$4 Gasoline? Oil Speculators Are Back

[boutons_deux]

Despite weak demand in the U.S. and Europe, oil prices climbed this week to near $90 a barrel and gasoline prices have passed $3 a gallon on the West Coast and parts of the Northeast.

Why? If demand is down and supplies are plentiful — and they are — why would prices be going up?

Because Wall Street speculators are driving up oil and gasoline prices again — just in time to dampen holiday cheer.

"It's all about investor optimism, and that's been the story about 2010 ... that's the primary reason why we're seeing oil prices at $90 (a barrel) and gasoline making an uncharacteristic climb in December towards $3 a gallon," said Troy Green, a national spokesman for the AAA Motor Club, which monitors gasoline prices.

"The money they get from government tax relief, they'll have to go pay in higher prices for food and energy," said Michael Masters, head of Masters Capital Management and a frequent witness before Congress about financial speculation in oil contracts.

But supplies are abundant, it said in its weekly report, This Week in Petroleum — especially when compared with a few years ago.

There's been so much oil in storage on land this year that oil tankers were actually converted into floating storage facilities.

refiners who convert oil into gasoline are operating at extremely low utilization rates.

Lower production runs create tightened supplies, which in turn drives up prices and sets the table for speculators.

http://www.truth-out.org/remember-4-gasoline-oil-speculators-are-back65799?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TRUTHOUT+%28t+r+u+t+h+o+u+t+| +News+Politics%29


so the Wall St oil traders speculating up the barrel and refiners are restricting supply. The "free market" at work. Hey, they gotta pay for the their Christmas parties and presents, too.

[RandomGuy]

http://caseyresearch.com/images/ChinaAutos3.jpg


Record oil prices have failed to temper the enthusiasm of Chinese auto buyers. In 2006, 6.2 million cars were sold in China, enough for the Middle Kingdom to surpass Japan for #2 in total vehicle sales (the United States still sells twice as many). In the first five months of 2008, Chinese auto sales show no signs of decelerating, up 17.4% from the same period last year.

The rise in Chinese auto sales has been so dramatic that projections by China’s government for auto sales in 2020 were already exceeded by 2005.

Millions of tons of copper, nickel, aluminum have gone into China’s car frenzy, boosting the commodity prices of every raw material involved. But the most pressing consequence of China's great leap into the culture of happy motoring is its impact on crude oil demand.

Assuming that the 7.3 million new car owners in 2008 each drive 5,000 miles a year, and they achieve 40 miles per gallon, the result would be an additional 45.6 million barrels of crude demand, equivalent to 125,000 bbl/day. In other words, new Chinese drivers will devour 25-30% of the recently promised Saudi production increase in a single year.

To those predicting an imminent decline in world oil demand, we say: don't bet on it.

http://www.propertyinvesting.net/cgi-script/csNews/image_upload/specialreports_2edb.China_Oil%20Consumption_Increa se_Due_to_Petrol_Diesel_Cars.gif

China's oil demand increase 'astonishing', says IEA (http://news.bbc.co.uk/2/hi/business/8563985.stm)


At the current rates of growth of US and China oil imports and consumption, China's oil consumption will match US oil imports by '16-'17. China's oil imports and consumption will reach parity with the US by '21-'22, at which point the US and China will together consume 60% of peak global oil production (assuming 73-75M bbl/day) versus 37-38% today, leaving the rest of the world to adapt to receiving the remaining 40% (35-40% less than is received today).

However, at the same trend rates of imports and consumption, the US and China will consume 80% of global oil production by the late '20s to early '30s, leaving the rest of the world just 20% of supplies, and China is on track to consume the entire world's oil production by the '40s-'50s; needless to say, this cannot occur.

Assuming the US and China can secure the necessary oil (???), and that global oil production remains at the plateau since '04-'05 (???), the EU+, Latin America, and Africa will experience a decline in oil supplies/consumption of 35-70% over the next 10-20 years, i.e., 4-6% avg. annual decline over the period. (This does not include faster depletion and/or the higher price of oil reducing growth of demand and thus cutting further supplies/consumption for the EU, Latin America, and Africa.)
A website that Boutons might agree with, based on the blurb at the top, heh. Data still looks fairly in line tho'. (http://imperialeconomics.blogspot.com/2010/07/chinas-oil-consumption-and-imports.html)

[RandomGuy]

so the Wall St oil traders speculating up the barrel and refiners are restricting supply. The "free market" at work. Hey, they gotta pay for the their Christmas parties and presents, too.

