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2007-2008 Crude Oil Cost


Pumapayam

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Come again? You're fading in and out there, Ghostrider....

If you were going to really cash in on that start, it was best to buy it ExxonMobil stock a few years back when it was reasonably low.

Since they are doing so well, the stock is much higher. I can't forecast it getting any higher than that, so that is why I mentioned that the stock is too high to really have value for new people to buy into it.

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If you were going to really cash in on that start, it was best to buy it ExxonMobil stock a few years back when it was reasonably low.

Since they are doing so well, the stock is much higher. I can't forecast it getting any higher than that, so that is why I mentioned that the stock is too high to really have value for new people to buy into it.

According to Biz Radio 1320 AM (and the owner of the station Daniel Frishberg), most of these types of stocks are still relatively cheap. And therefore, good buys.

If you were going to really cash in on that start, it was best to buy it ExxonMobil stock a few years back when it was reasonably low.

Since they are doing so well, the stock is much higher. I can't forecast it getting any higher than that, so that is why I mentioned that the stock is too high to really have value for new people to buy into it.

According to Biz Radio 1320 AM (and the owner of the station Daniel Frishberg), most of these types of stocks are still relatively cheap. And therefore, good buys.

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If you were going to really cash in on that start, it was best to buy it ExxonMobil stock a few years back when it was reasonably low.

Since they are doing so well, the stock is much higher. I can't forecast it getting any higher than that, so that is why I mentioned that the stock is too high to really have value for new people to buy into it.

OOH! OOH! Now's your chance! It tanked 3 bucks today!

Actually, it is rated very highly, even at 86 (now 83) dollars a share. Not only does it still have gas in the tank pricewise (damn, I'm funny), but it is a dividend stock that pays every quarter. 7 years ago, I told my broker friend that tech stocks were making me nervous, and that I wanted some dinosaurs like Exxon. He convinced me to buy some more tech stocks instead of Exxon. Well, the techs tanked, I fired my broker, lost him as a friend, and I went and bought the stinkin' Exxon stock like I wanted. I bought more when several people said it was as high as it would go, at 43. Of course, yeaterday it hit 86.

Exxon has loads of cash that it uses to buy back its stock if it gets too cheap. It usually splits when it hits the 90s. Certainly one who buys in at 83 missed some profits, but that doesn't mean it isn't worth buying. Oil is still a good place to be for awhile.

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  • 1 month later...
Has any one seen this movie?

A Crude Awakening: The Oil Crash

cover_image.jpg

No, I have not seen this movie, but it appears to be another retelling of the "Peak Oil" story, which basically says that we're running out of oil. Matthew Simmons (who apparently appears in this movie) has been saying this for some time and common sense and empirical data seem to be bearing him out - we are using oil faster than it's being discovered, so naturally we're going to run out some day. Basic supply and demand says the price of oil will go up if that happens and demand stays constant.

But...

I am new to this discussion - like Mr. Rabbit, I also trade energy and I find it funny to listen to people somehow think there is a "conspiracy" that oil and gas prices are artificially high. Not that OPEC doesn't introduce inefficiencies into the market, but the market reacts to OPEC in a very rational way and individual OPEC members cheat like the dickens, anyway, so that inefficiency is moderated somewhat. Similarly, there are plenty of other political factors that affect prices, but the market itself simply reacts to those factors and includes them in its price-setting calculus, and just like the effect of OPEC, the crude oil market is simply too big for any single law or country or government to have anything more than a small effect on prices. Information in the crude oil market is almost perfect and the market itself is so big that it simply MUST be efficient.

(EDIT: I should also hasten to add that individual consumers "boycotting" a particular oil company or gas station will have no effect on the price, either. The only thing that will affect the price of oil - or gasoline - from the demand side is a significant and substantial long term change in consuming habits and lifestyles. Not just you cutting back on your driving, but entire cities and countries... which, as other people have already explained, simply is not going to happen anywhere in the world anytime soon. Period.)

The point is, the world market for crude oil - and correspondingly, gasoline in the United States - is one of the most liquid and efficient markets EVER devised in the history of mankind, and anyone who thinks otherwise is just plain ignorant about economics and should have paid more attention in high school when they were taught supply and demand, which starts to get down to the point of Puma's OP: Crude oil and gasoline futures markets are constantly reacting to perceived changes in supply and demand by taking existing facts and taking an educated guess as to possible future outcomes in the actual cash market for those commodities.

Anyway, the answer to your question lies in understanding the difference between forward markets and spot markets. Say I have a barrel of oil just sitting in my garage today. If I know for sure that a hurricane is going to hit Lousiana in November and I'll be able to sell my barrel of oil in November for $20 more than I could sell it right now, then if I didn't HAVE to sell it today I wouldn't, I would wait until November. Why would I take $20 less today if I didn't have to? Maybe if I need the cash today, or maybe if I have to pay rent for my garage to hold it, but otherwise I would just wait.

