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#37640 - 06/06/08 03:28 PM Prime example of the Oil price circus.
Smike Offline
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WTF, when does outright speculative trading being done by Morgan Stanley (I don’t have the exact data in front, but my understanding is they have moved large amounts into Oil commodities recently) while they make public statements like this today cross the line? (Full well knowing that such statements influence market trading)

“Also contributing to the surge: Morgan Stanley (MS, Fortune 500) analyst Ole Slorer released a report saying that he expected a "short-term spike in oil prices," as high as $150 a barrel by July 4.”


To me that is a clear violation in market influence.

And you know who the biggest losers are? The average consumers around the world. Oil will never be cheap again (for a host of other fundamental supply / demand reasons), but he recent ‘super spike’ is a joke on free economic trade principles given this circus that continues in commodities trading.


http://money.cnn.com/news/newsfeeds/articles/djf500/200806051748DOWJONESDJONLINE000875_FORTUNE5.htm

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#37642 - 06/06/08 04:28 PM Re: Prime example of the Oil price circus. [Re: Smike]
crackers Offline
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oh shit. i agree with mike about something economic. oh shit. Quick mike, trot out your support of the Army's sunspot theory! ;\)

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#37643 - 06/06/08 04:58 PM Re: Prime example of the Oil price circus. [Re: Smike]
oenophore Online   confused
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What I haven't seen much in the "mainstream media" is news of a possible push for large-scale oil shale development and coal-to-liquid-fuel conversion. In my ignorance, I suspect that the floor to which petroleum price may drop after bursting of its price bubble is lower than the break-even price of such synthetic fuel products. Recall the creation of a Synfuels company in the seventies after a large price jump followed by a price collapse in the early eighties, making such an enterprise unprofitable, dooming Synfuels.
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#37649 - 06/06/08 05:35 PM Re: Prime example of the Oil price circus. [Re: oenophore]
Smike Offline
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Yes that is part of the issue in that we the consumers loses.

We pay inflated prices for oil products while not getting the full benefits at that price for future development and alternatives in fuel.

The industry will not (rightfully so) make long term development decisions based on the current high price. I would suspect based on what I have read that major oil company’s future development decisions are being based on oil holding in the range of 70-110 per barrel. (As they know the price above those levels is an artificial bubble)

Now I watch those shit heads in congress grill Oil company execs saying they are not spending enough on development based on current prices. They should be instead grilling the ones that control the commodities market. You wait, the most embarrassing is yet to come as foreign economies push for a crack down on the US commodities market. They are already telling us to get our shit together regarding these matters now.

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#37679 - 06/09/08 03:47 PM Re: Prime example of the Oil price circus. [Re: Smike]
Smike Offline
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The Whitehouse and congress, still have their heads up their ass and show no signs they have a clue as to the current conditions that are creating the price situation.

http://www.cnn.com/2008/POLITICS/06/09/bush.congress/index.html

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#37680 - 06/09/08 03:51 PM Re: Prime example of the Oil price circus. [Re: Smike]
pedestrian Offline
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Fix the falling dollar first... it's time to cut out all this deficit spending that is driving inflation. Unfortunately neither the Democrats nor the Republicans are putting that option on the table this election year.

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#37681 - 06/09/08 03:52 PM Re: Prime example of the Oil price circus. [Re: Smike]
Dillbag Offline
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Smike you need to get out and climb... You've had too much time to read!

Your spelling is improving too! It's like that Simpson's episode when Barney quits drinking and becomes crazy smart...
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#37682 - 06/09/08 04:10 PM Re: Prime example of the Oil price circus. [Re: Smike]
oenophore Online   confused
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Smike, what would you have governments do about the problem?
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#37684 - 06/09/08 04:32 PM Re: Prime example of the Oil price circus. [Re: oenophore]
Smike Offline
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Regarding Ped: Since oil is traded in US funds and the dollar is weak, that absolutely plays a role. But look at the % changes in the devaluation of the dollar over the last 12 months as compared to the increase in the price of oil. YTD changes in the dollar run from about 6% - 8% depending on the currently used as a benchmark. Crude Oil increase YTD near 55% The two do not align (not that they should, as other factors are at play, but the discrepancy can not be logically explained by world demand / supply issues) So what you are left with a massive growing bubble on the commodities market. Except unlike the tech bubble and housing bubble, this one smacks everyone across the board.

The biggest worry is that the accelerated speculative run of oil will trigger a much longer and deeper recession. (A.K.A the tipping point)

I believe something as simple as government statements saying something to the effect of clamping down and possible investigation into the commodities markets will fulfill the current need to stop the runaway train in oil prices and stabilize the market. Russia is already asking this of the US.

Regarding Dillhole: yes you are correct… on the climbing part, but I did not stop drinking.

O-NO - See statment above.

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#37803 - 06/13/08 04:24 PM Re: Prime example of the Oil price circus. [Re: Smike]
oenophore Online   confused
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I believe something as simple as government statements saying something to the effect of clamping down and possible investigation into the commodities markets will fulfill the current need to stop the runaway train in oil prices and stabilize the market.

Congress has done this sort of thing before, grilling corporate CEOs and excoriating them. Afterward it's business as usual.
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#37822 - 06/16/08 02:25 AM Re: Prime example of the Oil price circus. [Re: oenophore]
Smike Offline
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 Originally Posted By: oenophore


Congress has done this sort of thing before, grilling corporate CEOs and excoriating them. Afterward it's business as usual.


Given that, I'm pretty sure you misunderstood the above.

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#37823 - 06/16/08 09:42 AM Re: Prime example of the Oil price circus. [Re: Smike]
oenophore Online   confused
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Please explain.
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#37825 - 06/16/08 12:47 PM Re: Prime example of the Oil price circus. [Re: oenophore]
Smike Offline
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CEO’s getting grilled is not the same as sparking speculation on the commodities market of impending crack down. Trading markets are very sensitive to impeding government interference or the threat thereof. One only needs to break the bubble at this point.

Heck right now all it takes is one advisor from any well known name brand brokerage firm to toss out a few words that influences the commodities markets right now.

So Ono4 what’s your Ideas, thoughts?

