Oil prices are dropping...

[Charles_Main]

Is there any truth to what I keep hearing about Saudi Arabia.

I keep hearing it only costs them 3 bucks a barrel to bring oil to the market. If that is true I think we found the gougers

 

[Paulie]

Is there any truth to what I keep hearing about Saudi Arabia.

I keep hearing it only costs them 3 bucks a barrel to bring oil to the market. If that is true I think we found the gougers

Even if that's true, how are they gouging? The entire WORLD is paying the current price. That's the free market in action. It's also their oil, and if the market is willing to pay their price, then they should be free to profit.

Or should oil somehow be considered in a different light, because of what it is? Are you a free market advocate?

 

[Toro]

Oil's going lower, at least for a bit.

 

[Charles_Main]

Even if that's true, how are they gouging? The entire WORLD is paying the current price. That's the free market in action. It's also their oil, and if the market is willing to pay their price, then they should be free to profit.

Or should oil somehow be considered in a different light, because of what it is? Are you a free market advocate?

Sure I am, but god damn that is one hell of a profit

I am in the wrong business

I was actually just trying to find out if there is any truth to it anyways.

 

[Zoomie1980]

They are dropping mainly because people are feeling the crunch all around the world and using less.

So much for supply and Demand not effecting the price as some would have us believe.

I agree completely about announcing the lifting of the Congressional Ban on drilling, The mere act of saying so will lower the price we all pay.

At some point the wild SPECULATIVE demand will collapse. It may be doing that now.

The world has NEVER had a shortfall of production, not once, not ever and will not any time soon. Supply is expected to exceed demand for at least the next five years. There was never any supply-demand reason for oil to go much beyond $40. It costs only about $30, on average, to get a barrel of oil out of the ground and get it to a refinery. So $100+ is PURE SPECULATION.

At some point that will collapse just like US housing on the coasts and sun belt have (and are continuing to) and tech stocks did 10 years ago.

 

[Zoomie1980]

Is there any truth to what I keep hearing about Saudi Arabia.

I keep hearing it only costs them 3 bucks a barrel to bring oil to the market. If that is true I think we found the gougers

Actually it's about $2.25. But that is to get it out of the ground and to their terminals. There is cost in loading into tankers, then cost to ship those tankers to the consumer (refinery) then cost to unload it. There is also storage costs at the terminals and at the refineries. Saudi oil is about the cheapest oil to produce there is.

Overall, it costs $30-35, global average to get a barrel out of the ground and into the refining process, and that includes the producer's and shipper's average profit rate of 15-20%.

The REAL price of oil has yet to clear much beyond $40 even with the weak dollar. The rest is speculative.

 

[maneal]

Everything eventually comes into check. Oil prices, house prices, economy, the dollar. It will eventually even out. When? No one knows. However we need to remember that the economy goes in cycles. Ups and downs.

And dont forget.... still NO recession!

 

[Zoomie1980]

No argument that the price of oil and the relative value of the dollar are linked, but the SPIKE in oil prices exceeds the devaluation of the dollar by about fifty fucking times in the last year.

The bubble bursts when the market realizes that they have invested too heavily in the future price of oil.

I suspect (hope) that is happening right now.

The price of oil dropped from its all time high (was it up to 149?) to 129.96 as of 15 minutes ago.

I think it really ought to go down to about $80 when/if all the speculative bullshit gets wringed out of the spot price.

I'd expect to see some sympathetic downturns in the prices of commodities, too, ( gold and silver, for example) if the price of oil collapses, which is damned well better, BTW.

If the price of oil completely blows out, expect the next dumb assed sheeple's bubble (this is for someone who asked, BTW ) to be in things like airlines and other industries stocks which were being killed on the spike in oil prices.

On average the dollar is down roughly 14.5% against the all the world's major currencies. The Euro has been the strongest currency but even there the dollar is only down a little over 20%. Oil is up over 100% so the dollar is NOT the main reason behind oil moving up.

It is hedge funds and the large investement banks putting money in about the only place they can make money today, commoidities and especially oil. In 2004 there was about $16billion in speculative cash in oil, it's over $260billion today. That fact alone is the biggest driver. There is only so many contracts available and far too much money chasing them. That is called SPECULATIVE demand.

And the Senate votes to tomorrow on significant measures to drive the speculators out of the market. It is expected to pass and be mirrored by similar legislation in England. Once they are out of the market, oil will crash fast to a more realistic valuation of the commodity. And as commodities go, oil is among the most PLENTIFUL of them. We have actual and real shortages of many food items, gold and rare earths.

 

[Zoomie1980]

Even if that's true, how are they gouging? The entire WORLD is paying the current price. That's the free market in action. It's also their oil, and if the market is willing to pay their price, then they should be free to profit.

Or should oil somehow be considered in a different light, because of what it is? Are you a free market advocate?

