Political Crossfire Forums

[Divinity11]

Quote: LONDON (Reuters) - Oil briefly dropped below $55 Friday to its lowest level since mid-2005 amid fund selling across commodity markets on worries of an economic slowdown in the world's largest energy consumer, the United States.

High U.S. oil inventories heading into winter, and selling pressure ahead of the expiry of the front-month U.S. crude contract at the close of trading Friday, fueled the selling.

U.S. crude was down 61 cents at $55.65 a barrel at 1600 GMT after hitting its lowest level since June 14 last year at $54.86. The price has fallen nearly 30 percent from the record of $78.40 in July. London Brent crude rose 11 cents at $58.65.

"There is rising concern that we could be going into a U.S. economic slowdown," said Rick Mueller, senior oil analyst at consultancy ESAI. "This fall also speaks of a well supplied crude market and a warmer outlook in the U.S., and with those conditions maybe the market is starting to wake up to the fact that prices shouldn't be near $60."

There was also widespread talk in the market that a fund was in trouble and unwinding its positions.

Base metals also slid on concern that if the world's largest economy slows, global demand for raw materials would also suffer. London copper prices slid to their lowest levels since June on Friday.

U.S. industrial output data for October on Thursday was weak, showing signs of a cooling economy.

Oil markets had traded in a roughly $58-$62 barrel range for around six weeks, the longest period of range-bound trading since the same time a year ago.
While the front-month U.S. contract for December was well below that level on Friday, the second-month futures contract for oil in January was still trading near $58. That contract will become the benchmark on Monday.

CONTRACT EXPIRY

"We really can't ignore the fact that it is contract expiry," said Mueller. "As things stand, once that contract is off the board, we'll be back where we were on Monday."

Still, some traders say prices may break below the band, dragged down by ample stocks, a relatively mild start to the U.S. winter and doubts about the ability of the Organization of the Petroleum Exporting Countries to enforce output cuts agreed from November 1

Lower oil prices have spurred product consumption, but warmer than usual weather has sapped heating oil demand.

The U.S. National Weather Service on Thursday forecast warmer-than-normal weather for the U.S. Northeast, the world's top heating oil market, from December until February, although other forecasts are mixed.

OPEC producers agreed at an emergency meeting last month to cut supplies by 1.2 million barrels per day (bpd) from November 1, although investors doubt the cuts will be fully enacted.

OPEC this week prepared the ground for a further ouptut cut when the group next meets in output in December, citing concern about potentially large rises in inventories next spring if it continues to pump at present levels.

Analysts said the market may be testing the group to find the oil price it wants to defend.

For some longer-term investors who believe that markets will get tighter in the years to come as suppliers struggle to meet rising demand, the fall in price represents a buy opportunity.

"I don't think short-term sentiment is looking anything other than negative," said Mark Matthias, chief executive of British investment specialist Dawnay Day Quantum. "But taking a three-to-five year view, I would be a buyer of oil below $60.


http://today.reuters.com/news/articlenews.aspx?type=businessNews&storyID=2006-11-17T175417Z_01_SP247384_RTRUKOC_0_US-MARKETS-OIL.xml&pageNumber=1&imageid=&cap=&sz=13&WTModLoc=NewsArt-C1-ArticlePage1

Gee, I haven't noticed gas prices dropping in my area since, well, a month before the elections. 6 weeks, huh?

Oil is now 55 dollars a barrel. Should we see at least a "little" relief at the pump, as in the price going down a few cents? Or is Big Oil gonna continue to gouge us and have the audacity to post record profits once again, as well as get windfall tax breaks?

[homerjay_s]

Since the Democrats are already taking heat on all sorts of things before they've even taken control of the legislature, is it not only fair to credit them with the falling oil prices?

[Dookiestix]

That's funny. The price of gas goes up in my area while the price of a barrel of oil goes down.

No doubt demand is down with unseasonably warm weather in the fall/winter months. And when demand is down, revenues tend to fall.

[Alizard]

Divinity11 wrote:
Gee, I haven't noticed gas prices dropping in my area since, well, a month before the elections. 6 weeks, huh?

Oil is now 55 dollars a barrel. Should we see at least a "little" relief at the pump, as in the price going down a few cents? Or is Big Oil gonna continue to gouge us and have the audacity to post record profits once again, as well as get windfall tax breaks?

When oil prices go up, Big Oil raises gas prices.

When oil goes down, they raise gas prices and claim it's not the price of crude that determines gas prices, it's refinery capacity.

If usage drops, they raise prices and say they have fixed refinery cost they have to recoup on less sales.

