Gas Prices - Probably the REAL Reason

[L_Sludger]

Originally Posted By: itguy08
Originally Posted By: whip
Originally Posted By: L_Sludger
I think - regardless of politics, those people with the most fuel efficient cars win. No gas price anxiety anymore.. at all.

People with efficient cars, never worry about gas prices? Ever?


Of course they will. If/when gas goes to $10 a gallon and they are paying $100 to fill their 10 gallon econobox it will be just as painful as the person that pays $100 to fill their SUV now.


What will the SUV drivers do when they have to spend $280 to fill up?

It doesn't cost much to buy a cheap, highly-efficient car, in case of gas prices going sky-high. My car was very inexpensive, and it's already paid for itself in one year off gas savings alone vs. the car I drove previously, and that's with gas at current prices. If gas goes to $10/gallon I'm that much better off than people in guzzlers... duh! Can't you see the connection? I'll always have it better!

 

[The_Jeff]

Originally Posted By: whip
Originally Posted By: L_Sludger
I think - regardless of politics, those people with the most fuel efficient cars win. No gas price anxiety anymore.. at all.

People with efficient cars, never worry about gas prices? Ever?


I wouldn't worry about gas prices because if I wanted to trade out of my fuel efficient cars during a price spike I'll get pretty good money without a wait. I sold a saturn SL1 in March 2011 when gas was shooting from $3.30 to $4 and it sold quick.

If I had a land barge, not so much.

Of course if I had enough money in the futures market like Southwest Airlines so I'd break even no matter what, I wouldn't worry either.

 

[L_Sludger]

Originally Posted By: eljefino


Of course if I had enough money in the futures market like Southwest Airlines so I'd break even no matter what, I wouldn't worry either.

SWA isn't doing so hot anymore, Delta just took it to the next level by buying their own oil refinery. If you can 'roll your own', then I suppose you're best off!

 

[NHHEMI]

Originally Posted By: Drew99GT
Originally Posted By: NHHEMI


You are the one who seems to think it is untrue so if you are that curious do a search yourself. I am not doing it for you. I already know.


Your point? Look at what the price of oil did after it was deregulated and CBOT and NYMEX started futures trading. It went from 32 bucks to 16 bucks and stayed at roughly 25 bucks for 2 decades after the 80s. You think oil wouldn't have hit a high of 147 if it wasn't a free market in 2008? You think the shortages were bad in the 70s? Good lord...

Perhaps part of the price spike in 2007 was parabolic investment demand from the peak oil panic, the supposed dollar collapse/fear of inflation etc., the low interest rate induced asset bubbles in most risk assets, but was someone putting a gun to the guys who successfully shorted oil back to 30 bucks in 2008???


No, I do not believe oil would have hit $147 if it was not on the market. That price had nothing to do with supply and demand. It was all greed and panic. Never would have gone that high with set contract prices in place.

Oil wasn't shorted back to $30 it fell to that level along with the entire stock market as it crashed.

 

[Loobed]

Originally Posted By: mechtech2
It seems that high oil/gas prices are not so much from foreign countries, refiners, oil companies, or gas stations.
Sure, some, of course. But they do provide services/goods.

The real reason is that in about 1983 oil was allowed to be a COMMODITY that is traded. People making billions here [with no contribution], which WE pay for! It is way out of hand now.
I believe we are talking 1/2 the price or more.

This could be eliminated with a stroke of a pen - a law stopping the trade in oil futures.



I believe that Nixon took the U.S. off the gold standard and put us on the Petro Standard. Oil is now like gold; fluctuating up and down. The only difference is that oil is consumable, and gold is not.

 

[mechtech2]

Originally Posted By: Tempest
Quote:
This could be eliminated with a stroke of a pen - a law stopping the trade in oil futures.

So then please spell out how you wish oil to be distributed. How the supply chain can make contracts ahead of time so they can plan further out.

How are you going to prevent oil futures in other countries on a global market?

Futures allow smoother business and are a good and necessary part of any functional free market.


How can you not see that this system is rather new, that it was not always used? How? How did it work before, and in other places now?

 

[mechtech2]

Originally Posted By: Astro14
One of the big commodity traders in the oil futures markets is the airline industry. As an example, Southwest frequently loses money on selling tickets, but makes money hedging oil futures....

Take the market in which they hedge their biggest cost (fuel), and you'll see ticket prices rise, since they can't mitigate risk...

10 years before the date on which you suppose it became a market, the oil producing and exporting nations (known as OPEC) realized that they could control the price of the commodity by controlling supply. The result was the oil embargo of 1973-1974...and the price soared...from $3 to $12 (a four fold increase, while cheaper than it is now, it was a far more dramatic increase than in the last several years).

