San Diego Housing Bubble News and Analysis

What "Middle Class"? There may be a "Middle Gap", but the Middle Class started going away a long time ago. The fact that no president nor congress has actually created an energy policy since the Oil Embargo of the late 1970's should tell us all a lot about both parties! Even Business Week concluded years ago that corporate influence should not be allowed in politics.

So sell your McMansion & SUV, move closer to work or buy a fuel-efficient commuter vehicle and use the money you save to invest in oil futures.

Despite the Republican efforts, its still a free country; or at least it is for the moment.

I'll add that the greatest waste of capital and petro resources in the history of our country is the war in Iraq. Which the democrats are only partially culpable for.

The problem is the government has too much power and controls to much which is why corporations are forced to pay protection money to the politicans to protect their interests.

If you want corporations out of politics, then get rid of as much government as possible and then corporations won't have to pay the protection money.

Anti-trust laws, drug safety and stock market regulations all have their beginings due to corporate and systemic abuses. So the FTC, FDA, SEC and other govt regulatory groups were enacted to avoid these abuses in the future. Maybe they were all shams to begin with in order to give the population the impression that the govt was trying to solve certain problems, but the end result was that they were a reaction to big problems that occured when corporations were allowed to function completely unchecked. The problem is that these groups have morphed into control devices by the very corporations that they're supposed to regulate. I dont think it's "protection money" so much as it's "control money".
By lacking any energy policy for the last 40 years, we are now at the mercy of the "free market". I agree that this will be self-correcting in that high prices will intitiate change and alternatives, but it will be painful for many people because we were not prepared for it. Eventhough Stevie Wonder could have seen it comming.

our post originator is "trolling" for outrage.

fuck him, forget him, send him some pice.

If we had a free energy market oil would be $30 a barrel. A free market means that companies are free to develop resources to meet demand.

Our energy market is not free because the Socialists Democrats in Congress will not allow companies to go out and develop new supplies.

Why will they not do this?? Because the environmentalists contribute to their campaigns and they couldn't get elected without the money.

lol, democrats? Least I remind you when Clinton left office gas was 99¢.

jcfuquette = B.S.

That's right! Oil is finite. When it gets too short in supply, then price signals begin to start flashing! DUH!! For a bunch of capitalism-loving, brown people hating, business is always right, Escalade conservatives, you sure don't seem to understand much about bidness.

Now that reality has set in, you people start crying about poor people not being hurt, while the righteous middle-class conservatives who opted for this silly, but doomed, high energy lifestyle of land yachts, hundred mile commutes, and bloated value McMortgages, are left holding the clown bag full of trinkets and worthless Chinese manufactured crap and are now whining that the corporations aren't getting enough corporate welfare.

I have news. Physics don't care about your votes, your concerns, your whiny-butt, conservative entitlements, your hypocrisy. It is an inexorable reality. And one day you will realize that Darth Cheney's specious comment that the American lifestyle is non-negotiable was so much utter BS. Here is the news--You have a new negotiating partner. Its name is "REALITY." Get used to it.

jficquette:

I should know better than to argue with a fool, but here it goes...

You:
If we had a free energy market oil would be $30 a barrel. A free market means that companies are free to develop resources to meet demand.

Why will they not do this?? Because the environmentalists contribute to their campaigns and they couldn't get elected without the money.

Your argument is flawed on many levels.

1) Oil is a global commodity.

2) The US (ANWR & offshore) does not contain enough oil to make any meaningful difference to the price of crude in the global markets. Though it does contain enough to profoundly enrich the integrated oil companies that get access to it... (e.g. Exxon/Chevron/etc. refineries "pay" $5-10 a barrel to extract oil from their own fields, but there isn't nearly enough oil to meet US gasoline consumption, so they have to pay $140 a barrel on the open (free) market to meet demand. If these companies can replace a fraction of that imported oil with cheap domestic crude (selling the refined product for roughly the same price, since there isn't enough to make a significant dent in US demand) they will make a killing on those margins).

3) As to free markets, these new supplies are on government land, which last time I checked, was owned by "we the people", therefore if the majority of the citizenry (via their representatives) doesn't want drilling, then it is not a free market issue, nor is it socialism.

4) If you think that environmentalists contribute more to campaigns than the oil/energy industry, then you are a fool.

Since you claim to support your arguments with facts, I challenge you to obtain the following, with source:

1) The amount of campaign contributions by oil/energy companies vs. environmentalists.