If usage goes up, they raise gas prices and claim it's the law of supply and demand.

When nothing changes at all , they raise gas prices and claim it's because they have to sell different formula gas in different states.

You get the idea.....

[homerjay_s]

Dookiestix wrote: That's funny. The price of gas goes up in my area while the price of a barrel of oil goes down.

No doubt demand is down with unseasonably warm weather in the fall/winter months. And when demand is down, revenues tend to fall.

Uh-oh, the retail prices of gasoline are still up even though the price of crude is down?

God damn that Democratic legislature.

[GTTofAK]

It takes time for gas prices to drop due to the throttling effect. It is this effect that makes people think the market is rigged but its not.

When the price of oil is rising the price of gas rises just as fast because retailers charge what it costs to replenish their inventory. When the price of oil drops it take a while for the price of gast ot drop because retails still attempt to make a profit off their current inventory which they paid a higher price for.

I had a friend in college who ran a bunch of gas stations and he always said that when the wholesale price of gas drops it’s a race between competing stations to sell their inventory off first before the other guy does and lowers his price.

[Alizard]

Dookiestix wrote: That's funny. The price of gas goes up in my area while the price of a barrel of oil goes down.

No doubt demand is down with unseasonably warm weather in the fall/winter months. And when demand is down, revenues tend to fall.

Same out here, but thatnk God the dems won or the price would be going up a lot faster.

Right now Big Oil only has two "headboards" to limit how fast and how high they will crank the price:

1) So high people get angry and start to conserve

2) So high congress will open investigations into price fixing


#1 has already been sat at well above $3.50, because last year when it topped that gas usage did not go down one bit (actually went up a tad).

#2 is their big worry. I think Big Oil will use the "usual" gouging excuses to ratchet up the price.... changing to the "winter formula", increased driving in warm weather, special blend for west coast, etc.

It will be interesting to see how high it goes..... but remember, the $2.40 we are paying out here that everybody is saying is "low" is still WAYYYY higher than it was a couple of years ago.

I predict $3 is the new $2 and they will cozy the price up near $3 and stabilize it there in the coming year.

[Alizard]

GTTofAK wrote: It takes time for gas prices to drop due to the throttling effect. It is this effect that makes people think the market is rigged but its not.

Really?

Then why is it gas prices spike through the roof at the slightest hint of a threat to the oil pipe even though all the oil in the refineries was bought at the lower price?

No price fixing?

Funny how the price only reacts to market forces INSTANTLY when it is going UP.

[GTTofAK]

Alizard wrote: GTTofAK wrote: It takes time for gas prices to drop due to the throttling effect. It is this effect that makes people think the market is rigged but its not.

Really?

Then why is it gas prices spike through the roof at the slightest hint of a threat to the oil pipe even though all the oil in the refineries was bought at the lower price?

No price fixing?

Funny how the price only reacts to market forces INSTANTLY when it is going UP.

Didnt I just explain that to you.

[Kilo Tango]

What were gas prices the last time oil was this low?

I'm on my way out & don't have time to look it up.

It sure seems to me that gas prices jump a lot faster than they come down in relation to the price of oil.

I've seen oil go up and 6 hours later when I leave work the price is already raised at the gas stations.

[Alizard]

GTTofAK wrote: Alizard wrote: GTTofAK wrote: It takes time for gas prices to drop due to the throttling effect. It is this effect that makes people think the market is rigged but its not.

Really?

Then why is it gas prices spike through the roof at the slightest hint of a threat to the oil pipe even though all the oil in the refineries was bought at the lower price?

No price fixing?

Funny how the price only reacts to market forces INSTANTLY when it is going UP.

Didnt I just explain that to you.

No, you certainly did not. You claim it takes time for price fluctuations to hit the pump because of "throttling". Your theory does not explain why that only works on price DECREASES.

[GTTofAK]

I run a business.

At the time I bought my inventory the cost of materials per unit was $20.

At the time that a unit is produced the cost to replace the lost inventory so I can continue to produce more units is now $30 dollars.

If I sell my product for $25 dollars making a 25% profit I will be $5 short of having enough cash on hand to by the materials necessary to produce another unit and I will be out of business.

[Richard Owl Mirror]

This strikes me as being akin to those famous 50% off sales we so often see.
What they don't tell you is prior to reducing the price,
they marked up the price by 500% so when they offer you the 50% reduced sales price
they are still making a 250% profit.

[Alizard]

GTTofAK wrote: I run a business.

At the time I bought my inventory the cost of materials per unit was $20.

