Monday, September 11, 2006
Oil prices continue to fall
Oil prices fell almost a buck in morning trading, to less than $66/bbl. More interestingly, the linked article makes note of a report I had missed:
Last week, the U.S. Energy Department said American inventories were at their highest level since 1998.
The prices of shares in oil companies are falling commensurately.
Since, the left implies, oil and gasoline prices can be manipulated by evil oil companies, why has the price of crude fallen almost $15/bbl off its peak?
11 Comments:
By 
Dawnfire82, at
Mon Sep 11, 01:22:00 PM:
To keep us off balance of course, and convince naive people like you that there is no conspiracy after all.
Fnord!
By 
, at
Mon Sep 11, 01:24:00 PM:
"Since, the left implies, oil and gasoline prices can be manipulated by evil oil companies, why has the price of crude fallen almost $15/bbl off its peak?"
Well, it's pretty obvious. Periodically the evil oil companies will deliberately lower the prices to make the average person believe that market forces are involved. Fortunately, some of us have seen through this ruse.
By Lanky_Bastard, at
Mon Sep 11, 06:18:00 PM:
Oil prices precipitously lowered before elections because of market forces.
Casinoes are generous with alcohol because they care about my thirst.
The strippers at the club wink at me because they think I'm hot.
By Assistant Village Idiot, at
Mon Sep 11, 08:31:00 PM:
That is a standard leftist tactic these days: when the facts go against you, question the timing. Just regard No Evidence as Really Tricky Evidence. It's easier to do than trying to figure out how the thousands of people at hundreds of companies are keeping The Secret About Oil without anyone leaking it.
By , at
Mon Sep 11, 09:12:00 PM:
Obviously, the oil companies have forgotten how to be G-R-E-E-D-Y.
By Dawnfire82, at
Mon Sep 11, 10:26:00 PM:
"Oil prices precipitously lowered before elections because of market forces."
Every year since what? The 50s? It's taken as a matter of faith that the price of gas goes up in the US over the summer and has been my entire life. INCLUDING during the 90's when the Democrats had the Presidency, INCLUDING the 80's, when they had Congress, et cetera.
Yeah, it's a big partisan conspiracy alright.
You're obviously a bright person, LB. How can you honestly believe that kind of silliness?
By Lanky_Bastard, at
Tue Sep 12, 12:56:00 AM:
I'm not saying there is a conspiracy. I'm just just callin "maybe not" on this particular argument. That oil prices have dropped does not necessarily indicate an absence of price fixing. What really determines the price of crude? It costs the same amount to pump out of the ground as it did last year, and there hasn't been that big a change in the last few weeks. The rules of supply and demand are: you charge whatever you can get away with. Unfortunately, those rules lend themselves to price fixing. Public and political scrutiny also affect what people can get away with. Less than a year ago Congress brought in 5 CEOs for a chat. The president himself went on primetime TV and described the nation's relationship with oil as an "addiction". If politicians were running around making this much noise about the price of milk, you better believe the milk industry would try to lower it's profile during campaign season. Is that such an outrageous thought?
I don't think the recent price drop evidences a pure reliance on market forces. The industry hires people to determine their sales prices, and their job is to maximize profit. If they go back to their bosses and say a short term lower profit will avoid regulation and enable a longer term higher profit, then that's what a smart company does. It's just business. You don't need to be liberal to have my point of view: any combination of realism, cynicism, or pessimism can find this same issue with Tiger's argument. If you don't agree, that's cool. I have a point of view and you have one and that's great for everyone. There's no reason to get excited or launch partisan crusades against rhetorical devices (c'mon AVI). I respectfully suggest to Tiger that if I can use the same facts to argue the opposite point, it's not a great argument. Despite the conspicuous timing, I wouldn't use this data to argue that prices are being fixed, these facts are ambigous.
