Am I crazy or does this make any sense

I hate talking about oil prices or stocks only because my knowledge is very limited or perhaps non existant at times..............BUT HERE GOES

Edited by nightrider - 20/November/2008 at 11:42am

Why did oil drop so sharply..........that is the question.


Jack;

Oil has dropped so sharply because the bubble burst back on July 11th. It was in a speculative bubble at that time. The big US investment banks and hedge funds were primarily responsible for that. They made hundreds of Billions doing that. What finally pricked the bubble was demand destruction from the overpriced oil. This will be looked back on in hindsight as the real starting point of the Great Depression #2, which we both know will be far worse than the Great Depression #1 was.


WHY HAS THE UNITED STATES ALWAYS BOUGHT FOREIGN OIL FOR THE PAST 50 YEARS INSTEAD OF RELYING ON ITS OWN SUPPLY TO SUSTAIN THEIR COUNTRY AND CITIZENS.

The USA(primarily threw Chevron)was responsible for discovering most of the Middle East oil back in the 1940's. It was cheaper to buy than American oil at that time, so it was used first.Up until that time American oil was the highest produced oil supply in the world(up to 10 million barrels per day in 1970). In 1970 oil production in the USA peaked and has been going down ever since(now about 5 million barrels per day). This is high cost oil compared to middle eastern oil, and is being shut in now that oil is down to $50/barrel and falling.However since world-wide production of oil has peaked at 85 million barrels /day, this will not last long.

Due to the severity of the Depression we are now entering, demand for oil has fallen by a couple of million barrels per day and has briefly caused a slight surplus of up to a million barrels per day world wide. This will be eliminated after next week by 2 things:

1) Opec will cut another 1 million barrels per day in their meeting next month.

2) The winter heating season will increase oil usage by 2 million barrels per day during the Dec to Feb heating season. 1 million barrels per day will occur in the USA and the other 1 million barrels per day will occur in the rest of the world.

Bottom line is that the approx 1 million/day surplus is about to turn into a 2 million barrel per day deficit. This will cause oil prices to rocket back upward as fast as they have come down, even in a Depression.

Oil below $50/barrel will be very short lived. Buy it will you can. Enjoy gas prices in the USA below $2.00 per gallon while you can as well. By next July, they will be right back to $4 per gallon or more IMO.



Edited by Superglide Ken - 20/November/2008 at 3:20pm

Superglide Ken wrote: Yesterday at 12:29pm Oil has dropped so sharply because the bubble burst back on July 11th. It was in a speculative bubble at that time.

nightrider wrote:   WHY HAS THE UNITED STATES ALWAYS BOUGHT FOREIGN OIL FOR THE PAST 50 YEARS INSTEAD OF RELYING ON ITS OWN SUPPLY TO SUSTAIN THEIR COUNTRY AND CITIZENS.

So my answer to this question why  the united states bought foreign oil is: because it was cheaper - as simple as that!
That is the weard thing about shipping - it is cheaper to transport something around the world than to keep it in stock

Woohhwooow That is a pretty harsh coment as far as i'm concerned!
Dou you really think like that you do you want to provocate ...

Duck...............Canada is one of the worlds largest producer and the Number 1 supplier of oil to the United States...................How come our economy is not being torn apart

nightrider wrote: Duck...............Canada is one of the worlds largest producer and the Number 1 supplier of oil to the United States...................How come our economy is not being torn apart                                                    Nightrider

Russia sells theirs to China and their economy is suffering because the US economy sucks right now. 

Fear of loss of jobs keep people from buying even the cheap stuff here in the US.  Add to that 500,000 being added to the rolls of those receiving unemployment benefits each week and you have those who have a primary concern of food-clothing-shelter.   SamsClub, BJ's and Costco do better because more people are buying bulk food items -- and not because more is being bought by the same number of people every month.

Look at the influence a single industry can have on the economy.   Take airlines as an example.  Fuel prices are way down for them but they continue with higher prices.  Fears of what may happen next with the economy have some re-thinking travel plans.  Then the airlines cut back on the number of flights because leisure travelers won't pay the higher price.  Businesses decide that they too will curb their travels to save money.  All the businesses that rely on the leisure and business travelers are impacted - industries like rental car agencies, hotels, taxi services, convention centers, the kiosk shops at the airports. 

In answer to the question though, Russia is indirectly impacted by what happens in the US as apparently many countries are.  The US was the single largest marketplace for many of them.  Did you know there is a 4 month supply of imported cars based on the old sales numbers of cars sitting at the Long Beach dock in California.  That includes Mercedes, Toyota, Honda and other manufacturer's cars.  Car sales in the US are running 10-25% of what they were thanks to this crappy economy. 

Russia has little to do with the US directly, you're correct in saying that.  But the price that oil sells at is set by the futures which everyone watches.  And those basically flush out their inflated values at 90 day intervals leaving only the true buyers of oil left which by the way only represents 25% of the investors in oil futures, the rest are the gamblers.


Edited by duckcountry - 21/November/2008 at 2:08pm