greed

Ian, what day this week should I fill the tank?

mccain is on my teevee lying again

The $15 run[up before today was because of he huge rush of liquidity into the market.

imo, the recent (last few months) oil price fluctuations have made hugh’s case that speculation was the big cause of the price increases we’ve been seeing.

eCahn pointed out earlier that it is the time of the month to settle up so covering shorts definitely exacerbated matters. But I agree completely that these injections of liquidity are like dropping off a bunch of heroin to an addict. You are begging for the obvious to happen. Speculators will speculate. The easier you make it for them the more they will do.

The Nov contract was around $109 at the end of the day.

Some of it was clearly speculation (most of the runup this year), I don’t agree with the Hugh case that it’s all speculation since Bush took over, however. But anything over about 80 to 90 pretty clearly is and I’ve been saying so as well.

The Saudi owners of Bush and Cheney are smiling today.

We are helpless. The brokerage community is out there explaining to every investor that the financial world is on its way down the drain, and that we have to do something this week.

It may be that something needs to be done, but this can’t be it. We are so screwed.

We can be crewed in the long run by electing McCain.
We can be screwed in the short run by electing Obama and a solid Democratic majority in Congress who, together, will fix this Republic mess.

OT. What time zone is stamped on the remarks?

Dig it here.

PST, I gather.

I can’t afford to talk about it.

hopefully hugh is still here to correct me, but i don’t recall him ever saying that it’s all speculation – just that it’s mostly speculation. and iirc, he’s been saying that started in 2004, not at the beginning of bush’s term.

Great post, Ian, but:

Paulson’s bailout will also go to the price of oil. Bet on it.

Really? I can see that, but what about the auto industry, which I thoroughly expect to be next in line with their hands out. Then, what about the airlines. Third in line? Who’s next?

I do believe you’re right about the financial industry, especially the real estate assets, because when houses get foreclosed, they sit on the banks books as wasting assets, but the taxes still need to be paid, the pools still need to be serviced, the properties still need to be managed, etc. Once the gov’mint takes the assets, I would hope as much as possible they will do the sane thing: they will renegotiate the mortgages as if the owner/occupant was a new buyer, which means at market values, and they will give fixed mortgages at reasonable rates and do their best to keep the owner in the home as opposed to letting the property go dark (meaning vacant.)

The way I see it, the one bright light in our future, oddly enough, is the fact that we need to create whole new industries due to climate change, which will translate to jobs, jobs, jobs. So will the auto industry if we end up having to fix that industry too.

greedderegulation

I edited this for you just a little, wobblybits. Hope you don’t mind!

So all this worthless paper we are buying, but cannot see. Can we at least have a nationally televised (and live blogged) bonfire party or something.

I mean, 700 billion! give us a pony for a minute or two.

M3 was declining. As it declined, oil prices went down with it. Consider the differnece between M3 and M1 (real money) as “the money speculators play with” (it isn’t all, but it tracks it.) Pumping money into financials puts pressure on oil through speculation. Pumping money into the real economy puts pressure on oil through demand.

Fun, eh. It’s a nice trap we’re in. We need to get off oil to break this link.

Oh, and btw, my biggest beef is that I think it takes a lot of nerve to ask for a blank check from Congress on such short notice. This check was expected to be given as a gift to the very people who let things become major crises and gave no heads up. If it weren’t for Greenspan’s few words of wariness earlier on, there would have been no foresight shown at all, and the very people asking for money to repair the system with no oversight and no recourse for malfeasence, were the ones who ran it aground to begin with. Yet these same people are being called really good professionals and the best people to deal with these problems. Oy!

Uh, the trading volume simply doesn’t support your theories.

Thin-trading on the Oct futures led to the run-up. That’s why the October prices spiked and the others were less affected.

The REAL answer is in the trading volume, which was tiny (less than 40k contracts).

Put the tin-foil away, please.

Speculation that is informed by both peak oil and peak demand for oil. Like it or not production isn’t increasing, but there are a lot of new consumers in the world in China and India. We’re going to see $200 oil eventually (the Pentagon uses $225 for planning purposes!). The best thing this does is it promotes development of alternatives and conservation.

