Oil Inventories Down Over 7 Million Barrels, Price Goes Over $79

[Bronco_Beerslug]

$80 plus oil coming?

[Bronco Bob]

The government should impose a $2 a gallon gas tax to encourage
conservation, and use the money to rebuild the infra-structure.

[alkemical]

Bronco Bob,

I was a former resident of the state of PA. They had a 50cent a gallon tax to fix the roads - funny thing was - they raised another tax to fix the roads - PA roads still suck - not much was really done.

I don't think the gov't spends the money well, so i'm a bit snakebitten to accept a surcharge of that magnitude until proven otherwise.

[Bronco Bob]

$80 plus oil coming?

NEW YORK (AP) -- Oil futures prices briefly rose to a record $80 a barrel Wednesday afternoon after the government reported a surprisingly large drop in crude oil inventories and declines in gasoline supplies and refinery activity.

http://biz.yahoo.com/ap/070912/oil_prices.html?.v=27

[Bronco Bob]

Bronco Bob,

I was a former resident of the state of PA. They had a 50cent a gallon tax to fix the roads - funny thing was - they raised another tax to fix the roads - PA roads still suck - not much was really done.

I don't think the gov't spends the money well, so i'm a bit snakebitten to accept a surcharge of that magnitude until proven otherwise.

The main reason would be to spur conservation and encourage alternate
energy sources. If they buried the money in a coffee can in the back of the
capitol building, it would still serve that purpose.

[alkemical]

The main reason would be to spur conservation and encourage alternate
energy sources. If they buried the money in a coffee can in the back of the
capitol building, it would still serve that purpose.

Oh i don't disagree but I'm not sure how taxing petrol by $2/gal will do anything up front, right away. Infact i'd say offering major tax credits and removing the restrictions on where green vehicles are sold would do just as much good. Maybe not in 'fixing roads' - but in moving to alternate energy.

[L.A. BRONCOS FAN]

$80 plus oil coming?

http://img295.imageshack.us/img295/7863/signofsummermg7.gif

[Garcia Bronco]

The government should impose a $2 a gallon gas tax to encourage
conservation, and use the money to rebuild the infra-structure.

People need to travel to spend money. We should cut social programs.

[Bronco Bob]

People need to travel to spend money. We should cut social programs.

And how exactly is cutting social programs going to encourage people to conserve energy and make the US less dependent on foreign oil?
Other than maybe more poor people will take the bus because they can't afford a car.

[jhat01]

We should lock up all the illegals, and trade them back to Mexico on a one for one swap program. one body for one barrell. Ah screw it, let's just invade - they have plenty of oil right? lol

[Bronco_Beerslug]

Oil over $81 today, $100+ oil coming say some of the analysts I'm listening to right now.

[alkemical]

take it for what it's worth - but alex jones reports the bilderburgers want oil at $200/barrel

[Bronco_Beerslug]

Oil trading at $82.45 right now. Specualtors and analysts now talking about $120 oil.

It would be difficult to get there IMO as demand would drop off significantly before it did sending prices back down but I guess world demand ultimately decides that.

[alkemical]

how far would a 'hypothetical' war with iran drive oil prices?

[Bronco_Beerslug]

how far would a 'hypothetical' war with iran drive oil prices?Who knows. Alls kinds of speculation out there. Way up would probably be a good guess.

BP Amoco just announced it's pulling all of it's employees out of the Gulf because of Invest 93 forming there.

[Bronco_Beerslug]

Oil @ $84.10 and climbing.

Did everyone trade in their gas guzzler for a hybrid yet? :)

[Bronco Bob]

how far would a 'hypothetical' war with iran drive oil prices?

Iran closes down the Straight of Hormuz and all bets are off.
The ones I see benefiting the most after that are Russia
and Venezuela, both being able to dictate pretty much
any price they want for oil.

[Bronco Bob]

$80 plus oil coming?

Update:

Oil Futures Hit High of $88 a Barrel

Oil futures rose above $88 a barrel in New York trading today, their highest
level ever, because of unrest in the Middle East.

Crude oil for November delivery rose as much as $2.07 to $88.20 a barrel on
the New York Mercantile Exchange during midday trading after jumping nearly
3 percent yesterday. Oil futures, which have gained $9 in the past six trading
sessions, are up more than 43 percent this year.

On an inflation-adjusted basis, today’s prices are getting close to records
reached in the early 1980s when an energy crisis and the Iranian revolution
pushed oil prices up to about $100 in today’s money.

This week’s surge is being fueled by the threat of a Turkish military incursion
in northern Iraq. The sudden tensions in a highly volatile region gave rise to
fresh concerns about further instability in the oil-rich Middle East. Iraq is the
third-largest holder of known oil reserves, after Saudi Arabia and Iran. Turkey
is a key passage for oil exports from Iraq and the Caspian Sea.

On Monday, the Turkish cabinet asked Parliament for permission to launch an
attack on Kurdish separatists in northern Iraq.

