Oil prices are dropping...

[jreeves]

Not necessarily.

Here's oil's trend:

And here's USD vs. Oil from the 2nd half of last year:

Look at the trend between USD and Oil. They move almost in lockstep with one another. It's unmistakable. That's the market reacting normally. Give me one good reason why not to be invested in energy right now?




That's all well and good, but what keeps oil down after THAT?



How will gold and silver come down? Unless the Fed starts taking immediate deflationary actions like raising rates, gold and silver have nowhere to go but up. And smart investors who don't eat the government's bullshit for breakfast, lunch, and dinner will even be wary of rate hikes, and I wouldn't be surprised to see PM's and even the Dollar make no real significant moves...for at least the first few rate hikes, anyway. I suspect it may be why the Fed hasn't made any move to raise rates just yet. They are scared that a rate hike will not have an effect on the Dollar, and the PR mess it could cause. It's still not bad to hold PM's though. It will NEVER be bad to hold PM's.

Watch by mid first quarter next year oil will be going for around $100 a barrel.

 

[Zoomie1980]

Watch by mid first quarter next year oil will be going for around $100 a barrel.

Try $70 or lower....

 

[jreeves]

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.

Your not getting ripped off, oil is going for around $130 a barrel.

 

[jreeves]

I wonder.....

The existing ban may be renewed or modified when it expires September 30, and the White House wants legislation that would give states a say in whether to allow offshore drilling, how much and where, and how to manage revenues. Bush's announcement came two weeks before lawmakers leave for their month-long August recess, at a time when four out of five Americans tell public opinion surveys that sky-high gasoline prices cause considerable economic pain.
Bush lifts offshore drilling ban

I wonder if democrats will commit political suicide and renew the ban on offshore drilling in an election year. When over 70% of the country supports allowing offshore drilling. I think not, that could be the reason oil has dropped for the third consecutive day.

 

[Paulie]

Watch by mid first quarter next year oil will be going for around $100 a barrel.

Well shit, at least SOMEONE commented on the facts I posted. I guess everyone around here just likes to spread their opinion about the oil situation, and would rather not let the facts get in their way.

Zoomie...When the speculative pressures subside, what keeps oil down after that? Let's assume the Dollar doesn't come back up for a couple years...Just humor me on that for a second before freaking out and telling me it will be back up over the Euro in a month...If it doesn't come back up anytime soon and even continues to decline, like current policy seems to be making the environment ripe for, what holds oil down? If we take military actions against Iran, what keeps the price of oil DOWN? These are the questions that smart investors are asking themselves, and I believe it's why the speculation exists to begin with.

I realize you're quite bullish on the Dollar and our economy in the long term, but you can not possibly be SURE. You also say supply should stay constant for 5 years. Only 5 years??? Ok, so what happens after that? Another oil crisis? Seems like a good reason to be invested long, and STAY there. I hold USO, and I'm comfortable long right now. I'll be comfortable long even through a major correction, because I see the writing on the wall. What is going to KEEP oil down?

 

[Chris]

The Chinese are adding 9 million cars a year to the road. In 10 years they will have as many cars as we do. The only way to make the price of oil go down is to decrease demand. That will only happen if people drive smaller cars and switch to alternative fuels.

 

[editec]

Well shit, at least SOMEONE commented on the facts I posted. I guess everyone around here just likes to spread their opinion about the oil situation, and would rather not let the facts get in their way.

Zoomie...When the speculative pressures subside, what keeps oil down after that? Let's assume the Dollar doesn't come back up for a couple years...Just humor me on that for a second before freaking out and telling me it will be back up over the Euro in a month...If it doesn't come back up anytime soon and even continues to decline, like current policy seems to be making the environment ripe for, what holds oil down? If we take military actions against Iran, what keeps the price of oil DOWN? These are the questions that smart investors are asking themselves, and I believe it's why the speculation exists to begin with.

I realize you're quite bullish on the Dollar and our economy in the long term, but you can not possibly be SURE. You also say supply should stay constant for 5 years. Only 5 years??? Ok, so what happens after that? Another oil crisis? Seems like a good reason to be invested long, and STAY there. I hold USO, and I'm comfortable long right now. I'll be comfortable long even through a major correction, because I see the writing on the wall. What is going to KEEP oil down?

If your play is long term, oil is a good play.

If it's short?

Bad bet, I think.

I'd wait before I'd invest in oil stocks, if I were you.

 

[Ag107.87]

Try $70 or lower....

