The Real Reason Gas Prices Are Soaring

Discussion in 'Peak Oil' started by tsneds, Mar 29, 2011.

  1. fortunateson

    fortunateson I hate Illinois Nazis!

    You're giving them too much credit.

    Any Joe with a ScottTrade account can buy a share of ETF DIG.
    That person is now a speculator. If they buy ETF DUG they're a shorter.

    In addition, these things tend to create feeding frenzies with exaggerated highs and lows.

    Supply and demand will raise the price eventually. The spigot will not run dry at $2 / gallon. Prices will rise as supplies tighten.
  2. Tferg27

    Tferg27 Monkey+

    I sold my shares in Linn Energy (nat gas) about a month before Japan disaster. Kicking myself... Nat gas is pretty much sealed the deal as a bridge fuel, imo.

    There was an article on yahoo a few days ago about a new synthetic fossil fuel but I can't find it anymore. I found this article on Syngas at wikipedia, though.

    As for peak oil, who can say. They've been predicting it for 50 years now. Technology is getting better but the cost of recovery goes up up and up even without inflationary pressures.
  3. tsneds

    tsneds Monkey++

    You're not considering or are not aware of all the factors.

    Alternative sources are in tumultous places with high risk factors that traders both physical and non-physical have to factor into their trades and hedges, which affect prices.

    Alternative sources for Libyan light, sweet crude are places like Nigeria. Nigeria is highly risky because of the upcoming elections and regional tensions as the traditional two term swap between Northern and Southern candidates was broken with the succesion of Yar'Adua by Goodluck Jonathan, poll delays are also increasing tensions and potential for violence. This obviously has price implications for shipping, extraction and refining. As can be seen in the price differentials between the increasingly in demand Nigerian crudes, Qua Iboe and Bonny Light, and the global benchmark - Brent. The differential is now $4 in Bonny Light's favour, this is the second highest differential of all time and only needs to increase by 81 cents to be the highest ever differential.

    The Saudi coverage of the drop off in light, sweet crude with heavy, sour crude is, as I stated before, not a good replacement as it costs more to refine a barrel of heavy, sour crude than light, sweet and they yield less end product, so refinery costs are pushed up. In addition the Mediteranean refineries are not really capable of dealing with Saudi heavy, sour crude. As they are geared to light, sweet North and West African oil. So as they come out of their routine maintenance cycles and start coming online, this month. Further pressurises on the market will be created, as the Med refineries compete in an increasingly squeezed market for the few sources of light, sweet crude.

    In addition the cheaper and high quality end products of light, sweet crude such as diesel and other distillates is increasing and is expected to account for more than half of the global demand growth this year. So that will put further pressures on pricing.

    On top of all that you have regulatory pressures to reduce emissions and pollution which mean that the low sulphur crudes from Libya and these highly squeezed few alternatives has been growing and will continue to grow into 2012 as European regulation on them is extended to trains.

    A further effect of all these factors is that prices rises of these high end light, sweet crudes will force smaller refineries out of the market as they can't afford to buy the raw product. This will reduce overall fuel output and put further pressures on the demand side, which can't be easily met by the supply side and thus further increasing prices.

    Of course though , its easy to ignore all these issues and for people looking to make cheap and easy rabble rousing copy, just to blame speculators.
    thebastidge likes this.
  4. tsneds

    tsneds Monkey++

    I'm not assuming the average trader knows the exact qualities in the market that are driving up prices. But any UNCERTAINTY in the market will be reflected by "non-purchases". Lack of information will lead to less speculative bidders, and more accurate pricing in the day to day prices.

    I watched a great documentary on cognitive psychology the other day that supposed that people are predisposed to pricing frenzies. They did a myriad of experiments that showed dumb college students pissing away all their fake money, speculating on this or that retarded variable the "study" set up for them.

    You want to know the flaw in all the studies...and I mean EVERY one. Not a single college student was paying with their own cash. Every experiement was "all profit, no loss" models.

    It's true, when you're playing with someone else's cash, people are apt to bubble up whatever is the hot commodity of the moment. Whether it be the tulip bubble 300 years ago or the housing bubble of '08, they all have the same factor. No one's playing with their own cash, or at least a much less at risk version of their own cash.

    And we come back to oil. No one buys barrels of oil futures on leverage. So the price tends to pretty accurately reflect the risk/reward analysis people are willing to take with their own cash.

