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$114/bbl oil

Francesca R said:
Not that "What oil did last year" should be a reliable guide to "What oil will do next year".
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It is one piece of evidence. Combine it with other pieces (see the posts just above this one for example) and then it starts to be reliable. For it to stop going up one of two things will need to happen

1. Increased supply
2. Decrease in demand.

1. Will not happen in the next few years. Supply has not up much in the last few years and I can see no reason for it to do so in the future. If anyone does start pumping up new reserves of oil, or making oil from say coal, they will be demanding a high price.

2. Decrease in demand. This will happen. But at what price? Which consumers will be the first to stop or reduce their demand? Probably the ones with the weakest currencies.
 
rjh01 said:
2. Decrease in demand. This will happen. But at what price? Which consumers will be the first to stop or reduce their demand? Probably the ones with the weakest currencies.
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You omit speculative demand. Commodities (not just oil) have become an increasingly popular "investment category" and some prices look like speculative bubbles. As to why a speculative component would be so strong of late, there is the Frankel (Harvard) argument that low real interest rates give producers more incentive to not sell commodities, but give speculators more incentive to buy commodities.

I don't know how important this is, but I do not think that the explanation of commodity price rises is all in end-user demand.

If much of the oil spike is market speculators (profit-seeking traders) then it could unwind at any time.
 
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GET out of debt. 200 dollar here we come.....
and if Bill O’Reilly asks again who's buy oil, tell him diggy70. loading up on Oct. futures.
 
rjh01 said:
Oil price is not this high because speculators are buying oil. If that was true the bubble would burst when the captains of the oil ships tell the speculators 'Here is your oil, what do you want us to do with it?'
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Speculators who will take posession of actual gloopy oil, not just trade in futures, do exist. The extent of stockpiling is not known to me, but it's not difficult to find articles such as this from 2004(I think that was during the last time oil was in contango. Pardon the headline-writers disease): http://business.timesonline.co.uk/tol/business/article481363.ece.

A large part of the price is just the decline of the dollar. 130 US$ is a mere 80 €. Another part is that light sweet crude appears to have peaked, and that's what gets quoted as the price of oil, rather than the cheaper sour crude and unconventional oils that haven't yet peaked.
 
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Fact is it would take immense amounts of capital to corner the oil market in the long term. And; where do you PUT if you are stockpiling? Storage has a cost and shipping oil TO storage and then pumping it out and shipping it AGAIN to a final customer makes it hard to profit from such a scheme unless you are a very minor player.

However, a minor player in this market absolutely could make himself quite rich; But such a player, or several of them, could not possibly cage enough oil to make a difference this large in the global market.
 
The Central Scrutinizer said:
Hopefully.
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I don't begin to claim to understand economics, beyond my own very meager personal finances.

Can you (or someone) explain to me, in small words that I can understand, just how the hell it's supposed to be a "good" thing for the price of oil to go through the friggin roof?

Here's what little I know, and probably illustrative of why I don't understand:

1. Approximately every damned thing in the world is either made with, or needs oil.
2. Every single service or product I use both at work and in my personal life has to be transported by some sort of oil-using appliance.
3. I drive 60 miles a day round trip to & from work. I'd happily use public transportation, as soon as someone would build some.
4. Work: Shipping is our highest expense after payroll. We have two choices - charge higher prices to recoup the costs and risk losing business, OR charge the same and put employees out of work. Hooray.
5. Home: They don't just automatically start paying me more money even though I am suddenly paying a shaite-load more just for the privilege of driving to work, not to mention the increase in food and electricity costs.


Not everybody is making $50k+ a year and driving aircraft carriers on wheels. Not every company that employs people is Exxon-Mobile. So how does it "help" when it becomes just that much harder for business and individuals to survive financially?
 
negativ said:
Can you (or someone) explain to me, in small words that I can understand, just how the hell it's supposed to be a "good" thing for the price of oil to go through the friggin roof?
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As oil prices rise, both businesses and individuals will become increasingly motivated conserve, to explore alternatives, perhaps even to curtail certain activities altogether. This will be a good thing, because it will mean this freight train we're all riding on will only be doing maybe sixty miles an hour when it goes completely off the rails instead of the seventy-five miles an hour it's doing now.
 
negativ said:
I don't begin to claim to understand economics, beyond my own very meager personal finances.

Can you (or someone) explain to me, in small words that I can understand, just how the hell it's supposed to be a "good" thing for the price of oil to go through the friggin roof?

Here's what little I know, and probably illustrative of why I don't understand:

1. Approximately every damned thing in the world is either made with, or needs oil.
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Nothing needs oil. Oil may be the easiest option but there are always alturnatives. For example you can get benzene from coal or there are potential ways to do it starting with fats.

2. Every single service or product I use both at work and in my personal life has to be transported by some sort of oil-using appliance.
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Nope coal burning transport is certianly technicaly posible and there are numerious other options.

3. I drive 60 miles a day round trip to & from work. I'd happily use public transportation, as soon as someone would build some.
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Been tried a lot. So far people don't start useing the public transport (the exception being things like big cities it simple isn't practical to drive into).

