Got Gas? U.S. Economy to Worsen as Gas Prices Skyrocket

[Engineer]

From $3.34 to $3.55 to $3.75 over the last week here. Whooopeeeee!

To Whippershapper, I think it will eventually crush the economy if it continues to climb, especially near $5.00 per gallon.

 

[The-Noid]

There really should be a way to reduce the impact of such traders, if only by reducing their leverage, without losing the positive impact of futures trading. Though I'm not really sure if oil futures trading is even necessary anymore from the suppliers' perspective, though it's probably quite profitable. I can still see the hedge value for really large consumers, but I'm sure they'd love to have all the people looking to make money shut out of the market. If the buyer had to have at least the ability to take physical possession of the oil and the liquidity to purchase it, would that significantly reduce oil prices while leaving adequate liquidity? Or is the entire speculator debate pretty much a red herring?

Taking physical delivery wouldn't change much. You can get a fairly good approximation of the positions of traders from the CFTC reports on finviz. http://finviz.com/futures_charts.ashx?t=CL

It's the SWAP/Prepaid Forwards/Forwards/etc market that is hard to track. For every seller of a commodity contract, there has to be a buyer and vice versa.

Like I said, there are too many funds that are long-biased (pensions, hedges, etf's/etn's, managed futures trend following, etc) that probably shouldn't be participating in oil markets to begin with. If they are to participate they purchase another form of oil price derivative. Getting rid of the larger speculators (banks) may increase or decrease the price of oil (I'm not sure it's cut and dry) it would however increase the volatility of prices (swings would be exacerbated) as there would be a lack of hedging.

Again, there simply aren't enough back to back hedgers, as there are naturally more sellers that want to remain hedged compared to buyers that aren't as sensitive to cost. Gas stations can easily pass cost through. Airlines can not, etc.

 

[dmcowen674]

From $3.34 to $3.55 to $3.75 over the last week here. Whooopeeeee!

To Whippershapper, I think it will eventually crush the economy if it continues to climb, especially near $5.00 per gallon.

Listening on radio on way to work they were talking about ~$10 gas coming here to Chicago.

I look forward to the empty Tollways.

 

[monovillage]

Listening on radio on way to work they were talking about ~$10 gas coming here to Chicago.

I look forward to the empty Tollways.

That's only going to happen in Oct.- early Nov. Then prices will quickly go down.

 

[dmcowen674]

Originally Posted by dmcowen674
Listening on radio on way to work they were talking about ~$10 gas coming here to Chicago.

I look forward to the empty Tollways.

That's only going to happen in Oct.- early Nov. Then prices will quickly go down.

I know its so the Republicans can use the excuse of high gas prices to unseat Obama.

Obama knows this and going on the offense against such lies by Republicans:

2-23-2012

http://finance.yahoo.com/news/analysis-obama-goes-offense-over-high-gasoline-prices-060444869.html

Obama goes on offense over high gasoline prices



As Republican presidential candidates toss barbs at Barack Obama over expensive gasoline, the U.S. president and his team are going on the offensive with a strategy to divert blame and prepare voters for higher costs.

His strategy is both politically- and policy-oriented. The president wants to advance his plans to increase renewable energy sources and reduce U.S. reliance on foreign oil.


But he also needs to win the war of words to gain an upper hand over Republicans in Western battleground states such as Colorado, Nevada and New Mexico, where people drive a lot and feel the sting of rising prices acutely.

Politically, Obama's vulnerability over gasoline prices could be especially deadly in Western states that he needs to win to remain in the White House.

"If someone comes back at him and says, 'What's your policy Mr. Santorum, Mr. Gingrich, or whomever, to lower gasoline prices today,' I don't think they'll have a good answer."

 

[dmcowen674]

~$5.09 at some stations downtown LA now and climbing fast

http://www.losangelesgasprices.com/

 

[The-Noid]

~$5.09 at some stations downtown LA now and climbing fast

http://www.losangelesgasprices.com/

It's going to happen Dave. I think you may finally get to the mythical $5 national average.

 

[werepossum]

Taking physical delivery wouldn't change much. You can get a fairly good approximation of the positions of traders from the CFTC reports on finviz. http://finviz.com/futures_charts.ashx?t=CL

It's the SWAP/Prepaid Forwards/Forwards/etc market that is hard to track. For every seller of a commodity contract, there has to be a buyer and vice versa.