Nah.

They are too busy stealing money from municipalities. (http://www.bloomberg.com/news/2010-12-08/bank-of-america-deal-in-muni-case-may-be-tip-of-the-iceberg-.html)

[boutons_deux]

They might get caught stealing from municipalities, which they have to interact with.

Commodities speculation is totally secret den of thieves on computers.

[SnakeBoy]

http://i51.photobucket.com/albums/f378/owlmirror/drillbabydrill.jpg

[boutons_deux]

http://i51.photobucket.com/albums/f378/owlmirror/drillbabydrill.jpg

It was wrong then, and wronger now. USA cheap oil is drilled out.

Do you really think oil extracted from US dirt is gonna be sold by the extractors cheaper than that imported?

If pitbull bitch didn't look so drillable to all the bubbas, if she were plain or ugly, she'd be nowhere.

[boutons_deux]

OPEC expects $100/barrel is the price where price matches demand, and won't increase production to keep it below that, and of course, they don't GAF if it's $150.

$5+/barrel is on the horizon.

Faux Macho Drugstore Cowboys, Start Your Pristine Pickups.

[Wild Cobra]

Pssssstttt...

Boutons...

I'll tell you a secret.

The speculators never left!

[Winehole23]

Faux Macho Drugstore Cowboys, Start Your Pristine Pickups.Thanks for saying something different. :tu

[Winehole23]

I've seen some noise about this in the financial press. A couple of industry sources predict $150 oil barrels and $5.00 gas next year.

[Wild Cobra]

I've seen some noise about this in the financial press. A couple of industry sources predict $150 oil barrels and $5.00 gas next year.
Well, now the the democrats will lose the stranglehold on the economy, it will increase. Oil demands will increase. Simple supply and demand pricing would demand the prices increase.

Of course, the republicans will get blamed.

[Winehole23]

Well, now the the democrats will lose the stranglehold on the economy, it will increase. Oil demands will increase. Simple supply and demand pricing would demand the prices increase.Supply and demand, or "lost stranglehold"?

Please pick a lane.

Of course, the republicans will get blamed.I don't know about that.

Who will you blame?

[TeyshaBlue]

I've seen some noise about this in the financial press. A couple of industry sources predict $150 oil barrels and $5.00 gas next year.

Yeah, the CEO of Shell was saying $5/gal by 2012 over the weekend. He might be optimistic.

[boutons_deux]

http://www.salon.com/news/trending/2010/12/28/5_dollar_gas/index.html

[Trainwreck2100]

Pssssstttt...

Boutons...

I'll tell you a secret.

The speculators never left!

correct they just lost an assload of money and needed to get it back.

[CosmicCowboy]

Funny, I went fishing offshore from Port Aransas back in October/November...we went about 60 miles out. There were loaded down medium sized oil tankers (not super tankers) parked everywhere out there about 15 miles offshore...They weren't waiting for harbor pilots...they were in long term storage...there were at least 15 of them just sitting there...

We joked (half-seriously) that "they" knew the price of oil was about to go up and they were just sitting there till it did...

[boutons_deux]

"price of oil was about to go up and they were just sitting there till it did"

That oil probably belonged to Goldman or other asshole player.

There was a report that in early 2008, when oil was very low, a Goldman trader bought 5 tankers of oil and parked them in the Caribbean. That summer, oil hit $140, and the trader made a few $100M. Usually traders never take delivery on the oil they buy, but this guy did, and made a killing.

The world should bar oil from the commodities exchanges and from speculation. If not, the traders and oilcos will rip a huge asshole in civilization's wealth as recoverable, economic oil continues to be depleted, and as the demand outstrips supply catastrophically, as in old-timey wars for grabbing natural resources (aka, the Repugs invading Iraq for oil).

[CosmicCowboy]

The futures markets provide a valuable service to the actual end users of the product but the speculators who never intend to take delivery are the cancer on the system.

[boutons_deux]

Exactly.

Farmers hedge the crops with commodity futures, etc. and it provides a real service.

