Inflation

[Magox]

Iranian oil production is in decline due to various sanctions (sells, banks, currency, spare parts, insurance for tankers, etc etc) - Libya oil production is still not up to pre-war levels- but generally speaking rapid spikes in pump price usually have to due with refinery issues and or financial speculation.

 

Libyan oil production is higher today than it was in the first quarter of 2012.

 

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/8749925

 

 

Libya is currently producing an average 1.6 million b/d and expects to increase output by 30,000-40,000 b/d by early 2013 once repairs to one of the pipelines in eastern Libya are completed, National Oil Company Chairman Nuri Berruein said Monday. He told reporters on the sidelines of the CWC Libya Summit that Libya was targeting production of 1.8 million b/d next year.

 

Foreign oil companies shut down production and evacuated staff from Libya at the start of the anti-Qadhafi rebellion in early 2011, leading to a total shutdown of production in the OPEC member state. Libya was producing an estimated 1.6-1.7 million b/d before the crisis and has been able to restore capacity to its previous levels relatively quickly since the end of the civil war.

 

Berruein said the target was to produce 1.8 million b/d by 2013 and reiterated the target of 2 million b/d by 2015, which Oil Minister Abdulrahman Benyezza told the conference earlier remained the target under an existing five-year plan.

 

The U.S. Energy Department's Energy Information Administration, in its monthly review, reported that production by December 2011 had rebounded to 800 million bpd. The report said that by April 2012, Libya oil production was at 1.4 million bpd.

 

Read more: http://www.upi.com/Business_News/Energy-Resources/2012/07/31/Libyas-oil-production-below-pre-war-level/UPI-70431343736840/#ixzz2K4J4HvdE

 

 

The IEA also added that a new round of sanctions against Iran was likely to further cripple its finances although not necessarily further reduce its oil deliveries to markets.

"With the bulk of Iranian crude now heading to Asia, however, the main impact of the new EU measures will likely be on the country's financial sector," the IEA said.

 

 

 

WEAK DEMAND, PLENTIFUL SUPPLY

The rebound in Iranian exports added to a comfortable global supply picture as demand remained depressed, further reducing pressure on OPEC to maintain high production levels.

"What we can see now is that the market is well supplied," IEA Executive Director Maria van der Hoeven said.

Speaking at a conference in London with van der Hoeven after the release of the IEA report, OPEC Secretary General Abdullah al-Badri agreed: "There is no shortage anywhere in the world."

Global oil supply rose by 800,000 bpd in October month-on-month to 90.9 million bpd due to a rebound in supplies from the Americas and the North Sea. That offset a slight decline in OPEC crude supplies, mainly on the back of disruptions in Nigeria, which saw output tumble to two-and-a-half-year lows.

 

 

http://www.reuters.com/article/2012/11/13/iea-idUSL5E8MD38820121113

 

 

 

[Cinga]

Wait.... why are we discussing oil and inflation together??

 

Don't you all know, food and fuel have been removed from inflation figures?

 

It simply doesn't count anymore...

[TPS]

Wait.... why are we discussing oil and inflation together??

 

Don't you all know, food and fuel have been removed from inflation figures?

 

It simply doesn't count anymore...

We weren't discussing oil, we were discussing what Magox seems to have in surplus...gas.

Seriously, this was a really poor attempt to support a belief that we are experiencing high inflation, which we are not, and have not to date.

The issue has been that those who hold to old fashion notions of money believe the Fed's actions have caused or will cause seriously high inflation. The best arguments on their side to date:

1. Fun with numbers: If you start at the trough of the crisis in 2009, then you can come up with a really big % change. This is the most dishonest way to support your case.

Another problem with this type of number fudging (to support your contention that the FED has cause HUGE inflation) is that the additional rounds of QE should ALSO cause the burst in prices to continue onward and upward; however....the data doesn't support it. Since April 2011, oil and gas prices have declined, AND QE has proceeded non-stop. Shouldn't successive rounds of QE lead to successive rounds of inflationary burst? Not in their vocabulary.

Given, that this doesn't support their belief system, they come up with the second argument...

2. It's a government conspiracy. With the exception of the Shadowstats estimates, two other outside non-partisan estimates suggest differences of at most 2%. So at best, average inflation could've hit 4-5% over the past couple years. Hardly hyper.

