twa Posted February 29, 2012 Share Posted February 29, 2012 Came across this: Five Myths About the High Price of GasolineThought I'd throw it out there for your consideration. The European economic slowdown is also, ironically, causing our prices to go up, because European gasoline is being shipped to the U.S., and that is sparking the refinery shortage. That is leading to a change in the way gasoline is shipped, forcing, for example, the east coast to get gasoline from Gulf Coast refineries, increasing the transportation costs.Read more: http://www.big1059.com/cc-common/news/sections/newsarticle.html?feed=104668&article=9821147#ixzz1nmlnwA7P Interesting theory in light of what prices are in Europe and the transportation costs differential between pipelines and tankers. Surely it would be better explained as gas that was formerly shipped to Europe from other countries is being diverted to the US....or are import and other taxes truly that high there that refined products are sold more profitably here? ' Link to comment Share on other sites More sharing options...
Predicto Posted February 29, 2012 Share Posted February 29, 2012 CNN is just not that credible of a news source any more for me. Blaming Wall Street for gas prices moving up is a claim I expect any college freshman to make. CNN published an opinion piece by Senator Bernie Sanders. It was clearly an opinion piece. You can disagree with the opinion, but I'm not sure what the problem is with CNN's actions here. Do you only want to read opinions that you agree with? Link to comment Share on other sites More sharing options...
zoony Posted February 29, 2012 Share Posted February 29, 2012 Speculation is vastly overrated in terms of driving oil prices. Further, there's speculation and speculation. Driving prices up in anticipation of a future crisis is, as noted by Ignatius J., probably a smart (and even necessary) market reaction. :ols: ---------- Post added February-29th-2012 at 12:50 PM ---------- CNN published an opinion piece by Senator Bernie Sanders. It was clearly an opinion piece. You can disagree with the opinion, but I'm not sure what the problem is with CNN's actions here. Do you only want to read opinions that you agree with? No, he's fine with differing opinion. Just as long as its not from bed wetting liberals. For instance, one might speculate that the high price of gasoline is due to Obama's socialist agenda. Others might feel it has more to do with Obama being from Africa. Either is certainly respectable and worth listening to. cSZfUnCK5qk Link to comment Share on other sites More sharing options...
deejaydana Posted February 29, 2012 Share Posted February 29, 2012 CNN published an opinion piece by Senator Bernie Sanders. It was clearly an opinion piece. You can disagree with the opinion, but I'm not sure what the problem is with CNN's actions here. Do you only want to read opinions that you agree with? Of course not amigo. I used to live in Saudi and Kuwait and think I have a better handle on the reality of the oil market then most people. I just find CNn increasingly disreputable. It's an easy sell w/t he "greedy wall st" angle because gas prices effect most everyone. This piece is just political grandstanding. Link to comment Share on other sites More sharing options...
Corcaigh Posted February 29, 2012 Share Posted February 29, 2012 This piece is just political grandstanding. Many opinion pieces are. Check out what the WSJ or Washington Post runs sometimes. Link to comment Share on other sites More sharing options...
techboy Posted February 29, 2012 Share Posted February 29, 2012 :ols: I don't see what you think is so funny. Media reports are largely concerned with situations like the Hunt brothers trying to corner the silver market, not investors making the rational decision that oil supplies in the future could be impacted by Iran shutting down the Gulf of Hormuz. These theories were circulated in 2008 as well, and both Hamilton and Krugman show that they are wrong. Further, though nobody denies that speculation has some role in short term prices (or could, at least), it is not the primary cause of high prices. Demand and world events are. You can read Dr. Hamilton's 2011 analysis from my last post for more of the math on that. It is possible, therefore, for speculation to have some effect, but be overrated by people that seem to want to suggest that it is the main problem. The Economist put it pretty simply in 2008: Speculation does not drive the oil price. Driving does. Link to comment Share on other sites More sharing options...
zoony Posted February 29, 2012 Share Posted February 29, 2012 speculation doesn't drive stocks, dividends do. speculation doesn't drive housing, scarcity does speculation doesn't drive gold prices, etc. Link to comment Share on other sites More sharing options...
pjfootballer Posted February 29, 2012 Share Posted February 29, 2012 The Economist put it pretty simply in 2008: This quote says driving drives up the price. But in the article, it is saying we're driving less, yet prices are going up. 4) Rising gas prices mean there is more demand for gas than supply. Usually that's the case, but not this time. In fact, Americans today are using one million barrels of gasoline per day less than we were using in 2006, and in fact, there is more refined gasoline out there than Americans can use. The US has a refinery capacity of about 8.6 million barrels per day. In 2006, American drivers used 9 million barrels of gasoline per day, and then there was a shortage of refineries, but with current demand down to about 8 million barrels per day, there is a flood of extra gasoline on the market. In fact, refineries are shutting down due to lack of demand, and that is one reason, ironically, for higher prices. The markets are worried that those refinery shut downs will lead to supply chain shortages, especially if the economic picks up, because a refinery cannot be restarted overnight. Read more: http://www.big1059.com/cc-common/news/sections/newsarticle.html?feed=104668&article=9821147#ixzz1nnQKK4SC Link to comment Share on other sites More sharing options...
twa Posted February 29, 2012 Share Posted February 29, 2012 Heh GpUzcOOfxo4 Link to comment Share on other sites More sharing options...