But only a few big finance outfits run the futures/derivatives market, in secret, and block anybody (even other large Wall St outfits) from entering. iow, a secret cartel.

One farmer was complaining he had no idea what he was paying for, what fees were, no itemization, "just pay and STFU".

http://www.nytimes.com/2010/12/12/business/12advantage.html?_r=1&pagewanted=print

The entire financial sector is one big scam, a fraud, predatory, cheats, until proven otherwise (good luck finding that evidence).

[Wild Cobra]

Supply and demand, or "lost stranglehold"?

Please pick a lane.

Point is, that the economy will now start up again once the democrats can't fuck with it any longer. The increased economy will increase the demand for energy, hence the price will increase.

[Fabbs]

Point is, that the economy will now start up again once the democrats can't fuck with it any longer. The increased economy will increase the demand for energy, hence the price will increase.
You've got to be a troll. :lmao
Mouse?

[Wild Cobra]

You've got to be a troll. :lmao
Mouse?
That is just almost, the ultimate insult!

[boutons_deux]

I really know you won't answer, but just how did the Dems "fuck with the (Repug-raped) economy"? :lol

[Pistons < Spurs]

These gas prices are pissing me off.

We're now at $3.29 (credit) $3.19 (cash) here in Michigan

[jack sommerset]

I just know there is a endless supply of oil in Alaska, we just need to pull up our skirts up and drill goddamnit. Whose with me!?!?

[baseline bum]

I just know there is a endless suppy of oil in Alaska, we just need to pull up our skirts up and drill goddamnit. Whose with me!?!?

China?

[ducks]

opec is stupid

one company setting price of oil

[ducks]

It was wrong then, and wronger now. USA cheap oil is drilled out.

Do you really think oil extracted from US dirt is gonna be sold by the extractors cheaper than that imported?

If pitbull bitch didn't look so drillable to all the bubbas, if she were plain or ugly, she'd be nowhere.

montanta has more oil then the usa will ever use


if she was a liberal you would be full it
since she is not you think she lie

[jack sommerset]

China?

We can't wait for China to own us, lets get some shovels, pails and one of those wooden fork looking things that shakes when oil is near. Whose with us!?!?

[ducks]

but if we talk about paying down the debt the stupid liberals just say blame the repubicans and not try to solve the problem

[boutons_deux]

"montanta has more oil then the usa will ever use"

And that's exactly why the oilcos are sticking their big, long, hard dicks into Mont Tana right now, right?

[Wild Cobra]

I just know there is a endless supply of oil in Alaska, we just need to pull up our skirts up and drill goddamnit. Whose with me!?!?
And lift the drilling moratorium also.

[boutons_deux]

Drilling more oil in USA won't have ANY reducing effect on fuel prices.

[Wild Cobra]

Drilling more oil in USA won't have ANY reducing effect on fuel prices.

Sure it does.

[boutons_deux]

WC assuming, with his usual laser accuracy, that US fuel consumers will NOT be charged maximum price by the US oil cartel.

[Wild Cobra]

WC assuming, with his usual laser accuracy, that US fuel consumers will NOT be charged maximum price by the US oil cartel.
You don't understand supply and demand, do you.

[Fabbs]

Originally Posted by Fabbs
You've got to be a troll.
Mouse?


That is just almost, the ultimate insult!
Mouse is a goodhearted guy, he'll forgive me.

[boutons_deux]

You don't understand supply and demand, do you.

I understand that you live in an ideological fantasy world.

The competition-free oilcos and refiners cartel charge whatever the fuck they want to charge, depending how much their management bonuses will be. And they revel in the windfall, we-do-nothing-extra profits when oil goes up.

The only place gas competition exists is at retail and the oilcos will shut down any station operator who tries to compete on price.

Supply and demand? GMAFB

[Winehole23]

59GGJShZQWM

[Winehole23]

(double post)

[TheSullyMonster]

You don't understand supply and demand, do you.

Dude, I know this is your favorite phrase and all. I'm half convinced you use it to troll all of us.

But two questions:
1: Do you really think that oil production is a free market?

If yes,
2: Have you heard of OPEC?

[Wild Cobra]

Dude, I know this is your favorite phrase and all. I'm half convinced you use it to troll all of us.