How come everyone who thinks that oil is a bubble (which is what people have thought since it passed $40) have NEVER had their projections come to pass for the past few years?

Is it possible that there is a supply and demand cause for oil sky-rocketing? Could it potentially be due to the fact that world supply is CONSTANT over the past 3 years at ≈85 mpd while demand has been growing and supply can't increase? Could it be the fact that out of the 48 top oil producing nations, 33 have something in common: that is that they are past peak production and will continue to produce less and less oil each year than the year before? Could it be that our third largest importer of oil, Mexico, is soon going to be a net importer of oil in as short as two years?

The existing ban may be renewed or modified when it expires September 30, and the White House wants legislation that would give states a say in whether to allow offshore drilling, how much and where, and how to manage revenues.

The funny part about the drill drill crowd is that, for the most part, they are hard-core conservatives who demand states' rights, as well. But in order to get drilling off of the most prospective states (Cali and Fl), you would have to override those states' rights in order to drill because those states are very much and a good bit, respectively, opposed to any kind of drilling off of their coasts.

Cali will pretty much NEVER want drilling after their accident many years ago, not to mention that it's a liberal stronghold and even the GOP Gov. doesn't want drilling. FL is slowly, at a snail's pace, turning over to a drilling state, but it could take $5 gas before they even get a simple majority to approve of drilling. The Federal bans could be (and should be, for that matter) removed but that won't mean any drilling will occur unless those states approve of it, which is unlikely in the short-term.

Watch by mid first quarter next year oil will be going for around $100 a barrel.

We'll come back to this statement (as well as the subsequent $70/brl statement by Zoomie) during that time period. It will be quite funny to see how horribly wrong you guys (the "oil is a bubble" crowd) are yet again, a la Yergin and CERA.

 

[Paulie]

If your play is long term, oil is a good play.

If it's short?

Bad bet, I think.

I'd wait before I'd invest in oil stocks, if I were you.

I got in at $110. Wish I'd have gotten in earlier, but capital was an issue for me while setting up my portfolio. If it goes to $70, I'm still comfortable, because I just do not see ANYTHING in the foreseeable future that will keep the price down.

 

[jreeves]

I got in at $110. Wish I'd have gotten in earlier, but capital was an issue for me while setting up my portfolio. If it goes to $70, I'm still comfortable, because I just do not see ANYTHING in the foreseeable future that will keep the price down.

Sorry Paulitics, I see oil dropping dramatically. I would get out while you can and still make money. You speak of the correlation between the strength of the dollar and oil prices. Could it be that the value of the dollar drops when oil prices increase? Just think of how much money we are sending to the Saudi's, don't you think that creates a huge trade defecit? Thereby devaluing the dollar....

I will agree with you though, the government must stop helping this process along, by spending debt money like a teenager with a credit card.

 

[Charles_Main]

The Chinese are adding 9 million cars a year to the road. In 10 years they will have as many cars as we do. The only way to make the price of oil go down is to decrease demand. That will only happen if people drive smaller cars and switch to alternative fuels.

Sure because the law of supply and demand is actually the law of Demand and Demand. lol

 

[Charles_Main]

I will agree with you though, the government must stop helping this process along, by spending debt money like a teenager with a credit card.

or like my wife with one

 

[Ag107.87]

Could it be that the value of the dollar drops when oil prices increase? Just think of how much money we are sending to the Saudi's, don't you think that creates a huge trade defecit? Thereby devaluing the dollar....

Due to the fact that petrodollars rule the world, higher oil prices likely do not have a major effect on the value of the dollar. If prices go up, then yes, we export more dollars overseas which causes a loss of confidence in the dollar, causing the dollar to go down. But we are only 25% of the market and only 30% of the import/export market. So when the price of oil goes up, that means that the other 70% of the importers must find more dollars in order to pay for the higher cost of oil, thus causes the dollar to go back up. I imagine it to be a good bit of a balancing act. Now if the world goes the way of Russia, Iraq and Iran and switches to using Euros or other currencies for reserves and trading of oil, then we're pretty screwed.

Sure because the law of supply and demand is actually the law of Demand and Demand. lol

Well, it's doubtful that we'll ever be able to raise oil production above 85 mpd. If we are, it won't be by much and it won't last for long. So the idea of decreasing prices (from current levels) by increasing production is not a very good one.

 

[Paulie]

Sorry Paulitics, I see oil dropping dramatically. I would get out while you can and still make money. You speak of the correlation between the strength of the dollar and oil prices. Could it be that the value of the dollar drops when oil prices increase? Just think of how much money we are sending to the Saudi's, don't you think that creates a huge trade defecit? Thereby devaluing the dollar....

