Can somebody please tell me what's up with oil prices?

[bklyncowgirl]

Not so long ago, about one month ago to be exact, we were told that high gas prices were a product of the law of supply and demand. We were told that soaring demand not from the usual suspects in the U.S. and Europe but from all of those people in China and India who were buying cars and taking all the oil they could buy was driving up prices and that this was a permanent thing that we would have to live with. Indeed anyone who suggested that the high prices were due to speculation on the part of investors or price rigging on the part of producers, was was dismissed as a tinfoil hat conspiracy theorist who did not understand the ways of the marketplace.

Well count me among the conspiracy theorists because I don't understand this at all and nobody seems to be talking about it.

After hitting a high of around $4.00 per gallon, regular unleaded has dropped to under $2.00 per gallon. The real drop in prices seems to have begun around October and continued through November. As far as I can tell it's still happening.

Yes there has been a global economic slowdown that may have had some effect on oil prices but I can't see how the effect would have been so dramatic in so short a time. I see as many cars on the road as I did last summer and frankly, in this country, so many are tied to their cars to get to work or anywhere due to lack of alternatives, Yes, there has been a move on the part of Americans to drive less and move to smaller cars but don't tell me that some guy in New Jersey trading in his Hummer for a Prius caused oil prices to tank so drasically.

If you believe in the "magic of the marketplace" the only explanation would be an increase in supply.

Did the Saudis and other OPEC nations suddenly decide to open the spigots and increase production? Did the improvement of security in Iraq bring more oil into the global market? I don't know. I haven't read anything to indicate that supply somehow magically jumped in early October.

Which brings us to the conspiracy theories.

Were the oil companies, the Saudi's and others dropping prices to influence the election?

Did the Bush administration see the writing on the wall as far as the economy was going and pushed their pals in the Middle East for more production to stave off rescession?

Did some of the money inflating the oil market come from those same wonderful people who brought us mortgage based derivatives and other creative financing deals that lead to the collapse of so many major banks? With less money floating around, did the red hot oil futures market slow down creating a bust in prices? Were the massive increases in oil prices just a house of cards?

Now as a consumer, I like low prices, don't get me wrong. I also am someone who is serious about this country getting off the oil habit. Low oil prices encourage more oil use. As a citizen, however, I like to understand what's going on and right now, I don't get it.

[lostnotforgotten]

1. A Few Facts

1) The Oil Companies Own and Control only about 15% of the world oil supply. The rest is owned and controlled by state entities like Saudi Arabia, Venezuela, etc.

2) The run-up in world oil prices was due to to simple economics: supply and demand. If demand is high and supply is constrained, prices rise.

3) Oil prices have fallen because of supply and demand. Demand destruction has occurred globally which has resulted in excess supply.

4) Once the current global recession abates, demand will rise again which will cause price to spike again all due to constrained supply i.e. Peak Oil.

5) The oil companies have made record profits because they were able to sell oil into a global market at high prices while their costs for oil extraction and delivery were relatively constant. Market Price - Fixed Cost = Profit.

6) If Americans want to become immune to the fluctuations in Oil prices, then Americans will need to rescale their demand for fossil fuels accordingly.

[LARED]

5. Presenting facts to conspiracy advocates simply

is a waste of time.

Your facts are appreciated by the majority.

[bklyncowgirl]

16. I consider myself an agnostic with regard to conspiracy theories.

My personal opinion is that supply and demand had an effect. People reduced their driving, oil prices dropped. What has me questioning whether supply and demand is the only thing at work is the precipitous fluctuation in prices.

[lostnotforgotten]

27. Baltic Dry Index Has Collapsed - Vehicle Miles Driven Drops

Baltic Dry Index

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x48670

Vehicle Miles Driven

http://calculatedrisk.blogspot.com/2008/11/dot-us-vehicle-miles-off-sharply-in.html

[bklyncowgirl]

7. I'd like to believe that it is simply supply and demand but the rapidity of the drop has me puzzled.

You don't then believe that there was any speculation in the market that was driving prices up?

I don't know about that. Oil prices skyrocketed this summer. By mid autumn they were beginning to drop and by late autumn they were at the lowest price in two years. Hundreds of thousands of people in China and India didn't suddenly go out and buy cars in July and just as suddenly stop driving them in October.

Maybe it is all supply and demand but this incredible seesawing is something I've never seen before. In the past prices have skyrocketed and then dropped slightly to something above what they were before. Now they've dropped to the lowest in two years.