Those suppliers have a vested interest (their own economies and budgets) in keeping the price of oil high...commodities traders deal in the margins...the real power behind pricing are those pumping the oil...

It is naive to think that: 1. this market is more than half the cost of crude and 2. that you can eliminate a market without cascading consequences.


We all know about OPEC. This is part of , like I already pointed out. But at least something is provided and produced.

 

[mechtech2]

Originally Posted By: Pablo
Originally Posted By: mechtech2

I believe we are talking 1/2 the price or more.



That's simply not true.


You may be right! Because it is actually WORSE!!

http://money.howstuffworks.com/oil-speculation-raise-gas-price.htm\

In this short article, please note the actual numbers, and how the commodities market inflated the prices grossly.
They ARE the problem, in a great way!

 

[Pablo]

Originally Posted By: mechtech2
Originally Posted By: Pablo
Originally Posted By: mechtech2

I believe we are talking 1/2 the price or more.



That's simply not true.


You may be right! Because it is actually WORSE!!

http://money.howstuffworks.com/oil-speculation-raise-gas-price.htm\

In this short article, please note the actual numbers, and how the commodities market inflated the prices grossly.
They ARE the problem, in a great way!


Well, not even heavy on theory and certainly missing the facts.

http://money.cnn.com/2012/03/22/markets/oil-gas-prices-speculators/index.htm

Quote:
There is no evidence of such anomalous inventory accumulations in the hands of index funds or speculators generally during the commodity price booms of the 2006-2008 period, or the one currently in progress.

The absence of distortions in quantities is decisive evidence against the BM view that index funds -- or any speculator -- has driven up the price of commodities.

This is not the only evidence that tellingly contradicts the BM charges.

Careful research by University of Illinois scholar Scott Irwin and Southern Illinois University professor Dwight Sanders finds no evidence that index trading moves prices in the short run. Research I am conducting using a different methodology also fails to find any link between index trading and price movements over longer time periods.

BM draws a false distinction between commodity markets and capital markets.


http://www.consumerenergyreport.com/2012...and-oil-prices/

http://www.theatlantic.com/business/arch...-of-oil/256076/

You make it seem so clear. If you cut out "speculation", fuel prices will nose dive. When a) that's not the case at all b) the whole market is very complex and the price of oil is not set investors in the first place.

 

[NHHEMI]

Originally Posted By: mechtech2
Originally Posted By: Pablo
Originally Posted By: mechtech2

I believe we are talking 1/2 the price or more.



That's simply not true.


You may be right! Because it is actually WORSE!!

http://money.howstuffworks.com/oil-speculation-raise-gas-price.htm\

In this short article, please note the actual numbers, and how the commodities market inflated the prices grossly.
They ARE the problem, in a great way!


You and I may not agree on gapping iridium plugs but we definitely do on this!

 

[greenjp]

How does the "oil speculation since 1983 raises oil prices" crowd square that thinking with what we saw in the late 90s? Gas was gal for a good stretch, and in the $1.25 range for quite a while thereafter. Couldn't/shouldn't these evil traders been jacking the price up back then too?

 

[itguy08]

Originally Posted By: L_Sludger

What will the SUV drivers do when they have to spend $280 to fill up?

It doesn't cost much to buy a cheap, highly-efficient car, in case of gas prices going sky-high. My car was very inexpensive, and it's already paid for itself in one year off gas savings alone vs. the car I drove previously, and that's with gas at current prices. If gas goes to $10/gallon I'm that much better off than people in guzzlers... duh! Can't you see the connection? I'll always have it better!


They will do the same thing you will be doing - scrimping and saving or getting out of that SUV into something else. Both of you will see your gas expenses double (or whatever it works out to be). There is no free lunch - yes, you will spend less than the guy with the gas guzzler but both of you will be paying much more at the pump.

 

[itguy08]

Originally Posted By: greenjp
How does the "oil speculation since 1983 raises oil prices" crowd square that thinking with what we saw in the late 90s? Gas was gal for a good stretch, and in the $1.25 range for quite a while thereafter. Couldn't/shouldn't these evil traders been jacking the price up back then too?


Fear, Uncertainty, and Doubt are the key drivers in the Oil Prices. If someone so much as sneezes in the Middle East gas prices will go up on the "fear" that something will happen to supply. Given that nobody (outside of Sandy issues) has gone to a gas station and not gotten however much gas they want and there is no rationing at any level there are no supply issues. All supply [censored] is based on what might happen, what could happen, and not based on any reality. We're finding new oil every day, many previous dry fields are now producing and there is growing concern in Abiotic Oil (that oil is actively being produced by organisms in the Earth's crust).

