Democrats intent on destroying middle class with $11 gas

[jficquette]

[quote=arraya]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.

[/quote]

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/content/article/2008/06/05/AR2008060504322.html

“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

[Arraya]

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/public/@newsroom/documents/speechand…

Speculators are net short in the oil market right now: http://www.cftc.gov/dea/futures/deanymesf.htm (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=20602099&sid=ace77xJYOjNU&refer=e…. These shorts are turned into shorts in the futures market.

[Arraya]

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/public/@newsroom/documents/speechand…

Speculators are net short in the oil market right now: http://www.cftc.gov/dea/futures/deanymesf.htm (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=20602099&sid=ace77xJYOjNU&refer=e…. These shorts are turned into shorts in the futures market.

[Arraya]

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/public/@newsroom/documents/speechand…

Speculators are net short in the oil market right now: http://www.cftc.gov/dea/futures/deanymesf.htm (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=20602099&sid=ace77xJYOjNU&refer=e…. These shorts are turned into shorts in the futures market.

[Arraya]

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/public/@newsroom/documents/speechand…

Speculators are net short in the oil market right now: http://www.cftc.gov/dea/futures/deanymesf.htm (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=20602099&sid=ace77xJYOjNU&refer=e…. These shorts are turned into shorts in the futures market.

[Arraya]

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/public/@newsroom/documents/speechand…

Speculators are net short in the oil market right now: http://www.cftc.gov/dea/futures/deanymesf.htm (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=20602099&sid=ace77xJYOjNU&refer=e…. These shorts are turned into shorts in the futures market.

[Arraya]

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

[Arraya]

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

[Arraya]

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

[Arraya]

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

[Arraya]

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

[Arraya]

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?

[Arraya]

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?

[Arraya]

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?

[Arraya]

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?

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