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Why Oil Prices Will Tank

sifuwong

By sifuwong
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Subdude

Subdude

Posted
Posted
So, oil has dropped to levels not seen since...

...June 20. Wow. Color me impressed. That is such a long time ago. Someone help me out here. Was June the heyday of cheap oil?

Just for historical reference, 6 months ago, on January 20, oil was at $84. So, the precipitous fall of oil prices has left it 50% higher than 6 months ago. Time to go buy that SUV you've been longing for.

Now that we've added a little perspective, it is not unusual for markets to rise and fall. The unusual part was oil's unrelenting rise for 7 months straight, even during times when historically it would fall. With oil and gas prices FINALLY causing an adjustment in consumption, it is only natural that prices would moderate. If you look at the weekly average of oil, which levels out spikes and valleys, it is $131, down from its high of $135. Assuming no hurricanes hit the Gulf, come September we should see it fall some more. But, like clockwork, it will rise again next spring. The only thing we know for sure is that it will stay high relative to historical prices.

I guess I'm just a cock-eyed optimist. :D

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CDeb

CDeb

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My wife and I found some old papers from around the time we got married (1999). One of the things we found was our first budget that we had hammered out. Now, you'll remember that oil was about $11 and gasoline was around $0.80 a gallon. We lived in Lafayette and therefore only filled up about every 2-3 weeks. Our monthly gasoline budget? Twenty five dollars!

Ah, the good ole' days!

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Mr. Chenevert

Mr. Chenevert

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While I certainly agree, that 8 days, and $24 doesnt mean oil is about to collapse, I did come across an interesting quote.

On the product side, demand is bad," said Phil Flynn, a senior market analyst at Alaron Trading. "In terms of gasoline supplies, we have to find someone around here who wants to drive a car, because we don't have a place to put it all."

http://money.cnn.com/2008/07/23/news/econo...sion=2008072315

Gasoline inventories increased 2.9 Million barrels when it was expected to increase only 500,000.

Lack of storage could be an ironic bullet.

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ricco67

ricco67

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While I certainly agree, that 8 days, and $24 doesnt mean oil is about to collapse, I did come across an interesting quote.

http://money.cnn.com/2008/07/23/news/econo...sion=2008072315

Gasoline inventories increased 2.9 Million barrels when it was expected to increase only 500,000.

Lack of storage could be an ironic bullet.

It seems that as drivers conserve, this is something quite a few people (including me) didn't expect. As people start going to smaller cars, this might be something that might happen more.

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memebag

memebag

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It seems that as drivers conserve, this is something quite a few people (including me) didn't expect. As people start going to smaller cars, this might be something that might happen more.

They should make those big storage tanks out of rubber so they can just pump them up when demand drops.

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houstonmacbro

houstonmacbro

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Posted

Well, economists are saying oil is only worth $70 - $80 a barrel. We'll see if it falls that much.

On a related note, now all the naysayers from last week on the economy are rushing to tell us how much things are recovering (even a rally in the stock market). Just last week we were tucking in for a long bear market.

Gimme a break!

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TJones

TJones

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Oil down to $124 today, but still no change at the pump??!!! Should be at about $.60 cheaper at least, but thanks to the speculators, the schmoes that bought at $141 still have a ton of oil stock to go through before you and I will see the price come down.

Macbro, you and Red still believe we are close to runnin out of oil ? We might see oil return to $100 to $110 a barrel, I don't see it going to $80 EVER again. I hope I am wrong.

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RedScare

RedScare

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Posted
Oil down to $124 today, but still no change at the pump??!!! Should be at about $.60 cheaper at least, but thanks to the speculators, the schmoes that bought at $141 still have a ton of oil stock to go through before you and I will see the price come down.

Macbro, you and Red still believe we are close to runnin out of oil ? We might see oil return to $100 to $110 a barrel, I don't see it going to $80 EVER again. I hope I am wrong.

Man, you sound like McCain, the way you make stuff up. I have never said oil is running out. If you are asking if I believe that demand will catch back up to supply, yep, I sure do. Always does.

Now, considering that $124 you are talking about is the price of oil for AUGUST delivery, it is pretty easy to see why JULY gasoline has not dropped very much. That's why they call it the FUTURES market, because they are bidding on oil delivered in the FUTURE. Care to explain what speculators have to do with that, or is "speculators" just the new buzzword?

EDIT: Oops. My bad. $124 is the settlement price for SEPTEMBER delivery. I look for September gas prices to be perhaps 50-60 cents cheaper than today...unless we get a Gulf Hurricane that month.