Like I said, there are too many funds that are long-biased (pensions, hedges, etf's/etn's, managed futures trend following, etc) that probably shouldn't be participating in oil markets to begin with. If they are to participate they purchase another form of oil price derivative. Getting rid of the larger speculators (banks) may increase or decrease the price of oil (I'm not sure it's cut and dry) it would however increase the volatility of prices (swings would be exacerbated) as there would be a lack of hedging.

Again, there simply aren't enough back to back hedgers, as there are naturally more sellers that want to remain hedged compared to buyers that aren't as sensitive to cost. Gas stations can easily pass cost through. Airlines can not, etc.

Do you see any practical way to reduce the price pressure exerted by speculators? More to the point, do you think that speculators actually are exerting significant price pressure, or are they merely a convenient target for political purposes? (Obviously I'm bashing them too, but perhaps incorrectly out of ignorance. LOL)

 

[The-Noid]

Do you see any practical way to reduce the price pressure exerted by speculators? More to the point, do you think that speculators actually are exerting significant price pressure, or are they merely a convenient target for political purposes? (Obviously I'm bashing them too, but perhaps incorrectly out of ignorance. LOL)

Like I said, you need some speculation, otherwise there would have very few to take the long side of oil trades (there are more natural sellers than buyers) and there would be a huge amount of volatility in oil prices. Oil and gas prices would move huge based on short term supply disruptions etc.

AFAIC, oil and most other commodities should not be seen as investments. There are a lot of indexed products (ETF's, Mutual Funds, etc.) and pensions that purchase commodities simply for the inflation hedge. Then it becomes a question of is it the commodities that are increasing in price causing the inflation, or vice versa.

You need speculators, you don't need investments that are simply long-only conduits to buy commodities. That market is significantly smaller than the large spec/banking market but it adds marginal buyers that probably shouldn't be there to begin with. Get rid of them and I think the price goes down but it is going to be marginally, not huge.

If you make the banks take delivery, they will simply buy more ships and containment to take delivery the price will then be passed on through higher prices and wider bid/offer spreads.

As I said, there is probably too much speculation in the oil markets, however it is most likely not by the banks that everyone looks to. It is the small marginal buyers that are long-only as an inflation hedge that add-on and add-on to the price. Commodities with the huge implicit leverage in them have larger than expected moves to the upside based on relatively small marginal buyers.

It makes no sense to have investment vehicles that have to be long all the time in the commodities market regardless of price. Commodities need to be bi-directional and futures are some of the easiest investments to short.

 

[dmcowen674]

Gas is running around $5 in Los Angeles and getting close to $6 in Orlando.

2-23-2012

http://chicago.cbslocal.com/2012/02/23/gas-prices-well-above-4-at-some-chicago-stations/


Gas Prices Well Above $4 At Some Chicago Stations



ChicagoGasPrices.com says the cost of gasoline in the Chicago area as of midmorning Thursday ranged from $3.34 at the Sam’s Club at 7430 Woodward Ave. in Woodridge, to $4.11 at the Mobil station at 1106 W. Fullerton Ave. near DePaul University.

But if you think that’s high, just imagine the sticker shock at a station in Orlando, Fla., which is charging $5.89 a gallon. One man drove in, and drove right back out again.

 

[dmcowen674]

It's going to happen Dave. I think you may finally get to the mythical $5 national average.

I know that $5 that the rabids in here said would never happen.

They are going to faint.

 

[monovillage]

Originally Posted by dmcowen674
Listening on radio on way to work they were talking about ~$10 gas coming here to Chicago.

I look forward to the empty Tollways.



I know its so the Republicans can use the excuse of high gas prices to unseat Obama.

Obama knows this and going on the offense against such lies by Republicans:

2-23-2012

http://finance.yahoo.com/news/analysis-obama-goes-offense-over-high-gasoline-prices-060444869.html

Obama goes on offense over high gasoline prices



As Republican presidential candidates toss barbs at Barack Obama over expensive gasoline, the U.S. president and his team are going on the offensive with a strategy to divert blame and prepare voters for higher costs.

His strategy is both politically- and policy-oriented. The president wants to advance his plans to increase renewable energy sources and reduce U.S. reliance on foreign oil.


But he also needs to win the war of words to gain an upper hand over Republicans in Western battleground states such as Colorado, Nevada and New Mexico, where people drive a lot and feel the sting of rising prices acutely.

Politically, Obama's vulnerability over gasoline prices could be especially deadly in Western states that he needs to win to remain in the White House.

"If someone comes back at him and says, 'What's your policy Mr. Santorum, Mr. Gingrich, or whomever, to lower gasoline prices today,' I don't think they'll have a good answer."

