Oil prices dropping, demand down...

**suki** · 07-29-2008, 03:15 PM

The drop -- as much as $4 a barrel during the day -- was a throwback to oil's nosedive over the past two weeks and outweighed supply concerns touched off by a militant attack Monday on two Nigerian crude pipelines. It was oil's seventh decline in the last 10 sessions.
Light, sweet crude for September delivery fell $1.89, or 1.52 percent, to $122.84 a barrel in early afternoon trading on the New York Mercantile Exchange. Earlier, prices fell to $120.42, the lowest level for a front-month contract since June 10; they have now fallen more than $25 from their trading high of $147.27, reached July 11.
More concerns that crude's run-up over the past year has pushed prices to unsustainable levels fed Monday's decline. The U.S. Transportation Department said Monday that U.S. drivers logged 9.6 billion fewer vehicle miles in May -- or 3.7 percent -- compared to the same period last year, the biggest drop ever for the historically busy summer driving month.
And demand for oil in the U.S. -- the world's thirstiest consumer -- continues to fall, dropping by 891,000 barrels per day in May compared the same month a year ago, the Energy Department's Energy Information Administration said Monday.
"We're seeing both statistical and anecdotal evidence of very rapidly weakening demand picture," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
The declines accelerated after oil briefly dipped below $122, a key resistance level that triggered technical selling by computers programed to dump oil contracts once prices fall below a certain threshold. The next technical level traders are watching is $117.
"I think we could see $117 a barrel in a one-week time frame, and this market could eventually get to $100," Ritterbusch said.

http://money.aol.com/news/articles/_...eek-low/106432

But, these oil prices weren't about speculation it was about supply... right?

**yankeegal** · 07-29-2008, 03:21 PM

Whatever the reason, that's great news! Thanks for sharing it.

**IntlMom** · 07-29-2008, 04:08 PM

right.....it was all about supply! hmmmmm, while I know that oil prices were what was leading (and may yet may still lead) the insanely high prices at the pump, we were doing our part to lower demand. Now, to keep the demand down!!!

**Greebo** · 07-29-2008, 04:14 PM

Originally Posted by suki

http://money.aol.com/news/articles/_...eek-low/106432

But, these oil prices weren't about speculation it was about supply... right?

I don't think anyone here said it was all about supply. Supply is, however, a factor, and a 90% IIRC dependency upon foreign oil does not help. Neither does having the dollar be super deflated thanks to all the low rates creating the glut of money pumped out of thin air by the banks.

The fact that lower demand lowered the price is economic proof of that. Econ 101: Raise supply or lower demand and price drops. Do both, it drops more.

Demand for gasoline is not all that elastic. It won't be going down much more, I think. Can't predict the future though, so we'll have to wait and see.

**suki** · 07-29-2008, 04:20 PM

I wasn't saying anyone here said it was all about supply, but as I've heard it... it's been said a lot in the media and by certain political pundits.

Yeah, I took micro and macro-economics. The problem with the law of supply and demand in this scenario is that while demand was dropping (April, May, and most likely June, July)... the prices continued to soar and the scuttlebutt was that the reason for that soaring price was more demand and not enough supply. Considering that prices are dropping in spite of a definite supply issue (the attack on the pipelines) kind of blows applying the law of supply and demand and negating the impact of speculators on the market. It's a false threshold much like the techno boom and bust.

**Greebo** · 07-29-2008, 04:25 PM

Originally Posted by suki

I wasn't saying anyone here said it was all about supply, but as I've heard it... it's been said a lot in the media and by certain political pundits.

Yeah, I took micro and macro-economics. The problem with the law of supply and demand in this scenario is that while demand was dropping (April, May, and most likely June, July)... the prices continued to soar and the scuttlebutt was that the reason for that soaring price was more demand and not enough supply. Considering that prices are dropping in spite of a definite supply issue (the attack on the pipelines) kind of blows applying the law of supply and demand and negating the impact of speculators on the market. It's a false threshold much like the techno boom and bust.

Agreed - and I don't think we're alone in that thinking. I'm hearing reports of late about how some of the biggest oil investors are cashing out now, taking their profits and walking away.

I think a LOT of ppl are about to lose a LOT of money riding the tail of the oil bubble. Again. (To losing money riding the tail of a bubble, not oil per se)

**NMMatt** · 07-29-2008, 05:10 PM

Originally Posted by Greebo

Demand for gasoline is not all that elastic. It won't be going down much more, I think. Can't predict the future though, so we'll have to wait and see.

