oil supply issues.

[ericlp]

Originally posted by: Fern

Originally posted by: ericlp

Originally posted by: LegendKiller
50% weak dollar? Did you somehow miss the numerous highlights of the dollar only being down 28% since Nov 2001 whole oil is up over 620%?

Math much?

Hahaha... Damn, gotta love how he says that. ONLY 28%. sheesh... Only?????? 10% is way to much I could see if was only 3%...

hahaha

What a joke!

3% you say?

28% over 7 years is only 4% per year on average.

Originally posted by: Engineer
It was pointed out on CNBC (yesterday) that oil costs $1.50 per barrel to extract from the ground and that amount hasn't increased much over the last decade.

That sounds like a load of crap to me.

The cheapest production is in SA etc. They don't tell anybody how much it costs to extract. It's confidential info.

Fern

I am not talking about 7 years. It really started sliding in the past 2-3 years. Let's just start doing the numbers from that time period as no one was complaining about "OIL" prices 7 - 6 - 5 - 4 -3 years ago. This only happened because of the falling dollar.

As the dollar did not really start sliding till the last few years.

 

[ericlp]

Originally posted by: Engineer

Originally posted by: Fern

Originally posted by: ericlp

Originally posted by: LegendKiller
50% weak dollar? Did you somehow miss the numerous highlights of the dollar only being down 28% since Nov 2001 whole oil is up over 620%?

Math much?

Hahaha... Damn, gotta love how he says that. ONLY 28%. sheesh... Only?????? 10% is way to much I could see if was only 3%...

hahaha

What a joke!

3% you say?

28% over 7 years is only 4% per year on average.

Originally posted by: Engineer
It was pointed out on CNBC (yesterday) that oil costs $1.50 per barrel to extract from the ground and that amount hasn't increased much over the last decade.

That sounds like a load of crap to me.

The cheapest production is in SA etc. They don't tell anybody how much it costs to extract. It's confidential info.

Fern

Just reporting what the analyst stated. I also find it somewhat low, but what do I know. Just how much money does it take to extract one barrel from the ground (no mention of transportation costs, etc., just extraction costs).

sounds like a well rounded number to me. Tho if you had to cost in the factor of digging the well and capping it also but if you figure that well produced 500+ billion barrels of oil then the cost would be like a drop in the bucket.

Edit.

Tho they probably didn't factor in the cost of the sliding dollar so one would have to take on another ONLY 28% to that figure.

 

[LegendKiller]

Originally posted by: ericlp
I am not talking about 7 years. It really started sliding in the past 2-3 years. Let's just start doing the numbers from that time period as no one was complaining about "OIL" prices 7 - 6 - 5 - 4 -3 years ago. This only happened because of the falling dollar.

As the dollar did not really start sliding till the last few years.

Do you want to provide numbers or are you just going to go on about something you've got no data to back up? Here, I'll do your job for you.

Let's take the last 12 months as an example. July 2007, the dollar was at 82. Oil was at 74.

Now, oil is at 141.01 and the dollar is at 74.5.

Do you need me to do simple math for you? Ohh, yes, we must because you're quantitatively challenged.

dollar change

82 - 74.5 = 7.5.

7.5/82 = 9.14%

Oil change

141.01 - 74 = 67.01

67.01/74 = 90.55%


Do we see a pattern developing?


No? Let's take another measurement time. How about 2006?

The dollar was at 85
Oil was at 75.

85 - 74 = 11

11/85 = 13%

75 - 141 = 53.2

66/75 = 88%


Almost the same outcome.


What about 2005?

Oil at 59.

Dollar at 89.

59-141 = 82

82/59 = 139%

89-74 = 15

15/89 = 16.85%



OK, to summarize for those who don't need long math skills.

2007, dollar goes down 9.4%, oil goes up 90.55%
2006 dollar is down 13%, oil is up 88%
2005 dollar is down 16.85%, oil is up 139%

9.4%/90.55% = 10.38%
13/88 = 14.77%
16.85/139 = 12.11%

So, depending on your time measurement period, the decline in the dollar could have had as much as 14.77% contribution to the raise in oil.

Using the 7-year history, in which time the Dollar reached an almost all-time high (and large decline) and oil had a recent-record low, the dollar declined 28% and oil went up 620%. 28/620 = 4.51%


http://tfc-charts.w2d.com/hist_US.html
http://tonto.eia.doe.gov/dnav/pet/hist/rwtcd.htm


Are we going to stop screwing around with this ridiculous notion now?