2) The median estimate of reserves in ANWR and coastal pockets as a percentage of daily world demand (~85 million barrels) and US demand. IE, how many months of oil reserves are there?

3) Which Socialist Democrat presidential candidate said the following, published in the conservative "National Review" (hint: it wasn't Obama):

"As far as ANWR is concerned, I don’t want to drill in the Grand Canyon, and I don't want to drill in the Everglades. This is one of the most pristine and beautiful parts of the world."
John McCain - 1/16/08

Cooperthedog,

You post is not worth responding to other then to suggest that you go look up any information you are interested in yourself.

John

In combinatorial game theory, a game is partisan or partizan if it is not impartial. That is, some moves are available to one player and not to the other.

Most games are partisan; for example in chess, only one player can move the white pieces.

Partisan games are more difficult to analyze than impartial games, as the Sprague-Grundy theorem does not apply. However, the application of combinatorial game theory to partisan games allows the significance of numbers as games to be seen, in a way that is not possible with impartial games.

Correlation is not causation.

These high gas prices have been brewing since the 70s. It's just been delayed time and time again and the pain potential gets worse and worse. Kinda like the housing market (yay back on topic!)

Cooper: While John won't answer your questions, they are interesting. I'm on the periphery of the oil/gas business (I do seismic and blast engineering for refinery operations), and I'm also somewhat new to the business (coming out of defense biz). I hear a lot about Peak Oil and refineries having to work harder for less output.

Your question #2 caught my eye. Do you have this information? If so, I'd be curious to hear that number, as well as how it was derived. The second part of my question is driven by the fact that different oil companies (i.e. ExxonMobil, RD/S and BP) use different methodologies for the calculation(s), and therefore the variance between their respective numbers can be quite large.

Again, just curious, but it does pick at an interesting thread, especially in light of $5 per gallon gasoline.

jcfuquette is a troll. Stop being victims!

The price of any commodity is controlled by 3 things, supply demand and medium of exchange. You all keep going back and forth with "neener neener neener" about the politics of supply and demand with nary a word about the medium of exchange. It is unarguably the largest contributor to the rise in the price of oil over the last 6 months.

Supply has not noticeably decreased in six months, demand has increased, but linearly, not parabolic. What has changed is the value of those green FRN(American Pesos) you use to purchase the oil.

Those who argue only one side of the supply demand argument are simply interested in scoring cheap points.

Josh

Allan,

Here is a link discussing Anwr. http://www.anwr.org/

Here here is a link discussing the Bakken formation in North Dakota

http://www.nextenergynews.com/news1/next...

Here is another link that goes into a discussion about how the reserves are reported.

http://www.runet.edu/~wkovarik/oil/

Here is a link to an article discussing the speculation in the oil market.

http://www.globalresearch.ca/index.php?c...

There are many more links out there. I don't mind doing the leg work for people who are sincerly interested in the information but we both know Cooper doesn't care about the facts which is why I told him to go look the information up himself.

John

Both parties represent the same interests. And we aint it.

The longer we continue fighting each other, the longer we get buggered.

Allan - ANWR would reduce crude oil by 75 cents, in 2025...

That is 1/2 of 1% of the price of a barrel oil. Assuming that roughly the same percentage reduction would apply to gasoline, you are looking at saving 2 cents per gallon if ANWR is drilled (you will, of course, have to wait 10-15 years for this price "relief"). See below for details and src.

jficquette - You've provided some links to what appears to be oil industry sponsored propoganda (anwr.org), as well as a conspiracy theory of big oil lying about reserves to boost profits (which ironically contradicts your original premise of environmentalists conspiring to raise gas prices). In the future, when making a specious argument, cross reference your "talking points" a little better.

I will counter this with the official Energy Information Administration data (the EIA is part of the DOE, and provides the official energy statistics).

Estimates of oil reserves

For the average case, drilling in ANWR would reduce crude oil by 75 cents, in 2025. The total production from ANWR would be between 0.4 and 1.2 percent of total world oil consumption in 2030.[31]

Source: http://www.eia.doe.gov/oiaf/servicerpt/a...

Josh,

While I believe the trend in increasing oil prices is fundamental (a finite & static/declining supply and increased demand), I can't argue that part of the current run up isn't attributed to the weak dollar and inflation hedging (speculation). To what degree, I do not know. I do know that oil has also increased in euros, albeit to a lesser degree (~4.5x increase in EUR since 02 lows & ~7x for USD), so the medium of exchange isn't the only factor.

