CNN Breaks Down Drop in Oil

[Aggie Hoopsfan]

http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/30/8391681/index.htm?cnn=yes

[Nbadan]

If you believe this article then you are forced to believe two things

1. Even with the rising tensions between the U.S. and Iran and now North Korea, the geopolitical factors that were driving prices up just a few weeks ago have almost disappeared. Ok, but the rumors of U.S. mine sweepers and aircraft carriers in the Persian Gulf are up, not down. Whether you believe that North Korea was successful in its nuclear test or not, the geopolitical tension in that region of the world has gone up, not down. Hummm.....

2. Hedge funds have never manipulated. I mean, speculators betting millions to make oil companies billions would be unheard of in this day and age, right? The SEC would investigate that kinda thing, right? You can't short American Airlines or United on 09-10-01 and expect not be investigated, right?

[Aggie Hoopsfan]

the rumors of U.S. mine sweepers and aircraft carriers in the Persian Gulf are up, not down..

Link please, and I mean a reputable one, not some democratic dork on a message board or conspiracy blog.

Why would the hedge funds be investigated? Isn't losing a couple billion out of their pocket books enough? It wasn't manipulation. People were buying oil futures due to speculation on the hurricane season, etc. It's not manipulation. Simple suppy and demand economics.

[RandomGuy]

I have talked to quite a few people who believe the conspiracy thing. Scary.

The run up was fueled by speculation and so was the collapse. Nothing secret or sinister other than a bunch of greedy f***s loosing their shirts. Wah.

[Nbadan]

.

Link please, and I mean a reputable one, not some democratic dork on a message board or conspiracy blog.

Why would the hedge funds be investigated? Isn't losing a couple billion out of their pocket books enough? It wasn't manipulation. People were buying oil futures due to speculation on the hurricane season, etc. It's not manipulation. Simple suppy and demand economics.

If its simple supply and demand, then what has changed in the past few weeks to change either supply or demand?

Look the set-up is simplier than you think. Huge, risky, hedge-funds run up oil speculation while 'those-in-the-know' load up on oil stock and maybe a few put-options on oil when the timing is right, like now.

[RandomGuy]

If its simple supply and demand, then what has changed in the past few weeks to change either supply or demand?

Look the set-up is simplier than you think. Huge, risky, hedge-funds run up oil speculation while 'those-in-the-know' load up on oil stock and maybe a few put-options on oil when the timing is right, like now.


Iran and the US stepping back slightly from some harsher, earlier rhetoric.

If you had read the article, it points out that speculators accent trends. The upwards trend created by tighter supply/demand was accented by speculators, as was the fall from the peak.

Hardly a sinister plot.

[Nbadan]

Iran and the US stepping back slightly from some harsher, earlier rhetoric.

If you had read the article, it points out that speculators accent trends. The upwards trend created by tighter supply/demand was accented by speculators, as was the fall from the peak.

Hardly a sinister plot.

Being a free-market economists, normally, I'd be with you, but the sharp drop in prices at the pump and the approaching mid-term election, where this administration has so much to lose if the Demos can take the house, is just too much of a coincidence to blame on the normal mechnisms of a free-market economy.

[RandomGuy]

Being a free-market economists, normally, I'd be with you, but the sharp drop in prices at the pump and the approaching mid-term election, where this administration has so much to lose if the Demos can take the house, is just too much of a coincidence to blame on the normal mechnisms of a free-market economy.

Where is scott when you need him?

The drop is due to weather forecasts mainly.

Limited refinery capacity forces refiners to anticipate needs.

Mild weather=less heating oil

Part of the problem in the summer is that refiners had to start getting stuff ready for winter demand for heating oil, had a high demand for gasoline due to the driving season, and also were still repairing from Katrina, further tightening supply.

Demand for gasoline is relatively inelastic in the short term, as I think scott could confirm.

That means that with a tightening of supply, you don't get much decrease in underlying demand and BIG run-ups in price.

With prices high, the big oil companies saw a chance to make some extra profits and since they had weather forecasts that said heating oil wasn't going to be needed, spare capacity probably went to gasoline in a rush to maximize profit.

All the companies were suddenly creating more gasoline, and down go the prices.

All this stuff has been hashed over and explained here in this forum.

[johnsmith]

Being a free-market economists, normally, I'd be with you, but the sharp drop in prices at the pump and the approaching mid-term election, where this administration has so much to lose if the Demos can take the house, is just too much of a coincidence to blame on the normal mechnisms of a free-market economy.


Plus, what with the government busy planning the next terror attack on American soil, they need all the votes they can get huh Dan?