Monday, September 22, 2008
Oil, again
Oil is surging again in price, apparently in anticipation (and reflection) of a much weaker dollar. The supposed culprit is the bailout, and perhaps that does explain the reaction of traders. The prices of oil stocks are also rising rapidly, slowing what would otherwise be a huge decline in the DJIA. The question is whether this surge, like the one in June and July, is sustainable given the direction of consumption in the rich countries, particularly the United States. I think not.
4 Comments:
By 
, at
Mon Sep 22, 03:54:00 PM:
TH,
Dollar weakness explains much of the increase in futures prices for delivery in November 2008 and beyond. The November contract was up about $6 (roughly 6%) this afternoon.
What has everyone excited was the much greater increase ($18 now, $25at one point today) in the soon-to-expire October contract. The disproprtionate increase in October is likely some sort of short squeeze.
By 
Miss Ladybug, at
Mon Sep 22, 08:16:00 PM:
How much might the fact that the Congress is trying to tie up our oil wealth so it cannot be accessed be a factor in the rise in price?
By , at
Mon Sep 22, 11:05:00 PM:
@ TH: Does this mean you are shorting?
@ Miss Ladybug: Unless you want to drill for oil that will only be fore sale in the US, and assume that other sources of oil remain roughly as accessible after this act as before, US drilling won't impact price by more than a dime per gallon. Even the eia said so.
http://climateprogress.org/2008/06/18/eia-bombshell-offshore-drilling-would-not-have-a-significant-impact-on-domestic-crude-oil-and-natural-gas-production-or-prices-before-2030/
Run the numbers. Double the administration estimates, assume that the market receives the oil over a period of years, and that drillers recover costs. Drilling doesn't provide cheap oil, or even do much to price, and there is a reason no one makes the argument based on pricing fundamentals.
By Miss Ladybug, at
Mon Sep 22, 11:21:00 PM:
Just saying we won't see results from drilling next week or next year is incredibly shortsighted. I would like to not be dependent on oil from OPEC or Russia. Every little bit will help. I know this is slight OT, but I want us to pursue drilling, nuclear, clean coal, and the development of alternative energy. And I have no problem saying that oil drilled here, stays here. I just think it is foolish to tell American oil companies they can't drill in international waters off the coast of Florida when Cuba/China have no such restrictions...
I'm not completely ignorant about the oil industry. Having done my undergraduate work out in West Texas, I took an O&G accounting class as an elective within my major. I wrote a little about that back in August. I really should get my uncle to talk about it - his degree is chemical engineering (I think), and he works for a major oil company... We never talk about work like that when he's around.
