The price of oil will soon be $35-$45 a barrel...

tabs · 06-06-2006, 03:00 AM

Anybody who has listened to responsible sources would know this.. and I guess that leaves the media and Democrat Politicans out as a responsible sources.

I have been saying oil would return to $35 a barrel for years now...cause thats what the Saudis have been saying for years now...

GDSOB · GDSOB's Garage

damn supply & demand...

Dixie · Dixie's Garage

Chavez is going to be in a world of political hurt if oil goes down to $35/barrel

Aurel · Aurel's Garage

Cool, I get to keep my SUV and I can fill up the boat...

Aurel

wcc · 06-06-2006, 04:18 AM

That's great news, but does that guarantee the price at the pump will come down? Probably not. I'm sure they'll try to come up some excuse to keep prices up. Spills, natural disasters, new exploration, etc.... I hope that when the cost per barrel comes down that the price at the pump changes accordingly.

tabs · 06-06-2006, 04:21 AM

Look at my comments under "Can Brenanke Keep Quiet"....

Oil has been driven by those who are playing the fear card of another 911 or ME BLow Up. Once U see these guys get their heads handed to them by market forces you will see the fear of inflation disappear.

YOu will see the great run up of prices as a big blip on the radar screen as RE prices decline back to affordable levels....and they will stay there for quiet some time. The great runup in prices was due to the low interest rate environment caused by the need to keep liquidity (money in circulation) high because of 911. Now the FED is constricting liquidity to keep this inflation in check. Yet like the speculators buying Oil Futrures foreigners have been buying our Treasuries as a safe haven in an uncertain world thus keeping our Long Term Interest Rates low....

So as U can see 911 is still with us...and that is why we need to keep our thumb on those Jihadies..other wise economic/financial CHAOS will reign

red-beard · red-beard's Garage

Hmmmmmm. If the price of oil returns to normal and the price of Gas returns to normal...what will be the main debate of the election? People usually vote thier wallets.

legion · 06-06-2006, 04:27 AM

I've been quietly saying this to my wife for a few months now. All the people I work with are so pumped about "alternative" energy that I don't dare speak it out loud around them.

legion · 06-06-2006, 04:31 AM

Quote:

Originally posted by red-beard
Hmmmmmm. If the price of oil returns to normal and the price of Gas returns to normal...what will be the main debate of the election? People usually vote thier wallets.

The Republicans are already framing that debate (see the thread on what is most important to Congress). When housing and gas prices are on the way down, suddenly you have time to vote your heart....

The Dems, on the other hand, are beating the same "war is bad, Bush is an idiot" drum that they have been for two plus years.

tabs · 06-06-2006, 04:33 AM

We now have a virtually flat interest rate yield curve..taht means that the 10 Treasury has virtually the interest rate as the 30 year does...

cashflyer · 06-06-2006, 04:51 AM

Whew.... I was almost ready to trade my Porsche for a Vespa.

gaijindabe · 06-06-2006, 06:21 AM

I don't think OPEC wants to kill the golden goose. We shall see..

ErVikingo · 06-06-2006, 06:55 AM

You think that the oil market is crazy? Check out the copper and the molybdenum markets.....

turbo6bar · 06-06-2006, 07:22 AM

Yeah, check the price on copper pipe at Home Dep****. It used to be $10 for a 10 foot stick.

Rick Lee · Rick Lee's Garage

Oooh. I've been meaning to write about my gas price/gas station observations on my recent China trip. This is outrageous.

Gas there comes in 90, 93 and 97 octane and the gov't. just raised the price two weeks ago to about 5RMB and change per litre, which around $2.40 per gallon for 90 octane. This is the part that kills me. While riding in a minivan to the very remote countryisde in northwestern Sichuan province, not too far from Tibet, we saw a HUGE Sinopec gas station about every 3km winding up long mountain roads. This was the most remote place I'd ever been and there were not enough private cars or even construction vehicles to support one local gas station, much less the 20 ir so I saw in the mountains there. Their gas stations dwarf ours. They are like small airplane hangars. It's bad enough they subsidize their gas prices, or at least don't tax gas. But to build so many gas stations in remote areas that can't possibly turn a profit on their own is just nuts.