 

Now my good friend Mag tries to use gas prices as the indicator of inflation, telling us they are the highest they've ever been. Again, compared to the same time last year, gas prices are NOT higher. Most people would laugh at someone who went batty over a one-year difference between $3.48 and $3.52 to make their case. As the article stated, gas prices rose 17 cents over the past week, so something has happened in the past week that has caused this article to be written and Magox to use it to defend his inflation contention. What?

 

Two main things: oil prices having been increasing for the past few weeks (because of good economic news on the employment front); but, more important, refineries have closed, and this has been the more important issue wrt gasoline prices. This has NOTHING to do with Fed policy. BTW, there is also some crazy old law (Jones Act) that requires American oil to be transported domestically by American companies. This has created the perverse outcome of higher cost Brent being shipped to the east coast vs transporting cheaper WTI oil from Texas/Oklahoma.

 

I've given my good friend Mag credit when deserved. This is a stretch buddy.

Edited February 6, 2013 by TPS

[Magox]

Oil, gas .... same thing. The reason why I brought up gas was because that was the news of the day.

 

 

To your point that we aren't experiencing high inflation, most every day Americans would disagree with you. Who gives a **** what their metrics say? Real every day people spend money on housing, clothing, food, gasoline, health care, education and other goods. For people who are in the lower to middle class, every dollar matters, so when you have costs of essentials such as food and gasoline rising, then it makes a difference. You and I will never see eye to eye on this, you live in a bubble world, whereas most people live in the real world where these things matter.

 

So yes, we are experiencing high inflation, specially considering job creation is barely keeping up with population growth and wages are stagnant.

 

It's simple, if you were able to get out of your bubble and apply common sense you would agree. If wages remain stagnant and the price of essentials such as food and gasoline have risen considerably, then that means disposable income continues to drop. That is what real people in the lower to middle class have to go through.

 

Right here on Page 23, a recent poll showed when asked:

 

31. Which of the following is the biggest economic problem facing people like you?

 

 

You know what the number one answer they gave? You guessed it, Rising prices. Rising prices over housing, taxes, unemployment etc. People worry about inflation because they see it.. They see it in their day to day costs, meanwhile you sit in your office or wherever you do, and crunch numbers using metrics that every day people don't give two ***** about.

 

Let that poll sink in for a while. Seriously, let it sink in, read the question a few times, and think about what the result tells us.

 

 

 

The reality is that once QE began, the price of virtually everything went up afterwards, just as many people including myself predicted.

 

In regards to this point you made:

 

you start at the trough of the crisis in 2009, then you can come up with a really big % change. This is the most dishonest way to support your case.

 

 

I guess you missed or didn't understand what I was saying when I responded to your shallow year over year gasoline argument, when I said this:

 

Oh, you want to play this shallow game? Sure, if the shoe fits

 

So the price of RBOB gasoline on the NYMEX back on March 18th of 2009 the beginning of QE was at 1.36 a gallon. Today it trades north of 3 a gallon.

 

In other words, that of course I don't believe that the price of gasoline rise is completely attributed to QE. There are many other factors, but it certainly is one of the main drivers, without a doubt. I'm gonna try this one more time with you, since you are having a difficult time understanding why your year over year argument is a dishonest argument, and for your sake, I just hope it is dishonest, if not, then you should completely get out of the work you are doing because you are doing no one any good. You are using the year over year argument as your justification that inflation is tame. But you don't account for growth and supply. Without these two variables, your case is non existent. If growth is slower, which means demand for oil is relatively the same, yet supply is increasing, then even if you have a price that is static implies inflationary pressures. If you were to have similar 4.1% GDP growth from where we were one year ago here in the U.S and a world economy that was performing similar to then, then the price of oil would be considerably higher than it is today.

 

Do you understand this? Seriously. I'm curious. It's not that difficult to understand, or is it?

 

It's a government conspiracy.

 

 

When did I imply this?

