Re: Why Did Oil Prices Drop?
 

elaich added these comments in the current discussion du jour
....

> There is a school of thought among some that Bush has had the
> Saudis oversupply so that the cost will plummet before the
> elections. That would make the Republican regime look better,
> and take the high price of gas off people's minds, and as a
> reason to dump the Repubs.
>
> OPEC just called an emergency meeting to discuss the price
> drop, and the consensus is that they will opt to restrict the
> supply to drive the price back up.
>
Sometimes, but certainly not always, the simpler view make be the
right one. I don't think that the president has taken any direct
steps to help John McCain specifically or even the broader
Republican party.

My view is this: the pretty fast drop of oil to about $80 occurred
almost exactly when the economic meltdown was at its peak during
the big bailout debate. I agree with those who say this happened
because these non-existant speculators who supposedly drove the
price to a high of $146 simply decided to abandon the oil futures
game because the risk of currency devaluation was so high but
perhaps mostly because they could no longer finance the buys when
credit essentially dried up.

Without any artificial effects, oil simply dropped to about where
the supply & demand curve said it should be. There was intense
debate about oil maybe dropping to $60 or even lower but as we've
seen such carnage on Wall Street this past week, oil has stubbornly
stayed put. I guess it may just show that left to it's own devices,
the free market system will seek it's own level for prices of about
anything.

Another easy one to explain is why crude prices dropped so far and
so fast but gas prices at the pump lagged for sometime before
settling in at somewhere in the range of price/barrel plus
refining. The answer here, I think, is that it really does take
time for "new" crude to work it's way entirely through shipping,
refining, and distribution system again showing how free markets
can work well if only allowed to do so.

Have a great weekend.

--
HP, aka Jerry

"Don't say 'can't' when you really mean 'won't'"

Re: Why Did Oil Prices Drop?
 

Buffalo added these comments in the current discussion du jour
....


>> Another easy one to explain is why crude prices dropped so
>> far and so fast but gas prices at the pump lagged for
>> sometime before settling in at somewhere in the range of
>> price/barrel plus refining. The answer here, I think, is that
>> it really does take time for "new" crude to work it's way
>> entirely through shipping, refining, and distribution system
>> again showing how free markets can work well if only allowed
>> to do so.
>
> I think the reason it takes awhile for the gas pump prices to
> drop is called GREED!
> They go up right away *when the gas station tanks still have
> the cheaper gas in them* but don't go down when oil drops for
> quite awhile. This unsatiable thirst for greed is what caused
> the present financial problem and will be the cause of the
> demise or near demise of the USA. Hopefully, in the near
> distant future, the younger generation reverses this trend
> before it is too late
>
Greed on the part of the oil companies, refiners, and gas station
owners is certainly a big part of the equation, but not the only
component. Gas stations have long had to contend with, as do
refiners, the difference between "old oil" and "new oil", meaning
that in times of great price volitility, the crude or gas they
have in giant storage tanks may have been purchased either at too
high or too low a price for ordinary people to see a correlation
between crude prices at the wellhead and gas in their
neighborhood.

That said, what many/most gas station owners do whether they are
captive corporate stations, independent small businesses, or
maybe francisees is to attempt to raise prices as quickly as they
think they can get away with in order to pay for losses they
incurred when they had to lower their prices to meet local
competition even though their underground tanks were full of
uneconmically high priced gas.

I don't believe in the many conspiracy theories abounding in this
debate. Some greed, yes, some realistic business practices, yes,
but mainly just bad luck on the part of some in the business.
Now, before you send a missile up my six, let me qualify my
suppositions by saying that for quite awhile during the run-up of
the last 18 months or so that got us from the low 2 dollar range
to the mid 4 dollar range was pretty consistent across all the
stations in a given geographical area. Some differences could be
seen regionally, such as California vs the Midwest vs New England
but by and large, everybody was in lockstep.

Still, Mr. and Mrs. America have every right to be highly
suspicious when they see prices go up very quickly yet settle
rather slowly. But, please also bear in mind that ARMs do exactly
the same thing in response to the Fed raising or lowering
interest over the life of the mortgage and depending on the terms
of the adjustment process.

--
HP, aka Jerry

"Don't say 'can't' when you really mean 'won't'"

Re: Why Did Oil Prices Drop?
 

Buffalo added these comments in the current discussion du jour
....

> Thanks for an excellent response to my cynacism.
> The Greed I was talking about seemed aimed mainly at the oil
> companies, which was my mistake.
> It was aimed at the large number of people and businesses that
> are putting making a profit to a godly goal and doing anything
> to achieve it: above family, friends, country loyalty and
> consideration for others, besides themselves.
> You seemed well versed and very articulate.
> Thanks again for your informative opinions.
>
Buffalo, I'll take you at your word, and not that it might be
sarcasm.

Since you've made some cogent and pithy comments, let me reinforce
you, please. This thread and a couple other related ones in the NG
have shown me that many, many people seemed to be one or more of
the following: misinformed partially or totally, gullible, naive,
or simply lack any level of understand of micro and macro economics
much less the workings of business and government. I don't not
judge nor condemn these good citizens as they can, if they want to,
correct the problem.

Let me also add that there is nothing inherently wrong with being
ignorant on one or many complex subjects. It is pretty damn tough
to be knowledgeable in today's world. But, ignorance is not a fatal
disease. It can be cured simply by education and experience, but
not without some work. It blows me away how voters can possibly
make intelligent decisions in this or any election if they do it
they way my parent used to - walk in, pull one of the "vote for
everyone of this party" lever and walk out. Egad!

--
HP, aka Jerry

"Efficiency is doing things right, effectiveness is doing the right
things" - Peter Drucker