... and judging by posts hereabouts on crude prices the past few months, that a goodly percentage of wRec participants are more capable than congress of making valid judgments regarding the why's and wherefores of national energy policy:
Garfield has the answer....
"Frank Boettcher" wrote
However, it is inarguably "speculation" when the mere rumor of a storm hitting the Gulf a week in advance is enough to drive up prices within 24 hours; likewise it is such speculation that keeps prices, already falling on your valid "supply and demand" issues, from falling further.
IOW, the effect of "supply and demand" on prices has demonstrably been trumped by "speculation" in this regard.
Most will agree that "supply and demand" generally takes some bit of time to effect prices, but the effects of "speculation" on prices, driven by innuendo, rumor, greed, and fear, take effect before you wake up the next day.
To declare that "supply and demand" is not part of the big picture is as equally foolish as blaming it all on speculation, but it's been clear for sometime that the driving force in the past year has been fear/greed based speculation, and with much of the speculative index trading done on margin.
It's amazing how little "speculation" there is when you have to put up your own cold hard cash to practice it.
That is one of the controls I would like to see the CFTC take an interest in installing.
All the above notwithstanding, my original point was the planned paralysis of the corrupt bastards supposedly leading this nation.
No doubt requiring "some skin in the game" would go a long way toward curtailing speculation. Would also have helped in the mortgage/housing/banking crisis. You have to get to the very end of the financing "pass it on chain" before anyone has any skin in the game and, as we have seen, by the time you get there the taxpayers are left holding the bag.
I have said this time and again. When the oil companies started to merge they cut out 1/2 the competition. If pricing was truly the result of supply and demand we all would have been sitting in lines to gas up like we did back in the 70's.
Speculation and "What the market will Bare" is what's going on here. US oil consumption was down 6 months before prices shop up to $4.00 per gallon. The demand began it's decline in the fall of last year.
Hey, if you are willing to pay $4.00 per gallon there is certainly plenty to go around, same goes at $3.25 per gallon.
I looked at the charts earlier this year. World consumption is down compared to 3 or 4 years ago. 3rd world countires are using more but over all the world demand is lower.
Demand has been down for over a year, supply this summer has been interrrupted by hurricanes. Many refineries still do not expect to be back up and running to capacity for several more weeks because of Gustov and price of oil and gas continues to drop.
While the dollar is strengtening, oil prices began dropping befor the dollar went up. Oil prices going down will strengthen the dollar.
Agreed.
Leon wrote: ...
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Which is a positive feedback mechanism...
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An interesting observation - and, by implication, a serious warning.
True, if were only feedback/controlling mechanism.
It works both ways, too, of course. It's actually _a_good_thing_ in this period of high prices on the way back down to help accelerate that which has to be good overall for the entire world economy, not just the US. OTOH, the declining dollar did exacerbate the the rise in oil prices and that wasn't a good thing...
I've not researched it, but I suspect there have detailed analyses that attempt to break out portions of rises that can be attributed to various factors--I'd guess this one isn't in the noise but isn't the dominant, either, but somewhere in the middle of the pack.
Well, we may not agree on a lot of things, but we have proven we're literate :-).
I saw an ad on TV this morning for an auger to drill holes in your garden. Order it and you got a free "high-power" cordless drill. Had a "value of $1??.00 for only $19.95 plus (unspecified) S&H".
Consider that the marketeers felt there were enough customers out there to more than pay for the cost of the ad.
Should people stupid enough to fall for that ad be allowed to vote? Should we force the "it slices, it dices" crowd to provide their customer lists and use them to purge the voting rolls? Hmmmm - I may be on to something here :-).
For most of those items, the S+H charge covers both the S&H costs plus the wholesale cost of the item. What you pay then is pure profit, and even if you send it back, all they're out is the profit, they still have the S+H and the original item which can be resold.
scott
As of December the IEA was forecasting a worldwide increase in the demand for crude. In May they revised that figure down, but still an increase, based on slowing economies. I think, most recently because of the worldwide economic slowdown, the demand is actually predicted to fall.
Yes, if you go back in history, anytime there has been an economic slowdown demand drops. A slice in time. That's what is happening now.
You better check your facts, worldwide demand has not been down for over a year.
Refineries have to do with the price of refined products not with the price of crude, although if refineries are down for a lengthy period, and unrefined crude stacks up that could temporaily lower the price of crude by raising unrefined inventories.
