Originally Posted by buckeye125

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".

Originally Posted by redviking

Speculation is a factor, especially day-to-day. However, it is not a significant factor in the long-term prices. For Congress and presidential candidates to blame speculators - well that is a complete joke. They obviously don't understand how the market works or are just pandering to voters. OPEC also blames speculators, but that is because they don't want to admit that they can't significantly increase supply. If they admit that it is supply and demand, then they have to explain why they can't increase supply very much. It all makes perfect sense if you ask me.

Originally Posted by RYou

http://www.msnbc.msn.com/id/25417337/

Originally Posted by redviking

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.

Originally Posted by ArmyFan

In basic economic terms, US energy (esp gasoline) demand is inelastic with respect to price from $2.00 to $4.00 -- what that means is people continue consuming at a constant rate whether the price is $2.00 or $4.00. Natural gas consumption is also price inelastic.

Supply is constant in the short run in the US.

So effectively, prices can double and the fundamental picture (supply vs. demand) has not changed.

Even with pump prices north of $4.00, US gasoline demand has fallen 4% -- that's it. At $5.00, does it fall another 6%? At $6.00, maybe 10%?

Even as demand falls here in the US, worldwide demand continues to climb.

Energy prices are rising based on real fundamentals.

The energy trading markets have three types of participants - natural sellers looking to hedge, natural buyers looking to hedge, and speculators. Natural sellers are producers. Natural buyers are industries that consume natural gas.

Speculators act as middle men in the energy markets. Sometimes speculators buy, sometimes they sell. One thing is for certain -- for every futures contract or swap that trades, there is precisely one buyer and one seller. People falsely believe speculators only buy. Well, they have to buy from someone -- someone has to sell the contracts to them.

Now, interestingly, what's happening in the US is that natural buyers hedge a lot more than natural sellers. Most producers don't hedge at all or hedge very little. As a results, most of the real hedging that occurs in the markets is buying, putting some upward pressure on futures prices. Who sells the futures contracts to the natural buyers who hedge? Speculators.

Bottom line is energy prices will continue to remain high (and possibly rise more) as long as supply remains stagnant. Worldwide demand is not going to fall.

Originally Posted by ArmyFan

Bottom line is energy prices will continue to remain high (and possibly rise more) as long as supply remains stagnant. Worldwide demand is not going to fall.

Originally Posted by ArmyFan

In basic economic terms, US energy (esp gasoline) demand is inelastic with respect to price from $2.00 to $4.00 -- what that means is people continue consuming at a constant rate whether the price is $2.00 or $4.00. Natural gas consumption is also price inelastic.

Supply is constant in the short run in the US.

So effectively, prices can double and the fundamental picture (supply vs. demand) has not changed.

Even with pump prices north of $4.00, US gasoline demand has fallen 4% -- that's it. At $5.00, does it fall another 6%? At $6.00, maybe 10%?

Even as demand falls here in the US, worldwide demand continues to climb.

Energy prices are rising based on real fundamentals.

The energy trading markets have three types of participants - natural sellers looking to hedge, natural buyers looking to hedge, and speculators. Natural sellers are producers. Natural buyers are industries that consume natural gas.

Speculators act as middle men in the energy markets. Sometimes speculators buy, sometimes they sell. One thing is for certain -- for every futures contract or swap that trades, there is precisely one buyer and one seller. People falsely believe speculators only buy. Well, they have to buy from someone -- someone has to sell the contracts to them.

Now, interestingly, what's happening in the US is that natural buyers hedge a lot more than natural sellers. Most producers don't hedge at all or hedge very little. As a results, most of the real hedging that occurs in the markets is buying, putting some upward pressure on futures prices. Who sells the futures contracts to the natural buyers who hedge? Speculators.

Bottom line is energy prices will continue to remain high (and possibly rise more) as long as supply remains stagnant. Worldwide demand is not going to fall.