Crude is cheap at $113/barrel

[Sparohok]

Quote from ByLoSellHi:

So, crude oil has risen on an aggregate basis of 100% per year for the last 10 years ($11 to $114), while consumption has increased 3% per year.

No, that's 26% per year. If it were 100% per year, oil would be at $11,264 per barrel.

Oil supply has been flat since 2005. Latent demand has been increasing at 3% per year. The price elasticity of demand for oil has so far been very low. Hence the sharp increase in prices. Econ 101.

With that said, I don't expect that oil prices can stay above $100 in the near term, in the face of a likely global recession. The $150 chip shot that detective is calling for will occur but not this decade IMHO.

Martin

 

[Jayford]

Quote from stock_trad3r:

$150 is a given

adjusted for inflation Crude isn't that expensive historically

Nothing in trading is a given.

 

[Bowgett]

I like this headline:

1:55 Crude ends up $3.3, or 0.4%, at $932 an ounce



I didn't know crude is trading in ounces now

 

[Bowgett]

Here is the picture

 

[detective]

The only thing stopping the crude oil freight train is a very deep worldwide recession, and I am not counting that out at all. The US will be in for a doozy of a recession and I don't think that's priced in yet either for the stock market. But if Bernanke and company go crazy and really churn the printing presses to stop a recession, then all bets are off.

Speculators losing interest in crude oil will not lead to a sharp downturn in crude oil prices, most of the open interest in the NYMEX crude oil contract is commercial.

 

[The Kin]

Quote from ByLoSellHi:

Crude oil consumption has only grown at 3% per year. That's a little tidbit oil bulls love ignoring.

In the interim, crude oil has risen from $11 per barrel in 1998, and $55 per barrel in 2001.

So, crude oil has risen on an aggregate basis of 100% per year for the last 10 years ($11 to $114), while consumption has increased 3% per year.

Looks like someone fell asleep during Econ 101 and the issue of Price Inelasticity

 

[Maverickz]

Quote from Bowgett:

I like this headline:

1:55 Crude ends up $3.3, or 0.4%, at $932 an ounce



I didn't know crude is trading in ounces now

Wow. I have no idea how many ounces are in a barrel but if it actually went to $932 per ounce gas would be at least $300 per gallon...I'd be buying some horses and stagecoach.

 

[The Kin]

Let's go over Basic Laws of Supply and Demand. It does not matter how many speculators are buying the commodity since their actions alone does not increase consumption nor reduce production!

The price of oil will rise until market reaches equilibrium.

If oil consumption is rising 2% a year and production is flat, prices will continue to rise. What kind of idiot thinks the correlation in price should also be a 2%? So far it looks like a 1:10 ratio which is to be expected in any highly inelaestic good or service. In a few years it will probably go much higher if consumption growth and production continue at current rates.

Since there seems to be trouble increasing aggregate supply at current price levels, one of two options will be proven true: the price of oil continues to increase until consumption growth is 0% or less, or the price of oil continues to increase until production growth equals consumption growth or more.

 

[Maverickz]

It really doesn't matter anyway. Even if oil dropped to $2 per barrel the oil companies see that people will pay $3+ per gallon of gas and will keep the prices pretty much where they are anyway.

Same with the proposed Gas Tax suspension. Do you really think the gas companies will lower gas prices by that $0.18 or do you think they will keep price the same or near the same and pocket most of that?

 

[The Kin]

Quote from Maverickz:

It really doesn't matter anyway. Even if oil dropped to $2 per barrel the oil companies see that people will pay $3+ per gallon of gas and will keep the prices pretty much where they are anyway.

Same with the proposed Gas Tax suspension. Do you really think the gas companies will lower gas prices by that $0.18 or do you think they will keep price the same or near the same and pocket most of that?

You may have a point about retail gas, especially about the proposed summer gas tax suspension. The global crude oil market however is a little harder to manipulate.