 

 

 

Two main things: oil prices having been increasing for the past few weeks (because of good economic news on the employment front); but, more important, refineries have closed, and this has been the more important issue wrt gasoline prices. This has NOTHING to do with Fed policy

 

So your argument is that employment figures that are barely showing employment growth relative to population increase is "good economic news" ? Wow! That's how bad the economy is, where we have anemic job growth and flat lining GDP growth and somehow that is misconstrued as "good economic news"

 

 

In regards to Refinery closings. I traded these markets on the NYMEX for the firm I use to work for and my clients for years, and I can tell you that this is nothing new. So when you dug up an article that stated this as a reason, that means absolutely nothing. Every one in the business understands that what happens is when prices rise for any commodity or stock, they will interview one of the traders or analysts, and that analyst and trader naturally gives their best opinion on why the market went up or down for that day or week. So the refinery closings is nothing new, it is a common occurrence.

Edited February 6, 2013 by Magox

[TPS]

If you want to change the metric to people who are in the middle and lower class, of course higher prices for necessities hits them harder than is measured by the cpi because the cpi measures prices for a bundle of goods purchased by "the typical urban consumer." The reason I argue these mini speculative bubbles in oil always come back down to earth is because of that exact impact. However, I could argue that those higher prices barely impact the rich and upper classes, which changes the metric. So of course prices impact different classes differently, but if that's the focus you want to take, rather than on average inflation, then you better say so from the beginning, otherwise you are simply dancing around to make the data fit your point.

 

Where we differ is 1) I argue (since the 2000 cfma) investors now have the greatest influence on short term commodity prices which does not reflect the true underlying demand, hence those mini bubbles pop; and 2) your analysis does not explain why WTI or brent hit peaks in April 2011 and we have not seen prices go above those since, yet QE policies continue... Was it only the first round of QE that was inflationary? You have to change the measuring stick to support your case; i don't. You are the one who is being dishonest to use a base price of 2009. What was the impact of QE2, QE3, and current QE(insert infinity sign here)?

 

I only used the year over year because that's what the article used. I simply pointed out how stupid it was to say gas prices are higher than the equivalent time last year. You want to play games about "relative" demand, let's do it for every quarter for the past 2 years and see if your argument holds. In fact, since you are focusing on domestic demand, domestic consmption has been declining in the US

since the crisis began, regardless of what growth has been.

 

Yes, according to your friends the traders, the recent oil rally began with news that things are improving. That should be understandable to anyone who knows trading. It's the same reason the 10 year Tbond has been increasing, many people think the economy is finally recovering. Traders do bet on the future, yes?

 

The recent impact on refineries and the many closings is not some common occurence; there has been a significant change in the industry in the past few years.

 

 

 

 

 

[Magox]

If you want to change the metric to people who are in the middle and lower class, of course higher prices for necessities hits them harder than is measured by the cpi because the cpi measures prices for a bundle of goods purchased by "the typical urban consumer." The reason I argue these mini speculative bubbles in oil always come back down to earth is because of that exact impact. However, I could argue that those higher prices barely impact the rich and upper classes, which changes the metric. So of course prices impact different classes differently, but if that's the focus you want to take, rather than on average inflation, then you better say so from the beginning, otherwise you are simply dancing around to make the data fit your point.

 

Inflation doesn't impact people as much from the higher income levels because they can absorb the higher prices. I think that goes without saying.

 

Where we differ is 1) I argue (since the 2000 cfma) investors now have the greatest influence on short term commodity prices which does not reflect the true underlying demand, hence those mini bubbles pop; and 2) your analysis does not explain why WTI or brent hit peaks in April 2011 and we have not seen prices go above those since, yet QE policies continue... Was it only the first round of QE that was inflationary? You have to change the measuring stick to support your case; i don't. You are the one who is being dishonest to use a base price of 2009. What was the impact of QE2, QE3, and current QE(insert infinity sign here)?

 

We've had this argument over and over and over, and we will never see eye to eye. This isn't a "mini bubble". A bubble by nature is created through irrational investment/consumer behavior. This isn't irrational, the prices are justified for a few reasons, you are oblivious to the fact that currencies do play a huge role in the prices of many different asset classes. This is your greatest downfall in all your analysis. And again, for the third and final time, the only reason why I used the 2009 price was to show you that two can play the "shallow" game. You didn't get that? And the impacts of QE2 and QE3 etc. are an ongoing impact. Without these loose monetary policies, prices of many different assets wouldn't be where they are today. I don't understand how someone who follows the economy doesn't believe that the impacts from the Federal reserve don't have a say in the outcome of the prices of assets across the spectrum.

