Oil Bubble

Discussion in 'Politics, Religion, Social Issues' started by needthephone, May 22, 2008.

  1. needthephone macrumors 6502a

    Joined:
    Apr 4, 2006
    Location:
    sydney
    #1
    Really interesting article in the Times saying the Oil price rise is due to a speculative bubble which will inevitably burst. Not driven by Chinas increasing demand as China actually uses considerably less oil than in 2004. Just that the market thinks there is this new demand which doesn't actually exist. Its panic buying by Governments and traders are making lots of money by pushing the price up. Also seen what the Oil Company profits are these days? How come they are making such record profits if their % profit hasn't gone up? Obviously they are making a bigger margin.

    It's good to see the truth is getting out.

    http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article3980797.ece
     
  2. asrmatt macrumors regular

    asrmatt

    Joined:
    Sep 12, 2006
    Location:
    Rome, Italy
    #2
    Confirmed by CESR's (Committee of European Banking Supervisors) paper "on the review of commodities business" pubblished may 15th 2008 that says:

    " - producers and distributors of commodities seeking to optimise the prices of their products historically have constituted the most active force in commodity derivatives markets, but in recent years there has been an increase in the number of private and institutional investors entering these markets in the pursuit of financial returns;
    - this increasing involvement of private and institutional investors is expected to be a long-term trend.
    "
     
  3. MattG macrumors 68040

    MattG

    Joined:
    May 27, 2003
    Location:
    Fletcher, NC
    #3
    Yeah, I've read it's just a matter of time. Apparently a lot of people are speculating that prices will go back down after the end of this year.
     
  4. elfin buddy macrumors 6502a

    elfin buddy

    Joined:
    Sep 16, 2001
    Location:
    Tuttlingen, Germany
    #4
    Do you have a source for that? Everything I've ever read has said that China's demand for oil is increasing at a rate of about 6% per year.

    http://www.cbc.ca/news/background/oil/supply_demand.html

    According to the article you provided, China's rate of growth of oil consumption is decelerating, but its consumption is still growing.
     
  5. Mackan macrumors 65816

    Joined:
    Sep 16, 2007
    #5
    Well, I wonder how the world will look like when it is for real - demand of oil exceeds supply, and there is no turning back. Good luck to us all...
     
  6. ham_man macrumors 68020

    ham_man

    Joined:
    Jan 21, 2005
    #6
    I've been in this camp for a while.

    Should the price of oil have gone up? Yes.

    Should the price of oil have gone up as much as it has? No.
     
  7. Ugg macrumors 68000

    Ugg

    Joined:
    Apr 7, 2003
    Location:
    Penryn
    #7
    Was Greenspan's low interest rates a good idea at the time? Yes.

    Did the subprime loan originators abuse a laxly regulated system? Yes.

    Did speculators inflate the bubble even more? Yes.

    Did the dollar plummet in part due to the subprime mess? Yes.

    Did the plummeting dollar and the fact that ALL oil is sold in dollars contribute to rising oil prices? Yes.

    Are we stupid for putting our faith in bubble based economic growth? You decide.......
     
  8. solvs macrumors 603

    solvs

    Joined:
    Jun 25, 2002
    Location:
    LaLaLand, CA
    #8
    I just posted something in another thread about how the oil companies don't even plan on increasing production despite their own estimates having demand rise 1.3%. We're already producing more (2.5%) than demand is going up (2%). It's said that we should build more refineries, but they aren't. They won't. Despite our gov promising to remove all obstacles. Even giving tax breaks and corporate welfare to do so, among other things. They're operating at about 80-85% capacity last I checked anyway, but they're currently being subsidized, and when that stops, gas prices will continue to go up anyway. Maybe our dollar can improve and/or we can better negotiate with the oil producing countries and OPEC who are really bleeding us dry, but they have us over a barrel (no pun intended) and we have no leverage, so why would they?
     
  9. Desertrat macrumors newbie

    Joined:
    Jul 4, 2003
    Location:
    Terlingua, Texas
    #9
    needthephone, the particular dollar amounts of profits for the oil companies isn't important or relevant to anything. What's relevant is the Return On Investment (ROI) and the profit on sales.

    Exxon is doing about 7%, which is less than many "highly needed" companies like McDonald's or Coca Cola.

    Question: How will raising taxes on oil company profits bring about lower prices for gasoline?

    Note that the last time that "windfall profits" taxes were imposed, the result was a lessening of exploration and development and thus a lessening of supply. Why would a return of such a scenario be good for you?

    Edit-add: "Obama's windfall profits tax idea? A Jimmy Carter biggie. "Unless we tax the oil companies, they will reap huge and undeserved windfall profits," fumed Carter on national television in 1980. The New York Times agreed, warning darkly that "legislators who sit by idly while oil profits soar will have to answer to the voters." With Democrats controlling Congress they got their way. As if on cue, oil production -- fell. To the tune of 1.6 billion fewer barrels. America's dependence on foreign oil rose. Eventually even the Times was agreeing the tax had to be repealed, and by 1988 Reagan, who campaigned against it, signed the repeal (by a Democrat Congress no less) into law."


    Leaving out the issue of shale oil, tar sands and coal liquefaction: There is a general acceptance among oil folks that Hubbert's Pimple is correct. So, why invest a billion dollars in a refinery that won't operate long enough to amortize that investment? It would be an uneconomical investment--or, as is said, "Stupid."

    Remember, the maximum pumpage was in mid-2005. The total world output has been a bit less than that, ever since.

    The only way the US Government can help is to shut up and get out of the way of exploratory drilling and the subsequent production. The only thing which will lower the price of oil to any notable extent is more production. There are not enough legally-allowable formations in which to drill; we have legislated ourselves out of the large-capacity areas.

    The marketplace IS working, however. Mastercard reports a 7% reduction in gasoline charges in the week before this Memorial Day as compared to last year. It was also reported that in March, 2008, Americans drove 11 billion fewer miles than in March of 2007. With $5/gal gasoline, the situation will improve even more.

    And the price of oil might drop if there is indeed some further reduction in usage. Even so, it's a short-term deal, when some minimum demand-level is found. Remember, we're supposed to have another 140 million in the population by 2050.

    'Rat
     

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