Traffic in China is horrible. Beijing's airport is maybe 20 miles from the center of the city (Wangfujing Dajie) and it took me three hours on the bus and in a taxi, leaving the airport around 4:00pm one day. Yes, they are developing a middle class and their vehicle fleet will soon exceed ours. But they have 900 million peasants in the countryside who will probably never own a private car. I don't know how this can continue. I think our own gas is way too cheap. In China it's far cheaper, the cars are all pretty new with catalytic converters and still their air quality is like East Germany in the 1980's. What's gonna happen when their middle class really takes off? I think it will sting all of us.

sammyg2 · 06-06-2006, 07:29 AM

lol, I'd like to know who at WSJ is interpreting the data and coming to those conclusions.
maybe it's just a case of media sensationalism.
According to the API and the US DOE (which I follow and monitor religiously), the total crude stock inventory is up 4% from this time last year. It is up only slightly when compared to a percentage of consuption or when trended over 5 years. Not quite earth-shattering when taken in context of the huge scope. There is slightly more available but not enough to drastically turn the market.

I do not expect the price of crude to remain above $70 for the immediate long term, but I doubt it will drop below $50 bbl for any statistically significant amount of time and I doubt we will ever see it again in the $35 range for any sustained period. Maybe spikes but not sustained. The world is just too unstable. I'm guessing it will drop to around $65 by late October, it might hit a low of $55 by January and February when many refineries are performing periodic maintenance shut-downs, but will probably be up above $60 bbl by peak driving season 2007.
By peak 2008 it could be over $80 bbl. After that it should be a gradual but steady climb to $100 or more unless we have a global collapse of economies.
Please take all that with a grain of salt because my crystal ball is on the fritz.

Any unusual or unpredicted event could change all that to the upside, like escalation of the problems with iran or Venisuela or other central american countries could really upset the apple cart.
As fas as supply and demand goes, the price of a commodity is not directly proportional to supply. it's not even close.
When in the narrow range of equalibrium where supply and demand are matched to promote stability, the cost may be nearly linear, but as either supply or demand exceeds the range of equalibrium it becomes nearly logarythmic. Imagine an inverted bell curve.
I did a term paper on this subject several years ago which predicted the current situation fairly accurately, but not perfectly. The professor commented that while my research was accurate my conclusions were flawed and he gave it a B+.
I'd love to talk to him about it today and throw him a few nyaaa nyaaa I told-you-so's

He's a typical pomous a$$ who doesn't understand the real world because he had never escaped the confines of acedemia long enough to realize that his collection of manure books may not always be gospel. He tried to convince me the system is how he wants it to be (nice and uniform and predictable) instead of how it really is (highly emotional and influenced by knee-jerk reactions and opportunistic carpet-baggers).

BTW, In this case cost factored to supply and demand is not directly tied to crude production, it is tied to the crude market. Big difference.
The market sometimes is counter-intuitive to the actual production and refining numbers. I guess that's why they call it speculating. Buy on rumor sell on fact, but the rumors are winning the battle.

turbo6bar · 06-06-2006, 09:57 AM

The Chinese are subsidizing worldwide deflation of goods by crapping on the environment. The environmental costs will eventually be paid, and a slowdown will occur.

Assuming we do not have an unstable event(s), the central banks cannot tolerate persistent commodity inflation, so my bet is seeing commodity prices fall in the mid-term.

signed,
wannbetabdula

tabs · 06-06-2006, 12:03 PM

"The world is just too unstable" and therein lies the conundrum. Why is it perceived to be unstable? 911!! Before that the world was unstable but no one in the USA cared to take a look.

911 is a watershed event. Will it cause long lasting unstability, who knows? The economy seems to have shrugged it off and chugs along just fine. Yet the Stock Markets play this trading range game of up and down, back and forth and to and fro...Meanwhile the prices of RE skyrockets because of the liquidity that was needed to keep the system afloat after 911.

artplumber · 06-06-2006, 12:22 PM

Wayne,
Unfortunately, there is too much money out there to invest, a large portion of which is in the hands of institutional investors. Hence, swings in the market are exaggerated, and fear and herd mentality are the major factors in pricing. Therefore, while supposed "threats" continue to be manufactured (eg/the hurricane season is upon us and there might be disruption of the gulf supply/refining the price must go up!) I don't see a correction coming. Something fundamental has to change in the way the market functions.

The Saudis, or perhaps it was an OPEC spokesman, have said that if alternative energy ever takes off, they will pump more, to bring the price down so that oil is always cheaper. Makes you wonder eh?

red-beard · red-beard's Garage

From the WSJ:

"The news of Mr. Zarqawi's death sparked selling of crude-oil futures on international markets Thursday morning. U.S. benchmark crude-oil futures dropped below $70 a barrel for the first time in two weeks Thursday morning. Iraq, which has the world's second-largest reserves of crude oil after Saudi Arabia, has watched its oil facilities get hammered by insurgents and criminal gangs, leading to a falloff in crude output."