    And my point comes full circle. If you think the market is giving oil too high a premium, go short some. Come back here after you made 300K and laugh at us. If you HAVEN'T, then you've proven the point. Any uncertainty you may have about your supposition that oil prices should be shorter is counter-acted by another random buyers supposition that oil prices should be longer. Because neither of you bought because of your uncertainty, then by default it's the more educated speculators who are staying in the game, floating the prices, not because of uncertainty, but because of their resolve.
    thebastidge likes this.
  5. franks71vw

    franks71vw Monkey+++

    I say let a gallon of fuel hit 10 bucks and let people including the speculators feel the crunch and stop the subsidies to the oil companies.. No free RIDES....
  6. 44044

    44044 Monkey+++

    The price of oil is tied to the dollar, the dollar is not worth as much as it was
    So the amount of dollars that we trade for oil goes up
    thebastidge likes this.
  7. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    This increases the cost of corn. Letting the markets decide is always the best way. If ethanol was so great, then we would already be using those percentages. And the flip side is when we increase the ethanol content, we will increase our food costs and simply trading one problem for another.

    Mandates simply help the few and the congressmen who were supported by the few to get the mandate passed.
  8. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    Ethanol cost more in the long run in milage Oregon went with a 10% mix mandate well that is going away this year. I filled up last night on empty and can feel the difference in power and at idle.
    I used only a quarter of a tank of what with the ethanol would have been almost a half tank used today.
  9. Gator 45/70

    Gator 45/70 Monkey+++

    Ok...I work offshore for a oil company...
    I can only tell you some of the lifting cost per bbl.
    On land as a rule 7.00 to 12.00 per bbl..
    However on the inner continental shelf lifting cost run's for some company's between 12.00 to 22.00 per bbl...
    We are somewhat in the middle..We sell our's to Chevron..via a pipeline..
    We do not get market price's..Pipeline get's a cut and so on and so forth until it hit's the pump's...
    Deepwater operation's lifting cost are very high per bbl..
    I can not give you a number since i have not worked deepwater since 07'
    Bottom line...It's a business to make money..Like every other business in the U.S.
    We don't set price's...The market does and a lot of the ''chicken little syndrome'' is the driving factor...
  10. Seawolf1090

    Seawolf1090 Adventure Riding Monkey Founding Member

    My biggest gripe with E10-corrupted gas is the mileage loss. My motorcycle dropped from 53MPG to 48MPG when going from real gas to E10! A tankful that got me 250 miles down the road now gets me 220 miles.
    Now they are talking of making the mandate E15! How much more mileage and efficiency do we lose? :rolleyes:
  11. Gator 45/70

    Gator 45/70 Monkey+++

  12. Seawolf1090

    Seawolf1090 Adventure Riding Monkey Founding Member

    One is only a mile from me. Too expensive for general MC use though. I use it for small engine needs only.
    Another is down south of me - he takes cash only. Too far, with this other station so close.
  13. content

    content On Hiatus Banned

    look at the price of GOLD, boys! it doubled in 2 years, because the rest of the world isn't as STUPID as US people are! They KNOW how we "paid for" the bank bailout and how we are "paying for" the wars and infrastructure rebuilding!. We are simply prinnting more money! So each $ is worth less, you have to spend a lot more of it to get things from overseas, that is all.
  14. Falcon15

    Falcon15 Falco Peregrinus

    If you own physical gold, it is in your fillings. What do you know about fiat economies? Very over simplistic statements you are making there, meyah/gunkid...get your tacticool wheelbarrow out, take some pics I would love to see it...
    BTPost and Gray Wolf like this.
  15. Gray Wolf

    Gray Wolf Monkey+++

    And here I thought it was Rictus here to enlighten us with his boundless wisdom!
  16. content

    content On Hiatus Banned

    so you can't argue with my reasoning, as usual? just start with your stupid sniping at me, personally? :) you reveal your ineptitude, dude.
  17. Falcon15

    Falcon15 Falco Peregrinus

    I am sure you are far more intelligent than me. Far, far more intelligent...
    Plenty of free time when you were in the hoosegow. I am sure you are so adept at trading the markets and metals that you never have to work ever again...
    Gator 45/70 likes this.
  18. Kingfish

    Kingfish Self Reliant

    Gasoline is one of the first things I am going to replace as soon as our solar array is built. I am going to build two small electric cars that charge with solar power. The only way to lower gas prices is to stop using it. You see every time another electric car or alternate fuel comes along gas prices drop until they push it off the market. As long as the oil companies can say gas is still the cheapest then all the others are pushed aside. I think now is the time for a real strong electric car company to emerge with a solar charged electric powered car for under 15 grand. The new model T . Something about the size of my Chevy Aveo with a removable battery pack that goes on a solar charger. 12 grand out the door with 120 mile range. When this car is available gas prices will fall to 2 dollars a gallon to try and keep us from buying it. Kingfish
  19. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    I am going to buy a new mountain bike and power the engine with beer. That will lower my fuel costs.

    I got a hair cut yesterday and saw a sign:

    "Beer is now cheaper than gas. Don't drive, Drink beer to save money and the environment!"
  20. BTPost

    BTPost Old Fart Snow Monkey Moderator

    If you do Clyde, you had better watch out for Mikey Vandeman, the infamous Berkley Handsaw convict..... He really doesn't like Mountain Bikers...... .......[fnny]
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