I will agree with you though, the government must stop helping this process along, by spending debt money like a teenager with a credit card.

No, oil doesn't dictate the dollar. The Dollar dictates oil. Same with any commodity. Gold and oil move together historically, and you don't see gold pushing the dollar. You see the dollar pushing gold. Same thing with oil.

And our trade deficit is being caused by a HELL of a lot more than this oil situation. Plus, I'm sure the weapons we've been selling them have balanced things out just a bit.

Here's a question for you...On a scale of 1-10, 10 being absolutely sure and 1 being completely doubful, how sure are you that there will be some kind of military action against Iran involving the US?

EDIT: Don't get it twisted though. I scrutinize the situation every single day. I'm looking for ANYTHING that screams "get out".

 

[Zoomie1980]

Well shit, at least SOMEONE commented on the facts I posted. I guess everyone around here just likes to spread their opinion about the oil situation, and would rather not let the facts get in their way.

Zoomie...When the speculative pressures subside, what keeps oil down after that? Let's assume the Dollar doesn't come back up for a couple years...Just humor me on that for a second before freaking out and telling me it will be back up over the Euro in a month...If it doesn't come back up anytime soon and even continues to decline, like current policy seems to be making the environment ripe for, what holds oil down? If we take military actions against Iran, what keeps the price of oil DOWN? These are the questions that smart investors are asking themselves, and I believe it's why the speculation exists to begin with.

I realize you're quite bullish on the Dollar and our economy in the long term, but you can not possibly be SURE. You also say supply should stay constant for 5 years. Only 5 years??? Ok, so what happens after that? Another oil crisis? Seems like a good reason to be invested long, and STAY there. I hold USO, and I'm comfortable long right now. I'll be comfortable long even through a major correction, because I see the writing on the wall. What is going to KEEP oil down?

The REALITY of the day-to-day supply demand equation will keep oil closer to it's REAL value (which today is between $40-50/br depending on who's numbers you use). Currently we are producing over 2million barrels a day MORE than we consume. It is one of the MOST PLENTIFUL natural resources we use today, trailing only coal and natural gas. It FAR MORE plentiful than gold, most food commodities, platinum, rare-earths, etc... Pricing oil TODAY on what someone fears MIGHT happen 5-10 years down the road is insanity. No other commodity trades like that, nor should oil.

 

[Zoomie1980]

No, oil doesn't dictate the dollar. The Dollar dictates oil. Same with any commodity. Gold and oil move together historically, and you don't see gold pushing the dollar. You see the dollar pushing gold. Same thing with oil.

And our trade deficit is being caused by a HELL of a lot more than this oil situation. Plus, I'm sure the weapons we've been selling them have balanced things out just a bit.

Here's a question for you...On a scale of 1-10, 10 being absolutely sure and 1 being completely doubful, how sure are you that there will be some kind of military action against Iran involving the US?

EDIT: Don't get it twisted though. I scrutinize the situation every single day. I'm looking for ANYTHING that screams "get out".

2-3 on Iran, if Obama gets elected, 1. Israel will do the attacking and on that, if Iranian nuclear capability become real and verifiable I give that a 10. And it will have NO real impact on oil supplies. Iran will continue to ship oil without a break, especially since China is their main customer.

Chavez will not likely last five more years in Venezuela. He would have lost the last election had he not rigged it. Their economy is in a shambles, like Iran, even with oil revenues. Nigeria is the same state it's been in for almost 50 years, nothing will change there. There are no political situations anywhere that affect oil one bit over the long haul. THat's all SPECULATIVE lunacy.

 

[Paulie]

The REALITY of the day-to-day supply demand equation will keep oil closer to it's REAL value (which today is between $40-50/br depending on who's numbers you use). Currently we are producing over 2million barrels a day MORE than we consume. It is one of the MOST PLENTIFUL natural resources we use today, trailing only coal and natural gas. It FAR MORE plentiful than gold, most food commodities, platinum, rare-earths, etc... Pricing oil TODAY on what someone fears MIGHT happen 5-10 years down the road is insanity. No other commodity trades like that, nor should oil.

But it still begs the question. What keeps oil down long term?

Besides the supply situation, if there's going to be military action in Iran, it's not going to be 5-10 years from now. The mass media and the govt. have already made it clear that Iran could be a threat in a year or two. If there's going to be action, it's going to be soon. Are you saying investors should just ignore this potentiality?

