this just in - rise in price of oil has nothing to do with speculators

The price is going down because of Economic Devastation to the world economy. In the coming years, this will be the KEY reason why the price goes down.

Interesting Question wrote:

This year there were numerous reports that driving was WAY down for the holiday. Making it not terribly hard to predict for the July 11th Week that supplies would be up.

You're an idiot if you think legit traders are reacting to day-of news.

Remember - there are two parts of the equation - demand AND supply. Stories about lowering demand occured way before July 4th - but the oil stock report kept showing lower than expected reserves. Meaning that even though demand was lowering there was still less oil/gas/distallates than expected. Which means the supply crunch was real.

There are millions of traders - some are ahead of the curve and some are behind it - but to say that news (profit reports, commodity stocks reports, etc) doesn't effect the price of a stock/commodity is obviously false. Now I agree that expectations are priced into the market - but, when a report shows those expectations to be wrong there is an immediate price correction.

And remember, the CFTC report states that MORE speculators were betting that the price of oil was going to fall during the first 5 months of 2008. If speculators control the market and more than half of them wanted oil to go down - why did it go up? The only possible answer is that more people wanted to buy $120 per barrel oil than was available - so the price went up until demand fell off enough to equal the amount of supply.

Now it appears that we have less demand for oil at $140 per barrel than we have supply - so the price has gone down until demand increases to the amount of supply that's on the market.

definitely no speculation in the energy markets...

oh wait, the government disagrees with you.

Why would supply have changed?

Every oil producing country in the world was saying that supply hadn't changed.

I think you're just ignoring the possibility because you don't want to admit that you were wrong. It's cool man, I get the alpha male thing.

Supply hadn't changed. All oil exporters said that. Demand was dropping significantly. Those are two solid facts.

Yup, reports came out that oil reserves had dropped. But if supply hadn't changed, and demand was dropping, why would there be a net loss of oil. Apparently no one thought to ask that question.

Oil exporting countries don't want to see high prices for barrels of oil, that means demand will drop. They'll make more, but use less. So when they come out and say "hey, we don't know what's going on, supply hasn't changed". I trust them. Then when the airlines start crying about speculators killing their fuel costs. And the government catches people as the previous poster said.....

you can't ignore the facts much longer.

The run up to $147 was completely unwarranted.

We're seeing that now. Crude was down a little more today last time I checked... $124.

Manipulation and speculation are two different things.

You might want to read more than just the headline -

"CFTC has repeatedly said that speculators are not to blame for rising oil prices, and any cases of price manipulation - such as the one brought Thursday - have only a small, if any, effect on oil prices."

The manipulation was to quickly raise the price and then quickly bring the price back down - this manipulation had no longer term effect on the oil markets.

Next!

Because many countries are producing less than than they used to - and the other countries can't increase their output enough to keep up with demand.

That's false on several levels. A few oil producing countries have claimed that there is enough supply for demand (SA & Iran most notably). Nobody said anything about whether world wide oil supply is increasing, decreasing, or staying the same.

Look at this graph from the CFTC report - oil supply is not keeping up with economic growth as it did before 2005.

Actually you have it backwards. I want to be wrong. A world where oil production is decreasing by 4-5% every year ain't going to be fun. But, none of the hard data show that we're going to escape that fate.

I don't understand what you're saying - are you saying the reports are wrong? I haven't heard any evidence of that - and all the corrections for supply and reserve reports for the last year have all been revised downward.

You are right - historically saudi arabia has been a swing producer that is able to increase supply at the drop of a hat to decrease prices. But, this spring they at first declined to increase supply when Bush pressured them. Then they agreed to a piddly 2-300,000 barrels per day increase.

Their recent behavior only makes sense if they no longer have millons of barrels of spare capacity like they did in the good ole days. And actions speak louder than words. The Saudi oil minister is about as credible as the Iraqi press secretary who claimed Bagdhad was safe from attack as the US tanks rolled in behind him.

They have every reason not to admit that they are producing all out. It means they have lost a lot of power in the world and in their own country. The SA regime is not politically stable - if they can no longer guarantee that the oil money will keep flowing there is an increased chance of revolution. The Saudi's treat their oil field data as a state secret.

As for your comment about oil producing nations "using" less - actually all the wealth being poured into those countries are causing them to increase their oil consumption. Meaning that even if they kept pumping out the same amount their net exports are declining.

That's like saying gravity is unwarranted - what we saw was markets acting the way markets are supposed to act.

neb - buddy, you need to go have a beer and some relations with a young lady, time for you to move on.

neb, you're so far beyond help dude.

