Oil Prices (My First Vanity)

[LesbianThespianGymnasticMidget]

I used to trade commodities. Two ways to look at it. Charts and fundamentals.

Lets start with charts. What you are seeing is a serious market anomaly. Look at a longer time line. What you will see is level prices and demand for a long time. This run up is not natural market action, and outside the bounds of what charting will help predict. What it does show is a massive drop in supply or massive decrease in supply (At least on an expected basis)

Layman's translation,
Something is really weird with oil prices.

The other way to look at oil is fundamentals.
Think of the world being covered by a fishing net. The strands represent time and place. Each node can be thought of as having a specific value. Call that node the basis. You calculate a basis based upon shipping cost and just how bad your customer needs the commodity or your supplier wants to get rid of that commodity.

Shipping costs for oil are through the roof, but shipping can not explain the run up. There is a limited amount of shipping capacity, but the buyers are more powerful than the shipping companies.
Demand in China is up but does not explain the run up. China grows at a known rate, and plans their needs. They buy on long term fixed price contracts.

Hurricanes slowed deliveries to the US but do not explain this type of run up. Prices should reflect a tug on the fish net. Tug up on the node on the southern US coast and it may impact oil costs delivered to places oil can be diverted to.

So as I see them, the reasons for the run up

1) HUGO CHAVES - Castro with oil
2) NIGERIA - Islamofachists insurgency in oil producing areas
3) IRAN - Nuclear aspiration leads to their destruction
4) IRAQ - Slower coming to market than expected
5) SAUDI - Big talk, with no walk in production increases
6) KUWAIT - Greedy a$$holes

7*) SPECULATORS -
- more info below
8**) SUPPLIER MANIPULATION - Think the California energy crisis for a minute.
more info below

*Speculators can affect prices dramatically. Futures are relatively cheap. If you don't care about losing money and have a lot, you can influence general prices. Other speculators follow you over a cliff like a herd of lemming magnifying your power dramatically. I would like to look at the activities of Soros and the French and Russian oil companies

**There are many options for supplier manipulation. Short ship a load and all of a sudden the other company is nailed with freight per unit that is way over what they expected. Many bulk shipping contracts are 10% more or less. Ship 10% less every time and you can bankrupt your customer. This is just one of a mirriad of methods to manipulate as a supplier.

I believe the manipulation is to influince the US presidential election.

[Texasforever]

What part does limitations in refinery capacity play in it? I've heard it said that there is no reason to ship more, cuz refineries couldn't deal with more coming in.

You Re correct. I didn't want to veer the thread off subject but our refineries are at 95% capacity now and cannot sustain any kind of shutdown or even scheduled turn arounds for maintenance without shortages driving prices up. We haven't built a new refinery in the US in 40 YEARS. That is the result of the liberals worship of the environment.

[GoLightly]

I don't think it's totally off topic, as there is an artificial ceiling of product available to end users, so it would naturally create a price hike all of the way back to the raw materials. Everyone wants their proportial cut of what the market will bear.

[Texasforever]

Here is the scary part. Kerry wants us back into Kyoto. There isn't a refinery in this country that would meet Kyoto standards. You would see immediate moth balling of the oldest refineries and the cost to bring the newer plants to spec would make 50 buck/bbl seem like a bargain.

[garandgal]

Thanks for the informative post re: ethanol. Obviously, we need to rid ourselves of the need for M.E. oil. I was listening to talk radio here the other day; and they had a very informative discussion on E-85. I wasn't aware of the cost of production for the product; he said it is around $1.70/gallon for the amount that they are now producing. With taxes, and distributor profits it would cost more...but I, for one, would be willing to pay. We will be enriching our own country, rather than a bunch of nutty despots.

Most people don't realize that newer-model cars will run on this product (you can find it in your owners manual). In fact, most consumers have never heard of it.

[LesbianThespianGymnasticMidget]

Excellent post.
Thanks!

1. If Congress had passed Bush's "evil" energy plan, what effect would that have had on supplies (and hence prices?)
None short term. Energy is a long term issue. There are mo quick fixes.

2. As I see it, two factors are likely to moderate oil demand in the near term: First, the drag high energy prices have on the economy will limit oil consumption (remember it drops when the economy tanks.)
I do not think it is a real supply and demand issue short term. It is created for election effect and profit.


Second, many secondary fuels and alternative energy sources are only economically viable when oil prices are above a certain point. (For example, some large factories can burn either oil or natural gas depending on price.) We are about to see an explosion in alternative energy- for economic, not social reasons.

I do not think there is a short term crisis (until China needs energy like we do, and China is about to become USA East)

Pebble Bed Reactor Technology is the solution. The coolant is helium, which does not pick up radioactivity. Vent it all you like. No problem. Turn off the coolant and let it run, and it does not melt down, it cools down and shuts down. Hard to make nukes from the fuel. Lots of other really cool stuff about pebble bed reactors. The Germans in WWII that conceptualized a nuke reactor imagined it first, but we went with the crappy unsafe bad design of rods and water to make nuke bomb fuel.



