Why might oil prices be so high?

Discussion in 'Economics' started by sttrader, May 7, 2008.

  1. Next time you go to fill up your car, think about this. Every time I fill up my car you can guess who I'm thinking of and who I'm thanking!
  2. Every time I fill up the car I chuckle how ridiculously cheap gasoline is compared to rent or other expenses and how much people whine about it.
  3. Every time I fill up my car, I wonder why people complain about high gas prices. These are the same people that drive 90 mph, speed up to reds, slam on their brakes, and pound the gas once it turns green. How do I know these are the same people? Because that's how 90% ...wait 99% of the people in my city drive.

    Don't get me wrong, I bitch about $4 gas but only because I know it is benefiting the dildo we have for a president. Otherwise, I'd just be plugging along at the speed limit and coast to a stop...
  4. piezoe


    A forward contract to deliver oil implies a commitment which, in general. would require storage of oil to assure that the commitment can be kept. I am concerned that in unregulated markets (or even in poorly regulated) that so long as supply exceeds demand a mechanism might exist to create a contract naked so to speak. i.e., without being backed by the necessary quantity of oil. This could result in an irrational rise in oil price just as naked shorting of equities results in an irrational drop in price. The amount of storage readily available is large but finite. Once this storage capacity is exhausted, or nearly so, the price of oil should come down, but only if the market is legitimate.

    In December (was it 2007 or 2006? I forget now) we had a situation where again oil price had been pushed up on speculation, but storage was nearly full. At that point prices began to fall. We should see a similar phenomenon again, but when? Those who enter the speculative market late in this cycle, whenever that is, should rightfully end up as bag holders. In other words, i do not see how it is possible for oil to rise indefinitely without a pullback in an environment where supply is exceeding demand so long as the market is legitimate.
  5. Gyles