I believe you are mistaken.
I would suggest that you've got that backwards.
Since I was one of those working in the industry and became part of the "competition" that was eliminated, I would agree wholeheartedly
I still think you are confusing crude supply/demand curves with refined product costs. U. S. Oil consumption is only one part of the demand curve. When you buy that Chinese whatever in Walmart, you are living in the USA and driving up crude demand in China.
When the consumer quit driving, U. S. Demand went down. When the consumer quit spending, worldwide demand went down.
The key work you used here Frank is "forcast". A forcast is not a sure thing. The figures I was looking at were not forcasts rather actual figures for the last several years. IIRC the percentage of increase of 3rd world countries has been up significantly ofer the last 10 years where as the usage by large industrial nations has been dropping for 4 or 5 years. I will say that I don't recall the source of those figures, probably "MSNBC" however the article that included that actual world usage chart was actually trying to explain that the rising oil and gas costs were a direct result of supply and demand. I suspect a 2nd year college drop out was piecing together information he found on the internet. While supply and demand is certainly a part of the pricing/any product pricing actually, I would say it has about 10% effect on the current situation.
Here in the US drop in demand has been going on for the last 4 or 5 years/
Well I probably blur the lines occasionally however my son has been studying world economies in college and has learned that China has been hoarding oil for the Olympics. Thier demand should deminish. Either way I see and have seen no shortages of any thing oil related.
Leon wrote: ...
Not according to EIA data...
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Leon wrote: ...
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Their demand isn't going to diminish unless the world economy goes into a far deeper recession than it has so far. Their "hoarding" for the Olympics has been accomplished in large part by rationing the consumer market. Once that has returned to pre-Olympic status the demand for more vehicles and their continuing expansion of electricity production will more than make up for small drops in consumer goods production for the short term and longer term their demand will only continue to skyrocket (as will India and the rest of SE Asia).
While there haven't (at least yet) been severe restrictions in supply, that supply is extremely tight is clear if one looks at overall world production/consumption data.
Last I looked, US production was still flat at best if not slightly decreasing. The higher prices have brought some old production back online that was marginally or unprofitable before, but new production hasn't yet increased significantly enough to really make a big impact on turning around the longtime trend of lowered production from mature fields.
If prices will stabilize at a level that isn't recession-inducing yet still above the "do-nothing" inducing values of the previous 20 years, we should gradually see the positive impact of increased production. The difficulty is, of course, that there's always the risk of the "boom/bust" cycle if, for example, OPEC were to flood the market as some have asked them to do.
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Forecast demand is what current price is built around.
for actual world demand through 2007
World Total 63,113.57 60,943.79 59,543.24
58,778.20 59,815.17 60,085.13 61,808.95 63,095.12 64,965.31 66,077.79 66,689.10 67,295.81 67,489.45 67,609.63 68,930.00 70,133.12 71,670.75 73,426.90 74,052.94 75,727.16 76,711.90 77,443.55 78,089.42 79,660.39 82,407.67 83,818.93 84,948.77Read across then down, figures in thousands of barrels per day
Well not quite.
The U. S. figures are
United States 17,056.00 16,058.00 15,296.00
15,231.00 15,725.61 15,726.42 16,280.63 16,665.05 17,283.31 17,325.15 16,988.50 16,713.84 17,032.86 17,236.73 17,718.16 17,724.59 18,308.90 18,620.30 18,917.15 19,519.34 19,701.08 19,648.71 19,761.30 20,033.50 20,731.15 20,802.16 20,687.42 20,680.38Large spike up in '04, increase in '05 two years of very slight declines 2006 and 2007, and more than likely 2008 will come in as a decline because of the reaction to high gas prices and the slowing economy, so by year end three years, but made up for up till possibly this year by the world demand.
Keep in mind this in the shadow of "forecasted"declining production which affects the supply side of the equation and also puts pressure on pricing.
We already knew that :-)
Does anyone have any info on new refining capacity under construction or in the process of being brought on line in the near future?
There's a new refining facility planned in SE NE (because our intrepid Governor is so anti-business the developers moved it out of NE KS :( ).
It'll be sizable and include a new large capacity pipeline to collect crude from central US and distribute at least some product.
Exact timeline I'm not sure of...I'll see what I can dig up; I sorta' lost interest when they moved out of state.
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