In addition the "parabolic" move may be the illusion of linear graphs vs. logarithmic & breaking the psychological $100 mark. The increase in the last 6 months (100 to 140) in "only" a 40% increase. The price of oil was ~$20 in 2002, and doubled TWICE to $80 last year, and I don't remember fx or speculators being blamed, nor the parabolic arguments proffered until recently. On the other hand the dollar has been falling since then, and seems to really have accelerated starting in mid 2007 (imagine that...), so your argument of medium of exchange is definitely a factor that should be included in the scope of the debate.

I would posit that the environmentalists are also to blame for our currency crisis. Anyone interested in the "facts" knows that these notorious limosuine liberals are in bed with the Federal Reserve. Environmentalists are to Bernanke, as peanut butter is to jelly...

I've included a graph of oil in USD and Euros.

Oil in USD & EUR

Source: http://www.econbrowser.com/archives/2008...

Glad to see that both sides are bringing data to the table. Dare I say that everyone is getting more civil here too. It is not often that a thread that devolves into mud-slinging can recover and become useful to us observers.
Here's another piece of data. Many Americans have no idea how significant, area-wise, drilling for oil in ANWAR would really be. The fact is that the drilling would occupy an area the size of the Dallas airport, in a region the size of Virginia. That is like taking a postage stamp and putting it in the middle of your bedroom.
Add to that, with modern technology and safety requirements, oil spills and accidents are practically non-existent today.
Whether you are for or against drilling in ANWAR, let's keep these facts in perspective.

It [medium of exchange, US dollar] is unarguably the largest contributor to the rise in the price of oil over the last 6 months.

I argue it.

Facts say otherwise.

Percentage rise of oil denominated in euros is significantly higher than the rise of euros (or decline in USD index trade weighted) versus US$.

Both last 6 months and last 2 years.

Fact, ANWR isn't about oil. Its a proxy for all sorts of things, and oil isn't really one of them. Ok its not really a fact, but if you think about it it sure has a lot of fact like qualities.

Even if we went forward with drilling in ANWR, its a small amount, too small for the controversy, of oil. It wouldn't move the price of oil in the short term and it more than likely wouldn't move it in the long term either. All it would really do is send a signal that we are willing to exploit anything at any cost, so long as its out of the way and no one really goes there.

It would send the message, that no people don't need to change their ways and we won't show restraint in our devouring of the world resources. In my fact like opinion, thats why people have fought so hard to keep out drilling.

Jfiquette-Your argument it schizophrenic. On one side you are arguing that it is lack of supply that is driving prices i.e. "the liberals" not allowing exploration. On the other side you are arguing that it is all speculative. Ok, so which is it? You can't just "shotgun" conflicting theories of why oil prices should not be so high. It's just silly and wreaks of desperation. Desperation of what, I don't know.

BIG PICTURE

Let's looks at some fundamentals for a big picture. And the fundamentals are roughly flat production over 4+ years (maybe 1.5 mbpd max more in certain quarters) now versus a near 8 mbpd increase in consumption by China and India. If we subtract out that 1.5 mbpd occasional bump up in production, that means China and India combined are taking 6.5 mbpd away from someone else who was consuming that oil in 2004. And that doesn't account for increases in consumption elsewhere in the world, which have been documented.

DECLINING NET EXPORTS

On top of the 4 years of flat production we have also seen oil exporting countries demand increase dramatically. What this has caused is less and less oil for oil importing countries. So one could conclude that oil importers are bidding up declining net exports thus at least driving the trend. Net exports are actually down 4% from 2006.

ELASTICITY OF OIL

Elasticity of oil by most studies is measured at 15-20%. This means that for every 1% decline of supply or 1% increase in demand the price will move 15-20%. I would are argue that as forced conservation moves up the food chain it becomes more inelastic due to the fact that the buyers bidding up oil having more buying power.

SPECULATION

I don't think you can accurately show that as a specific number, and since a large part of the speculation is in shorts I do not think you can even argue clearly what effect speculation is even having in this market.

I get a kick of how stupid people really are.

Go back to the archives of the Senate and House and see who introduced bills that would lead to less reliance on petroleum. Notice who squashed that legislation.

The latest proof is when Bush came in he immediately did away with the CAFE standards (at the automakers bidding). If the Democratic CAFE standards had been imposed, Detroit would already have the fleets of higher economy autos. The U.S. would be importing a minimum of 1 million barrels per day less.

