why has gas dropped so much? im bewildered, can someone give me some insight?
Probably because of the holiday shopping season has approached. IMO. I dont believe this hype about the demand is down. Its always about money.
Because there's a global recession happening. Oil was so high because of speculation about demand in the future outweighing supply, so it drove up cost. Now that economies around the world are hurting, the demand for oil isn't as high. I just hope that we don't stray from trying to get off our dependence from oil now that the price is going down. We need to still develop alternative sources and do it fast. I believe Obama is the right man to get it done, but it's going to take all of us.
Quote from: MattnJax on November 19, 2008, 09:55:57 PM
Because there's a global recession happening. Oil was so high because of speculation about demand in the future outweighing supply, so it drove up cost. Now that economies around the world are hurting, the demand for oil isn't as high. I just hope that we don't stray from trying to get off our dependence from oil now that the price is going down. We need to still develop alternative sources and do it fast. I believe Obama is the right man to get it done, but it's going to take all of us.
MATT FOR PRESIDENT 2016!!!
Man I could not agree more, and people should not change their driving habits!!
The gas is down due that stock crash that happened a month ago. When all that stock dropped, the gas prices started going down like a 3 cents a day. in a month it went from 4.05 gal to 1.84 gal....IN A MONTH, people that invested in oil stocks lost a lot of money. They are trying to get that money back, so to get people buying gas again, they lower the price and hope that we will drive more and buy more gas. Many have taken the bait. And it sucks, because these dumb ass car companies won't make the giant sized power wheels they need to be making, they still want to build gas drinkers. no one is buying and now they want 25 BILLION from the government!!!! Its a friggin set up. Gas companies and car companies are in cahoots. Anyone on that side of the fence is totally against mass transit which was a topic that was red hot when gas prices were high, now its low and mass transit talk is going away. They are playing this game with all of us. Some of us are too dumb to see what it going on. Cars need to be electric and mass transit should be an alternative. These are needs for planet earth, not just America.
I agree with you both, but as long as there money to be made, things will not change.
Gas is down because of a few reasons.
1. Worldwide recession has caused global demand to drop below supply. Economic rule: When demand is higher than supply, the product goes to the next highest bidder.
2. Banks are broke. Most people don't actually buy physical oil, rather they contracts for oil in the future (usually 1-3 month forward contracts). Banks are however broke and are unwilling or unable to lend investors, users, and hedge funds the margin funds needed to buy these contracts.
3. The stock market crashes around the world has caused investors (chiefly US investors) to withdraw money from foreign markets and retrench them back into US bonds. This has caused a hugh run on the dollar. As the dollar has risen, the attractiveness of oil as a hedge against inflation has gone down. So expensive dollar means cheaper oil.
Hope this helps.
This will be interesting. For the consumer, the drop in gas prices has been one of few upsides of the current economic situation. Fuel prices and energy costs will be important to any rebound in the economy. Unfortunately, with this incoming administration combined with the merry band of idiots who now sit in Congress, I have a feeling we will be seeing calls for new energy taxes if prices remain low. It will be part of a series of actions which will have the same effect as New Deal socialistic policies which prolonged the effects of the Great Depression throughout the 1930's.
Bush made it happen,he pulled his lever on side of his Lazyboy and prices of oil went down.
Quote from: Bostech on November 20, 2008, 01:19:19 PM
Bush made it happen,he pulled his lever on side of his Lazyboy and prices of oil went down.
Must be true... that is what you said when they went up...
Whatever. This goes far beyond such agreements. BP, Exxon Mobil, Shell have reportedly secured rights of first refusal on 30-year production contracts in Iraq's vast oil reserves. What this means, we found out, the Iraq war is largely about oil. Now that we own these oil reserves there's less speculation and with less speculation there is the drop in prices.
ok...whatever
that was for Bostech, you just posted between when I typed it and before I submitted it.
I think the gas tax in china is actually going to curb demand as well and push oil lower.
Quote from: gatorback on November 20, 2008, 02:14:31 PM
that was for Bostech, you just posted between when I typed it and before I submitted it.
I think the gas tax in china is actually going to curb demand as well and push oil lower.
Sorry :)
Why is gas so cheap??__Who cares; I just hope that it stays that way for a good while. OPEC isn't done screwing with us yet, so don't get too happy; Screw you OPEC, with this see-saw game!! Americans NEED to find ways to get gas (alternate sources etc.) outta this country, instead of others.
Maybe its just old fashoined economics at play here. Less demand=cheaper price?? just a thought.
