Aces High Bulletin Board
General Forums => The O' Club => Topic started by: SEraider on August 20, 2009, 01:06:19 PM
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What's scary for me here is gas prices are $2.90/gl for an economy that has "bottomed" out. What happens when the economy recovers? $4-$5?
I would suppose if the economy would recover fuel costs would have to stay where they are or ever lower a bit to make it feasible to increase trafficing unit goods.
Is there anybody in the inside of this industry that could tell us what the reality is concerning future fuel costs? I saw in a article that $$ barrel of oil could crash to $10 and another article that would have it permanently to $70-$80/brl.
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Its impossible to tell really. There are different reports comming on an almost daily basis. Stability is more important than low cost though so im hoping for a stable price between 55 and 60.
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Its impossible to tell really. There are different reports comming on an almost daily basis. Stability is more important than low cost though so im hoping for a stable price between 55 and 60.
Kinda makes me wonder if $140/brl scared us into accepting $55-60 as the norm instead of $25-30. That still 100% in 3 years time.
I could understand $30-$40 (25%-40%) increase due to world usage.
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Personally, before the Bush administration ended, i have said that the prices of oil will drop by the time he is out of office. Looks like i am right about that. However, it could the timing of everything has happen at the right time for the oil price to go down.
Who knows how these prices are set these days. You would think it is supply and demand but that doesn't even look like the case.
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Kinda makes me wonder if $140/brl scared us into accepting $55-60 as the norm instead of $25-30. That still 100% in 3 years time.
I could understand $30-$40 (25%-40%) increase due to world usage.
Too expencive and people panic, and when its too cheap people really wont bother looking into alternatives. Both are equally bad in the short and long run. 55-60 really isnt that much, and over time every barrel made will cost more to pull out of the earth anyway. Stability at a level somwhere in between the two extremes is best for businesses and individuals.
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This week ,i payed here in Windsor,ON aprox 0.90CAD/L x 3.7 L/gal=3.33cad/gal / 1.1 exchange rate===>3.02 USD/gal, more than you pay in California, and the unemployment in town is 15.2% ,the highest in Canada.
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Imagine what fuel prices will hit IF Cap and Trade goes into effect.
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I saw a interview from Donald Trump about the prices of oil and gasoline and how OPEC just is really the worlds largest price fixing scam . I'm lucky I get fuel thru my job and it is in my bennys package but I pay tax on it . But I wonder how long I'll get that if prices go thru the roof .
Nutte :salute
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It's not OPEC controlling the price any more. It's the resellers that hold it off the market. Speculation is king now.
wrongway
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Correct WW. Opec "only" controls something like 40% of the market and they operate at max or close to max capacity most of the time. Its the market and speculators that sets the prices.
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Recently I have spent a little time considering the real price of fuel.
By real price I mean what it costs as related to the amount of work it takes to buy a gallon of fuel.
While not scientific or statistically correct, my method is to compare the price per gallon to the minimum wage. Currently our minimum wage is close to $7.00 an hour and (Here) a gallon of gas costs $2.55. That puts the cost of a gallon at close to 21 minutes of work.
When I started driving the minimum wage was $1.60 and a gallon of gas ran about $.25 a gallon. Giving a "cost" per gallon of just under 10 minutes.
By this measure the price of fuel has roughly doubled in the past 36 years. while this is entirely subjective, it does provide a reference to how much it really costs.
Regards,
Kevin
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That is true for many countries gunnss. Cant remember where i found it, but there is a list on the web with gas prices vs income. It was an interesting read. We have very expensive gas, but compared to income its cheap. The list also had an historical graph and in most places gas prices vs income has gone down alot since ww2 with the exceptions of a few events that were fairly short in duration. Ill see if i can find it.
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At my local gas station, here in the UK, currently gas works out to around the equivalent of $7 a galllon. You guys have it easy.
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At my local gas station, here in the UK, currently gas works out to around the equivalent of $7 a galllon. You guys have it easy.
