Oil energy futures speculation drives rising cost

redviking · 07-05-2008, 09:28 PM

Speculation has little if anything to do with it. If it does, then we have nothing to worry about because fundamentals will eventually take over. If the prices hold, and it appears as though they are, then this is supply and demand.

Guess what? Oil supplies have plateaued since 2005 while demand has increased significantly internationally? What do you think is supposed to happen with oil prices?

The speculation argument is a joke.

redviking · 07-05-2008, 09:29 PM

Originally Posted by Big

Look, even if 1/5 of people in China can afford cars and gas, that is still 300 million people driving. Also, those well off Chinese pay 10 times less for most goods than Americans.

Say a person that makes $30K in China is considered well off even though in America that is almost povety level. That person in China has more money than $30K making Americans because he pays 10 times less than Americans for everything else. Many people in China live on $2 per day.

You're a smart man Big. 9,000 new cars on the road PER DAY in Beijing alone is no joke.

buckeye125 · 07-07-2008, 08:12 PM

Redviking, is your figure of 9000 new cars daily in Beijing based on "speculation"?

Can you cite any official reports or stats that confirm that demand has increased as much as you say?

redviking · 07-07-2008, 08:56 PM

http://seattle.bizjournals.com/dalla...07/story3.html

Buckeye, I've heard this a few times. One of the links is above. A little outdated, but I doubt it has changed much. If you think it is a total lie, go ahead and think that. Givent the # of times I've heard it from mainstream sources, I believe it. On the flip side, please show me a reputable source that denies this. Thanks.

RYou · 07-07-2008, 09:27 PM

The Arabs increased oil production 500,000 bbls a day. No drop in price. Trading in oil futures has artificially inflated the wholesale cost.
It's no different than gold right now. The US dollar is in the toilet, so international investors are turning to the international commodities, gold, silver, and now oil.

Cyclone85 · 07-07-2008, 09:57 PM

Big deal; the U.S. sells 43,000 a day. Assuming 9,000 cars is a 125% increase over the previous sales, that only represents an additional 625-million Chinese gallons of gas a year assuming each car travels 8,500 miles a year and gets 25 MPG. I'm also assuming that 50% of all oil is converted to gas which is accurate. That accounts for only 4% additional gallons of gas assuming that the world uses 85-million barrels a day where 50% is converted to gas. So -- where is the other 1,300% that oil has gone up? India? I don't think so -- it must be roughly equivalent to China. So, there's another 4%. Oil has gone up 1,350% so even if China and India are selling tiny little cars (and they are tiny), they cannot possibly account for 1,300% given the estimates above.

Another way to think about it is this: The current annualized increase in China and Indian car sales + current U.S. sales = U.S. sales at their very peak from a couple of years ago. Oil was $50 a barrel just a few years ago. So again, the current price does not make any sense given that total world wide sales aren't that impressive. China and India have experienced increases (though still very small in real numbers relative to the world) and U.S. sales are pathetic. Euro sales are pathetic. China and India cannot possibly be the difference here.

BTW ___ FWIW ____ I am not convinced that speculation is fully the cause either.

Originally Posted by redviking

http://seattle.bizjournals.com/dalla...07/story3.html

Buckeye, I've heard this a few times. One of the links is above. A little outdated, but I doubt it has changed much. If you think it is a total lie, go ahead and think that. Givent the # of times I've heard it from mainstream sources, I believe it. On the flip side, please show me a reputable source that denies this. Thanks.

buckeye125 · 07-07-2008, 10:11 PM

Originally Posted by redviking

http://seattle.bizjournals.com/dalla...07/story3.html

Buckeye, I've heard this a few times. One of the links is above. A little outdated, but I doubt it has changed much. If you think it is a total lie, go ahead and think that. Givent the # of times I've heard it from mainstream sources, I believe it. On the flip side, please show me a reputable source that denies this. Thanks.

Thanks for posting the link. I have not seen these specific figures cited elsewhere, but I will agree that China's rate of car ownership and oil consumption is rapidly increasing. Logically, this would have some effect on oil prices. However, I do not see how this rules out speculation as a factor (there is much evidence to suggest that it is a strong factor). When it comes down to it, it's not simply an "either/or" situation, it's "both/and".

redviking · 07-07-2008, 10:12 PM

Originally Posted by RYou

The Arabs increased oil production 500,000 bbls a day. No drop in price. Trading in oil futures has artificially inflated the wholesale cost.
It's no different than gold right now. The US dollar is in the toilet, so international investors are turning to the international commodities, gold, silver, and now oil.

When was the 500,000 increase? Explain further and I'll then explain what happened. Speculation always has some effect, but I'm saying that this is mainly due to supply and demand.

redviking · 07-07-2008, 10:16 PM

Originally Posted by Cyclone85

Big deal; the U.S. sells 43,000 a day. Assuming 9,000 cars is a 125% increase over the previous sales, that only represents an additional 625-million Chinese gallons of gas a year assuming each car travels 8,500 miles a year and gets 25 MPG. I'm also assuming that 50% of all oil is converted to gas which is accurate. That accounts for only 4% additional gallons of gas assuming that the world uses 85-million barrels a day where 50% is converted to gas. So -- where is the other 1,300% that oil has gone up? India? I don't think -- it must be roughly equivalent to China. So, there's another 4%. Oil has gone up 1,350% so even if China and India are selling tiny little cars (and they are tiny), they cannot possibly account for 1,300% given the estimates above.

Another way to think about it is this: The current annualized increase in China and Indian car sales + current U.S. sales = U.S. sales at their very peak from a couple of years ago. Oil was $50 a barrel just a few years ago. So again, the current price does not make any sense given that total world wide sales aren't that impressive. China and India have experienced increases (though still very small in real numbers relative to the world) and U.S. sales are pathetic. Euro sales are pathetic. China and India cannot possibly be the difference here.

BTW ___ FWIW ____ I am not convinced that speculation is fully the cause either.

That was just in Beijing alone - one city Cyclone. You can't make an argument based on one city, except to say that 9,000 per day is a huge increase for one city.

Your logic is very flawed in so many ways I don't know where to begin. Prices are dictated by supply and demand and also how "flexible" the market is (this is a biggy), what people are willing to pay, and probably a few other factors. Pretty much any economist will tell you that you CANNOT predict a price change simply based on the amount of increased consumption. I'm not saying you're dumb but your argument shows a lack of understanding of basic economics. Lastly, you're only factoring in cars, not what is used in industry, heating, etc., worldwide gas consumption, etc. I've probably only scratched the surface on the problems with your numbers.

redviking · 07-07-2008, 10:18 PM

Originally Posted by RYou

The Arabs increased oil production 500,000 bbls a day. No drop in price. Trading in oil futures has artificially inflated the wholesale cost.
It's no different than gold right now. The US dollar is in the toilet, so international investors are turning to the international commodities, gold, silver, and now oil.

It IS different than gold. Look at gold prices over the past 4 months and then look at oil. There is a huge difference. In fact, one has increased drastically and the other has actually dropped. The dollar has also stabilized the past 4 months. Gold to a large extent is tied to the value of the dollar, while oil is only a tiny bit.

Oil energy futures speculation drives rising cost

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