Nov 25 2008
Yeah Baby!
While all the news is not great these days, some of it is just great. For the first time since I can remember I filled up with $1.99/gallon gas. Now, are the dems really going to push green policies that bring back they dog days of $4.00/gallon gas?
Oh dear, big drop in big oil profit, where o where will we get money for all those green projects. I paid $1.95 yesterday!
$1.60 by me in Michigan.
1.65 here is Louisiana
$1.66 in North Carolina.
I wonder when groceries are coming down. Once they go up, they don’t seem to come down. You would think with these gas prices they would be lower than before the gas blowout since that was the reason given for the rise but I haven’t seen any lower prices.
$1.57 in Topeka KS I-70 & Wanamaker
Deflationary depressions aren’t all bad.
$1.75 here in southern Indiana. I never thought I would see that again.
Low oil prices are going to be with us for some time, IMHO. The recent disproportionately high prices were due to speculation all right, it wasn’t that the speculators had bet on dwindling oil, they were betting that the world economy was going to keep rising. That assumption can no longer underpin the bets they place.
We’re back to fundamentals, as relates to the oil market, and increasing Iraqi extraction is only one of the aces in the deck. What’s interesting to me is how powerless OPEC seems.
$1.79. You should come out to lunch one day AJ and you can get it that cheap too.
It was always about fundamentals. A mania in a market like oil is normal because businesses and individuals have to have it. Any type of shortage will produce manic buying and hyper hoarding. A client of mine is in a business where their number one supplier is that evil corp ExxonMobil. When there is a whiff of shortage they are out buying like crazy no matter how many 30% increases that evil corp ExxonMobil throws at them. No supply, no product, no customers, no business. In July they had a one year supply of raw material inventory. They chased the market higher and then the speculators jumped on the bandwagon in a big way to chase it even higher. In July with that one year supply they said “no mas” to ExxonMobil. Them and a whole boatload of competitors.
When a whiff of glut hit the market they were armed with a big hoard of supply so the price crumbled fast. One 10% decrease after another which did not induce any orders. That is demand destruction (at least temporary), and ExxonMobil is still adjusting the price downward and even inquiring when the next order will be placed. Once the commercial demand fell off the table the speculators jumped ship like so many rats and an upward mania turned into a downward spiral.
The lesson is that the upward mania was produced by legitimate fear of a shortage. A shortage that I would agree was created to a large degree by a contribution from the green maniacs. With a scientific demand forecast, new wells can be drilled to replace older wells and provide excess capacity to handle a demand spike and squash any speculation of an acute shortage. That is why even with $50 crude we should still drill, baby, drill, without the religious over the top opposition from the global warming crowd.