Which is about what $2.00 for a gallon and $5.00 for corrupt politicians? Isnt it about 71% tax over there?
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(http://www.petrolprices.com/images/april-petrol.jpg)
iirc that gallon costs about 5p to produce, refine and ship, the other 16p goes into the Saudi treasury...
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while 66p goes into the UK treasury......... everyones gettin rich while youre just gettin hosed
which if I read correctly....... the tax is set to go up again in January...... shame
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while 66p goes into the UK treasury......... everyones gettin rich while youre just gettin hosed
which if I read correctly....... the tax is set to go up again in January...... shame
Yep, also there was a duty freeze on fuel in this years budget which means it'll probably go up double next time round.
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I just did some tractor work and still run on frying oil :devil
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which if I read correctly....... the tax is set to go up again in January.
It's actually going up in September and January.
Yep, also there was a duty freeze on fuel in this years budget
Duty went up in April, it's going up in September and again next April. And when the government temporarily cut VAT, they put duty up at the same time to offset the VAT cost. VAT is going back up in December, the increased duty will of course remain.
So between November 2008 and April 2010 we will have had 4 increases in fuel tax.
As to the future price of oil, OPEC now controls the market in a way it hasn't since the early 80s. Other countries are producing at maximum, OPEC has cut production by millions of barrels since last summer. Don't expect low prices again until there is a major drop in oil consumption. That's not likely in the next few years, unless we go in to a major depression.
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Correct WW. Opec "only" controls something like 40% of the market and they operate at max or close to max capacity most of the time. Its the market and speculators that sets the prices.
If I may take this further, the speculators are tied into the richest figures in the world, Soros, Rockefeller and British/Dutch royalty.
Our country was able to grow and become powerful because of the relative low cost of energy. Industry bloosomed that created wealth. It was not until the late 90's that these figures began to consolodate ownership of personal property and smaller businesses through legal loopholes and inflationary measures which serve as a hidden tax.
$100,000 per year in salary is worth less now than it was 5-6 years ago becuase of skyrocketing real-estate, food and energy prices. Essentially, with the collapsing dollar the have nots are finding it increasingly difficult to get ahead by hard work alone. Only if you have a very special talent you could get ahead.
I believe the manipulation of gas prices is to curtail industry in our country and rob us of our wealth. This is not a Left-Right issue, just a "top of the pyramid" issue.
I didn't mean to go off tangent - however this I believe is a symptom of a larger national issue for us all in N. America and even abroad.
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It was not until the late 90's that these figures began to consolodate ownership of personal property and smaller businesses through legal loopholes and inflationary measures which serve as a hidden tax.
That was happening in the 70s sir...if you remember there was a big stink about how Hughes and Rockefeller used the magic of tax shelters and investment loopholes to keep from paying taxes...now corporations do it legally due gradual tax law changes made over a 25 year span...the obvious loopholes were closed while much more lucrative loopholes were opened.
The only way we in the U.S. will every see gas prices the same level they were in 1975 is if the feds reinstitute "regulation", but that won't happen because no one wants to see it...when the oil companies and the government realized they could make billions on oil without actually incurring higher crude costs...the prices started going up. What you see as the cost of a barrel of oil is not the actual cost to the oil companies...it's the speculative value based on world wide production and demand (and some other b.s. thrown in there for good measure to make it look scientific).
Anyone ever notice that when a refinery is damaged due to some "accident" gas prices for all companies goes up even though that refinery belonged to just one? Then the cost of repairing that refinery gets added on to the price of petroleum products even though the oil company made enough profit to build a new refinery...yet not a single oil company has built a new more efficient refinery in 20 or 30 years...why is that?
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I believe the manipulation of gas prices is to curtail industry in our country and rob us of our wealth.
Fuel prices went up because the oil supply didn't. It's as simple as that. The world boomed, oil demand grew, supply remained the same.
