Why are oil prices plunges and what is next?

[dilloduck]

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.

 

[bigbroodmaster]

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

Why are those mutually exclusive in your mind?

 

[dilloduck]

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 ?

 

[editec]

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

Yeah.

 

[bigbroodmaster]

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.

 

[sealybobo]

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.

 

[dilloduck]

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."



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.

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 ?

 

[bigbroodmaster]

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.

 

[dilloduck]

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.

 

[bigbroodmaster]

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?

 

[dilloduck]

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.

 

[bigbroodmaster]

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.

 

[dilloduck]

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 ?

 

[bigbroodmaster]

You mean like Barney Frank and that wizard Greenspan ?

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

 

[Charles_Main]

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.

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.

 

[Zoomie1980]

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.....

 

[Dr Grump]

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.

 

[Zoomie1980]

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.

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

 

[Zoomie1980]

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

 

[Zoomie1980]

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).