But two questions:
1: Do you really think that oil production is a free market?

If yes,
2: Have you heard of OPEC?
Not completely and yes. It doesn't take much of a supply change to change price. OPEC may control most the supply, but not all of it.

[RandomGuy]

opec is stupid

one company setting price of oil


montanta has more oil then the usa will ever use


if she was a liberal you would be full it
since she is not you think she lie

OPEC is not a company.

They don't set oil prices.

Montana most certainly does not have that much oil. (http://www.snopes.com/politics/gasoline/bakken.asp) That bit was misapplied information taken from a puffy brochure to lure suckers, I mean, investors, into investing in companies extracting Bakken formation oil.

I don't think Palin lies. She is just stupid and ignorant.

There is a difference.

[boutons_deux]

pitbull bitch is stupid, ignorant, patron saint of American Venality, and she lies (she's right wing, she can'/won't stop)

[boutons_deux]

Even if Bakken had as much oil as its press release, American fuel prices wouldn't drop.

But American environment would drop.

[RandomGuy]

By the way, the US is a net exporter of gasoline.

Wrap yer heads around THAT.

Heard it on NPR the other day in one of their business clips, did some research on it and danged if it wasn't true.

The US has been expanding refinery capacity at a time when countries around the world have seen a rise in demand for distilled petroleum products, like gasoline. (think lots of new Chinese drivers)

It may surpise some of you to know that Iran has to import gasoline.

Refineries are hard to build and generally fairly technologically sophisticated.

http://paul.kedrosky.com//MDIEXUS2m.jpg

US Becoming Oil Products Net Exporter: GS (http://www.foxbusiness.com/markets/2010/09/21/oil-products-net-exporter-gs/)

Be interesting to see if this trend continues.

[ElNono]

You don't understand supply and demand, do you.

Who's going to force extra supply, when oil producers can reap a lot more money per barrel by keeping supply low and charging an arm and a leg?

As long as people need the oil and are willing to pay a lot for it, there's no incentive to increase production.

The only solution to that dilemma would be regulation (probably on antitrust grounds), but then we all know what you think about that...

[ElNono]

BTW, the current system is a lot more complicated than simple supply-demand. The entire futures market on energy can drive prices up and down merely on speculation.

[RandomGuy]

BTW, the current system is a lot more complicated than simple supply-demand. The entire futures market on energy can drive prices up and down merely on speculation.

To some extent.

Nobody is really quite sure how much that actually affects the final prices.

Even before outright speculation with derivatives, you still have buyers and sellers reacting to things and adjusting bids/offers.

I still think that underlying fundamental supply and demand will drive the price up over the long term at rates much faster than inflation.

[RandomGuy]

As long as people need the oil and are willing to pay a lot for it, there's no incentive to increase production.


There is every incentive to increase production. :greedy

That is why most OPEC nations cheat on their production quotas, and cartels are notoriously hard to enforce supply discipline on.

It is a version of the prisoner's dillemma.

If everyone else restricts their output, and you don't, you gain a lot of profit at their expense.

[ElNono]

There is every incentive to increase production. :greedy

Not really. Only if you actually want to compete. Given that you're creating an artificial lack of supply (something OPEC does all the time), you can control what the demand level is and price accordingly. It's called price-fixing, which is supposed to be illegal in this country, but if you don't enforce it, then it will just happen. Stuff like this happens all the time in other markets also (a few know recent high demand cases include computer RAM chips and LCD screens).


That is why most OPEC nations cheat on their production quotas, and cartels are notoriously hard to enforce supply discipline on.

It is a version of the prisoner's dillemma.

If everyone else restricts their output, and you don't, you gain a lot of profit at their expense.

There's every incentive to sell as little as possible of the actual product in a market of a finite good in high demand. I'm sure OPEC could double production tomorrow, halve the price of their oil and surpass non-OPEC producing countries just in order to regain the market-share they lost since the 80's. You just don't see that because holding on to the oil longer-term is more valuable to them.

[boutons_deux]

"By the way, the US is a net exporter of gasoline."

btw, US Big Coal is tearing up the US and is increasing its coal exports to China.

This fucking country is so self-fucked by the Repug, corps, and capitalists.

And of course, the Repugs and tea baggers remain totally silent on coal/fuel exports.