At the time that a unit is produced the cost to replace the lost inventory so I can continue to produce more units is now $30 dollars.

If I sell my product for $25 dollars making a 25% profit I will be $5 short of having enough cash on hand to by the materials necessary to produce another unit and I will be out of business.

Now explain why that does not apply symmetrically to product being sold in an environment of declining material cost. Since the "replacement" material cost of manyfacture is now only $10, why must you sell existing inventory for $25?

You are trying to have your cake and eat it too. You can't claim throttling ONLY occurs in an environment of descending cost. If it occurs at all, it should be exactly the same for both increase and decrease.

[homerjay_s]

GTTofAK wrote: I run a business.

At the time I bought my inventory the cost of materials per unit was $20.

At the time that a unit is produced the cost to replace the lost inventory so I can continue to produce more units is now $30 dollars.

If I sell my product for $25 dollars making a 25% profit I will be $5 short of having enough cash on hand to by the materials necessary to produce another unit and I will be out of business.

But if you are making record profits and your production costs go down, you can lower your prices and make the same profits.

You aren't suggesting that the oil companies aren't making enough profits to cover the costs of pumping oil out of the ground, are you?

[GTTofAK]

Alizard wrote: Now explain why that does not apply symmetrically to product being sold in an environment of declining material cost. Since the "replacement" material cost of manyfacture is now only $10, why must you sell existing inventory for $25?

You are trying to have your cake and eat it too. You can't claim throttling ONLY occurs in an environment of descending cost. If it occurs at all, it should be exactly the same for both increase and decrease.

If you read my OP you would see why.

If I charge less than it originally cost me to fill my inventory then I have lost money. I was better off not being in business at all. It would be a better use of my time to be on a beach in kona.

If the price of materials in my example was to drop from $20 to $10 and I sold it for $15 I have lost $5. I could have not produced a unit in the first place and kept my $20 instead of ending up with $15.

In order to be successful the price I sell a unit at must meet two criteria. The price must be high enough to both replenish my inventory and make a profit. This is why prices rise immediately with price of the raw materials and fall slower than the price of the raw materials.

To put it as simply as possible. When the price of raw materials is rising the retail price rises just as fast because of the need to replace inventory. When the price of raw materials is dropping the retail price drops far slower because of the need to make a profit.

[Tono]

If you can't afford to pay $24.99/gallon for gas, politicians don't give a crap about you.

[JLB]

Dookiestix wrote: That's funny. The price of gas goes up in my area while the price of a barrel of oil goes down.

No doubt demand is down with unseasonably warm weather in the fall/winter months. And when demand is down, revenues tend to fall.

San Francisco adds an additional gas tax on top of the Federal and Stae tax you already pay.

You deserve to pay higher taxes for electing socialists. 8:)

[JLB]

Alizard wrote: Divinity11 wrote:
Gee, I haven't noticed gas prices dropping in my area since, well, a month before the elections. 6 weeks, huh?

Oil is now 55 dollars a barrel. Should we see at least a "little" relief at the pump, as in the price going down a few cents? Or is Big Oil gonna continue to gouge us and have the audacity to post record profits once again, as well as get windfall tax breaks?

When oil prices go up, Big Oil raises gas prices.

When oil goes down, they raise gas prices and claim it's not the price of crude that determines gas prices, it's refinery capacity.

If usage drops, they raise prices and say they have fixed refinery cost they have to recoup on less sales.

If usage goes up, they raise gas prices and claim it's the law of supply and demand.

When nothing changes at all , they raise gas prices and claim it's because they have to sell different formula gas in different states.

You get the idea.....

So are gas priices higher now, or lower than a few months ago, hmmm? 8:)

[JLB]

Alizard wrote: Divinity11 wrote:
Gee, I haven't noticed gas prices dropping in my area since, well, a month before the elections. 6 weeks, huh?

Oil is now 55 dollars a barrel. Should we see at least a "little" relief at the pump, as in the price going down a few cents? Or is Big Oil gonna continue to gouge us and have the audacity to post record profits once again, as well as get windfall tax breaks?

When oil prices go up, Big Oil raises gas prices.

When oil goes down, they raise gas prices and claim it's not the price of crude that determines gas prices, it's refinery capacity.

If usage drops, they raise prices and say they have fixed refinery cost they have to recoup on less sales.

If usage goes up, they raise gas prices and claim it's the law of supply and demand.

When nothing changes at all , they raise gas prices and claim it's because they have to sell different formula gas in different states.

You get the idea.....

Educate yourself. 8:)