 

I only used the year over year because that's what the article used. I simply pointed out how stupid it was to say gas prices are higher than the equivalent time last year. You want to play games about "relative" demand, let's do it for every quarter for the past 2 years and see if your argument holds. In fact, since you are focusing on domestic demand, domestic consumption has been declining in the US

since the crisis began, regardless of what growth has been.

 

My argument holds, I've already looked back because I follow oil a million times closer than you do. And in regards to the domestic consumption declining since the crisis began. Well yeah, that supports my argument even more so. How can you not understand that? Don't you see that by bringing that up, you are helping me make my point. Apart from the beginning of the global recovery of the crisis, demand hasn't really grown that much, yet supply continues to outpace demand. The reason is the point that I've made on many occasions. Remember those newsletter thingies I use to post? I stated all along that the value of currencies would continue to devalue, which would in turn cause tangible assets, such as oil rise. Of course real demand plays a factor, and if we had a healthy domestic and global economy, the price of oil would be over $120 a barrel. But since we have a depressed economy, the prices are slightly rising. The point that I've been making, which you are having a hard time grasping is that because of the actions of the FED, the price of not just oil or food or grains or commodities but even stocks are much higher than they would be. That's why it's important to note relativity.

 

Yes, according to your friends the traders, the recent oil rally began with news that things are improving. That should be understandable to anyone who knows trading. It's the same reason the 10 year Tbond has been increasing, many people think the economy is finally recovering. Traders do bet on the future, yes?

 

Of course they do.

 

The recent impact on refineries and the many closings is not some common occurence; there has been a significant change in the industry in the past few years.

 

Yes it is a common occurrence, I traded the market for years for a commodity brokerage firm for years, I saw the information first hand, and just about every year I traded it happened.

[TPS]

Wow! You have changed your target again. Now you say that QE impacts asset prices. Of course! That is how monetary policy impacts the economy, via asset prices. My point all along is that the changes from the 2000 cfma have turned commodities into financial assets, so they now increase from Fed actions just like other financial assets, but commodity prices eventually have to reflect true demand. Which eventually brings those prices back down to earth.

 

the big debate is, you and others have argued that the fed's policies will cause significant inflation of real goods prices, and that has not been the case. Inflation of real goods and services has been no different than the past 30 years, roughly 2-3%. The impact has been on the inflation of assets. That's the way monetary policy has always worked.

[Cinga]

wow... and it's really, only simple math... the gubment has of course chaned a few rules in how the inflation rate is calculated, and do so almost daily... Case in point...

 

Check this site out... official gubment site... , but I still like the calculator...

http://www.bls.gov/d..._calculator.htm

 

Funny thing is... Last year, out of curiosity, I put my dad's salary from 1975, from working the steel mills, and just before he passed on.... 10 bucks an hour... really good money at the time around B'lo industry...

 

Anyway, last year, I used the calculator, put 10 in for 1975, and calculated for today, and learned my dad would have to make over 48 bucks an hour, to have the same buying power he did then....

 

But then... something more amazing happens if I put those numbers in now....My dad only has to make 42 and change an hour this year....????? Hmmmm

 

But let's have fun!!! the calculator goes back to 1913, so lets!!!

 

100 bucks in 1913???

 

$2,319.13 in today dollars...

 

yeah.... fun, huh???

 

Economists try to make it much harder than it is... But Economics, is simple math, and understanding simplicity...

Edited February 7, 2013 by Cinga

[Magox]

What the hell are you talking about? Of course it will affect almost all asset prices. What are you, a moron? You keep sinking lower and lower. You are incapable of understanding what inflation truly means. Your main flaw and its a big one is the failure to recognize the impact of what currencies do to assets such as commodities. Until you correct this failure of yours we will continue to go in circles, in the meantime, real every day Americans see rising prices ie. inflation as their chief concern . But in your in bubble world, they are wrong, because your metrics say differently. Who cares that the price of gasoline and food continue to rise, despite seeing their wages stagnate.

 

 

 

Also commodity prices will one day tumble, for a long period of time, but it will because of one of two reasons. And you can take this to the bank, either the world falls into a long- term slump or the return of hawkish monetary policy will return, which is the most likely scenario. Monetary policy is the number one driver of commodity valuation. More so than actual physical demand and supply. . This is lost upon you

 

wow... and it's really, only simple math... the gubment has of course chaned a few rules in how the inflation rate is calculated, and do so almost daily... Case in point...