[RandomGuy]

I'm sure OPEC could double production tomorrow, halve the price of their oil and surpass non-OPEC producing countries just in order to regain the market-share they lost since the 80's. You just don't see that because holding on to the oil longer-term is more valuable to them.

No, actually they can't double their production tomorrow. Pretty much every OPEC producer is working at capacity, save the Saudis, and most experts think they are bumping up against their limits as well. If you like, I can re-research that and provide some supporting links.

Oil exploration is not like having spare factory capacity that can be scaled up at will.

You have to drill new wells and find new sources as old ones deplete, and do that faster than you deplete your sources in the first place.

OPEC hates high prices because of what is termed "demand destruction". If prices remain high for too long, people either use less, or find other energy sources.

Energy sources are increasingly becoming interchangible.

Having a trillion barrels of oil in the ground is worthless if everybody is driving electric cars.

[boutons_deux]

Some think SA is well past their peak oil, explaining why they keep their reserves so secret (with the complicity of the US/UK oilcos, of course).

[RandomGuy]

Some think SA is well past their peak oil, explaining why they keep their reserves so secret (with the complicity of the US/UK oilcos, of course).

It is an ill-kept secret that OPEC reserve estimates are 99% political, and 1% scientific data. For those who are unfamiliar, production quoatas are based on these reserves, so more "reserves" means they are allowed to pump/sell more oil.

http://en.wikipedia.org/wiki/Oil_reserves_in_Saudi_Arabia


In a study discussed in Matthew Simmons's book Twilight in the Desert, 200 technical papers on Saudi reserves by the Society of Petroleum Engineers were analyzed to reach the conclusion that Saudi Arabia's oil production faces near term decline, and that it will not be able to consistently produce more than 2004 levels.[6] Simmons also argues that the Saudis may have irretrievably damaged their large oil fields by over-pumping salt water into the fields in an effort to maintain the fields' pressure and boost short term oil extraction amounts.

http://www.eia.doe.gov/cabs/Saudi_Arabia/Oil.html



Challenges to the Upstream Development Program

One challenge the Saudis face in achieving their strategic vision to add production capacity is that their existing fields experience 6 to 8 percent annual "decline rates” on average (as reported by Platts Oilgram in 2006) in existing fields, meaning that the country needs around 700,000 bbl/d in additional capacity each year just to compensate for natural decline.

Decline estimates for Saudi Arabia vary widely, however.

The Ministry of Petroleum maintains that decline rates in Saudi Arabia are around 2 percent annually. Saudi Aramco has stated that it will also conduct additional drilling at existing fields in order to help compensate for the natural declines from the mature fields.

[the EIA is being diplomatic here, IMO. Most outside experts think the Saudis are full of shit when they put out "pie in the sky" estimates of their own capacity--RG]

Saudi Aramco, Saudi Arabia’s national oil company, estimates that the average total depletion for Saudi oil fields is 29 percent, with Abqaiq (the oldest) 74 percent depleted, the giant Ghawar field having produced 48 percent of its proven reserves and the younger Shaybah, just 5 percent depleted. Aramco also reports that Saudi oil reserves are likely underestimated, not overestimated, although some analysts have disputed Aramco's optimistic assessments of Saudi oil reserves and future production. Minister Al-Naimi has refuted these contrarian arguments, and stated that Saudi Arabia could add as much as 200 billion barrels of oil to proven reserves after an extended period of investment and exploration.

[Wild Cobra]

Who's going to force extra supply, when oil producers can reap a lot more money per barrel by keeping supply low and charging an arm and a leg?

As long as people need the oil and are willing to pay a lot for it, there's no incentive to increase production.

The only solution to that dilemma would be regulation (probably on antitrust grounds), but then we all know what you think about that...

Like I said, you don't understand supply and demand.

there is money to be made by introducing more supply. The price may be sightly lower, but if it makes you slice of the pie bigger, it pays off.
Your thought assumes a monopoly or similar situation, which it isn't.

[boutons_deux]

"you don't understand supply and demand"

goddammit, you're stupid

You don't understand restricting supply to force up price into essentially inelastic demand while selling less product.

Cheap oil has the planet by the short-and-curlies, and the source countries and oilcos know they are untouchable and unstoppable.

