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#38734 - 07/30/08 03:10 AM Re: Prime example of the Oil price circus. [Re: Daniel]
Smike Offline
Carpal Tunnel

Registered: 05/01/01
Posts: 3143
Loc: in your backyard

 Quote:
I've never heard an economist say "we'll get off of oil as long as it remains relatively cheap." It is precisely only sustained high oil prices that provides a market incentive for alternatives--perhaps not by the oil companies, but by everyone else.”

Agreed 100% as I started before, but we will find out that current pricing is NOT going be stay sustainable. (Not even close) Same as we found out that recent home price increase's were not. That’s what they call a bubble.

This has already started and finding this article made it pretty clear because I suck at explaining this event, which I see is another episode of world market overreactions: (one of the costs of the free market system) So it will be the continuation of the historic slide in old prices that could show us the reasons behind the run up.


 Quote:
What’s behind the Slide in Oil and Commodities?

http://news.goldseek.com/GoldSeek/1216920460.php

“……US consumer prices were increasing at a 5% annual clip in June, reflecting the global commodity boom that the Fed’s rate cuts had set in motion. Then suddenly, at 10:30 am EST on July 15th, a miracle happened, the Nymex crude oil market began to collapse, plunging $10 per barrel within a span of less than one-hour, to its biggest daily decline in 17-years. What was behind the historic crash in the crude oil market on July 15th that prevented “Black Tuesday” on Wall Street?

A few hours later, at 11:30 pm EST, the Bush administration announced a shift in its foreign policy, and said it would send a high ranking envoy to Geneva, Switzerland to talk with Iran’s diplomat directly, about Tehran’s nuclear program. As long as the diplomatic game continues, there is less chance of any military action against Iran’s nuclear weapons program. At a cost of one round-trip airline ticket to Geneva, Washington engineered a stunning 15% drop in world oil prices.

On July 16th, Nevada Senator Harry Reid fashioned a bill to rein-in speculators in the energy markets, who bet on the price of oil, but don’t intend to take physical delivery. “This bill will address the rising cost of gasoline in the short term, and prevent Wall Street traders from gaming oil markets, and insure that American consumers are paying a fair price at the pump,” Reid said. The bill would restrict the number of oil futures contracts an individual speculator could control.

Oil prices have tumbled more than $23 a barrel from their all-time high set on July 11th, marking the biggest decline in dollar terms in the market’s history. The evaporation of the Iranian “war premium” from the oil market, rescued the Dow Jones Industrials with a “miracle rally” of 800-points, from the brink of Armageddon. But could there be another hero who is responsible for the historic slide in crude oil, besides the backroom cabal at the US State and Treasury departments?



No market travels in a straight line. In the second half of 2006, the crude oil market fell by 35% to as low as $50 /barrel, before hitting bottom in January 2007. Such is the nature of commodity markets, which often fool most people, most of the time. The OPEC cartel was forced to rescue its most precious asset, by slashing oil output one-million bpd in Nov 2006, to put a floor under the “black gold” market.

But perhaps, the real hero behind the latest slide in crude oil is European Central Bank chief Jean “Tricky” Trichet, who has a penchant for fooling most traders, most of the time. The world owes a big debt of gratitude to Trichet and the ECB hawks, for objecting to the reckless strategies of the Federal Reserve, the Bank of Canada and England, who slashed their interest rates in a state of panic, and guided the global economy into the “Stagflation” trap.

Instead, Trichet and the ECB hawks refused to be bullied by politicians into a series of rate cuts, in order to bail-out over-zealous speculators in the Euro-zone stock markets. Instead, the ECB held its repo rate steady at 4% throughout the first-year of the global banking crisis. Then on June 5th, Trichet and the ECB hawks shocked the global markets, by signaling a baby-step rate hike to 4.25%, and guided benchmark German schatz yields to their highest levels in six-years.

If the historic rise in crude oil to $150 /barrel is driven by speculators, as the OPEC cartel and Democrats on Capitol Hill argue, then the world needs a powerful central bank to go against the “Big-Easy” at the US Treasury and the Fed, and the “yen carry” traders at the Bank of Japan, in order to deflate the oil “bubble” with a classic dose of higher interest rates. “The simple fact is that there is nearly $250 billion in America’s commodity futures markets that wasn’t there just a few years ago,” said CFTC commissioner Bart Chilton on July 22nd. “



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#38735 - 07/30/08 12:52 PM Re: Prime example of the Oil price circus. [Re: Smike]
Smike Offline
Carpal Tunnel

Registered: 05/01/01
Posts: 3143
Loc: in your backyard
 Quote:


http://online.wsj.com/article/SB121733894576993197.html?mod=googlenews_wsj

Oil's Hot Streak Looks Over, Traders Say
By NEIL KING JR.
The Wall Street Journal

"The most fundamental change is that starting this month, the financial markets could no longer ignore the physical markets," said David Kirsch, an analyst at the consulting group PFC Energy in Washington, which began predicting in April that prices would slump during the third quarter.


