# Why are oil prices plunges and what is next?



## JimH52 (Oct 25, 2008)

What's Behind (and Ahead for) the Plunging Price of Oil - TIME

But how long will the price of oil fall?  There will be a rebound and we will be back at $100 a barrel one day but no one sees that day right now.


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## Remey688 (Oct 27, 2008)

Prices go down and prices go up!


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## Charles_Main (Oct 27, 2008)

Falling demand and artificially high prices to begin with. 

Simple economics.


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## bigdaddygtr (Oct 28, 2008)

Charles_Main said:


> Falling demand and artificially high prices to begin with.
> 
> Simple economics.





I think thats a big part, but I also believe that OPEC is releasing more oil in response to a probable Obama win and getting out of Iraq which they hate that we're there


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## JimH52 (Oct 28, 2008)

Yeah, we just ousted Saddam for them.  Now we can leave.


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## Toro (Oct 28, 2008)

OPEC has little to do with it.

They need the money and are pumping away.  

It was funny when Chavez said he'd cut 150k barrels.  As if.  When oil was at $145, they couldn't balance the budget.  Now, he's in deep doodoo.


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## JimH52 (Oct 29, 2008)

Don't count on low oil prices for long.  OPEC nations have budgeted for $80-90 a barrel of oil and as it plunges below that number, they will cut production until they are able to revive the price per barrel.  $140 a barrel will return one day but hopefully we will be more prepared than before.


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## bigbroodmaster (Oct 29, 2008)

OPEC is talking about artificially keeping the price of oil high by stockpiling it.


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## dilloduck (Oct 29, 2008)

The price of gas plummeted at the same time that the stock market did. Thank a speculator for screwing you. So much for the supply and demand theory of high gas prices. Now everyone who blamed big oil for this, raise you hands.


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## bigbroodmaster (Oct 29, 2008)

The reason the price of gas and oil went down is because there isn't going to be as much demand for it. That's the point: there was a large demand for gas even a few months ago, and because of the economic crisis, that demand is starting to shore up. People are flying less, driving less, going on road trips less. That means less gas is being used, which means there is more of it available, and it isn't as desirable as it once was. That drives the price down.

Supply and demand in action.


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## dilloduck (Oct 29, 2008)

bigbroodmaster said:


> The reason the price of gas and oil went down is because there isn't going to be as much demand for it. That's the point: there was a large demand for gas even a few months ago, and because of the economic crisis, that demand is starting to shore up. People are flying less, driving less, going on road trips less. That means less gas is being used, which means there is more of it available, and it isn't as desirable as it once was. That drives the price down.
> 
> Supply and demand in action.



Link me up . I want to see how badly WORLD demand plummeted.


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## bigbroodmaster (Oct 29, 2008)

I can't post links yet. I need 15 posts. But I will in a few moments, because I've found it.


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## bigbroodmaster (Oct 29, 2008)

Besides, WORLD demand (as in the amount of oil the world consumes) is highly dependant on how much oil the US uses, because it makes up a large percentage of oil-users. If demand slips in the US, it will show up very strongly on world demand.


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## Andrew2382 (Oct 29, 2008)

gas started going down before the market collpased.

IT all has to do with supply and demand.

This is why we still need to drill, to keep the supply up.

It's economic 101


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## bigbroodmaster (Oct 29, 2008)

Oil at 17-month low on demand worries | The Australian


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## dilloduck (Oct 29, 2008)

"Whatever you want to call it - speculators, fast money, hot money - a big part of the drop in crude that we've seen this year is because of selling by hedge funds," says Merrill Lynch technical analyst Mary Ann Bartels. 

Hedge fund speculation and sales explain drop gas prices - October 30, 2006


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## bigbroodmaster (Oct 29, 2008)

People tend to sell things that they see underperforming in the future. You're saying that the price of oil is dropping because of people selling their positions? Yes, that's how the market operates, and it says nothing about demand at all positive or negative.

If you read closer in the article, it mentions that stocks were driven up by the threat of a hurricane. Now why would that be?


