Easy peasy: Oil prices - supply demand and the $

[ChooseLiberty]

There's a lot of discussion on the price of oil, supply/demand and inflation.

Here's an easy way to look at it -

You're really talking about two things S/D Oil and S/D US dollars.

Let's look at approx the last 10 years and assume there is a form of "real" money - gold.

In late 1997 the peak $ price in West Texas Intermediate was about $27 and gold was about $400. So about .07 oz of gold bought a barrel.

In late 2000 that same ratio peaked at .14. So the price of Oil doubled relative to gold.

Currently the ratio is about .16 approx the same as 2000, but the price of WTI in $ has gone from about $27 in late 1997 to about $140 current. This is approx 5X.

So an easy approximation is that the S/D for WTI has doubled while the effect of $ inflation accounts for the other 3X. And the S/D effect for WTI made it's adjustment in the late 90's, while the inflation effect has occured since 2000 as the US gov/Fed flooded the banks and economy with $, mostly after 2001.

Comments?

 

[Fox McCloud]

Pretty much what Paul van Eeden has said:

http://www.youtube.com/watch?v=yvCcBILF7ow
http://www.youtube.com/watch?v=jqz9J4hxh3k

 

[Matt Collins]

This book dispells Peak Oil Theory and is an EXCELLENT read!!!
I HIGHLY recommend it!

http://www.amazon.com/Black-Gold-St...d_bbs_2?ie=UTF8&s=books&qid=1212527846&sr=8-2



Experts estimate that Americans consume more than 25 percent of the world's oil but have control over less than 3 percent of its proven oil supply. This unbalanced pattern of consumption makes it possible for foreign governments, corrupt political leaders, terrorist organizations, and oil conglomerates to hold the economy and the citizens of the United States in a virtual stranglehold. There is no greater proof of this than the direct relationship between skyrocketing gas prices and the explosion of wealth among those who control the world's supply of oil.

In Black Gold Stranglehold, Jerome Corsi and Craig Smith expose the fraudulent science that has made America so vulnerable: the belief that oil is a fossil fuel and that it is a finite resource. This book reveals the conclusions reached by Dr. Thomas Gold, a professor at Cornell University, in his seminal book The Deep Hot Biosphere: The Myth of Fossil Fuels (Copernicus Books, 1998) and accepted by many in the scientific community that oil is not a product of fossils and prehistoric forests but rather the bio-product of a continuing biochemical reaction below the earth's surface that is brought to attainable depths by the centrifugal forces of the earth's rotation.
Jerome Corsi explores the international and domestic politics of oil production and consumption, including the wealth and power of major oil conglomerates, the manipulation of world economies by oil-producing nations and rogue terrorist regimes, and the shortsightedness of those who endorse expensive conservation efforts while rejecting the use of the oil reserves currently controlled by the U.S. government.


As an expert in tangible assets, Craig Smith provides an understanding of the history of America's dangerous dissociation of the dollar with precious—and truly scarce—metals such as gold and the devastation that would be inflicted on the U.S. economy if Middle Eastern countries are able to follow through with current plans to make the euro the standard currency for oil instead of U.S. dollars.
Black Gold Stranglehold is a thoughtful work that is certain to dramatically change the debate on oil consumption, oil dependence, and oil availability.


​

 

[HOLLYWOOD]

The 3 parts of the OIL BARREL:

1/3: Gasolines
2/3: Diesels, Aviation Fuels, Heating Oils
3/3: Petro Chemicals

the 2nd third is where there's a BIG PROBLEM. Refiners/refineries are maxed out capacities on the 2nd third fuels and the world demand has sky rocketed, and when I mean skyrocket, just look at China alone:

In the second quarter of 2008, China has INCREASED DIESEL demand x27s over 2007. The Emerging markets are driving demand and are assisted by these countries governments of subsidizing the costs of fuels to Increase GDP and Global Market share, growth, etc. EU Refineries are a little more poised to produce more of the 2/3 third fuels than NAU.

the American Government can't get their heads out of their A$$E$ and DO STUPID LEGISLATION, like spend on artificially inflating fuels (like Ethanol) by using one of the most inefficient crops for BioFuels and adding TARIFFS to IMPORTS, disrupting food supplies and prices, Increasing Massive Debt, which kills the Greenback's value.

What's wrong with this picture?

 

[ChooseLiberty]

Good vids. Hadn't heard of Eeden before, but seems like a very smart guy (Leisman is a Fed hack), even though his explanation wasn't easy peasy and he was using govt monetary aggregates.

Liked the part where Eeden mentioned the the TMS.

true money supply

http://www.mises.org/content/nofed/chart.aspx?series=TMS

BTW: Where does the BBN broadcast?

