Originally posted by: Genx87
Originally posted by: miketheidiot
Originally posted by: Genx87
Originally posted by: miketheidiot
Originally posted by: charrison
Originally posted by: dahunan
Remember this was all about Peak Oil and running out of oil etc.. right? .. lol
now they are giving it away..l
Supply and demand was tight. Prices got high which caused demand destruction and new sources to come online. Add inthe world economy is going in the tank, which demand for oil is down...
yeah lets forget the billions of dollars that hedgefunds put into the market.
stockpiles of oil and gas both increased as the price increased, this was never about supply and demand.
Right this slide started after a jump in supply in July. If Supply and Demand have nothing to do with it. Then why arent the hedgefunds driving the price to 200 instead of 50?
because the bubble ran out of steam and investors bailed.
Ran out of steam when the supply stopped being so tight. This thing collapsed the week they announced a higher supply due to lower demand. I am with Charrison on this one. The price was definately run up past where it should have by investors. But was allowed to due to such a tight supply. It is no coincidence when the supply outstripped demand the bubble burst. Now OPEC is cutting supply to try and stabilize the price due to a lower demand.
Again, there was no higher demand that justified the price. There is a reason why oil futures contracts have declined more than 50%. It's because contracts future-sold the next 8 years worth of production. The problem with people thinking the price went *DOWN* because demand destruction is that they think the price went *UP* because demand creation. However, the problem with that argument is that despite global demand going *DOWN* during the massive run-up in price *AND* the fact that the increase in China's demand was well known, *AND* that OPEC was increasing production in the face of the increase in China's demand, *AND* economic conditions were worsening, prices still went up?
Why? Why, in the face of all fundamentals pointing to the *FACT* that there were no shortages, still room to increase, and falling demand, did prices go up? The simple answer is that there was no fundamental that supported the prices, it was the mere fact that over $100BN of liquidity flooded into the commodities market after the RMBS bubble exploded. Returns were sought.
They are cutting supply to stabilize the price at what *THEY* want their revenue to be fixed at. Why? Because they projected higher revenue due to the manipulation of the futures market, using those future cashflows on projects, such as Dubai. Look at Russia now, they are collapsing. They are in a huge amount of trouble now because they future-sold their own ability to sell oil at a price that wasn't supported by one single fundamental.
Now they're trying to manipulate the market to bail themselves out. However, the biggest problem is that by manipulating the market and not allowing the *ACTUAL* demand for oil (not future-sold oil based upon a ridiculous commodity bubble) to realistically set the price, they *ARE* creating demand destruction by opening up other viable alternatives for oil.
So, in effect, there was no oil bubble based upon fundamentals, it was always going to crash and burn because it was a future-sold market based upopn speculation. However, now that they're trying to support a price artificially, through cutting supply (which the market knows is artificial), they are just creating their own competition.
Frankly, I hope they cut supply to support $100/bbl prices, because, at that level, so many other technologies are viable and attractive that they are shooting themselves in the wang.
This was all a massive joke.