5. Home: They don't just automatically start paying me more money even though I am suddenly paying a shaite-load more just for the privilege of driving to work, not to mention the increase in food and electricity costs.
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The days of living 60 miles from work are probably numbered in any case. I expect sub-urban populations to fall in future.

Not everybody is making $50k+ a year and driving aircraft carriers on wheels. Not every company that employs people is Exxon-Mobile. So how does it "help" when it becomes just that much harder for business and individuals to survive financially?
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Strategicaly anything that reduces the US relicance on oil is good for the US.
 
negativ said:
I don't begin to claim to understand economics, beyond my own very meager personal finances.

Can you (or someone) explain to me, in small words that I can understand, just how the hell it's supposed to be a "good" thing for the price of oil to go through the friggin roof?

Here's what little I know, and probably illustrative of why I don't understand:

1. Approximately every damned thing in the world is either made with, or needs oil.
2. Every single service or product I use both at work and in my personal life has to be transported by some sort of oil-using appliance.
3. I drive 60 miles a day round trip to & from work. I'd happily use public transportation, as soon as someone would build some.
4. Work: Shipping is our highest expense after payroll. We have two choices - charge higher prices to recoup the costs and risk losing business, OR charge the same and put employees out of work. Hooray.
5. Home: They don't just automatically start paying me more money even though I am suddenly paying a shaite-load more just for the privilege of driving to work, not to mention the increase in food and electricity costs.


Not everybody is making $50k+ a year and driving aircraft carriers on wheels. Not every company that employs people is Exxon-Mobile. So how does it "help" when it becomes just that much harder for business and individuals to survive financially?
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Two words: Urban Sprawl

Higher oil (and by extension higher gas) prices gets more cars off the road, and more people onto subways and trains. It means people will move closer in instead of farther away. Given enough time, of course.
 
The Central Scrutinizer said:
Higher oil (and by extension higher gas) prices gets more cars off the road, and more people onto subways and trains. It means people will move closer in instead of farther away. Given enough time, of course.
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Quite a few governments subsidise the price of petrol at the expense of public debt and therefore future generations (such as India) and the effect you speak of is still moving fast in the opposite direction.
 
negativ said:
Can you (or someone) explain to me, in small words that I can understand, just how the hell it's supposed to be a "good" thing for the price of oil to go through the friggin roof?
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It just is what it is. It causes a bigger transfer of wealth from consumers to producers. That does not--by itself--make everybody net better-off, so it is not "good" in dispassionate economic parlance.

Here's what little I know, and probably illustrative of why I don't understand:

1. Approximately every damned thing in the world is either made with, or needs oil.
2. Every single service or product I use both at work and in my personal life has to be transported by some sort of oil-using appliance.
3. I drive 60 miles a day round trip to & from work. I'd happily use public transportation, as soon as someone would build some.
4. Work: Shipping is our highest expense after payroll. We have two choices - charge higher prices to recoup the costs and risk losing business, OR charge the same and put employees out of work. Hooray.
5. Home: They don't just automatically start paying me more money even though I am suddenly paying a shaite-load more just for the privilege of driving to work, not to mention the increase in food and electricity costs.
Click to expand...

OK your firm, like most, is a net energy consumer, and a price-taker like the rest of us.

Not everybody is making $50k+ a year and driving aircraft carriers on wheels. Not every company that employs people is Exxon-Mobile. So how does it "help" when it becomes just that much harder for business and individuals to survive financially?
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It doesn't help and the immediate effect is to subtract from consumer spending and profit margins outside of energy. Others have mentioned that expensive oil makes alternative power sources more attractive in comparison, and to the extent that alternatives may have less severe negative externalities (undesirable spillover effects onto everyone else) then the relative promotion of alternatives (energy sources and economic behaviour) can be a "good" thing.

"Things tend to work out best when people have to live with [finance] the costs of their own behaviour"--Steven E Landsburg, from "More Sex is Safer Sex" (Incidentally this is a truly great recent book about economics suitable for a lay reader. I like it very much)
 
Francesca R said:
"Things tend to work out best when people have to live with [finance] the costs of their own behaviour"--Steven E Landsburg, from "More Sex is Safer Sex" (Incidentally this is a truly great recent book about economics suitable for a lay reader. I like it very much)
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Which is exactly what is not happening now. The rich, who have a disproportionate influence on economic and political power, find the recent oil prices rises personally no more annoying than a flea bite. Those with little money simply have to go without.
 
a_unique_person said:
Which is exactly what is not happening now. The rich, who have a disproportionate influence on economic and political power, find the recent oil prices rises personally no more annoying than a flea bite. Those with little money simply have to go without.
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This is not unique to oil.
 
a_unique_person said:
Which is exactly what is not happening now. The rich, who have a disproportionate influence on economic and political power, find the recent oil prices rises personally no more annoying than a flea bite. Those with little money simply have to go without.
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That has nothing to do with the statement in the quote. You are simply stating that rich people can buy more, which is not relevant IMO.
 
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