And a very good thought... much more thoughtful and correct than..."Bush did it" :D :D
Ha ha. Let's take a closer albeit funner look at....
When President Bush took office on January 20, 2001, the national average gas price was $1.46 per gallon. Almost 8 years later, the national average gas price has jumped to $2.02 roughly 36% higher. Compounded annually, this represents about a 4.5% jump each year Bush has been in office.
Now, let’s compare the numbers over the same time period for President Clinton.
When Clinton took office on January 20, 1993, the national average gas price was $1.06 per gallon. Eight years later, the national average gas price had jumped to $1.46, roughly 37% higher. Compounded annually, this represents about a 4.6% jump each year.
While these numbers are pretty close, I’m of the belief that you’d have to be pretty nuts to think Bush would have the ability to do this. ;)
Quote from: gatorback on November 20, 2008, 02:05:11 PM
Whatever. This goes far beyond such agreements. BP, Exxon Mobil, Shell have reportedly secured rights of first refusal on 30-year production contracts in Iraq's vast oil reserves. What this means, we found out, the Iraq war is largely about oil. Now that we own these oil reserves there's less speculation and with less speculation there is the drop in prices.
Source?
BTW, the higher prices also encouraged additional drilling which then resulted in larger supplies. More supply and less demand combined with an increase in the value of the dollar equals lower oil prices.
Quote from: fsujax on November 20, 2008, 02:26:32 PM
Maybe its just old fashoined economics at play here. Less demand=cheaper price?? just a thought.
It funny people say that, but I still see the same amount of cars and traffic I always seen. Now all of a sudden in Oct 2008 there is less demand? Where was this less demand in Sept, Aug, July & June. And don't take this at a shot at you FSUJAX..your a cool poster, its just that can't be what is going on.
I don't remember even complaining about gas prices until 2006. 2001, 2002, 2003, 2004 & 2005 I would fill up the tank without a thought. Then it got to the point where you were debating how long you ride with the gas light on. Something else is going on, and its not the supply & demand thing. Definitely not the case for a city like Jacksonville.
Alan Greenspan, said the war is largely about oil. It surely was about wmd.
Could you guys imagine if George W. Screwup .... errrr I mean Bush, hadn't stole the election from Gore in 2000? As we all know Bush is a texas oilman, so what the hell does he care about finding or funding alternative energy sources? Whereas Gore is a staunch environmentalist and avid supporter of alternative energy. I think that if he was elected we would be far along on the path of getting off our dependence on oil, and we sure as hell wouldn't have invaded Iraq for no reason. Just a thought for everyone.
Quote from: MattnJax on November 20, 2008, 05:26:38 PM
Could you guys imagine if George W. Screwup .... errrr I mean Bush, hadn't stole the election from Gore in 2000? As we all know Bush is a texas oilman, so what the hell does he care about finding or funding alternative energy sources? Whereas Gore is a staunch environmentalist and avid supporter of alternative energy. I think that if he was elected we would be far along on the path of getting off our dependence on oil, and we sure as hell wouldn't have invaded Iraq for no reason. Just a thought for everyone.
"Imagine" isn't the right word - "nightmare" is more like it...we'd have had $4.00 gas right after 9/11, rather than years later, the economy would have tanked FAR sooner. Talk about biting the bullet and having Bush stop Gore from changing the rules in the middle of the game and preventing an election from being stolen outright.
(http://img227.imageshack.us/img227/6623/armyzx8.png) (http://imageshack.us)
^^^LOL7X!!!!!!!!
I'm all for alternative fuels and conservation. Anything to keep us from buying from our enemies. Al Gore is a typical politician. In 2007 the average household used 10,656 kilowatt hours per year. Al Gore used 221,000. lmao He seems really concerned about the environment. Where are the pictures of his energy consuming mansion or private jet he uses to fly to global warming conventions???
Bostech. Die Burger is a South African newspaper. Is that picture from the snow swept oil fields of Iraq?
Quote from: alta on November 21, 2008, 02:45:53 PM
I'm all for alternative fuels and conservation. Anything to keep us from buying from our enemies. Al Gore is a typical politician. In 2007 the average household used 10,656 kilowatt hours per year. Al Gore used 221,000. lmao He seems really concerned about the environment. Where are the pictures of his energy consuming mansion or private jet he uses to fly to global warming conventions???