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TexasVines

TexasVines

Posted
Posted

there is still a shortage of refineries which creates a refined products supply problem....but gas should go down some in the future

what should go down more is products that require a lot of transport and oil energy and are made in countries outside the USA....because outside the USA they still build refineries and do not have as much of a refinery capacity shortage

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houstonmacbro

houstonmacbro

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Macbro, you and Red still believe we are close to runnin out of oil ? We might see oil return to $100 to $110 a barrel, I don't see it going to $80 EVER again. I hope I am wrong.

I dunno what to believe. What I believe now is that Big Oil and OPEC and our own government (not to mention all the traders) keep us intentionally dumb to all of it.

Competing, often conflicting stories. Who knows what to believe any more.

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RedScare

RedScare

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Are the people who blamed speculators for the price increase now praising speculators for the price drop?

Not that I've heard.

Hey, if Bush signing that executive order made the price of oil drop like the Republicans claim, does that mean we don't have to open ANWR to drilling? Clearly, the speculators are dumb enough that signing a meaningless order scared them into bidding oil down. So now that we know they can be psyched out so easily we only need to suggest it to keep prices down, right?

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TJones

TJones

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Are the people who blamed speculators for the price increase now praising speculators for the price drop?

No meme, we aren't, because we knew they were lying about the amounts of oil out there and blatantly price fixing when they knew the truth also. The truth comes out finally, and now all those people who were on the speculators wagon about how little oil there is, are now going, "Gee, I really thought we were all out of oil." The price of oil can do nothing BUT come down when you have the truth that 3 times the amount of oil that Saudi has is right here in our own backyard.

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memebag

memebag

Posted
Posted
No meme, we aren't, because we knew they were lying about the amounts of oil out there and blatantly price fixing when they knew the truth also. The truth comes out finally, and now all those people who were on the speculators wagon about how little oil there is, are now going, "Gee, I really thought we were all out of oil." The price of oil can do nothing BUT come down when you have the truth that 3 times the amount of oil that Saudi has is right here in our own backyard.

But the same economic tools that let the price rise are now letting the price fall. And the people who were going to profit from betting it would go up will lose money when it falls. You don't see them as loyal soldiers falling on their swords so that the rest of us can get cheaper gas and food and such? That seems unfair.

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TJones

TJones

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Posted
But the same economic tools that let the price rise are now letting the price fall. And the people who were going to profit from betting it would go up will lose money when it falls. You don't see them as loyal soldiers falling on their swords so that the rest of us can get cheaper gas and food and such? That seems unfair.

I haven't seen cheaper gas, have you ? Suppliers are still stuck with lots of product at the INFLATED price that was set by speculators because there were no checks and balances on them. Someone finally looked into them and BOOM, busted.

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memebag

memebag

Posted
Posted
Meme, whatever you do, DO NOT READ THIS ARTICLE ! I don't want your rose colored glasses to unfog.

Eh? Rose colored glasses? What are you talking about?

(BTW, If you read the article, it's about events in March 2007.)

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Pumapayam

Pumapayam

Posted
Posted
I heard on the radio that now that oil prices are dropping, preliminary sales numbers are showing that gasoline usage is already going back up. That didn't take long.

So it seems that people are conditioned to the $100 - $120 range.

Sucks. <_<

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Pumapayam

Pumapayam

Posted
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It's exactly what one might have expected. I'm guessing that all those reports of the death of the SUV will look greatly exaggerated.

Death to the SUV for the poorer people still.

Heck, I bet Chryler buyers who opted for the $2.99 gas deal are kicking themselves in the rear.

At least in Houston gas stations are supporting a low of $3.20/gallon now.

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TheNiche

TheNiche

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So it seems that people are conditioned to the $100 - $120 range.

Sucks. <_<

No, it means that gasoline is a commodity with demand elasticity >0. When the price rises, people use less. When the price drops, people use more.

Consumers do not respond to the price of oil. Consumers don't buy oil.

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RedScare

RedScare

Posted
Posted
It's exactly what one might have expected. I'm guessing that all those reports of the death of the SUV will look greatly exaggerated.

Not exaggerated at all. Big SUV and truck sales are down by as much as 50%. Gasoline dropping to $3.75 nationwide will not bring them back. Even prices at $3.40-3.50 won't, considering that US vehicle miles have been dropping since last November, when gasoline was under $3.00. There likely will be some extra driving by those who have cut back drastically, though...kinda the car equivalent to 'stir crazy'. Those who cut out vacations this summer may feel a little breathing room at $3.50 that they did not feel at $4.00. And, just as drivers drive a little more, supplies will drop and prices rise...just as the market intended.

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RedScare

RedScare

Posted
Posted
$106 and falling. I'm guessing it will be below $100 very soon.

Ike may boost the price a little, now that its course is charted for the Gulf. But, the extraordinarily bad economic news, both here and abroad, is making it hard to support high oil prices. I suppose the difference is, in the 80s and 90s, a bad economy brought $10 oil. Today, a bad economy may get it under $100.

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