Analysts note that since the American invasion of 2003, oil exports from
northern Iraq through Turkey have been sporadic because of frequent
bombings against Iraq’s northern pipeline. But as oil producers are straining
to meet the global growth in oil demand, commodity traders are focused on
anything that might affect energy supplies.

http://www.nytimes.com/2007/10/16/business/worldbusiness/16cnd-oil.html?ref=worldbusiness

[L.A. BRONCOS FAN]

Oil Futures Hit High of $88 a Barrel

Bush's base is getting a boner.

http://www.bartcop.com/oil-gauge-gouge.JPG

[L.A. BRONCOS FAN]

Real Reasons for $88 a Barrel

Oil briefly touched $88 a barrel today with Turkey poised to approve military raids inside Iraq against Kurdish rebels. Oh, what rubbish.

Every time the price of oil goes up $3 or $5 a barrel, analysts point with alarm to Iraq, Iran, Venezuela or Nigeria. In today's case, no incursions have happened yet, Turkey is still subject to international pressure and the oilfields of Kirkuk are as far from the Turkish border as you can get inside Iraqi Kurdistan (even if Iraq was providing a dependable oil flow to the rest of the world, which it isn't).

The finger-pointing at unrest here and a worker strike there is just avoidance of the fact that oil is far more expensive than market fundamentals can support. (I do credit the analysts who are finally saying this, if not getting to the root of it.)

So what is this upward race about?

Start with speculative trading.

During a Senate hearing on oil prices last year, the Senate Subcommittee on Investigations concluded that speculative energy trading drives up the price of oil, and a staff report endorsed analyst estimates that speculation may account for $20 of a $70-per-barrel oil price.

The subcommittee chairman, Sen. Carl Levin (D-NY) is backing a bill repeatedly submitted by Sen. Dianne Feinstein (D-CA) that would restore oversight of unregulated energy trading. The bill, fittingly titled the "Close the Enron Loophole Act," has only a snowball's change until the White House changes hands, but would sharply cut speculative trades if enacted.

Even if the trading in futures markets were benign, the trades themselves add to price. Every trade has a cost built in, and every gallon of oil is being traded multiple times. From the NY Mercantile Exchange website: "Crude oil is the world's most actively traded physical commodity. ...The futures contract is the most liquid trading instrument for crude oil, with daily trading volume averaging the equivalent of 230 million barrels of crude, approximately three times physical daily output."

I'm sure the numbers are up from whenever that was written, since the Nymex just reported 13% year-to-year increase in business. Aside from the transaction cost, the dollars thrown into futures trading keep rising, and the amount of oil available is pretty much static. Econ 101 says that prices rise as more money chases less product, and I'd be happy to hear why that's not even partially true in the futures markets for a physical commodity.

Even more interesting is a theory I heard from Marc Cooper, the deep-digging energy analyst for the Consumer Federation of America: It's also OPEC and the Big Oil oligarchy going back and forth over who's taking whose profit.

I'm leaving out some of the technical language and doing some paraphrasing, so apologies to Marc if I get any part of this wrong. But it goes like this:

OPEC is a cartel that asks themselves what they can charge for oil that comes out of the ground for maybe $10-$20 a barrel. They see U.S. oil refiners pushing up the price at the gasoline pump and keeping $30 a barrel for profit, as they did this spring, and figure, "Hey, the refiners are taking our share."

So now, OPEC has taken back a significant 25 cents a gallon worth of the economic rent that the oil companies were collecting--and the oil companies and refiners have reduced their windfall share of last spring. That'll obviously be reflected in lower 3rd quarter oil company profits. Americans will pay $3.00 for gasoline and not like it, but there won't be barricades in the street or global recession--the things that would scare the Saudis.

That is not commodity trading at work but it's not simple competitive market behavior either.

It's a back and forth between OPEC, the cartel, and oil, the oligopoly. All of it is effectuated by the mechanism for setting the economic rent, the Nynex spot market.

There are not economic fundamentals behind the price of oil. If there were not a crude oil cartel and an oil-company oligopoly, the cost of producing a gallon of gasoline would be about $1.50 including a decent refining profit. Anything above that is baloney.

Tight oligopolies (like the oil business) and cartels price politically, as with last year's election pricing. Since next year is an election year, it's not clear how hard the oil companies will push to restore their big refining margins.

No matter what mix of these forces is pushing up the price, it isn't economic fundamentals, it isn't a competitive market and it isn't Turkey's saber-rattling over the Kurds.

We may get a clue to how much of the price of oil and gasoline is politically determined in the reaction to today's mild little White House statement: "There is no doubt that energy prices are too high. They disproportionately hurt low-income families that have to spend so much of their money on energy. We watch it closely, we're very concerned."

Where was that statement in May, when gasoline was $3.25 (higher, of course, in California)? Tucked away, perhaps, until the White House could blame it on OPEC.

http://www.huffingtonpost.com/judy-dugan/real-reasons-for-88-a-ba_b_68814.html

[W*GS]

I hope oil keeps going up and stays high. Perhaps then we'll get serious about energy and realize that depending so much on such a nasty source is a really Bad Idea.

Global warming and terrorism against us being two of the reasons oil is nasty. Which reminds me - remember when Bush tried to tie drug usage and terrorism together? It would have made more sense to say "Every time you fill up your SUV, you're supporting terrorism". But that won't sell to us oil-addicted Americans...