Rising price of oil

[aurik]

I hear conservatives eat live babies. That's why they're so anti-abortion, they see it as a threat to their food supply.

[Tebet]

I hear conservatives eat live babies. That's why they're so anti-abortion, they see it as a threat to their food supply.

Except conservatives know that a fetus is a baby. abortion would just be farming. oh wait... you said live babies.

[Headspace]

Swamp, why are gas prices so high?

[kuronosan]

Yes, liberals only see intent to create results. It's a lot better than achieving results that have no fucking intent.

[Fhqwghads]

Also, oil speculators know we have to buy oil, and they know we'll pay whatever it costs to be able to drive to work.

They assume we'll pay whatever it costs to be able to drive to work. They are wrong. Everyone has a breaking point. I've seen less traffic on the roads, more open spaces at work, and a lot more goofy looking motherfuckers riding around in tight bike shorts, even in shitastic weather. I live too far away, and fuck public transportation (for now) but even I changed my habits. I stopped driving my Durango in to work and am now using my wife's Honda Civic. Filling up every week with $70+ dollars worth of gas can piss right the hell off.

[Melchiah]

If you can't visualize how buying and withholding a commodity from the market creates an artificial drop in supply, then there is no point discussing this with you.

[Anton]

If you can't visualize how buying and withholding a commodity from the market creates an artificial drop in supply, then there is no point discussing this with you.

Truth - Investors not only pay attention to the price-per-barrel, but also the price-at-port (WTI, Brent), the contango (investor slang for the spread between a contract price@now and contract price@1-4 months out), and especially the state of the country reserves (at capacity? near drained? changes +/- day to day reflect usage).

Because countries purchase oil by contract for x barrels @ time, tracking the country reserves show how daily usage compares to the contracted influx.

[Acevalefor]

So what are the potential abuses of a regulation that requires buyers to take delivery in a set amount of time? Wouldn't that just move the market manipulation from the buyer to the seller just like the mills control supply to manipulate prices of wood?

[Tebet]

If you can't visualize how buying and withholding a commodity from the market creates an artificial drop in supply, then there is no point discussing this with you.

who is buying and withholding? futures are just a promise to buy later at a predetermined price. does money even change hands? (i really dont know im asking.) unless you mean the oil companies are withholding.

[Anton]

Good article from the UK Telegraph

http://www.telegraph.co.uk/finance/n...ing-point.html

TL;DR version: It's NOT OPEC's fault (because they're actually the most dysfunctional 'cartel' ever - since '73 they all cheat on the quotas and remind eachother not to cheat), it's not entirely speculator's fault (though free-market involvement has risen alot since the 70's), it's not entirely Global credit risk - it is all of these things combined plus Chindia coming online(all commodities are at highs cause they need to build shit), a weaker-than-usual US dollar hurting buying power relative to chindia, and the fact that only some of all oil (light -not thick, sweet -low sulphur) is the stuff we want - alot of it is sludge that takes forever to refine.

And even if we did get more oil, we wouldn't have the capacity to refine it all anyway. You can't just turn the taps on.

[Gwynplaine]

All right here's the basic thrust of my point, I'll try to say it as clearly as I can one last time in case I'm not articulating it well.

Speculators only help to pinpoint and reveal the changes in real values of commodities. The values of the things they invest in are just a fact of reality. And so to the extent speculation is regulated, frozen, or outlawed, the more the actual values of those things are obscured, murky, or inexact. To the extent they are inexact you will experience disruptions, shortages, or stagnation.

No dictate or writing on a bureaucrats piece of paper will change the reality of those values. That's why reality eventually caught up to the worthlessness of those AAA rated loans and why the banning of short-selling didn't stop the worst banks from being a hallow shell.

[Ferion]

The thing I'm not understanding about your point is if speculators start buying tons of oil because they "think" there is going to be a shortage, how does that reflect the real price of the good if there is never actually a shortage, that's just cost-push inflation. Yes the good will jump up in price and then drop down once everyone realizes the shortage isn't happening, but that's the nominal price not the real price.