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#37826 - 06/16/08 04:19 PM Re: Prime example of the Oil price circus. [Re: Smike]
oenophore Online   confused
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It seems that you're saying that a federal saber rattle in this case is credible and I'm saying I don't think so. I could be wrong.
Perhaps a quasi-public TVA-like company might be created to exploit wind power, oil shale and coal-to-liquid fuel. It would be an enormous hurdle to raise hundreds of billions via bonds and endure all the flak about its being a taxpayer funds wasting boondoggle and a source of patronage.
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#37828 - 06/16/08 04:34 PM Re: Prime example of the Oil price circus. [Re: oenophore]
Smike Offline
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 Originally Posted By: oenophore
It seems that you're saying that a federal saber rattle in this case is credible and I'm saying I don't think so. I could be wrong.
Perhaps a quasi-public TWA-like company might be created to exploit wind power, oil shale and coal-to-liquid fuel. It would be an enormous hurdle to raise hundreds of billions via bonds and endure all the flak about its being a taxpayer funds wasting boondoggle and a source of patronage.


Well the bubble in oil prices is here. I can in no way measure the current price of oil (going back 12 months) and say its not a bubble. Rattling the cage is one step that could make it burst. There is a lot of scared inverstors out there right now pouring large amounts of money into oil futures. Give them any reason to back out and they will.

Unfortunately any new initiatives put fourth to combat the price of oil in ‘alternatives’ in direct response to the current level will fail when the bubble bursts. It’s like saying the public needed to find a way to build millions of cheaper priced homes during the housing bubble due to high prices.

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#37831 - 06/16/08 06:29 PM Re: Prime example of the Oil price circus. [Re: Smike]
Mike Rawdon Offline

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 Originally Posted By: Smike

Heck right now all it takes is one advisor from any well known name brand brokerage firm to toss out a few words that influences the commodities markets right now.


Unfortunately the only words tossed out are things like "$4/gallon by summer" and "$5/gallon by Labor Day". All that does is send a clear signal to all the players to go ahead and run the price up. It's even more infuriating when it's the government that makes these, um, "predictions". (No, I can't cite specific instances when the gov't has done this; but I THINK they have)

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#37833 - 06/16/08 07:26 PM Re: Prime example of the Oil price circus. [Re: Mike Rawdon]
Smike Offline
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 Originally Posted By: Mike Rawdon
 Originally Posted By: Smike

Heck right now all it takes is one advisor from any well known name brand brokerage firm to toss out a few words that influences the commodities markets right now.


Unfortunately the only words tossed out are things like "$4/gallon by summer" and "$5/gallon by Labor Day". All that does is send a clear signal to all the players to go ahead and run the price up. It's even more infuriating when it's the government that makes these, um, "predictions". (No, I can't cite specific instances when the gov't has done this; but I THINK they have)


Gas prices in the US are actually holding as they are under immense pressure and low demand for this time of year. Right now if adjusted based on oil price increase alone it should be on average about $1 more.

Also one of the major factors for Exxon / Mobil selling it retail stations and getting out the retail end.

http://www.bizjournals.com/sanantonio/stories/2008/06/16/daily1.html

So if anything we are getting a break on the retail end at the moment (as bad as it seems, it should be much worse) What incentive would the gov have with higher gas prices? The tax is a flat rate on gas.


Edited by Smike (06/17/08 12:39 AM)
Edit Reason: cause I'm smike...

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#37840 - 06/16/08 11:47 PM Re: Prime example of the Oil price circus. [Re: Mike Rawdon]
learningtolead Offline
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 Originally Posted By: Mike Rawdon

It's even more infuriating when it's the government that makes these, um, "predictions". (No, I can't cite specific instances when the gov't has done this; but I THINK they have)


Uh, Bush didn't even know that gas prices would hit $4 six weeks ago...

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#37850 - 06/17/08 10:20 AM Biotechnology to the rescue(?) [Re: Smike]
oenophore Online   confused
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June 14, 2008

Scientists find bugs that eat waste and excrete petrol

Silicon Valley is experimenting with bacteria that have been genetically altered to provide 'renewable petroleum'

Chris Ayres

“Ten years ago I could never have imagined I’d be doing this,” says Greg Pal, 33, a former software executive, as he squints into the late afternoon Californian sun. “I mean, this is essentially agriculture, right? But the people I talk to – especially the ones coming out of business school – this is the one hot area everyone wants to get into.”

He means bugs. To be more precise: the genetic alteration of bugs – very, very small ones – so that when they feed on agricultural waste such as woodchips or wheat straw, they do something extraordinary. They excrete crude oil.

Unbelievably, this is not science fiction. Mr Pal holds up a small beaker of bug excretion that could, theoretically, be poured into the tank of the giant Lexus SUV next to us. Not that Mr Pal is willing to risk it just yet. He gives it a month before the first vehicle is filled up on what he calls “renewable petroleum”. After that, he grins, “it’s a brave new world”.

Mr Pal is a senior director of LS9, one of several companies in or near Silicon Valley that have spurned traditional high-tech activities such as software and networking and embarked instead on an extraordinary race to make $140-a-barrel oil (£70) from Saudi Arabia obsolete. “All of us here – everyone in this company and in this industry, are aware of the urgency,” Mr Pal says.

What is most remarkable about what they are doing is that instead of trying to reengineer the global economy – as is required, for example, for the use of hydrogen fuel – they are trying to make a product that is interchangeable with oil. The company claims that this “Oil 2.0” will not only be renewable but also carbon negative – meaning that the carbon it emits will be less than that sucked from the atmosphere by the raw materials from which it is made.

LS9 has already convinced one oil industry veteran of its plan: Bob Walsh, 50, who now serves as the firm’s president after a 26-year career at Shell, most recently running European supply operations in London. “How many times in your life do you get the opportunity to grow a multi-billion-dollar company?” he asks. It is a bold statement from a man who works in a glorified cubicle in a San Francisco industrial estate for a company that describes itself as being “prerevenue”.

Inside LS9’s cluttered laboratory – funded by $20 million of start-up capital from investors including Vinod Khosla, the Indian-American entrepreneur who co-founded Sun Micro-systems – Mr Pal explains that LS9’s bugs are single-cell organisms, each a fraction of a billionth the size of an ant. They start out as industrial yeast or nonpathogenic strains of E. coli, but LS9 modifies them by custom-de-signing their DNA. “Five to seven years ago, that process would have taken months and cost hundreds of thousands of dollars,” he says. “Now it can take weeks and cost maybe $20,000.”

