At Least Have The Grace To Oil Up…Again

So last time we talked supply and demand and oil/gasoline prices in the US, there was quite a bit of disagreement about whether or not US demand for gasoline makes any difference in gas prices at the pump at all.  There was agreement that gasoline price increases are pretty elastic (they respond to oil supply cuts and demand increases) but are obnoxiously inelastic when it comes to price decreases (reduced demand doesn’t lower the price of gas.)

We’ve now got evidence that increasing domestic oil production also does not lower the price of gasoline at the pump, because hey, we’re producing more oil domestically under this President.

The United States’ rapidly declining crude oil supply has made a stunning about-face, shredding federal oil projections and putting energy independence in sight of some analyst forecasts.

After declining to levels not seen since the 1940s, U.S. crude production began rising again in 2009. Drilling rigs have rushed into the nation’s oil fields, suggesting a surge in domestic crude is on the horizon.

The number of rigs in U.S. oil fields has more than quad­rupled in the past three years to 1,272, according to the Baker Hughes rig count. Including those in natural gas fields, the United States now has more rigs at work than the entire rest of the world.

“It’s staggering,” said Marshall Adkins, who directs energy research for the financial services firm Raymond James. “If we continue growing anywhere near that pace and keep squeezing demand out of the system, that puts you in a world where we are not importing oil in 10 years.”

There are doubts that energy independence is that close. But many say the booming shale oil fields in Texas and North Dakota and the growth of deep-water drilling in the Gulf of Mexico will allow the nation to cut its reliance on oil imports significantly over the next couple of decades.

But wait…Republicans have told us that increasing oil production now will lower gas prices now.  Certainly Johnny Volcano and Moose Lady ran on a platform like this in 2008.  And yet…gas prices are now going up.  People keep forgetting that President Obama has, on several occasions, said he would increase domestic energy production and work to get technologies on the road to decrease consumption.  Certainly one of the very, very minor bright spots in the Great Recession is that it lowered demand for gasoline in the US.

“Drill baby drill”?  Hey, that’s what we’re doing.  And yet we’re facing $4 gas this summer.  Not only do we have decreased demand, we have increased supply brought on line.  But gas prices are still high.  Here’s another example of President Obama’s policies doing what the Republicans said we should be doing but of course the President not getting any credit for it.  But the big money continues to be put down on long positions.

Hedge funds and other large speculators boosted their net- long position in crude futures to the highest level in nine months, according to the U.S. Commodity Futures Trading Commission. Managed-money bets that prices will rise, in futures and options combined, outnumbered short positions by 233,889 contracts in the week ended Feb. 14, the Washington-based regulator said in its report on Feb. 17. Net-long positions rose by 28,180 contracts, or 13.7 percent, from a week earlier.

And lo and behold, the long positions are again driving prices up.  But we’re told speculation is “a scapegoat”.  Well, it’s not demand, and now it’s not supply.  Either we can’t do anything about gas prices by affecting production and demand in the US so the Republicans should shut it, or we need to have a little talk about rampant commodities speculation.

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103 replies
  1. 1
    cathyx says:

    We just haven’t increased production enough.

  2. 2
    c u n d gulag says:

    Hey MORON CONSERVATIVES – it ain’t the diggin’!
    It’s the speculatin’!

    And gas prices will continue to rise in an effort to make Obama and the Democrats lose in November.

    And I know how we can all make money on that – BET ON IT!!!
    Just like the speculators.

    But then, even an old Agnostic border on Atheism like me has a conscience.

  3. 3
    Guster says:

    Hedge funds and other large speculators boosted their net- long position in crude futures to the highest level in nine months.

    Time to tap the strategic reserve?

  4. 4
    General Stuck (Bravo Nope Zero) says:

    Wink and Nod Monopolistic conspiracy from top to bottom, a few oil companies, a few OPEC’s, and eager beaver speculators trying to play global politics, or at least US politics. Dems won the government in 2008, gas prices fall and stay that way till wingnuts win back the House, and keep going up as the POTUS election approaches, apparently divorced from current supply and demand. Now tell me how Peak Oil is affecting this clear pattern, for the short term we are seeing such fluxes, then I have a bridge to sell you, river included. Fear not, the GOP will cover your bets on the oil scam front.

