DC Tom Posted April 30, 2011 Posted April 30, 2011 So your local produce walks itself to the market? He only eats turnips delivered by horse-drawn wagon.
ExiledInIllinois Posted May 1, 2011 Posted May 1, 2011 So your local produce walks itself to the market? No. But it is cheaper than having it come from farther away and not in your local season. Time to throttle back the economy in almost every area. And who cares... Most of the stuff one can grow themselves... Which I do. He only eats turnips delivered by horse-drawn wagon. I am a Welsh miner... Rutabaga by choice.
TPS Posted May 1, 2011 Posted May 1, 2011 (edited) Isn't this supporting my point that there's no shortage of politicians waiting to put Wall Street in front of the firing squad? If there was more evidence that speculators account for 25%-50% of the price of whatever commodity you choose - oil/gas, then nothing gets the electorate more pumped up than a bunch of fat cat bankers in handcuffs. Unless you also believe that Obama's FTC is in Wall Street's back pocket? It's the CFTC commission members. Chilton is the only one fighting for strict limits. In order for markets to continue rising absent a fundamental supply/demand driver, you need a patsy at the table who will absorb the loss. In your case that's the investor in the ETF. But the only way funds will continue to flow into ETFs is if they continue to book gains. So how can they make money, and the guys who feed off of them make money? You mean, "how long can a bubble last?" This one started a little over a year ago. I think we're getting close to the tipping point--look for a serious correction in oil this month. Also, what I have said is that the investment demand is the main driver now, that does not mean there is no influence from "fundamental" underlying demand. My contention is that if you removed the influence from the investment flows, then prices would mainly reflect the STEADY growing demand from emerging markets, and we would not see the rapid spikes and volatility. Take a look at the most recent trade data. Oil imports are at a 12 year low (in barrels, not dollars). Demand in the US is falling and inventories are maxed out. So you really believe the current price is "market clearing"? This piece suggests the fundamental price should be $75-85 and that the CFTC has basically turned a blind eye... seeking alpha Edited May 1, 2011 by TPS
TPS Posted May 5, 2011 Posted May 5, 2011 You mean, "how long can a bubble last?" This one started a little over a year ago. I think we're getting close to the tipping point--look for a serious correction in oil this month. Also, what I have said is that the investment demand is the main driver now, that does not mean there is no influence from "fundamental" underlying demand. My contention is that if you removed the influence from the investment flows, then prices would mainly reflect the STEADY growing demand from emerging markets, and we would not see the rapid spikes and volatility. Take a look at the most recent trade data. Oil imports are at a 12 year low (in barrels, not dollars). Demand in the US is falling and inventories are maxed out. So you really believe the current price is "market clearing"? Well, that didn't take long... Wonder if crude will crack the $100 barrier today?
TPS Posted May 5, 2011 Posted May 5, 2011 Well, that didn't take long... Wonder if crude will crack the $100 barrier today? Yeah baby! $99.80. Conversation with myself...
DrFishfinder Posted May 5, 2011 Posted May 5, 2011 Well, that didn't take long... Wonder if crude will crack the $100 barrier today? So why is it when some middle eastern cook yells, "Hey, we're out of oil", gas jumps $.50 a gallon overnight, but when oil drops $10 a barrel, it takes 3 months for gas to drop $.10 a gallon?
meazza Posted May 5, 2011 Posted May 5, 2011 Well, that didn't take long... Wonder if crude will crack the $100 barrier today? Oil was over 100+ for 3 months. I call that short term and based on the risk premium of the "Arab Spring". I don't agree that this was a bubble.
Rob's House Posted May 5, 2011 Posted May 5, 2011 So why is it when some middle eastern cook yells, "Hey, we're out of oil", gas jumps $.50 a gallon overnight, but when oil drops $10 a barrel, it takes 3 months for gas to drop $.10 a gallon? I'll take a stab at it, I'm sure the finance wizzards will correct me if I'm wrong. When the price of a barrel goes up they base selling (pump) price on the replacement cost of their reserves. When the price of a barrel goes down, they base the selling price on on what they paid for their existing reserves. I think.