I do agree with you that we absolutely need to cut our use of fossil fuels.

[EV_Ares]

46. Supply & demand is part of it however, the hedge funds have had to dump a lot of

their investments to meet their margins with the stock market rapid drop. Supply & demand did not bring down the cost of gas this quickly by itself.

[lectrobyte]

60. China and India's cars are not even a drop in the bucket compared

to our 250 million or so.

[Hugin]

9. I don't buy it.

No mention of Lehman's extensive speculation in the oil market. Squeezing the garden hose at both ends.

[bklyncowgirl]

13. Was Lehman Brothers deeply invested in oil futures?

Between that and the mortgage security mess I can see why they went belly up.

[Hugin]

14. There were several of the Investment Banks deeply involved.

Also, do you recall all of the hoochie-cootchie goings on over at the MMS in Denver with the MMS-Chicks?


Add to that the fact Peak Oil is one of Cheney's Pet Theories and it's all pretty well explained.

I'll see if I can find an article about the Investment Bank's involvement in the affair, but, you can understand
the relative scarcity of them.

[ProfessorGAC]

21. 2 & 3 Are Not Facts. They're Conjecture On Your Part

Supply and demand curves do not explain either the rapid and dramatic increase in prices previously, nor to the explain the fall recently.

The demand simply hasn't fallen enough to even come close to rationalizing price changes this dramatic.
The Professor

[lostnotforgotten]

26. Support Your Conjecture As You Assert That My Conjectures Are false

I would direct you to the Baltic Dry Index as a indirect measure for global demand destruction.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x48670

[ProfessorGAC]

28. I Have Looking At That For Years

I'm not going to debate microeconomics with you. It would be pointless. You don't want to learn anything from someone who actually understands it. It would interfere with your preconceived conclusions.

[lostnotforgotten]

30. My, My Professor Are We Not Touchy - Seems I Offered Two Key Indicators Up Thread

What have you offered?

We are waiting to be educated.

[ProfessorGAC]

You're Not Educable

Your mind is already made up.

I know this stuff better than you wished you did. You are irretreivable.

Quit bothering me. I don't have time for the unwilling to learn.

[ProfessorGAC]

73. Like I Figured

Another coward.

[HamdenRice]

37. The person to whom you are responding seems to equate

speculation in futures markets (demonstrable fact) with conspiracy theory. I agree that the fall in demand cannot account for the fall in prices.

For that matter, the run up in prices cannot be accounted for by either a run up in demand or constraints in supply. It was based in speculation about future demand, not actual demand.

[lostnotforgotten]

41. Sources?

eom

[HamdenRice]

49. Sources for the existence of the futures markets?

Can you take "judicial notice" of the fact that futures markets exist and therefore by definition, speculation?

[lostnotforgotten]

51. See Good Report Here - Since I Am One Of The Few Providing Sources

http://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/itfinterimreportoncrudeoil0708.pdf

"The Task Force’s preliminary assessment is that current oil prices and the increase in oil prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors. During this same period, activity on the crude oil futures market – as measured by the number of contracts outstanding, trading activity, and the number of traders – has increased significantly. While these increases broadly coincided with the run-up in crude oil prices, the Task Force’s preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices."

See Discussion Here:

http://www.theoildrum.com/node/4334

[ThomWV]

47. The presumption here ...

Good morning.

You make a possibly fatal presumption. You presume that somewhere accurate numbers can be found to define demand or supply. The horrible truth has become so commonplace its too easy to let it slip our minds, you can not trust any economic data coming out of Washington and unfortunately it is the ultimate source for the vast majority of economic data. Unflattering data is altered and damming data is simply not reported at all.

[lostnotforgotten]

54. Plausible Conjecture That Would Equally Invalidate My position And That Of The Speculation Theorists

eom

[FarCenter]

23. It was the supply of and demand for oil futures contracts

The actual oil itself -- not so much.

And when actual demand fell a little, the demand for the futures fell a lot.

[HamdenRice]

35. The problem with your model is that demand did not fall far enough

to account for the fall in prices. You are also overlooking that the commodities markets do indeed have a massive amount of speculation. There was a bubble based on future expectations of demand, not actual demand.

It's not a conspiracy theory. It's the facts being printed in the New York Times and Wall Street Journal.

[lostnotforgotten]

40. Sources Not Conjecture As The Professor Above Demands

eom

[bighart]

69. Isn't point 5 a contradiction to point 1?

If the oil companies only own 15% of the supply then extraction and delivery cost don't explain the profits.