Now say that I could agree to deliver my oil in November and still get paid for it today while the actual oil just sat in my garage for four months. If someone else wanted to have my barrel of oil RIGHT NOW, then they would have to pay me the same (or very nearly the same) price for it, otherwise I will sell it to the guy who wants it in November instead.

The problem is, we can't predict the future, so we don't know whether a hurricane really is going to hit Lousiana, we can only guess. If more people than not think that the hurricane is going to hit, then they will indeed be willing to pay more now for the oil to be received in November, and if they do offer to pay me that price, then the same logic applies - I'm not going to be willing to sell it right now for a lower price, even if nothing yet has actually happened.

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No, I have not seen this movie, but it appears to be another retelling of the "Peak Oil" story, which basically says that we're running out of oil. Matthew Simmons (who apparently appears in this movie) has been saying this for some time and common sense and empirical data seem to be bearing him out - we are using oil faster than it's being discovered, so naturally we're going to run out some day. Basic supply and demand says the price of oil will go up if that happens and demand stays constant.

Answer: oil supply is extremely "sticky"...and yes, that is a technical term.

The massive investment and the long time horizon between when an E&P investment is made and when new crude starts hitting the market means that firms need to be very confident about the price that they'll be able to get for what they produce. Although demand has so rapidly increased in recent years, it has been coincided by what is perceived as a short-term terrorism or political risk premium, so many firms have been hestiant to pull the trigger on E&P projects because the permanency of pricing has been very uncertain. This uncertainty is reflected by a NYMEX forward price curve that is downward-sloping in the long term (and this curve also foils many attempts of oil producers at locking in today's high prices to hedge really big projects in such a way that profitability can be made more certain).

As E&P firms have become increasingly convinced of the fundamental support for crude prices where they are, the uncertainties have been in large part overcome, so investments have picked up. ...but we still won't see big results in any measurable way for at least a couple years in my estimation. The results are a supply that is more able to fulfill demand, moderated prices, and an increase in proven reserves. The Earth's reserves of crude are indeed diminishing, but the amount of crude that we are both aware of and that is accessible to us has historically increased at a pace faster than we can take it from the ground. There is no reason yet to believe that any reversal of that long-term trend is anything more than a short-term anomaly related to political and economic factors unrelated with geology.

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  • 3 weeks later...

This is another fairy tale that some dealers in California are trying to spin. The very idea of including Chevron in the lawsuit means that whoever filed it doesn't even have a firm grasp on the companies history. Shell and Texaco agreed to place all of their retail assets into two companies known as Motiva and Equilon in 1998. The two independent companies ran all of the two companies combined retail assets. When Chevron sought to purchase Texaco they were told by the FTC that they could but they could not have any of Texacos portion of the combined retail assets which included all the stations, and refineries that were in Motiva or Equilon. This means that Chevron at no time had any control what so ever over price setting at Texaco or Shell stations. Secondly, no where in the article (or probably in the actual filing) does it ever compare the price increases to the dealers with the price increases other oil companies were passing on to their dealers. I can tell you from knowing details of how rack prices are set and having been involved in studies looking at pricing during that period that there are no significant statistical variations in pricing across the entire market. This fact alone makes the case extremly weak from the outset. Also the last group of dealers to complain about the pricing set up should be the California dealers. Since their state legislators have created stringent regulations concerning fuel blends sold in the state they have increased the cost out there significantly. Only a handful of refineries even produce fuel that can be legally sold in that state therefore making it one of the highest priced markets in the nation. More laws and regulations exsist in this country pertaining specifically to price fixing, and colusion in the fuel business than perhaps any other. Dispite the allegations of a group of dealers in California to the contrary there was no price fixing in California.

A simple look at the NYMEX posted price for Unleaded fuel for the period vs the rack price changes to the dealers for the period shows a highly correlated pattern going both up and down. It takes about ten minutes to blow these guys theroy clean out of the water. The law suit is complete waste of time.

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"We're running out. And we don't have a plan."

My plan: invest in the education of our young people so as to ensure that they understand simple notions of supply and demand.

Good plan. Then maybe I will stop hearing all these young kids saying "I miss Bill Clinton, he had gas only 1 doller something". - Nothing bugs me more. We don't live in the U.S.S.R., the goverment does not control the prices (besides taxes). Inflation anyone?

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"We're running out. And we don't have a plan."

My plan: invest in the education of our young people so as to ensure that they understand simple notions of supply and demand.

High school economics classes are supposed to do this.

In fact, that is one of the first lessons of economics. If the demand is high and the supply is low, the prices are high. If the demand is low and the supply is high, prices are low.

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I saw an Exxon around Wilcrest and 59 for $2.47!

