Originally posted by highflier934I discussed this earlier here:Thread 90860
......., and? How about an explanation as to why she's wrong?
World demand for oil and commodities is growing FAST. China's (and other developing countries like India) fast growth is increasing demand for oil dramatically. Even with the prices at such levels, consumption in China is growing fast. http://www.chinadaily.com.cn/bizchina/2008-04/30/content_6653782.htm
There's hardly an analyst in the market that expects this demand for oil from developing countries to stop increasing in the near future. This is why there is a surge in the trade of futures. Investors are trying to cash in today in future price increases.
Sure, there is bound to be some overshooting. Since the housing market has collapsed, there's a lot of money pouring into the market and this also helps explain the surge in oil futures.
Nevertheless, we see that these increase in the trading of futures is not being accompanied by an accumulation of oil inventories. This means that the oil being produced now is mostly being sold for final consumption. Why is then the price rising today? Because companies know that they can sell it. The market is now larger (and increasing) and production has remained roughly the same. You do the math.
Moreover, there are several commodities that do not have a futures market but the prices have been rising in a similar fashion. How would uzless' story of placing the blame squarely on future speculators explain that? It can't.
There is then a bit of both. Money being channeled into commodities markets due to the collapse of subprimes AND clear increases in world oil demand. Unless production increases significantly, the times of cheap oil are gone.
Originally posted by AVDNations with high taxes on fuel are those which will be best able to adapt to a world with rising fuel prices.
65-70% of that is tax.
Why? Because people living in those countries have had to adapt to very high fuel costs, by, for example driving smaller cars, better public transport, and promoting local produce consumption.
In countries like the States where the oil execs who run the country have kept taxes negligible, there is going to be a complete rethink. Currently, 4 litre engines are the norm ("bigger is better" ), investment in highways is huge, while public transport users are often looked down upon. The American lifestyle will be severely hit, and rightly so seeing as your pollution to population ratio is obscene.
Forward thinkers like Passive house builders, Prius drivers and business people who concentrate on selling top quality, seasonal local produce (Our very own Invigorate being one of these, where everything sold in his shop is from within 50 miles) will lead us through the dark times of expensive oil, and out the other side into alternative technologies. Think about it, Invigorates produce will only be slightly hit by ever increasing transport costs, while somebody selling produce imported from the other side of the world will struggle.
D
Originally posted by NatsiaI'd conservatively estimate at least a 100% increase in oil prices by this time next year at the latest, possibly by the end of this year.
http://punditkitchen.com/2008/05/17/political-pictures-high-prices-gas-pump/
I see no ceiling on the price of oil, as it gets more and more expensive to extract, and as the oil barons realise that they have a finite resource, to wring as much profit as possible from.
More and more incidences will be used as excuses to drive the price up. These incidences may also coincide with the oil baron's future interests, eg: weapons in the case of the Saudi Princes. So an attack on America by mostly Saudis leads to a rise in oil prices, but also leads to a couple of invasions on fuel producing nations, so driving oil prices up while also increasing demand for weapons.
It's brilliant in it's deviousness.
D
Originally posted by Ray Gunz IThe average journey probably costs about the same though, when you take into account the average engine size of the two countries.
I can vouch for that! I was just over to the UK and the gas prices just shocked me! $4.00 a gallon in the US is small potatoes compared to you guys.
D
Originally posted by RagnorakVery well said there.
I'd conservatively estimate at least a 100% increase in oil prices by this time next year at the latest, possibly by the end of this year.
I see no ceiling on the price of oil, as it gets more and more expensive to extract, and as the oil barons realise that they have a finite resource, to wring as much profit as possible from.
More and more inciden ...[text shortened]... s up while also increasing demand for weapons.
It's brilliant in it's deviousness.
D
The nearest realistic grocery store to me is 22 miles. Ditto, drug stores, doctor, hospital. We are victims of the capitalist system. I'm on fixed income and my wife is bedridden. I live where the first oil well was drilled and there are oil deposits all around me and a refinery 32 miles away and the price of gasoline was and may have since increased $3.99.9 a gallon. The news media predicted four dollars a gallon by Memorial day and it did the day befor Memorial Day. How is this possible if the price is not being controled by the industry.
Does anyone remember reading about the Boston Tea Party????????????????Drastic measures are called for. Not violence, but severe abstenence. Quit buying one ounce of fuel that in absolutely unnecessary. Don't waste one drop. I have to use a cane to walk and I'm in the mountains and walk to the post office which is 1.3 miles away. If the hills weren't so steep I would get a bicycle to ride.
Originally posted by Evil Pawn 666What size engine is your truck?