I think you're the only person in the world that believes the crap you post.

Look - I just happen to think that the peak oil issue is the most important issue facing the world right now. And yet very few people seem to understand it or accept it. I don't think I can change the mind of everybody who reads my posts - but I think it's important to get the message out. I know that I piss some people off - but, that doesn't concern me too much.

Most people think that oil will just keep flowing out at what ever rate we need (unless we can't drill on the coasts and alaska or that darn OPEC withholds oil) until oil is gone - which will supposedly take 75 or 100 years. That's not how it works. We've drilled all the easy fields - now comes the expensive, slow flowing, heavy sour, under 3-6 miles of bedrock stuff that just won't get to us a quickly, efficiently, and cheaply as we have become accustomed to in the 20th century.

I just worry that we are in such denial over this inevitability that we will care more about maintaining the luxuries of the petroleum age than we do about maintaining truth, freedom, and justice - even in the face of overwhelming evidence that our current standard of living is not sustainable.

So, feel free to bash me - call me names - but, use your brain a little bit. Read a few peak oil websites and you can make a determination for yourself.

neb wrote:

Most people think that oil will just keep flowing out at what ever rate we need

It will. Oil is not produced by decaying plants or dinosaurs, it's produced naturally within the earth:

Hey neb, didn't you post some crap awhile ago saying something like "I hope you haven't been shorting oil lately, pretty soon you won't be able to afford an Internet connection to post this drivel." ?

Well if that guy (Tx Oil Man / hang the speculators) did short oil, he'd have made a good amount of cash by now. Oil dropped from $135 when he made that post to $125 this week.

As for me, I'm buying some airline stocks. Northwest and Delta look good and will do even better once the oil bubble bursts.

Wait. Here's that thread:

http://www.letsrun.com/forum/flat_read.php?board=1&id=2566679&thread=2566586

Maybe not one of my prouder moments - but if you look at the date and price of oil it was at $135 a barrel and July 9th - meaning it would rise over $12 until it hit it's peak of $147 on July 11th. Oil is still the same price (~$125) as when "Tx oil man" posted his first "oil bubble is about to burst" post on 5/29. Whatever money he's made in the last few weeks sure hasn't made up for what he lost since May. A LOT of people have shorted oil in 2008 - not many of made money - congratulations.

I love how people think that $125 is suddenly "cheap" - before you buy that airline stock let me tell you a little secret. Most airlines will not survive unless oil drops below $80 per barrel. Demand needs to come down quite a bit more to see $80 oil - only some kind of major financial disaster would precipitate that kind of drop in demand. In that case - oil might be cheap, but your airlines might be out of business anyways.

Limits on futures trading could boost gas prices, expert says

http://www.news.uiuc.edu/news/08/0725speculators.html

Uh oh

I mean this guy has only been studying commodity markets for 25 years - but apparently the "hang the speculator" types on letsrun know better.

Neb, just because oil production may peak sometime in our lifetime doesn't mean that it's behind the current price increases. If oil peaks in 2020 or 2030, prices will rise a year or two before 2020 or 2030, not now. There is absolutely no evidence that oil production is about to peak now. Production in the 1st quarter of 2008 was 87 million barrels/day, compared with 85 million barrels/day in 2005 and 83 million barrels/day in 2003.

Even if you were right that oil is peaking now, what exactly do you propose? Electric cars have a very limited range, ethanol-powered cars are fine if you want to destroy our food supply, and it takes more energy to produce hydrogen than we get from it if we use it to power our cars. Wind, solar, and nuclear may be good in the long run, but they'll need at least a decade to make any impact, and that's assuming electrified trains and cable cars replace cars, trucks, and planes overnight.

That leaves Harry Potter spells, koala plushies, puppy wags, and rainbow power as a source of fuel. Pick one.

Oil - is at 122 per barrel today - it will probably slip under 120 later in the week.

Oil is down $25 vs the all time high just a few weeks ago - I think that is on the order of 17%.

things that make you go hmm...Oil prices started dropping about 8 seconds after W lifted the executive ban on drilling, today's drop followed Dem. Majority Leader Harry Reid indicating he'll let the drilling issue come to a vote in Congress(a novel idea in a representative democracy)...

Oil is now below 122.

neb = moron

It will be below $120 by friday.

One heck of a correction going on. Someday he'll come to his senses that this wasn't a supply and demand issue. It was people messing with the market and trying to drive the price up on fears and politics.

I will be happy to see it slip below 100.