Oil, Again

If things go the way they've done in the past oil will drop. During the 70's oil was around $4 a barrel ( ) but because of OPEC and the oil embargo it rose to $12 a barrel and then later on $24 a barrel and eventually topped out at around $35 a barrel. These oil shocks caused aggregate supply stocks, rising unemployment, and rapid inflation. In the late 80s and through most of the 90s oil began to fall again and in 1998 fell to a low of about $11 a barrel but OPEC teamed up with some other countries and restricted output which caused the price to rise again to about $35 a barrel and then level off around $26 a barrel in 2002. The latest jumps have almost tripled that price but if history repeats itself the price will fall again.

What I find weird is that if oil falls you all are talking about jobs being lost but I have read that the same thing happens when oil prices rise.

 

yes. and you have a little too much faith in big business, every learns, but there seems to be some industry collasping every ten years. snl. internet, natural gas etc.

 

Couldn't you say the same thing about other commodities?

 

run for congress. it can't be that hard to sound more compassionate than culberson.

 

metals are commodities too. i guess i don't understand what you are asking. the futures of the commodities are what is traded.

 

So what you guys are saying is that when oil prices fall the economy of Houston is affected in a negative way and high oil prices boost the economy there?

 

hehe i know what you mean. but it's really nothing we can control unless we stop being dependent on foreign energy.

 

of course. houston's economy is fairly dependent on oil. not as much as it was in the early 80s but still.

just as the dot com bubble hurt san fran or steel not being produced hurt the rust belt.

 

okay I understand they are trading on speculation of future value, I guess what I'm asking is it neccessary? do we need it.


gold and silver is a little different, those products are held strictly for value. oil is a consumed product, and maybe I don't understand how long it sits before it goes to the consumer.

 

i agree. but i guess its another way to maximize profits. since saudi oil is worth only 10 dollars a barrel how do companies get to make more money if not via trading? it gives them a good cover.

but i know nothing about economics.

 

i think realistically you wont be able to stop oil companies from doing that at least in the US. you just have to support mass transit even when its not economical unless heavily subsidized. and since your a commi thats up your ally. why can't we spend 5-10 billion and put rail down I-10 and up 45 down 59? i know in minneapolis they spent almost 700 mil to build light rail thats 12 miles long with almost 500 in federal money. similarly in nova they're expanding their metro to reach tysons and dulles for almost a billion and a lot of it is federal money. whereas our lovely congressmen like culberson and delay ensure that we lose funding for doing whats best for our community.

mass transit is the only thing that solves gas dependency. we just wont have alternates anytime soon. we have the technology to have mass transit right now. and the houston economy can certainly support it.

 

because it's a necessity.

 

so what does that mean. does it insure there is always a market, that it is always available?

 

There is a lot of value to trading it on exchanged.. Basically a lot of the value comes from a company being able to hedge itself from the price swings we see now. If a company needs to buy a lot of oil in the oil, for example, they would rather lock in a price rather than risk the price running up on them. These companies can pass off risk to companies who can better bear it or to speculators.

In reference to your other post, trading is done more for hedging than for speculation.