[lostnotforgotten]

71. Sure They Do - The Oil Companies Own and Control Oil Through Long-Term Extraction Leases

These are negotiated with the land owners.

So if Exxon, or Mobil, or Shell negotiated an extraction lease 15 years ago it would reflect oil prices at that time.

As the market price of oil is bid up on the open market, the oil companies reap huge windfall profits as they have purchased low and can now sell high.

[Lasher]

2. People can't afford to buy gas.

It's that simple.

[Donnachaidh]

3. futures speculation drove a lot of it

and when the government made noises about investigating exactly how the speculators were working, the speculators dumped the play.

They may be greedy, but they are not stupid enough to continue their ponzi scheme when the possibility of fines and jail time loom large.

Of course, once the prices dropped the representatives that were gonna *get them* dropped the ball too. Don't ever expect a representative to do anything for the people if the threat of losing their seat is not the weapon to urge them on.

[bklyncowgirl]

12. Can you give some examples?

Someone in another reply mentioned Lehman being a big speculator.

[lostnotforgotten]

42. Note That When Speculation Is Mentioned No Proof Is Proffered

Only more speculation in the from of conjectures.

[rucky]

15. Bingo.

We have a winnah!

[rainy]

18. you nailed it. When the light was shown on them they scurried like roaches.

[pampango]

38. The "light" being shown on the speculation may have speeded the bubble "popping"

but speculative bubbles always eventually pop. Whether it is housing prices, tech stock prices, tulip prices in Denmark centuries ago, once the bubble gets started it is fueled by the "oil (housing, tech stocks, tulip) prices will always go up, for what on the surface appears to be a believable reason. (Peak oil and demand is growing. Tech companies will solve all kinds of problems.) Why am I working at my regular job when I can make so much sure money speculating on (fill in the blank)."

The price collapse is than anything but gradual and pretty as people wake up to the "realities" of what they have invested in. In the case of the oil speculation this price collapse was either cause by or speeded up by the decline in demand associated with worldwide economic decline.

[Hugin]

19. Here's a write-up on the details.

"As detailed in an earlier article, a conservative calculation is that at least 60% of today’s $128 per barrel price of crude oil comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York NYMEX futures exchanges and uncontrolled inter-bank or Over-The-Counter trading to avoid scrutiny. US margin rules of the government’s Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex, by having to pay only 6% of the value of the contract. At today's price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population."

From: http://www.engdahl.oilgeopolitics.net/Financial_Tsunami/Oil_Speculation_II/oil_speculation_ii.html

____________________________________________________________________________________

Since you've got a better explanation than I do above. :)

[KittyWampus]

32. thanks, it's always great when DU'ers add actual info to the mix.

:)

[bklyncowgirl]

34. Interesting article, thanks. nt

[lostnotforgotten]

43. Reads As Opinions With No Facts In the Form Of Sources Proffered

eom

[Hugin]

44. You obviously didn't read the article linked.

There are many empirical sources cited for support.

I only provided the executive summary in my post... For the attention impaired.

[lostnotforgotten]

50. Yes I Did And Still Find The Article Lacking - Here Is A Counter Article

"The Task Force’s preliminary assessment is that current oil prices and the increase in oil prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors. During this same period, activity on the crude oil futures market – as measured by the number of contracts outstanding, trading activity, and the number of traders – has increased significantly. While these increases broadly coincided with the run-up in crude oil prices, the Task Force’s preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices."

http://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/itfinterimreportoncrudeoil0708.pdf

See Discussion Here:

http://www.theoildrum.com/node/4334

Hmm, Whom to believe?

[Hugin]

53. Well, the Commodity Futures Trading Commission has been implicated as part....

of the problem. So, I'm certainly -NOT- going to cite them as a reference or as a source of 'facts'.


Here, I'll post it again... Read carefully, it's quite clear.

"Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex, by having to pay only 6% of the value of the contract. At today's price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population."

See... No supply problem. No demand problem. Only a middle-man problem. It's also an interesting confluence of the
crash of the oil bubble and the sudden demise of the Investment Banks requiring their bailout by the taxpayers at
the insistence of the oil cabal currently in power.

Coincidence? I highly doubt it.

[lostnotforgotten]

55. So What's Your Point - You Don't Like World Views That Don't Conform To Opinions

eom

[Sal Minella]

57. Aren't you embarrassed to step sideways and play stupid like that?

"What's your point" indeed.
You lost any and all credibility with that maneuver.