Predicto Posted February 29, 2012 Share Posted February 29, 2012 The US has a refinery capacity of about 8.6 million barrels per day. In 2006, American drivers used 9 million barrels of gasoline per day, and then there was a shortage of refineries, but with current demand down to about 8 million barrels per day, there is a flood of extra gasoline on the market. In fact, refineries are shutting down due to lack of demand, and that is one reason, ironically, for higher prices. That's part of the game. The refiners do not want sufficient renifing capacity to exist, ever. All you need is a slight shortfall to make profit margins skyrocket. So if demand is down, you need to reduce refining supply to perpetuate the eternal crisis that keeps prices high. Link to comment Share on other sites More sharing options...
ABQCOWBOY Posted February 29, 2012 Share Posted February 29, 2012 Three years ago, when gas prices were less then they are today, the reason given by media sources and the left in general were the result of the Bush Administration. Today, it's speculators and futures. A significant part of the reason, at lease in my opinion, is that the dollar is devalued and our Countries economic status has been downgraded. When the downgrade occured, last year, we had this discussion and we were warned that gas prices would soon be going up. Well, here we are. Link to comment Share on other sites More sharing options...
Predicto Posted February 29, 2012 Share Posted February 29, 2012 Three years ago, when gas prices were less then they are today, the reason given by media sources and the left in general were the result of the Bush Administration. Today, it's speculators and futures. Don't you mean gas prices were greater three years ago? Link to comment Share on other sites More sharing options...
PleaseBlitz Posted February 29, 2012 Share Posted February 29, 2012 Perhaps someone on this forum can help us all out by answering this: What would be the downside of simply banning oil speculation completely? (for those that do not plan on using most of what they are buying) People that purchase oil futures for legitmate hedging purposes (like truckers and airlines) would take a beating. Link to comment Share on other sites More sharing options...
ABQCOWBOY Posted February 29, 2012 Share Posted February 29, 2012 Don't you mean gas prices were greater three years ago? No. Link to comment Share on other sites More sharing options...
The Evil Genius Posted February 29, 2012 Share Posted February 29, 2012 No. Too bad. They were back in 2008. http://gasbuddy.com/gb_retail_price_chart.aspx ---------- Post added February-29th-2012 at 02:43 PM ---------- Even in Alberquerque Link to comment Share on other sites More sharing options...
ABQCOWBOY Posted February 29, 2012 Share Posted February 29, 2012 Too bad. They were back in 2008.http://gasbuddy.com/gb_retail_price_chart.aspx ---------- Post added February-29th-2012 at 02:43 PM ---------- Even in Alberquerque I'm fairly certain that I said three years ago. What date does that mean to you Evil Genius? Link to comment Share on other sites More sharing options...
The Evil Genius Posted February 29, 2012 Share Posted February 29, 2012 I'm fairly certain that I said three years ago. What date does that mean to you Evil Genius? Ok, so it was 3 1/2 years ago. Sorry - I rounded down. edit..or even 3 years 5 months ago, considering it was higher in September of 2008, which is 41 months ago. Link to comment Share on other sites More sharing options...
skinfan2k Posted February 29, 2012 Share Posted February 29, 2012 how did gas spike down to 1.46 a month after the meltdown in 2008? Link to comment Share on other sites More sharing options...
The Evil Genius Posted February 29, 2012 Share Posted February 29, 2012 how did gas spike down to 1.46 a month after the meltdown in 2008? The recession severely slashed demand, so much so that the suppliers didn't react in time to cut production to keep the prices artificially high. It's all really a charade, from my limited understanding of how the gas prices work. Link to comment Share on other sites More sharing options...
twa Posted February 29, 2012 Share Posted February 29, 2012 Ok, so it was 3 1/2 years ago. Sorry - I rounded down. edit..or even 3 years 5 months ago, considering it was higher in September of 2008, which is 41 months ago. give it a couple months...wailing and gnashing of teeth:ols: Link to comment Share on other sites More sharing options...
skinfan2k Posted February 29, 2012 Share Posted February 29, 2012 i have a economics degree and i still don't understand it the real truth behind the pricing. Link to comment Share on other sites More sharing options...
Destino Posted March 1, 2012 Share Posted March 1, 2012 People that purchase oil futures for legitmate hedging purposes (like truckers and airlines) would take a beating. They use the fuel. This question seems to be more complicated than I intended. What is the downside of removing all companies / individuals that do not use oil for there business from the speculation market entirely. No investors that can not take delivery of it and intend to sell it as a product or use it. Link to comment Share on other sites More sharing options...