The only countries with enough excess capacity to increase production are in OPEC, Saudi Arabia in particular. They chose to keep production down in order to keep prices up.
What you see as the cost of a barrel of oil is not the actual cost to the oil companies...it's the speculative value based on world wide production and demand (and some other b.s. thrown in there for good measure to make it look scientific).
The price of oil, like any other commodity, is the price the customer is willing to pay. The seller wants to sell for as much as possible, the buyer wants to pay as little as possible, the final price is one they both agree on.
Anyone ever notice that when a refinery is damaged due to some "accident" gas prices for all companies goes up even though that refinery belonged to just one?
That's supply and demand. Supply, demand and price are all inextricably linked. If supply goes up the price goes down to increase demand and/or reduce supply. If demand goes up the price rises to increase supply and/or reduce demand.
If enough refineries go down and supply can't meet demand, then you have 2 options. Rationing by price or rationing by queue.
In a free market you get rationing by price. The price goes up which drives down demand until it's in line with the new, reduced, supply situation.
When governments intervene you get rationing by queue. The price remains the same, so does demand, but there isn't enough to go around, so you have to wait your turn.
Rationing by price is a much better system. The higher price encourages increased production. The continued availability enables people to make rational decisions about whether they can cut back or not.
Rationing by queue is a poor alternative. People waste time queueing. Rather than reducing consumption they are encouraged to hoard, making the situation worse. People who desperately need fuel can't get it, those who have little need will still try to buy in case they need it in the future.
Then the cost of repairing that refinery gets added on to the price of petroleum products even though the oil company made enough profit to build a new refinery
No, oil companies sell fuel for as much as they can, regardless of costs.
yet not a single oil company has built a new more efficient refinery in 20 or 30 years...why is that?
Because oil refineries are expensive and it's cheaper to upgrade existing refineries than build new ones. US refinery capacity has increased over the last 15 years.
On top of that US oil production is decreasing. As oil has to be imported, it's just as cheap to import refined product. Refineries can be run cheaper abroad with lower labour costs and environmental standards.
The US has had excess refinery capacity for more than a year now.
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a mosquito just bit a moose in wisconsin.......... fuel prices will have to go up now
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The price of oil, like any other commodity, is the price the customer is willing to pay. The seller wants to sell for as much as possible, the buyer wants to pay as little as possible, the final price is one they both agree on.
I'll just start with this point you made.
The customer is not willing to pay, more like unwilling necessity of staying afloat. What I mean by that is that most of our national infrustructure is built around family vehicles to get to point A - B. There is very little else in mass transit that makes it efficient to get to point A - B. Other than say NY city where mass transit is the easiest to get to A-B. The roads there are too full and the "demand" to get to A-B is mass transit and some walking.
If you have a business, you are in a position to continue your business via unwilling necessity. The other alternative is to shut down? No, you have to stay afloat and your margins get hit in a bad economy, sales drop and your way of life is harder to maintain.
The oligarchy drive prices up by speculation and manipulation of what you call supply, they make the money they make through a transfer of wealth from middle class to upper wealth.
This is not helpfull and this is why US wealth per person had suffered in the last 40 years and will continue to do so unless true regulation against oligarchy takes place.
If you have a chance, I like your rebuttal on this point.
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Fuel prices went up because the oil supply didn't. It's as simple as that. The world boomed, oil demand grew, supply remained the same.
Actually without U.S. involvement in a foreign war the demand for oil in the U.S. went down and the economy boomed...that's public record.
The only countries with enough excess capacity to increase production are in OPEC, Saudi Arabia in particular. They chose to keep production down in order to keep prices up.
There are others outside of OPEC but Saudi Arabia tends to dictate production rates based on it's decisions.
The price of oil, like any other commodity, is the price the customer is willing to pay. The seller wants to sell for as much as possible, the buyer wants to pay as little as possible, the final price is one they both agree on.
