Pelosi on reducing gas prices

[Toad]

Hey, Charon, what do you think of T. Boone's wind plan?

Think it will actually start anything rolling? Are his pockets deep enough?

[Yeager]

It is amazing to me the "morphing" ability of the republican media machine

if you were anywhere near as wise as you most likely think you are then you would not have engineered such a moronic tabloid'esque statement as the one quoted above.

The entire media machine exists to "influence" your opinion to their respective benifit, not just some right wing conspiritorial media machine that you fabricate to justify your own sense of vicitmization.  Also, feel free to replace "influence" with "tool" because they are one and the same.

I guess, or something like that.

[midnight Target]

if you were anywhere near as wise as you most likely think you are then you would not have engineered such a moronic tabloid'esque statement as the one quoted above.

The entire media machine exists to "influence" your opinion to their respective benifit, not just some right wing conspiritorial media machine that you fabricate to justify your own sense of vicitmization.  Also, feel free to replace "influence" with "tool" because they are one and the same.

I guess, or something like that.

Actually I'm way wiser.

[Holden McGroin]

And now they are morphing the fuel cost crunch into a liberal problem due to lack of production when it is well known that the real issue is speculation and the unwillingness of the former republican congress to pass laws restricting the speculation on oil (see the ENRON loophole).

Mighty morphing republirangers

Can you site authoriies that show with any certainty at all that X amount of the cost of a barrell of crude is due to speculators, or can you just site those who speculate about the speculators?

[Captain Virgil Hilts]

For those playing BBB, the number is 16.

Would that be "A" 16, or "B" 16? If it's not one of those, it doesn't help me.

[midnight Target]

Can you site authoriies that show with any certainty at all that X amount of the cost of a barrell of crude is due to speculators, or can you just site those who speculate about the speculators?

'Speculation' causing oil price hike

http://www.abc.net.au/news/stories/2008/03/17/2191035.htm

A report the U.S. Congress released Monday showed that, in January 2000, 37 percent of the NYMEX crude futures contracts were held by speculative traders; but in April 2008, the number has soared to 71 percent. Meanwhile, the proportion of contracts held by commercial traders greatly declined.

[Nashwan]

The two major western energy monitoring organisations, the EIA and the IEA both say the current oil price is caused by fundamental supply and demand issues. For example, the IEA:

In reality, these abnormally high prices are largely explained by fundamentals. Supply growth so far this year has been poor and higher prices are needed to choke off demand to balance the market (and if so, then absolutely the worst response is to subsidise prices more, or in the case of the OECD, to cut taxes).

As the IEA point out, prices higher than those needed to balance supply and demand lead to consumption falling below supply, and an increase in stockpiles. Stockpiles are not increasing, so prices are in balance.

Look at it another way. If the price of oil fell to $70 a barrel, consumption would increase. Unless supply also increased, we'd be using more oil than we were producing.

[lazs2]

much as I would love to blame the lions share of the cost we are seeing on speculators....  it does not make sense.. what are they doing with it?  where are they storing it?  in their apartments?    The only viable storage is in the ground at the source.

Nope the only solution to the price is to find more oil while using less.    Any small amount of increase due to speculation will be gone when we open up more production.

No matter what.. finding more oil and using less by building nuclear plants will drive the cost down.. neither of which the democrats are in favor of.   No "morphing" at all.. simply look at their voting record on nuclear power and oil exploration.

lazs

[Charon]

Hey, Charon, what do you think of T. Boone's wind plan?

Think it will actually start anything rolling? Are his pockets deep enough?

I haven't really followed it all that much. When you hear wind, or solar or nuclear you are talking electrical generation. Now, unless you combine that with McCain's electric cars I don't see it (or the other solutions) much impacting gasoline or diesel prices. We don't generate much (I'm not sure if we generate any) electricity in the US using oil. It certainly could impact the natural gas price spike though.

Where motor fuels are concerned you have biofuels, coal-to-liquid, tar sands, oil/shale and deepwater. I believe ANWR is the last conventional/cheap oil opportunity of any note in the US -- and it's not all that much. For these alternatives (and the supply is plentiful) you are talking $40+ bbl oil at least to start making them viable. And by that, a fairly guaranteed $40-$60 and consistant floor on oil prices and not just a spike here or there, even if that spike lasts 5 years  or so at a pop and comes around once a decade or so.