  5. 5
    Bruce S says:

    “Hedge funds and other large speculators”

    Is there any prospect for a constitutional amendment that would allow us to shoot these people?

  6. 6
    PurpleGirl says:

    If we are drilling more, are we refining more for domestic use or are we selling more crude overseas? After all, the goal of the Keystone Project is/was to bring oil to refineries in the US that were close to ports from which the refined oil could be shipped (overseas) more easily.

  7. 7
    eemom says:

    [gibberish] Obambi [gibberish]

    /Veritard

  8. 8
    Cls180 says:

    I wrote up something on this subject this past weekend if you’d like to know more:

    http://www.dailykos.com/story/.....log_511979

  9. 9
    R Johnston says:

    It is supply and demand. China and India exist, and while their growth has slowed down a bit, they’re still expanding well more than rapidly enough to offset decreased U.S. demand in the global oil market.

  10. 10
    Crusty Dem says:

    We’re up ~10-15% from 2008, but still importing nearly 1/2 of what we use. We would have to increase both production and fuel standards by ~50% to get in the vicinity of “energy independence”.

    And the continued high gas prices? Mostly speculation.

  11. 11
    trollhattan says:

    Don’t hold your breath waiting for The Atlantic’s Senior Editor, Business and Economics to weigh in to note awhl is fungible, one of her favorite words in the Planned Parenthood kerfuffle. Even if it is.

  12. 12
    ruemara says:

    You’ve been right on target about this being the next big talking point. It’s all over the FB from various wingnut/libertarian fools I tangentially know.

    OT, can I get a big dollop of good vibes out to my mister? He’s heading off to his first interview for a pretty decent job (that I found and sent the interview winning resume for) in about a year and half. And he’s driving me nuts, which is making my good vibes sending a little wonky. Seriously, fighting over whether or not me asking if he will shower before leaving or if my facial instructions are clear? His natural reaction to stress is to use me as an emotional chew toy, but he really, really needs to nail this interview and land the job, so I am trying not to add to his stress.

  13. 13
    SpotWeld says:

    Okay, a question for people with more investment experience.

    When a comodity price gets this disconnected from supply and demend, isn’t that a huge screaming alarm to get out of that particular market, now now now!

    Some peaks and troughs are expected, but don’t huge spikes usually indicate tons of “stupid money” going in signalling the time for “smart money” to switch over to some other investment?

    (Unless you are being paid by other people so you can have the job of gambling thier money for them)

  14. 14
    General Stuck (Bravo Nope Zero) says:

    @ruemara:

    considered it dolloped, the good vibes.

  15. 15
    chopper says:

    but…drill here! drill now! wait, we’ve been doing that? shit!

    gas prices are high because oil prices are high in spite of our increased domestic production and reduced consumption, because we’re not the only market out there. china and india are sucking up every last drop of extra supply and it’s still not enough. they are the highest bidder and it’s driving the price up.

    the world market, specifically exports, drives the price of oil. and gas in the US still revolves around that price. simple as that.

  16. 16
    robertdsc-PowerBook says:

    Sending good thoughts his way, Ruemara.

  17. 17
    jayackroyd says:

    This is a really hard story to tell. If “speculators” are pricing futures too high–“too high” meaning more than the spot price plus the cost of storage up to the delivery date–then there is free money to be had.

    Keep in mind that most participants in futures markets have an inherent long or short position, and use futures to offset their inherent position. Electricity producers are inherently long–they gotta buy in the future no matter what, while oil producers are inherently short. Speculators add lubrication to the system, but the prices are driven by participants with underlying positions.

  18. 18
    gene108 says:

    OPEC claims to control 80% of the world’s proven oil reserves.

    We raise production. They cut production.

    Prices remain the same.

    I’m not sure, why no one mentions OPEC’s role in driving oil prices, when talking about domestic production.

  19. 19
    jayackroyd says:

    @SpotWeld:

    “Get out of the market”? No, it’s a screaming signal to get into the market on the short side–if there’s nothing else going on.