 

[ericlp]

I was kinda just hoping for a graph on oil vs the dollar sliding. I saw it once but I can't find it. Oh well, it was interesting to say the least. Must of hit a nerve of some sort...

OK, to summarize for those who don't need long math skills.

2007, dollar goes down 9.4%, oil goes up 90.55%
2006 dollar is down 13%, oil is up 88%
2005 dollar is down 16.85%, oil is up 139%

Tho this pretty much proves my point.

Thanks.

 

[dmcowen674]

Originally posted by: blackangst1
I'd like to know who exactly says there is a supply problem?

The only ones complaining of a "supply problem" is the ones benefitting from the high prices and they are the ones drving the prices up:

These people are criminals plain and simple and should be charged immediately with high crimes against humanity on Financial Espionage.

6-30-2008 BP's CEO Tony Hayward said the argument that financial investors buying oil futures were behind a four-year rally that pushed oil prices to new records above $143/barrel on Monday was a "myth."

He said the problem was a failure of supply growth to match demand growth. "Supply is not responding adequately to rising demand," he told thousands of delegates at the World Petroleum Congress.

Repsol CEO Antonio Brufau agreed. "The fundamentals in the industry are the significant reasons for having these prices," he said.

Oil companies often hedge production but do not usually bet on the direction of the oil market, with the possible exception of BP which is considered the most aggressive trader among the majors.

 

[ericlp]

I've read that some believe that this is just an oil bubble and when it bursts you should see the prices drop to 70 - 80 dollars per barrel ... Tho, who knows when and if it's really a bubble.

Time will tell.

 

[Hayabusa Rider]

Originally posted by: ericlp
I was kinda just hoping for a graph on oil vs the dollar sliding. I saw it once but I can't find it. Oh well, it was interesting to say the least. Must of hit a nerve of some sort...

OK, to summarize for those who don't need long math skills.

2007, dollar goes down 9.4%, oil goes up 90.55%
2006 dollar is down 13%, oil is up 88%
2005 dollar is down 16.85%, oil is up 139%

Tho this pretty much proves my point.

Thanks.

I've gotten lost here. Would you restate your point? In another post you seem to say that oil has risen because of the falling dollar, but here you recognize that the falling dollar isn't responsible. Which is it?

 

[LegendKiller]

Originally posted by: Hayabusa Rider

Originally posted by: ericlp
I was kinda just hoping for a graph on oil vs the dollar sliding. I saw it once but I can't find it. Oh well, it was interesting to say the least. Must of hit a nerve of some sort...

OK, to summarize for those who don't need long math skills.

2007, dollar goes down 9.4%, oil goes up 90.55%
2006 dollar is down 13%, oil is up 88%
2005 dollar is down 16.85%, oil is up 139%

Tho this pretty much proves my point.

Thanks.

I've gotten lost here. Would you restate your point? In another post you seem to say that oil has risen because of the falling dollar, but here you recognize that the falling dollar isn't responsible. Which is it?

I am pretty confused here also, since it's pretty obvious that the increase in oil is completely out of alignment with the increase in the dollar. Excluding market inefficiencies, I believe that oil should probably move in similar patterns to oil if it were just the dollar. As such, a 10% decline in the dollar would equate to a 10% increase in oil prices, to keep PPP equiv..

 

[Hayabusa Rider]

Originally posted by: LegendKiller

Originally posted by: Hayabusa Rider

Originally posted by: ericlp
I was kinda just hoping for a graph on oil vs the dollar sliding. I saw it once but I can't find it. Oh well, it was interesting to say the least. Must of hit a nerve of some sort...

OK, to summarize for those who don't need long math skills.

2007, dollar goes down 9.4%, oil goes up 90.55%
2006 dollar is down 13%, oil is up 88%
2005 dollar is down 16.85%, oil is up 139%

Tho this pretty much proves my point.

Thanks.

I've gotten lost here. Would you restate your point? In another post you seem to say that oil has risen because of the falling dollar, but here you recognize that the falling dollar isn't responsible. Which is it?

I am pretty confused here also, since it's pretty obvious that the increase in oil is completely out of alignment with the increase in the dollar. Excluding market inefficiencies, I believe that oil should probably move in similar patterns to oil if it were just the dollar. As such, a 10% decline in the dollar would equate to a 10% increase in oil prices, to keep PPP equiv..

Well that's just it. Dollars don't make a resource "scarce". It would be like valuing an item in different currencies, but instead of trading two currencies at the same time, it's effectively trading the same good in one currency at two different times. The process is pretty much equivalent, if you understand what I'm getting at.