DrFishfinder Posted May 5, 2011 Posted May 5, 2011 (edited) I'll take a stab at it, I'm sure the finance wizzards will correct me if I'm wrong. When the price of a barrel goes up they base selling (pump) price on the replacement cost of their reserves. When the price of a barrel goes down, they base the selling price on on what they paid for their existing reserves. I think. That's possible. I'll take another stab at it: They do, because they can. Edited May 5, 2011 by DrFishfinder
DC Tom Posted May 6, 2011 Posted May 6, 2011 That's possible. I'll take another stab at it: They do, because they can. There is that. There's also the less cynical point (yes, I'm surprising even me) that fear is a very strong motivator. When oil supplies are even perceived to be threatened, everyone stampedes. When the perception goes away...everyone's slow to relax, because who knows, oil supplies might be threatened tomorrow... Same psychology behind the Dow falling several thousand points in a week, then taking two years to claw back to the same level.
Doc Posted May 6, 2011 Posted May 6, 2011 There is that. There's also the less cynical point (yes, I'm surprising even me) that fear is a very strong motivator. When oil supplies are even perceived to be threatened, everyone stampedes. When the perception goes away...everyone's slow to relax, because who knows, oil supplies might be threatened tomorrow... Same psychology behind the Dow falling several thousand points in a week, then taking two years to claw back to the same level. I'm more cynical and say the do it because they learned long ago that they can and there's nothing any of us can do about it. It's like how back a couple years ago when gas prices were this high and gas stations started charging 5 cents more per gallon if you paid with credit versus cash, because the higher gas prices/charges ate more into their credit purchase profits. Yet when the price of gas tumbled, they still kept the same policies because it meant less credit card fees for them and ostensibly a "savings" for the cash-paying customer.
TPS Posted May 6, 2011 Posted May 6, 2011 Oil was over 100+ for 3 months. I call that short term and based on the risk premium of the "Arab Spring". I don't agree that this was a bubble. According to this link: Investors held a record $412 billion of raw-material assets by the end of March, almost 50 percent more than a year earlier, according to Barclays Capital. Investment linked to commodity indices reached a record-high $352 billion last month, Bank of America Merrill Lynch said today. Funds held a net 1.49 million futures and options in 18 commodities by April 26, 57 percent more than a year earlier, within 4.8 percent of a record, according to U.S. Commodity Futures Trading Commission data compiled by Bloomberg. In my view, the "commodity bubble" (not just oil) got started last fall, further fueled by QE2 in November. For Oil, it was pumped up by MENA activity to get the retail dopes in for the final push... It was a sector bubble, not just oil, hence the across-the-board drop/pop. Bloomberg
TPS Posted May 6, 2011 Posted May 6, 2011 That's possible. I'll take another stab at it: They do, because they can. It's a combination of this and what Rob said. Raise the price because I can (lots of news about higher oil prices), but also because I'm going to need more cash to replace inventory, so I can pay for it without having to borrow. I lower prices only after I sell off the expensive inventory, and I make more money because my replacement costs are lower. Prices tend to be flexible up but sticky down.
Doc Posted May 6, 2011 Posted May 6, 2011 I got your back, TPS. It's mostly speculation driving the price. The dollar didn't strengthen to any appreciable degree yesterday and demand didn't suddenly fall, just the "concern" that it would.
TPS Posted May 6, 2011 Posted May 6, 2011 I got your back, TPS. It's mostly speculation driving the price. The dollar didn't strengthen to any appreciable degree yesterday and demand didn't suddenly fall, just the "concern" that it would. Doc, There is a negative relationship between the $ and oil now (it used to be positive--pre 2000/1). I can imagine program traders have investment programs that move when the dollar moves. If that's the case, are they also programmed to make the reverse move? While the usual causality runs from $ to oil, maybe this time the steep drop in oil (and other commodities) drove the $ up? I looked at that relation yesterday too. Commodities and oil were trending down all week, the $ wobbled all week (without trend) until yesterday's crash.