Uh wrong...the seller sets the price based on supply and consumer demand...the consumer usually has the option to bargain based on quantity except in the case of commodities where the price is based on speculative future value...in the case of gasoline, most of the price at the pump is taxes (state and federal).
That's supply and demand. Supply, demand and price are all inextricably linked. If supply goes up the price goes down to increase demand and/or reduce supply. If demand goes up the price rises to increase supply and/or reduce demand.
You didn't question the laws of economics did you? Take for example luxury items...low demand...little true value...high supply...yet cost remains high. The system is flawed and doesn't work...if it did GM and Chrysler wouldn't have had to file bankruptcy and Hummer would still be a U.S. owned product...domestic beer wouldn't cost 3 times more than it should and foreign corporations wouldn't own Anheuser Busch or Miller.
If the U.S. refineries are more efficient and have increased their capacity then gas prices wouldn't fluctuate when one goes down since the rest should be able to handle the output..demand doesn't go up when there is a refinery accident.
In a free market you get rationing by price. The price goes up which drives down demand until it's in line with the new, reduced, supply situation.
The only reason demand decreases is by improved gas mileage the actual number of cars on the road has steadily increased...has nothing to do with the price of gas.
You watch...when gas is no longer needed in the U.S. oil prices will skyrocket to compensate for the shortfall in demand.
Rationing by price is a much better system. The higher price encourages increased production. The continued availability enables people to make rational decisions about whether they can cut back or not.
Hmmm...I thought the oil producing countries dictated the amount of production...and that the prices went up when production was decreased to lower demand.
No, oil companies sell fuel for as much as they can, regardless of costs.
Because oil refineries are expensive and it's cheaper to upgrade existing refineries than build new ones. US refinery capacity has increased over the last 15 years.
On top of that US oil production is decreasing. As oil has to be imported, it's just as cheap to import refined product. Refineries can be run cheaper abroad with lower labour costs and environmental standards.
The US has had excess refinery capacity for more than a year now.
So there is no logical reasonable basis for fuel costs to increase when there is an accident at a U.S. refinery since the U.S. has excess refinery capacity and they are importing pre-refined product that isn't affected by the loss of a U.S. refinery.
Brilliant!!!
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Look at those gas prices....
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(http://www.flatrock.org.nz/topics/flying/assets/fast_crash.jpg)
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Fuel prices went up because the oil supply didn't. It's as simple as that. The world boomed, oil demand grew, supply remained the same.
You begin your argument from a flawed assumption.
True demand for oil did not go up. All that happened was speculators with no use for oil jumped into the mix and artificially increased demand.
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Look at those gas prices....
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(http://www.flatrock.org.nz/topics/flying/assets/fast_crash.jpg)
Please repost image.
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The customer is not willing to pay, more like unwilling necessity of staying afloat.
It doesn't matter why the customer is willing to pay, only that he is.
Just to make something clear. Anyone selling will try to sell for as high a price possible. Oil, second hand car, house, whatever. When you come to sell you sell for as much as you can.
The oligarchy drive prices up by speculation and manipulation of what you call supply, they make the money they make through a transfer of wealth from middle class to upper wealth.
Certainly. Only understand who has the power to control oil prices; The Saudis and one or two other OPEC countries are the only ones with excess capacity. Everyone else pumps oil as fast as they can.
This is not helpfull and this is why US wealth per person had suffered in the last 40 years and will continue to do so unless true regulation against oligarchy takes place.
How do you tell a sovereign foreign government how much they must invest in their oil fields, and how much oil they must pump?
You can try, but they are going to act in their own interests, not yours. And high oil prices suit Saudi Arabia.
Actually without U.S. involvement in a foreign war the demand for oil in the U.S. went down and the economy boomed...that's public record.
US oil consumption increases over time:
(http://tonto.eia.doe.gov/dnav/pet/hist_chart/MTTUPUS1a.jpg)
Note that recessions cause drops in oil consumption, but that US oil consumption flatlined from 2004 despite the booming economy.
