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A prediction, Pt II
Topic Started: Aug 8 2008, 06:54 AM (669 Views)
Larry
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Mmmmmmm, pie!
A couple of months ago, at a time when were were hearing all sorts of dire warnings about how gas prices could go as high as ten dollars a gallon, I started a thread predicting what I thought would happen in the oil market, based on what I had been hearing. I told the reasons behind my thoughts, and said we would see the price of oil begin to tumble in about 6 weeks.

Six weeks to the day, Ax started a thread asking me why the price of oil hadn't come down as I predicted, enjoying the fact that my prediction had not come true in exactly six weeks.

As we watch the price of oil tumble and my prediction come true, now would be a good time to reflect on the difference in "exactly six weeks" - something I didn't say, and "about six weeks", what I *did* say.

I missed by about 2 weeks............. :D

:gloat:

Of the Pokatwat Tribe

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jon-nyc
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Cheers
Sorry Larry, you were more specific than that. You said there would be a major find, which would cause the price to drop. That's not what happened.

Ax 1, Larry 0.
In my defense, I was left unsupervised.
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Improviso
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HOLY CARP!!!
The great oil bubble has burst.

Bad news from the Baku-Tbilisi-Ceyhan pipeline - an installation that may not normally draw much of your attention, but which is a throbbing artery of global energy supply, carrying vital oil supplies from Central Asia towards a tanker terminal on the Turkish coast. On some remote, sun-baked plain of Anatolia, an explosion sparked a fire earlier this week, temporarily cutting the flow through the pipeline.

But guess what? Here's the good news: the oil price did not zoom upwards in response, not a blip, barely a flicker. Actually the price of a barrel of crude has been falling: from a peak of $145 in early July, it came down to $117 and was trading yesterday at $120. That's almost a 20 per cent drop in little more than three weeks.

A return to relatively normal oil prices would take the sting out of inflation. If the trend continues into September at anything like the same rate of descent, most of the inflationary spike of the past 12 months will miraculously have been sliced away. This is a dramatic reversal, and it is worth trying to work out why it is happening and what it means.

Just possibly, it means that what investors refer to in shorthand as the great "oil up" story has finally revealed itself not as the fundamental reflection of scarce supply that its adherents liked to claim, but as a simple, speculative bubble that was always going to burst.

The market's conviction that oil prices were set on an unstoppable upswing was underpinned by a set of mantras to be chanted daily before breakfast by anyone hoping to make money by following the crowd: insatiable demand from China; indolent Opec sheikhs unwilling to open the supply taps; that nasty Vladimir Putin playing political hardball with Russia's oil and gas resources; those mad Iranian mullahs hell-bent on nuclear conflict; and beyond all these, the looming threat of "peak oil", the inevitable moment when Mother Earth's carbon-fuel gauge starts pointing towards empty.

One way or another, said the fundamentalists, the only destination for oil prices in the medium term was somewhere north of $200 a barrel. And hooray to that, chorused the green lobby, because it may be the only thing that will ever make us wake up to the need to stop cooking the planet with carbon emissions.

Layered on top of these long-term factors were the short-term headlines. As a matter of market psychology for the past several years, any news item suggesting temporary disruption of supply - rebel activity around Nigerian refineries, strikes in Venezuela, hurricane warnings in the Gulf of Mexico, Anatolian shepherds lighting their cooking fires beside a leaking pipeline - has motivated oil traders to push prices upwards: sometimes just long enough to turn a quick buck before settling back for the next jump, but always trending higher.

Now the psychological tide seems to be turning. On the supply side, Saudi Arabia, the dominant member of Opec, is now signalling greater willingness to open the oil taps. When the princes of the desert made a rather smaller gesture of willingness in that direction in June, the market took no notice and prices marched on. But in the new mood, any hint of an increase in Saudi supply is a reason to mark down prices.

As for the Russians and the Iranians, the pundits have remembered that even the most externally truculent or internally turbulent of energy-exporting nations can feed its people at home only by selling its natural resources abroad, so must ultimately stay on good terms with its customers.