Because crude oil (which can be refined into other products, such as petroleum or jet fuel) is only a few molecular stages removed from the fatty acids normally excreted by yeast or E. coli during fermentation, it does not take much fiddling to get the desired result.

For fermentation to take place you need raw material, or feedstock, as it is known in the biofuels industry. Anything will do as long as it can be broken down into sugars, with the byproduct ideally burnt to produce electricity to run the plant.

The company is not interested in using corn as feedstock, given the much-publicised problems created by using food crops for fuel, such as the tortilla inflation that recently caused food riots in Mexico City. Instead, different types of agricultural waste will be used according to whatever makes sense for the local climate and economy: wheat straw in California, for example, or woodchips in the South.

Using genetically modified bugs for fermentation is essentially the same as using natural bacteria to produce ethanol, although the energy-intensive final process of distillation is virtually eliminated because the bugs excrete a substance that is almost pump-ready.

The closest that LS9 has come to mass production is a 1,000-litre fermenting machine, which looks like a large stainless-steel jar, next to a wardrobe-sized computer connected by a tangle of cables and tubes. It has not yet been plugged in. The machine produces the equivalent of one barrel a week and takes up 40 sq ft of floor space.

However, to substitute America’s weekly oil consumption of 143 million barrels, you would need a facility that covered about 205 square miles, an area roughly the size of Chicago.

That is the main problem: although LS9 can produce its bug fuel in laboratory beakers, it has no idea whether it will be able produce the same results on a nationwide or even global scale.

“Our plan is to have a demonstration-scale plant operational by 2010 and, in parallel, we’ll be working on the design and construction of a commercial-scale facility to open in 2011,” says Mr Pal, adding that if LS9 used Brazilian sugar cane as its feedstock, its fuel would probably cost about $50 a barrel.

Are Americans ready to be putting genetically modified bug excretion in their cars? “It’s not the same as with food,” Mr Pal says. “We’re putting these bacteria in a very isolated container: their entire universe is in that tank. When we’re done with them, they’re destroyed.”

Besides, he says, there is greater good being served. “I have two children, and climate change is something that they are going to face. The energy crisis is something that they are going to face. We have a collective responsibility to do this.”

=================================================================

If only microbes could be engineered to convert bullshit into fuel, our nation could fuel the entire world.
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#37861 - 06/17/08 02:51 PM Re: Biotechnology to the rescue(?) [Re: oenophore]
Smike Offline
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So shitting bugs is your answer????

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#37862 - 06/17/08 03:00 PM Re: Biotechnology to the rescue(?) [Re: Smike]
oenophore Online   confused
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Who knows?
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#37865 - 06/17/08 03:37 PM Re: Biotechnology to the rescue(?) [Re: oenophore]
Smike Offline
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Science didn’t get us into this current oil price mess, (political actions, and commodities traders did) so science is not going to get us out of this current mess in the near term.

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#37869 - 06/17/08 05:08 PM Re: Biotechnology to the rescue(?) [Re: Smike]
Smike Offline
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Well finally looks like public pressure is getting through to congress:

http://money.cnn.com/2008/06/17/news/economy/oil_trading/index.htm?cnn=yes

"NEW YORK (CNNMoney.com) -- Fed up with soaring oil prices and a chorus of people blaming Wall Street speculators, Congress is considering a host of rules aimed at limiting the inflow of investor money into oil contracts. .........."

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#37895 - 06/18/08 05:08 PM Other ideas [Re: Smike]
oenophore Online   confused
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#37898 - 06/18/08 05:36 PM Re: Biotechnology to the rescue(?) [Re: Smike]
mworking Offline
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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!

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#37901 - 06/18/08 07:06 PM Re: Biotechnology to the rescue(?) [Re: mworking]
Smike Offline
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Wow it took Ono4 till the 3 page of this thread to post a cartoon! New record.... ;\)

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#38025 - 06/26/08 09:20 PM Re: Prime example of the Oil price circus. [Re: Smike]
Daniel Offline
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Well, one top oil analyst says the price rise is not primarily due to speculation. From yesterday's New York Times:
______________

As the ninth hearing of the month gets under way on Wednesday, one of the nation’s best-known energy experts, Daniel Yergin, is expected to tell Congress that the focus on speculation is largely misguided.

Mr. Yergin will join numerous other energy experts who have declared that the rise in oil prices can be explained by basic economic factors, such as the limited growth in supplies in recent years, a weakening dollar, a global surge in energy demand and a string of production disruptions in countries like Nigeria.

“When an issue is this hot, it would be so much easier if there was a single reason to blame,” Mr. Yergin said in an interview on Tuesday, previewing his testimony before Congress.

“The oil shock is real and is about the hottest political issue right now,” he said. “So Congress feels the pressure to do something but there is not much it can do to promote peace in Nigeria or to get the value of the dollar to go up.”

Mr. Yergin is the chairman of Cambridge Energy Research Associates, a consulting firm, and the Pulitzer Prize-winning author of “The Prize,” an authoritative history of the oil business. He will speak on Wednesday before the Joint Economic Committee, headed by Senator Charles E. Schumer, Democrat of New York.

Mr. Yergin said the market is relentlessly bidding up oil prices in response to deep-seated fears that the growth in demand will keep outpacing the growth in oil supplies in coming years.

“There is a shortage psychology in the financial markets and that is reflected in the price of oil,” Mr. Yergin said in the interview. “You are seeing a lot of people who have never invested in commodities who are now piling into the market. But calling it speculation is way too simplistic.”

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#38031 - 06/27/08 02:07 AM Re: Prime example of the Oil price circus. [Re: Daniel]
Smike Offline
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 Originally Posted By: Daniel
Well, one top oil analyst says the price rise is not primarily due to speculation.

-----------

Mr. Yergin said the market is relentlessly bidding up oil prices in response to deep-seated fears that the growth in demand will keep outpacing the growth in oil supplies in coming years.


Oh....I get it, its not foreclosure these days either thats the problem, but its people that can't pay their mortgages thats the problem.. ;\)

This might help clear the air a little more,

http://seekingalpha.com/article/81267-hayward-and-butler-comment-on-speculation-in-oil-markets

The only issue I have with this article is that the data they ref in the article is suspect as its not so clear cut who's buying the shorts in this market. (hence the need for regulation)

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#38118 - 06/30/08 03:22 PM Re: Prime example of the Oil price circus. [Re: Smike]
Daniel Offline
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Far be it from me to claim any expertise on the matter, but Joe Nocera's article in Saturday's New York Times says oil speculators are the "Easy Target, but Not the Right One," and (I think) briefly addresses the long-short argument in the article referenced in the prior post.