There are others outside of OPEC but Saudi Arabia tends to dictate production rates based on it's decisions.
There are plenty of oil producers around the world. Most of them produce oil as fast as they sensibly can. Only a few countries, principally Saudi, have been deliberately restricting oil supplies over the last few years.
Uh wrong...the seller sets the price based on supply and consumer demand...the consumer usually has the option to bargain based on quantity except in the case of commodities where the price is based on speculative future value.
You can equally say a buyer pays a price of his own choosing. The truth is that if the seller sets his price too high he doesn't sell, if the buyer makes his offer too low he can't buy.
in the case of gasoline, most of the price at the pump is taxes (state and federal).
In the US? No. The EIA maintain a list of the component cost of gasoline at http://tonto.eia.doe.gov/oog/info/gdu/gaspump.html
Over the last 9 years the highest proportion taken by taxes was in December 2001, when gasoline cost $1.09 a gallon and taxes made up 38.7% of the total.
The low point was June and July 2008, when gasoline cost over $4 a gallon and taxes made up less than 10%.
Currently taxes make up about 16% of the cost of gasoline.
You didn't question the laws of economics did you? Take for example luxury items...low demand...little true value...high supply...yet cost remains high.
What luxury products are you talking about? Understand that "value" is what people value a product at, not a measure of usefulness. I may think that a pair of jeans with some designer's name printed on them are no more valuable than any other pair of jeans, but other people disagree. The value then becomes what those other people are prepared to pay.
The system is flawed and doesn't work...if it did GM and Chrysler wouldn't have had to file bankruptcy and Hummer would still be a U.S. owned product...domestic beer wouldn't cost 3 times more than it should and foreign corporations wouldn't own Anheuser Busch or Miller.
Why?
If the U.S. refineries are more efficient and have increased their capacity then gas prices wouldn't fluctuate when one goes down since the rest should be able to handle the output.
Gasoline prices don't fluctuate when one refinery goes down. They did fluctuate in the aftermath of hurricanes Katrina and Rita, which between them closed 23% of US refinery capacity.
The effects of Katrina lasted a long time. Other refineries put off maintenance to keep up production, causing shortages for the next couple of years when they finally had to undergo maintenance.
The only reason demand decreases is by improved gas mileage the actual number of cars on the road has steadily increased...has nothing to do with the price of gas.
Look at the chart I posted above. US oil consumption growth stalled as prices began to climb. US consumption fell heavily in early 2008, before the recession really struck.
When prices are high people reduce consumption.
Hmmm...I thought the oil producing countries dictated the amount of production...and that the prices went up when production was decreased to lower demand.
No, prices drop when consumption decreases, unless production is also decreased.
Look what happened last year. Oil consumption dropped rapidly from the summer, oil fell to less than $40 a barrel. It only climbed back because OPEC cut production so much.
Markets work in a very simple way. If you can't sell, you cut the price until you can. Or you take the product off the market. Doesn't matter if you are selling your old car, your house or a barrel of oil.
So there is no logical reasonable basis for fuel costs to increase when there is an accident at a U.S. refinery
Not if it only affects one refinery. If it means extra safety standards that affect every refinery then of course a single incident could.
Extremely local price affects might be felt from one refinery, too. If you live 1 mile from the refinery and it goes down, it might take a day or 2 to get supplies from another refinery. If your state has some weird gasoline blend mandated by the state government, it might take even longer to produce it at another refinery. But the effect will be purely local.
You begin your argument from a flawed assumption.
True demand for oil did not go up.
Demand for oil increases with economic growth. All those people in China who used to be peasant farmers, and now have cars, increase oil consumption. All the trucks taking supplies and finished goods to and from Chinese factories require oil. So do the construction machines building their cities, and the quarrying and mining machines producing the raw materials.
Economic growth brings higher oil consumption.