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## dilloduck (Oct 29, 2008)

bigbroodmaster said:


> People tend to sell things that they see underperforming in the future. You're saying that the price of oil is dropping because of people selling their positions? Yes, that's how the market operates, and it says nothing about demand at all positive or negative.
> 
> If you read closer in the article, it mentions that stocks were driven up by the threat of a hurricane. Now why would that be?



People gambling on what they think MIGHT happen.


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## sealybobo (Oct 29, 2008)

1 week before the election?  Let me guess.  

It already made you forgive and forget the $700 billion they just took from you.

You didn't care bush spent $10 billion in a month for 6 years because he just threw it on the debt.

American voters are really really stupid.


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## bigbroodmaster (Oct 29, 2008)

dilloduck said:


> People gambling on what they think MIGHT happen.



What might happen? Supply shrinking, meaning the increase in the value of oil.

What you're arguing is that it's speculative, like virtually any other company traded on the stock market. It says absolutely nothing about the principles of supply and demand.

People buy and sell positions due to what they believe is going to happen. If they think supply is going to be disrupted, it's a good bet that the price of gas will rise. In the same way that people predict less demand for oil, and the price of gas goes down. It's 100% related to supply and demand.


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## dilloduck (Oct 29, 2008)

bigbroodmaster said:


> What might happen? Supply shrinking, meaning the increase in the value of oil.
> 
> What you're arguing is that it's speculative, like virtually any other company traded on the stock market. It says absolutely nothing about the principles of supply and demand.
> 
> People buy and sell positions due to what they believe is going to happen. If they think supply is going to be disrupted, it's a good bet that the price of gas will rise. In the same way that people predict less demand for oil, and the price of gas goes down. It's 100% related to supply and demand.



no--It's 100% related to what people think is going to happen.


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## bigbroodmaster (Oct 29, 2008)

dilloduck said:


> no--It's 100% related to what people think is going to happen.



Why are those mutually exclusive in your mind?


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## dilloduck (Oct 29, 2008)

bigbroodmaster said:


> Why are those mutually exclusive in your mind?



because now and the future are not the same---are you going to argue that they are ?


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## editec (Oct 29, 2008)

dilloduck said:


> no--It's 100% related to what people think is going to happen.


 
Yeah.


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## bigbroodmaster (Oct 29, 2008)

Here's what you're saying:

"It's not related to supply and demand at all! It's all just speculators and people trying to predict the future!"

Here's what I'm saying:

"It is related to supply and demand because they are speculating on what supply and demand will be in the future."



> because now and the future are not the same---are you going to argue that they are ?



This doesn't make sense. A complete strawman argument.

You're trying to say that it's not about supply and demand at all. If they're speculating on what the supply and demand is going to be in the future, you'll have to concede that supply and demand is very relevant to this argument.


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## sealybobo (Oct 29, 2008)

dilloduck said:


> because now and the future are not the same---are you going to argue that they are ?



I heard Russia was going to spend a lot on defense but now that oil prices dropped, they don't have the money they thought they would.


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## dilloduck (Oct 29, 2008)

bigbroodmaster said:


> Here's what you're saying:
> 
> "It's not related to supply and demand at all! It's all just speculators and people trying to predict the future!"
> 
> ...



Sure it's relevant but only in the minds of those who are trying to make a buck by predicting what will happen. Comsumers say " WTF--why are prices so high ? "  Speculators answer them by saying " the supply WILL go down ".
How does that affect the price they are paying TODAY ?


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## bigbroodmaster (Oct 29, 2008)

dilloduck said:


> Sure it's relevant but only in the minds of those who are trying to make a buck by predicting what will happen. Comsumers say " WTF--why are prices so high ? "  Speculators answer them by saying " the supply WILL go down ".
> How does that affect the price they are paying TODAY ?



That's how people determine what the dollar is worth, what the price of a company's stock is worth, how much someone's grain is worth, silver, gold, steel, basically any commodity that is traded.