Also, Paul Krugman in his blog argues that the evidence is lacking that speculation is having an effect on spot prices, and his recent column argues that prices of commodities that have no speculative market, such as iron ore, have surged recently, suggesting that old-fashioned supply and demand are the root causes.

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#38129 - 06/30/08 06:43 PM Re: Prime example of the Oil price circus. [Re: Daniel]
Smike Offline
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I think I need to rein in on this thread as its seems even I have forgot the basic reason "Loosely regulated commodities market'

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#38178 - 07/02/08 01:03 PM Re: Prime example of the Oil price circus. [Re: Smike]
Smike Offline
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So in further attempt to understand the reason for the spike, I found this:

Atlanta hedge fund manager Michael Masters told a House subcommittee in June.

"When a trader sends a buy order to the exchange floor or presses the 'buy' key on their trading terminal, if he or she is attempting to buy more contracts than are currently offered for sale at the market price, then the market price will rise,"

I also found this:

“He points out that the amount invested in commodities index products has risen from $13 billion to $260 billion in five years, a fact he thinks is key to understanding oil prices.”

Source: http://money.cnn.com/2008/07/01/magazine...sion=2008070205


So if the same amount of oil is flowing through the supply / demand pipeline (Again there is no known storage in the supply in any part of the world, but yes a tight supply / demand in current conditions) and you have an influx of $240+ billion attempting to trade on that same amount, how could that factor alone not be a large part of price increase?

Want would happen to the price today if a large part of the influx of cash were removed? (With no change to supply - demand)

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#38262 - 07/05/08 01:46 AM Re: Prime example of the Oil price circus. [Re: Smike]
Dillbag Offline
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Smike... Isn't your job interesting enough that you only have time to play meteorologist? Now you're playing economist too?

You need more to do!
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#38295 - 07/07/08 02:25 PM Re: Prime example of the Oil price circus. [Re: Dillbag]
Smike Offline
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I was looking for a political cartoon to post here but came up with none \:\/

Work is overrated, and its corporate vacation season...

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#38674 - 07/25/08 02:15 PM Re: Prime example of the Oil price circus. [Re: Smike]
Smike Offline
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Most sensible article I've read on this so far:

http://money.cnn.com/2008/07/07/news/economy/oil_prins.fortune/index.htm?postversion=2008070811

"Supply and demand of the physical product, by and large, has remained fairly stable. In 2005, global oil production was 84.6 million barrels per day, and consumption was 83.6 million. Today, those numbers are 86.5 million and 86.4 million. That slight tightening hardly justifies the tripled price"

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#38676 - 07/25/08 06:00 PM Re: Prime example of the Oil price circus. [Re: Smike]
mworking Offline
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Posts: 764
I agree with the article about what should change.

But the %change in the amount of oil available for trade after demand was satisfied in the numbers above is numbers above is -%90 in terms of percent change!!!

So I agree we should to remove opacity from trading, I disagree with the premise that "The question Congress and regulators should be focusing on isn't who is driving prices, but how prices are being driven.

I'd give better than even odds the controlling speculators are directly in the oil business and not retirement funds or airlines etc. Why? Cause it is a business they know and they stand to profit by far the most. There is something in it for "all" of them. Higher profit on the original product. Profit on selling and reselling the same product.

Gaining access to US oil fields shouldn't be disregarded.
Who wants to drill where to "solve our oil problem"?

We need to remove trading opacity only to gain proof, not to use common sense.


Edited by mworking (07/25/08 06:09 PM)

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#38677 - 07/25/08 06:50 PM Re: Prime example of the Oil price circus. [Re: mworking]
pedestrian Offline
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mworking, no, I don't think so. There are two types of people who buy oil futures contracts:

1) Those who take physical possession of the commodity
2) Those who don't.

Obviously oil produces are in the former category. But the fact of the matter is that essentially all of the players in category 1) are buying futures not in order to speculate, but in order to hedge their inventories against future price volatility. That's like buying an insurance policy. On average it costs money to insure yourself against risk. The producers who are hedging more aggressively, more often than not are passing on fewer earnings to their shareholders. A prime example would be Pengrowth Energy Trust's first quarter results this year, which ended up being a loss because of mark-to-market writedowns related to their futures contracts holdings. That's right, oil prices climbed to a record high, and at the same time, these guys were losing money on their futures. It's not as simple as saying that people buying futures are fleecing the rest of us.

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#38679 - 07/25/08 08:08 PM Re: Prime example of the Oil price circus. [Re: pedestrian]
irisharehere Offline
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exactly.....for every person who buys a futures contract, there's a willing seller, who is happy to get a price guarentee. Why should the government get in the way? Are they going to decide who is a speculator, and who is hedging for commercial purposes?

If they decide to only allow hedging for commercial purposes, you know the kind of insanity that will inflict on markets? Airlines will be worth buying, just to use their "hedging" capability! Delta Airlines will become an energy hedge fund that flys a few planes on the side..........

And for everyone who's moaning about how "regular folk" are getting screwed by the high cost of gas, and oil companies, and speculators, get off your ass and do something about it......like buying into a long-energy ETF......or if you think its a bubble, quit pontificating from the sidelines, and get into a short-ETF


Just don't tell me that more government regulation is the answer.......should I have to clear all my trades with some jackass in DC? Maybe it's your pension fund I'm making money for, huh?



Jaysus, I've become a raving right-winger!!!!!!! Time to get the hell out of here for the weekend before I get any worse!


Edited by irisharehere (07/25/08 08:08 PM)
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#38680 - 07/25/08 09:14 PM Re: Prime example of the Oil price circus. [Re: irisharehere]
pedestrian Offline
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Exactly. hadn't thought that way about Delta good point. Incidentally, I just bought shares in IXC. Although I do expect that prices will continue to ease in the short run, they will be back up in the long run. For oil consumers, there are places to run but there is nowhere to hide.