Here's a graph of the rate of growth in the world economy, and in the production of oil:
(http://img73.imageshack.us/img73/2149/oilgdp.jpg)
As you can see, oil production tracks economic growth. But look at what happens since the 2001/02 slowdown. Until 2004 oil production kept pace, but with the economy booming it grew only 1% in 2005, 0.5% in 2006 and actually fell in 2007. And that's with world growth stronger than seen over the past 20 years.
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Look up the amount of oil transactions using the same years as your graph.
The "increase in demand" was mostly artificial.
The past couple of "bubbles" (tech, real estate) created an incredible amount of wealth with no basis in reality, and all of it didn't cease to exist when the bubbles "popped". People needed somewhere to park all that money, and oil was it.
The simple theory of supply and demand doesn't work in this case.
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Look up the amount of oil transactions using the same years as your graph.
The "increase in demand" was mostly artificial.
Demand is the amount of oil burned or put in storage. Adding middlemen does not increase demand.
When the world economy grows so does demand for oil. Richer people take more holidays, buy more goods, drive bigger cars further. All that uses more oil
2005, 2006 and 2007 saw almost unprecedented global economic growth. The world economy was growing by 5% a year. That pushes up demand for oil. Oil production hardly grew at all.
The past couple of "bubbles" (tech, real estate) created an incredible amount of wealth with no basis in reality, and all of it didn't cease to exist when the bubbles "popped". People needed somewhere to park all that money, and oil was it.
There's a problem with the idea that "investment" in oil pushed the price up. You can't invest in something if you burn it.
Nobody was buying tech shares and houses and burning them. Oil was being produced, and consumed, at a rate of about 85 million barrels a day. Stockpiles of oil were not increasing. So how do you invest in something that gets burned and leaves only gasses released in to the atmosphere? What's the value in a barrel of oil that doesn't exist any more?
The price of oil went up because demand increased and supply didn't. It's as simple as that.
The simple theory of supply and demand doesn't work in this case.
It works perfectly. Ask any economist what they would expect to happen to the price of a commodity if demand rose and supply remained the same. Simple theory of supply and demand will tell you the price will rise.
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If oil wasn't bought and sold as futures, you'd be right.
Problem is, it is.
So increasing the number of middlemen buying and selling oil increases the price, even though there is no substantial increase in true demand.
It works like the housing bubble did. You really think there was a large enough increase in housing demand to push prices up by 200% in places? If you do, you are a fool.
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It works very differently from housing.
Oil futures are a way for oil producers and consumers to offset risk. An oil company knows it will have X barrels of oil to sell in December, but doesn't know what the price is. A futures contract enables them to sell it now for December delivery.
The same is true for buyers. An airline might want to lock in a price for their fuel in December.
Speculators will buy and sell futures, taking on the risk themselves.
Imagine a simple trade. The oil company sells 1 million barrels for December delivery. The price now is $75, they sell the December contract at $80.
The speculator pays $80 a barrel for December delivery. What happens in December? The speculator doesn't want the oil, he wants to sell the oil. If the spot price in December is $85 a barrel he has made $5 million. If the price is $75 he has lost $5 million. But come December he is in the same position as every other oil seller. He might want $85 a barrel, he'd really like at least $100 a barrel, but he has to sell for the current market price. He has no more way of fixing the price he can sell at than the oil companies who are also selling oil at the same time.
To believe speculators can raise the price you have to believe they know some secret way to sell oil for more than it's worth, and that the oil companies don't. Or that the oil companies are actually altruistic and sell oil for less than they could, just to help out the customer.
As to houses, they work very differently. You might buy a house for speculation, but you don't then burn it to keep warm. The house remains. It's an asset, not a consumable.
There is a way speculators can turn oil in to an asset, and that's to actually take delivery and store it. The speculator buys oil and removes it from the market. That has an effect on price because he's reducing supply. There is less oil for the consumers and so price goes up.
Of course, when he comes to sell the price goes down, so the net effect to the consumer is zero. And people weren't removing oil from the market in any quantity during the boom of the last few years. There was no meaningful increase in stockpiles.