Typical misleading comment from another repug. Here's what your not telling: "The former vice president's home has 20 rooms, including home offices for himself and his wife, as well as a guest house and special security measures." -Wikipedia
So who knows how the Gores live. Perhaps they have this big ass house cause they work from home and have large offices full of electrical equipment. Perhaps they entertain other politicians and high-ranking officials. I'm sure you do all that stuff when your the ex-vice president, a presidential nominee, oscar winner, and a leading environmentalist. Perhaps their home has sercurity measures out the ying yang to protect them. I don't know. I'm not the Gores. I'm just making an educated guess instead of spewing crap you hear from right-wing propaganda. I mean what do you expect the man to do? Live in a shack where he bearly uses any energy. Give me a break.
His house is pretty efficient. I remember him saying that there are much smaller homes that use far more energy then his home. Besides, this is America. If you earn a crib like that and want it who business is it to say?
Why would being the ex vice president justify an electric bill 10x the national average??? He installed solar panels after all the scrutiny he received about his high electric bills which now makes it efficient. Look it up online. Misleading comment? Please tell me how it is misleading. I'm not a repug. I ride my bike to work, recycle, drive a small car. Al Gore shouldn't be the poster child for the enviromental movement. Ed Begley is a good example of someone who lives what he preaches.
Ed is kind of cocky, not unlike Al so they both have a lot in common. Ed is an amazing actor I have to give him that. He has made a lot of movies and I've enjoyed getting my gas guzzlers and going to see him. To be blunt, Ed is the problem. He gets people to drive cars to see his movies. If ed really cared he wouldnt work in that industry. Think about it is all i'm saying. If you are a baptist you wouldn't work for Adolf Coors would you?
Quote from: alta on November 21, 2008, 03:50:53 PM
Why would being the ex vice president justify an electric bill 10x the national average??? He installed solar panels after all the scrutiny he received about his high electric bills which now makes it efficient. Look it up online. Misleading comment? Please tell me how it is misleading. I'm not a repug. I ride my bike to work, recycle, drive a small car. Al Gore shouldn't be the poster child for the enviromental movement. Ed Begley is a good example of someone who lives what he preaches.
Dude, do you not read? I basically said because he and his wife work from home, and he's not the average american. You're going by the national average for a 'typical' home. Key word there is typical. You say that he only tried to make his house green after scruntiny but you don't know that. Fact is is that Gore has one of the greenest houses in America and he pays out the ass for it:
".... Furthermore, the Gores buy energy produced from renewable sources, such as wind and solar. MSNBC confirmed with the local utility officials that their program, called the Green Power Switch, actually costs more for the Gores -- four dollars for every 150 kilowatt hours. Meaning, by our calculations, our math here, that the Gores actually chose to increase their electric bill by $5,893, more than 50 percent, in order to minimize carbon pollution." A few months later, the Associated Press reported on December 13, 2007 that Gore "has completed a host of improvements to make the home more energy efficient, and a building-industry group has praised the house as one of the nation's most environmentally friendly [...] 'Short of tearing it down and starting anew, I don't know how it could have been rated any higher,' said Kim Shinn of the non-profit U.S. Green Building Council, which gave the house its second-highest rating for sustainable design."
Source: Wikipedia
But yeah you would have us all believe that the man doesn't care about going green. But truth is is the man has spent hundreds of thousands of dollars to make improvements to his house. Sounds pretty dedicated to me.
Actually I do read. Go figure. That is how I know that he didn't choose to go green until December of last year. After the press made him look foolish and hypocritical He has been an evironmentalist his entire life but just chose to go green last December. He had the means to have his entire house solar twenty years ago. Even if he doesn't have the typical house or lifestyle.
my electic bill is around 30 a month. Nobody is giving me kudos. I don't own a car, I ride the bike or walk or take the bus. Why should we give ed all the kudos? I try to get my friends to mass it.
Quote from: MattnJax on November 21, 2008, 04:10:11 PM
Quote from: alta on November 21, 2008, 03:50:53 PM
Why would being the ex vice president justify an electric bill 10x the national average??? He installed solar panels after all the scrutiny he received about his high electric bills which now makes it efficient. Look it up online. Misleading comment? Please tell me how it is misleading. I'm not a repug. I ride my bike to work, recycle, drive a small car. Al Gore shouldn't be the poster child for the enviromental movement. Ed Begley is a good example of someone who lives what he preaches.