DF, you're pretty bright yourself. Would you say a $15 drop is typical of the seasonal effect? I'm a bit behind the times, but that used to be huge. (I'm assuming it still is or Tiger wouldn't be writing about it.) The truth is, I don't think American corporate interests have much control over the price of crude, but I do think OPEC does. I also think consumers took an unecessary post-Katrina gouging by the refiners (which are US corporatations), but that orgy seems to be over and it probably wasn't illegal anyway.
By , at
Tue Sep 12, 11:30:00 AM:
Just as a simple aside, the oil companies have to run out the supplies of their "summer" blends, before they can start filling their storage tanks with their "winter" blends. The USEPA oversees this process strictly, by the way. This happens every freakin' year, it's just now people see more volatility in price and are up in arms about it. This can and might happen again next March, when the reverse happens (switch to summer blend).
Right now, where I live, the price per gallon is $2.129/gal at the cheapest station (Exxon/Mobil). In about, say , 2 weeks and 5 days, around Oct.1, I expect the price of gas to go back to $2.30-$2.40 a gallon, because they will be filling the tanks with the "winter" blend of gasoline, which will be priced to reflect that ugliest of capitalist motives, profit (heh).
It is supply-demand in the truest sense, because they have to liquidate (heh) their present supplies by a date in the very near future (Sept. 30) required by law, and are dropping prices to increase demand. Part of the high prices this summer were a hedge in cost/supply by the oil companies against a big disruption similar to what happened last summer with Rita/Katrina. They over-built their reserves to be prepared for a similar reccurance. To some this may seem sinister, to others, good business. Results may vary with personal usage.
And I'm sure someone will be "outaged" at the oil companies in three weeks when the prices go back up.
-David
By TigerHawk, at
Tue Sep 12, 02:08:00 PM:
David, thank you for the excellent contribution regarding the price of gasoline. Presumably, though, that has very little impact on the price of crude, which is also declining fairly decisively (dropped below $65 for a time today).
By , at
Tue Sep 12, 02:28:00 PM:
Actually, Tigerhawk, I think that it does.
Oil companies "overbought" crude oil on the open market to have sufficient reserves to refine to gasoline and be able to ride out any disruptions such as Rita and Katrina in 2005. Was this a bad business practice? Consider the alternatives.
With the passing of Labor Day and the end of the American vacation season, no major hurricanes to disrupt production in the GoM, and the need to deplete the summer blend(s) of gasoline, the demand for crude has dropped. Suprisingly (huh?) the price of crude has dropped with it.
I don't know what the "real" price per barrel should be, but in the weeks to come, the market will finally stabilize around a new price (lower), based on the current demand. And remember that the price listed is the "scalper's" price, that is, the spot market price, per barrel. The major oil companies pay less for much of their supplies because they have contracted at prices for very large quantities (outside of OPEC, that is).
Because such very large quantities of money (audited constantly by the IRS) and oil change hands, I think it is childish to assume that these people are "crooks" who are "fixing the market".
The world market is unstable and unpredictable (compared to earlier eras), and every time there is more instability and unpredictability, the price goes up. We either uncouple ourselves from the world market by producing more domestically, or find more politically stable sources for oil offshore. This isn't rocket science.
-David
By Dawnfire82, at
Tue Sep 12, 07:52:00 PM:
"Would you say a $15 drop is typical of the seasonal effect?"
Not entirely. I'd say part of the price fall is the complete failure of regional war to take hold in the Middle East. Price speculation has (had) been running wild since last year. The whole question is addressed here.
http://www.usatoday.com/money/industries/energy/2006-09-11-gas-prices_x.htm?cause=election
"The reason prices are going down so far so fast is that they shouldn't have been that high in the first place. Two reasons they were: fear and speculation," says Mike O'Connor, president of the Virginia Petroleum, Convenience and Grocery Association."
Speculation blowback. I think we talked about this on this blog back in the Spring.
Here it is.
http://tigerhawk.blogspot.com/2006/04/americas-absurd-energy-policy-and.html
A fall in price shouldn't be surprising.
