Price of Oil

[Cypress]

I am not sure where to put this concern but it is related to the media. I keep hearing and reading about $5 per gallon gasoline by late spring. The cost of gas this morning is $3.59 per gallon around here.

This language is causing major concerns for me and every other person I would imagine. Is this just talk? Isn't it irresponsible to speculate out loud about a maybe? This happened a few years ago and what was the major reason? Wasn't it partly speculation by financiers?

I am a fed up consumer who keeps trying to reduce my spending and conserve resources. I can only manage so much on a modest income. Most of us have to commute to work. I had a job 15 minutes from home but left that due to awful work environment. Also, there was constant talk about cut backs in staff. Now I commute into the city for 45 minutes. I cannot find work in my town otherwise I'd do that today. I drive a Corolla and am highly organized about driving including all chores en route. Plus car well maintained for mileage.

Nobody wants to car pool! I've tried!

[creaker]

"Nobody wants to car pool! I've tried! "

Wait until prices get up toward $5 - although no one wants to carpool, the number that have to will rise considerably.

As far as gas prices going up, it seems that we're just going back to where they were before the crash of 2008. Although there may be other factors at work - why spend millions on PAC's, if you could force the current President out and make billions besides?

[ApatheticNoMore]

The whole thing about the $5 gas is I just *ACCEPT* it. I know it's going to happen (at least in California). It was $5 here before in 2008, it's $4 now. Well know might be too strong, I think it's very likely to happen :). I can deal. It's not like much else is getting cheaper (like health insurance etc. - actually seems to be increasing much faster than the cost of gas ...). I also drive a fuel efficient car.

[bae]

It is often nearly $5 where I live, and people manage. There's nothing magical about the figure, I suspect you'd want to look at constant-dollar prices, and a few other things, before you panic.

[pinkytoe]

Can't help but think this has at least a little to do with the pipeline they want to push through.

[bae]

Can't help but think this has at least a little to do with the pipeline they want to push through.

The coordination world-wide between multiple competing sources, suppliers, and investors to make that happen is beyond the realm of the plausible.

[Gregg]

There are multiple factors that go into the cost of gas. I don't really think the media has much to do with it and the Keystone XL pipeline is only a very tiny little blip on the radar of the global oil industry. The effect of geopolitics, especially in the Middle East, has a huge effect on the price of oil and that transfers all the way through our economy. The price of refined products, esp. gas and diesel, impacts the price of every other product that gets transported to you. Products that use oil or refined petroleum in other ways (medicine, plastic, fertilizer, etc.) also steadily get more expensive. That broad base causing everything to get more expensive stings beyond just what it takes to fill your tank.

The biggest driver of short term oil market moves is usually speculation, not necessarily the market forces themselves. In a very difficult scenario, something like Iran blockading the Straight of Hormuz, the price of oil would likely spike as the speculators buy up future contracts at a crazy pace. If the blockade were to last only a few days there would not be a significant disruption in global supplies so the price would creep back down. If it lasted for a long time the price would probably continue to go up as reserves were tapped and supplies got tight. The frustration most of us face is that upward pricing pressure is very quick to take hold, but there is almost nothing that will quickly drive prices down. Those pressures play out over months or longer instead of hours or days. In the long run it probably pays to figure out how you're going to deal with $20/gal. gas because its only a matter of time until that's what we'll be talking about.

[Spartana]

I read a few books several years ago (before the big oil price increases in 2008) called something like "The Coming Oil Collapse: When Oil Reaches $100/Barrel" or "Peak Oil and the New Great Depression" something those lines. Anyways, they were all about not only the doom and gloom of what will become our economic and social collapse when oil hits $100/barrel, but the worldwide market and econimc and political influences that create higher (and lower) oil prices - most artificially. Very interesting but was outdated very fast since about a week after reading them prices topped $100/barrel and I'm still alive and well and haven't had to battle roaming zombie hoardes and mauradering human cannibels (yet)! And of course the oil marketteers are just a tad happy about it all. Now I see a new book called "the Coming Economic Collapse: How We Can Thrive when Oil Costs $200/Barrel" (soon my prettys, soon)

[loosechickens]

well, lots of the spikes of the moment are being caused by lots of speculation and buying of oil futures by investors and fund managers, hedging bets due to the instability in the Middle East. Not to mention, I suspect, a bit of "hey, we can get away with it", from the oil companies, who will use practically any excuse to raise, but then lag badly on lowering after emergencies are past.

it's going to hurt, and it's not going to stop, and it will get a lot worse before it gets better. We have 2% of the world's oil reserves, China added 10,000,000 additional motor vehicles last year alone, population is growing, oil is a finite resource, and any politicians that tell us that we can drill our way out of this are misinformed or lying. Even if we drilled everywhere without regard for the environment, it would be years and years before that oil came to market, and only a LOT of attention paid and money invested in research into alternatives, renewables, efficiency and conservation, an "everything" approach, will help to make the transition from fossil fuels as bearable as possible.

Folks who believe Newt Gingrich and his "if you elect ME President, gas will be $2.50 a gallon or less", have to be the most gullible of folks, and I wish they would look at this very nice bridge I have for sale........

We'd better get used to very high energy prices because, at least in my opinion, we're going to see a lot higher prices, and the only variable is how well can we manage diminishing resources and rising demand in the best ways to provide the least hard blows to ours and the world's economy. Because avoiding the problem with rhetoric, just isn't going to cut it.

[Rogar]

I think there will be a long term trend for higher oil prices, but right now it has little to do with supply and demand. Speculators have driven up oil futures prices playing on fears over unrest in Iran and the risk of shipping interruptions. Hopefully this will end favorably and oil prices will resume a more gradual rise so that people can adjust their lifestyles to the inevitable future without a panic.

[puglogic]

The biggest driver of short term oil market moves is usually speculation, not necessarily the market forces themselves. In a very difficult scenario, something like Iran blockading the Straight of Hormuz, the price of oil would likely spike as the speculators buy up future contracts at a crazy pace.

Is there anything to be done about speculators? Since the government shows no sign of reining in this damaging behavior, is there anything Everyman/Everywoman can do, short of shooting them on sight? :)

[bae]

"Speculators" serve an important market function. Note that the commodities future market is a zero-sum game...

"Shooting them on sight" is what communists do, and look how well their economies function.

It's fun to make "speculators" the monster under the bed though :-)

[puglogic]

Don't their heads grow back, though, like some of those worms? ;)

[freein05]

The government can release oil for the strategic oil reserve. This would cause the price to drop and commodity brokers to lose a lot of money. The problem with commodity brokers today is they have so much money they can actually cause markets to move in the direction they want. In prior years they were important to stabilize the markets and in farm commodities they would give farmers assurance that there would be a market for their product before they spent the money to plant it.

Today commodities is just another Wall Street game to make money.