Why Exactly Are Oil Pricings Droping? (Not That I am Complaining)

[RanterMaximus]

I have heard a variety of reasons.  Just curious what so many of you think. 

[cjd]

I have heard a variety of reasons.  Just curious what so many of you think. 

Usage is way down here in America and abroad. I use around 30 or so gallons a week so this drop in price is very welcomed by me however I honestly think that the price is now dropping way to much and is a harbinger of big problems to come.  My fear is that the oil cartels will clamp down on production to increase the price and cause a shortage. I think the price structure is starting to collapse and we are facing a period of deflation which in many ways can even be worse than inflation.With prices collapsing its not profitable to produce things and people will be put out of work when companies can no longer make ends meet.

[Tzvi Ben Roshel1]

Lower Demand expecially in China and India. (Also expected lower demand in the near future with people becoming poorer).
Another thing could be that for instance the currencies of places like Russia (and other places) are falling much lower then the U.S., thus making the U.S. dollar worth more then  their currencies, thus we can buy more of their products (oil) relativly cheaper then before.

[Tzvi Ben Roshel1]

I have heard a variety of reasons.  Just curious what so many of you think. 

Usage is way down here in America and abroad. I use around 30 or so gallons a week so this drop in price is very welcomed by me however I honestly think that the price is now dropping way to much and is a harbinger of big problems to come.  My fear is that the oil cartels will clamp down on production to increase the price and cause a shortage. I think the price structure is starting to collapse and we are facing a period of deflation which in many ways can even be worse than inflation.With prices collapsing its not profitable to produce things and people will be put out of work when companies can no longer make ends meet.

 Dont be worried too much with deflation, with the massive bailouts and printing of money, their will be inflation and maybe even the collapse of currencies.

[cjd]

Yes that will indeed be the end result. I think the printing presses are already running at full tilt. When they can no longer tax people up front they will do it behind their backs by devaluation of the money supply.

[briann]

Lower Demand expecially in China and India. (Also expected lower demand in the near future with people becoming poorer).
Another thing could be that for instance the currencies of places like Russia (and other places) are falling much lower then the U.S., thus making the U.S. dollar worth more then  their currencies, thus we can buy more of their products (oil) relativly cheaper then before.

Well said.  BUT you are missing something very relevant!!!!

THe price to went down from $147.50 a barrel to $43.54 a barrel in 5 months!!!!!

Does this make sense that worldwide demand would be 29% of what it was just 5 months ago??

The answer is that roughly half of the demand was artificial speculative demand  (People buying oil contracts NOT to use it... but to sell it to a greater fool at a greater price)

NOW that greed has turned to FEAR... you are seeing the opposite effect....   everyone is fearful of buying oil contracts as an investment.

It took a recession to burst the bubble.... but its done.

If there was NO speculative trading and oil was just being bought and sold... it still woulda gone down.. because of global demand going down... BUT only 10-15%... NOT 71%!!!

The dollar regaining some of its sell off had an effect... but it was still only about 7-8%.

[Sparky]

The most likely explanation is simply supply and demand.  Oil prices got really high and people cut back on driving their cars.  So now there's an oversupply of oil and prices are down.

My cynical explanation is that the prices are purposely being brought down this low in order to get people comfortable buying gas again, so the prices can be brought back up later. The oil companies want people addicted to oil and high prices discourage this.

High oil prices also encourage development of alternative energy sources.  Had the oil embargo of the 1970's continued, we wouldn't be using gas cars today.  With oil prices coming down now, the alternatives to fossil fuels will once again be relegated to the back burner.

This is why high oil prices are actually a good thing.

[Tzvi Ben Roshel1]

I'm not too sure, but dont the car companies own a lot of the oil?

 Right now they need oil to be very low so people might think about buying big cars (p.s.- American cars suck, they need to produce better cars (In quality also), even changing the way the cars are run from oil to alternative energy).

[muman613]

I'm not too sure, but dont the car companies own a lot of the oil?

 Right now they need oil to be very low so people might think about buying big cars (p.s.- American cars suck, they need to produce better cars (In quality also), even changing the way the cars are run from oil to alternative energy).

Maybe Im lucky but Ive been very satisfied with FORDS quality and their cars. Ive been buying FORDS for the last 10 years. I have had two Mustangs and both haven't required anything but regular service in the last 10 years. I know that they have had problems, but in my experience FORD has been making solid and very good cars.