  20. 20
    General Stuck (Bravo Nope Zero) says:

    When a comodity price gets this disconnected from supply and demend, isn’t that a huge screaming alarm to get out of that particular market, now now now!

    I am an idiot, and can see that any claim to free market supply and demand cannot exist when only a few actors own or control the entire apparatus from wellhead to gas pump. I can drive any day into town, and like Synchronized Swimming, every gas station has identical prices. That ain’t natural and it ain’t competitive.

  21. 21
    Violet says:

    @ruemara:
    Sending good vibes, if that kind of thing is possible through the intertubes. I hope it goes well for him. And hang in there. He’s probably very nervous but not handling it well. Which, given his depression and other stuff, is really hard on you. Try to let it roll off you today and hopefully the interview will go well for him.

  22. 22
    jayackroyd says:

    @gene108:

    Indeed. It is very interesting that the US tolerates the cartel, in fact, spends a good chunk of its GDP providing security for the cartel’s operation.

  23. 23
    jayackroyd says:

    @General Stuck (Bravo Nope Zero):

    That’s actually pretty good evidence that the price of gasoline is set competitively. It’s an undifferentiated, commodity product (despite attempts at branding with supposed additives). The prices in a competitive environment should be identical.

  24. 24
    SpotWeld says:

    @jayackroyd: as you said “if there’s nothing else going on”

    If we learned anything from the housing crash. It is that when the palyers and shakers see the dumb money coming on one side, they immediatly start playing both sides of a market.

    And if they’re playing one side publically, then they’re just playing the other privately.

    In short, if you’re not one of them, you’re going to be the one left holding the hot potato when the buzzer goes off. (Regardless of how you played the game up until that point)

  25. 25
    StringonaStick says:

    @ Spotweld: Usually your assessment is correct. However, trading commodity futures is not for the part-time former dotcom-betmaker. Making a trading mistake/losing with commodity futures can have huge financial implications if you don’t know what you are doing, and there are few non-pro traders in commodity futures. Still, the same general idea applies, because pros make mistakes too and the madness of crowds/herd behavior affects them as well.

    It won’t blow up as spectacularly as stocks did in 2000 and housing did in the mid- 2000’s; the former was facilitated by money that could be moved within nanoseconds and non-pro money, and the latter had a lot of different players and barely connected aspects to the game. Commodity futures are played in a fairly isolated sphere, and the number of actual players in that sphere is much, much smaller.

    What would really upset the commodity futures trading cart would be a sudden market intervention (government crack-down on BS speculation); I’d love to see that!

  26. 26
    Belafon (formerly anonevent) says:

    @jayackroyd: What’s interesting is that the prices around the DFW have been changing throughout the day, sometimes by quite a bit. I’ve seen the price in the morning be 10cents higher than the previous evening, and then back down by the evening.

  27. 27
    Violet says:

    The thing about this oil prices speculation is that it’s happening pretty close to the housing bubble, mortgage and other banking disasters and all of that involved convoluted pricing speculation by hedge fund managers and other bankster types.

    The general public is pretty primed to hate on those types of people so if Democrats, other folks on the left and especially the Obama administration start pushing back on what’s happening by using phrases like “they’re treating oil prices like a cas ino game”, “hedge fund managers attacking our energy security”, “Wall Street types manipulating oil prices to get rich” etc., that kind of thing will resonate in a big way. But people have to push back.

  28. 28
    Brachiator says:

    Either we can’t do anything about gas prices by affecting production and demand in the US so the Republicans should shut it, or we need to have a little talk about rampant commodities speculation.

    It’s not just commodities speculation, it’s manipulation of oil production and refinery capacity.

    @chopper:

    china and india are sucking up every last drop of extra supply and it’s still not enough. they are the highest bidder and it’s driving the price up.

    Sorry, that’s not how it works. The US is no longer a manufacturing giant. The West has largely shifted this to China. It only makes sense that oil use would shift as well. This would also suggest that overall oil consumption may have declined somewhat in the US. As long as you use China to make your stuff, don’t complain about them using oil.

    The same is true of India to a lesser degree. And also you can’t really blame Japan, even though oil use has increased as nuclear plants have been taken out of service.

    Oil is a global commodity. Talk about domestic and international oil is misleading and largely a waste of time.

