Oil Prices...Fundamentals or Not? | 27 comments (27 topical, 0 hidden)
No Fun and a lot of Mental (none / 0)

Irrational exuberance comes to mind, probably a bit of both I would think. The speculators feed off the reports that show lower than expected stocks , whatever, that in turn drive more speculation raising the price...

The only advice I'll ever give you is ignore Ken, he predicted that oil would be 20$ a barrel again.

However, I have been getting a lot of calls and emails from "investment brokers" selling oil futures in one form or another. Most are legitimate , registered dealers. I think the conventional wisdom is that when the hype gets down to this level, meaning poor slobs like me, its probably over.

I have also be seeing a few whispers about an "oil" bubble..Best guesses from some of the "gurus" are a fall back to the 80-90 range. Some even called 60$

However, one hurricane or Iranian attack could change all of that. 

by MRFred on 06/17/2008 02:32:21 AM EST

Unsubstantiated thought on oil prices (none / 0)

I don't know much about oil prices and markets or energy and how and where we can get it.  A lot of y'all know a lot more than me on this stuff.

Here are my thoughts on how the election of Obama might impact oil prices.  Tell me where and why I'm wrong and where I might be on to something.

1) It seems clear that at least part of what is determining oil prices is futures.  Futures are clearly being affected by what people predict will happen in the middle east.  I know that every time tension with Iran increases, oil shoots up.  If Iraq appears to be going to hell, oil prices shoot up.  

If Obama dismisses the notion of war with Iran, won't that drop oil futures?  I am just assuming this, since increasing talk of war with Iran clearly raises them.

2)Bush has been extremely irresponsible with our money, borrowing trillions to pay for his tax cuts and war.  This has destroyed the value of the dollar and hurt our ability to buy oil.  IF (and it is an if) Obama can help the dollar rebound, won't that help the price of oil.

3) I know this a pet theory of mine, but OPEC has made comments that have led some analysts to believe that Iran and Venezuela are leading a push for artificially high prices to punish the U.S. for our agressive foriegn policy.

If we withdraw from Iraq, back off Iran and stop making cheap, stupid jokes about Hugo Chavez, won't they drop the price?

Attack away (except Ken because I don't think he can do so seriously and objectively). 

by ProfRich on 06/17/2008 02:19:01 PM EST

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2 for 3 (none / 0)
I think there is some truth to 1 and 2, but I wouldn't bet on 3.  Oil prices to a degree elevated due to the lack of any spare capacity in the system.  This means that if there is an event that would cause a significant amount of oil to be taken off the market (~5% in the case of Iran) buyers who need oil no matter what are willing to pay a bit of a premium to ensure that they can get it at todays price rather than the highly elevated price in the future.  In the past there has been a large overhang of spare capacity that could kick in to cushion an event like this.  However, for the past few years oil producers have been pumping every last drop because of high prices and increased demand (except for some Saudi heavy crude that is so difficult and expensive to refine that most wont accept it).  Because of this any extended loss of significant supply would likely lead to huge spikes in the price. 

The decline in the dollar is significant cause of the increase in oil and other commodities, but oil has been increasing in every major currency lately so the effects might not be as great as hoped.  I'm also not sure how much Obama can really do to save the dollar.  We've got decades of built up irrisponsible fiscal policy to work through, Obama is no miracle man. 

I disagree with this.  Although it may be a goal and they may cheer high prices I am of the theory that OPEC no longer has any control over oil prices.  In order to have control they must have both spare capacity and the will to cut production.  I dont' think they have either anymore.  As discussed above the small amount of spare capacity they have is oil that no one really wants.  In addition very few OPEC members can willingly cut production since they are heavily dependent upon the huge revenue stream to keep their economies running and their populations from chopping off their heads!  As much as Ajob and Chavez hate America they love power even more. 

by alphasigmookie on 06/17/2008 03:07:02 PM EST

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That all seems reasonable (none / 0)
Thank you for your informed, reasoned response.

by ProfRich on 06/17/2008 03:10:29 PM EST

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One problem... (none / 0)

"If Obama dismisses the notion of war with Iran"

...and therein lies the rub...

"And we can, then, more effectively deal with one of the greatest threats to the United States, Israel and world peace: Iran.  Iran’s President Ahmadinejad’s regime is a threat to all of us. His words contain a chilling echo of some of the world’s most tragic history."
"In the 21st century, it is unacceptable that a member state of the United Nations would openly call for the elimination of another member state. But that is exactly what he has done. Neither Israel nor the United States has the luxury of dismissing these outrages as mere rhetoric."

"The world must work to stop Iran’s uranium enrichment program and prevent Iran from acquiring nuclear weapons. It is far too dangerous to have nuclear weapons in the hands of a radical theocracy. And while we should take no option, including military action, off the table, sustained and aggressive diplomacy combined with tough sanctions should be our primary means to prevent Iran from building nuclear weapons."

 - Barack Obama, AIPAC convention, 2008

Certainly, the overall tone of the speech was a moderate's call for peace, but I don't want ANYONE being able to say, "no one could have anticipated..." ever again.

by MedfordTim on 06/17/2008 03:35:34 PM EST

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Oil Prices...Fundamentals or Not? | 27 comments (27 topical, 0 hidden)