FeverBuster

The Oil Bubble Will Meet the Same Fate as Tech, Housing

Oil bulls need to realize that as oil price rises, any cash profit they make in realized value decreases over time. Since oil contributes to inflation when it goes up, it essentially erodes the profit that you are making. Inflation becomes the check and balance for oil pricing. So, a dramatic price drop in oil to get inflation back in line would allow the market to explore higher prices once corrected in the future.

The Oil Bubble Will Meet the Same Fate as Tech, Housing

christletoe,

The last report from the EIA on gasoline indicated the opposite from you claim of being at an all time low and on the verge of shortages. Please post a reference for this claim.

Additionally, with oil being at an all time high, inventories have to be managed better to hedge against potential price drops like what we have seen in last few days. The higher the price of oil, the less the demand, and thus the less inventory needed as buffer. As the demand goes back up, so will inventories.

Gas Lines Coming This Fall

Bill,

In one of the pictures on your site(bottom left), there is a canopy covered with what looks like solar panels. Have you done any calculations to see if it could be self powered during the day by solar alone? I would imagine with hundreds and hundreds of miles of solar panels it could be self powered and even add to the power grid at times.

Offshore Drilling Isn't the Answer - Supply and Demand Is

18 billion barrels is close to 3 years worth of oil consumption by the US at 20 million barrels a day. I am not sure why that is not enough to go after and drill for.

Gas Lines Coming This Fall

I like the JPod Idea. Imagine how much less stress it would be to not have to worry about driving and at the same time have a personal space that you do not share. JPods could be customized to a personal taste(as long as they met requirements) just as there are so many different type and style of cars. Americans do have a love affair with automobiles, and in reality both modes of transportation could co-exist. The auto could then become the hobby or leisure drive and eliminate it as a necessity for just getting from point a to point b.

Energy and Metals Charts

Regarding $7 drop:

"Investors hope that lower energy prices could help revive the flagging economy". Source: Yahoo

Oil is going to have to drop down below $100 to have any impact on the economy. But every bit helps. It will not last though, Iran will just launch another missile, or someone in Nigeria that has a gun will get mad, or maybe someone will spill a barrel of oil somewhere. You know that these type of things can really cause disruption of oil flow that will have devastating effects on the supply.

Energy and Metals Charts

I do not understand how a futures market of commodities can be charted in a way that provides overbought or oversold ranges since it is a complete different way of trading in relation to common stock buying and selling. To me your tying to fit a square peg into a round hole.

What We Can Do To Reverse the Oil Crisis

I support Bush in opening up drilling. However, it will not fix current problem of oil prices. Releasing oil out of the SPR as Phil has suggested would disrupt the insane trading going on. Add to that, increasing the interest rate by a .25% and you have a mix bag of weapons to counter balance the insanity of the market.

Gas Lines Coming This Fall

"If demand falls very quickly, exporters like Mexico, will like cut production to protect their current revenues. They are as addicted to their oil income as we are to using oil. Then again, price would go up, further stressing inventory levels."

You are 100% correct. Oil producers are doing this already, that is why inventory is low. That is why the fundamentals of supply and demand are not at work. The high price is out of range from balance causing the stress as you mentioned.

I just pray that we do not have any Hurricanes this year that hit the Gulf. Although, I am sure that oil future investors are hoping for one so they can make money off of a disaster.

This is just another reason I think both an interest rate increase and the SPR should be used now. This would bring the price down and to regulate the market back to a balanced state.

Why Are Oil Prices So High? Gold Solves the Riddle

The fall of the dollar value is a catalyst for over investment in oil futures. Just as all of the propaganda from the Middle East or the latest round of "fear" tactics coming from Brazil and their oil strike which only represents 64,000 barrels of oil a day in actual physical loss. This is not even in the same ballpark as to how much demand destruction has occurred from the high prices, yet the considerable fall in demand does nothing to offset the price.

Physical Supply and demand are not at play now. Just oil futures determining the price curve.

Your essay only proves that there is more at play than the fall of the dollar if even gold can not buy the same amount of oil as is did in the past. As I stated before, the over investment of oil futures on the scale of 2X futures than actual supply is where the high price is coming from.

Gas Lines Coming This Fall

I agree with both comments above. The high price of oil is keeping inventories low. The last thing oil companies would want to do is keep a large amount of inventory and then all of sudden the price falls dramatically.

There is no mention of the fact that Gasoline inventories are high side. This would explain that the buffer is in the Gasoline and not in oil.

There is no shortage of Oil. If there was, then OPEC would increase production. As of now, they have indicated several times that an increase is not necessary.

You also do not mention the fact that if you are correct about the gas shortage based on low oil inventories that SPR could release oil as they did back after Katrina hit. This would change your figures quite a bit.

Options Trader: Friday Outlook

PokerDonkey

Iran and Allies of Iran are the ones manipulating. They are making billions of extra$$ off of the US. They continue bait investors/speculators back to the oil market with their psychological warfare and propaganda. Then, they are probably funding Al Qaeda, and insurgence with a lot of that extra money. So, anybody that contributes to the increase in oil, needs to think about where that money is going and ask themselves how ethical it is if that were the case.

All governments lie, but the fact is that there is plenty of oil, and if the government was to come out and say that they were going to allocate 2-3 million barrels a day until the market stabilized, the actual amount would probably be not much if any. It is more psychological than physical in the oil market now.

"I don't care who is getting rich and who is getting screwed."
This attitude is horrible. If you are not careful, you will be the one that will get screwed whether you are a oil bull or not.

You can not compare Goog or AAPL, etc. to oil. None of your examples have an effect if any on inflation like oil does.

Options Trader: Friday Outlook

The "oil crises" can be solved by releasing/allocating oil from the SPR and increasing the prime rate by a small percentage. Heck, I do not think they would even have to physically move the oil from the SPR, just make an announcement about it. After all, nothing physically actually has to happen to effect the supply, just an implication of such would do it.