all time. It is this knowledge that made the speculation driven fuel bubble frightening, not knowing the real cause. The take-away is we need to develop alternative energy far more quickly than we are, in order to be ready when the real wolf of depleted supply finally arrives. Many nations are already doing the alternative thing, but here we have been insulated from it by previously cheap oil.
10-15-2008, 11:43 AM
#6
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However, you are wrong when you infer that because they are not oil friendly that the price of oil will go up over the long term. The price of oil will definitely go up over the near future (3-5 years). However, both Obama and McCain are extremely strong supporters of renewable energy. Obama is calling for the US to become completely independent of foreign oil within 10 years (that is more than 12 million barrels of oil per day cut, or 15% of global demand just by the US cutting consumption). McCain is not far behind that (although he technically has not set a date of 10 years).
Just the fear that demand may be reduced slightly because of the economic recession has caused the price of oil to fall $70 a barrel (about 50%) in just 3 months. Think about what will happen when the actual demand for oil is reduced by 30-50%. Then what will happen to oil prices.
The candidates are not oil friendly. However, they are alternative energy friendly. And over the long term, that is a much better position.
Or we can continue to send billions a year to our enemies (Iran, Iraq, Libya, Nigeria, Saudi Arabia, Russia, Venezuela, just to name a few of the top 10 oil exporters)
10-15-2008, 12:54 PM
#7
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The high oil prices only accelerated the housing / lending fiasco. But yes, the relaxation of lending / borrowing rules is what put us in this mess. We have personal, local, city, county, state, and national debt at all time highs. And we wonder where our future is headed.
To the other guy, THERE IS ONLY ONE RENEWABLE ENERGY SOURCE ... and that is geothermal heat. Why? Because it is constant and never goes away. The sun goes down and the wind doesn't always blow. They will only supplement real sources of energy and will never be anything but that.
To the other guy, THERE IS ONLY ONE RENEWABLE ENERGY SOURCE ... and that is geothermal heat. Why? Because it is constant and never goes away. The sun goes down and the wind doesn't always blow. They will only supplement real sources of energy and will never be anything but that.
10-15-2008, 01:27 PM
#8
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Yep,
And the world was once believed to be flat
The sound barrier could never be broken
Smoking was not harmful to your health
Evolution was a myth
No one could survive a trip to the moon
Modern science and human ingenuity proved all these theories wrong. I think your theory will make this list in 10-20 years.
And the world was once believed to be flat
The sound barrier could never be broken
Smoking was not harmful to your health
Evolution was a myth
No one could survive a trip to the moon
Modern science and human ingenuity proved all these theories wrong. I think your theory will make this list in 10-20 years.
10-15-2008, 09:08 PM
#9
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Position: USAF
Posts: 1,398
Yep,
And the world was once believed to be flat
The sound barrier could never be broken
Smoking was not harmful to your health
Evolution was a myth
No one could survive a trip to the moon
Modern science and human ingenuity proved all these theories wrong. I think your theory will make this list in 10-20 years.
And the world was once believed to be flat
The sound barrier could never be broken
Smoking was not harmful to your health
Evolution was a myth
No one could survive a trip to the moon
Modern science and human ingenuity proved all these theories wrong. I think your theory will make this list in 10-20 years.
To say that modern science and human ingenuity have proven evolution true is a great logical fallacy
Evolution can't be proven one way or the other... it is subjective intrinsically.
A dicto secundum quid ad dictum simpliciter
To say it can be proven is a negative-proof fallacy. The evidence itself is subjective and there is evidence for and against. It is not empirical to prove as the other things you have listed.
Last edited by ryan1234; 10-15-2008 at 09:14 PM.
10-16-2008, 03:25 AM
#10
Libertarian Resistance
Joined APC: Feb 2007
Position: 757 FO
Posts: 1,057
You are right about the first part and wrong about the second part. Yes, both Obama and McCain technically are not very oil friendly. McCain has been against off shore drilling his entire career (he only changed his mind during the election to get votes). McCain is still against drilling in ANWR. Obama is also against both of these too. So yes, technically both candidates are not oil friendly.
However, you are wrong when you infer that because they are not oil friendly that the price of oil will go up over the long term. The price of oil will definitely go up over the near future (3-5 years). However, both Obama and McCain are extremely strong supporters of renewable energy. Obama is calling for the US to become completely independent of foreign oil within 10 years (that is more than 12 million barrels of oil per day cut, or 15% of global demand just by the US cutting consumption). McCain is not far behind that (although he technically has not set a date of 10 years).
Just the fear that demand may be reduced slightly because of the economic recession has caused the price of oil to fall $70 a barrel (about 50%) in just 3 months. Think about what will happen when the actual demand for oil is reduced by 30-50%. Then what will happen to oil prices.
The candidates are not oil friendly. However, they are alternative energy friendly. And over the long term, that is a much better position.
Or we can continue to send billions a year to our enemies (Iran, Iraq, Libya, Nigeria, Saudi Arabia, Russia, Venezuela, just to name a few of the top 10 oil exporters)
However, you are wrong when you infer that because they are not oil friendly that the price of oil will go up over the long term. The price of oil will definitely go up over the near future (3-5 years). However, both Obama and McCain are extremely strong supporters of renewable energy. Obama is calling for the US to become completely independent of foreign oil within 10 years (that is more than 12 million barrels of oil per day cut, or 15% of global demand just by the US cutting consumption). McCain is not far behind that (although he technically has not set a date of 10 years).
Just the fear that demand may be reduced slightly because of the economic recession has caused the price of oil to fall $70 a barrel (about 50%) in just 3 months. Think about what will happen when the actual demand for oil is reduced by 30-50%. Then what will happen to oil prices.
The candidates are not oil friendly. However, they are alternative energy friendly. And over the long term, that is a much better position.
Or we can continue to send billions a year to our enemies (Iran, Iraq, Libya, Nigeria, Saudi Arabia, Russia, Venezuela, just to name a few of the top 10 oil exporters)
I do share your confidence that innovators can create new, efficient, and better supplies of energy. Arrogant, statist politicians will hinder, not help these inventors.
WW
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