Dude, do you not read? I basically said because he and his wife work from home, and he's not the average american. You're going by the national average for a 'typical' home. Key word there is typical. You say that he only tried to make his house green after scruntiny but you don't know that. Fact is is that Gore has one of the greenest houses in America and he pays out the ass for it:
".... Furthermore, the Gores buy energy produced from renewable sources, such as wind and solar. MSNBC confirmed with the local utility officials that their program, called the Green Power Switch, actually costs more for the Gores -- four dollars for every 150 kilowatt hours. Meaning, by our calculations, our math here, that the Gores actually chose to increase their electric bill by $5,893, more than 50 percent, in order to minimize carbon pollution." A few months later, the Associated Press reported on December 13, 2007 that Gore "has completed a host of improvements to make the home more energy efficient, and a building-industry group has praised the house as one of the nation's most environmentally friendly [...] 'Short of tearing it down and starting anew, I don't know how it could have been rated any higher,' said Kim Shinn of the non-profit U.S. Green Building Council, which gave the house its second-highest rating for sustainable design."
Source: Wikipedia
But yeah you would have us all believe that the man doesn't care about going green. But truth is is the man has spent hundreds of thousands of dollars to make improvements to his house. Sounds pretty dedicated to me.
So how do you explain Gore's many many plane flights, especially those on private jets? And his frequent use of limousines? And the fact that he uses natural gas to heat his pool? And the fact that he lives in a home four times larger than the average US home? And the fact that he has started a company that trades in carbon offsets thereby making himself millions of dollars off the hysteria he himself helped to foment?
The answer: Gore is a hypocrite and a liar who has ridden this enviro-hysteria to fame and fortune on the backs of credulous libs around the world. Wake up.
He also invented The Internet which keeps everybody at home saving more gas then that limo and pool use.
lmao Please tell me you aren't serious. The internet was developed by the military for communication between troops.
lmao...But according to the man himself, he invented it during his service in the congress.
Transcript: Vice President Gore on
CNN's 'Late Edition'
March 9, 1999
CNN'S WOLF BLITZER: I want to get to some of the substance of domestic and international issues in a minute, but let's just wrap up a little bit of the politics right now.
Why should Democrats, looking at the Democratic nomination process, support you instead of Bill Bradley, a friend of yours, a former colleague in the Senate? What do you have to bring to this that he doesn't necessarily bring to this process?
AL GORE: Well, I'll be offering my vision when my campaign begins. And it will be comprehensive and sweeping. And I hope that it will be compelling enough to draw people toward it. I feel that it will be.
But it will emerge from my dialogue with the American people. I've traveled to every part of this country during the last six years. During my service in the United States Congress, I took the initiative in creating the Internet. I took the initiative in moving forward a whole range of initiatives that have proven to be important to our country's economic growth and environmental protection, improvements in our educational system.
http://en.wikipedia.org/wiki/Internet
A 1946 comic science-fiction story, A Logic Named Joe, by Murray Leinster laid out the Internet and many of its strengths and weaknesses. However, it took more than a decade before reality began to catch up with this vision.
The USSR's launch of Sputnik spurred the United States to create the Advanced Research Projects Agency, known as ARPA, in February 1958 to regain a technological lead.
Did you read past the first sentence????????
Al Gore said he did is all I am saying.
Quote from: gatorback on November 21, 2008, 05:26:50 PM
my electic bill is around 30 a month. Nobody is giving me kudos. I don't own a car, I ride the bike or walk or take the bus. Why should we give ed all the kudos? I try to get my friends to mass it.
We all love your for it Gatorback!!
Quote from: alta on November 22, 2008, 10:29:59 AM
lmao Please tell me you aren't serious. The internet was developed by the military for communication between troops.
Alta, as Gatorback shown, all he said was that he took the initiative in Congress when he was a congressman for 17 years before become vice-president. Here's an exerpt from wikipedia about Gore's view on technology while in congress:
"Gore was one of the Atari Democrats who were given this name due to their "passion for technological issues, from biomedical research and genetic engineering to the environmental impact of the "greenhouse effect." On March 19, 1979 he became the first member of Congress to appear on C-SPAN. During this time, Gore co-chaired the Congressional Clearinghouse on the Future, along with Newt Gingrich. In addition, he has been described as having been a "genuine nerd, with a geek reputation running back to his days as a futurist Atari Democrat in the House. Before computers were comprehensible, let alone sexy, the poker-faced Gore struggled to explain artificial intelligence and fiber-optic networks to sleepy colleagues."Internet pioneers Vint Cerf and Bob Kahn have also noted that, "as far back as the 1970s, Congressman Gore promoted the idea of high speed telecommunications as an engine for both economic growth and the improvement of our educational system. He was the first elected official to grasp the potential of computer communications to have a broader impact than just improving the conduct of science and scholarship [...] the Internet, as we know it today, was not deployed until 1983. When the Internet was still in the early stages of its deployment, Congressman Gore provided intellectual leadership by helping create the vision of the potential benefits of high speed computing and communication. As an example, he sponsored hearings on how advanced technologies might be put to use in areas like coordinating the response of government agencies to natural disasters and other crises."
