Should the government interject oil into the market to burst the oil bubble?

[mirage62 0]

Would this pop oil speculation?

It has been speculated that speculation is driving up the cost to the end user (us) on gas prices. Would the government selling off a % of the oil reserves to decrease the cost of oil, which would hurt the speculators and possibly “burst the bubble”?

The only way I see that working would be the government’s willingness to do it several times, to do that we would have lower our reserves perhaps to low.

The housing bubble burst and we are going through the painful correction. But to a large degree many benefited from the good economy that was part of the bubble. I see this bubble as being beneficial to a very few, and painful to many. Hence I believe that the government taking an active roll (interjecting the oil reserves into the market at some level) to possibly be a worth while action.

Kevin Keenan is my hero, a double FUP, he does so much with so little

[billvon 3,119]

>Would the government selling off a % of the oil reserves to decrease
>the cost of oil, which would hurt the speculators and possibly “burst the
>bubble”?

Nope. It would momentarily depress the price of oil. People would get used to the new supply.

Fast forward a few months. The announcement surfaces that the government will stop injecting oil (because, for example, they have no more.) The headlines read "FEDS WILL CUT OFF OIL SUPPORT." Oil hits $250 a barrel as everyone panics.

>The housing bubble burst and we are going through the painful correction.

The housing bubble burst partly because we built more houses than people, and thus had a surplus of housing. We will never again have a surplus of oil.

[mirage62 0]

Quote

We will never again have a surplus of oil.

Bill so do you believe that in total the run up in oil prices is actually a supply and demand problem? While I agree that in the future we WILL run out of oil that future isn't now.

http://www.iberkshires.com/story/27276/Berkshire-Businesses-Burned-by-Energy-Costs.html

...."It is those rising prices that brought Sen. John F. Kerry to Berkshire Community College on Wednesday to find out what the cost of energy was doing to the cost of business here in the far west corner of Massachusetts.

Seated at the head table with state Attorney General Martha Coakley, a North Adams native, the senator agreed that speculation was an issue in the spiraling costs. (He told the Berkshire News Network afterward that he'd heard 40 percent to 50 percent of the cost of crude oil was caused by speculation.)"

If the speculators lose money and they feel like the goverment will interject oil again the bubble while burst. The fear of the goverment doing so could help prevent another bubble.

Kevin Keenan is my hero, a double FUP, he does so much with so little

[StreetScooby 5]

Pickens thinks otherwise. This just in:
http://www.nytimes.com/reuters/business/business-usa-oil-pickens.html
I'm not agreeing or disagreeing with him.

We are all engines of karma

[billvon 3,119]

>Bill so do you believe that in total the run up in oil prices is actually a
>supply and demand problem?

Supply and demand account for approx. 60-70% of the price. (i.e. without a futures market, oil prices would be around $90 a barrel.) The futures market is speculating on what will happen in the future. With demand from China and India increasing faster than most countries can ramp up their output, the likelihood is for higher prices in the future.

>If the speculators lose money and they feel like the goverment will
>interject oil again the bubble while burst. The fear of the goverment doing
>so could help prevent another bubble.

That was the thinking behind the "windfall tax" threat to the oil companies. It might work once, even twice, but it's not a good long term solution. Eventually investors will realize that the US is bluffing. (Which they have to be most of the time; we just don't have much oil saved up.)

[kelpdiver 2]

Quote

Seated at the head table with state Attorney General Martha Coakley, a North Adams native, the senator agreed that speculation was an issue in the spiraling costs. (He told the Berkshire News Network afterward that he'd heard 40 percent to 50 percent of the cost of crude oil was caused by speculation.)"

"He'd heard?" WTF? I hope it wasn't his barber, and there was a bit more substance behind the claim. I think Bill's percentage is closer to the truth.

Speculation is not just on the long side. If you try to inferfere with a short sighted move by the Feds, the shorts will clean up instead. And then the longs the year after. I think the move is more likely to stall out the process, much as we've tried delaying the punishment for our real estate bubble.

[speedy 0]

Quote

Supply and demand account for approx. 60-70% of the price. (i.e. without a futures market, oil prices would be around $90 a barrel.)

On what information do you base that statement?

Watch this video and think again http://www.cnbc.com/id/15840232?video=753754816&play=1

Dave

Fallschirmsport Marl

[billvon 3,119]

>On what information do you base that statement?

A few factors.

One, demand is outpacing supply. All by itself that causes massive runups in price.

Two, there is a vicious cycle at work here. The more we pay for oil, the more OPEC countries make. The more they make, the more oil/goods they use. That drives oil usage up further (since nearly everything, from ships to cars to planes to Saudi generators, runs on oil.) So high oil prices lead to higher demand in some places.

Three, the market will take a lot of time to turn to alternatives. While that happens demand will be relatively inflexible. That means fast runups in price.

[speedy 0]

There is no bubble to pop.

China and India also want to drive cars and acheive your standard of living. That requires oil and they will bid against you to get it.

The production at Mexicos cantrell field is crashing. Start looking at servere shortages along the gulf coast in the next 6 months.

If you get a hurricane restricting production in the gulf of mexico you are well truely f***ed.

Dave

Fallschirmsport Marl

[speedy 0]

Quote

>On what information do you base that statement?

A few factors.

One, demand is outpacing supply. All by itself that causes massive runups in price.

Two, there is a vicious cycle at work here. The more we pay for oil, the more OPEC countries make. The more they make, the more oil/goods they use. That drives oil usage up further (since nearly everything, from ships to cars to planes to Saudi generators, runs on oil.) So high oil prices lead to higher demand in some places.

Three, the market will take a lot of time to turn to alternatives. While that happens demand will be relatively inflexible. That means fast runups in price.

I think you did not read my question properly. I quoted you as saying that oil would be priced at $90 a barrel without the speculators.

I say for all ( and more) of the reasons you give above that oil would still be at $130 a barrel without speculators.

But that is standard for debate here, ignore the context of the question and run off in a different direction.

Dave

Fallschirmsport Marl

[billvon 3,119]

>I think you did not read my question properly.

Sorry, I thought you were asking about "Supply and demand account for approx. 60-70% of the price."

>I say for all ( and more) of the reasons you give above that oil would
>still be at $130 a barrel without speculators.

I agree that it would be at a similar price, but it would be a bit lower.

We see this in every speculated market. Orange juice prices go up when there's a cold winter in orange producing areas. That's not because last year's crop isn't still enough to make orange juice, it's because _next_year's_ crop is expected to be worse - and people want to lock in a price so they can buy at $20 a ton and sell at $25 a ton.

That's true of every market that people speculate in. They are looking at what will happen in a year, not what will happen tomorrow. That's why demand and production estimates for last year are so important. Since demand is going up faster than supply, speculative prices are high, because people want to make money.