[Hugin]

58. I don't like World Views that deny a glaring conflict of interest.

"Regulator Is Named President of Nymex"

Published: July 10, 2004

"The head of the federal agency that regulates the commodity exchanges is resigning to become president of the New York Mercantile Exchange, the exchange announced Friday.

James Newsome, a Bush administration appointee, has been chairman of the Commodity Futures Trading Commission since December 2001 and was acting chairman for most of that year. The commission said his resignation was effective July 23 but did not say where he was going.

The Nymex announced that he would become president on Aug. 2. Mr. Newsome will succeed J. Robert Collins, whose contract expired on June 30.

The Nymex has trading in crude oil, gasoline and natural gas futures among other commodities."

http://query.nytimes.com/gst/fullpage.html?res=9C00E0DE103BF933A25754C0A9629C8B63

Oh, and here's the tip of the iceberg...

"Regulators Say Company Manipulated Oil Market"

By DIANA B. HENRIQUES
Published: July 25, 2008

"Commodity regulators in Washington on Thursday accused a Dutch trading company of manipulating the prices of crude oil, heating oil and gasoline over an 11-day period.

The scheme, which the defendants referred to in conversations caught on tape as a plan to “bully the market,” produced illegal profits of more than $1 million, according to regulators. On at least five occasions, global benchmark prices of those products settled at artificial levels, they said.

Though the price movements were small and the scheme was detected within days, the case is still likely to resonate in Washington. The Senate has been debating proposals to tackle high oil prices by curbing market speculation — and lawmakers, at more than 40 hearings this year, have repeatedly demanded tougher enforcement by market regulators.

Unlike many manipulation cases, which typically involve obscure commodities in less-liquid markets, this complaint accuses the defendants of affecting, however briefly, the final prices in important energy markets that are generally considered too big to manipulate.

The complaint, which must be proved in court, is the first fruit of a continuing investigation into possible oil-market manipulation that was announced two months ago by the Commodity Futures Trading Commission, which oversees the exchanges that help determine global prices for a host of commodities, from crude oil to orange juice."

From: http://www.nytimes.com/2008/07/25/business/25cftc.html among many others.

[ChairmanAgnostic]

4. In september alone, we drove 3 BILLION miles less

than the month before. Considering 42 gallons per barrel, (after refining light crude, about 29 recoverable fuel or gasoline gallons) with oil at $130 per barrel, the loss of income for oil producers due to a huge drop in demand was noticeable.

October was worse, and November worse still. because of 5 months of soaring gas and energy prices, they killed the golden goose, and much of the underlying structure of production, supply, construction, manufacturing, etc, has been forced into massive disarray. Now, even with $40-60 per barrel energy costs, too much of the global economy was destroyed, and will take quite some time to repair. If it can be repaired.

[Deja Q]

8. Thx for the info -- and it can be repaired. Indeed, if it can't be repaired then

some DUers will really have a field day.

[bklyncowgirl]

11. Now that's interesting. I didn't realize that it was that much. nt

[eilen]

22. I still don't buy it.

They said it was demand, increasing demand from hungry emerging markets like China and India (competition from buyers)--not driven from US. Wasn't the Chinese government (or some nation) subsidizing the price of retail gasoline? The oil market is not a free market. Demand did not increase nor fall of as suddenly as these prices have moved. Production has decreased and still the price goes down. I'm not complaining about low prices. I'm pissed off at being squeezed for the Bush years (funny that coincidence).

[ChairmanAgnostic]

33. China's collapse has been even harder.

I once taught foreign lawyers and judges, many of whom were from China. I still keep in touch. They look at America's economy with envy. Their troubles are far worse than ours. Our media simply fails to research and report, and of course, Chinese media control is state-based, unlike ours, which is corporate-based. But both media outlets have their biases.

[TWiley]

67. dont forget the supply side .......

if there is a projected increase in future consumption that is not matched by an equal increase in the supply side ..... then the price will go up TODAY based on that analysis.

[Deja Q]

6. Speculators, deflation, offshoring, head-lice, crabs, cooties, shootout at Toys R Us, and syphilis.

I think that covers everything...

[ChairmanAgnostic]

10. I got most of that, but, syphilis? ? ? ? I thought

chlamydia.

[JVS]

25. yum

[TNDemo]

17. I think the demand for oil for shipping has dropped dramatically too.

The overseas cargo shipping is way down in the last few months and that is part of the equation. I am not sure about shipping by truck but I would think it is down too.