And meanwhile, five years of rising oil prices have provoked a wave of investment in new drilling and refinery capacity - including the opening up of inaccessible oil sources that no one wanted to tackle when prices were low. Whether it is deep under the Arctic ice-cap or soaked into the tar-sands of northern Alberta, there turns out to be quite a lot more oil waiting to be exploited before we really approach the peak-oil apocalypse. More than that, high oil prices have encouraged rapid development of such alternative energy sources as wind and solar power, and more efficient engine and heating technologies.

On the demand side, a shuddering deceleration in economic activity across the industrialised world is starting to take pressure away. Many economists think the downturn will be deep and painful, and Opec (whose predictions are naturally at the low end of the range) thinks demand for its output could be lower in the early part of the next decade than it was in 2006.

In the motor industry, the talk is of plunging sales of gas-guzzlers, as drivers on both sides of the Atlantic switch to smaller, fuel-efficient cars - or simply cut out non-essential mileage. Even in China, for all the Olympic razzamatazz, a fall-off in Western demand for cheap manufactured exports must soon lead to at least a tempering of growth in energy demand.

Reading these tea leaves, if you are a hedge-fund manager who has spent the past year smugly amassing "oil up" positions in sophisticated financial instruments, you will certainly be trying to get out of them now: hence the sheer speed of the recent falls.

There is a long-running argument as to just what proportion of any commodity price movement can be traced to speculative activity by hedge funds and others, and what proportion to physical demand. But when the oil price swings up or down by $5 or more in a single day, you may be sure that the fluctuation is not being caused by a sheikh on one end of the line arguing with the manager of your local petrol station on the other: it is the financial parasites in between who are moving the market.

Less sophisticated, perhaps, are the more traditional oil players, who have simply been holding tankers full of the sticky stuff offshore while the barrel price was rising. They will now be instructing their captains to steam into port sharp-ish and unload at the best cash price they can get.

And where will that price be by mid-autumn, after a couple more months of gloom-laden statistics from the industrialised economies? Perhaps, with all the speculative fizz taken out of it, down by as much as a half from its June peak. That's not to say it won't go up again when the signals change and all those long-term factors loom large once more.

But for the time being, a return to a relatively "normal" oil price in the $60 to $80 range would take the sting out of the current inflationary surge, and that in turn would allow the Bank of England to contemplate cutting interest rates to stave off recession and help the housing market. Keep your fingers crossed, and keep your eye on how oil traders react to titbits of bad news.


It's just a great right-wing conspiracy (aka "The Barge" :whistle: ) to get McCain elected this fall. :wink:
Identifying narcissists isn't difficult. Just look for the person who is constantly fishing for compliments
and admiration while breaking down over even the slightest bit of criticism.

We have the freedom to choose our actions, but we do not get to choose our consequences.
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Larry
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Mmmmmmm, pie!
jon-nyc
Aug 8 2008, 11:10 AM
Sorry Larry, you were more specific than that.  You said there would be a major find, which would cause the price to drop.  That's not what happened. 

Ax 1, Larry 0.

I never said a thing about a major find causing the price to drop. I listed off several things that would remove the pressure on demand, and other things, but not a word about a major find causing the price to drop.

Don't put words in my mouth.

Larry 1, Ax 0, Jon benched for rules violation
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phykell
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Senior Carp
jon-nyc
Aug 8 2008, 03:10 PM
Sorry Larry, you were more specific than that.  You said there would be a major find, which would cause the price to drop.  That's not what happened. 

Ax 1, Larry 0.

He was right about the price drop though, thank goodness - that's the bit that matters to our wallets!
The greatness of a nation and its moral progress can be judged by the way it's animals are treated. - Ghandhi

Evil cannot be conquered in the world. It can only be resisted within oneself.

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Klaus
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HOLY CARP!!!
But then again, every price will fall if you wait long enough.

Didn't you predict this some time in May? This was three months ago...