  29. 29
    chopper says:

    @jayackroyd:

    right. speculation in the oil market is fine in the form of futures. but when supply gets tight, it makes the market susceptible to a freakout. it’s like when your body does something wrong and the natural bacteria in your body grow out of control and you get sick as hell.

    given that supply has had intermittent trouble meeting actual demand since crude production plateaued in 2005, and will for the duration, we’re going to see many repeats of the 2008 situation, although maybe not as ‘spiky’, and in every case the ‘baseline’ cost is going to continue going up. brent has spent the last year over $100/bbl. this is the new ‘normal’.

    as an aside, ever calculate the actual cost of gas in the US when oil is consistently $100/bbl? it aint pretty.

  30. 30
    philpm says:

    But if we regulate the commodities traders, how ever will they create jobs?

    /Republican

  31. 31
    Nylund says:

    I have some issues with the way you phrase your elastic/inelastic bit, but the general point comes across correctly.

    In the end it comes down to supply and demand. Oil and gas are fungible goods, so (for the most part) it doesn’t matter who or where it’s made, bought, or sold. It’s a single global market. [not quite 100% true, but a decent first order approximation]

    Fundamentally, the question is, “Can the US alone shift either the world demand or world supply curves?”

    On the demand side, we’re a big enough player, but whatever cuts we make (via less driving or more efficient cars), are probably swallowed up (and then some) by growth in demand from other countries like China.

    Can we effect supply? Sure, we can make more, but what’s to stop OPEC from cutting their production down in order to maintain the current price? Short answer: Nothing.

    Basically, gas prices are what they are (and what they are is, in part, what OPEC (and oil speculators) say they are).

    It is indeed true that we would “drill baby drill” and sell OUR oil for that money and let the OPEC countries keep their reserves while we dwindle our own. They’d probably like that for, as time goes on, demand will increase and oil will become even scarcer, so it’s going to add value to their reserves.

    But even if that didn’t happen, what does “our” oil even mean? The oil business is privately owned in the US, so it really just means lots of profits for private companies (and not necessarily even American companies), and there are no guarantees that any of those profits will even be kept in the US.

    In short, “drill baby drill” will make a lot of money for some corporations in the short run, probably benefit OPEC in the long run, have ambiguous profit benefits for Americans, and do little to nothing to change gas prices for average Americans.

    In other words, short term gains for executives and shareholders of Exxon, BP, Shell, etc. and not much benefit for anyone other Americans.

    No wonder the GOP loves the idea.

  32. 32
    General Stuck (Bravo Nope Zero) says:

    @jayackroyd:

    The prices in a competitive environment should be identical.

    Real competition is between unaffiliated entities all the way through the delivery system including one gas station to the one next door. Not between so called markets. That is the problem, and it is a shroud of monopolistic complicity gibberish to call it that. It is profoundly un competitive, when I have to drive 100 miles to find cheaper gas, or more expensive gas. Rather than in the local market.

  33. 33

    I put to you that the large and constant swings in gas price are themselves the proof that something is wrong. Supply and demand do not go up or down rapidly, but gas prices change every day. What can account for that disparity? I’m not seeing anything but petroleum company shenanigans or powerful influences of speculation on the market.

  34. 34
    Bubblegum Tate says:

    @cathyx:

    One wingnut I know keeps screaming that even though overall oil production is up, oil production on federal land is down, therefore prices are going up. I don’t know how to make any sense of that argument at all.

  35. 35
    gnomedad says:

    Economic literacy is objectively pro-terrorist.

  36. 36
    JGabriel says:

    Zandar:

    But we’re told speculation is “a scapegoat”.

    God forbid we should be crude about crude.

    .

  37. 37
    Yutsano says:

    @Nylund:

    Can we effect supply? Sure, we can make more, but what’s to stop OPEC from cutting their production down in order to maintain the current price? Short answer: Nothing.

    Most OPEC nations set their budgets by the current price of oil because it’s their only real export of note. Because of this, it gives them a huge incentive to manipulate the price as much as possible. When we should really get worried is when OPEC starts to do that and it has little to no effect because the supply isn’t there. Either we have a transition plan in place or we’re in Hunger Games territory.

