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So far demand is dropping quicker than production, but if the two cross again, it may whip up higher than the last Price Peak.
The last peak was largely speculative and not driven by any fundamental. The only reason prices would "whip up" again is if there is another speculative bubble, which is extremely unlikely. That is assuming by "whip up" you mean a rapid increase in prices. Its perfectly possible that prices exceed the previous peak over time though. I really don't know enough about the oil markets to make a claim about what sort of time frame is reasonable though. But its hard to imagine how a fundamentally driven increase in oil prices would happen at the rate of the most recent speculative bubble.
Really though, at least to me the current downward shift in oil prices is a godsend. If the new government, private business and individuals doesn't take advantage of this period of cheap oil to get their crap in order then they deserve failure.
I think the world can function quite well if oil is at its current level. A lot of economies of the world need oil to be north of $30/bbl. The Saudis are used to having big excesses to splurge on.
The last peak was largely speculative and not driven by any fundamental. The only reason prices would "whip up" again is if there is another speculative bubble, which is extremely unlikely. That is assuming by "whip up" you mean a rapid increase in prices. Its perfectly possible that prices exceed the previous peak over time though. I really don't know enough about the oil markets to make a claim about what sort of time frame is reasonable though. But its hard to imagine how a fundamentally driven increase in oil prices would happen at the rate of the most recent speculative bubble.
Underneath he speculation that drives the overshoot there is some basis in the real world. But last time I looked the typical commodity has around 20X the volume of trading as there is actual real world product.
A few months before the (most recent) Peak Price, Demand actually was out running Production/Supply. And there are still no easy wins on getting Production higher. Not that it matters for prices at this point -- the general economic collapse is dropping Demand faster than Production.
The look ahead caution is that as Production continues to fall, Production may fall faster than the falling Demand. When and if that happens it is the point when the price rise begins again -- and then hit the Amplifiers of commodity trading -- speculation, as you say -- and then BAM up it flies, again.
The part I am still pondering if it behaving like a under-damped system -- each Peak Price higher and the drops faster and closer together. Those systems tend to end with a Bang!
Quote:
Really though, at least to me the current downward shift in oil prices is a godsend. If the new government, private business and individuals doesn't take advantage of this period of cheap oil to get their crap in order then they deserve failure.
You mean like with gasoline prices down we can finally get the overstock of SUVs sold and get autoworkers back to work -- building more?
Humanoid, you might as well face it. You fell asleep at college one day and woke up in a country of Wall-toWall morons.
Of course oil will go up and down with supply, demand, speculation, etc. but at too low a price there is a disincentive to make large capital investments to find and produce more.
With all the booms, busts, and general inflation in the industry a price floor of $70 is not unreasonable if we want to see continued exploration (equivalent to about the $30 level in 1980 that boosted exploration).
Today's ~$50 range puts a bit of a damper on both oil exploration and alternative energy research.
don't forget governor palin has a new pipeline coming down too. but i dont see a reason why we shouldn't be building towards an energy free economy. what i mean by that is, no longer importing oil or at least cut it by 70%. i am really in support of t boon pickens natural gas on the trucking industry. its easy and its here now and it costs hardly anything to covert an engine.
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Originally Posted by 70Ford
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHA
/points at Saudi King
Be careful where you point that thing. We're going to wind up eating it when we find ourselves in a supply crisis after the Arabian states cut production by 20%.
The look ahead caution is that as Production continues to fall, Production may fall faster than the falling Demand. When and if that happens it is the point when the price rise begins again -- and then hit the Amplifiers of commodity trading -- speculation, as you say -- and then BAM up it flies, again.
The same speculative environment is not going to exist. Not only due to changes in regulations, but also because the massive deleveraging going on right now. You're not going to see 40 to 1 leveraging again. All the broker dealers are no bank holding companies (or have merged with one) and aren't allowed to leverage themselves like this anymore.
Anyhow, I really don't know how much changes in demand vs supply effect oil prices but I'm pretty confident that we won't see a speculative bubble again. Its going to be fundamentally driven. I don't see how fundamentals are going to drive oil prices up 100% in a single year.
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8,309 posts, read 38,782,175 times
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Quote:
Originally Posted by Humanoid
The same speculative environment is not going to exist. Not only due to changes in regulations, but also because the massive deleveraging going on right now. You're not going to see 40 to 1 leveraging again. All the broker dealers are no bank holding companies (or have merged with one) and aren't allowed to leverage themselves like this anymore.
Anyhow, I really don't know how much changes in demand vs supply effect oil prices but I'm pretty confident that we won't see a speculative bubble again. Its going to be fundamentally driven. I don't see how fundamentals are going to drive oil prices up 100% in a single year.
I hope this is correct. The most win-win scenario (unless you are an alternative fuels advocate) would be to see oil stabilize in the $50-$60 range for 2009.
I hope this is correct. The most win-win scenario (unless you are an alternative fuels advocate) would be to see oil stabilize in the $50-$60 range for 2009.
Actually I am an Alternate Fuels advocate, but truly am not served by wild ups and downs.
You know that story about two guys out in the woods with a bear coming, and one stops to tie his shoes -- the other guy says do not worry about your shoes, you cannot out run a bear . . . the first guys responses -- I do not have out run the bear . . . I only have to out run you.
Same story in Alternate / Renewable Energy, it just has to be cheaper than the conventional, if the prices are stable. I can beat the $50 to $60 equivalent rate you are talking with domestic produced Alternates / Renewables.
Hard part is when the conventional has the capacity to have price drops into the single digits (e.g. Oil under $10 -- and yeah, I can already hear it -- THAT can never happen. Folks said that about another Depression, as well.)
Oil's downward price capacity creates a downside risk that is very difficult to manage -- other than maybe by shorting Oil Futures.
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