Also of interest is the over 3 point drop in the dollar index.

Looking at oil vs dollar index it appears that 1/4 of the oil increase is due to dollar waekness. Look for more dollar weakness, it’s the flip side of the commodity price coin.

I think this is a simple correction of the market-jitter driven declines from last week… now that the promised bail-out has restored a measure of confidence, oil is coming back. I haven’t looked at the volume or volatility numbers so I’m just kind of shooting off my mouth now, but its possible that this really isn’t that complicated, I think.

My argument runs like this. Crude was selling at $32/bbl when Bush came into office. During this time, the value of the dollar has fallen. Even if you took a very generous number like 50%, this would mean that the base price plus devaluation would result in a price of $48/bbl. Now if we leave out speculation for the moment, the only triggers that will change price are those that affect supply or demand. On the supply side, you have factors like wars, hurricanes, or shutdowns (like what happened to part of the Alaska pipeline). On the demand side, you have new players like China and both economic expansions and recessions. Overarching these is peak oil which is near but hasn’t really affected the calculus of oil prices in the Bush years. Now the thing about supply-demand factors is that their effects on price last only as long as their effects last on the supply-demand equation.

So you can have a war in an oil rich region. This can drive up prices because of either fears of a supply decrease or because the supply does decrease. But at some point the war ends or the production is made up elsewhere. At this point, the oil price should return to at or near its baseline. In reality, this only happens this way sometimes. Political considerations can drive the price down even when there is an expectation that it should rise. So for instance after 9/11 with threats of war on the horizon, the price actually fell. Why? Because a lot of oil producers decided to show solidarity with us.

Now some pressures on price can be long term at least potentially. China is often cited but if you look at world demand China has not had, so far, the big impact predicted for it. Why? Mostly because there is a certain elasticity in demand. Rich countries can conserve some. Third World countries can be bid out of the market. The result is that China’s impact on price has just not been very significant. Maybe it will in the future but China is not an explanation for oil price changes in the last 4 years.

So that leaves us with speculation. And speculation has been tracked over and above supply-demand since 2004 when the year end to year end price increased by a third, and unlike the predictions of supply-demand models, never returned to its baseline.

A $40 turn around in just a few weeks should be a clear indication that speculation is a potent factor driving oil prices. There is no evidence that $80 to $90 was a floor. As far as I can see, it is just a made up number. The only evidence that there is is the 2001 baseline plus inflation of around $50. These are numbers that are straight out of the futures markets, the currency markets, and the numbers on supply and demand that anyone can look by going to the EIA site for oil and the Fed site for currency.

It appears the speculators woke up from their drunk today. Assholes.

Ot

Check out muckycasy overule immigration court to send mali woman back for genital mutilation

1984

Hey, Ian.

Crap. Higher prices at the pump _again_.

I guess the good news is that the RW either won’t be able to artificially lower gas prices between now and the election or if they do, it will be very obvious that’s what’s going on (since we’ll be able to compare/contrast crude prices vs pump prices over a similar range).

Not much of a silver lining.
Talk about insult to injury for ordinary taxpayers! *spit*

FunnyD

thanks. best argument i’ve heard, you’ve convinced me.

what day this week should I fill the tank?

I’d fill mine today if I had the money. Heh.

Nobody knows how low the market might go, but I’d expect it to go lower until Congress announces a solid plan that makes ‘em happy. And, if oil keeps going up (inversely to stocks), then that means it’ll go up ’til the bill comes out and then might begin back down a bit. But, you know how slow oil prices go down, so don’t bet on it being a crash.

There clearly still needs to be anti-speculation legislation to stop this oh so precious and highly influential price from booming & busting so regularly. It needs to relate much more to the actual user’s needs.

Fun, eh. It’s a nice trap we’re in. We need to get off oil to break this link.

ehyuh.

Apparently, the markets agreed with my analysis.

Yesterday’s run-up was a short-term volume-related blip.

Doesn’t mean oil won’t be heading higher over the much longer term, tho.