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#38682 - 07/27/08 02:03 AM Re: Prime example of the Oil price circus. [Re: pedestrian]
Dillbag Offline
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Registered: 05/02/06
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You know... Without the accent the iris hare almost makes sense!
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#38701 - 07/28/08 01:52 PM Re: Prime example of the Oil price circus. [Re: Dillbag]
Smike Offline
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Peter:
Any regulation what so ever is always met with some negative tone from anyone on the trading side. The name of the game is “Transparency” Which from pretty much all that I’ve read is severely lacking in the oil commodities market. If everyone is screaming were not the problem, then they should have no issue with regulations that make what they are doing visible. I agree with your points on the fundamentals of how the market ‘should’ be working, but no one really knows the true nature of the market.


So Peter can you explain what has driven the oil trading market from 13 billion to 260 billion over the last 5 years and what affect this has on price? So if you take roughly the same pie (supply) and bring in some 20x the amount of cash from people to trade on that, what do you think is going to happen to the price?

Its not supply and demand of the actual oil so much as supply and demand of the contracts IMHO.

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#38703 - 07/28/08 02:44 PM Re: Prime example of the Oil price circus. [Re: Smike]
irisharehere Offline
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Transparency is an issue.......one of the big questions is how much transparency is correct or efficient - and I know I don't have the definitive answer for that..... I know a bunch of funds actually don't have any objection to increased transparency


I don't think anyone has a problem with going after people trying to manipulate the price of commodities (or anything else), but it seems that many commentators these days are confusing (deliberately, for politcal gain?) hedging, speculation, and manipulation.


I honestly don't know of a better way to allocate a resource with limited supplies - let people bid what they will, and those who value it most can buy it. If they're not actually using it, they have to sell it again (thus pushing the price back down) or they end up sitting on 1000 barrels of West Texas Intermediate crude!



What has driven the oil market from $13b to $260b over hte past 5 years...... (1) tight short/medium term supplies (2) reasonably steady/slightly increasing demand (3) VERY weak US dollar (4) oil is a good inflation hedge (5) people looking to get as good a return on their money as they can (6) big pension funds looking to diversify away from equities and bonds (7) the MCSI index - this is a commodity index, that lets you invest in a weighted basket of commodities


Why shouldn't more people buy oil, thus bidding up the price? Nobody complains when it happens to equities. It's simply the nature of the marketplace. I know lots of pension funds have made good money out of the oil market, softening the blow from their equity investments! Oil is also a reasonably decent hedge against inflation and the puny US$.


Your point about it being demand for contracts is true - but thats how oil is traded these days (and for many many years past). It's simply much more efficient than actually piping the stuff all over the country as its bought and sold.


Is your arguement with the level of transparency, the volumne of money in the market, or the use of contracts (or all of them)?

P
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#38706 - 07/28/08 03:18 PM Re: Prime example of the Oil price circus. [Re: irisharehere]
Smike Offline
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 Quote:
“Why shouldn't more people buy oil, thus bidding up the price? Nobody complains when it happens to equities”


Those two are not interchangeable. They are vastly different as you would know. Shares of Intel going up doesn’t increase PC costs on the shelves the next day. (If anything high equity helps to lower costs)

 Quote:
“I know lots of pension funds have made good money out of the oil market, softening the blow from their equity investments! Oil is also a reasonably decent hedge against inflation and the puny US$.”


There is lies the crux of my issue with the oil market today. The number of people that have entered the oil market that are motivated by the above is suspected to now far out place the number with actual demand and need for oil or oil hedging. Of course with out much transparency is hard to prove either way.

Bad things can happen when you get an overwhelming number of players in a market motivated by fundamentals outside of said market. You only have to look back at history in the markets to see that.

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#38707 - 07/28/08 03:49 PM Re: Prime example of the Oil price circus. [Re: irisharehere]
Smike Offline
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This puts the price into perspective. (Adjusted for inflation) You can see certain events and the price during that time. Also this charts stops at $103 so keep in the mind that line now is at a substantially higher mark now then in 1970 when an actually supply storage was in place.

http://bp0.blogger.com/_8FEZeAhD6mo/R81P...ation_chart.gif


Edited by Smike (07/28/08 03:51 PM)

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#38708 - 07/28/08 04:35 PM Re: Prime example of the Oil price circus. [Re: Smike]
irisharehere Offline
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 Originally Posted By: Smike
 Quote:
“Why shouldn't more people buy oil, thus bidding up the price? Nobody complains when it happens to equities”


Those two are not interchangeable. They are vastly different as you would know. Shares of Intel going up doesn’t increase PC costs on the shelves the next day. (If anything high equity helps to lower costs)




 Quote:
“I know lots of pension funds have made good money out of the oil market, softening the blow from their equity investments! Oil is also a reasonably decent hedge against inflation and the puny US$.”


There is lies the crux of my issue with the oil market today. The number of people that have entered the oil market that are motivated by the above is suspected to now far out place the number with actual demand and need for oil or oil hedging. Of course with out much transparency is hard to prove either way.

Bad things can happen when you get an overwhelming number of players in a market motivated by fundamentals outside of said market. You only have to look back at history in the markets to see that.


Vastly different, but also similar in that people buy them because they believe they will appreciate in price....... My point wasn't that they were the same, but that they are both instruments for financial speculation. Why shouldn't people and firms speculate on the price of oil? There is no such thing as a correct price, only what people are willing to pay.


Equally bad things can happen when you have government trying to determine who can or cannot buy things............ so who should be excluded from the oil markets Smike? Who gets a quota and who doesnt? What decides how big your quota is?

The oil market seems to be working perfectly well right now. Prices are high, relative to the historical short/medium term, but thats not "wrong" necessarily. Producers are bringing marginal supply back into production, and marginal users are cutting back. If you didn't have a real market signal, you wouldn't get the extra production as fast, you wouldn't get people carpooling to the daks, reducing demand.......


I'm not sure what you mean by people "motivated by fundamentals outside of said market" - for sure, everyone trading oil, be they a producer, speculator, hedger, or end user, is motivated by market fundamentals. In fact you could argue that speculators are the most purely motivated by market fundamentals. They aren't producing it, and they aren't using it. They buy contracts when they feel the market has undervalued them, and sell them when they feel they're at full (or greater than) value. End users are completely free to buy or sell contracts at the same times that speculators do.




Edited by irisharehere (07/28/08 04:36 PM)
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#38709 - 07/28/08 06:15 PM Re: Prime example of the Oil price circus. [Re: irisharehere]
Smike Offline
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 Quote:
“so who should be excluded from the oil markets Smike? Who gets a quota and who doesnt? What decides how big your quota is?”