Hmm, maybe that's confusing
Perhaps it's better to say that there is no inherent cost added to oil because the value of the dollar changes. If it were otherwise the price of oil would increase in different currencies simply because it changed in ours, which of course doesn't happen.

 

[LegendKiller]

Originally posted by: Hayabusa Rider
Well that's just it. Dollars don't make a resource "scarce". It would be like valuing an item in different currencies, but instead of trading two currencies at the same time, it's effectively trading the same good in one currency at two different times. The process is pretty much equivalent, if you understand what I'm getting at.

Hmm, maybe that's confusing
Perhaps it's better to say that there is no inherent cost added to oil because the value of the dollar changes. If it were otherwise the price of oil would increase in different currencies simply because it changed in ours, which of course doesn't happen.

Purchasing Power Parity (PPP) says that prices of a good, regardless of where it is purchased, should be the same once currency translation takes place. Thus, if oil costs $100 in USD and the USD/EUR is 1.5, then oil should cost $150 in Euros.

When the Dollar readjusts according to supply and demand of the dollar, the price of oil denominated in dollars will adjust. However, if anything, because the dollar has declined, oil should become more available (less demand) and cheaper, not more expensive and less available. Due to PPP, the appreciation of the oil against the dollar won't make a difference in foreign currencies.

Thus, the price of oil denominated in dollars *should* move in lock-step with the decline of the dollar. Anything outside of lockstep indicates price inefficiencies, or a change in fundamentals. Since fundamentals haven't changed significantly over the timeperiods measured, the only logical conclusion of the regression analysis is that there are inefficiencies.

By inefficiencies I mean anything not explained by simple currency valuation or fundamental shifts. This would include speculation and/or market irrationality, but should also include Geopolitical issues.

If we were to look at a regression analysis...

P = Price
F = Fundamentals
D = Dollar
G = Geopolitical
O = Other

On an index, P equals 100. Fundamentals over the last year (disruption of supply from Nigeria, other declines in production) have been offset by new finds or increased production (Brazil, Bakken, Alberta). However, we might attribute 10% of the increase to Fundamentals.

Then we can easily quantify D, 14% at the most.

Geopolitical? Let's call it 20%, considering Libya, Nigeria, iraq, Iran.

100 = 10 + 14 + 20 + X

X in this case = 66%.

Apply that index to the actual price and you'll get a whole different story.
We can futz with F, G, and O all day. However, we *ABSOLUTELY* know D, we can quantify it through various methods, including the Dollar Index, USD/EUR, or other methodologies.

This is what these people do not get. The only question marks are the ones which are qualitative, not quantitative.

 

[ericlp]

obviously there is more then the falling dollar at play here. But there is a lot more overall variables that we haven't covered here due to fluctuation of oil price vs. the failing of the dollar. I think it would be impossible to cover the entire thing or see the entire picture. I could really care less to go into all the detail on every situation as well.

Good Luck if that is your aim.

 

[LegendKiller]

Originally posted by: ericlp
obviously there is more then the falling dollar at play here. But there is a lot more overall variables that we haven't covered here due to fluctuation of oil price vs. the failing of the dollar. I think it would be impossible to cover the entire thing or see the entire picture. I could really care less to go into all the detail on every situation as well.

Good Luck if that is your aim.

As you can see, I backed up my reasoning. All you provide is fuzzy BS. Whatcha got buckwheat?

 

[blackangst1]

I appreciate your explanations LK. My experience in securities doesnt cover this shit but it's good to know.

 

[AccruedExpenditure]

Originally posted by: Capt Caveman

Originally posted by: AccruedExpenditure

Originally posted by: Capt Caveman
YES, we need another one of these threads!!!!!!!!!!!!!!!!!!!!

And speculation has actually pushed gas prices up more like 30%.

Far more than 30 percent. It's a bubble, it will pop, sub 70 dollar a barrel/ sub 3 dollar a gallon oil will return
-AE

Nope. Not with the weakening of the dollar.

Looks like I was right here too
-AE

 

[miketheidiot]

Originally posted by: AccruedExpenditure

Originally posted by: Capt Caveman

Originally posted by: AccruedExpenditure

Originally posted by: Capt Caveman
YES, we need another one of these threads!!!!!!!!!!!!!!!!!!!!

And speculation has actually pushed gas prices up more like 30%.

Far more than 30 percent. It's a bubble, it will pop, sub 70 dollar a barrel/ sub 3 dollar a gallon oil will return
-AE

Nope. Not with the weakening of the dollar.

Looks like I was right here too
-AE

pwned hi5