ExiledInIllinois Posted May 8, 2011 Posted May 8, 2011 There has to be some strange local pricing dynamics in play. I Traveled around this weekend and noticed a 50-60 cent price swing in areas not seperated by more than 80 miles. All rural areas and counties were the "blend" thing isn't in play either. What gives? Seems even where I live, the local pricing is out of whack... Stations follow the other "lead" stations... Seems negative news drives prices right up, yet positive news has no effect. I know, some stations might have old supplies or whatever... It is impossible to prove... But there is some tacit collusion going on.
Chef Jim Posted May 8, 2011 Posted May 8, 2011 There has to be some strange local pricing dynamics in play. I Traveled around this weekend and noticed a 50-60 cent price swing in areas not seperated by more than 80 miles. All rural areas and counties were the "blend" thing isn't in play either. What gives? Seems even where I live, the local pricing is out of whack... Stations follow the other "lead" stations... Seems negative news drives prices right up, yet positive news has no effect. I know, some stations might have old supplies or whatever... It is impossible to prove... But there is some tacit collusion going on. So if one restaurant in one part of town serves a burger for $5.00 and another in a different part of town serves one for $5.50 there's collusion going on? Of course not, only the evil oil companies do that.
DrFishfinder Posted May 8, 2011 Posted May 8, 2011 It's a combination of this and what Rob said. Raise the price because I can (lots of news about higher oil prices), but also because I'm going to need more cash to replace inventory, so I can pay for it without having to borrow. I lower prices only after I sell off the expensive inventory, and I make more money because my replacement costs are lower. Prices tend to be flexible up but sticky down. Okay....so 'splain me this..... Shell station A is selling reg for $4.09 a gallon. Shell station B, a mile away, is selling reg for $3.93 a gallon. Presumably the same gas, presumably the same company. Is Shell station A paying more for their gas, or is it because they are right next to The Country Club of Miami and do because they can?
ExiledInIllinois Posted May 8, 2011 Posted May 8, 2011 So if one restaurant in one part of town serves a burger for $5.00 and another in a different part of town serves one for $5.50 there's collusion going on? Of course not, only the evil oil companies do that. That is not the same... Apples and oranges with regard to what the business' are. I am not whining, really. The oil/gas industry is so pivotal in our society and really there is no competition. It effects alot than my piddly 5-30 bucks extra a tankful. Eating out is a luxury. As much as one can walk, ride bikes, whatever... It is very different with the petrol industry... It is almost survival... YET, there are even more expensive other options to avoid buying gas. If there were cheap options to keep the tacit collusion in check, I would agree with you. This argument should have no place in the free-market equation UNTIL THERE are viable cheaper alternatives that people can take advantage of. Seeing how dependant everyone is to the pertrol industry... There is no competition, this isn't free-market dynamics. Argue all you want that there is. What I really would like to see is the individual numbers the actual stations make over what they invoice the petrol for... I have not a clue. The owners are always saying they do better when gas is cheaper... IE: People buy more junk for their fat-asses. But we just don't see the numbers on that end. We see Exxon's 10%... I want to see what the individual station is making... Is that available? I can't really judge until those numbers are available. If we judge Exxon for its profit of 10%, we can judge Joe Schmoe station owner. Also, funny how Citgo is the leader when it comes to setting local price dynamics that every other station in an area tends to follow!
DrFishfinder Posted May 9, 2011 Posted May 9, 2011 There is that. There's also the less cynical point (yes, I'm surprising even me) that fear is a very strong motivator. When oil supplies are even perceived to be threatened, everyone stampedes. When the perception goes away...everyone's slow to relax, because who knows, oil supplies might be threatened tomorrow... Same psychology behind the Dow falling several thousand points in a week, then taking two years to claw back to the same level. If I was a business owner (which I was), I would be using everything at my disposal to sell for as much as the goddam market would bear, legally. I would also be using your above explanation to justify why I increase prices overnight but decrease over a period of weeks if not months. So if I get back into ownership again, I will have your above post framed and mounted in my office.
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