[kjam22]

The thing about oil and gas is that it is effected by supply and demand... but it's also effected by pure speculation....because it is a traded commodity. Because of fears of war in the middle east, or fears of shortages in years to come. Or because of fears of new technology etc. Because of a lot of factors that are difficult to measure without a "crystal ball."

We have a blip in production in the gulf coast that will effect the immediate production....and yet the strip changes 2 years out. There is no logic for that based on pure supply and demand.

So I'm just saying that the people on this board who make supply and demand statements regarding the cost of oil and gas are only telling half of the story. And comparing a traded commodity to something produced in a manufacturing plant is just not an accurate depiction.

[Rodney King]

We have a blip in production in the gulf coast that will effect the immediate production....and yet the strip changes 2 years out. There is no logic for that based on pure supply and demand.

There is plenty of logic for that. The futures are not just traded by "specualtors". They are also traded by suppliers and end-users.

Besides, there is nothing wrong with "specualtors".

[Rodney King]

That's not true... because it still takes people. Their salaries are higher. The cost of equipment is higher. Federal regulations have added cost. Production equipment sitting on the well costs more. And on and on. You can't say it only costs more to drill because oil is more difficult to find. That's just not accurate.

Well, for one thing I am assuming that we are adjusting for inflation, etc. 2nd, I still stand behind my statement. Sure, it might cost $25 million to drill some deep-water well. 15 years ago, that same deep-water well wouldn't have been drilled at all because it would have cost too much. Since then, the techonology has improved. For example, the spar's developed my Kerr-Mcgee.

Sure, it might cost a lot to drill some directional well in the LA. Chalk. 15 years ago it wouldn't have been drilled at all because the technology wasn't there, and one would have had to drill a number of vertical wells to extract the same amount of oil.

[Rodney King]

And comparing a traded commodity to something produced in a manufacturing plant is just not an accurate depiction.

By the way, the only difference is that something that is a traded commodity is in fact MORE responsive to supply and demand because there is a futures curve that is going to result in the spot price being responsive to no-arbitrage pricing.