Crude oil drops nearly $9 to $106 a barrel

[jpak]

http://www.bloomberg.com/markets/commodities/cfutures.html

[dmallind]

1. Jeez when it goes up $1

These threads get dozens of posts screaming about peak oil and coming oblivion, but nothing when a big correction occurs? Same as every Dow drop is sign of a meltdown and every uptick is just a dead cat bounce before the inevitable depression I guess (even though in that instance the DJIA has essentially been a bouncy line around a very gradual increase trend for years. At least oil really is historically high)


Fore the kneejerk crowd:

Yes I know oil is finite.

Yes I know it's still expensive in historical terms.

Yes I know it can and indeed probably will continue to fluctuate up and down well above pre-Bush levels

Yes I know increasing demand in poor but populous countries will cause upward price pressure.

But I also know that $140+ at this time was and remains a panic-driven artificial level caused by both speculators and Chicken Littles.

[phantom power]

2. Something is jerking. But it's not my knee.

[dmallind]

5. Ah

Abuse and (lack of)humor. The sure signs of a person confident in the validity of their position.

[Terry in Austin]

3. Artificial level

Yes I know...
$140+... artificial level

Ok, fair enough. For the moment, then, $108 is a "natural" price level. Maybe even a couple of bucks low, according to the Clingendael International Energy Program (CIEP), whose recent study suggested a new "floor price" of $110.

As long as we're comparing crystal-ball views, I'd be curious to know your take on two things:

1. What's the highest price that you would judge to be natural at this point?
   
2. How long do you estimate before $140 stops being artificial and becomes natural?

Standard disclaimers apply -- prediction is a dicey business!

[dmallind]

4. Actually I made no predictions

Other than that the price will probably fluctuate. That's pretty safe I think.

I have no discrete number for what is natural, since it is a commodity and a widely fluctuating one at that, other than to say this would be the price if no speculation were allowed. Let's ban oil futures and find out perhaps?

When will it be $140? Dunno. Lot depends on how quickly burgeoning demand outstrips conservation, substitution and additional supply. That really would take a crystal ball. For all I know tomorrow someone releases a power source based on molecular bonding and oil becomes wrothless overnight, or Bush drops a nuclear bomb on Iran and the Middle East unites in a blockade on oil to the US and it hits $200 before I finish this sentence. Again I'm making comments on what IS, and what the DU reaction to it tends to be.

[Doug.Goodall]

6. Gustav shuts down 20% of American crude production - prices fall

Makes a person wonder if OPEC is in the tank with the Republicans. It looks suspicious that when prices should be rising, they fall along with the start of the Republican convention.

Just my tinfoil hat analysis of a single data point.

[Strelnikov_]

7. Sure glad the miracle of the 'free market' considers redundancy

and fault tolerance in energy infrastructure development . . .

instead of simply planting things where they are the cheapest to build and operate.