E.g., I predict that the Dow will fall some time in the three months.
Trifonov Fleisher Klaus Sokolov Zimmerman
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AlbertaCrude
Bull-Carp
Larry
Aug 8 2008, 10:50 AM
jon-nyc
Aug 8 2008, 11:10 AM
Sorry Larry, you were more specific than that.  You said there would be a major find, which would cause the price to drop.  That's not what happened. 

Ax 1, Larry 0.

I never said a thing about a major find causing the price to drop. I listed off several things that would remove the pressure on demand, and other things, but not a word about a major find causing the price to drop.


Larry's right Jon- he made no mention of a find.

http://z10.invisionfree.com/The_New_Coffee...opic=35590&st=0

I seem recall though Jolly posting something about a large but very deep find in the Gulf.
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jon-nyc
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Cheers
You're right. My bad.

In my defense, I was left unsupervised.
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jon-nyc
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AlbertaCrude
Aug 8 2008, 01:22 PM
I seem recall though Jolly posting something about a large but very deep find in the Gulf.


Jolly also posted that there was more oil in the gulf then there was in Saudi Arabia. He wasn't able to find any published sources to support that, curiously enough.
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QuirtEvans
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I Owe It All To John D'Oh
Let's give it a few weeks, hmm?

I didn't go back and look at the thread AC kindly linked, but my recollection is that Larry said something about new refineries coming on line, or refineries coming back on line, or some such thing.

There are lots of theories for the recent price drop. One is that the Chinese have forced many cars off the road during the Olympics (they're on an odd-even every-other-day restriction, iirc). There has been speculation that that is affecting the price. If that's right, the price of oil should shoot back up after the Olympics are over.

I saw something yesterday from one analyst who said that, by October, the price of oil could be $100 a gallon. Or, he said, equally likely, it could be $150 a gallon. We just don't know. That seems to be the best answer.
It would be unwise to underestimate what large groups of ill-informed people acting together can achieve. -- John D'Oh, January 14, 2010.
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AlbertaCrude
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jon-nyc
Aug 8 2008, 11:46 AM
Jolly also posted that there was more oil in the gulf then there was in Saudi Arabia. He wasn't able to find any published sources to support that, curiously enough.

That's because there isn't.
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jon-nyc
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Yeah, that was my view as well.
In my defense, I was left unsupervised.
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Mark
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HOLY CARP!!!
Klaus
Aug 8 2008, 11:16 AM
But then again, every price will fall if you wait long enough.

Didn't you predict this some time in May? This was three months ago...

E.g., I predict that the Dow will fall some time in the three months.

Not every price Klaus.

Astro-Physics Telescopes never and I mean never fall in price. Used examples only appreciate in value.

The price of new constantly inches up as costs to manufacture them increase.

:P
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jon-nyc
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You mean like grand pianos?

;)
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big al
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Bull-Carp
:biggrin: Gee, you have to be careful how you parse a sentence.

Larry said...
Quote:
 
Oil supply will pass demand resulting in a surplus in supply within the next 4 to 6 weeks, which in turn will cause a drop in gas prices.


He didn't say that gas prices would drop in 4 to 6 weeks, but that the underlying fundamentals of supply and demand would shift in that time. The drop in price could come any time.

There's another issue that I'm still watching with some interest and that's the HHO system. Popular Mechanics is running tests on these systems and the comments there are as divided as ones I've seen here: Water Powered Cars

Big Al
Location: Western PA

"jesu, der simcha fun der man's farlangen."
-bachophile
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Mark
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HOLY CARP!!!
jon-nyc
Aug 8 2008, 12:00 PM
You mean like grand pianos?

;)

Is my used Estonia 190 appreciating? :excited: :lol:
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When I see an adult on a bicycle, I do not despair for the future of the human race. H.G. Wells
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George K
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Finally
Estonia L190 Satin or Polished Ebony - $37,945

(you should see what happened with Bohemia!)
A guide to GKSR: Click

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- Mik, 6/14/08


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Daniel
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HOLY CARP!!!
Fing nut-cases want to drill off Florida from one end to the other. Do it and turn it into a oil slick/ cesspool.

