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  • Why Oil Prices Change

    This article is spot on. It provides examples of what does not change oil prices despite what the President and the media would like you to believe.

    http://www.elliottwave.com/freeupdat...-Part-III.aspx

  • #2
    Re: Why Oil Prices Change

    good stuff.

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    • #3
      Re: Why Oil Prices Change

      There are many many factors, but as the article appropriately pointed out, they are small pieces of the pie and more insignificant than we are led to believe. It's plain and simple. Why are prices so high? Because they can be. You would think at $4 a gallon, people would start car-pooling and using mass transit more, but I don't know a single person whose lifestyles have changed much at all. In all honesty, I believe these high gas prices have been a positive thing for out nation, as it's making us collectively pull our head out of our rear and think about conserving our resources a bit more. SUV and truck sales are falling. Economy car sales are up. All of a sudden, people are being more conscious about the environment, natural resources, and our impact on things. For the first time in a long time, people want maximum mpg in their vehicles. That can only be a good thing IMO, even if it does hurt the wallet a bit initially. Good article and thanks for sharing.
      "Common sense is not so common." -Voltaire

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      • #4
        Re: Why Oil Prices Change

        You know what that really looks like? That looks like an advertisement for their secret market prediction technology that will allow you to make millions with no risk if you just pay them a few hundred bucks to learn how!

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        • #5
          Re: Why Oil Prices Change

          An article comparing oil and gold prices (which shouldn't be particularly coupled in the economy):

          http://www.downsizedc.org/blog/2008/..._tax_with_gold

          Has anyone seen a chart that holds some commodity such as gold or oil constant and charts the dollar in terms of that commodity? I'd love to see the dollar's value graphed in milk gallons, oil ounces, or gold grams. I'll bet you it sinks like lead.
          Dude, seriously, WHAT handkerchief?

          snooggums' density principal: "The more dense a population, the more dense a population."

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          • #6
            Re: Why Oil Prices Change

            I have been led to believe that it is the same reason housing prices skyrocketed in the recent history.

            Speculators are betting that what they are paying now will not be what the actual price will be in the future. That in the future it will actuall be more than $120/barrel.

            Isn't it true that when you see "$120/barrel" that isn't what being paid for the oil being pumped out today? That is the price traders are paying for oil that will be pumped out in the future? They are betting that oil will actually be more expensive in the future because of guesses they are making today. Guesses like China and India will use x/barrels per day. Production will be hampered due to unstable producing countries like Venezuela and Iraq. That oil will still be the primary energy source and the efficiencies will not be gained.

            These guesses could be wrong. And much of this speculation, like that in the housing markets, could be way off.

            So even if the actual cost of oil in the future is $30/barrel those that paid $120/barrel they are going to either be wiped out are will try and maintain the artificially inflated prices to recoup their costs. It could be another bubble that harms the economy overall.
            Iím not racists, I have republican friends. Radio show host.
            - "The essence of tyranny is the denial of complexity". -Jacob Burkhardt
            - "A foolish consistency is the hobgoblin of little minds" - Emerson
            - "People should not be afraid of it's government, government should be afraid of it's People." - Line from V for Vendetta
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            - "Don't waist your time on me your already the voice inside my head." Blink 182 to my wife

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            • #7
              Re: Why Oil Prices Change

              Paul Krugman published a short blog post a few weeks ago on the nature of bubbles. Shorter version: bubbles are by definition accompanied by an excess of supply. Since there is no significant rise in (reported) oil inventory against demand, there cannot be a bubble. Speculation may be a player in the game but it's not the primary player.

              Global demand is up. Welcome to peak oil.
              In game handle: Steel Scion
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              • #8
                Re: Why Oil Prices Change

                Originally posted by Steeler View Post
                Paul Krugman published a short blog post a few weeks ago on the nature of bubbles. Shorter version: bubbles are by definition accompanied by an excess of supply. Since there is no significant rise in (reported) oil inventory against demand, there cannot be a bubble. Speculation may be a player in the game but it's not the primary player.

                Global demand is up. Welcome to peak oil.
                Former Enron adviser Paul Krugman has an interesting take, but I don't see how you get from "demand is too high" to "peak oil." Just because supply is not meeting current demand is not proof that supply is declining.

                In other news, did everyone find Maxine Waters threatening to nationalize our oil companies amusing? I didn't.
                ---
                Sources say the Dow Jones' decline is directly related to Dethklok front-man Nathan Explosion's constant deleting of potential new albums.

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                • #9
                  Re: Why Oil Prices Change

                  Originally posted by Switchcraft View Post
                  Former Enron adviser Paul Krugman has an interesting take, but I don't see how you get from "demand is too high" to "peak oil." Just because supply is not meeting current demand is not proof that supply is declining.
                  I didn't lay out (and am not prepared to do so right now) a complete line of argument that we are at or approaching peak oil. But a sudden increase in global demand without a significant or likely increase in future oil supply fits in with the general worldview of peak oil.

                  Nice red herring on Krugman-Enron, by the way. How is that even relevant to the current discussion?
                  In game handle: Steel Scion
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                  • #10
                    Re: Why Oil Prices Change

                    Originally posted by Steeler View Post
                    I didn't lay out (and am not prepared to do so right now) a complete line of argument that we are at or approaching peak oil. But a sudden increase in global demand without a significant or likely increase in future oil supply fits in with the general worldview of peak oil.