Let's hope for sub $2 gas this winter! :D

I am like you, wishful thinking. I just happened to talk to my local station owner last night while filling up. I don't know how he "knew" this but he claims that prices will be going back up by next week. I don't know if he was speculating, or was told something by his supplier.

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I am like you, wishful thinking. I just happened to talk to my local station owner last night while filling up. I don't know how he "knew" this but he claims that prices will be going back up by next week. I don't know if he was speculating, or was told something by his supplier.

Strictly speculation. Rack prices change daily. They are very unpredictable, you have a better shot of predicting the national interest rate.

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I am like you, wishful thinking. I just happened to talk to my local station owner last night while filling up. I don't know how he "knew" this but he claims that prices will be going back up by next week. I don't know if he was speculating, or was told something by his supplier.

Gas is typically artificially decreased during election time.

So come October, we should have even cheaper gas to make the voters happy about the energy policy.

I remember that happening last year too.

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Gas is typically artificially decreased during election time.

So come October, we should have even cheaper gas to make the voters happy about the energy policy.

I remember that happening last year too.

Gas prices tend to come down as we head into the winter months, reflecting somewhat lower demand, so yes there is a correlation between lower gas prices and November elections. But correlation is not causality. Please provide evidence to the effect that gas prices are being artificially manipulated.

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Gas prices tend to come down as we head into the winter months, reflecting somewhat lower demand, so yes there is a correlation between lower gas prices and November elections. But correlation is not causality. Please provide evidence to the effect that gas prices are being artificially manipulated.

No evidence does not mean its not happening though, if I want to join in a conspiracy to lower gas prices to help my party get elected, I am going to do it discreetly, and definitely use the winter demand as a shield.

Of course, this is not evidence, otherwise all hell will break loose already.

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Gas is typically artificially decreased during election time.

So come October, we should have even cheaper gas to make the voters happy about the energy policy.

I remember that happening last year too.

Yes, gas prices were decreasing before the elections last year. They were also decreasing after the election and hit their low point in February this year. So much for that theory.

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Yes, gas prices were decreasing before the elections last year. They were also decreasing after the election and hit their low point in February this year. So much for that theory.

No my theory still holds.

Here are the gas prices in Houston from last year until now.

It went up right after the election, but it did go down again in February because of the mild winter the majority of the nation experienced.

4pc8qpw.jpg

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No my theory still holds.

Here are the gas prices in Houston from last year until now.

It went up right after the election, but it did go down again in February because of the mild winter the majority of the nation experienced.

4pc8qpw.jpg

Your theory is as ridiculous as they come. The small bump in December was caused by the holidays. If elections were held in June, then an environmentalist may as well argue that global warming is real and happening at rapid rate because, after all, look at how much warmer it has gotten over the past six months.

Btw, gasoline demand doesn't tend to be much a function of unexpected changes in climate. You're thinking of heating oil and electricity.

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It went up right after the election, but it did go down again in February because of the mild winter the majority of the nation experienced.

You're trying to have your cake and eat it too.

You accept a market-based explanation for a price decrease but reject a market-based explanation for a price increase?

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Btw, gasoline demand doesn't tend to be much a function of unexpected changes in climate. You're thinking of heating oil and electricity.

I thought the same factories that refine gasoline, refine heating oil.

If heating oil is not in demand, they can resume refining gasoline.

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I thought the same factories that refine gasoline, refine heating oil.

If heating oil is not in demand, they can resume refining gasoline.

They have to shut down units and retool to refine different products. It isn't as easy as flicking a switch and is very expensive.

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Due to the precariously close supply/demand balance we have in the US suppliers can see two and three weeks out what way the prices will go. And no its not because of a conspiracy. Its because a particular refinery may be going through turn around, a pipeline may be going down for maintainence or the governement may be enacting a new regulation that costs the refiners more money. When Congress mandated the 10% ethenol blend that increased prices quite a bit. Ethenol cannot be added to the gas prior to shipping through pipelines. Because of its corrosive nature it has to be added to the fuel just before it is delivered to the station and cannot be shipped via pipelines. Ethenol has to be shipped by railcar thus increasing its price significantly and thus increasing the cost for the 10% of the fuel you put in your car.

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Due to the precariously close supply/demand balance we have in the US suppliers can see two and three weeks out what way the prices will go. And no its not because of a conspiracy. Its because a particular refinery may be going through turn around, a pipeline may be going down for maintainence or the governement may be enacting a new regulation that costs the refiners more money. When Congress mandated the 10% ethenol blend that increased prices quite a bit. Ethenol cannot be added to the gas prior to shipping through pipelines. Because of its corrosive nature it has to be added to the fuel just before it is delivered to the station and cannot be shipped via pipelines. Ethenol has to be shipped by railcar thus increasing its price significantly and thus increasing the cost for the 10% of the fuel you put in your car.

That explains ALOT to me. Thanks brerrabbit. Then they of course pass on the added costs to the consumer.

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