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Thread: What Has Changed In Oil?

  1. #1

    Default What Has Changed In Oil?

    can anyone explain to me how the price of gasoline/petrol went from $4.15+ down to nearly $3.70 in a month or why the price went from $1.43 in july of 2002 to where it is now?

  2. #2


    Apparently, we've pass our "Peak Oil" point.

    It was so cheap before because our supply could easily meet our demand. We had enough reserves to last. Now we've past this point, our demand is increasing but our supply is decreasing. We can't produce gas at such a rate that it meets the demand, hence it drives the price up.

    Then again, I'm no expert on economics. It's just something I've heard in passing.

  3. #3


    that would make since if production hadn't changed or if they couldn't produce more. they can, but then that would make prices drop. china has come into play, but america is still the largest user of oil in the world so it doesn't make sense to me.

  4. #4


    Long story short... it's all about speculation and the value of the US dollar.

    You see... oil is traded on the international market as a commodity... and the only currency that oil is traded in is US dollars. When the idiots on capitol hill started spending billions and billions on this stupid war they started racking up a defecit... spending in the red in other words. To gain the necessary capital to continue operations and try to stimulate the economy (b/c of the home mortgage market failure) the US govt borrowed money from many other nations around the world. This defecit spending has massively devalued the dollar on the international market.

    When investors see the dollar falling they start putting their money somewhere else... typically in commodities like oil and metals like gold, silver, & copper (which is going for a shitload right now). This mad rush to put money into oil... coupled with a slight decrease in production... is what lead to the price spiraling out of control.

    After some period in time... the investors are finally beginning to see that by jacking up the price of oil they are actually crippling the economy's ability to recover and are making things worse for themselves in the long run... because the high price of oil has now made it harder for other countries (in europe) to buy oil for themselves... and it is hurting their economy too.

    I could go on and on about it... but that's pretty much it in a nutshell.

    What we (the US Govt) should learn from this is that a stricter stance needs to be taken on the ability of companies to speculate on the prices of items that are key to the survival of the American nation. For far too long the feds have taken a hands-off approach to governing what businesses can and cannot do... which has let things get out of control.

  5. #5


    Very thorough analysis, and it's consistent with what I learned in macro.

  6. #6


    well that explains it. i wonder who's making the money in congress off of this. whoever did this played it well because they must have known, in turn, that the biggest user and purchaser of oil (no, not hummers) is the department of defense. makes you think...

  7. #7


    I can name you the 3 top dogs.

    GWB, Dick Cheney, & Condolezza Rice (Rice actually has an oil tanker named after her). They are all lining their pockets with profits from these oil contracts. Bush Sr & McCain are also in on this as well... and have been for some time.

    If you really read into it... the whole "war on terror" is nothing but an oil grab that has been planned and plotted since the Reagan administration back in the 1980's. We gave weapons to the Iranians, Iraqis, and Afghans long long ago... in a deliberate move to destabalize the region and give us a legitimate excuse to go over there and "settle things down".

    The only thing I'm not sure about is whether or not Bush was in on the attacks of 9/11. It wouldn't suprise me to hear that he was.

  8. #8


    Speculation! Everyone believed the oil prices would go up, so it turned into what economists call a "self fulfilling prophecy". Many people trade on the stock market like that, and more and more people took an interest in speculating on rising oil prices.
    ANd there's the danger: The price for oil on the market had no relation to the actual supply and demand - it was overinflated. The market was waiting for a signal that the price ralley would stop, and I can think of three signals in the past weeks:
    - China raised gas prices by like 25 percent (they're government controlled), thus lowering demand
    - the growth of the Euro-zone economies is slowing down#
    - American car manufacturers are on the verge of bankruptcy because more and more people are interested in small and fuel efficient cars - something they don't offer.

    Combine all those news and it's not hard to figure out that aggregate demand for oil is about to fall, or at least won't go up soon. That was the final blow to the bubble, and once you poke a small hole into it, all the air rushes out. Why? Because people put stop-loss limits on their speculation - i.e. they'll pull out of the market once the price has fallen to a certain point. So when the price fell below $140 a barrel, people kept selling, creating an excess supply in oil markets, which made the prices fall even more.
    In essence, the price for crude oil fell from $149 (I think) to $112 (yesterday) within weeks. That's going to show at the fuel pump eventually!


  9. #9


    Let me further clarify the speculation game in terms of something we can all understand... diapers.

    You have $10 today... and right now that $10 will buy you 10 diapers on the international market. That's fine and dandy... you've got enough diapers for now, so you keep your cash. But suddenly you hear news that tomorrow your $10 will only buy you 8 diapers... you'd better buy now if you want a good deal. You go ahead and buy those 10 diapers now.

    So now you've got diapers... and there are other AB/DLs out there who are willing to trade you goods such as pacis and bottles for your diapers. Let's say they trade you one paci for those 10 diapers that you just bought. So now you've got a paci... which you turn around and sell for $15. Bam... you just made $5 by trading commodities.

    Your buddy Joe over there didn't buy the diapers before the price went up... so now he can only get 8 diapers. From what he's heard his $10 will only buy him 5 diapers next week instead of 8 now... so he decided to buy the 8 diapers for $10. But you've heard the same news... and also want those 8 diapers. But since you have $15 instead of 10... you tell the diaper supplier that you can pay him more for the diapers than Joe can. So naturally your supplier takes the higher offer.

    Since diapers are still worth the same amount on the open market... you can trade your new diapers for other things you need just like you could when you got 10 for $10. So it's a safe investment.

    Now imagine this same situation happening millions of times a day on a global scale. It starts a bidding war b/c everyone is afraid that at some point down the line they won't be able to buy the things they need with the money they currently have.

    That is how commodity speculation jacks prices up.

    The way to reverse the trend is simple... stop buying diapers. Eventually your supplier will have a surplus and will lower his price back to what it originally was. The problem with that is... some people are incontinent... and need diapers to get by on a daily basis... so they have to keep shelling out more and more money to get what they need to survive. Now people are giving up their lunch money and falling behind on their bills because they have to buy diapers (unrealistic I know, but you get the idea). Thus is the danger of speculation on the price of an item that people need to survive and function properly.

  10. #10


    I can some that up in a few words, Big Oil put GW in office to do just what he did, make billions for them, and to sum that up in one word GREED.

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