Stock markets are designed to determine the real value of goods. Speculation on what something will be worth is why you decided to trade these things in the first place.


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## dilloduck (Oct 29, 2008)

bigbroodmaster said:


> That's how people determine what the dollar is worth, what the price of a company's stock is worth and how much someone's grain is worth.
> 
> Stock markets are designed to determine the real value of goods. Speculation on what something will be worth is why you decided to trade these things in the first place.



right--I call it gambling. If you get enough people gambling that something WILL be really expensive, comsumers will pay a high price for that commodity--TODAY.


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## bigbroodmaster (Oct 29, 2008)

dilloduck said:


> right--I call it gambling. If you get enough people gambling that something WILL be really expensive, comsumers will pay a high price for that commodity--TODAY.



I really don't care what you call it, it makes no difference to me. What I do care about is your position that it has nothing to do with supply and demand, which I think I've shown is not the case.

The market will determine if the price is too high or too low. It will correct itself. It doesn't just work one way, either. Funny thing is, I don't hear people complaining when the price of gas goes down, even if it's artificially too low (which I believe it to be at the moment). 

Speculative futures markets has been very good at determining the price of goods over the years. Most of the time, and movement from the market has been natural and directly tied to real world events and the principles of supply and demand. But the alternative is?


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## dilloduck (Oct 29, 2008)

bigbroodmaster said:


> I really don't care what you call it, it makes no difference to me. What I do care about is your position that it has nothing to do with supply and demand, which I think I've shown is not the case.
> 
> The market will determine if the price is too high or too low. It will correct itself. It doesn't just work one way, either. Funny thing is, I don't hear people complaining when the price of gas goes down, even if it's artificially too low (which I believe it to be at the moment).
> 
> Speculative futures markets has been very good at determining the price of goods over the years. Most of the time, and movement from the market has been natural and directly tied to real world events and the principles of supply and demand. But the alternative is?



I agree--It's a subtle difference and I'm not bitching about prices going up or down. Speculative forces set the prices PRIOR to the commodity actually achieving that value. Consumers pay what gamblers predict a commodity will be worth. It's just the way it is. The accusations of big oil gouging us are BS.


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## bigbroodmaster (Oct 29, 2008)

dilloduck said:


> I agree--It's a subtle difference and I'm not bitching about prices going up or down. Speculative forces set the prices PRIOR to the commodity actually achieving that value. Consumers pay what gamblers predict a commodity will be worth. It's just the way it is. The accusations of big oil gouging us are BS.



What you are failing to recognise is that the "gamblers" make or lose money on the correctness of their bet. That's the motivation for them to be right. Like, if I put 10 thousand dollars on oil going up due to the hurricanes, and they never hurt supply, and the price of oil goes down, I get hosed, don't I?

That's why markets are the best price-finder we have available. They will find the correct price most of the time because the people putting the money in have a stake in their prediction being correct.


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## dilloduck (Oct 29, 2008)

bigbroodmaster said:


> What you are failing to recognise is that the "gamblers" make or lose money on the correctness of their bet. That's the motivation for them to be right. Like, if I put 10 thousand dollars on oil going up due to the hurricanes, and they never hurt supply, and the price of oil goes down, I get hosed, don't I?
> 
> That's why markets are the best price-finder we have available. They will find the correct price most of the time because the people putting the money in have a stake in their prediction being correct.



You mean like Barney Frank and that wizard Greenspan ?


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## bigbroodmaster (Oct 29, 2008)

dilloduck said:


> You mean like Barney Frank and that wizard Greenspan ?



Or Warren Buffett, or Charles Schwab or Jim Cramer, etc.


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## Charles_Main (Oct 29, 2008)

sealybobo said:


> 1 week before the election?  Let me guess.
> 
> It already made you forgive and forget the $700 billion they just took from you.
> 
> ...



You mean the 700 Billion we had to spend to bail out a credit system broken by The Democrats with their CRA and Fanny and Freddie.

The only stupid one here is the guy trying to convince us all Republicans are all evil and Democrats are saints who will save us all.