I was born in Florida in 1967. Most of you reading this have no idea how much environmental damage has been done to that state since that time.

But just go ahead and finish it off. It will be worth it x Fing years from now when the price of gas goes down- oh that's right, not at all.

But the oil companies and people who own oil company stock want it, and all the other leases they're not using.

So go ahead. What can go wrong? Idiots.
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Kincaid
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HOLY CARP!!!
That's hysterical, Daniel.

No, I really mean it.
Kincaid - disgusted Republican Partisan since 2006.
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big al
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Bull-Carp
Daniel is the only guy I know who gets PMS. :P

Big Al
Location: Western PA

"jesu, der simcha fun der man's farlangen."
-bachophile
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Daniel
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HOLY CARP!!!
Daniel
Aug 8 2008, 10:20 AM
Fing nut-cases want to drill off Florida from one end to the other. Do it and turn it into a oil slick/ cesspool.

I was born in Florida in 1967. Most of you reading this have no idea how much environmental damage has been done to that state since that time.

But just go ahead and finish it off. It will be worth it x Fing years from now when the price of gas goes down- oh that's right, not at all.

But the oil companies and people who own oil company stock want it, and all the other leases they're not using.

So go ahead. What can go wrong? Idiots.

And I think there is a reason why there was a Presidential ban on it and there is a reason why there is a Congressional ban on it.

But I'm "hysterical." Sorry but your response seems ignorant to me.

Big Al,
:lol:

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Jolly
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Geaux Tigers!
jon-nyc
Aug 8 2008, 11:46 AM
AlbertaCrude
Aug 8 2008, 01:22 PM
I seem recall though Jolly posting something about a large but very deep find in the Gulf.


Jolly also posted that there was more oil in the gulf then there was in Saudi Arabia. He wasn't able to find any published sources to support that, curiously enough.

Ah, just wait until we get it all out of the ground, sir.

And on a related note....1000 acre lease, DeSoto Parish, $28,000/acre. Just part of another small boom I told you about....
The main obstacle to a stable and just world order is the United States.- George Soros
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jon-nyc
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big al
Aug 8 2008, 02:08 PM
Larry said...
Quote:
 
Oil supply will pass demand resulting in a surplus in supply within the next 4 to 6 weeks, which in turn will cause a drop in gas prices.


He didn't say that gas prices would drop in 4 to 6 weeks, but that the underlying fundamentals of supply and demand would shift in that time.

True that. I'd also be more inclined to think that demand dropped below supply, not the other way around. We'll know soon in a few months.
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jon-nyc
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Jolly
Aug 8 2008, 02:36 PM
Ah, just wait until we get it all out of the ground, sir.

So you still think there is more oil in the Gulf of Mexico than in KSA?
In my defense, I was left unsupervised.
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Kincaid
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HOLY CARP!!!
Daniel
Aug 8 2008, 10:31 AM
Daniel
Aug 8 2008, 10:20 AM
Fing nut-cases want to drill off Florida from one end to the other. Do it and turn it into a oil slick/ cesspool. 

I was born in Florida in 1967.  Most of you reading this have no idea how much environmental damage has been done to that state since that time.

But just go ahead and finish it off.  It will be worth it x Fing years from now when the price of gas goes down- oh that's right, not at all.

But the oil companies and people who own oil company stock want it, and all the other leases they're not using. 

So go ahead.  What can go wrong?  Idiots.

And I think there is a reason why there was a Presidential ban on it and there is a reason why there is a Congressional ban on it.

But I'm "hysterical." Sorry but your response seems ignorant to me.

Big Al,
:lol:

I think I'm quite aware of the spills that sparked the offshore oil drill ban.

I'm also aware that since those days there is a tremendous safety record with the current platforms.

So, your opinion seems outdated and unfounded to me.
Kincaid - disgusted Republican Partisan since 2006.
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