The nearest realistic grocery store to me is 22 miles. Ditto, drug stores, doctor, hospital. We are victims of the capitalist system. I'm on fixed income and my wife is bedridden. I live where the first oil well was drilled and there are oil deposits all around me and a refinery 32 miles away and the price of gasoline was and may have since increased $ ...[text shortened]... office which is 1.3 miles away. If the hills weren't so steep I would get a bicycle to ride.
Protests will only achieve short term gains for the consumer. Consumer habit change is the only long term solution.
D
Originally posted by RagnorakConsumer habit change helps but it's a medium-term solution. The problem is that it's not just personal direct use of oil but also its use as an intermediate input.
What size engine is your truck?
Protests will only achieve short term gains for the consumer. Consumer habit change is the only long term solution.
D
In my opinion, the long-term solution must come from research into alternative forms of energy. Consumer habit changes are necessary to provide this research with more time but for them to be sufficient you would need a gigantic change in life standards.
Originally posted by PalynkaI disagree, assuming your "gigantic change in life standards" means a gigantic downward change.
Consumer habit change helps but it's a medium-term solution. The problem is that it's not just personal direct use of oil but also its use as an intermediate input.
Consumer habit changes are necessary to provide this research with more time but for them to be sufficient you would need a gigantic change in life standards.
[EDIT] I also disagree assuming that change gathers pace immediately, as opposed to our usual habit of being strictly reactionary, ie: waiting until we really can't afford to do much.
[EDIT2] Hmm, maybe I actually mostly agree after rereading the first line of your second paragraph. 😳 I'll leave my initial response stand.
D
Actually a big aprt of oil is directly going into transportation. So cutting on driving is only one means of cutting the cost. Another is buying things less transported.
And as a policy it would be advisable to have tax on energy, raw materials and litter and none on work. This would lead to people having work it would lead to the selling of repairable goods and thus save heavily on energy (which wouldn't becheaper bt dearer due to that strategy however)
All in all oil is far too cheap now.
Here's an independant voice from businessweek.com. Decide for yourself if you still think world demand is what is causing prices to increase...
Viewpoint April 1, 2008, 3:41PM EST
There Is No Gas Shortage!!!!!
But Washington, Wall Street, and ethanol and oil and gas companies want you to think there is, says automotive expert Ed Wallace
by Ed Wallace
"They see speculation in the market, I see decline in global inventories. I don't think this is a big surprise, that we've had a jump in price when there has been a decrease in crude inventories."— Energy Secretary Sam Bodman, Bloomberg News, Mar. 5, 2008
"It should be obvious to you all that the [gasoline] demand is outstripping supply, which causes prices to go up." — President George W. Bush, Associated Press, Mar. 5, 2008
One wonders if verifiable facts ever get in the way of this administration's statements on issues that are critical to the average American's wellbeing. After all, last time I checked, when politicians are elected to public office, or appointed, as is Energy Secretary Samuel W. Bodman, they must take an oath to the American people before assuming their new positions. How can they forget a sacred oath so quickly? Were they daydreaming when they took it, so it never meant anything to begin with? Maybe it's just another promise you have to make to get into office: When you're securely incumbent you can ignore even solemn oaths you took.
Obviously, the two quotes that led this article came from discussions concerning the current high price for oil on the futures market. Bodman appears to be protecting the speculators in oil, as opposed to looking after the interests of all Americans. President Bush, apparently, has never talked to the Energy Dept.'s Energy Information Agency to see whether gasoline demand is actually up. More troubling, the writer of that particular Associated Press article obviously didn't look up the EIA's numbers to verify the President's assertions. They weren't accurate.
1. There Is No Shortage
Gasoline reserves on hand are at the highest levels since the early 1990s, which is remarkable considering the nation's refineries have been cutting back on the production of gasoline because their margins have declined. In fact, average gasoline reserves on hand have risen since this past October, while oil reserves in this country have gone up virtually every week this year—and only fog in the Houston Ship Channel that kept oil tankers from unloading their crude one week kept it from being every week.
In the same Bloomberg article that quotes from Bodman's CNBC appearance on Mar. 4, he also said that it was thanks to ethanol that the gasoline problem isn't even worse. He then added that the fact that making ethanol is forcing up prices of other farm commodities, including hog and chicken feed, is "nowhere near as important as trying to relieve pressure on [gasoline] supplies."
Of course, there is no pressure on gasoline supplies in this country as of today, but Bodman's statement must have made eyes roll among the executives at Pilgrim's Pride PPC; the Pittsburg, (Tex.) poultry producer announced 1,100 layoffs on Mar. 13, closing one processing plant and 6 of their 13 distribution centers because their company's outlay for chicken feed went up $600 million last fiscal year and was on track to increase by another $700 million this year.