Your man Obama will make bushes spending seem trivial, and He will make Bushes Deficits seem tiny by comparison. Obama will run over trillion dollar deficits his entire stay in the white house, and you asshole liar Dems will still be trying to blame them on Bush in 8 years.


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## Zoomie1980 (Oct 29, 2008)

JimH52 said:


> What's Behind (and Ahead for) the Plunging Price of Oil - TIME
> 
> But how long will the price of oil fall?  There will be a rebound and we will be back at $100 a barrel one day but no one sees that day right now.



Oil was RIDICULOUSLY overpriced is the main reason.   To get the REAL price of oil you have to calculate how much it costs to actually pump it out of the ground, store it, load it to a tanker and ship it and then unload it, or pipe it.  Then there is the amortized cost of drilling the hole in the first place (and the dozens of dry holes as well) and the pipelines and tanks used to store it.

Then add a reasonable profit for the producer and you get the REAL value or price of oil, right now.  Some speculative demand is always there so add that in.  If the price goes much above that, it will inevitably fall back towards it at some time.  Right now the REAL worldwide cost of producing, storing, and moving a barrel of oil is about $32.  Add a healthy profit for the producer and you get to roughly $45-$50.  Add historical speculative demand and you get to around $60.  So if oil gets too far above that it will come down at some point, if it gets even a little below that it will go up even quicker than it went down.

We are near the bottom unless the speculative short sellers run wild.....


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## Dr Grump (Oct 30, 2008)

Zoomie1980 said:


> Oil was RIDICULOUSLY overpriced is the main reason.   To get the REAL price of oil you have to calculate how much it costs to actually pump it out of the ground, store it, load it to a tanker and ship it and then unload it, or pipe it.  Then there is the amortized cost of drilling the hole in the first place (and the dozens of dry holes as well) and the pipelines and tanks used to store it.
> 
> Then add a reasonable profit for the producer and you get the REAL value or price of oil, right now.  Some speculative demand is always there so add that in.  If the price goes much above that, it will inevitably fall back towards it at some time.  Right now the REAL worldwide cost of producing, storing, and moving a barrel of oil is about $32.  Add a healthy profit for the producer and you get to roughly $45-$50.  Add historical speculative demand and you get to around $60.  So if oil gets too far above that it will come down at some point, if it gets even a little below that it will go up even quicker than it went down.
> 
> We are near the bottom unless the speculative short sellers run wild.....



So why did it get so expensive? And why wouldn't the OPEC countries basically sell it at any price they care to? 
Just interested.


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## Zoomie1980 (Oct 31, 2008)

sealybobo said:


> 1 week before the election?  Let me guess.
> 
> It already made you forgive and forget the $700 billion they just took from you.
> 
> ...



Bush never spent a dime.  Congress has spent a lot, though


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## Zoomie1980 (Oct 31, 2008)

bigbroodmaster said:


> What you are failing to recognise is that the "gamblers" make or lose money on the correctness of their bet. That's the motivation for them to be right. Like, if I put 10 thousand dollars on oil going up due to the hurricanes, and they never hurt supply, and the price of oil goes down, I get hosed, don't I?
> 
> That's why markets are the best price-finder we have available. They will find the correct price most of the time because the people putting the money in have a stake in their prediction being correct.



Normally functioning markets are the ONLY way to set commodity prices.  However, when markets become awash in SPECULATIVE cash, they cease to function as a valid price setting force.  In 2004 the total amount of money in the oil market was 23 billion at any one trading day.  At the height of the oil price explosion over 260 billion of speculative cash was in the market.  It ceased to function as a rational market.  When most all that 260 billion ran away, it expectedly CRASHED.

A Normal market will have about 10% of its investment classified as SPECULATIVE.  90% comes from people who actually deal in the physical commodity.  At the height of the oil boom over 80% of the money in the market was SPECULATIVE!!!!  A market simply ceases to function rationally in that fashion


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## Zoomie1980 (Oct 31, 2008)

Dr Grump said:


> So why did it get so expensive? And why wouldn't the OPEC countries basically sell it at any price they care to?
> Just interested.



