Steep Drop in the Price of Gasoline and Fuel-oil

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toggleswitch2

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May 23, 2008
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Petroleum distillates like gasoline and fule-oil:
From $4.75 per U.S, gallon to $2.00 per gallon in a short time.

Ok, is it me or is this reeking of game-playing? Now, I hate to be the type to suggest foul-play, manipulation or conspiracy, but I just cant't seem to digest the B/S that the price-drop is related to a drop in demand. Methinks the price-drop is due to an increase in production.

Here's my theory: "W" got on the horn and asked his cronies in Tex-@$$ to "speed up them pumps" or there would not be a country left after the economy does its thing.

Or maybe it's hope in Obama.

Am I totally paranoid and crazy?

[a high of USD 1.26 per litre, to a low of USD 0.53 per litre which equates to 1.00 Euro to 0.42 Euro per litre].

NOTE: I DONT WANT TO SEE THE WORDS:
DEMOCRAT, REPUBLICAN, CONSERVATIVE, LIBERAL OR ANY OTHER POLITICAL IDEOLOGY COME FORTH. TYVM! We all know how our various memebers *COUGH* stand politically. Just because one believes something fervently does not make it gospel. There may, just may be other views.

TREAD GENTLY and be nice. If it gets nasty I'll ask Robert to yank it. *LOL* Maybe I had better rephrase that...........
 
Am I totally paranoid and crazy?

No. Not totally.
I think you're right. Er, I mean "correct".

I think there is such a thing as market inertia and we will soon see the price shoot up again.

The fixed cost of producing this resource is only a minor factor in the cost. All the rest is purely subject to the value the producers choose to assign to it.

Look at the cost of tail in Reno, Nevada and Chicago, Illinois...those girls are sitting on the same capital equipment, the fixed costs are pretty much the same...but you can get full-house and little-casino in Reno for less than half the going rate in the Windy City.

It's all market driven - and it's a seller's market.
 
Agreement in Full

I have long believed that W has been in control of gas prices all along. The US may have conserved when it was $4 per gallon but now..... And to add to the irony, in Atlanta, one of the worst traffic laden cities, there was no change in traffic jams regardless of price. There is no way the price of gas is due to reduction in use. I remember when it all began, 911. That day in my neck of the woods gas went to above $2 a gallon and it fell back the day after, but as soon as Iraq came....up up and away.
 
I think you're all wrong. But, then again, I'm a businessman, beliieve in supply & demand, capitalist society. And I'm a small, viewed skeptically here, minority around these parts. Y'all chose to believe all sorts of hogwash after Ike because production was reduced significantly as well as difficulty in distribution to the southeast caused such a huge spike in gas prices. But y'all all bitched about the prices and didn't wanna belive busiess realities. And y'all hate Texas oilmen. World wide economies are slowing down, including China and India and other fast developing 3rd world countries. Their projected (perceived-futures markets) need for oil & fuel consumption has dropped dramatically. And we in the U.S., who drive such a huge demand with our gass-guzzling vehicles, have reduced our driving by up to 30% (what I've read), if not more. So get over it, it's not pure manipulation!!
 
It just amazes me that energy costs(i.e. natural gas) and pharmaceuticals in Canada costs so much less than here.

Perhaps big business has gotten too powerful and the people have shown via our recent vote that should this be the case it needs to be reeled-in and stopped ASAP.

Perhaps tax dollars should be allocated towards election funds and campaign funds and lobbying and "incentives" should be curtailed.

If we keep allowing big business to infulence gov't and run this country we are sunk!

Fine the stock market plunged, crashed and burned. But we all need to spend our paychecks the was we always have or else things are just gonna get worse.
 
Supposedly the world economic downturn has reduced demand for oil to the extent that prices have plummeted.

Bear in mind that a lot of the price hiking above $100/barrel was the result of speculation, not truly reflective of supply and demand. Those who stayed at it a little too long lost their shirts - as they should have.

Here abouts, I just saw the price of a gallon of regular go for $1.96 at the local Costco this morning. Motor oil prices are still inflated, though, and it may take some time for their prices to reflect the new prices of crude oil. However I was able to get a $65 case of Delo 400 (six gallons) for $50, by virtue of a Costco coupon. That's still higher than the price I paid for same a couple years ago: $42/case. But better than nuttin.
 
Have to agree with BOB

Supply and Demand it drives EVERYTHING think so or not.. IT really does.

Gas can be had here in places now for 1.58/gal
 
I' ll be there by five minutes !!! :-))

"a high of USD 1.26 per litre, to a low of USD 0.53 per litre which equates to 1.00 Euro to 0.42 Euro per litre"

As now we pay 1.16 - 1.19 € per litre (last summer 1.45 €) this 0.42 € is a dream 4 us
Many people who live close to the Swiss border go there for fuel shopping. Crazy, eh ?
Despite the fact Switzerland is a rather expensive country, they have cheaper fuels. One half of the price we pay here in IT is due to fuel taxes (yes, is not only one ...) :-(((
 
I really don't think the price drop is being politically controlled. The market was definitely manipulated upwards by speculation and demand from overseas. The souring world economy has really curbed demand. I feel that next year or shortly thereafter, the price will go back up to previous levels. I read an article a few weeks ago that station owners who previously were making $.06 - $.08/gal are now making $.30-.60/gal. I just saw that wholesale gas for December delivery was down to about $1/gal. We really should be seeing even lower prices at the pump. In my area we just hit $1.99. If you drive anywhere west of my county, it's down to $1.75-1.79. I'm not in a metro area, but we're paying more than anyone else around us.
 
