Almost a year ago I started a thread about surging oild price, in that post my concern was if oil would hit $100 mark and its effect on US economy, many have replied with insightful knowledge. Well, seems I was too optimistic, now the talk in town is ....... $120 ! Phew, now that $600 rebate check would really go far
glad i started riding my bike to work. (yes i know oil prices arent linked directly to gas prices... but when a refinery has to pay >$100 a barrel, that mark up will be passed on to the consumer.)
I very clearly don't understand this market. I understand supply and demand, but they're only marginally applicable apparently.
You have a handful of sellers and millions of buyers. Straight oligopoly. It's pretty simple, really. Insert Trader_Jorge "rookie" post in 5...4...3...2...
Actually supply and demand is perfectly applicable. In this case you have a very steep or inelastic demand curve and supply curve so any shift in demand or supply has drastic price implications.
Refineries buy oil. There aren't millions of refineries. You don't understand the value chain. The millions of buyers purchase refined products. Read up my friend.
From a trader's perspective, WTI crude has been range bound between low 90's to $100 for some time now. If it can break through and settle above $100 for a few days, you will see a new range set in, which could possibly send oil toward $110/barrel and higher.
Are there really people who think that oil isn't going to increase in price forever until there's not a drop left for sale?
At some price point oil becomes uneconomical and an alternative will become viable. The oil cartel will try its best to make sure this does not happen.
Truth is oil reserves are limited and starting to be peaked. Why would we think there is an unlimited supply? The price of oil must continue to increase. How fast depends upon the stability of the middle east. As the reserves become strained over the next 10 years expect some really weird stuff happening globally. Alternate energy means doesn't offer much hope as demand is increasing at exponential rates. To much demand increasing from Asia. (lead recently by China) I hope we can get it stabilized for some generous periods of time to help ease the economy already teetering from the debt crunch.
This market shrugs off supply/demand issues on a daily basis. It latches on to tangentially related issues at this point in full force...with greater weight than fundamentals. http://www.chron.com/disp/story.mpl/ap/business/5561797.html On Thursday, the Energy Department's Energy Information Administration reported that U.S. crude oil inventories rose 4.2 million barrels in the week ended Feb. 15, more than the 2.9 million barrel increase analysts surveyed by Dow Jones Newswires had expected. "We are only at the halfway point of the first quarter and crude oil builds are already greater than what we typically see for the entire quarter," said the Schork Report, edited by U.S. energy analyst Stephen Schork. http://english.aljazeera.net/NR/exeres/C4C0C1CA-98AF-4368-9947-3BA9CC799378.htm Many recent forecasts have said demand growth this year will be less than initially expected - yet prices continue to rise. http://uk.reuters.com/article/oilRpt/idUKN0720445120070907 "I cannot explain why we have $70 oil. The fundamentals behind supply and demand do not support $70 oil. The fundamentals support something much less," Exxon Mobil CEO Rex Tillerson told a business roundtable at the Spruce Meadows equestrian facility on the outskirts of Calgary. "There's something else going on there that I don't get," Tillerson said, speaking to an audience of business and political leaders about energy security.
crude supply has been growing all year and the reports have been very robust. its ridiculous, oil traded high on the news of that refinery explosion in north texas. okay, refinery explodes, one less buyor right? why does price shoot up. there is no credible argument for the way oil has been trading since katrina.
You are being distracted by the establishment. Globalism and the demand-supply dynamics of oil are a secondary issue. Oil is only becoming marginally more valuable. The dollar has lost half of its value since 2001. That's the main culprit. If this was an oil issue only, why has a loaf of bread gone from $1 to $3 in the last 10 years? The invasion of Iraq also put a fear premium into the price of oil. If we leave Iraq, that alone will reduce the price. The Federal Reserve has printed untold amounts of counterfiet dollars since the Nixon-gold debacle. The printing presses have been hot and those excessive dollars are circulating throughout the world. It's the sins of the Federal Reserve during the past 30 years coming home to roost. Helicopter Ben (as in "he'll print money and drop it from helicopters") is at the helm. No need to worry. I am Eastern European. My parents just sold their house in Europe and they can use those proceeds to almost buy a house in the US, because the value of my currency has doubled against the dollar since I came to this country in 1999. INFLATION is the ultimate sin of paper currency and bureacrats. We are being robbed. When the Fed lowered rates this year, they achieved that by printing new couterfeit dollars. We have a government that punishes its citizens for producing counterfeit currency, but it has given authority to the Fed to do just that.