 Quote:
Oil prices slide on demand risks
Carolyn Cui, Dow Jones Newswires | July 30, 2008


"Funds are unwinding their positions partly due to the rising capital costs in the oil markets, as exchanges have raised margin requirements in volatile markets, said Brad Zigler, managing editor, Hard Assets Investor, a commodities research web site. Others are simply taking gains off the market, while some are waiting for the results from the CFTC's ongoing investigations in oil market speculation.

The president of the Organisation of Petroleum Exporting Countries bolstered bears further by saying that oil prices could fall further if the US dollar strengthens and if political tensions ease.

OPEC president Chakib Khelil said current oil prices are "abnormal".

"It's more of a realisation that the supply and demand conditions couldn't justify the trajectory of the prices," Mr Zigler said. "


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#38834 - 08/04/08 08:17 PM Re: Biotechnology to the rescue(?) [Re: mworking]
mworking Offline
old hand

Registered: 05/26/04
Posts: 764
 Originally Posted By: mworking
I am sure that the demand for oil is growing, and that it will continue to grow, but I don’t buy the theory the current oil bubble was caused buy that increase alone. So, I’ll espouse my usual, a conspiracy theory!

Who will benefit from this bubble?
Who are the speculators?
Why wouldn’t you guess the oil companies themselves?

* They are already knowledgeable and in the oil business
* We know that they have to have lots of money to invest, and it would give them lots of revenue without the blame for price gouging.
* It doesn’t hurt them in terms of volume because the world isn’t really using and buying less oil, and the supply which they don’t own all is limited.
* It aids their drive for local drilling over which they will have more control.

Let’s hear some better theories!


I think we can all agree that the state of affairs might be described as an energy crisis, no?
How has the US voted “recently”? By crisis. Manufactured crisis’s to be sure. What makes you think this isn’t another? I know it sounds like a conspiracy theory. So what? Who’s got more to gain? Who’s got more capability to do it. I already assumed oil companies were involved. I'm just noting that keeping the presidency may be a stronger motive to work as a team with the “business community” . Sure prices change on their own...but this benfits more people than I listed before - and they are still all on the same team.

Reuters today:
 Quote:
McCain fired back in Pennsylvania, criticizing Obama's opposition to nuclear power and broad offshore drilling and calling on Congress and Obama to return to Washington to try to solve the country's growing energy challenges.

"We need more nuclear power. We need clean coal technology. We need to offshore drill for oil and natural gas. We need to drill now," McCain said in Lafayette Hill, a suburb of Philadelphia.

"Anybody who says that we can achieve energy independence without using and increasing these existing energy resources either doesn't have the experience to meet the challenges we face or isn't giving the American people straight talk," he said.

Two daily tracking polls show McCain, a Republican senator from Arizona, has wiped out Obama's narrow national lead in the past week and pulled even in the November 4 election race as the two candidates wage an increasingly acrimonious campaign for the White House.

The faltering U.S. economy, including rising gas prices, rank as the top issue for American voters in most polls.

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#39331 - 08/28/08 03:32 PM Re: Biotechnology to the rescue(?) [Re: mworking]
MurphysLaw Offline
gumby

Registered: 03/12/02
Posts: 2308
Loc: Hudson Valley, NY
The best cure for high commodity prices, is high commodity prices. \:\/

All speculative bubbles are inherently the same.
Folks keep buying X - because they are convinced that in the future X will cost more, and then the next "greater fool" does the same, lather rinse repeat.

Why, just in the last decade, we've had a few doozies:
Tech/.com bubble of '99-'00
cash (get me out!!!) bubble late '02-early'03
Real Estate bubble '05-'05
Commodities bubble '07-now.

(PS - 2 of the above bubbles were directly aided and abetted by Mr Greenspan and his flood of liquidity, aka "the Greenspan put". The tech and RE bubbles were funded by ridiculously cheap and easy $.)

Where's the price of a bbl of oil today?

Speculative bubbles have been occurring in all sorts of forms, for centuries. Alas, human beings seem hard-wired to continue to make these same sorta mistakes, over and over and over again.
Can you say "Beanie Babies"?
(Hell - there was a massive speculative bubble over tulips in Holland for chrissakes!!! Freaking flowers!)