The oil market hasn't been a "free" market in half a decade. A free and fair market obeys it's fundamentals of supply, demand, and costs to produce and ship. Any time speculation exceeds what is needed for market liquidity, it becomes a destructive force. That happened in tech stocks in the late 90's to the extreme point that many believed they no longer even had to obey simple fundamentals like price to earnings and real market value. Happened again in housing and now oil and to some extent, gold. Speculation should NEVER be allowed to subvert the normal functioning of ANY market and why it MUST be regulated

 

[Ravi]

Doesn't a free market mean that neither the buyers nor sellers mislead each other? If so, I've got to agree with Zoomie...oil is and has been in plentiful supply and yet we keep paying through the nose at the pump. Somehow, I don't think it is the buyer misleading in this equation.

Why is it that most free market supporters only seem to support the supplier's right to make a profit?

 

[Charles_Main]

Doesn't a free market mean that neither the buyers nor sellers mislead each other? If so, I've got to agree with Zoomie...oil is and has been in plentiful supply and yet we keep paying through the nose at the pump.

Some, not all, of that is do to the fact that you must refine the oil into gas, and we are at 99% of our capacity to do so.

Not denying the price is artificially to high, just pointing out the Oil is not gas, it has to be made into gas, and the wholesale price of gas is, you guesses it, set on the stock market by speculators

 

[Zoomie1980]

Doesn't a free market mean that neither the buyers nor sellers mislead each other? If so, I've got to agree with Zoomie...oil is and has been in plentiful supply and yet we keep paying through the nose at the pump. Somehow, I don't think it is the buyer misleading in this equation.

Why is it that most free market supporters only seem to support the supplier's right to make a profit?

A regulator's role is basically to keep capitalism, capitalistic. Left completely alone, the "winners" of the competition go to excesses and you have fraud, monopoly, and the market simply ceases to function. In the case of a futures exchange, they exist solely for the benifit of those who deal in the physical commodity. They were never designed to be houses of investment and speculation. A small amount of speculation is needed for maintaining market liquidity, but beyond that, it distorts the market and eventually leads to it ceasing to function....as oil is right now.

 

[Zoomie1980]

Some, not all, of that is do to the fact that you must refine the oil into gas, and we are at 99% of our capacity to do so.

Not denying the price is artificially to high, just pointing out the Oil is not gas, it has to be made into gas, and the wholesale price of gas is, you guesses it, set on the stock market by speculators

The refiners have been almost completely cut out of the profit equation. They are making almost nothing now. IF they were making their traditional margins we'd be somewhere between $5-6 gal, not $4. Which is why the price of gas will not fall anywhere near as fast as oil as refiners will take the oportunity to make some money on the way down.

 

[Ravi]

Yep, and the oil companies keep posting record profits quarter after quarter after quarter....

 

[Charles_Main]

Yep, and the oil companies keep posting record profits quarter after quarter after quarter....

Record demand will almost always equal record profits, Besides Millions of Americans are invested in those oil companies

 

[Ravi]

Record demand will almost always equal record profits, Besides Millions of Americans are invested in those oil companies

That's nice, Charles, except for the fact that I haven't seen gasoline prices drop any time recently to reflect the market value of oil...have you? Even when demand drops, prices stay high. I bet no matter what happens, gasoline won't go much below $4 per gallon simply because we are already used to paying for it.

 

[Zoomie1980]

Yep, and the oil companies keep posting record profits quarter after quarter after quarter....

They make less margin than WalMart or Target or the Railroads. They just have enormous volume. And they put almost 95% of those profits right back into the ground, the rest goes to share holders.

Never heard much complaint about them losing money most of the past 20 years.

And the commercial oil companies only control 15% of the world's oil. The rest is control by government owned entities, like the national oil companies of the Saudis, Iranians, Nigerians, Mexicans, Venezuelans, Russians, Chinese, Indonesians,...

 

[Ravi]

Well, I'm confused. I can't really see a philosophical difference between a collective group of shareholders profiting at the expense of others and a group of poor people profiting at the expense of others. The method is different, and yet the end result is the same.

Someone is getting ripped off.

Probably a little off topic.

 

[jreeves]

There are forces within the market that could cause the price to drop regardless of the Dollar, but that drop would certainly be short lived so long as the Dollar continues to be treated the way it currently is.

Everyone here thinks all this bullshit about building refineries, drilling here at home, etc, is going to magically make the problem go away. It will definitely bring the prices down, but it most certainly won't KEEP them down.

It is a mix of all the elements; the weak dollar, supply and demand, perceived supply and demand and refining capacity......


I believe they all hold great importance.....

 

[Zoomie1980]

Well, I'm confused. I can't really see a philosophical difference between a collective group of shareholders profiting at the expense of others and a group of poor people profiting at the expense of others. The method is different, and yet the end result is the same.

Someone is getting ripped off.

Probably a little off topic.

The citizens of most of those countries are the ones getting really ripped off and most of those governments are corrupt and keep virtually ALL the oil revenue in their own pockets. The Saudis do a reasonable job of distributing the wealth as do most of the other gulf states, but the Iranians, Russians, Chavez and the rest don't do much. At least with the commercial oil companies a lot of it gets to the people in the form of dividends and capital gains in pension funds and 401k's and such....and of course hundreds of thousands of jobs.