That's not Obama defending himself, it's Yahoo news and AP that's defending him.

 

[fskimospy]

That's not Obama defending himself, it's Yahoo news and AP that's defending him.

Are we cranking out the 'librul media' myth again?

 

[dmcowen674]

That's not Obama defending himself, it's Yahoo news and AP that's defending him.

Did you RTWFA?

Clearly states:

Rising gasoline costs have brought the issue to the forefront of the presidential campaign.

So Obama has started to pepper his speeches with references to prices at the pump.

 

[DirthNader]

Gas is running around $5 in Los Angeles and getting close to $6 in Orlando.

There are a couple of stations in Orlando on Semoron Blvd on the way into the airport that prey on tourists who are either:

a. Deperate to fill up their rental cars and not miss their flights
b. Not paying attention (the prices aren't advertised on any signage)

These stations have been doing this for years. Saying gas is "getting close to $6 in Orlando" is disingenuous. It's around $3.60 for regular unleaded.

EDIT: Link to local news story from 2010, citing these stations with gas ~$5/gallon:

http://www.myfoxorlando.com/dpp/money/051810-gas-prices

 

[ElFenix]

I know that $5 that the rabids in here said would never happen.

They are going to faint.

no one here has ever said it would never happen. inevitability eventually trumps probability.

 

[monovillage]

Are we cranking out the 'librul media' myth again?

Not liberal, but with a decided Democrat tilt. If they were really liberal they'd strive much harder to be objective.

 

[monovillage]

Did you RTWFA?

Clearly states:

Rising gasoline costs have brought the issue to the forefront of the presidential campaign.

So Obama has started to pepper his speeches with references to prices at the pump.

It's an article ? Damn, I thought it was a White House press release.

 

[blankslate]

I wonder if this has been brought up before...

There is also another interesting fact...

if you notice the trendline starting with jan 2001. This means that under President Clinton (relative to Bush) oil production was also rather high.

 

[dmcowen674]

2-23-2012

http://finance.yahoo.com/q;_ylt=AoS...1lBHB0A3NlY3Rpb25zBHRlc3QD;_ylv=3?s=clj12.nym

Crude Oil Apr 12 (CLJ12.NYM)

-NY Mercantile

107.81

1.53(1.44%)


My Electoral Map looks more solid for a Red win everyday


http://www.npr.org/blogs/itsallpoli...-gas-pump-prices-leave-obama-running-on-empty

Could Higher Gas Pump Prices Leave Obama Running On Empty?


This question has been studied by economists as well, as you might expect. Christopher Decker and Mark Wohar at the University of Nebraska asked the question if higher prices for petroleum products raises the chances of the incumbent party losing in states where it won previously? They found a correlation, especially in states that were big industrial consumers of oil.

Worth noting is that several battleground states would be those with energy-intensive manufacturing sectors including Michigan, Ohio, Pennsylvania and Wisconsin.

 

[The-Noid]

OIL FUTURES: Nymex Crude Settles $1.55 Higher At $107.83/Bbl

I think Brent hit an all-time high in Euros earlier in the session. Current quote is $123.55/Eur92.64

 

[Doppel]

I know that $5 that the rabids in here said would never happen.

They are going to faint.

Nobody on anandtech ever, in the history of the forums ever ever has said that gas will never hit 5. Ever. Not ever. I don't even need to have bothered searching to know that.

It is good to se we are now using stations two bucks above their peers, however, as evidence of where prices are. How very meaningful.

 

[Jaskalas]

I know that $5 that the rabids in here said would never happen.

They are going to faint.

If you make a headline 'Sun going to explode, red giant to engulf earth' should we not attack you for making the obvious omission of WHEN it's going to happen?

Broken clocks, etc... you don't get credit for predicting the inevitable just because a decade later it finally happens.

 

[dmcowen674]

Heads assploding has begun in earnest

 

[AznAnarchy99]

There are a couple of stations in Orlando on Semoron Blvd on the way into the airport that prey on tourists who are either:

a. Deperate to fill up their rental cars and not miss their flights
b. Not paying attention (the prices aren't advertised on any signage)

These stations have been doing this for years. Saying gas is "getting close to $6 in Orlando" is disingenuous. It's around $3.60 for regular unleaded.

EDIT: Link to local news story from 2010, citing these stations with gas ~$5/gallon:

http://www.myfoxorlando.com/dpp/money/051810-gas-prices

Yea I work around LA and those stations have typically been $1 higher than the average to get those people who dont know the area.