                    Nice red herring on Krugman-Enron, by the way. How is that even relevant to the current discussion?
                    You're right, you didn't lay out a complete argument. Which is what I said.

                    And why are you asking me how Krugman is relevant to the discussion? You brought him up! You didn't say who he is or what he does for a living. You didn't even link to the post you're talking about. There are a million ways I could attack the man's "credibility" but I was mostly trying to make a gently humorous jab at him while asking you for more information. Everything I've ever read about "peak oil" has to do with decreases in available supply. If Krugman made a peak oil argument, I'll attack him when you actually cite sources. If you're making it, I'd like to see it laid out so I can tell you why you're wrong.
                    ---
                    Sources say the Dow Jones' decline is directly related to Dethklok front-man Nathan Explosion's constant deleting of potential new albums.

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                    • #11
                      Re: Why Oil Prices Change

                      As Warmonger stated, oil is priced that way simply because people will pay it.

                      It's like asking why do TVs cost what they do? Because people pay it.

                      Why should gas be $2/gallon if people are willing to pay $4/gallon?

                      If gas were $10/gallon and people still drove like they do, then the price would be warranted. If people cut their gas consumption because the price was too high, well then, gas would come down in price.

                      In the short term, speculators can have an effect on the pricing, but not long term.

                      (note: I am using gas prices instead of oil prices because they're easier to relate to, but the same principles apply to either)

                      3) Support game play in a near-simulation environment. Where the focus of play would not be solely on doing what it takes to win, but doing so utilizing real-world combat strategy and tactics rather than leveraging exploits provided to players by the design of the game engine.

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                      • #12
                        Re: Why Oil Prices Change

                        Gas prices have been all over the American media lately - it's even trumped the Obama-Hillary story, even if just a little bit.

                        Based on the 'man on the street' spots (taken with a grain of salt), it seems to me that American demand is in a decline as prices near $4 a gallon. I wonder what effect, if any, this will have on the speculator market. Looking at the evidence available, it seems to me that something has to give, even if just a little.

                        Based on my understanding of peak oil and its theories, my layman's opinion is that the 'plateau oil' theory is more realistic, although for slightly different reasons than were traditionally theorized. I think the situation today is a mixture of a speculation bubble and supply/production failing to keep pace with demand. In a general sense it is inevitable that if none of these aspects change, we are either headed for a steep crash (demand completely outstripping supply) or an undulating 'plateau' (tempered increases in supply met with subsequent increases in demand).

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                        • #13
                          Re: Why Oil Prices Change

                          I'm not a big fan of "Peak Oil" theory myself, but from my understanding, it doesn't really talk much about decreasing oil supply. The concept behind Peak Oil is that while supply will decrease eventually, it won't be any time soon so you don't have to worry much about that. However, long before it begins to decrease, it will stop increasing and reach a fairly steady plateau. And when supply plateaus, it is likely that demand will keep growing. And when demand grows while supply remains constant, the result will be massive increases in price as more and more people (and dollars) fight over the same amount of available oil.

                          To be fair, that scenario does look remarkably similar to what we see in the oil market today. But true Peak Oil theory blames the supply plateau on natural limiting factors based on geography, while I tend to blame the plateau on geopolitical concerns, such as military conflict in oil-producing areas and various governments taking actions limiting oil production in their own territory. If the political concerns were solved, in theory we could resume increasing our (global) oil supply and avoid the Peak Oil catastrophy scenario.

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                          • #14
                            Re: Why Oil Prices Change

                            Sadly, it really seems to be just the speculation on the oil futures market that is driving prices up. Everyone knows when you go into a bubble-like state similar to this, you're going to get a collapse eventually, but for right now you can turn a huge profit by essentially betting on the price of oil going up. A lot of hedge funds are also behind some of this, since they're seeking to regain profits lost from the housing bubble collapse by investing tons of their client's funds in something as profitable as oil futures. If everyone is doing it, all the big boys win, as usual.

                            Bubble to bubble, pop to pop. These futures markets need SOME regulation or else we'll keep following the fun boom-to-bust cycle.

                            -Zephyr
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                            • #15
                              Re: Why Oil Prices Change

                              The difference between TVs and and Gas is that very few people need a TV to provide for their family. So if you price a TV out of their means they don't watch TV. Price gas out of their means and their means potentially decrease.

                              Many people, however, can just take public transportation. And while a bit inconvenient it isn't devastating. Live where there is no public transportation, or it absolutely sucks? You better hope people start using public transportation and other means so demand goes down so prices goes down.

                              I personally don't blame the oil companies for this mess. We did it to ourselves. Hippies years ago told us to find a solution. We got a taste of it back in the late 70s(?) oil embargos.

                              The good news is that some of the hippies didn't give up and they have solutions for all this. Those solutions just need to be adopted.
                              Iím not racists, I have republican friends. Radio show host.
                              - "The essence of tyranny is the denial of complexity". -Jacob Burkhardt
                              - "A foolish consistency is the hobgoblin of little minds" - Emerson
                              - "People should not be afraid of it's government, government should be afraid of it's People." - Line from V for Vendetta
                              - If software were as unreliable as economic theory, there wouldn't be a plane made of anything other than paper that could get off the ground. Jim Fawcette
                              - "Let me now state what seems to me the decisive objection to any conservatism which deserves to be called such. It is that by its very nature it cannot offer an alternative to the direction in which we are moving." -Friedrich Hayek
                              - "Don't waist your time on me your already the voice inside my head." Blink 182 to my wife

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