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-   -   When Gulf Crude is SHUT IN prices should NOT SPIKE! (http://www.early-retirement.org/forums/f27/when-gulf-crude-is-shut-in-prices-should-not-spike-30209.html)

newguy88 09-25-2007 04:20 PM

When Gulf Crude is SHUT IN prices should NOT SPIKE!
 
Think about this sure the oil is off the market BUT it is still in the GROUND!!!

So it gets pumped up into the tanks and pipelines at a later date. There is no reason other than fear and greed that prices spike when a storm shuts in production.

RedHawk 09-25-2007 11:45 PM

Quote:

Originally Posted by BooBooBear (Post 559704)
Think about this sure the oil is off the market BUT it is still in the GROUND!!!


This has got to be one of the dumbest things that I have ever read on this board. What good does oil in the ground do? You can't magically take it from the ground and put it in your gas tank. What happens if production is shut down for months? What good does it do to have oil "in the ground? when its only usable when its above ground?"

Caroline 09-26-2007 12:51 AM

Quote:

This has got to be one of the dumbest things that I have ever read on this board.
Oh, I don't know... I think it's an interesting question, if nothing else. I imagine that some oil is in the gas stations, and some in trucks, and some at refineries, and some on tankers floating in the gulf... and some is in the ground but we know where it is and have pumps attached to it, and some we don't know about yet.

If there's a temporary slowdown but still enough in reserve to keep us going for several months, then why do prices fluctuate?

I can see if there's a long disruption that draws down reserves, or an unpredictible disruption such as a war, but if it's a short-term, predictible storm, as the OP posits, then why DOES the price go up? Do we really not have much of a reserve at all?

This may be the second-dumbest thing ever written on this board, but I'll risk it. Even we folks from the slow class get to ask questions! ;-)

haha 09-26-2007 02:17 AM

Basically the at any time the price is what it is because under all the market conditions and sentiments of that time, and giving consideration to real or perceived inventory needs, bottlenecks, possibilities of disruption, etc- that given price clears the market and uses what is available. If anything disrupts the flow of crude, and demand stays the same, the price has to rise given the conditions we mentioned. You need crude entering the refinery today to make gasoline and heating oil which will be needed in the very near future. What is in the ground can't heat your house next week, or enable trucks to get to market with your food, or enable you to get to work in your car.

Price is determined by flows, not by ultimate reserves, at least in the near to intermediate term.

Ha

FinanceDude 09-26-2007 07:35 AM

Quote:

Originally Posted by haha (Post 559799)
Basically the at any time the price is what it is because under all the market conditions and sentiments of that time, and giving consideration to real or perceived inventory needs, bottlenecks, possibilities of disruption, etc- that given price clears the market and uses what is available. If anything disrupts the flow of crude, and demand stays the same, the price has to rise given the conditions we mentioned. You need crude entering the refinery today to make gasoline and heating oil which will be needed in the very near future. What is in the ground can't heat your house next week, or enable trucks to get to market with your food, or enable you to get to work in your car.

Price is determined by flows, not by ultimate reserves, at least in the near to intermediate term.

Ha

You guys are thinking too hard.........it's just supply and demand at work in a global market.........:)

Wags 09-26-2007 07:56 AM

Has anybody noticed how the price of oil and gasoline jump up quicky at the slighest indication of problems in the Middle East or when there are hurricanes in the Gulf of Mexico? But yet it's kind of funny how the price of gasoline and oil do not jump down as fast.

One has to wonder if the scare tactics are legimate or just a way to drive up the price of a barrel of oil and the price that we pay at the pump for gas.

Unfortunately the only ones that our really paying the piper are the American people while the oil companies, the lobbyist and the varmints in D.C line their pockets with our hard earned $$$$.:rant:>:D

Maybe who ever becomes President should appoint the GREAT WILLIE NELSON as the Energy Sec so that he can find a way to get America to use HEMP as an alternate energy. Instead of smoking it we shoudl be putting it into our gas tanks. He sure can't do any worse then the mangy varmints >:Dwe already have in Washington D.C.

GOD BLESS AMERICA AND THE GREAT WILLIE NELSON:angel:

Zathras 09-26-2007 09:36 AM

Wags, I don't think that happens as often as people think it does.
In the last 'run up' of oil prices I watched the pump very carefully.
Just before the run-up to $82/barrel, our pump price was $2.96/gallon. During the price increase, the price at the pump when down. To a low of $2.69/gallon. Currently it is at $2.79/gallon.