Rules somewhat to this effect already exist (and have for many years in other commodities markets) For one, my understanding is the threshold of upfront capital for buying into the oil commodities is very low as compared to other commodities. Looking back at the mortgage industries we know how bad of situation that can create.



 Quote:
“I'm not sure what you mean by people "motivated by fundamentals outside of said market"”


Fundamentals of the oil market:

Oil price Hedging
Oil Supply
Oil demand.
Conservation
Supply disruptions

Outside market influences:

The devaluation of the dollar
Massive influx of fund money into the oil market to hedge against bad investments. (The recent exit from the banking sectors)

Not saying these things could ever be independent from oil as free market is a sum of all of parts that all have some influence on one or another. But I feel that when you have a land slide of one into the other at such a dramatic rate, the market can not adapt as quickly and someone gets hung out to dry.
 Quote:

“for sure, everyone trading oil, be they a producer, speculator, hedger, or end user, is motivated by market fundamentals”


So the numbers look like this:

“ Historically, roughly 70% of market participants used exchanges for commercial purposes” …. “Today roughly 30% of market participants on the New York Mercantile Exchange (NYMEX) are identifiable hedgers with a legitimate business purpose”

 Quote:
“or they end up sitting on 1000 barrels of West Texas Intermediate crude!”


God help me If I see congress in 2 yrs talking about an investor bail out on those holding oil future contracts that are turned into physical holding when deamand goes down. A lot of people are going to lose, as there is no way the oil market can sustain 260 billion. What goes up fast (in this case ultra fast) will come down just as fast.

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#38710 - 07/28/08 06:41 PM Re: Prime example of the Oil price circus. [Re: Smike]
pedestrian Offline
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smike, forget about what trading volume the oil market can sustain. that's beside the point. instead think about what price per barrel it can sustain.

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#38714 - 07/28/08 11:48 PM Re: Prime example of the Oil price circus. [Re: pedestrian]
Mike Rawdon Offline

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 Originally Posted By: pedestrian
smike, forget about what trading volume the oil market can sustain. that's beside the point. instead think about what price per barrel it can sustain.


I don't see the price going down. As with many other products, there is a period of shock as the price shoots up, "testing the water" as it were, but if all's well, then it settles in at the higher level. My favorite example of this is maple syrup. About 10 yr ago there was a (reportedly) terrible sugaring season and syrup prices doubled. Guess what - they're still up at that level, cuz people kept buying it at the higher price.

As long as everyone is selling all the oil they can produce, who's going to break ranks and lower their price? I mean, I don't hear any cries of anguish out of the American Petroleum Institute (Big Oil lobby/trade group), nor is ExxonMobil apologizing to their shareholders.

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#38715 - 07/28/08 11:55 PM Re: Prime example of the Oil price circus. [Re: Mike Rawdon]
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Sometime in the not-too-distant future, I suspect, one of those posters above (possibly me) will have to explain why he was wrong in his prediction.
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#38716 - 07/29/08 04:47 AM Re: Prime example of the Oil price circus. [Re: Mike Rawdon]
Smike Offline
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 Quote:
I don't see the price going down. As with many other products, there is a period of shock as the price shoots up, "testing the water" as it were, but if all's well, then it settles in at the higher level. My favorite example of this is maple syrup. About 10 yr ago there was a (reportedly) terrible sugaring season and syrup prices doubled. Guess what - they're still up at that level, cuz people kept buying it at the higher price.


Haha... unm when was the last time a country went to war over syrup???

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#38717 - 07/29/08 10:06 AM Re: Prime example of the Oil price circus. [Re: Smike]
empicard Offline
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Not syrup, but people have been fighting for centuries over SPICES.
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#38718 - 07/29/08 10:50 AM Re: Prime example of the Oil price circus. [Re: Mike Rawdon]
oenophore Online   confused
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#38720 - 07/29/08 11:12 AM Re: Prime example of the Oil price circus. [Re: Smike]
Mike Rawdon Offline

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 Originally Posted By: Smike
 Quote:
I don't see the price going down. As with many other products, there is a period of shock as the price shoots up, "testing the water" as it were, but if all's well, then it settles in at the higher level. My favorite example of this is maple syrup. About 10 yr ago there was a (reportedly) terrible sugaring season and syrup prices doubled. Guess what - they're still up at that level, cuz people kept buying it at the higher price.


Haha... unm when was the last time a country went to war over syrup???


You obviously don't remember the Acer Wars that took control of Vermont away from Canada...

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#38721 - 07/29/08 11:33 AM Re: Prime example of the Oil price circus. [Re: Mike Rawdon]
Dillbag Offline
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Not all of us are as old as you Mike!
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#38725 - 07/29/08 03:09 PM Re: Prime example of the Oil price circus. [Re: Smike]
Daniel Offline
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Not that I'm an expert, but I'm still not convinced that speculation is driving up oil prices. According to the NY Times, a recent federal task force report stated that "oil consumption grew 3.9 percent between 2004 and 2007. At the same time, oil supplies lagged that demand, with production growth from nations outside the Organization of the Petroleum Exporting Countries slowing to levels well below the historic averages." For other skeptical views (some of which I posted earlier), one can look here , here , and here .

But even if speculation were having some effect...so what? Our reliance on oil is a bad thing. It's bad for our foreign policy. It's bad for our troops who have to protect supply lines. It's bad for our economy. It's bad for the environment.

Economists have said that people will change their behavior when the price of gas is high enough to matter. Now it is, and people are. Those who can are buying more efficient vehicles. SUV and small truck sales are plummeting. Those who can are shifting to mass transit. Those who can are carpooling. Miles driven is dropping. And these things are bad?

Yes, there are households that have no choice but to spend upwards of 15% of their income on gas. They should not have to bear that burden. But surely there must be a way of helping those in need without removing the most powerful incentive to get the rest of us doing what we should have been doing over a decade ago.

Two-thirds of our oil is imported, and most of it goes to transportation. If we only drove the cars Europeans drive, we'd cut oil imports dramatically. New CAFE standards set fuel the new fleet efficiency average at 32 mpg by 2020; the Europeans are at over 40 mpg today. Right now. So it won't take new technology; it just takes different choices.

If we just use less oil, the price will go down too (or at least won't go up as much as it would with demand from China and India expected to increase anyway). And if the price of gas goes up 40%, you don't pay any more to drive the same number of miles if your next car is 40% more efficient.