Gore also sat on United States House Committee on Science and Technology and chaired it for 4 years. Where I'm sure he led the push to develop the internet into what it would ultimately become. Of course the right-wingers took what he said and twisted his words to make it look like he said he invented the internet. When in fact he never said that.
If right-wingers and repugs would/could just learn to read, instead of following along like sheep, they could understand these things. But of course Republicans love to lie and tell half-truths. Just look at this last election for president. Full of lies and scare tactics to make Obama look like the Antichrist. Epic fail on their part.
Quote from: alta on November 21, 2008, 05:17:35 PM
Actually I do read. Go figure. That is how I know that he didn't choose to go green until December of last year. After the press made him look foolish and hypocritical He has been an evironmentalist his entire life but just chose to go green last December. He had the means to have his entire house solar twenty years ago. Even if he doesn't have the typical house or lifestyle.
So who wrote this book/article that you are referencing? Rush Limbaugh? Sean Hannity? Fact is he didn't even buy his current house in Nashville til 2002. Maybe he didn't start renovating til later for whatever reason. I'm not Al Gore. I don't know the man's schedule. Maybe he didn't have the hundreds of thousands of dollars to renovate the house til after he made some money. I don't know the man's bank account. But I guess repugs do. Just find it funny that right-wingers trash a guy that wants to make our world a cleaner, better place. But I should expect that, repugs voted in Bush, twice! lmao
Quote from: civil42806 on November 22, 2008, 12:18:16 PM
Quote from: gatorback on November 21, 2008, 05:26:50 PM
my electic bill is around 30 a month. Nobody is giving me kudos. I don't own a car, I ride the bike or walk or take the bus. Why should we give ed all the kudos? I try to get my friends to mass it.
We all love your for it Gatorback!!
Thanks man but I'm just doing my part. I am currently learning as much as I can about The Pickens Plan. http://www.pickensplan.com (http://www.pickensplan.com) What do you guys think of his plan? I don't know enough yet to have any comment other then it looks like a plan. And I'm not trying to recuit you either; however, I always wanted to be in an army. Lol
So Newt Gingrich was the co creator of the internet...
http://abcnews.go.com/Politics/GlobalWarming/story?id=2906888&page=1
Fact is Gore is a hypocrite like most policitians (Democrat and Republican)!!!
Or at least... exaggerates his importance... as most politicians... :)
al had a great role model. "it depends on what your definition 'is' is."
Quote from: Coolyfett on November 20, 2008, 04:50:37 PM
Quote from: fsujax on November 20, 2008, 02:26:32 PM
Maybe its just old fashoined economics at play here. Less demand=cheaper price?? just a thought.
It funny people say that, but I still see the same amount of cars and traffic I always seen. Now all of a sudden in Oct 2008 there is less demand? Where was this less demand in Sept, Aug, July & June. And don't take this at a shot at you FSUJAX..your a cool poster, its just that can't be what is going on.
I don't remember even complaining about gas prices until 2006. 2001, 2002, 2003, 2004 & 2005 I would fill up the tank without a thought. Then it got to the point where you were debating how long you ride with the gas light on. Something else is going on, and its not the supply & demand thing. Definitely not the case for a city like Jacksonville.
The total miles driven in the US has fallen on a year over year basis for the last 10 months. In fact we are on pace to "only" drive as many miles as we did in 2004.
As of July we had driven 50 BILLION less miles than we had compared to that point last year.
I would say that demand has fallen.
Quote from: MattnJax on November 22, 2008, 03:00:24 PM
Quote from: alta on November 21, 2008, 05:17:35 PM
Actually I do read. Go figure. That is how I know that he didn't choose to go green until December of last year. After the press made him look foolish and hypocritical He has been an evironmentalist his entire life but just chose to go green last December. He had the means to have his entire house solar twenty years ago. Even if he doesn't have the typical house or lifestyle.
So who wrote this book/article that you are referencing? Rush Limbaugh? Sean Hannity? Fact is he didn't even buy his current house in Nashville til 2002. Maybe he didn't start renovating til later for whatever reason. I'm not Al Gore. I don't know the man's schedule. Maybe he didn't have the hundreds of thousands of dollars to renovate the house til after he made some money. I don't know the man's bank account. But I guess repugs do. Just find it funny that right-wingers trash a guy that wants to make our world a cleaner, better place. But I should expect that, repugs voted in Bush, twice! lmao
So how do you explain Gore's many many plane flights, especially those on private jets? And his frequent use of limousines? And the fact that he uses natural gas to heat his pool? And the fact that he lives in a home four times larger than the average US home? And the fact that he has started a company that trades in carbon offsets thereby making himself millions of dollars off the hysteria he himself helped to foment?