PS - regarding the "insatiable appetite" of some emerging economies for oil, it's only insatiable because over 50% off all oil being purchased for use has been subsidized, sometimes quite heavily, by those particular governments.

Now that many of those same governments cannot afford those subsidies anymore, the consumers are forced to pay market prices for oil, and the shock of doing so has decreased demand.

Which brings us back to the first line in my post....
_________________________
"Flailing?" "Flail on!"

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#39333 - 08/28/08 05:34 PM Re: Biotechnology to the rescue(?) [Re: MurphysLaw]
Mike Rawdon Offline

Carpal Tunnel

Registered: 11/29/99
Posts: 4276
Loc: Poughkeepsie
 Originally Posted By: MurphysLaw

Now that many of those same governments cannot afford those subsidies anymore, the consumers are forced to pay market prices for oil, and the shock of doing so has decreased demand.



Merely tinkering around the edges, I suspect. I'll have to see if I can find some hard numbers, but I am convinced worldwide oil demand has been steadily increasing and will continue to do so until we hit "peak oil" (and the onset of declining production regardless of cost). The pessimist in me sees higher prices...forever.

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#39490 - 09/04/08 04:26 PM Re: Biotechnology to the rescue(?) [Re: Mike Rawdon]
MurphysLaw Offline
gumby

Registered: 03/12/02
Posts: 2308
Loc: Hudson Valley, NY
I wish I could remember where I saw the chart, but, for the last great oil price shocks we experienced ('73 and then again in '79, IIRC), the second one brought about a dramatic, and nearly PERMANENT decline in the demand for oil.
(which is why, on an inflation-adjusted basis, the cost of oil dropped 90% from it's peak in the 70's, to around '99 or so, when things started moving back up again)

The reason demand *seems* to have been increasing is, as stated above, due primarily to the fact that over half the citizens of the world had been having their oil subsidized by their respective governments.
Thereby artificially keeping the prices low, which led to increased demand (who cares about MPG?? Buy another Hummer!! \:\/ )

Example:
Camalots - $60. I'll take one
Camalots - $40. Oooh, gimme two!
Camalots - $20. OK, time for a new rack!
Camalots - $6. Time for a new rack for me, the Mrs, the dog, and anybody else who wants one!!!
_________________________
"Flailing?" "Flail on!"

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#39952 - 09/22/08 07:18 PM Re: Oil price circus Part 2 [Re: MurphysLaw]
Smike Offline
Carpal Tunnel

Registered: 05/01/01
Posts: 3143
Loc: in your backyard
I believe today puts to rest any question as to whether factors outside of supply and demand are in control of the oil market right now. (at least in control in the short term)

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#40006 - 09/23/08 08:26 PM Re: Oil price circus Part 2 [Re: Smike]
Daniel Offline
veteran

Registered: 05/23/01
Posts: 1515
 Originally Posted By: Smike
I believe today puts to rest any question as to whether factors outside of supply and demand are in control of the oil market right now. (at least in control in the short term)


There are other factors at work, and one of them is the strength of the dollar. According to the news summary on yesterday's PBS Newshour: "The price of oil soared and stocks plunged today over jitters about the government's massive financial rescue plan. Oil was up more than $25 at one point on concerns the plan would weaken the dollar."

So I'm still reluctant to assume anything nefarious without more evidence.

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#40009 - 09/23/08 08:45 PM Re: Oil price circus Part 2 [Re: Daniel]
Smike Offline
Carpal Tunnel

Registered: 05/01/01
Posts: 3143
Loc: in your backyard
 Originally Posted By: Daniel
 Originally Posted By: Smike
I believe today puts to rest any question as to whether factors outside of supply and demand are in control of the oil market right now. (at least in control in the short term)


There are other factors at work, and one of them is the strength of the dollar. According to the news summary on yesterday's PBS Newshour: "The price of oil soared and stocks plunged today over jitters about the government's massive financial rescue plan. Oil was up more than $25 at one point on concerns the plan would weaken the dollar."

So I'm still reluctant to assume anything nefarious without more evidence.


I guess we will have to wait:

"In response to the unprecedented runup in oil futures, the Commodity Futures Trading Commission (CFTC) said in a statement that it was investigating the situation to be sure that there was no mishandling of the oil trade.

"No one should be trying to game our nation's commodity futures markets," said CFTC Acting Chairman Walter Lukken in a written statement. "

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#40010 - 09/23/08 09:02 PM Re: Oil price circus Part 2 [Re: Smike]
pedestrian Offline
Pooh-Bah

Registered: 08/05/02
Posts: 2244
Loc: a heavily fortified bunker!
with this going through, it's definitely time to invest in pork futures

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