Someday we're going to have to decide whether we're serious about dealing with our oil problem. To me, looking at the speculators is a distraction from this decision, whether or not they're affecting oil prices. The further this can is kicked down the road, the greater the pain when we finally have to deal with it.

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#38726 - 07/29/08 04:37 PM Re: Prime example of the Oil price circus. [Re: Daniel]
alicex4 Offline
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Interesting that the Hummer sales in China are booming.

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#38727 - 07/29/08 06:28 PM Re: Prime example of the Oil price circus. [Re: alicex4]
Smike Offline
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"But even if speculation were having some effect...so what? Our reliance on oil is a bad thing"

Um the ‘why’ and ‘so what’ is the basic premise of the thread, not the question of is dependency on oil bad (the answer to that is so obvious its not worth the 1’s + 0’s)


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#38728 - 07/29/08 07:02 PM Re: Prime example of the Oil price circus. [Re: Smike]
Daniel Offline
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 Originally Posted By: Smike
Um the ‘why’ and ‘so what’ is the basic premise of the thread, not the question of is dependency on oil bad


I understand that. But I question (1) whether the effect of speculation on current prices exists, (2) whether it's significant, and (3) why reversing it would be a good thing--which necessarily implicates asking what we're trying to achieve regarding oil usage. If the answer to the last question is that it would not be a good thing to lower prices in the long-term (because higher prices are making our society finally move in the right direction on this issue), then I wonder why there's so much concern about the first two questions; wouldn't they be moot? If getting off of oil is a good thing, and if speculation is either having no effect or is helping to drive up prices, why not allow speculators to speculate away?

To put it another way: even if speculation is affecting oil prices, isn't any proposed resolution meaningful only within the context of the overall national energy policy? I just feel that there's been such focus on whether speculators are driving up prices that the question of what to do about it in terms of our larger energy issues isn't getting much if any attention--and that we can't really answer the "what to do about it" question without the bigger context.

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#38731 - 07/29/08 08:54 PM Re: Prime example of the Oil price circus. [Re: Daniel]
Smike Offline
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“because higher prices are making our society finally move in the right direction on this issue”

Bottom line: Long Term Real change in upward movement in prices will spur all the goodies on Gore’s wish list. Short term raping of the market will not. The increase in over 60% in less then 1 year without any serious supply / demand is fueling money to those that will not use that for what you are expecting should happen with higher prices while taking that money from those (As in. governments) that actually might want to make a difference.

This short term price spike has only fueled other environmental disasters (some yet to be realized and acted on) to plug the short term oil needs. No oil company or energy alternatives is shelling out new development based on $150 or even $120 being sustainable in the market. They are basing that on $60-70, you know where the rest is going?

You know the best way to make a short term environmental impact in the world? Hold the Olympics in China again.

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#38732 - 07/29/08 09:10 PM Re: Prime example of the Oil price circus. [Re: Smike]
Dillbag Offline
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Hmmm... Maybe the speculators are starting to get nervous and back off a bit?

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#38733 - 07/29/08 11:43 PM Re: Prime example of the Oil price circus. [Re: Smike]
Daniel Offline
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 Originally Posted By: Smike
The increase in over 60% in less then 1 year without any serious supply / demand is fueling money to those that will not use that for what you are expecting should happen with higher prices while taking that money from those (As in. governments) that actually might want to make a difference.

.... No oil company or energy alternatives is shelling out new development based on $150 or even $120 being sustainable in the market.


First, the federal task force said consumption has increased over the past several years. And while I'm admittedly an economic amateur, it seems to me that even a modest increase can produce a sharp price rise depending on the demand-supply curves; even a slight shortage could sometimes create a price spike if demand is fairly inflexible.

Second, I thought economic theory said that high oil prices were exactly what was needed to spur other technologies. No one will invest in them as long as oil is cheap because they wouldn't be competitive. Why should companies, oil or otherwise, invest in solar if it's cheaper for people to use oil and will continue to be so?

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.

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#38734 - 07/30/08 03:10 AM Re: Prime example of the Oil price circus. [Re: Daniel]
Smike Offline
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 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
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 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
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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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#40021 - 09/24/08 11:59 AM Re: Oil price circus Part 2 [Re: pedestrian]
empicard Offline
Carpal Tunnel

Registered: 08/29/01
Posts: 2957
Loc: LI, NY
frozen concentrated orange juice
_________________________
tOOthless

Time flies like an arrow. Fruit flies like a banana.

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#40031 - 09/24/08 02:35 PM Re: Oil price circus Part 2 [Re: Smike]
mworking Offline
old hand

Registered: 05/26/04
Posts: 764
 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)


???

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#40085 - 09/25/08 01:55 AM Re: Oil price circus Part 2 [Re: mworking]
acdnyc Offline
enthusiast

Registered: 11/10/04
Posts: 208
Loc: NYC/Kerhonkson
Double ??? to that.

Isn't there some dumb oil guy in the White House?
_________________________
jugs or mugs

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#40101 - 09/25/08 12:59 PM Re: Oil price circus Part 2 [Re: acdnyc]
Smike Offline
Carpal Tunnel

Registered: 05/01/01
Posts: 3143
Loc: in your backyard
Here is a better explanation: (Which is was basically a lot of investors with no business holding oil contracts that were going to be on hook when those contacts were being called.)


http://money.cnn.com/news/newsfeeds/articles/djf500/200809241020DOWJONESDJONLINE000546_FORTUNE5.htm
 Quote:


US Bodman: Monday Record Oil Price Move Likely A Short Squeeze

WASHINGTON -(Dow Jones)- Monday's record oil-price spike was most likely a short squeeze on financial traders who had misjudged trading positions that would be needed following hurricane strikes on the Gulf coast, U.S. Energy Secretary Samuel Bodman said Wednesday.
The biggest one-day jump in crude contracts in the front-month contract prompted an investigation by the Commodity Futures Trading Commission.
An emerging consensus of analysts and traders attribute the wild session, in which oil prices surged to $130 a barrel at one point, to investors trapped with short positions in the expiring contract. Those traders, who had bet oil prices would fall, were forced to enter equivalent long October positions, or deliver on the physical barrels of oil underlying the short contracts.
"The best that I know about it, it was a short squeeze," Bodman told reporters on the sidelines on an event, adding, "it was clearly not a fundamental (move)."
"I think it was unrelated to the hurricanes," the secretary said, adding it was "an issue that no doubt affected the judgment of the traders."
"This was a feature of the financial market ... as best I know these were professional traders in the marketplace, " Bodman said.
-By Ian Talley, Dow Jones Newswires; 202 862 9285; ian.talley@dowjones.com


 Quote:

http://www.cattlenetwork.com/Content.asp?ContentID=255129

CME Confirms Subpoenas Issued In Monday Oil Price Spike Inquiry
NEW YORK (Dow Jones)--


The Commodity Futures Trading Commission has issued subpoenas in its inquiry into Monday's unprecedented jump in crude-oil futures on the New York Mercantile Exchange, a spokesman for the exchange parent said Tuesday.

