Are we using every bit of gasoline produced?

[berettafan]

I'm wondering because if not then how does allowing for profit companies to produce more do anything to reduce the cost?

[Aerkuld]

It's all down to perception.

As I understand it the prices are being driven by speculators in a market who's perception is that the demand is rising faster than it can be produced. Whether it is or not is immaterial, the fact that the perception exists means that the future price of oil is expected to rise. By producing more oil I assume they hope to change the perception of the market place thereby lowering the future price of oil.

[sammyg2]

Yes, we use all the gasoline produced. We only produce as much as can be sold and used. It balances out. If we made gas that we couldn't sell or use, what would we do with it and why would we make more?

[berettafan]

Reserves? Days in inventory?

Also to clarify when i say 'we' i mean the entire globe.

[legion]

Some evaporates...

[silverc4s]

It's like Ferrari's in the late 80's; if you believe that a Daytona Spyder will be worth $1.0 million in a year, you are willing to buy it now for $800,000, even though you know the seller bought it a month ago for $600,000.

It's called the "greater fool theory" and the -- last fool in -- gets his A$$ burned usually...

[MRM]

Of course all the gas produced is used. If it wasn't, we'd either start drowning in it or they would have to stop producing it.

The secret is that supply and demand create the price. If the price goes down, more people buy and use gas, increasing demand. If prices go up, people and businesses consume less, creating less demand. It doesn't matter if the demand is created by people filling their tanks, industrial giants using it for manufacturing, or Lehman Brothers buying billion dollar contracts for investment purposes, when demand increases prices increase to match.

Gas demand is pretty inflexible in the short run. In other words, if the price goes up, it is hard to decrease demand quickly, so we're subject to price hikes without demand decreasing quickly, which would put the supply and demand back in whack, reducing prices. That's why you can see huge runups in prices without much seeming to change. But in the long run factories will convert to cheaper forms of energy, people and industry will conserve, and demand will go down in response to the higher prices.

The unknown equation is to what extent new demand for gas is coming on line in the developing countries. If there is substantial new demand just starting to happen, then we have what is called a demand shock, which will send prices higher on a fundamental level. If you think that's happening, or is about to happen, and you're a trader, you might take a lot of long term contracts betting that the price of oil and gas will stay high and go higher.

My personal thinking is that there is a fundamental increase in demand, but that prices have gotten out of whack in the short term, and there will be an oil bust when our conservation efforts start to bear fruit, followed by inevitable and never ending incremental increases in price as the developing world comes on line.

[pwd72s]

Originally Posted by silverc4s

It's like Ferrari's in the late 80's; if you believe that a Daytona Spyder will be worth $1.0 million in a year, you are willing to buy it now for $800,000, even though you know the seller bought it a month ago for $600,000.

It's called the "greater fool theory" and the -- last fool in -- gets his A$$ burned usually...

Check out the ealy 911S registry board to see more examples of this theory...

[berettafan]

Originally Posted by pwd72s

Check out the ealy 911S registry board to see more examples of this theory...

One in particular actually had me laughing today. I mean the math doesn't even add up. It's not even debatable.

[anthony 911]

if we quit buying china made goods they cant buy cars=more oil for us.