You're basically arguing for oil to come back down to reality for NOW, but what's the point of getting it cheaper for a couple years if it's only going to come back up again? If that's the case there better damn well be some MAJOR advances in other forms of energy in the next 5 years.

What will KEEP oil down, considering there seems to be no near term end to inflation and dollar devaluation?

 

[Zoomie1980]

Due to the fact that petrodollars rule the world, higher oil prices likely do not have a major effect on the value of the dollar. If prices go up, then yes, we export more dollars overseas which causes a loss of confidence in the dollar, causing the dollar to go down. But we are only 25% of the market and only 30% of the import/export market. So when the price of oil goes up, that means that the other 70% of the importers must find more dollars in order to pay for the higher cost of oil, thus causes the dollar to go back up. I imagine it to be a good bit of a balancing act. Now if the world goes the way of Russia, Iraq and Iran and switches to using Euros or other currencies for reserves and trading of oil, then we're pretty screwed.



Well, it's doubtful that we'll ever be able to raise oil production above 85 mpd. If we are, it won't be by much and it won't last for long. So the idea of decreasing prices (from current levels) by increasing production is not a very good one.

The major false assumption is believing the growth in demand will simply continue at current level forever. That is about as false a general assumption among speculators as exists anywhere, for a number of factors. It is perfectly plausible that much of the 1st world will be ongoing a rather massive alternation to alternatives that should more than offset growth in consumption from the developing world. And as for that, China is going to have to drastically reduce is subsidies in the coming years to fund the rest of their government, particularly the military. Same with India, as their subsidies of oil and gasoline now are the largest portions of their GDP's of any cost factor. That will cap a lot of growth there.

Result is basing future price estimates on current consumption patterns and assumption that growth curves will continue indefinitely into the future, is absurd. Yet that is EXACTLY what is going on in the speculative oil world today, and why, when the reality hits home that those assumptions they've been using are substantially flawed....oil is as likely to crash in price as it is to sharply rise.

 

[Zoomie1980]

But it still begs the question. What keeps oil down long term?

Besides the supply situation, if there's going to be military action in Iran, it's not going to be 5-10 years from now. The mass media and the govt. have already made it clear that Iran could be a threat in a year or two. If there's going to be action, it's going to be soon. Are you saying investors should just ignore this potentiality?

You're basically arguing for oil to come back down to reality for NOW, but what's the point of getting it cheaper for a couple years if it's only going to come back up again? If that's the case there better damn well be some MAJOR advances in other forms of energy in the next 5 years.

What will KEEP oil down, considering there seems to be no near term end to inflation and dollar devaluation?

AGain, any attack on Iran will be done by Israel and will have NO effect on oil supplies. That is another gross false assumption. There will be some rather major advances in alternative over the next 5-10 years. THat die has been cast. Electrics like the Tesla and Chevy Volt are only the beginning. Most auto manufactures selling in the US and Europe and Japan will be almost totally converted to electrics and gas-electric hybrids inside of 10 years. Most US government and large corporate fleets will be 100% electric of gas-electric hybrid inside of five years. China and India's consumption will be neutered by the reality that they cannot afford their subsidies any longer and their consumers are many times more price sensitive than we are. Those are all downward pressures that will offset much of the coming slowdowns in production capacity.

 

[Paulie]

AGain, any attack on Iran will be done by Israel and will have NO effect on oil supplies. That is another gross false assumption.

You of course have no real way of knowing that. You can't tell me that if Israel hits Iran, and Iran retaliates, that we won't get involved. I'd say THAT is a gross false assumption. And how exactly does military action against an OPEC country, regardless of who is involved, not effect oil supplies and prices? We already know that Iran will close Hormuz. It may just be their only real way of retaliating. And of course, since our Navy is positioned there, who do you think would handle THAT situation?

There will be some rather major advances in alternative over the next 5-10 years. THat die has been cast. Electrics like the Tesla and Chevy Volt are only the beginning. Most auto manufactures selling in the US and Europe and Japan will be almost totally converted to electrics and gas-electric hybrids inside of 10 years. Most US government and large corporate fleets will be 100% electric of gas-electric hybrid inside of five years. China and India's consumption will be neutered by the reality that they cannot afford their subsidies any longer and their consumers are many times more price sensitive than we are. Those are all downward pressures that will offset much of the coming slowdowns in production capacity.

Could you do us a favor and provide some links to all these assertions? You love to post opinions and assertions, but you never cite any sources. Not that I don't believe you, but I'd still like to see this, and I'm sure many others here would as well.