[Wild Cobra]

"you don't understand supply and demand"

goddammit, you're stupid

You don't understand restricting supply to force up price into essentially inelastic demand while selling less product.

Cheap oil has the planet by the short-and-curlies, and the source countries and oilcos know they are untouchable and unstoppable.
No, I understand that. Problem is, that the entire world doesn't conspire to limit supply. It would take all producers to refrain from producing more. OPECC does, but even they have members that violate that time to time to increase their market share, including over stating their reserves.

Wait...

You might be right...

Obama's actions do limit our oil!

[RandomGuy]

Obama's actions do limit our oil!

Specifically how? and to what effect?

This oughta be good. :corn:

[ElNono]

No, actually they can't double their production tomorrow. Pretty much every OPEC producer is working at capacity, save the Saudis, and most experts think they are bumping up against their limits as well. If you like, I can re-research that and provide some supporting links.

I believe you. That said, don't forget that Saudis tried to increase production in 85 to regain market share, and they were scolded by the other OPEC colleagues. They also didn't gain any market share.


Oil exploration is not like having spare factory capacity that can be scaled up at will.

You have to drill new wells and find new sources as old ones deplete, and do that faster than you deplete your sources in the first place.

The 'double the supply' was an exaggeration to make a point. That said, OPEC is simply not working at capacity right now. I was reading about a month ago that they could increase supply if needed (not double, but enough to prevent the price runaway), but they just didn't think the current demand warrants it. I don't know what's the situation with non-OPEC producers.


OPEC hates high prices because of what is termed "demand destruction". If prices remain high for too long, people either use less, or find other energy sources.

Energy sources are increasingly becoming interchangible.

Having a trillion barrels of oil in the ground is worthless if everybody is driving electric cars.

Alternates are simply not commercially viable when gas is below a certain threshold. That threshold is exactly where gas is priced. It simply makes no sense to sell for less, considering the scarce nature of oil.

[ElNono]

Like I said, you don't understand supply and demand.

there is money to be made by introducing more supply. The price may be sightly lower, but if it makes you slice of the pie bigger, it pays off.
Your thought assumes a monopoly or similar situation, which it isn't.

You don't understand that oil is a limited resource that appreciates more as time goes by due to its scarce nature. Somebody sitting on a oil field much rather sell as little as possible for as much as they can. Simply because that same oil will be worth 5x more (arbitrary figure) 10 years from now.

Saudis already tried to play the 'gain market share with cheap oil' game and it didn't work for them. Non-OPEC producers remained constantly above them.

The only way regular supply-demand rules rules would apply is if somebody can flood the market with cheap oil, but then that would make it non scarce, which really isn't the reality with that product.

[RandomGuy]

I believe you. That said, don't forget that Saudis tried to increase production in 85 to regain market share, and they were scolded by the other OPEC colleagues. They also didn't gain any market share.

The 'double the supply' was an exaggeration to make a point. That said, OPEC is simply not working at capacity right now. I was reading about a month ago that they could increase supply if needed (not double, but enough to prevent the price runaway), but they just didn't think the current demand warrants it. I don't know what's the situation with non-OPEC producers.

Alternates are simply not commercially viable when gas is below a certain threshold. That threshold is exactly where gas is priced. It simply makes no sense to sell for less, considering the scarce nature of oil.

Fair enough.

OPEC has SOME control over prices, but increasingly less as time goes by, and non-OPEC's share of production increases.

The thing about "market share" only really applies if your product is not fungible. You only really gain market share if one can even mildly tell the difference between products. Commodities don't work like cars.

I found this bit on 1980's oil production:
http://en.wikipedia.org/wiki/1980s_oil_glut

It very clearly outlines the demand destruction so feared by OPEC, and why they don't push for higher prices.

I don't buy the "let's keep it in the ground to make it's value go up". That is simply not the way I understand oil production to work at all.

[ElNono]

They'll push for as high prices as they can as long it's economically viable. That applies to OPEC and non-OPEC producers.

None of the oil companies are interested nor involved in any kind of competition. When there's real competition, there's winners and losers. When all you see is winners, then something is not quite right.

[boutons_deux]

the producers will charge as much as they can, aka "free" but captive market, up to the point where the world is pushed into depression, as it was after the 67,73,79 oil shocks.