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Ride a bike...problem solved:)
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The speculator pays $80 a barrel for December delivery. What happens in December? The speculator doesn't want the oil, he wants to sell the oil. If the spot price in December is $85 a barrel he has made $5 million. If the price is $75 he has lost $5 million. But come December he is in the same position as every other oil seller. He might want $85 a barrel, he'd really like at least $100 a barrel, but he has to sell for the current market price. He has no more way of fixing the price he can sell at than the oil companies who are also selling oil at the same time.
To believe speculators can raise the price you have to believe they know some secret way to sell oil for more than it's worth, and that the oil companies don't. Or that the oil companies are actually altruistic and sell oil for less than they could, just to help out the customer.
I do not want to ignore your entire post but I will focus on this part if you don't mind.
In 2007 winter season, Citibank bought a large amount of barrels and held it off the market (according to 60 minutes), this moved the "supply" down and holding these millions of barrels off the market.
So while you state that speculators cannot set prices, they could influence the supply chain to help achieve their eventual goal of satisfactory prices they would "want" to sell it for.
This is why I believe that supply and demand forces takes on a different form with the most wealthiest that have that power to manipulate supply. Thus hurting the world economy and hurting our industrial output.
If I can throw another wrench in this whole thing: If free markets truley do work, why then are auto mfg's unable to release electric or various forms therof of non-petrol vehicles to create the 'competition' in free markets that it was intended to? The answer is money and oligarchy.
Demand is predermined - Supply is manipulated.
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In 2007 winter season, Citibank bought a large amount of barrels and held it off the market (according to 60 minutes), this moved the "supply" down and holding these millions of barrels off the market.
Yes, it happens from time to time. It's worth pointing out the scale, though. The world uses about 85 million barrels a day (or did before summer 2008). The largest oil tankers hold about 4 million barrels.
Overall stockpiles didn't go up substantially during 2005 - 2008.
So while you state that speculators cannot set prices, they could influence the supply chain to help achieve their eventual goal of satisfactory prices they would "want" to sell it for.
You can certainly manipulate the price if you stockpile oil. That's reducing supply. But when you come to sell you are increasing supply, which pushes the price back down again.
This is why I believe that supply and demand forces takes on a different form with the most wealthiest that have that power to manipulate supply. Thus hurting the world economy and hurting our industrial output.
You get speculative movement every day. But over the longer term the world was consuming every barrel of oil produced. The price was correct.
If it hadn't been, if oil had cost more than it should, the result would have been a surfeit of oil on the market as the high price would have reduced consumption.
If I can throw another wrench in this whole thing: If free markets truley do work, why then are auto mfg's unable to release electric or various forms therof of non-petrol vehicles to create the 'competition' in free markets that it was intended to? The answer is money and oligarchy.
The technology just doesn't exist.
If you take battery cars as an example, you need about 40 kw/h of batteries to power a family car for about 125 miles. That battery pack costs around $30,000. It has to be replaced every 100,000 miles or so, meaning the replacement cost of the battery is about 2 - 3 times as expensive as gasoline.
Oil is a very good store of energy. Crude oil (and gasoline) have about 12.8 kw/h of energy per kg. A car battery has 0.04 kw/h per kg.
And oil is just lying there under ground, ready to be used. It can be easily transported and stored. It's the ideal fuel for vehicles.
There's nothing that can compete with oil at the moment. Batteries cost more and are less convenient. Natural gas has to be compressed and stored in expensive tanks. Overall it costs more. Hydrogen has to be made from natural gas, compressed and stored in even more expensive tanks, and costs much more. Compressed air doesn't store enough energy to power the sort of vehicles people want.
People use oil powered vehicles because they are cheaper and better than the alternatives. That's true even in Europe where taxes raise the price of fuel to $8 a gallon. People drive smaller, more efficient cars, but they are still powered by gasoline and diesel.