Not necessarily in the short term, but in the long term it could be. If the price drops enough, we may see people return to buying SUV's, growing demand for trucking and less investment in mass transportation and rail freight. If the price stays high enough there may well be enough incentive to decrease demand long term. Europe, which has had high gas prices for years, has a much lower per capita demand than we do for example - but it does take years because of infrastructure.

**Russ** · 07-29-2008, 05:49 PM

Originally Posted by NMMatt

- but it does take years because of infrastructure.

which the American public is not willing to pay for in the form of higher taxes.

No biggie, we can just make more money.

**shoiji** · 07-29-2008, 06:14 PM

Yup this will "interesting" to see how it plays out here. I can't help but hope we don't go back to the way things were. More driving, larger cars, larger homes, spend, spend, spend mindset. Can't help but wonder if we (US) has learned anything from this. Since this has happened in the 70's and we still went on our way using cars and buying many big things. Sure some of us may not be feeling the pinch as hard as others but it dosen't mean we should go back to our old ways all together. Just think we should really concentrate on alternative fuel sources. I have said it before the US has had 30 years to figure it out. But hasn't completely. We can go to MARS but can't figure out alternative fuel sources. Something is not right. Right now besides all the people hurting now I can't help but wonder about all the communities that rely on summer time travel. Will just be hurting more people. Really do think we need to think about the future, not in a short term way.

**NMMatt** · 07-29-2008, 06:21 PM

Originally Posted by rcannon

which the American public is not willing to pay for in the form of higher taxes.

No biggie, we can just make more money.

Except it doesn't necessarily mean higher taxes - rather a different focus in resources when it comes to infrastructure. The point being that we've built our transportation and energy infrustructure around cheap and limitless fossil fuels. With limited and high priced fuels we are likely to change emphasis - i.e. a new rail line doesn't cost more than widening a highway.

**Russ** · 07-29-2008, 07:13 PM

you do realize that less driving means less taxes being paid to the gooberment? And that equals less money for the REPAIR of roadways, light rails mass transit in general.
Bottom line..where does the money come from?

**angrypuppy** · 07-29-2008, 07:28 PM

Originally Posted by Greebo

Agreed - and I don't think we're alone in that thinking. I'm hearing reports of late about how some of the biggest oil investors are cashing out now, taking their profits and walking away.

I think a LOT of ppl are about to lose a LOT of money riding the tail of the oil bubble. Again. (To losing money riding the tail of a bubble, not oil per se)

T boone Pickens, two months ago was yelling at the top of his lungs that oil was going to $200 and never coming down. In the mean time he has cashed out, and is now heavily invested in wind power.

**angrypuppy** · 07-29-2008, 07:32 PM

Originally Posted by shoiji

Yup this will "interesting" to see how it plays out here. I can't help but hope we don't go back to the way things were. More driving, larger cars, larger homes, spend, spend, spend mindset. Can't help but wonder if we (US) has learned anything from this. Since this has happened in the 70's and we still went on our way using cars and buying many big things. Sure some of us may not be feeling the pinch as hard as others but it dosen't mean we should go back to our old ways all together. Just think we should really concentrate on alternative fuel sources. I have said it before the US has had 30 years to figure it out. But hasn't completely. We can go to MARS but can't figure out alternative fuel sources. Something is not right. Right now besides all the people hurting now I can't help but wonder about all the communities that rely on summer time travel. Will just be hurting more people. Really do think we need to think about the future, not in a short term way.

Who cares if we go back to driving large cars lots of miles? Oil is plentifull, who cares if I drive a lot.

**angrypuppy** · 07-29-2008, 07:35 PM

Many analysts agree the funamentals alone should place the price of oil at $83 a barrel. We are headed that direction, the decline will accelerate after the olympics. China is currently stockpiling gas so they do not have a shortage during their time in the spotlight.

**angrypuppy** · 07-29-2008, 07:36 PM

Originally Posted by rcannon

you do realize that less driving means less taxes being paid to the gooberment? And that equals less money for the REPAIR of roadways, light rails mass transit in general.
Bottom line..where does the money come from?

They will steal more money from the Social Security trust fund like always. And then claim SS is broke.