[ProfessorGAC]

20. Supply & Demand. Pffft!

The supply and demand curves could NEVER explain the wild swings in gas prices. And they could never explain the increases that went up over $140 per barrel.

People who say that are simply looking for a way to provide cover for the non-value added element of futures and speculation on same.

The problem was the speculators went insane, drove prices well beyond any amount justified by supply and demand, and when Congress started to look into speculation run amok, the wildmen in that business calmed down!

Now that there is no longer going to be oilmen in the WH, they aren't exactly ready to attract any further scrutiny. So, they're doing the function within reason and with some logic to the futures prices.

Demand hasn't fallen anywhere near enough to rationalize a 60% drop in price at the pump.

The Professor

[lostnotforgotten]

31. Yes - But One Must Include The Added Drop Due To Recession Effects

eom

[ProfessorGAC]

64. We've Been In A Recessionary Economy For 6 Years

And yet, for a long part of that, gas prices went UP! Not down due to recessionary pressures, but up!

So, the recesionary aspects of the impact on gas prices is overstated, if for no other reason than the opposite of what those prediction suggest is what happened for 6 freakin' years.
GAC

[NNN0LHI]

24. It was no conspiracy that when gas hit 4 bucks a gallon the demand fell a lot

I know mine did.

Don

[springhill]

65. Mine didn't........

Still had to travel to my sons games, go shopping and all the other things you need a car for.

[lonestarnot]

29. Outgoing bushitler and cronie friends of House of Saud.

:hi: That's all.

[TWiley]

dont forget futures

A president who is dedicated to alternate energy, and willing to put some serious cabbage behind it, actually reduces the expected oil consumption in the future. Therefore oil prices drop as current supply rates are more than sufficient.

When you have an oil-baron president, and a candidate who says "drill baby drill" Then the future oil consumption is seen to increase as oil will remain the only game in town, and more of it will be needed to support future economic growth.

It is not just "supply" side economics, or "demand" side either. It is also the political system in which each capitalist niche operates.

[bklyncowgirl]

52. I don't know about that. Oil prices were declining before the election.

"Drill Baby Drill" was actually gaining some political traction and Obama did not, imho have a clear advantage on energy among the general electorate in the U.S.. I could see your theory if the decline had begun after Obama was elected but that's not the case.

[TWiley]

66. Today's oil prices reflect (also) the estimated future use.

If the estimation reveals a FUTURE increase in demand that supply side projections cannot accomidate, then todays prices go up. If FUTURE consumption is believed to be over-run by supply capacity projections, then today's price drops.

Obviously, energy prices are not this simple, but don't forget that expected FUTURE supply - demand imbalances will affect todays price. Political posturing and legislation CAN influence this.

Just because a reserve is tapped does not mean that it will wind up at the pump anytime soon. Low interest rates tend to encourage suppliers to keep oil in the ground. Why convert an asset into cash when excess money earns dismal returns in the bank? Domestic oil companies addressed this problem by launching the largest stock buy-back program in that industries history. It is easy to create momentum with a $100 million buy-back when individuals are eager to jump on the percieved band wagon. Simply spread the money around to different brokerages, and instruct them to buy on the same day. A $10 million syncronized investment could easily cause the price to overshoot by 50%.

[bklyncowgirl]

68. I think too that Barack Obama seems to understand the need to move to alternative energy sources

Low oil prices would remove some of the urgency he'd need to really push this program through. Hopefully he'll be able to communicate the message that while prices are low now they won't always be low.

[TWiley]

70. Exactly .... the system is almost self-defeating

More political talk about alternative energy and todays prices drop which tend to keep oil companies in control as alternate sources are unaffordable.

[azul]

59. Another bingo. But wait, more conjecture.

What would you do if you saw your dominant energy industry position threatened? And this is not a free market or industry, hello, cartel (conspirators by definition).

Behind the cover of increasing demand and speculation, if I were leading such an industry, I would raise the cost of the product high enough to encourage investment in alternative energy development, and then pull the rug out from under them. The trick was not to depress the world economy to the point where you kill the golden goose.

The same way that the cartel shut out competitors in oil previously by flooding the market and lowering the price, and also such as the investment in wind power has been boom and bust cycled by the energy pricing manipulations.

This is not a clean and sunshiny industry that is easily exposed. But by its historic actions I trust them to do the business-like things that would keep them in power and wealth.

