$100 A Barrel Oil is on the Way

#1,456
#1,456
rjd970 said:
How would more supply bring the cost down?

Demand is down. Supply isn't the problem.
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It's not always about current supply and demand. Prices also rise and fall on future expected values. The argument for Keystone, fracing, offshore production etc. is that it changes some of the volatility in the expected future values of supply.

If the Obama Admin went all in on exploration and production we'd see it in the markets long prior to the actual output.

That effect would not be permanent at the new level but as these new sources come on line the expectations of future supply interuptions in areas like the ME would have less impact on pricing.
 
#1,459
#1,459
volinbham said:
It's not always about current supply and demand. Prices also rise and fall on future expected values. The argument for Keystone, fracing, offshore production etc. is that it changes some of the volatility in the expected future values of supply.

If the Obama Admin went all in on exploration and production we'd see it in the markets long prior to the actual output.

That effect would not be permanent at the new level but as these new sources come on line the expectations of future supply interuptions in areas like the ME would have less impact on pricing.
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I agree this is the way it is supposed to work.

What the market is basically saying is demand will go up in the future and supply will go down, hence the future prices rising the way they are and being subject to ME turmoil. I don't think that is reality, and things like Obama going all in on exploration and what not will have little affect on future. As soon as somebody farts in the ME the price will skyrocket again overnight, no matter how much we promise to look for more oil. I just get the feeling that we are all paying at the pump right now because of pyschological commodities trading that have little basis in reality. Sooner or later this bubble is going to burst.

Honestly, if Obama announced tomorrow we are going all in with all exploration and pipeline building, do you think price drop overnight the way it has risen the last couple of weeks?
 
#1,460
#1,460
rjd970 said:
I agree this is the way it is supposed to work.

What the market is basically saying is demand will go up in the future and supply will go down, hence the future prices rising the way they are and being subject to ME turmoil. I don't think that is reality, and things like Obama going all in on exploration and what not will have little affect on future. As soon as somebody farts in the ME the price will skyrocket again overnight, no matter how much we promise to look for more oil. I just get the feeling that we are all paying at the pump right now because of pyschological commodities trading that have little basis in reality. Sooner or later this bubble is going to burst.

Honestly, if Obama announced tomorrow we are going all in with all exploration and pipeline building, do you think price drop overnight the way it has risen the last couple of weeks?
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I couldn't agree more. I wish that the oil markets were more of a reflection of actual events rather than guessing about what will happen. I am no stock market guru, I admit. Are all markets as vulnerable to speculation as the oil market? Again, no expert, but it seems to me that other markets at least wait for quarterly profit reports are released until the bottom drops out from under a stock or the price rises significantly. Another question: Do speculators benefit monetarily from driving the price up based on guess work? My guess is that they do, but I am not sure. If that's the case, seems shady at the least perhaps rising to criminal levels.
 
#1,462
#1,462
MG1968 said:
here we go again, blaming it on the speculators

that's what Bill O'Reilly does
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Not necessarily, I concede there are a lot of factors that play into this. I just think futures are irrationally weighting the price right now.

Like I said, we could go all in with exploration right now, and I doubt it would have anywhere near the equal opposite effect that happens when, say, Israel threatens attack on Iran, or some other stupid thing in the ME that happens every 10 years.

I think speculation is a big part of it right now.
 
#1,463
#1,463
I would say us all in would have a noticeable impact both on overall price and stability of price - particularly when it moves beyond words to actions. Political shocks will always introduce spikes but part of their magnitude is based in the upward limit on supply. Change that upward limit and some of the short-term shock is mitigated.
 
#1,464
#1,464
rjd970 said:
Not necessarily, I concede there are a lot of factors that play into this. I just think futures are irrationally weighting the price right now.

Like I said, we could go all in with exploration right now, and I doubt it would have anywhere near the equal opposite effect that happens when, say, Israel threatens attack on Iran, or some other stupid thing in the ME that happens every 10 years.

I think speculation is a big part of it right now.
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Speculation does play its part in the price, there's no getting around it. The share of speculation in the market is well over twice what it was just ten years ago, but it's silly to make it the main culprit for the price, same as policy or any one nation or group.

Anything our government or private sector does in this country isn't going to substantially shift the price of oil on the world market (and our own prices), and our level of influence is going to continue to decline as China and India continue astronomical growth in GDP.
 
#1,465
#1,465
milohimself said:
Speculation does play its part in the price, there's no getting around it. The share of speculation in the market is well over twice what it was just ten years ago, but it's silly to make it the main culprit for the price, same as policy or any one nation or group.

