http://www.hussmanfunds.com/wmc/wmc080707.htm This will be interesting to see how it plays out. There was recent testimony before congress of the role of speculators in driving up the price of oil. Some think its a legit mover of the price, some don't. Dr. Hussman is a Phd. in economics, and manages his own $3B mutual fund. Most who think the price of oil will not fall, believe that growth in China and India will soak up the supply that is freed by a US recession.
I'm one of those that speculate that oil prices will not fall. The growth in China and India is part of the problem along with our opponents such as Venezuela, Iran, etc. Speaking of Iran, they keep threatening to eliminate Israel. It wouldn't surprise me If Israel bombs some of their nuclear facilities by the end of the year btw. Then you have us who are playing into our enemies hands because we haven't built a refinery in this country in 30 years and the government won't let the free market system work when it comes to oil drilling in this country! Too much regulation! It all has played a role, you can't look at just a hand full or one reason and say that is why this has happened! I'm not sayin you did houtiger, just sayin my 2 cents before bedtime!
Undoubtedly, there are several big things affecting the price of oil. 1. Supply / demand - China has 1.5 billion people and India 1.0 billion, together, they have 1/3 of the worlds population. Both were economically backward 30 years ago, but are modernizing rapidly, leaving the water buffalo and bicycle era behind and buying CARS. There is significant new demand and it will grow for years to come in those large countries. 2. The US Dollar (USD) has been decimated by 8 years of republican policies. Clinton turned over a balanced budget and strong dollar, and the republicans have trashed it. The dollar has lost half its purchasing power vs. the Euro during Bush II's term. It now takes more dollars to buy a barrel of oil from overseas. 3. We are running out of "cheap to produce" oil. We found and produced the easy onshore supplies of crude first, then moved to shallow water offshore, now we are after deep water offshore oil. It gets more expensive all the time. There is plenty of oil in the tar sands in Canada and is shale in the western US, but producing it is much more expensive than other sources. 4. Speculators in the commodity marketplace. 1, 2, and 3 are real, and seemed to drive oil from 30 to 70 a barrel over 6 years. Oil doubled from 70 to 140 per barrel in the last 12 months. That is highly unusual. It seems like something other than supply demand, value of the dollar, and creeping production cost have moved the market in the last year. Several bright folks have suggested, as in congressional testimony recently, that it is financial speculators who have caused the rapid price rise, as happened to Cal. electricity prices when the market was manipulated by Enron traders just prior to Enron's collapse. I'm an active investor, but I don't do commodities (cept for a few gold coins) and I don't do futures (I don't want to spend the time to learn the complexities). So, I don't know the effect of commodities futures trading, other than what I read. But it sounds like we should all do a little reading and try to understand what's going on with it. It could affect you if you hold Exxon stock, or the other major producers or oil service companies, over the next year.
I don't know if I buy the Enron traders thing or speculators theory. I will plead some ignorance here but I believe the Enron thing was an American problem and not a world wide issue. I would find it hard to believe that the speculators in this country have that much control over the oil market world wide. It seems like people want to make speculators bad guys but if I'm not wrong here I believe we have speculators for many things other than oil and they probably aren't bad. I don't know if other countries have speculators but I'm assuming oil cartels are just that, just a little different so its possible. I heard something very enteresting on the radio a while back. They were talking about all the supplies of coal we have in this country and how the technology is there to convert it to oil. They were talking about what a wealth of coal we have. I know that is a dirty little word to some in the left. Btw, Lets don't leave out the factor you haven't stated. The left is also responsible since we haven't built any refineries in this country, the anti-drilling left are already starting to come around in this country. Why? The Americans vote with their pocketbooks, they aint going to put up with gas prices and the government not attempting to do anything to fix the problem. Democrats will lose big time if they don't appear on board with oil drilling in the short term at least. This was suppose to be their year but the price of crude, gas may say otherwise. I will say that I am for alternative energy however we need oil and gas today to get us where we need to go tomorrow. All politicians have let us down time and time again and this is just another issue and reason why. America use to lead the world in technologies, we use to have the ability to move on, one step ahead of countries like China but they have caught up to us and we now feel the pinch.
The problem with commodities futures is the inherent factor that 50% of the people will make money and 50% will lose money. One really must be a well-informed professional to make consistent money in such a risky venture.
THat's two times you've stated we won't build refineries. How's that the left's fault? Do you really believe that here in La. we wouldn't let any oil company build a refinery? We have land by the Sunshine bridge that we're trying to give away to any heavy industry. The governor and Legislature would do cartwheels down the Mississippi if a company proposed a new, mega refinery. To say the goverment is stopping the construction of a refinery is insulting the intelligence of anyone scantly involved in the La. petro chemical industry. And I would be willing to bet you know it. To say "it's the left's fault we don't have anymore refineries is disenginious, to say the least.
To add to this while no new reindeers have been built in thirty years are so, refining capacity has been increased through expansion of existing refineries.
I think the reason that people thing that "the left" is responsible for the lack of new refineries is this: Most environmental groups are left wing oriented. There was a ruling, approved by the Supreme Court, that allows for environmental groups to sue oil companies in State Courts to block new drilling and new refineries. So anytime a new refinery or drilling is proposed, multiple environmentalist groups file multiple lawsuits, that must be cleared up in the courts before they can proceed. This process takes many many many years, and in the end the Oil companies feel like they can make their profits elsewhere. I'm not opining whether these tactics are right or wrong, but just trying to clear up why people seem to blame the lefties for the lack of new refineries.
Reindeers?? :lol: But you're exactly right, Marathon near Laplace is doubling their capacity as we speak.