The answer: Gore is a hypocrite and a liar who has ridden this enviro-hysteria to fame and fortune on the backs of credulous libs around the world. Wake up.
Quote from: RiversideGator on November 24, 2008, 12:19:24 AM
So how do you explain Gore's many many plane flights, especially those on private jets? And his frequent use of limousines? And the fact that he uses natural gas to heat his pool? And the fact that he lives in a home four times larger than the average US home? And the fact that he has started a company that trades in carbon offsets thereby making himself millions of dollars off the hysteria he himself helped to foment?
The answer: Gore is a hypocrite and a liar who has ridden this enviro-hysteria to fame and fortune on the backs of credulous libs around the world. Wake up.
Pete and Repeat were in a boat... ;D
So why is gas so cheap?
Or rather, how long can we expect it to stay this cheap?
i think opec is thinking that if they keep production at the current level then the prices will come down and demand will go back up. if they cut production then demand will drive up prices and keep the world in the pickle it is in. so my guess is it is going to stay low till memorial day 09. By then our new superstar prez Obama will have us all out of this mess.
Quote from: gatorback on November 22, 2008, 03:15:20 PM
Quote from: civil42806 on November 22, 2008, 12:18:16 PM
Quote from: gatorback on November 21, 2008, 05:26:50 PM
my electic bill is around 30 a month. Nobody is giving me kudos. I don't own a car, I ride the bike or walk or take the bus. Why should we give ed all the kudos? I try to get my friends to mass it.
We all love your for it Gatorback!!
Thanks man but I'm just doing my part. I am currently learning as much as I can about The Pickens Plan. http://www.pickensplan.com (http://www.pickensplan.com) What do you guys think of his plan? I don't know enough yet to have any comment other then it looks like a plan. And I'm not trying to recuit you either; however, I always wanted to be in an army. Lol
pickens will become even more enormously rich off it
better him the alcida
Here is your answer:
QuoteDecember 2007: The Coming Oil Crash and $30 Oil?
(http://2.bp.blogspot.com/_otfwl2zc6Qc/SThVdj4ZLDI/AAAAAAAAH9s/AWQRv_b0ZHE/s400/gasoil.bmp)
From the December 2007 article "The Coming Oil Crash" by John Cassidy, subtitled "Crude at $100 a barrel makes good headlines but ignores basic economics. Why oil prices are in for a 50% drop."
The tripling of oil prices since the summer of 2003 (from $30 to about $95 per barrel, see chart above) has unleashed forces that within the next two or three years will bring oil prices tumbling back down to below $50 a barrel. Looking even further ahead, prices could easily fall to $30 a barrel or even lower. So before you trade in your Cadillac Escalade for a Toyota Prius, think twice: $1.50-a-gallon gas might not be gone forever.
The key to understanding where prices are headed is distinguishing between the short run and the long run. In a time frame of anything shorter than five years, the supply of crude is more or less fixed. Drilling for oil is an arduous and unpredictable process. Even after a new hydrocarbon reservoir is discovered, ramping up output takes years. Current production capacities reflect investment decisions made in the late 1990s or earlier.
Today, OPEC has the ability to produce about 35 million barrels of crude a day; the rest of the world can produce perhaps 50 million barrels a day. As recently as 2003, this seemed like plenty. Since then, though, global demand has grown rapidly, and a series of catastrophesâ€"some natural (hurricanes Rita and Katrina), some man-made (war in Iraq and unrest in Nigeria and Venezuela)â€"have curtailed production, causing supply to dip below demand. In September 2007, the global demand for crude reached 85.9 million barrels a day, whereas global supply was just 85.1 million barrels a day, according to I.E.A. figures.
When shortages emerge in any market, prices spike. If the imbalance is expected to continue, speculators move in and drive prices even higher. Oil is no exception. In the fall, as crude inventories declined and the rhetorical battle between the U.S. and Iran escalated, trading volume shot up.
With prices close to the inflation-adjusted record, energy companies and governments are investing heavily in facilities that generate crude and crude substitutes. Consumers of fuel oil and gasoline are starting to economize, and over time, these changes in behavior will shift the balance of power in their favor. When that happens, an oil glut will emerge, and the price will plummet.