Pebble bed tech for electricity and electricity to make hydrogen for mobile fuel is the future. <>

[pepsionice]

The China/India problem is alot bigger than folks think. Both are bringing in tons of middle-class workers...who demand cars. The odds of the barrell price staying at $50...simply isn't there. My guess is that by the summer of 2006, we will be at $100 a barrel...and this is the only way to stop the Chinese/Indian problem. If they can't afford gas...then they won't buy it. SUV sales will virtually halt once we come the magic number of $100 a barrel. On one is going to go out and pay $4.50 a gallon for gas...go figure $100 for each tank for your SUV and remember to fill it each six days. Thats over $5000 a year for gas...and most yuppies will refuse to hand over $5k just for gas.

[LesbianThespianGymnasticMidget]

I don't think it's totally off topic, as there is an artificial ceiling of product available to end users, so it would naturally create a price hike all of the way back to the raw materials. Everyone wants their proportial cut of what the market will bear.

Bingo on the tugging of the price fish net. It is a net, it tugs a lot of places if you tug it hard. It took me a long time to explain that to people with a good conceptual model, and a fish net is almost perfect in how it explains it.

[Chemist_Geek]

50 dollar/bbl makes domestic drilling profitable and that will bring many new and capped wells on line.

I'm looking forward to that. How long will it take?

[LesbianThespianGymnasticMidget]

Lots of oil in the world. The US would be an exporter at 60 bucks a bbl. It depends on what it costs to pump it, but that is not the future.

[quietolong]

I have thought this since Bush became Prez. Oil is only one part.

[Chemist_Geek]

Find more oil, or start to conserve. Both would be the quickest, but I don't see a million SUV's being scrapped for a Prius overnight.

Even if they wanted to, Toyota is maxed out making Prii this year, making more is not in the cards. They're bringing the Highlander hybrid online in 2005 too, so...

[LesbianThespianGymnasticMidget]

Oil producers can not afford to keep prices at this level for long. More production will come on line and then it costs to shut it down so you ride it down a bit.

[Chemist_Geek]

Pebble bed tech for electricity and electricity to make hydrogen for mobile fuel is the future.

Yes, but you'll get a bunch of Luddites in here shouting that H₂ is the most inefficient fuel and only OIL-by-God is a real fuel...

[LesbianThespianGymnasticMidget]

Pebble bed tech for electricity and electricity to make hydrogen for mobile fuel is the future. Yes, but you'll get a bunch of Luddites in here shouting that H2 is the most inefficient fuel and only OIL-by-God is a real fuel...

Intellect over ignorance
I'm a dude, but I love you man !!

[endthematrix]

Metals are at high levels, maritime shipping is in the stratosphere! I hope with the high oil price some infrastructure improvements by producers will be made.

[LesbianThespianGymnasticMidget]

Refinery limitations are tugs on the fish net. Should not impact the base price of oil at the well head, but it depends on the the level of customer desperation.

[GoLightly]

He said his vote was against Kyoto, but he wanted to reopen dialog to tweek it. I'm against it on the basis of maintaining sovereignty, never mind the harm it would do to our entire economy.

China Syndrome took us out of nuclear years ago, clean air standards put a whole lot more of our electricity production on the back of natural gas, we're already shipping in a portion of refined oil product...

That light at the end of the tunnel is looking a whole lot like the headlight of a freight train & a Presidential candidate is telling everyone to get in the middle of the tracks.

[endthematrix]

Re: The Germans in WWII

The same crowd that had a COAL propulsion plant in fighter planes?

[LesbianThespianGymnasticMidget]

Re: The Germans in WWII The same crowd that had a COAL propulsion plant in fighter planes?

Look up SASOL - South Africa. Converting coal to high grade fuel, including jet fuel; for an entire country. Did it for years during the embargo.

[chuckles]

E-85 still uses 15% gas. The purpose of my plan is to switch entirely to alcohol. Mixing the oil product reqires PURE alcohol to keep water from forming in the tank. Removing the last 5% of h2o is the costly part of making alcohol. The key to making it cheap is to have your engine made for alcohol only. Raise the compression ratio to 12 to 1 and higher. Use a turbo for more boost to the HP you need for the load. A car will run on 160 proof(80%) but may have trouble starting in cold weather(glow plugs). not having the gas mix in E-85 would lower the cost drastically. It might not qualify for dual fuel vehicles then however. Our cars today use 8 to 1 compression and have several plastic parts that alcohol could damage. If you replaced the plastic parts it probably would only get about 2/3 the milage it got on gas so the cost would be high even at say $1.50 a gallon with tax. The alcohol would be veeeery cheap but the taxes would still be there and profit for the handlers. Another problem is the gubmint will NEVER allow this because someone may mix it with a little coca cola and the gubmint wouldn't get their tax. You know the reason the gas is in the e-85 is so you can't drink it. I figured they would mix it with methanol to poison people but that takes away the BTU advantage and gives more pollution.

Cars run fine on pure alcohol every weekend at the racetrack The reason we don't have it now is political. I have heard all the reasons we "can't" and they are easily fixed. Another gripe is that it would make the price of food go up because our fuel would be in competition with our food. Most people think in terms of corn only. What do we use sugar cane for? We subsidize it. Sweet potatoes is next, then corn, regular potato's and then grains. If we could make Ethanol from oil(not methanol) and the bacteria in patent 5 million changes methenol to ethenol, Then we could use garbage, tree rot, sawdust, cuttings from the hyway medians, you name it. Imagine Georgia being a major fuel producer because of runaway kudzu. Poor places in Central America, and Africa could grow incomes and compete. We could drown in ethanol and nobody could cut us off in the US. We could have 50cent fuel and have cars with 600HP.

Sounds like the good ole days to me.