Oil supplies were higher than expected, what's the reaction, record highs both real and inflation adjusted link NEW YORK — Crude prices rebounded today, shooting up more than $2 a barrel to another new record as a falling dollar and the prospect of lower interest rates attracted fresh money to the oil market. Retail gas prices, meanwhile, rose closer to records above $3 a gallon. A pair of dismal economic reports today drew more money into the oil market, as did Federal Reserve Chairman Ben Bernanke's comments that the economy is not immediately threatened with stagflation, a combination of economic weakness and rising inflation. The Commerce Department said gross domestic product grew at only a 0.6 percent rate in the fourth quarter, below estimates and at only a fraction of the previous quarter's growth rate, while the Labor Department said applications for unemployment benefits rose by 19,000 last week, more than expected. Rather than viewing such news as bad for oil demand, investors chose to see it as confirmation of their beliefs that the Fed will continue cutting interest rates to try to shore up the economy. Interest rate cuts tend to weaken the dollar, and crude futures offer a hedge against a falling dollar. Also, oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling. "I really think that this is oil being viewed as ... a financial instrument," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. Light, sweet crude for April delivery rose $2.95 to settle at a record $102.59 a barrel on the New York Mercantile Exchange. Prices continued rising after the Nymex closed, setting a new trading record of $102.97. Crude prices are within the range of inflation-adjusted highs set in early 1980. A $38 barrel of oil then would be worth $97 to $104 or more today, depending on the how the adjustment is calculated. A direct comparison with daily Nymex prices is difficult because historical data, gathered before the crude futures contract was created in 1983, are based on average monthly prices posted by oil producers. Different analysts have varying benchmarks for an inflation adjusted high. For example, John Kingston, director of oil at Platts, the energy research arm of McGraw-Hill Cos., arrived at an all-time high of more than $104 a barrel, which he said adjusts for delivery costs to and from Cushing, Okla., the Nymex crude oil delivery terminal. Using his own inflation adjustment, A. G. Edwards & Sons, Inc. oil analyst Eric Wittenauer arrived at a widely-quoted estimate of $103.76. However, an inflation calculator maintained by the Bueau of Labor Statistics estimates that $38 in 1980 is worth $97.34 today. A Federal Reserve Bank of Minneapolis calculator puts $38 in 1980 dollars at $99.43 today. Oil's rally is pulling gas prices higher. At the pump, retail gasoline prices rose 0.9 cent overnight to a national average of $3.161 a gallon, according to AAA and the Oil Price Information Service. Prices are within 7 cents of May's record of $3.227 a gallon. The Energy Department expects prices to peak near $3.40 a gallon this spring; many analysts think prices will rise much higher than that. On Wednesday, oil prices fell $1.24 a barrel after the Energy Department reported crude inventories rose more than expected last week. But that reflected a rare reaction by oil investors to supply and demand fundamentals. Oil prices have been far more affected in recent months by dollar- and interest rate-driven investment decisions, analysts say. "(Fundamentals) have no relationship to price right now," Flynn said. If prices were responding to supply and demand, fundamentals, they would be falling, he said. Several recent forecasters have lowered oil demand growth predictions for this year due to the slowing economy, and domestic oil inventories have been growing. Oil prices have received some support in recent days from word of a technical glitch that temporarily disrupted the flow of a small amount of crude out of Nigeria. Eni SpA denied earlier reports that its Brass River oil terminal had been attacked by rebels. Turkey's recent invasion of Northern Iraq in search of Kurdish rebels has also been supportive, Flynn said, but these stories are not enough in and of themselves to explain why oil continues to trade above $100. Many analysts believe it's just a matter of time until the fundamentals reassert themselves on the market, pushing prices down. Other energy futures also rose today. March gasoline futures rose 1.8 cents to settle at $2.4957 a gallon on the Nymex, while March heating oil futures rose 7.45 cents to settle at $2.8456 a gallon.
Oil Supplies are Peaking. Oil Reserves are NOT. Current production just can't get it out of the ground fast enough. But there is plenty in the ground all over the world. Also, the most expensive the oil, the more reserves/supplies increase, as the oil that was expensive to get to, now becomes economically viable. The low cost of the dollar is also adding about $35-40 to a barrel of oil over prices a couple years ago. If you are extremely concerned and convinced that oil prices will continue to skyrocket over the next few years, you should seriously consider investing in energy and oil funds/stocks. It will hedge against the high energy costs that you are paying.
I agree, this is part of it. The rest of the world isn't seeing oil skyrocket as much because their currency isn't dropping like ours. The other part is the huge growing demand from India and China. ALL commodities are skyrocketing, including stuff like gold and wheat.
Great advice....except....those that are most affected by the rise in fuel prices are generally the ones who have the least liquidity and ability to invest in energy and oil funds/stocks...more money for fuel means less money for food and rent for those most affected by this.
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