The last eight years is what happens when you elect despotic oil whores to run your country. Anyone remember Dick Cheney's "Energy Task Force"? Did you know Ken Lay (CEO of Enron) was given an office INSIDE THE WHITE HOUSE, right next to Dick Cheney's? Almost everyone in Bush's White House came from the oil industry. Even Condi Rice.

So kids, bend over and bark like the bitches you are. Arf. Arf.

Keep staring at this photo until you understand.

11-21-2008-17-00-37--JeffG.jpg
 
The other thing to remember, is the Value of the USD has increased as well.

3 Months ago 1 AUD bought 90 US Cents

Now we're down to 1 AUD buys 61 US Cents.

The US has increased in value by a third, which will help bring oil costs down too.
 
What is *our* oil doing under their sand?

LOL. You would think the one with the dress on is getting f---ed. But in this case it appears to be the one with the trousers on.

Sorry, but I'm having a hard time wrapping my brain around demand falling to such a great extent.
 
Americans have driven over 90 BILLION miles less over the last year. That is HUGE demand destruction. Industries are slower, less demand for oil, nat gas, elec. etc. Less demand, higher dollar, lower prices.
 
So get over it, it's not pure manipulation!!

And it aint pure supply and demand either!

Jeff G, you make some excellent points! The oil industry and the Bush admin are very very interconnected. That aint politics, its reality!

I say this as i savor the low Texas gas prices.
 
Excess Capacity . . .

Toggles, maybe the best way to think about this is in electrical terms: Imagine you've got a 15 amp circuit with a total 14 amp load, and a 20 amp circuit with the same 14 amp load. In a simple sense, both circuits should work fine. In reality, you know that if you have any items on the 15 amp circuit which are switched and you turn all of them on at once the breaker is likely to blow. That probably won't happen on the 20 amp circuit as it has some extra capacity to absorb a demand spike without trouble.

The world oil supply and refining system has developed over the past century when supply almost always exceeded demand, due to the ease of finding oil and refining it. There was lots of money to be made, so big oil companies never let the supply fall too close to demand. Things are different today because most oil is under control of various governments, like Saudi Arabia, Venezuela, Russia and others, instead of the big multinationals like Shell, Chevron, Mobil, and BP. Refinery capacity hasn't kept pace with demand due to environmental issues, the increasing amount of poor quality oil and the associated costs of dealing with both problems.

The net result is like the 15 amp circuit: even a small spike in demand or reduction in supply has the potential to cause big problems because all the oil traders and speculators get nervous that they'll not get their share. So first they rapidly bid futures prices up, then eventually price increases cause a plateau that holds until all of a sudden the speculators get nervous en masse and quit buying. At that point the price drops rapidly. Twenty years ago there was enough excess capacity in the whole system to keep buyers from fretting if a Nigerian pipeline is attacked by rebels or some refineries are put out of commission by a storm. Not so today, and probably not ever again.

One other key problem is that government operated oil companies often don't cooperate much with the industry in terms of honestly sharing data on the health of their fields. Saudi Arabia is the best example here: unlike some countries (Mexico for instance), the Saudi engineers are very sophisticated and their endeavors are well funded, but only they know the latest technical data on their fields. Russia is more like Mexico in that their oil companies aren't always up to date technically. So there is a lot of oil in the ground, but no one entity knows how much of that can economically be recovered, and that leads to more competition for the diminishing amount of guaranteed supplies under the control of the multinationals.

It's funny to think that we all hate Big Oil, and for good reason, but as they rapidly become Little Oil in comparison to nationalized oil companies the whole system gets way less predictable. With Big Oil, you always knew that they'd supply lots of oil so long as they made a profit. With nationalized oil companies, that's not always true as they may prefer to use oil for political ends. This explains a few things: the huge amount of money and goodwill the US expends to be a very, very good friend to the Saudi royal family, and the recent skirmish in Georgia. In the latter situation, the US and some European entities were backing a major pipeline to get oil out of Central Asia without going through Russia or territory heavily influenced by Moscow. When the president of Georgia very stupidly gave Moscow a small excuse for a skirmish they responded with a very public and over the top use of force. The message wasn't subtle, and it is ulikely that it was done just for the benefit of Georgia's breakaway provice, but rather it was a message to all Central Asian countries that they better not get too cozy with the US and Europe. Funny thing, that oil pipeline is now unlikely to be built, and as a result Russia has increased the percentage of the world's oil that is under their direct or indirect control.
 
You tell 'em Todd and hydralique. Toggles wrap your brain and other parts around something else that you can relate too!!! They spekath the truth, although you and jeff refuse because you disdain TX oilmen!!!
 
Sorry guys, but Bob hit the nail mostly on the head. As long as oil does not appear to be a solid investment (demand dropping), speculators take their dollars elsewhere. Oil skyrocketed when the dollar weakened against other baskets of currency, since oil is a dollar based commodity. But now those other currencies have also weakened dramatically, due to a global economic slowdown, effectively strengthening the dollar. Thus the steep drop in oil prices. Oil is like any other commodity - real estate, corn, etc. Speculation will drive it up, but when it's not an attractive investment due to decreasing demand (due to unsustainable rising prices), the speculators will go elsewhere, and lose their shirts in the process. It's simple Economics 101.
 
Speculations I recall so far:

Pennies (copper) in the 70's when someone tried to corner the market (and failed).

The infamous dot.com's of the 90's

Housing in the early 2000's.

Oil in 2005-2008.

All of these promised huge profits to those who got in early... but disaster for those who invested late.

Can anyone thing of other speculative bubbles in the past 50 years or so?

Then there are the fads:

In the 50's, it was the Hula-Hoop

In the 70's, it was the Pet Rock

In the 90's, it was Beanie Babies

Can anyone think of other fads?
 

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