Is there a point in which the price of oil will begin to go down? If the price of gas gets too high it will begin to drastically change the way consumers travel. I assume more mass transit and more fuel efficent cars will be produced and a lot of people in the country will start riding motorcycles and scooters. I read an article the other day in which the National Association of Business Economists predicted that the cost of crude oil per barrel would fall to $98 in Dec. '08 and $92 by Dec. '09. Where would they come up with such an estimate?
So in your opinions will oil continue to climb upwards forever or will it eventually fall in price like the NABE says?
"It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people's minds. " -- Samuel Adams.
When, do you think, are customers going to change their travelling preferences and habits dramatically? As far as I understand, gas prices have reached about 3,70$ per gallon in the United States. Americans perceive that to be high. In Germany, you pay 1,50€ per litre these days, that's about 6€ per gallon, equalling around 9,40$ per gallon. And still, people rather drive than walk a hundred yards to buy sweets and cigarettes.On the other hand, you rarely see gas-guzzlin' Silverados cruisin' 'round here, but still. The convenience of individualized transportation continues to justify the exploding costs for most car owners, as far as I see.I'd also contest the view that American gasoline is the main driving force behind crude oil prices. After all, awakening giants like China are going to increase demand pretty much regardless of price hikes and oil as the "lubricant" of every industrialized country has far more applications than just powering cars.Don't lose sight of inflationary effects either. As oil prices are intimately connected to the dollar, a plunge in dollar value is likely to cause another hike in crude oil prices.Personally, I can't reenact the NABE's conclusions. Maybe it's just supposed to create some sort of 'upbeat' business atmosphere?
Oil is in a bubble. It's being driven up now on speculation that Iran will be bombed. If Iran is bombed, it will spike up even further for a short time while smart longs dump it, then slowly collapse to a point way below where it is now.The price has been increasing at a cumulative rate of 25% pa for the past seven years or so. It has just hit the top of that price-channel (viz $130 per barrel). Channel analysis suggests that it will fall back from here, then leap up at some point to $160 until it falls back to $40.But I ain't placing any bets on it. Betting on a bubble is a sure route to the poor house.
The complaints from the media have shifted from the high prices of gasoline to the high profits of the companies. The companies blame supply and demand, and say that they need to be allowed to drill in places where they are banned from drilling, and senators tell them that they just want to do that to make more profit.
Increasing the supply might drop the prices. So will using less gasoline, in general.
Why don't the oil companies bring up that they're only getting 8% return on investment? (http://abcnews.go.com/Business/IndustryInfo/Story?id=4749343&page=2 http://blog.mises.org/archives/008088.asp) I mean, dear lord, I can get a risk-free C.D. for 5% return, even if oil profits were 20% I couldn't see why people would get P.O.ed.
"Keynesianomics is a Ponzi scheme"
"You are correct in that Capitalism does not help with poverty, but it is only because it eliminates poverty altogether.."
I think it will drop, but not by a ton. The run-up in the last few months has been really something. I paid $3.97 yesterday!
The political grandstanding and economic ignorance in the Senate this week is rather frustrating to watch.
How do these Senators know that prices are too high? How would they know what the correct prices are? What is it that made the previous prices (say 6-12 months ago) 'correct?' http://news.yahoo.com/s/ap/20080521/ap_on_go_co/oil_congress
Interested in economics, watches, or fountain pens?http://amateureconblog.blogspot.com/
They believe the level that people can't afford to drive to work, apparently, is the one by which it's too high.
Nevermind the lack of planning that got them stranded at home in the first place.
kingmonkey: So in your opinions will oil continue to climb upwards forever or will it eventually fall in price like the NABE says?
I tried looking for their analysis on their website, but I think you have to be a paying member. I am curious how they came up with their estimates. Obviosly demand is only to increase, especially with the emerging countries of China and India
Like Lance said, oil could be in a bubble, but I really don't know. I think we are reaching the critical point where demand is outstripping supply. I really don't see cheap oil ever again. It may dip down to $90 or $100 per barrel for a time. I would be skeptical if it dipped below these levels and remained there for a substantial time.
i'm not sure oil will come down substantially. it may not be a market process. if you look at the price of oil in terms of gold, it has actually slightly declined in the last 10 years or so. compared to the super-inflationary dollar and euro, on the other hand, well, you know what that looks like.
here's a chart (gold in purple, dollar in blue and euro in red):
zrated:if you look at the price of oil in terms of gold, it has actually slightly declined in the last 10 years or so
Your chart does not show the most recent surge in oil/gold -- from 0.1 oz in Feb to 0.14 oz today.I am looking now at a chart of oil/gold - i.e. the cost of a barrel of light crude oil in troy oz of gold - which stretches from 1920 to today.In 1920 oil was 0.3 oz gold. From 1921 to 1930 it was down to between 0.1 oz and 0.2 oz of gold. Since 1930 it has always been between 0.03oz and approx 0.14 oz, and right now is at the top end of that band.This is only the 4th time it has reached this level since the 1920s. The other times were Jul 76, Jul 2000, and Jul 2005. Every other time it has rebounded sharply downwards from these levels. This time might be different - but I wouldn't bet on it.
i'd never bet on "this time it's different", either. normally in a situation where something like this is on what might be called a "climax run", a sharp decline follows. that happens in a market process. what i wonder is if this particular instance actually is a market process considering the effects of monetary inflation. i'd like to see the relationship between gold (or any other commodity, for that matter) and oil before and after 1913 in relation to actual monetary policy.
the chart simply shows a remarkable stabilty of gold compared to exaggerated fluctualtions of the dollar. of course, we know that any two commodities will fluctuate in price relative to each other on a market, but i'm interested to see the fluctuations of a non-market entity (where supply is not market determined) like the dollar in comparison.
btw, where did you get those charts? i'd love to take a look at them.