ABQCOWBOY Posted March 1, 2012 Share Posted March 1, 2012 Ok, so it was 3 1/2 years ago. Sorry - I rounded down. edit..or even 3 years 5 months ago, considering it was higher in September of 2008, which is 41 months ago. Be that as it may, the original statement is still true. It was blamed on the Bush administration but now that prices are hitting record highs for historical annual time periods, it's Wall Street. Seems as if it is a double standard in play. Also, you did not comment on the fact that I believe it is, in no small part, due to the fact that we have been downgraded as an economy. Link to comment Share on other sites More sharing options...
Hubbs Posted March 1, 2012 Share Posted March 1, 2012 This quote says driving drives up the price.But in the article, it is saying we're driving less, yet prices are going up. 4) Rising gas prices mean there is more demand for gas than supply. Usually that's the case, but not this time. In fact, Americans today are using one million barrels of gasoline per day less than we were using in 2006, and in fact, there is more refined gasoline out there than Americans can use. The US has a refinery capacity of about 8.6 million barrels per day. In 2006, American drivers used 9 million barrels of gasoline per day, and then there was a shortage of refineries, but with current demand down to about 8 million barrels per day, there is a flood of extra gasoline on the market. In fact, refineries are shutting down due to lack of demand, and that is one reason, ironically, for higher prices. The markets are worried that those refinery shut downs will lead to supply chain shortages, especially if the economic picks up, because a refinery cannot be restarted overnight. Read more: http://www.big1059.com/cc-common/news/sections/newsarticle.html?feed=104668&article=9821147#ixzz1nnQKK4SC Again... if it was just the U.S. that used oil to drive, your reasoning would make sense. Link to comment Share on other sites More sharing options...
PleaseBlitz Posted March 1, 2012 Share Posted March 1, 2012 They use the fuel. This question seems to be more complicated than I intended. What is the downside of removing all companies / individuals that do not use oil for there business from the speculation market entirely. No investors that can not take delivery of it and intend to sell it as a product or use it. Yea, you asked a simple (and good) question and I gave you a too simple (but correct ) answer. The last sentence you wrote is where the sticking point in removing your Column A (hedgers) from you Column B (speculators). I'll give a short explanation why, which will also be too simple. Hedgers (almost) never take delivery of the commodity they are buying. They don't buy the actual commodity at today's price and then have a big stockpile of whatever product/resources/lets just say gasoline for our purposes. They buy a "futures option contract" (FOC). This gives them the OPTION to buy some amount of gasoline at some future date at a price that is set in stone TODAY. BOTH hedgers and speculators trade in the exact same instruments. For speculators, it's easy, it's just gambling (exactly like gambling, which i will get to in a minute), but for HEDGERS, it basically amounts to them paying a premium today to KNOW exactly what their fuel cost will be over the course of the next 6 months or a year or whatever. For our example, lets say our hedger is Farmer Brown, who owns and runs a gigantic farm (i.e. not Ma and Pa Farmer with 40 acres). The way this works is they buy a FOC on "Wall Street" (catchall term, commidities are traded all over and mostly on the Chicago Mercantile Exchange, but i can literally trade them on my iPhone) today which is essentially a bet that the price of gasoline will be higher in 6 months. They then buy the gas for their combine from their regular local source of gasoline. IF the price of gas goes DOWN, they lost their bet, but dont really care because their fuel cost for this growing season stayed low, and they are all . (the difference between current price and their option price that they lose is the premium they pay for KNOWING their fuel cost 6 months in advance, and they are 100% willing to pay for that knowledge). IF the price of gas goes UP, then their fuel costs went up, which would normally make them :cry: BUT, they won their bet and they can sell their FOC's at a premium, which therefore offsets their higher fuel cost, and then they are . Farmer Brown does this for fuel, AND he does it for EVERYTHING he grows. It keeps his costs and revenues predictable. He doesn't care about making a huge killing if the price of his pork bellies explodes, he wants to earn his target income and protect himself from a disaster, like the price of his pork bellies collapsing, and earning no revenue for a year, not being able to pay his creditors, and losing everything he owns due to one bad season. NOW, i said it is exactly like gambling,and it is. In sports gambling, for every bet, their has to be a counter-party willing to make the exact opposite bet, one side wins, one side loses, and it is a zero sum game (no value is created or lost, it just changes hands). Trading in commodities is similar to this, which is why market speculation is overrated as it pertains to "fueling" changes in the market value of commodities. I personally think that anyone dumb enough to get into Commodities trading deserves to lose their asses, and if you ever want to see a collection of the worst people in the world, watch a documentary on commodities trading called The Pit, its a bunch of Jersey guido ****heads talking about how smart they are for being able to make $500k a year with no education or what you or i would call job skills, it's like the Jersey Shore crew grew up.......but then they get on a bad beat and lose EVERYTHING and it's a happy ending after all. That being said, methinks the junior senator from Vermont is simply trying to cash in on the "BLAME WALL STREET FOR ALL PROBLEMS" trend that is so very popular these days with the democratic party and probably understands this EXTREMELY complicated area of finance about as well as most people, which is to say not at all. Now i have to wait 15 minutes and come back and read this post to make sure it actually makes any sense at all. Link to comment Share on other sites More sharing options...
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