 

Check this site out... official gubment site... , but I still like the calculator...

http://www.bls.gov/data/inflation_calculator.htm

 

Funny thing is... Last year, out of curiosity, I put my dad's salary from 1975, from working the steel mills, and just before he passed on.... 10 bucks an hour... really good money at the time around B'lo industry...

 

Anyway, last year, I used the calculator, put 10 in for 1975, and calculated for today, and learned my dad would have to make over 48 bucks an hour, to have the same buying power he did then....

 

But then... something more amazing happens if I put those numbers in now....My dad only has to make 42 and change an hour this year....????? Hmmmm

 

But let's have fun!!! the calculator goes back to 1913, so lets!!!

 

100 bucks in 1913???

 

$2,319.13 in today dollars...

 

yeah.... fun, huh???

 

no no, you simpleton, TPS' metrics says differently. There is no inflation. Everything is a fantasy, it's just a bubble waiting to burst. In the meantime just about everyday that passes your wages are buying you less and less. But that's not real because TPS says so

[Cinga]

What the hell are you talking about? Of course it will affect almost all asset prices. What are you, a moron? You keep sinking lower and lower. You are incapable of understanding what inflation truly means. Your main flaw and its a big one is the failure to recognize the impact of what currencies do to assets such as commodities. Until you correct this failure of yours we will continue to go in circles, in the meantime, real every day Americans see rising prices ie. inflation as their chief concern . But in your in bubble world, they are wrong, because your metrics say differently. Who cares that the price of gasoline and food continue to rise, despite seeing their wages stagnate.

 

 

 

Also commodity prices will one day tumble, for a long period of time, but it will because of one of two reasons. And you can take this to the bank, either the world falls into a long- term slump or the return of hawkish monetary policy will return, which is the most likely scenario. Monetary policy is the number one driver of commodity valuation. More so than actual physical demand and supply. . This is lost upon you

 

 

 

no no, you simpleton, TPS' metrics says differently. There is no inflation. Everything is a fantasy, it's just a bubble waiting to burst. In the meantime just about everyday that passes your wages are buying you less and less. But that's not real because TPS says so

 

Magox... you've done well in this debate, but don't get sucked in to the same ole crap... Economics, as you obviously know, ain't that hard, but is too often, used as a tool, to make people look like a fool...

 

Micro vs Macro I guess... How do the people understand and thereby win????

 

Keep It Simple Stupid

 

???

[TPS]

Who cares that the price of gasoline and food continue to rise, despite seeing their wages stagnate.

You've just expressed why you are wrong. Gasoline has not continued to rise. It has see-sawed for the past 3 years. As I said, the price of oil hit a peak in April 2011, and prices have been below that peak price ever since, almost 2 years now. Look at any commodity index and it is the same. Please do explain why almost all commodity prices are lower today than they were 2 years ago, even though the Fed has pumped another trillion dollars into the economy over the same period.

 

By the way Cinga, that nice little inflation indicator supports me as well, from 2008 to 2012, $100 is worth $106.64. An inflation rate of less than 2% per year. And that is the debate: it's not that there hasn't been inflation, rather there hasn't been significantly high inflation. Moderate inflation is the "price" we pay to prevent debt-deflations. Madox expresses the issue in the following quote.

 

Magox: "monetary policy is the number one driver of commodity valuation" If so, please explain why almost all commodity prices are lower than they were in April 2011 (almost 2 years ago), even though the Fed has since pumped another trillion dollars into the economy.

 

[B-Man]

 

Gasoline at highest price ever for this time of year

 

U.S. drivers are now paying more to fill up their gas tanks than they ever have at this time of year.

 

The national average price of retail gasoline posted its biggest overnight increase in 23 months,rising four cents to $3.462 a gallon on Friday, according to AAA. The average price has risen 13 cents in the past week, a 4 percent jump.

 

"This is the highest price record for February 1st," says OPIS analyst Tom Kloza, who predicts the average price could reach $3.50 a gallon this weekend.

 

NYMEX March RBOB gasoline futures, which help determine prices at the pump, have risen 10 percent in the past two weeks to a session high of $3.045 a gallon on Friday.