Allan Schoenberg, a spokesman for Nymex parent CME Group Inc. (CME), did not provide further information on the number or identity of the recipients. A CFTC spokeswoman declined to comment.

The CFTC on Monday said it was "closely monitoring" the large movement in oil prices Monday, when the expiring October contract surged more than $25 to $130 a barrel in frenzied trading, to determine whether illegal market manipulation took place.

Separately, U.S. Energy Secretary Samuel Bodman said Wednesday the record price spike was most likely a short squeeze on financial traders who had misjudged trading positions that would be needed following hurricane strikes on the Gulf Coast.



-By Gregory Meyer, Dow Jones Newswires; 201-938-4377; greg.meyer@dowjones.com

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#40120 - 09/25/08 05:04 PM Re: Oil price circus Part 2 [Re: Smike]
Mike Rawdon Offline

Carpal Tunnel

Registered: 11/29/99
Posts: 4276
Loc: Poughkeepsie
Last week (before this latest spike event) there was an article that I saw somewhere online that said some thinkgroup had concluded that speculation and trading had definitely been a more significant driver of recent oil price increases than supply-and-demand. I wish I'd kept/remembered where I saw it. So this latest news didn't come as news to me.

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#40125 - 09/25/08 06:46 PM Re: Oil price circus Part 2 [Re: Mike Rawdon]
pedestrian Offline
Pooh-Bah

Registered: 08/05/02
Posts: 2244
Loc: a heavily fortified bunker!
Hmm... makes sense. Probably a lot of oil producers are holding short positions in the futures market to hedge their inventories of physical oil against price decreases. Hedge too far and you get squeezed...

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#40127 - 09/25/08 07:14 PM Re: Oil price circus Part 2 [Re: pedestrian]
mworking Offline
old hand

Registered: 05/26/04
Posts: 764
Grrrr..

It ought to be very clear by now that our financial system is intentionally opaque allowing many people to profit heavily in questionable ways, and that this is causing trouble in more than one area!

When the system work like this it's not trickle down, it's trickle up - no pumped up.

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#42624 - 01/17/09 12:38 PM Drill for the inner city poor (?) [Re: mworking]
oenophore Online   confused
Carpal Tunnel

Registered: 09/24/01
Posts: 5977
Loc: 212 land
Who would have guessed that environmental conservation can be racist?
...............................................................................

Protesters label Redford an enemy of the poor

By Patty Henetz

The Salt Lake Tribune

Updated: 01/16/2009 12:55:51 PM MST

Hollywood's Sundance Kid is hurting poor people.

So say some East Coast ministers and conservative activists, who took to the streets in front of a downtown Salt Lake City theater on the eve of Robert Redford's Sundance Film Festival to accuse the actor of holding down low-income Americans with his opposition to oil and gas drilling near national parks in Utah.

The protesters, led by the Congress of Racial Equality's national spokesman Niger Innis, suggested Redford should "relinquish his wealth" and live like a poor person. They complained that the filmmaker's anti-drilling stance could lead to higher energy prices for inner-city residents, forcing them to accept a lower standard of living.

The clergymen prayed for Redford "to see the light" and linked his environmental activism with racism.

"The high energy prices we're going to see this winter are essentially discriminatory," said Bishop Harry Jackson Jr. of the Hope Christian Church in Beltsville, Md., chairman of the High-Impact Leadership Coalition, a petroleum industry advocate.

A month ago, Redford, a trustee of the National Resources Defense Council, voiced support for a federal lawsuit aimed at blocking the Bush administration's "morally criminal" attempt to auction 103,000 acres of scenic redrock desert for oil and gas drilling near Arches and Canyonlands national parks and Dinosaur National Monument.

On Wednesday, Redford said through a spokeswoman that he stands by his opposition to the leasing. "These contested oil leases in Utah really have nothing to do with the cost of home heating," said Los Angeles-based spokeswoman Joyce Deep. "The fact is, the oil and gas industry already has more leases than it knows what to do with."

Using federal studies and statistics, The Wilderness Society calculated the natural gas recoverable from the 77 contested parcels would be the equivalent of two days of national consumption. The oil recoverable from those parcels would last 1 hour and 40 minutes at today's consumption rate.

Glenn Bailey, executive director of the poverty-advocacy group Crossroads Urban Center in Salt Lake City, called CORE's message a "red herring." The root cause of high energy prices, he said, are "big industry and price manipulation, not conservationists."

But Bishop Bobby Allen, of Ogden's Griffin Memorial Church of God in Christ, said even a tiny amount of Utah gas represents a lifeline to poor inner-city residents. "One life worth saving is worth the effort," he said.

On Wednesday, Innis asserted that a billion cubic feet of Utah natural gas flows to the East every day. That's possible, given that Utah, Wyoming and Colorado together daily ship 4.3 billion cubic feet eastward, according to Mark Doelger of the Wyoming Pipeline Authority.

But to put that in perspective, the 1 million people in the greater Chicago region consumes more than 4 billion cubic feet per day.

According to the Utah Division of Oil, Gas and Mining, the entire amount of gas drilled in Utah between 1891 and 2000 has been 7.65 trillion cubic feet. Between 2000 and September 2007, drilling in Utah yielded 2.3 trillion cubic feet -- all told, about six month's worth at today's consumption level.
_________________________

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#42669 - 01/19/09 04:28 PM Re: Drill for the inner city poor (?) [Re: oenophore]
pda Offline
addict

Registered: 08/30/01
Posts: 621
Loc: Bergen County NJ
It's not racist. Innis is a conservative, and this is a conservative issue, not a racial one. He's just using the CORE platform to attract attention.

In case you didn't catch it, here is the latest on the student that screwed up the latest lease auction:

http://www.sltrib.com/news/ci_11289406

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