Pretty much what Paul van Eeden has said:

http://www.youtube.com/watch?v=yvCcBILF7ow
http://www.youtube.com/watch?v=jqz9J4hxh3k

 

[bander87]

Poor Fed

 

[HOLLYWOOD]

Good vids. Hadn't heard of Eeden before, but seems like a very smart guy (Leisman is a Fed hack), even though his explanation wasn't easy peasy and he was using govt monetary aggregates.

Liked the part where Eeden mentioned the the TMS.

true money supply

http://www.mises.org/content/nofed/chart.aspx?series=TMS

BTW: Where does the BBN broadcast?

I'm still trying to figure out how Leimans stars on CNBC... that 'CHEERLEADER' should be on FOX 'FIXED' BUSINESS TV. What a bunch of Monkeys... serving their CHIMPS in Government.

 

[ChooseLiberty]

Wow. Schiff says the Dow will eventually equal one ounce of gold.

http://www.youtube.com/watch?v=WceUm3Dc2Y0

 

[acptulsa]

The 3 parts of the OIL BARREL:

1/3: Gasolines
2/3: Diesels, Aviation Fuels, Heating Oils
3/3: Petro Chemicals

the 2nd third is where there's a BIG PROBLEM. Refiners/refineries are maxed out capacities on the 2nd third fuels and the world demand has sky rocketed

You make some interesting points. And while the proportions you indicate are somewhat adjustable and include other items (like kerosene), yes they do need to keep these markets balanced or they'll have waste. This is why diesel is notably higher than gasoline for the first time--and why no one is trying too hard to sell us diesels right now.

 

[jjbond007]

Interesting.

Let's do the math. Tight supply + high demand = higher oil prices or is it weak dollar+US Petroleum Reserves=higher oil prices

High oil prices could push the economies of the US and others that import more oil than they produce, into recession or a lengthy period of inflation.

 

[Zippyjuan]

In the case of oil, it is both a weaker dollar and a rising global demand matched with a not increasing supply.

 

[torchbearer]

http://www.youtube.com/watch?v=jqz9J4hxh3k&feature=PlayList&p=44D5EECCCBBF0AB4&index=40

 

[Zippyjuan]

He is not allowing for increases in the population or the overall economy when he tries to compare the price of oil vs the supply of money (M3 in this case) over time. If the money supply is growing at the same rate as the population and economy then you should not have price inflation. If for example the amount of goods is doubled and the population doubles you can double the money supply without doubling the prices of goods. Not saying that there was or was not over the last 30 years- only that he does not consider it when he says that oil could be $2 today. The value of the dollar has impacted the price of oil- definately. It can also be somewhat difficult to seperate the price of oil from inflation since it is a component of producing and delivering goods and hence part of the cost of all goods and services. He does agree that supply and demand are part of the equation as well.
Here is a look at inflation adjusted oil prices.
http://www.inflationdata.com/inflation/images/charts/Oil/Inflation_Adj_Oil_Prices_Chart.htm

 

[jjbond007]

In the case of oil, it is both a weaker dollar and a rising global demand matched with a not increasing supply.

I agree. high oil prices= weak dollar+increased global demand+decreased supply

 

[torchbearer]

I agree. high oil prices= weak dollar+increased global demand+decreased supply

now, what percentages cause the increase?
weak dollar? 90%?
supply and demand 9%
speculation? 1%?
these percentages are my estimates

this video talks about who much each factor is contributing to the increase in crude since 1959.
http://www.youtube.com/watch?v=iwAHnpIR8is (starts 2 minutes in)

http://www.youtube.com/watch?v=jqz9J4hxh3k

 

[torchbearer]

bump

 

[Fox McCloud]

now, what percentages cause the increase?
weak dollar? 90%?
supply and demand 9%
speculation? 1%?
these percentages are my estimates

a close economist friend of mine (who knows more about it than 99% of the people here) said a weak dollar is 100% of the cause of the rising price of oil--I'm not sure if he means that supply has increased with demand, and thus that's not a factor, or if he means that it plays such as tiny role that it's really not worth nothing.

I really have no idea--I'll have to e-mail and ask him some time.

 

[torchbearer]

a close economist friend of mine (who knows more about it than 99% of the people here) said a weak dollar is 100% of the cause of the rising price of oil--I'm not sure if he means that supply has increased with demand, and thus that's not a factor, or if he means that it plays such as tiny role that it's really not worth nothing.

I really have no idea--I'll have to e-mail and ask him some time.

Watch these two short youtubes:

http://www.youtube.com/watch?v=iwAHnpIR8is (starts 2 minutes in)

http://www.youtube.com/watch?v=jqz9J4hxh3k


Your friend is basically right in the sense.. that.. as gas prices has gone up due to inflation, people's driving habits have changed in ways that have actually reduced demand to easily meet supply...
the supply and demand part may be in a consumer favorable position minus the inflation, though cheap fuel would once again increase demand as people relax on the fuel expenditures, ie. road trips etc.