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Oil Down Nearly 26% From Its High
By JLP | September 3, 2008
This is good news:
The price of oil is down nearly 26% if you use the record settlement of $145.29 and a current price of $107.76.
What’s up? I have no idea but I would venture to guess that the high oil prices we saw earlier this year had less to do with fundamentals and more to do with speculation. I just hope prices can stay low but I realize that’s probably wishful thinking.
Topics: Oil |
September 3rd, 2008 at 2:23 pm
So why is gas still so darn high?
September 3rd, 2008 at 2:25 pm
If oil and gas prices stay low then SUV sales go back up and our dependence on oil from…less than pleasant…regimes goes on.
I’d be surprised if the price at the pump dropped below $3/gallon, and frankly I don’t much mind. The sooner we develop hybrid tech that runs of algal biodiesel and switch to nuclear power for our non-transportation needs, the better. That won’t happen if oil is cheap.
September 3rd, 2008 at 3:33 pm
The lower price can only be temporary since production and consumption have not changed significantly. Speculation seems to be the only thing that could have caused the price to drop.
September 3rd, 2008 at 4:39 pm
“Mo”
you answered your own question. since production and consumption have not changed, but the price has, then the price run up in oil has little to do with those two factors. Speculation caused the price to RISE. That and the value of the dollar.
Now you are seeing speculators dumping oil, and the truth is coming out. The extreme price was never about demand. It was always about speculation. It is the same in all run ups of all markets.
September 3rd, 2008 at 4:57 pm
With the end of the Bush regime coming to an end, the oil companies know that the party will soon be over and they will be coming under closer scrutiny. They know the Democrats want to impose a windfall profits tax and don’t want Congress looking into their books. They won’t have Bush and Cheney to protect them anymore.
September 3rd, 2008 at 5:05 pm
JT,
Give me a break!
Oil prices are set by a MARKET, not by oil companies. Besides, what about all those foreign producers that refuse to increase output even though they could?
The “Bush and his oil buddies” silliness is getting rather old.
September 3rd, 2008 at 6:56 pm
Did someone else say speculators? Yeah I’m not crazy.
I also have no clue about investing. It seems to me you don’t need to know anything about investing to call this one. Ask yourself what we knew in June we didn’t know in March. What new information became available? Since oil prices where already up from 25 to 75 in a couple of years how could 150 or 200 be justified?
I knew something was up when I was at a family picnic on the 4th of July. Everyone was saying how “this time was different.” OK yeah if I lost a pound for everytime I said that.
Why does goldman sach’s keep cheerleading this 150 oil thing. The timing is really bad too because I noticed them doing it on the 19th right before the shorts came in on the 20th.
September 3rd, 2008 at 8:00 pm
Speculation had alot to do with the oil price earlier. My idea what happened.. It was nothing more than a short term bubble created by the falling dollar, low interest rates, struggling stock market, and dead real estate market. Once the housing market blew up, the same people that rapidly inflated that market jumped ship and began funneling money in to oil futures (along with gold and other metals) to protect thier capital (this was why the oil price spiked so high so quickly) Then hedge funds jumped on the bandwagon expecting the price to keep going in to orbit, which just dumped fuel to the already raging fire. (pardon the pun). This would have gone on as long as the housing and tech bubbles did with the exception of the fact the economy was beginning to wobble to start with, and as the price of oil jumped like crazy gasoline began to follow it until people and businesses began to seriously cut back because they either couldnt afford to spend that much or they refused to spend that much. seriously dropping demand. The same followed in other countries.. the price rose to high too fast for the market to support it, just like housing prices did, and the market “corrected”. Around here i noticed gas prices rose just as fast as oil did until it hit a certain point. (3.75/gal) Once it got there, it stopped going up even though oil kept on going. once gas price stopped going up, it just stayed there, for several weeks not going either direction.. before finally hitting 3.89/gal in one final jump.. again staying there almost a month before oil began dropping. even as oil began its freefall, the price stayed at 3.89 for at least 2 more weeks before it began dropping like oil was. Heres why. Gas prices here hit a “cap” and the gas companies knew they couldnt raise the price any higher if they wanted to actually sell any of it. so they reluctlantly held the price at the highs, and “ate” the losses they were taking, once oil began to fall, it took a few weeks for gas to follow because the gas companies needed to recover some of the losses they were taking once gas price stopped rising, so they could stay in the black for the year. I think oil will continue to drop like a rock for at least the next several weeks before stabilizing around 60-80 bucks a barrel and staying there for the next several years. There isnt as much of an oil shortage as there is a “production” shortage, (and that is meant to manipulate the price by OPEC). Now that the “air heads” have bailed out of the oil market, the price will fall and then remain fairly stable like it has been for the 20 to 25 years. Remember the speed at which the price spikes tells you how long it will stay high.. if it goes up slowly, its more permanent, if it jumps up from out of nowhere, it will come back down with a rather large crash sooner or later.
September 3rd, 2008 at 8:22 pm
Chad
That was a long post but I agree with you. OPEC has tried this before and it doesn’t work. At least one of the members will be tempted by the price. As JLP said the market sets the price. I think we had that a year ago. It was way up in accordance with supply and demand. Way up was 75. I am happy for sanity sake it has come down. However I would still like to see a cheap alternative as I have a longer communte than is average. If they did it once they can do it again. I totaly agree that the same people who made money off risky loans are the same ones who drove this up (credit suise sp?).
September 4th, 2008 at 3:54 am
I told you crude and oil stocks were in a bubble. I made a bit on DUG (look it up, it’s the double inverse of oil and gas stocks). DUG goes up when crude and related stocks go down. Of course, it’s too late to buy DUG now, I’d buy DIG and go the other way. But, I’m a contrarian.
Buy what folks hate, sell what folks love.
Buy financials, better yet, buy ultra financials (double your bet) with UYG.
Folks hate financials, so, that’s when you buy them.
Bozo
September 4th, 2008 at 9:04 am
Even though I own a car, I was hoping oil would go up to $5/gallon. I wonder if my fellow Americans will again start driving SUVs to run errands and buy groceries.
September 4th, 2008 at 9:25 am
To JLP
How many shares of Halliburton stock does Cheney still own in his “blind” trust? Also, isn’t he still getting deferred compensation from them as well? It’s people like you who think what Bush has done to this country in the last eight years is just silliness. This why we are in the mess we are in.
September 4th, 2008 at 3:31 pm
Sameer
I also hoping to this, I think that all want it. I think the situation settled after the elections.
September 6th, 2008 at 2:38 am
Boy, it doesn’t take long to boil the frogs, does it? We’re already thinking prices around $100 are low. I seem to remember when $50 was considered high.