As much as we all have wanted to string speculators up by their thumbs (and they do have it coming), the drop in oil over the past three days has been because of downward pressure being placed on the market by fundamentals.
Remember my post a few days ago discussing the main pillars to what is proping up oil prices? Well a couple of them are crumbling ever so slightly.
The two main factors pushing oil prices down currently is a significant drop in use over what was predicted (yeah, thats right a guess) and over what was used last year in addition to “positive” signs that the situation in Iran might be defused without conflict.
The unexpected increase in supply helps remove much of the fear in speculators about being able to meet global demand. The recentl diplomacy with Iran by the Bush administration helped take the edge off of some of the geopolitical risk which at one point boosted prices by as much as fifteen dollars in a single day.
Now, take these moves into account and then look at what Democrats and Nancy Pelosi are trying to solve the same problem. Are they in any way trying to open up new supplies or put downward pressure on the market? No.
In fact they are doing just the opposite by digging in against any new exploration and adding regulations which could make it harder for domestic exploration. Their Orwellian name for the legislation? DRILL.
It is because of that announced policy, combined with some speculators trying to get in on the market when they consider it a low that prices started to rise today.
Moe Lane
Dan McLaughlin
Neil Stevens
Steve Maley
Supply isn't up - demand is down
satchman3 Friday, July 18th at 4:54PM EST (link)I talked to a client at a US refinery today and he told me they’ve cut back on production because demand is weak.
I think this is because we’re in the summer driving season yet folks aren’t driving much. Maybe this means we’re out on the elastic part of the demand curve and usage is responding to price – not a bad thing in my estimation.
I’ve also been hearing that refining margins have tightened way up but I don’t know why??
Technically they are the same
Dave_in_Fla (Diary) Friday, July 18th at 5:12PM EST (link)If demand is down, then supply is up.
“If they were merely incompetent, then at least SOME of their actions would have been to the benefit of the country.” – Joe McCarthy
Here's why refining margins have tightened
Vegas_Rick (Diary) Friday, July 18th at 5:22PM EST (link)If you look back over the last 9 to 12 months, you will see that oil more than doubled in price, but gasoline did not go up neary as much.
When the cost of producing a product goes up (price of oil)but the price paid for the product does not keep pace, the margins tighten.
“God is great, beer is good and people are crazy.”- Billy Currington
“Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘press on’ has solved and always will solve the problems of the human race.” Calvin Coolidge.
Paul I respectfully suggest
Vegas_Rick (Diary) Friday, July 18th at 5:25PM EST (link)that President Bush’s repeal of the Executive Order early in the week may have had a small role in the decline in price as well.
“God is great, beer is good and people are crazy.”- Billy Currington
“Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘press on’ has solved and always will solve the problems of the human race.” Calvin Coolidge.
the prices were simply unsustainable
kyle8 (Diary) Friday, July 18th at 5:50PM EST (link)This is an artifact of demand reduction due to price. It will have an effect upon speculators is my guess, and we will see further declines.
But not a whole lot, about another ten dollars a barrel.
“Nothing works like freedom, Nothing succeeds like liberty”
Kyle
On a related note
moderich (Diary) Friday, July 18th at 6:09PM EST (link)McCain Talks with GM workers
Juliet Eilperin, Washington Post, July 18, 2008
Speaking to a group of General Motors Corp. employees, Sen. John McCain (R-Ariz.) promised to provide a $5,000 tax credit for Americans who buy electric-powered cars such as the future Chevy Volt and “other automobiles that put us on the path to energy independence,” even as he suggested he might alter his climate plan to aid the auto industry.
“Austere, intolerant, well-armed, and blood-thirsty, in their own regions the Wahhabis are a distinct factor which must be taken into account” – Winston Churchill, 1921
Supply & Demand
Whitehorse (Diary) Saturday, July 19th at 12:38AM EST (link)It works. Think if we drill for our own oil & keep it here in the US. Not only would that increase supply, it would also lower demand for OPEC oil. The law of supply & demand work even better when the playing field is more level & there is truer competition.
Please oh please, Sen. McCain & every Republican running, hammer this home – don’t stop. Not only will this help Republicans win more seats, it is also the right thing to do for the country!
I think speculation is also a factor here.
Rod_Patrick (Diary) Saturday, July 19th at 6:36AM EST (link)My friend, a stock broker, said that there is a growing fear by the “new” investors on oil futures that the onshore and off-shore oil drilling will eventually lead to a lower price.
Some of these investors are actually long-term investors who switched from securities like T-bills into oil futures, which explains the rising price of oil. Now, they’re having a second thought.
WE MUST CONTINUE OUR MANTRA: DRILL, DRILL, DRILL.
Even the OPEC members are beginning to fear us, especially the imminent threat of ANWR oil reserves.