Instead Republicans got their way. No mileage standards, big, fat SUVs that suck up the gas and Detroit in shambles. AND, now, they are successful and blaming Democrats for oil prices!.

I don't know about you, but I sleep better at night knowing this nation has a huge STRATIGIC RESERVE of petroleum to cushion our transition away from that energy source.

Bush doesn't think 5.00 gasoline is enough to dip into the Strategic reserve that was created.....The Demos don't think 5.00 gas is enough to dip into the Strategic reserve nature gave us. What's the difference? Neither will solve our problem, only alternative energies will.

''

Read this link and see what you think about speculation and its influence on the price of oil.

http://www.globalresearch.ca/index.php?
context=va&aid=8878

Here is another article you might want to read.

http://www.washingtonpost.com/wp-dyn/con...

"Hedge funds and big Wall Street banks are taking advantage of loopholes in federal trading limits to buy massive amounts of oil contracts, according to a growing number of lawmakers and prominent investors, who blame the practice for helping to push oil prices to record highs."

The reason why oil is easily manipulated is because is market cap is very small relative to say the NYSE or the Treasury market. It doesn't take much to push oil up or down for that matter. This makes it ideal for speculation.

The backdrop behind this speculation is partly to blame on the perception that America is not going to do anything to develop its own resources.

In speculation perception is everything. The perception that Qualcomm was going to $1000 per share is what drove its price so high. The idea that the Internet was going to make everyone rich is what drove NASDAQ to 5000.

Right now the perception is that Oil can go no where but up so people are piling into the market because it appears to be easy money.

All of this is taking place when oil inventories are higher then they have been in years and where demand for Oil in the US had dropped 4% over the last year.

I suggest that if America were to come out with a program on the same scale and commitment as we did with landing a man on the Moon then we would see over time the speculation diminish because it would change the psychology of the investors. Now they have nothing to lose but with a commitment by America to become energy independent all bets would be off.

This program to become energy independence would take 20 years but had we started Anwar in 1995 we would now be getting a 2 mill barrels a day which would affect the price of oil and more importantly the market psychology.

In summary, speculation is conducted on expectations of easy money and low risk. Change the expectations and you change the degree of speculation. Committing this country to energy independence is the best way to change the expectations and therefore the upward pressure on prices and when the supply becomes to come online we might become exporters and that would greatly help the balance of trade and also the value of the dollar. Not to mention not sending billions to countries who are not our friends.

John

I've read most all the oil speculation articles and they are shallow to say the least.

A: They do not address fundamentals which I clearly have stated trend up.
B: For every long contract purchased on behalf of a pension fund or index fund, somebody has to short oil. What we've been seeing is that speculators have been getting increasingly short as index fund long participation in the oil market increased.

If you look at the chart on p. 15 of this report from the CFTC, you will see that increased long participation has clearly been offset by increased short participation: http://www.cftc.gov/stellent/groups/publ......

Speculators are net short in the oil market right now: http://www.cftc.gov/dea/futures/deanymes... (look at Crude Oil, Light Sweet, and add up speculators and nonreportables).

Furthermore, during the second quarter of 2008, while the price of oil rose from $100 to $140, there were net investor outflows from energy-related exchange-traded funds that are long. In fact, investors bet an additional $270 million on energy shorts during the second quarter: http://www.bloomberg.com/apps/news?pid=2....... These shorts are turned into shorts in the futures market.

Right now the perception is that Oil can go no where but up so people are piling into the market because it appears to be easy money.

This is NOT CORRECT because as I have shown speculators are NET SHORT.

All of this is taking place when oil inventories are higher then they have been in years and where demand for Oil in the US had dropped 4% over the last year.

This is NOT CORRECT inventories have been falling for 2 months

http://www.energybulletin.net/node/45592

Crude inventories were up by a relatively minor 800,000 barrels; however, the markets had expected a 1.7 million barrel drop. This was the first increase in US crude stocks for nearly two months and the news sent prices down by $4 a barrel before recovering. Distillate fuel inventories increased by an unexpectedly large 2.8 million barrels and are back to the middle of the normal range for this time of year

This program to become energy independence would take 20 years but had we started Anwar in 1995 we would now be getting a 2 mill barrels a day

That is ironically, speculation. I actually support drilling in ANWAR. Good thing we did not sell that oil @ $11 per barrel like the Republicans wanted, huh?