so its all about money (surprise!)

[nostatic]

The Organization of Petroleum Exporting Countries can do little to lower record crude oil prices as banks, hedge funds and investors pile into "overheated futures markets,'' the kingdom's oil minister, Ali al-Naimi said in Paris yesterday.

Oil "is attracting vast sums of money from hedge funds and institutional investors seeking to maximize returns and diversify their portfolios,'' al-Naimi said. "The price today is not only influenced by fundamentals. The fundamentals of supply and demand for oil today are very sound, but the market is dancing to a different tune.''

http://www.bloomberg.com/apps/news?pid=10000102&sid=awg0PXKEbL_4&refer=uk

[jyl]

Well, the hedgies and speculators eventually move on to the next asset. That part of the oil price run-up will end up as a burst bubble. Leaving the price set by fundamental demand-supply. Which, unfortunately, probably doesn't take us back to the days of cheap oil - unless demand collapses.

[cegerer]

Adjusted for inflation, gasoline prices are still very reasonable. I think the all-time high was in the 1930's actually. Anyway, I'm just happy cars don't burn bottled water - that WOULD be expensive.

[jyl]

Gasoline may have been $1.88 in 2004, but the latest average gasoline price is $2.22 (see http://www.fuelgaugereport.com/ ), which is getting closer to the $2.87 (in 2004 dollars) of 1980.

I think just as important as the price of a commodity is the rate at which the price changes. So if gasoline goes up $1/gal over 5 years, that is less of an economic shock than if it goes there in 2 years.

Anyway, ceertainly current oil prices are not as much of an economic negative as the oil prices of the late 70s/1980. They're not as high (inflation-adjusted) and we use less oil per dollar of production than we did 25 years ago.

But oil is still very important. If you compare a long-term chart of GDP with a chart of oil prices, long-term meaning over the past 40 years, it is pretty remarkable - every time oil prices rise sharply and by a lot, the US economy either goes into a full-blown recession or a growth recession (growth slowdown). This relationship is well-tested - economic models almost all use oil prices as a major input.

Let's hope the speculators get blown up soon.

[speeder]

You show me where I can get a gallon of gas for $1.88, a house for $273K, or a movie ticket for $6.00 and I will be doing kartwheels and grinning like a jackass. Is the rest of the country that much cheaper??

The bottom line is that a gallon of gas or diesel has almost doubled at the pump in the last two years. That's not healthy right now, I don't care how many kooky/deceptive charts and graphs the oil company and Bush apologists drag out. Are they pounding home the whole "oil is actually cheap/historically speaking" hooey on Fox News these days? I haven't been watching.

[tabs]

Originally posted by speeder
hooey

HEHEHEHE.....Hey Speeder you must be DAFFY using the word "HOOEY".....you bin watching too many 30's movies...

BTW..I have been planning on dropping those slang terms from a bygone era in my posts for some time now....

[lendaddy]

Originally posted by speeder
You show me where I can get a gallon of gas for $1.88, a house for $273K, or a movie ticket for $6.00 and I will be doing kartwheels and grinning like a jackass. Is the rest of the country that much cheaper??

Absof'nlutely! You could have a very high end home here for $275k, and I paid $2.02 for unleaded yesterday. As far as a movie ticket, ya got me there, I have no idea anymore. But if that's a major expense, then you have deeper issues

The real question should be:

Are we Californians THAT disconnected from reality?

[hardflex]

1980 was an artificial spike in the price of oil, so that chart is cooked to confuse the issue. Within a few years the price had fallen to $10 per barrel, sending oil-focused Texas into recession.

As I recall, Oil wasn't even traded as a commodity until the mid 80's, keeping the speculator's out of the market entirely.

[RickM]

Originally posted by speeder
You show me where I can get a gallon of gas for $1.88, a house for $273K, or a movie ticket for $6.00 and I will be doing kartwheels and grinning like a jackass. Is the rest of the country that much cheaper??

$1.97 at a Delta station a few towns over as of yesterday.
Twilight show at a local 10 theater movieplex $5.75 for adults.
The house? $275k would be a start on a downpayment.

[Gooch1971]

Originally posted by jyl
Well, the hedgies and speculators eventually move on to the next asset. That part of the oil price run-up will end up as a burst bubble.

Just to further illustrate jyl's point that there has been a "run-up" this graph shows the crude futures traded on the NY Merc Exch since 5/22/02 (as far back as Bloomberg would allow).

[Shaun @ Tru6]

Why post 2004 prices? Who cares about 2004, we're in the second quarter of '05. It's a shame these prices weren't a reality in '04, we'd have a different president.

$275K gets you 500 square feet in the Boston area.

Movie tickets: $9.50

Gas: cheapest off-brand: $2.12/gallon for the Jeep

$2.39 for the E and Targa at Shell

Beefsteak tomatoes: $3.29/lb. that's the same as 75% lean ground beef.

Milk: $2.09 per half gallon.

[speeder]

Fascinating the way that oil has been on an unprecedented run-up since the Iraq war started, with the only interuption just before and during the 2004 election. Then the run-up accellerates as if to make up for the interuption. ******* amazing.

Where do I get some of the kool-aid that makes me think that everything is just fine and that we are in good hands right now? I want to be happy like the fools who think that GWB has done a good job w/ the stewardship of this country.

[gaijindabe]

Originally posted by nostatic
" ......The fundamentals of supply and demand for oil today are very sound, but the market is dancing to a different tune.''

http://www.bloomberg.com/apps/news?pid=10000102&sid=awg0PXKEbL_4&refer=uk

Somebody is going to be left holding the bag - just like in overpriced RE. When your cabbie starts to talk about oil futures - sell!

[djmcmath]

$275K buys an 1800 sqft house with a view of Mt. Rainier, Seattle, and the Puget Sound within walking distance of downtown Silverdale. Many of my friends bought perfectly acceptable homes in slightly less prestigious neighborhoods for closer to $150K. $6 still gets a movie ticket -- or $5 at the matinee, or with a military discount. There are a number of theatres that are cheaper than that, too. Gas, unfortunately ... $2.60, even at the Navy Exchange.

(shrug) California is expensive. Boston is expensive. NJ is expensive. Most of the rest of us can live reasonably well with much smaller numbers on our paychecks.

Dan

[Shaun @ Tru6]

Originally posted by djmcmath
Most of the rest of us can live reasonably well with much smaller numbers on our paychecks.

Dan

You get a paycheck? What do I have to do to get one of those? Can I get more than one?

[tabs]

Ahhhh Whats a paycheck???? I just call Mother and say I need $10,000.00 and she sends it....

[kach22i]

Originally posted by tabs
I just call Mother and say I need $10,000.00 and she sends it....

Is she single?

Who's your daddy.

[Shaun @ Tru6]

Originally posted by tabs
Ahhhh Whats a paycheck???? I just call Mother and say I need $10,000.00 and she sends it....

I could be the son she never had!

[Shaun @ Tru6]

I've never invested in the stock market, but this graph kinda makes me wish I had, at least ever since Bush took office. How many other companies/industries experienced a 100% increase in share price in the last 3 years? Pharmaceuticals prolly 200%, which only proves the point.

[tabs]

Mother and Daddy are living quiet comfortably in a luxury condo with a nice view of a valley and mountains...