NABE has a very strange way of looking at things. I am a member of NABE and get quite flustered trying to understand their reasoning. A lot of times they will send out questionaires to folks who then respond and based upon the responses of the individual members will they come up with some chart/analysis.
Bear in mind that NABE LOVES the Fed. They love the Fed to the point of putting on a seminar where the Fed talks about the Economic Outlook. As for me, the Fed is not to be trusted or believed.
Unless the dollar is going to gain some ground again and the threat of the US bombing Iran subsides, I do not see the price of oil getting any cheaper.
As far as Congress' ideas on how to deal with the problem....taking OPEC to court (which court by the way and would OPEC care) is a move in the wrong direction....how about getting rid of the Fed and those lunatics in the White House....after all, that's where part of the problem resides.
Sometimes "majority" simply means that all the fools are on the same side
www.frontlinethoughts.com email address required to read the articles...
Where Will Oil Prices Go? So, let's look at the fundamentals for oil. While a large part of this week's rise in oil was short covering (you can tell that from open positions), the supply of oil was down 7% from last year, even with demand beginning to fall. But there is an interesting footnote to that statistic, which we will visit later. Look at the chart below from www.economy.com: Notice that supplies turned down sharply this last month, while the momentum of falling supply had been dropping since January. That is to say, the change in crude oil stocks was a negative 10% in January and was a little over -4% a month ago, falling to -7% today. But this is in the face of demand slowing. Today we learned that gasoline usage was down 4.2%, as prices are finally changing American driving behavior. Jakab Spencer noted in his always interesting Dow Jones column that there is a disconnect between the New York Stock Exchange and the New York Mercantile Exchange, just one mile apart. The NYSE is pricing in $75 oil in oil stocks, while the futures market is surging over $135, and there are calls for near-term $150-a-barrel oil. The stock market is telling us that oil, at least in futures terms, is in a bubble. And frankly, if you listened to their testimony, and more importantly pay attention to their actions, oil company executives simply do not believe that the price of oil is going to be $135 a barrel for the next few years. If they did, they would be punching more holes in the ground in places where it might be expensive to get the oil to market - but at $135 a barrel it would be profitable. And then there is an odd circumstance in the oil picture that I think may suggest that we could see a break, and perhaps a violent one, in the near term for the price of oil. Where Are All the Tankers? For a few weeks now, observers have noticed that Iran is leasing tankers and storing oil in them. At about $140,000 a week or so, that is expensive storage. At first, conspiracy theorists were wondering if they were preparing for some kind of war or attack. But more conventionally, it may be they are having problems selling their oil. Their oil is not very high-quality, and there are only a few places that can take it and refine it. India, China, and the US are among the countries with refineries that can take Iranian oil. (And yes, George Friedman of Stratfor tells me some of it does end up in the US from time to time.) India's re
So, let's look at the fundamentals for oil. While a large part of this week's rise in oil was short covering (you can tell that from open positions), the supply of oil was down 7% from last year, even with demand beginning to fall. But there is an interesting footnote to that statistic, which we will visit later. Look at the chart below from www.economy.com:
Notice that supplies turned down sharply this last month, while the momentum of falling supply had been dropping since January. That is to say, the change in crude oil stocks was a negative 10% in January and was a little over -4% a month ago, falling to -7% today. But this is in the face of demand slowing. Today we learned that gasoline usage was down 4.2%, as prices are finally changing American driving behavior.
Jakab Spencer noted in his always interesting Dow Jones column that there is a disconnect between the New York Stock Exchange and the New York Mercantile Exchange, just one mile apart. The NYSE is pricing in $75 oil in oil stocks, while the futures market is surging over $135, and there are calls for near-term $150-a-barrel oil. The stock market is telling us that oil, at least in futures terms, is in a bubble.
And frankly, if you listened to their testimony, and more importantly pay attention to their actions, oil company executives simply do not believe that the price of oil is going to be $135 a barrel for the next few years. If they did, they would be punching more holes in the ground in places where it might be expensive to get the oil to market - but at $135 a barrel it would be profitable.
And then there is an odd circumstance in the oil picture that I think may suggest that we could see a break, and perhaps a violent one, in the near term for the price of oil.
Where Are All the Tankers? For a few weeks now, observers have noticed that Iran is leasing tankers and storing oil in them. At about $140,000 a week or so, that is expensive storage. At first, conspiracy theorists were wondering if they were preparing for some kind of war or attack. But more conventionally, it may be they are having problems selling their oil. Their oil is not very high-quality, and there are only a few places that can take it and refine it. India, China, and the US are among the countries with refineries that can take Iranian oil. (And yes, George Friedman of Stratfor tells me some of it does end up in the US from time to time.) India's re
For a few weeks now, observers have noticed that Iran is leasing tankers and storing oil in them. At about $140,000 a week or so, that is expensive storage. At first, conspiracy theorists were wondering if they were preparing for some kind of war or attack. But more conventionally, it may be they are having problems selling their oil. Their oil is not very high-quality, and there are only a few places that can take it and refine it. India, China, and the US are among the countries with refineries that can take Iranian oil. (And yes, George Friedman of Stratfor tells me some of it does end up in the US from time to time.)
India's re