I think this is one of those times where people remember the bad things that happen and easily forget the average occurance.

FinanceDude 09-26-2007 10:08 AM

There was a time when the oil futures market were not on the front burner every day.........and talked about by every financial reporter in the world...........

ERD50 09-26-2007 11:51 AM

Quote:

Originally Posted by Wags (Post 559832)
Has anybody noticed how the price of oil and gasoline jump up quicky at the slighest indication of problems in the Middle East or when there are hurricanes in the Gulf of Mexico? But yet it's kind of funny how the price of gasoline and oil do not jump down as fast.

Wags - have you ever thought to do some research to see if your 'beliefs' align with reality? I see some pretty sharp drops there.

But if you want to believe that it's all rigged, I am sure I can't stop you.

http://upload.wikimedia.org/wikipedi...Short_Term.png


and another:

http://tonto.eia.doe.gov/oog/info/gdu/grprrets.gif

What do ya' got, Wags? - ERD50

FinanceDude 09-26-2007 01:38 PM

Quote:

Originally Posted by ERD50 (Post 559938)
Wags - have you ever thought to do some research to see if your 'beliefs' align with reality? I see some pretty sharp drops there.

But if you want to believe that it's all rigged, I am sure I can't stop you.

http://upload.wikimedia.org/wikipedi...Short_Term.png


and another:

http://tonto.eia.doe.gov/oog/info/gdu/grprrets.gif

What do ya' got, Wags? - ERD50

What is the reality though...is it TODAY'S futures markets, or the two year futures contract prices that are important? You can arbitrage anything you want but I how many airlines have to buy spot contracts for delivery TODAY, at $82 a barrel??

ERD50 09-26-2007 02:28 PM

Quote:

Originally Posted by FinanceDude (Post 559972)
What is the reality though...is it TODAY'S futures markets, or the two year futures contract prices that are important? You can arbitrage anything you want but I how many airlines have to buy spot contracts for delivery TODAY, at $82 a barrel??

I'm not sure how futures contracts and spot prices play into it. I was responding to Wag's preconceived notion that prices go up fast, but go down slow.

I see no evidence of that.

-ERD50

FinanceDude 09-26-2007 03:38 PM

Quote:

Originally Posted by ERD50 (Post 559989)
I'm not sure how futures contracts and spot prices play into it. I was responding to Wag's preconceived notion that prices go up fast, but go down slow.

I see no evidence of that.

-ERD50

It just SEEMS that way. I think the individual consumer is more sensitive to the problem than let's say FedEX........;)

Or as I like to say: "the only economy I am concerned about is MY PERSONAL ECONOMY".........:o:D

greg 09-27-2007 04:28 AM

Two words: elasticity and emotions. Nowadays we really have little extra capacity in the oil and gas system. We use such huge volumes everyday that the draw down rate really doesn't give us a comfortable amount of time or ability to adapt. Related to this is that during hurricanes, for example, a fair amount of domestic infrastructure can be taken out, oil platforms, refineries, nat gas pipes, all further compounding problems.

The fragile nature of this system or the perception (or misperception?) of this fragility can easily lead to an emotional reaction of panic and fear. This certainly can happen among end users such as ourselves but, more interesting to me, is that energy traders and producers can also have a similar reaction and then act on it. Sadly, they can also create the appearance of a panic without there actually being one. This is when prices often go up for no good reason.

Remember the many natural gas traders that were scamming the system during early deregulation of the California utility market, right before Enron went down? I suspect traders and energy companies are still getting panicked and also working in some "extra" manipulation at times. Some low lives probably think this is in their best self interest--and part of grand and good system.;) A sick sort of rationalization process among a few manipulators. They skew themselves.

It's hard to fight purposeful manipulation of perceptions or spin for one's own advantage, especially when done in carefully planned and long term way.

Not that I'm paranoid. ;D

edit: There is the real problem and the appearance of the problem. In today's complex and large world it is very, very--very--hard for any of us to get at the real problems. We mostly depend on others for our information, such as TV news or papers or, um, gov't. We end up not only having to look for and finding the real original problem but also wading thru enormous quantities of additional human biases that skew our lenses in the process.


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