Here's the scorecard, in case you missed it. There's no shortage of gasoline or oil in the U.S. today, and we have near-record reserves on hand. Meanwhile the Congressional mandate for ethanol has jacked up the price of chicken feed for Pilgrim's Pride, which is the U.S.'s largest processor of chickens and turkeys—by $1.3 billion. And that's for just one company processing chicken. This is what passes for acceptable to our Energy Secretary?
2. Demand Is DOWN, Yet Prices Are UP
Just so we can all get on the same page, here are the verifiable facts on oil supplies, production, and gasoline demand.
In January of this year, the U.S. used 4% less petroleum than we did a year ago. (Oil demand was down 3.2% in February.) Furthermore, demand has been falling slowly since July of last year. Ronald Bailey of Reason Online has pointed out that worldwide production of oil has risen 2.5% in the first quarter, while worldwide demand has grown by only 2%. Production is expected to increase by 3.3% in the second quarter, and by as much as 4.1% by the third quarter. The net result is that the U.S. daily buffer for oil production against demand, which was a paltry 1.5 million barrels as recently as 2005, is now up to 3 million barrels in excess capacity today.
So what is going on here? Why would our Energy Secretary say there's a supply and demand problem when none exists? Why would he say that speculators have little or nothing to do with the incredibly high price of oil and gasoline, when it's clear they do? President Bush—a former oilman—gives the ever-growing demand for gasoline as the primary reason prices are so high, yet that notion can be dispelled with one minute of research. That's the problem with rhetoric; it rarely matches the facts.
3. Speculation is Up, and the Dollar Is Down
On the same day the President and our Energy Secretary made those foolish comments, no less an authority than ExxonMobil (XOM) Chief Executive Officer Rex Tillerson was quoted by Marketwatch as saying, "The record run in oil prices is related more to speculation and a weakening dollar than supply and demand in the market." He added, "In terms of fundamentals, fear of supply reliability is overblown."
As for the speculators, in 2000 approximately $9 billion was invested in oil futures, while today that number has gone up to $250 billion. Now, if any publicly traded company had an additional $241 billion put into its stock in the same period, its stock would rise out of sight too—even if the company was not worth anywhere near that amount of market capitalization.
Moving on to the weak U.S. dollar as a primary cause for skyrocketing oil prices—there is "some" truth in that statement. But consider this: The dollar has depreciated 30% against the world's currencies since 2002, while the price of oil has gone up 500%. So is it the weak dollar that has caused a 500% increase in the price of oil, or is it the extra $241 billion worth of speculation? You can make the call on that one.
Possibly just to ensure oil prices don't respond to real-world market conditions, Goldman Sachs (GS) forecast on Mar. 7 that turbulence in the oil market could cause oil to spike as high as $200 a barrel. This flies in the face of all known information—but then again, Goldman Sachs is the world's biggest trader of energy derivatives, and its Goldman Sachs Commodities Index is a widely watched barometer of energy and commodities prices.
What Is Washington Thinking?
Rounding out the list of experts discussing our oil and gasoline situation is Bill Klesse, head of San Antonio (Tex.) Valero Energy (VLO). He spoke in San Diego a week after those comments from Goldman Sachs, the President, and Secretary Bodman. Believe it or not, Klesse said poor margins may cause Valero to sell one-third of its refinery operations; he stated that poor margins in recent months had caused planned refinery expansions—which would have produced 500,000 more barrels per day—to be canceled. Moreover, according to a report from Reuters on Mar. 11, 2008, Klesse recently released the information that gasoline production has been curtailed in response to slowing demand.
Imagine that: Refiners cut gasoline production, yet gasoline reserves have grown to their largest since late 1992. So much for "surging demand."
Klesse also called for the government to start imposing a tariff on imported gasoline to protect U.S. refiners' profits. Protectionism? As famed economist John Kenneth Galbraith correctly said, "In America, the only respectable form of socialism is socialism for the rich."
Which takes us back to the original question: Why is Washington doing everything it can to convince us there is a shortage when there isn't one? After all, the only people they're protecting are those heavily invested in oil futures—and that's to the detriment of all other Americans.
Short-sighted analysis from someone that doesn't understand that oil markets are global. Perhaps that person should realize that understanding oil prices also requires looking outside of America.
1) The relevant demand for oil is world demand, not just US demand.
2) The relevant measure for supply in evaluating prices is NOT reserves, but extracted oil and extraction capacity.
3) It confuses consumption with demand. The price of oil has been going up dramatically and still world consumption has increased. How is that compatible with demand going down? That's right. It isn't.
4) The dollar fall isn't enough to explain much, because the price per barrel has been increasing quite fast in other currencies, including the Euro which has appreciated dramatically. It just means it's worse for the US.
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