MP: Spot crude oil today is selling for $41.25 per barrel and gas for $1.77 per gallon. Original CD December 2007 post about this here. Thanks to an anonymous comment for pointing this out.
http://mjperry.blogspot.com/2008/12/december-2007-coming-oil-crash.html
Just read an article where the CEO of Gulf oil is predicting $1.00 gas by early next year. IMHO the US should be pumping oil into the strategic reserve as fast as they can with crude at this low price...
Quote from: BridgeTroll on December 05, 2008, 08:57:46 AM
Just read an article where the CEO of Gulf oil is predicting $1.00 gas by early next year. IMHO the US should be pumping oil into the strategic reserve as fast as they can with crude at this low price...
Agree. On top of that, a larger question begs to be asked:
Carmakers (particularly the US' Big 3) are in the process of retooling their assembly lines to spit out smaller, more fuel-efficient carts as a response to sky-high gasoline prices.
Now that the gas bubble has popped (for want of a better phrase), will the demand be nearly as great for gas-sippers?
Will the car manufacturers be facing a triple whammy of trying to supply a now-evaporating demand while facing the spectre of bankruptcy? Gloomy indeed.
The worst thing is the clowns in the Democrat party (and some silly Republicans) have imposed all these CAFE standards on the manufacturers and are still extorting all these promises that Detroit will build these small cars that most people do not want. The best thing for Detroit would be if gas prices stay low and SUV sales pick up again. SUVs are more profitable for the manufacturer and Detroit has the edge in them at present.
So you are saying stick our heads back in the ground again?
Quote from: RiversideGator on December 05, 2008, 12:15:17 PM
The worst thing is the clowns in the Democrat party (and some silly Republicans) have imposed all these CAFE standards on the manufacturers and are still extorting all these promises that Detroit will build these small cars that most people do not want. The best thing for Detroit would be if gas prices stay low and SUV sales pick up again. SUVs are more profitable for the manufacturer and Detroit has the edge in them at present.
While I agree that mandatory standards are regressive and Detroit should not be required to follow them... I disagree with your theory that
QuoteThe best thing for Detroit would be if gas prices stay low and SUV sales pick up again.
This is suicide. While possibly profitable short term for Detroit... their lack of vision and innovation is what brings them to the brink of bankruptcy and "too big to fail" status.
They need to put their marketing genius to work convincing the american public that smaller fuel efficiant vehicles are desireable.
The best thing for Detroit and the govenment is to let the CONSUMER decide. This is an issue that begs the question of how far we are willing to let the government interfere in the free market. Should a small number of government bureaucrats decide the types of vehicles we will be allowed to purchase or should that decision be left up to the manufacturers and the millions of consumers? If the manufacturers do not react to the changing markets fast enough or will not make a serious effort to control their costs they should pay the price. The foreign manufacturers are weathering the storm quite well and don't forget the Toyota Tundra's, Nissan Titans, and the many other full size trucks and SUV's that the foreign manufacturers have been producing and selling all along. Government interference has already made one hell of a mess out of the financial industry. The automotive industry doesn't need that kind of help.
I agree with everything you said. However...
QuoteIf the manufacturers do not react to the changing markets fast enough or will not make a serious effort to control their costs they should pay the price.
... is where we are now. Their argument is ...oops... sorry... bail us out... we are too big to fail.
QuoteTheir argument is ...oops... sorry... bail us out... we are too big to fail.
So true, BT. I would like to know what their definition of "fail" is. Are they saying that without this bailout money they will shut their doors or is it more precise to say that they are desperately trying to avoid the pain of a desperately needed reorganization.
There are still a lot of questions that need to be addressed.
Everyone keeps saying "bail out" as if the money were a gift. My understanding is that they are asking for loans, not gifts, which would be paid back.
As for consumer preferences, the consumer appears to prefer big cars and SUVs as long as gas is reasonably priced.
Quote from: jaxnative on December 05, 2008, 10:47:14 PM
So true, BT. I would like to know what their definition of "fail" is. Are they saying that without this bailout money they will shut their doors or is it more precise to say that they are desperately trying to avoid the pain of a desperately needed reorganization.
What "fail" means is a good question here. I think all the coverage is making the mistake of talking of the "Big 3" as if they were a single entity. Looking at each one individually paints a stark picture.