 

"Refinery issues and speculation about refinery issues has a lot of money betting on still higher prices," Kloza said.

 

{snip}

 

Meanwhile gasoline demand is on the rise. While total U.S. gasoline supplies fell by 1 million barrels last week, gasoline demand increased by 70,000 barrels a day to the highest level since the end of December.

 

Analysts say the U.S. Labor Department's upward revision to payrolls data on Friday is further indication of steady economic growth and will lead to continued increases in gasoline demand.

[TPS]

Oh gosh, you mean refinery issues and positive employment data are behind this? Who would've guessed?

[Magox]

You've just expressed why you are wrong. Gasoline has not continued to rise. It has see-sawed for the past 3 years. As I said, the price of oil hit a peak in April 2011, and prices have been below that peak price ever since, almost 2 years now. Look at any commodity index and it is the same. Please do explain why almost all commodity prices are lower today than they were 2 years ago, even though the Fed has pumped another trillion dollars into the economy over the same period.

 

By the way Cinga, that nice little inflation indicator supports me as well, from 2008 to 2012, $100 is worth $106.64. An inflation rate of less than 2% per year. And that is the debate: it's not that there hasn't been inflation, rather there hasn't been significantly high inflation. Moderate inflation is the "price" we pay to prevent debt-deflations. Madox expresses the issue in the following quote.

 

Magox: "monetary policy is the number one driver of commodity valuation" If so, please explain why almost all commodity prices are lower than they were in April 2011 (almost 2 years ago), even though the Fed has since pumped another trillion dollars into the economy.

 

Again, everything with you is in a vacuum. Thats not the way things work TPS. World growth was considerably stronger then than it is today, not to mention the turmoil and supply disruptions in the Middle East were pushing prices higher. With considerably weaker domestic and global growth we have the highest energy prices EVER for this time of the year. The main driver for the inflation we are experiencing today is more currency driven than anything else. I'm not arguing its the only factor, yet somehow I explain it to you over and over and over and you still keep failing to grasp the concept of relativity of growth from then to today.

 

 

Why do you keep doing that? It's one of two things, either you are purposely ignoring what I'm saying or that you are too dense to fully comprehend what I'm saying. One of the two

 

 

[Magox]

Oh gosh, you mean refinery issues and positive employment data are behind this? Who would've guessed?

 

You are one hard headed dude. The economy sucks and is flat lining, global growth is considerably weaker than it was last year or the year before, demand for oil in the US is dropping, global oil supply and production is rising, domestic supplies are 10% higher than it was last year at this time and YET Brent crude WHICH IS THE OIL THAT IS TRADED GLOBALLY averaged a record high last year and on pace to go higher than last year, AND We have record high gasoline prices for this time of the year.

 

You know when you parrot something that you read a trader comment on, you do know that the rationale given for the price rise was for that particular day don't you? So when you say "good employment numbers and refinery issues". All you did was repeat that particular traders analysis for what he attributed for that particular day or days rise.

 

We had a guy at our firm that use to be quoted occasionally at IBD and when they called him for his opinion he'd give them his best opinion based on the word at the floor. It's not long- term analysis, it's extremely short-term.

 

[TakeYouToTasker]

You are one hard headed dude. The economy sucks and is flat lining, global growth is considerably weaker than it was last year or the year before, demand for oil in the US is dropping, global oil supply and production is rising, domestic supplies are 10% higher than it was last year at this time and YET Brent crude WHICH IS THE OIL THAT IS TRADED GLOBALLY averaged a record high last year and on pace to go higher than last year, AND We have record high gasoline prices for this time of the year.

 

You know when you parrot something that you read a trader comment on, you do know that the rationale given for the price rise was for that particular day don't you? So when you say "good employment numbers and refinery issues". All you did was repeat that particular traders analysis for what he attributed for that particular day or days rise.

 

We had a guy at our firm that use to be quoted occasionally at IBD and when they called him for his opinion he'd give them his best opinion based on the word at the floor. It's not long- term analysis, it's extremely short-term.

To put this another way: Despite an increase in global supply, and a great decrease in global demand (largely due to a suspension of India and China's industrial revolutions given the global economic downturn), the price of fossil fuels has remained relatively flat. What external force is putting upward pressure on their prices to keep them from falling when supply and demand dictate that they should?

