Oil <$80/BBL: SO;the big run-Up WAS speculation?

Something is very fishy here. We were told that oil was heading for $200/bbl, and consumption was rising, and the oil was running out! Yeah Right! Now, i don’t see any big drop in consumtion, and oil has dropped below $80. I think this is prety good proof that the run-up was engineered by market manipulators.
Q: could these guys be getting burned big time, as the price drops so fast?

You don’t see any big drop in oil consumption?! Many countries in the world are about to go into recession. Demand is going to be considerably lower than was anticipated by the markets. So the price has fallen. You should see what’s happening to other minerals prices.

So, no it isn’t evidence of prior market manipulation. But yes, people who owned interests in resources or resource stocks are indeed getting burned.

The Wall Street Journal:

Financial Times:

The New York Times:

If you haven’t noticed the drop in demand, it’s because you haven’t glanced in a business paper recently. The coming recession has been pretty big news lately, at least for the people who like to follow that sort of thing.

I thought I smelled something fishy too.

What is the threshold price of oil to drill here drill now? I remember reading somewhere that it was around $70-80, and that was one of the reasons there were so many unused leases.

Does the price of oil have to go up again to make drill here drill now profitable at current prices?

Why wouldn’t they ‘engineer another big run up’, to make more money again?

I would think so…the reason the oil companies aren’t already “drilling here, drilling now” is that the places still available are more trouble than they’re worth, unless oil prices skyrocket even further than they already have. I have no love for oil companies, but I at least give them credit for knowing whether a particular area is worth drilling or not given current prices.

I have nothing buy own opinion and experience, but I’m of the belief no one does anything (and nothing happens) for just one reason.

Part of the rise in oil prices was undoubtedly due to speculation. People thought it was rise, and because they wanted to make money from it, they bet on it. It did rise, and then they sold their interests, made their money, and the prices started to fall.

Another part of the rise was global demand. As the prices rose, demand began to fall. And so did prices.

There may be other reasons as well, and it’s probably fair to say this is oversimplified, since who knows what percentage of the bubble was caused by speculation and how much was demand, but I believe it to be true.

But to put all the blame on some shadowy, nebulous “them” (speculators) is pretty out there. When it’s all said and done, “they” are really us.

Oil flirting with the 60s. Right now at 72. A ten percent demand drop. if it is real. does not explain a drop of over 50 percent.

It doesn’t? What are the elasticities involved, then, both short term and long term?

Demand is expected to keep falling. The market is taking this into account.

Well, let’s see…demand (world wide but especially in the US which represents something like 25% of the total world wide use) is down while production (due to countries and companies trying to cash in on rising prices) is up. So…demand down supply up. No new rants from Iran about a supposed war with Israel either…no hurricanes lately to give the smack down on the refinery side…no new disasters or production problems lately…

What’s the mystery here exactly? Well, besides the fact that gonzo still can’t grasp even the basics of this stuff?


Sure there was speculation, but that only magnified the trends already there. They didn’t control the market, and once demand fell they took a bath.
The lesson here isn’t about speculation, it’s about conservation. The drill, baby, drill people were offering a few cents off the price of gas in ten years or so. Cutting demand gave me $1 off the price of gas in three months. If we can lock in demand reduction through better mileage standards, we can push the price down for a long time.

And, give credit where it is due. The Republicans did manage to solve the energy crisis, at least in the short term.

Sort of like trimming a baby’s hair with an axe, ehe?


A small drop huge price difference. World wide demand stiil not down much. Try and follow. If you are changing investment due on what you expect the demand to be in the future ,you are speculating. That is what it is. You are saying it is not speculation while making the case that it is. Typical XT .

:stuck_out_tongue: You seriously don’t have a clue, do you?


Gonzomax, tell me what the elasticities involved are. You know that a 10% drop in demand cannot possibly explain a 50% price drop. You must have access to the data to tell me the actual numbers.

:smiley: But at least that keeps the bits of hair off the floor.

I’m betting this lowered demand for refined fuels will be offset by winter’s demand for heating fuel and OPEC’s regulating the oil production. They have already desensitized us to 4 dollar a gallon gas, so I’ll bet it’s back by next spring.

There was an opinion piece on Marketplace a while ago that predicted this. They said that people in the market at high prices were very exposed, and would have to sell off their positions if the price started dropping, or seemed to be about to drop, as it did due to reduced demand. I wouldn’t be surprised if this accelerated the drop somewhat. I can’t imagine the underlying curves are as steep as we’re seeing now in either direction, but I’m definitely not claiming that they are linear.

Oil went up about 2 bucks yesterday. It was attributed to the rumor that OPEC will cut supplies. OPEC did not even meet yet. Investors were speculating that when they do they will cut production. They will artificially raise prices and get back to the huge profits they love. But the point is nothing was done yet. They were speculating that it would and invested accordingly. When the swings are big in response to small ldemand changes, it is due to people thinking they see a trend and are trying to anticipate it. that is speculation.