As much as it pains me to say it - GM as we know it is history (pains me for personal reasons - my Grandfather worked his entire life for GM...I realize it's not the same company as it was then, but still). Probably the most under-covered angle to this story is the part where GM is literally going to be out of money by the end of the year (or, maybe a week or two into 09). Not "ok, things are tight, rack up some debt" out of money, but literally, "we can't cut you a paycheck because if you cash it it will bounce" out of money. So while I agree they need some painful reorganization, they don't have the money to go Chapter 11 - Ch11 means functionality basically continues while the reorganization happens. So even if they go Ch11, they can't pay people to continue operating. The only way that happens is if they get a loan that allows them to continue functioning while reorganizing. And if, in this credit market, anyone believes GM could get a loan from a bank to allow them to operate under Chapter 11, I've got a bridge in New York you might want to get a loan to buy while you're at it. Which means, in GM's case, the government is literally the "lender of last resort."
On the other end of the spectrum, you have Ford. Ford is probably positioned the best to get through this - they actually have the capital on hand to reorganize (maybe even without going Ch11). But let's be honest...if my major competitor is going to get some cash from the government to reorganize, why they heck shouldn't I be there too? Or, more importantly in Ford's case, what happens if GM goes completely under? GM goes, a good number of their suppliers disappear too - and they happen to be Ford's suppliers too. So Ford at least has a vested interest in GM at least reorganizing rather than going completely under (not to mention the ridiculous impact GM completely disappearing would have on the economy overall).
So "fail" depends on how the government wants to approach it. I promise you, if they get an outright, no strings bail out, they they'll be back in March saying they need more money. I'm of the position that if any of those companies get cash, it comes with a Chapter 11 requirement - they can get the money to continue operating as they reorganize.
At the same time, this should be addressed...
Quote from: RiversideGator on December 05, 2008, 11:32:53 PM
Everyone keeps saying "bail out" as if the money were a gift. My understanding is that they are asking for loans, not gifts, which would be paid back.
As for consumer preferences, the consumer appears to prefer big cars and SUVs as long as gas is reasonably priced.
River, you know in general I've got your back on these positions, but as far as the Big 3 goes, it's really naive to consider these loans. I'll agree with you that calling the financial/TARP program a "bailout" is wrong - those were legitimate loans, that I fully expect the government to get most of that money back (if not come out ahead in the deal). But there's a reason why no bank would lend to GM right now - there's no way they pay that back. Or, rather, they'd pay it back once inflation renders the original amount meaningless. Money that would go to the Big 3 is going to be a bailout - nothing more, nothing less. That's why I take the position that the money has to have major requirements attached - because I have no faith that money is ever coming back.
On the SUV thing, I think that's a bit of penny-wise, pound foolish. I agree that when gas is cheap, consumers love SUVs. And yes, right now, the Big 3 are geared to sell SUVs to a clamoring consumer base, so a short-term desire for SUVs would solve a lot of the problems. But all that means is continuing an imbalanced business model - we're here today because people stopped buying the SUVs to begin with. The revenue stream disappeared, which means they couldn't pay their (admittedly ridiculous) union commitments, and now they're begging for survival.
Personally, I think what they need is a forced reorganization so that they can concentrate on stuff like the Volt and it's siblings - cost-efficient fuel-efficient vehicles. Not for any standards, but because the market has shifted - the majority of the consumer base won't buy overpriced fuel-efficient cars (really - how many Prius do you see on the road?)...but given a reasonably priced car that's fuel efficient? In this market, they'll jump. $4.00 gas is too clear in the current market's mind for people to go back to their standard SUV ways. The Big 3 needs a balanced production line, not something for a single market.
QuoteI'm of the position that if any of those companies get cash, it comes with a Chapter 11 requirement - they can get the money to continue operating as they reorganize.
I hope that this type of common sense arrangement can be presented and accepted. I don't see GM having an option of refusal and the taxpayers should expect no less.
Further:
http://biz.yahoo.com/rb/081219/business_us_markets_oil.html (http://biz.yahoo.com/rb/081219/business_us_markets_oil.html)
Quote
Reuters
Oil falls over 6 percent on demand outlook
Friday December 19, 3:33 pm ET
By Edward McAllister
NEW YORK (Reuters) - Oil fell over 6 percent on Friday, as fears of economic slowdown weighed heavier than proposed production cuts by the world's major oil exporters.
U.S. light crude for January delivery, which expired Friday, settled down $2.35 at $33.87 a barrel, the lowest since February 10, 2004, when it ended at the same level.
The more active February contract settled up 69 cents at $42.36 a barrel with cuts in OPEC production expected to take hold in that month.
London Brent crude gained 64 cents, settling at $44.00.
Friday marks the sixth consecutive day of falls in oil, off more than 29 percent from the $47.98 seen when prices last rose on December 11.
Oil prices have fallen more than $100 from their peak above $147 in July as a global economic downturn ripped into global oil demand, and looked set for one of their biggest weekly declines for years.