[Magox]

To put this another way: Despite an increase in global supply, and a great decrease in global demand (largely due to a suspension of India and China's industrial revolutions given the global economic downturn), the price of fossil fuels has remained relatively flat. What external force is putting upward pressure on their prices to keep them from falling when supply and demand dictate that they should?

 

Exactly

[TPS]

To put this another way: Despite an increase in global supply, and a great decrease in global demand (largely due to a suspension of India and China's industrial revolutions given the global economic downturn), the price of fossil fuels has remained relatively flat. What external force is putting upward pressure on their prices to keep them from falling when supply and demand dictate that they should?

Supply reacts to demand in the current environment. Since oil "inventories" are stored in the ground, the Saudis have reacted when those "external forces" push prices above their target, which is about $110 for Brent, and when prices fall they cut output. Regarding WTI, BO has threatened to release oil from the SPR when its price exceeds $100. They (Saudis and their muslim brother BO) have done this when they think the underlying driver is financial, not real. The better question to ask, regarding this current argument, is what has caused oil (both Brent and WTI) to increase $10 in the past couple months? Without that increase and the refinery issue, gas prices are below last year's at this time, and that article would not have been written.

 

Again, QE policies have been ongoing since fall 2008, and ratcheted up several times (end of 2010 and end of last summer), yet oil prices have been essentially flat for the past 2 years. The facts don't fit your theory.

[Magox]

Supply reacts to demand in the current environment. Since oil "inventories" are stored in the ground, the Saudis have reacted when those "external forces" push prices above their target, which is about $110 for Brent, and when prices fall they cut output. Regarding WTI, BO has threatened to release oil from the SPR when its price exceeds $100. They (Saudis and their muslim brother BO) have done this when they think the underlying driver is financial, not real. The better question to ask, regarding this current argument, is what has caused oil (both Brent and WTI) to increase $10 in the past couple months? Without that increase and the refinery issue, gas prices are below last year's at this time, and that article would not have been written.

 

Again, QE policies have been ongoing since fall 2008, and ratcheted up several times (end of 2010 and end of last summer), yet oil prices have been essentially flat for the past 2 years. The facts don't fit your theory.

 

I can safely say you have no clue in what you are saying. Remember when you incorrectly believed that the release of the oil reserves would have an impact on the price oil and I told you that it wouldn't? Ya, that was hilarious

 

And the only person who ignores facts here is you.

Edited February 7, 2013 by Magox

[TPS]

I can safely say you have no clue in what you are saying. Remember when you incorrectly believed that the release of the oil reserves would have an impact on the price oil and I told you that it wouldn't? Ya, that was hilarious

 

And the only person who ignores facts here is you.

Here's what was said:

 

You:

Magox, on 06 July 2011 - 12:12 PM, said:

 

It still doesnt play much of a role on the overall price of oil. Traders play both sides of the markets, that is the point that

 

I have been trying to make to you for quite some time now. Every time they raise margins, create new regulations or in the latest case of government intervention release reserves, all it does it flush out the short-term traders (for a day or two), only to see the price of oil go right back up.

 

So when you are saying commodity markets are now subject to the "whims of investors" if you mean markets like trading, then yes, if you mean the final price is heavily influenced from speculators, then you are dead wrong. I told you that the release of these reserves would have a negligible effect on prices, and voilaaaa look where the price is.

 

As I stated all along, the price of oil will not be affected by this asinine move that you applauded and thought would have an effect, the price of oil for now is being dictated on the prospects of growth.

 

On a sidenote, 95% of trades is not the same as 95% of positions held.

 

My response:

I guess I have to repeat myself so you get it. I agreed that the release of oil from SPR won't impact long term. my point, as was stated in the article I linked, is that it was used as a message to speculative investment flows--which it appears you agree with.

 

Second, I've argued two points about the money flows: first, they create more volatility--in the short term; second, there is an upward bias on prices from ETF type investments that are longer term. Did you read the second article? That one focused on the impact from long positions.

 

As for that move I applauded, it did have an immediate effect. However, I argued that it was a signal to short term speculators--be ware of taking big positions.

 

Finally, as I've said several times, I think prices are now closer to fundamental values since the big shakeout in early May.