[Sparky]

The answer is that roughly half of the demand was artificial speculative demand  (People buying oil contracts NOT to use it... but to sell it to a greater fool at a greater price)

If there was NO speculative trading and oil was just being bought and sold... it still woulda gone down.. because of global demand going down... BUT only 10-15%... NOT 71%!!!

Makes sense.

[briann]

Im kinda confused why people would be perplexed by this.   Its a very simple basic concept.   A bad economy means people pinch their pennies... which means demand for EVERYTHING goes down.  (The oil speculative bubble bursting just made it more dramatic)

A big misconception is that recessions/depressions coincide with inflation.  The opposite is actually true.   Look at the great depression... when EVERYONE was stingy... and prices on everything... became very low... and we had horrible deflation.   This becomes 100x worse when banks collapse....  as people become fearful to even put $ in banks... so there is almost NO $ in the economy.  This may happen in the next few years (I give it a 10% chance)

If a stupid Fed Chair(Take your pick with Carter) tries to fight this TOO hard... and print TOO much money... they of course cause stagflation... which does nothing except piss people off.

If a stupid President (Obama, FDR) tries to spend his way out...  resources become missalocated... and this can actually cause a SECOND economic downturn.. (!939)

Brian

[Tzvi Ben Roshel1]

I'm not too sure, but dont the car companies own a lot of the oil?

 Right now they need oil to be very low so people might think about buying big cars (p.s.- American cars suck, they need to produce better cars (In quality also), even changing the way the cars are run from oil to alternative energy).

Maybe Im lucky but Ive been very satisfied with FORDS quality and their cars. Ive been buying FORDS for the last 10 years. I have had two Mustangs and both haven't required anything but regular service in the last 10 years. I know that they have had problems, but in my experience FORD has been making solid and very good cars.

 The mustangs of the past were much better quality wise. They made them last less so that people would buy cars more often.

[briann]

I'm not too sure, but dont the car companies own a lot of the oil?

 Right now they need oil to be very low so people might think about buying big cars (p.s.- American cars suck, they need to produce better cars (In quality also), even changing the way the cars are run from oil to alternative energy).

Maybe Im lucky but Ive been very satisfied with FORDS quality and their cars. Ive been buying FORDS for the last 10 years. I have had two Mustangs and both haven't required anything but regular service in the last 10 years. I know that they have had problems, but in my experience FORD has been making solid and very good cars.

 The mustangs of the past were much better quality wise. They made them last less so that people would buy cars more often.

I'm not a Ford guy.  Not to mention Henry Ford was pure evil.

[GodGunsAndGlory]

I'm not too sure, but dont the car companies own a lot of the oil?

 Right now they need oil to be very low so people might think about buying big cars (p.s.- American cars suck, they need to produce better cars (In quality also), even changing the way the cars are run from oil to alternative energy).

Maybe Im lucky but Ive been very satisfied with FORDS quality and their cars. Ive been buying FORDS for the last 10 years. I have had two Mustangs and both haven't required anything but regular service in the last 10 years. I know that they have had problems, but in my experience FORD has been making solid and very good cars.

 The mustangs of the past were much better quality wise. They made them last less so that people would buy cars more often.

I'm not a Ford guy.  Not to mention Henry Ford was pure evil.

Ford supports the gay lobby through advertising in their publications.

[muman613]

I'm not too sure, but dont the car companies own a lot of the oil?

 Right now they need oil to be very low so people might think about buying big cars (p.s.- American cars suck, they need to produce better cars (In quality also), even changing the way the cars are run from oil to alternative energy).

Maybe Im lucky but Ive been very satisfied with FORDS quality and their cars. Ive been buying FORDS for the last 10 years. I have had two Mustangs and both haven't required anything but regular service in the last 10 years. I know that they have had problems, but in my experience FORD has been making solid and very good cars.

 The mustangs of the past were much better quality wise. They made them last less so that people would buy cars more often.

I'm not a Ford guy.  Not to mention Henry Ford was pure evil.

Ford supports the gay lobby through advertising in their publications.

The Mustang is a solid car and I enjoy it more than any vehicle I have ever owned... And regarding these complaints...

Ford lived many years ago... I also drove VW cars, should I not drive VW because it was created by Hisler? That is history...

Regarding the gay lobby... Just about every major american company must provide benefits for same-sex couples, my current company included. You suggest I should quit because of this? Not bloody likely...