$260 billion was chasing the same number of oil contracts that four years earlier $25 billion was chasing.....   And almost none of that 260 billion was from people who had any intent to deal with the ACTUAL commodity (producer, consumer or shipper).


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## Warner (Nov 4, 2008)

ROFL

There's a 2-3 month lag between actions that will drop the price of oil and the actual price drop.  The oil companies did not think the stock market crash would happen before the election when they made their moves.  It's POLITICS!

By the end of January, the price will be at $100/bbl again.


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## Kid Pickle (Nov 12, 2008)

The speculators figure we are all going to be broke soon, so they cannot continue to write high priced contracts when people are going to be unable to buy the gas for their cars anyway.  That is a bad sign that America is heading for serious trouble, especially now that the oil companies are losing their shirt over the whole deal.

Next, Russia invades south and takes as much oil as it can, which drives the price up - Russia wins!  Or, maybe, Iran and Syria invade Israel and/or everything around them and then fight over the rest, which drives the price up - OPEC and Russia win!

Either way, the loser is US, spelled U.S., because we are gonna get taxed into oblivion and Our Shiny New Fearless Leader won't lift a finger to stop either of them.

America, the next France.  Hoorah.


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## Toro (Nov 12, 2008)

Now the speculators are driving the price down because of mass liquidations and de-leveraging.


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## dilloduck (Nov 12, 2008)

Zoomie1980 said:


> Normally functioning markets are the ONLY way to set commodity prices.  However, when markets become awash in SPECULATIVE cash, they cease to function as a valid price setting force.  In 2004 the total amount of money in the oil market was 23 billion at any one trading day.  At the height of the oil price explosion over 260 billion of speculative cash was in the market.  It ceased to function as a rational market.  When most all that 260 billion ran away, it expectedly CRASHED.
> 
> A Normal market will have about 10% of its investment classified as SPECULATIVE.  90% comes from people who actually deal in the physical commodity.  At the height of the oil boom over 80% of the money in the market was SPECULATIVE!!!!  A market simply ceases to function rationally in that fashion



gambling----we lost our asses to people who gamble--on oil, on mortgages, etc.


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## JimH52 (Nov 13, 2008)

Kid Pickle said:


> The speculators figure we are all going to be broke soon, so they cannot continue to write high priced contracts when people are going to be unable to buy the gas for their cars anyway.  That is a bad sign that America is heading for serious trouble, especially now that the oil companies are losing their shirt over the whole deal.
> 
> Next, Russia invades south and takes as much oil as it can, which drives the price up - Russia wins!  Or, maybe, Iran and Syria invade Israel and/or everything around them and then fight over the rest, which drives the price up - OPEC and Russia win!
> 
> ...



Can you tell me where you are hiding the crystal ball so that we can all take a peak.  The GOP lost.  Get used to it...


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## editec (Nov 13, 2008)

There's no shortage of oil and certaily even less of a shortage of energy sources other than oil.

There's a shortage of political will to fix the problem.


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## Chris (Nov 13, 2008)

Buckminster Fuller said, "There is no energy crisis. There is only a crisis of ignorance."


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## Zoomie1980 (Nov 14, 2008)

dilloduck said:


> gambling----we lost our asses to people who gamble--on oil, on mortgages, etc.


This is a clear lesson to the libertarians.  Some regulation is always needed.  But it should be limited to solely preventing speculative EXCESS.  THat's easy to accomplish in commodity markets.  Simply limit daily moves, and limit the speculative activity to 15% or less in any market.  After a set amount of money is in a market, that's it, the market is closed to any NEW speculative money. Get in line if you want to "invest"


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## editec (Nov 14, 2008)

It should be easy to prevent banks from going into the wild speculation business, too.

We had those laws in place and then we blew it in a frenzy of stupid deregulation based on nothing but a goofy ideology that all regulation was bad for business.

When will we ever learn not to throw the baby out with the bath?


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