[bklyncowgirl]

62. Interesting theory--so you believe that the idea by the oil cartel was to destroy alternative energy

I tend to agree that the sudden drop in oil prices has slowed the calls for alternative energy. T.Boone Pickens has apparently taken a bath with his wind energy investments. The question is whether this is a cause or an effect.

[azul]

63. Just seems like good monopoly business sense to me.

The oil money is being spread around in hedge funds and private equity with opacity, and why shouldn't they try to protect their market however thuggishly and secretly?

You are aware of their guilty verdict in their role in Who Killed the Eclectic Car? What serious journalist would take them on when we've seen Prince Bandar going in and out of the back door of the White House at will with his own personal key, or Cheney jumping to SA at the beck and call of the monarchy?

I am optimistic that the climate science is resonating with consumers, however, and green electricity will be king someday soon.

[TWiley]

36. .

it posted twice for some reason.

[JCMach1]

39. Saudis increased oil production to help out the Repugs for the fall elections

the sad fact for them is the bottom fell out of the economy before they could curtail production. Now we have a 1990's style oil glut. Gas will see .99 before it sees $4.00 again any time soon.

[kristopher]

45. Speculation & decreased demand

I believe that if you chart the price of crude against the major market indicators (DOW, S&P etc) you'll see that the initial steep drop in crude started about 2 days after the market tanked and continued until it stabilized in the $80 range. A few weeks later it started sliding again; we are still on that slope.

I read the first drop and then stabilization as evidence of the amount of speculation that was built into the price. The precipitous market drop forced margin calls in other areas on speculators and they had to dump their oil positions for money to cover their asses.

The second slide reflects projections about loss of demand due to a global economic slow-down. If you aren't familiar with the idea, look up "marginal pricing" since that is the key to understanding how a 5-10% change in demand could result in a much larger fluctuation in price.

Just MHO.

[gravity]

48. The "magic of the marketplace" also allows for less demand

We are in a global recession, and there is less demand for oil around the world.

The oil prices were really high because people were assuming that the world economy and emerging markets was going to grow as fast as it did in 2007. When the financial system almost completely collapsed recently, it became evident that we are going to have a major recession involving the whole world (not just the US) and the oil prices dropped accordingly.

Oil prices are very inelastic, so small drops in demand can cause huge price falls. It is the same with increases in demand, which can cause huge price hikes in oil.

[treestar]

56. The "less demand" theory sounds plausible

But it's the M$M giving it to us. Sort of like the explanation for a jump they once gave us - Hurricane Katrina.

It takes a level of understanding most of us may not be willing to take the time for. that's why it's hard to write out the conspiracy (especially when the drop occurs running up to an election - there was a drop in 2006, too).

[pitohui]

61. they were blatantly artificially inflated

opec made no secret of trying to set the price high, and the bush policies were obviously intended to choke supply to americans and give excuses to inflate the price -- fomenting war in the mideast, picking fights w. venezuela over nothing, etc. -- pretending hurricanes gustav and ike were going to destroy production in the gulf -- all such had no other purpose than blatant scams to drive up prices -- the president has control over the strategic reserve but at times bush was cruelly reluctant to release enough to relieve the pressure on american consumers -- as others point out, the price fell before each election, it's a cycle, goes up in summer, comes down before an election because the stupid people have no memory -- anyone who can't see that the market is manipulated is a poor observer indeed (or perhaps very very young and hasn't lived through a full cycle yet)

an artificially inflated price has to fall when people can't pay it, and we're in a horrid recession and people can't just pay anything so all the manipulation in the world couldn't keep the gag going -- the price to be lowered before the election, we all predicted it, hell, BARTCOP predicted it, for it to keep going down w. no further benefit to the bush co is because of the recession running away out of his control

look at where prices were in the clinton era...the price could go down further and probably should if we are to have a healthy economy -- those who think HIGH oil prices are good for research and development and planning for future are just well i'll be kind and say naive -- you need a strong wealthy economy to fund R&D, green research, etc. -- if you want to guarantee that every mountain is taken apart for its coal, tar sands, etc and our world completely spoiled by all means root for high oil prices -- no one benefits from that but the aristocracy

the peak oil hysterics were doing the yeoman's work for bush, exxon mobil and the rest to help inflate prices but don't expect them to have the decency to admit they were wrong or to apologize for their part in the run-up of prices, so many people who fall victim to whispering campaigns and who happily repeat those whispers never admit they were wrong

[lib2DaBone]

72. Yes, the idea is to get as much of your money for as long as they can....

and then.. to convince you to vote for them AGAIN.