[Drex]

The thing I'm not understanding about your point is if speculators start buying tons of oil because they "think" there is going to be a shortage, how does that reflect the real price of the good if there is never actually a shortage, that's just cost-push inflation. Yes the good will jump up in price and then drop down once everyone realizes the shortage isn't happening, but that's the nominal price not the real price.

If anyone buys tons of oil for any reason the price will go up. The shortage is going to happen sooner or later, so I don't see how people would think to themselves "oh hey shortage isn't happening". The demand for oil is ever-increasing at the moment, and the supply will continue to shrink until whenever in the future it runs out.

Either way, I think people bitching about the price of imported oil are cute. It's not ours to begin with. Since when is it your business what other people sell their shit for? If you want what they've got, you pay what they're asking for it or find an alternative.

[notorious bum]

Does anyone remember when speculators single-handedly helped caused the food crisis in 2008?

Yeah, these guys operate on a whole other level of duechebaggary. There is no argument for the defense or rationale that would follow any sort of standard market practices.


Found a link to the story about the crisis in detail and should also give you a much better understanding on speculators' practices than what this thread's resident expert has conveyed.

http://www.democracynow.org/2010/7/1...ow_wall_street

[Anton]

If I recall correctly, wheat wasn't the only thing money was being thrown at in 2008. Commodities across the board were up so much, the Canadian dollar broke to the upside from slightly below 1-1 with the US$ to $1.20-1 US$ in a matter of months. The BoC and the Gov't jawed the shit out of the Cbuck to no avail.

Was that the excess money available for other investments in 2008? Was that China starting a commodities rush that's still on today? Was that a pure spec play by a bunch of banks with access to cheap and plentiful investment dollars? I'm not sure how you tell.

Whatever it was, then came Sept/Oct '08 which broke the bubble and crashed the shit out of everything.

I know the corn markets suffered to the upside from the green shift in the US gov't (Corn is a unique crop in that less than 30% is actually used for food - it has a multitude of uses). At the time (and to this day), corn was the go-to crop for ethanol production. The result? The Tortilla Riots, a group of food riots in Mexico over the rising costs of their main source of food.

Although you can make ethanol from anything with glucose (the process is the same as making Jack Daniel's), there is significant political pressure in the US Senate to subsidize US farmers, and corn is one of the most heavily subsidized of the lot. It's totally unfair. It's probably in violation of free-trade. But what the US says, goes.

(This is now well off-topic, but the US Senate is heavily agriculture-weighted by design. Major farming states generally have low populations, but in the senate every state gets 2 seats regardless of pop. It's not anyone's fault per se, that's just the way it is atm)

[*Shinzon*]

Anyone know how Brazil manages it's ethanol production? Ethanol powers most Brazilian transport and it doesn't have any effect on food prices theres.

[Lordesequiel]

You have it easy, I paid £1.41 a LITRE for petrol in the uk that's like $3.00 a LITRE almost

[Restrat]

Brazil use plants for its ethanol that are 3x+ more efficient than corn, and also has infrastructure in place to make the whole process way more efficient, so that it doesn't have as large an effect as it does here.

[*Shinzon*]

Brazil use plants for its ethanol that are 3x+ more efficient than corn, and also has infrastructure in place to make the whole process way more efficient, so that it doesn't have as large an effect as it does here.

Well whats the argument against doing that here in the US? Could have farmers plant instead of using harvested corn I would imagine that would make both sides happy. Though I still believe diesel is an incredibly more efficient alternative.

[Ferion]

If anyone buys tons of oil for any reason the price will go up. The shortage is going to happen sooner or later, so I don't see how people would think to themselves "oh hey shortage isn't happening". The demand for oil is ever-increasing at the moment, and the supply will continue to shrink until whenever in the future it runs out.

People don't generally think in the long-run. Plus I'm assuming that everyones talking about short-term shortages, not the fact that we're eventually gonna run out of oil some day.