One could also make the case that those who lost their shirts with the stock crash (think fund managers) needed something to bolster their losses. What does pretty much everyone on the Earth need and will pay whatever you are asking use? OIL! So they forced us all to pay more to cover their losses. Again, there has never been supply issues, just good old FUD.

 

[Drew99GT]

Originally Posted By: NHHEMI
Originally Posted By: Drew99GT
Originally Posted By: NHHEMI


You are the one who seems to think it is untrue so if you are that curious do a search yourself. I am not doing it for you. I already know.


Your point? Look at what the price of oil did after it was deregulated and CBOT and NYMEX started futures trading. It went from 32 bucks to 16 bucks and stayed at roughly 25 bucks for 2 decades after the 80s. You think oil wouldn't have hit a high of 147 if it wasn't a free market in 2008? You think the shortages were bad in the 70s? Good lord...

Perhaps part of the price spike in 2007 was parabolic investment demand from the peak oil panic, the supposed dollar collapse/fear of inflation etc., the low interest rate induced asset bubbles in most risk assets, but was someone putting a gun to the guys who successfully shorted oil back to 30 bucks in 2008???


No, I do not believe oil would have hit $147 if it was not on the market. That price had nothing to do with supply and demand. It was all greed and panic. Never would have gone that high with set contract prices in place.

Oil wasn't shorted back to $30 it fell to that level along with the entire stock market as it crashed.


There HAS to be 2 sides to every transaction in a financial market by definition, and when more people are selling at lower asking prices, the price goes down. It doesn't just magically happen. Same with the equity markets. Isn't that the entire point of having a free market? So yes, many MANY good and prudent traders/investors sold futures contracts and made out like bandits. Funny, I don't hear people complaining when that happens...

 

[itguy08]

Originally Posted By: Drew99GT

There HAS to be 2 sides to every transaction in a financial market by definition, and when more people are selling at lower asking prices, the price goes down. It doesn't just magically happen. Same with the equity markets. Isn't that the entire point of having a free market? So yes, many MANY good and prudent traders/investors sold futures contracts and made out like bandits. Funny, I don't hear people complaining when that happens...


That's true when something is not a necessity. I can forgo the purchase of a new car, iPhone, computer, even clothes to an extent. But I must purchase oil to get to work. Not purchasing gasoline is not an option as I must go to work. Truckers must purchase Diesel to get goods to us, airlines must purchase jet fuel, etc. yes we can conserve but at the end of the day I need to fill my tank to go to work. And I will have to pay whatever they charge.

Think of it like water or electricity. What are your options if the rates go up 100%? Pretty much slim. You could shut the lights off and use candlelight but your fridge needs to run on something. In many places with city water, you are prohibited from digging a well so you are stuck.

 

[The_Jeff]

Originally Posted By: itguy08


Think of it like water or electricity. What are your options if the rates go up 100%? Pretty much slim. You could shut the lights off and use candlelight but your fridge needs to run on something. In many places with city water, you are prohibited from digging a well so you are stuck.


Or think of it as pork bellies or bushels of wheat or any other commodity you can invest in. You need food to live.

With oil prices, ultimately it's the producers and consumers who dicate price, the traders just bet for and against one or the other. If we can cut our consumption, they'll lose their shirts. If I find oil on my land while shooting at some food, I'm pretty much guaranteed the same price whether I sell it to Shell or XOM.

 

[itguy08]

I get what you are saying and I think oil/gas/diesel is different. With food, I can plant my back yard for veggies and talk to a local farmer about buying a pig or cow. My bet is you could get a deal on one.

If you find that oil there really is no option to refine it yourself. You would never get the appropriate permits and such to open a refinery. You pretty much have to sell it, cap it, or see if you can barter with a larger refinery.

Oil is more a utility like electric, water, and natural gas and should be regulated as such. Or get smart about rising energy prices.

 

[Tempest]

Quote:
All it does it cut out people who buy and sell it without having anything to do with it.

Exactly why property rights are involved. You want the government to determine who can purchase oil.

Essentially, you want the government to create a cartel of specific people that are "approved" to buy and sell crude.

This cuts out the general populace thereby removing their property rights.

 

[Drew99GT]

You're right; oil is about the most inelastic market there is. Still doesn't deny the fact that in any market, there is a buyer and a seller for the market to exist and for prices to move. My objection in this thread was the notion that people seem to think oil prices only go up.

 

[Drew99GT]

Originally Posted By: eljefino
If we can cut our consumption, they'll lose their shirts.
The bad ones who risk their own money and lose will lose their shirts; the smart ones who sell make money if they see consumption/demand is dropping, just like in 2008! Which is kind of the beauty of the market, isn't it???