That's the deal about "peak oil" where the new crop of institutional speculation is concerned. The new financial players outside the industry seem to think these high prices are the norm, and are only going to increase in the future. Those in the industry itself remember oil at $10 to $15 per bbl less than a decade ago, have gone through these swings a number of times and don't seem to be all that sure the high prices are here to stay. If they were, the oil companies would be investing in alternative motor fuel technologies with no reservations and real dollars.

Charon

[Baitman]

Talking with a few American bretheren I find that they are paying WAY less down south than in Canada where the majority of the US oil comes from. I just filled up in Vancouver at $1.55 per liter for diesel. 1.55 x 3.785=$5.87cdn per us gal... Convert to US dollars (.9891x5.87) =  $5.80 US per Gallon :OOUCH it hurts to fill up.

[Mickey1992]

Yeah, but on average one third of the price of gas in Canada is tax.

[Baitman]

We have as low as 20% tax on gas to as high as 40% in some cities. BC just added our Carbon Tax another .03 per liter.

[Charon]

much as I would love to blame the lions share of the cost we are seeing on speculators....  it does not make sense.. what are they doing with it?  where are they storing it?  in their apartments?    The only viable storage is in the ground at the source.

It's futures trading on the commodities market. People outside the suppliers and end users are making big money paper bets on the future price of oil going ever higher. Like the housing market, you could always find someone to bet your $500,000 purchased/rehabbed $1 million Calif. house would sell for $1.5 million a few years down the road -- until the day you suddenly couldn't.

Here is an explanation I read online at the Washington Post, that explains it fairly well. I use this response post because I have had a bit of a brain lock on how futures work (outside of traditional hedging used by suppliers and end users) and this made sense to me:

Answer: it isn’t going anywhere, it never existed. There is a difference between “deliverable” vs. “non-deliverable” (i.e. fictitious) trading, and it is the fictitious trading that is driving commodity prices.

There need not be a physical surplus of oil for the market price to be above some hypothetical market-clearing equilibrium. This is a fallacy that comes from taking the Marshallian totems and Walrasian metaphors too literally. This is not how commodity prices are actually determined.

I don’t know the oil market, but I know something about another market that also is in a bubble right now (wheat) and I suspect the principles are the same. In the U.S. Hard Red Winter Wheat (the primary wheat for bread production) is centrally traded at the Kansas City Board of Trade. 96% of the trades (which take the form of futures and options contracts) are “non-deliverable”, meaning that neither party intends to trade any actual wheat. What they are instead doing is trading claims to buy or sell wheat in the future, not wheat itself. The price that these claims trade at is driven by the (different) expectations of each party. They are simply speculating on prices of wheat in the future.

So the actual physical trade in wheat for use (”deliverable” trades) is an insignificant part (4%) of this market. My guess would be that the same is true for oil.

But while the actual trade in physical quantities of wheat is most definitely not what drives the trading activity in this commodity market, the price that physical shipments of wheat are bought and sold at is determined in the market for these fictitous wheat trades (the non-deliverables). So the price is determined by trades between people who never intend to touch wheat at all, and there need not be a physical surplus that is being stored somewhere.

As Kindleberger showed long ago, normally sedate markets can become unhinged, and the case of oil or wheat is no different. But what is being traded now is primarily contracts to buy and sell these commodities, the actual commodities are incidental.

Failure to grasp this issue demonstrates a naive faith in what economists teach (and win Bank of Sweden prizes for) and a real ignorance of the way markets actually work.

— Posted by E. Olsen

Charon

[DREDIOCK]

thing is it isnt ONLY speculators, Or demand, Or the Weak Dollar
Its all three combined

Is a triple headed monster

[bj229r]

It is amazing to me the "morphing" ability of the republican media machine. Somehow they morphed John Kerry's war service into some kind of pathetic cowardess. They morphed Saddam Hussein into Osama Bin Laden. And now they are morphing the fuel cost crunch into a liberal problem due to lack of production when it is well known that the real issue is speculation and the unwillingness of the former republican congress to pass laws restricting the speculation on oil (see the ENRON loophole).

Mighty morphing republirangers

If there wasn't a supply/demand issue, there would be no point in speculating, as no money could be made.

On another aspect, I read that before the war, Iraq was putting out 6 million barrels a day, and only NOW is it even up to 2.5 million? Their infrastructure has ALWAYS been poor, and it seems like getting Exxon, BP, etc. in there would be about the fastest way to get a few million more barrels a day onto the market--which should end the crunch. (I keep hearing a million or two is all that is needed....) If rampant speculation continues after that, I'll buy MT's argument