Anything our government or private sector does in this country isn't going to substantially shift the price of oil on the world market (and our own prices), and our level of influence is going to continue to decline as China and India continue astronomical growth in GDP.
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I'm all for energy independence, meaning more drilling, digging, and expansion of alternatives. But I don't seriously think it is rational to believe a potential problem in the ME should rationally have as much affect it is having, and I dont think increased domestic production can make any appreciable offsetting difference.

It is just irritating because there isn't much anybody can do, despite what we are told by the politicians trying to make a play on the situation. I don't get the feeling current pricing is a true reflection of reality, whether that is right or wrong.
 
#1,466
#1,466
Despite all that, the majority of Americans still think that politicians have far more ability to affect the price of oil than they really do. So the politicians have to pander and sell that idea, because the second one does come out and admit that, then his or her career is probably through.
 
#1,468
#1,468
milohimself said:
Despite all that, the majority of Americans still think that politicians have far more ability to affect the price of oil than they really do. So the politicians have to pander and sell that idea, because the second one does come out and admit that, then his or her career is probably through.
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Every Democrat in the US, including the elected ones, said Bush could heavily influence gas prices.

Funny how now, they say the president has no control of gas prices.
 
#1,469
#1,469
TheDeeble said:
Every Democrat in the US, including the elected ones, said Bush could heavily influence gas prices.

Funny how now, they say the president has no control of gas prices.
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I think Bush's reputation as an oil man fairly or unfairly hurt him a bit on that issue. Not saying that justifies the conflicting stances, it's just an observation. Truth is presidents get more credit and blame than they deserve on many issues.
 
#1,470
#1,470
TheDeeble said:
Every Democrat in the US, including the elected ones, said Bush could heavily influence gas prices.

Funny how now, they say the president has no control of gas prices.
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Both sides do it because they have to do it, because the majority of people think the POTUS or the legislature can push some bills through and magically drop the price of gas by a dollar. It was stupid when Dems did it while Bush was in office and it's stupid when Newt or whoever trots out $2.50 gas pump signs.
 
#1,471
#1,471
milohimself said:
Both sides do it because they have to do it, because the majority of people think the POTUS or the legislature can push some bills through and magically drop the price of gas by a dollar. It was stupid when Dems did it while Bush was in office and it's stupid when Newt or whoever trots out $2.50 gas pump signs.
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But in reality they could. Not saying it's a good idea but they could repeal all Federal taxes on gasoline. Another move would be to mandate one single blend for all of the country and all times of year.

Both of these would easily take a buck off the cost.
 
#1,472
#1,472
volinbham said:
But in reality they could. Not saying it's a good idea but they could repeal all Federal taxes on gasoline. Another move would be to mandate one single blend for all of the country and all times of year.

Both of these would easily take a buck off the cost.
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But, as you said, none of them are a good idea. Besides, federal fuel tax for petrol is something like $0.18, and even requiring a cost-optimal blend of ethanol and petrol would struggle to strip more than $0.15 or so.

The only way they could really drop the price is to provide some massive subsidy or tax credit.
 
#1,473
#1,473
milohimself said:
But, as you said, none of them are a good idea. Besides, federal fuel tax for petrol is something like $0.18, and even requiring a cost-optimal blend of ethanol and petrol would struggle to strip more than $0.15 or so.

The only way they could really drop the price is to provide some massive subsidy or tax credit.
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I'm simply questioning the assertion that the POTUS and/or Congress can have virtually no effect. I think the blending issue would have more effect since it would enhance refining capacity and take some of the seasonal impact out of pricing.

I guarantee if we go all in on exploration we would change the supply situation enough to moderate the impact of speculation. The ME is producing at near capacity. That is why small changes have big impacts in the speculation market - the upside for another country to make up supply interruption is very narrow. If we brought the equivalent of a Venezuela online the upside variability of supply would grow which would alleviate some of the speculation. Nigeria gets all hinky? More oil sands come on line and the risk of supply interruptions is mitigated.

As an example the other way, if we declared war on Iran the price of oil would skyrocket. Clearly, policy decisions can and do impact pricing.
 
#1,474
#1,474
Except that I believe we're basically reacting to Iran and Israel at this point.

As for our own production, as far as I'm aware, something like two thirds of all current leases out there are inactive, even though the companies who hold those leases are already green lit to explore and drill. I don't know why that already available land isn't being used.
 
#1,475
#1,475
Because we don't have the infrastructure to move the oil from the well and there are only so many drilling rigs available and they are all busy drilling on better/more expensive private land
 
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