[Shlomo]

I think that someone up the government ladder realized that high energy prices actually started this whole recession (along with a huge increase in food and travel costs) and they panicked realizing our country's dollar was tanking when they were drafting up these bailouts for corporation after corporation. The reason no one says it (i.e. on the news) is so they don't get the rap for it.

This whole mess started before these banks were going under from making bad loans (and oil companies were making record profits claiming they weren't responsible for any of it yet that money went somewhere) And that's when the government started handing out our hard earned tax money to multinational corporations like it was bail-out Chanukah.

[briann]

I think that someone up the government ladder realized that high energy prices actually started this whole recession (along with a huge increase in food and travel costs) and they panicked realizing our country's dollar was tanking when they were drafting up these bailouts for corporation after corporation. The reason no one says it (i.e. on the news) is so they don't get the rap for it.

This whole mess started before these banks were going under from making bad loans (and oil companies were making record profits claiming they weren't responsible for any of it yet that money went somewhere) And that's when the government started handing out our hard earned tax money to multinational corporations like it was bail-out Chanukah.

Every recession since the beginning of time has been caused by a bursting bubble (w/ the exception of adjusting from a war-time economy)... and the energy prices were NOT the bubble... it WAS Real estate.... and comparitively... the Real Estate Bubble was 100x more dangerous than the energy bubble.... since it involved a MUCH larger amount of money.... and it started WAY before oil prices were high.  You shall see what Im talking about in the upcoming years.

The bailouts have nothing to do with energy.. unless you consider the fact that American car companies were much slower to adjust to the need for hybrids, smaller cars... etc... and that gave them an economic disadvantage.  But now thats irrelevant... since Japanese car companies have now seen their sales go down by 30% as well... and they will probably be seeking some sort of emergency loans from Japan.

Again... this is SUCH a simple topic.  Energy prices go down when the economy tumbles.  Its always been like that.  (Except for during stagflation when they're artificially pumped up) 

[zachor_ve_kavod]

I heard something about futures speculation.  I'll have to look into it.  It is a good question.

[Ultra Requete]

Aside from economic explanation the high oil prices were dictated by OPEC and Russia to facilate "the change" in USA... people did blame them on Bush and GOP afterall... now when BHO is next mesiash... sorry president he can reap all benefits of cheap fuel in his campaign of "healing the world" aka creating the G-dless NWO.   
 

[Abben]

I'm not too sure, but dont the car companies own a lot of the oil?

 Right now they need oil to be very low so people might think about buying big cars (p.s.- American cars suck, they need to produce better cars (In quality also), even changing the way the cars are run from oil to alternative energy).

I am in the auto field and I will say that autos made from 2000-current are not made well at all. There is a reason why I would only drive rwd cars and cars made before 99.

[briann]

I heard something about futures speculation.  I'll have to look into it.  It is a good question.

Its very simple.   'Futures' are how most commodities are traded.  You dont go around buying and selling physical Barrels of oil..... you buy contracts to purchase oil at a stated price and a stated date.  And before that date... you can sell the oil contract to someone else... (sometimes at a profit... or at a loss.. depending upon what has happened to the price)

Speculating is very simple too.  Think about the .com boom.  People bought Pets.com stocks NOT because they wanted to hold it for decades and receive dividends from it... etc.  They bought it so that they could sell it to a greater fool.. at a greater price in a short period of time.  (This is called the 'greater fool' theory.)

This is what happened with oil.  These contracts were being bought NOT to exercise them... but to sell them to a greater fool.   This has happened with all sorts of different investments.   Take a look at this..  http://en.wikipedia.org/wiki/Tulip_mania

The speculation of tullips in Holland became absolutely absurd in the 1600's and caused a 100 year depression.

Heres a snippit from it:

February 1637 tulip contracts sold for more than 20 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble

[Tzvi Ben Roshel1]

Aside from economic explanation the high oil prices were dictated by OPEC and Russia to facilate "the change" in USA... people did blame them on Bush and GOP afterall... now when BHO is next mesiash... sorry president he can reap all benefits of cheap fuel in his campaign of "healing the world" aka creating the G-dless NWO.   
 

 Now they are also suffering, expecially Russia. I dont think they would purposly have done what they did and put themselves in the situation they are in now (unless they thought this wouldn't have happened to them eventually).

[Dr. Dan]

Because the banks have no more money to allow for financing of automobiles which means fewer automobiles being driven.

Also fewer people have money and therefore not spending it.