  38. 38
    Another Halocene Human says:

    B-b-b-but reining in commodities speculation makes Baby Jesus cry!

  39. 39
    philpm says:

    @Bubblegum Tate:

    Don’t try, it’ll just make your head hurt. That person is obviously one of those that have no connection between reality and their brain.

  40. 40
    jayackroyd says:

    @chopper:

    What I think you’re saying here is that oil production is price inelastic–that when supplies get tight, it’s difficult to bring more production online quickly. That is, production facilities that are profitable at 100 dollars a barrel don’t come on line immediately in response to those prices (and may not come on line at all until that price appears to be stable.)

    So there are going to be spikes and valleys, as production capacity responds, slowly, to demand.

    In this case, of course, there is the driving force of OPEC, which effectively sets supply and pricing.

    Until peak oil comes, and then everybody’s fucked.

  41. 41
    Zifnab says:

    @General Stuck (Bravo Nope Zero):

    I can drive any day into town, and like Synchronized Swimming, every gas station has identical prices. That ain’t natural and it ain’t competitive.

    I don’t know where you live, but down here in Houston there are pumps that vary by upwards of 20-30 cents / gal depending on how close they are to a highway or the center of town.

    Prices likewise vary by region – Texas has cheaper gas than Florida which has cheaper gas than New York or California.

    If you are asking why two stations right next to each other will be within a penny’s difference, well… That’s the problem with selling identical products across the street from one another. Prices are supposed to normalize in this situation.

    I’m not going to toss the idea of oligopolistic control of the oil supply out the window, because I agree its there to some degree. But I don’t think your evidence is consistent or particularly indicative of the problem.

  42. 42
    Amir Khalid says:

    @ruemara:
    It’s no small thing for your man to be competing for a job again; especially against other candidates who might not have to explain away a year and a half out of work, even if it was through no fault of his own. He’s got a lot riding on this, including what he thinks of himself, and what he thinks you think of him (no matter how much you assure him otherwise). But he’s definitely got something to offer, if his resume got him to an interview. Don’t let him forget that. Good luck to him and you.

  43. 43
    OzoneR says:

    And conservatives will ignore this and Republicans will scream for more drilling and 45%-50% will believe them despite this because it just makes sense to them, and the media will do nothing to point out that we are drilling because it would ruin the narrative.

  44. 44
    Another Halocene Human says:

    One problem with oil is that one of the big checks on speculation in the CBOT (AFAIK–unless they’ve recently changed this) is that you must be able to take delivery.

    Pork bellies and orange juice have a limited shelf life–but oil can be stored indefinitely.

    According to some sources, this is exactly what some investment banks were doing, off-shore in some barges, during the Great Run-Up of 2008.

    Stocks and commodities markets are the victims of promoters today. All of the post-Great Crash reforms have been watered down, rolled back, or just aren’t enforced. We’re in Joe Kennedy territory, people. Less transparency, more (licit) fraud. In a just world, would Screaming Cokehead Jim Cramer be a free man after telling the rubes to sell while his buddies were buying and vice versa so many times?

    In fact, I wouldn’t be shocked if the Longs in the oil market aren’t pushing Fox News to run this bogus story. Get the stupid longs in (the dumb money) so you can exit your position with your profits intact.

    If I were an evil bastard, that’s what I’d do.

  45. 45

    […] Balloon Juice » At Least Have The Grace To Oil Up…Again […]We’ve now got evidence that increasing domestic oil production also does not lower the price of gasoline at the pump, because hey, we’re producing more oil domestically under this President. The United States’ rapidly declining crude oil supply has made a stunning about-face, shredding federal oil projections and putting energy independence in sight of some analyst forecasts.After declining to levels not seen since the 1940s, U.S. crude production began rising again in 2009. Drilling rigs have rushed into the nation’s oil fields, suggesting a surge in domestic crude is on the horizon. […]

  46. 46
    General Stuck (Bravo Nope Zero) says:

    @Zifnab:

    But I don’t think your evidence is consistent or particularly indicative of the problem.

    I grew when there was real competition in a small town. We had gas wars and the like, locally. Now There may be some difference of a few cents here and there, especially in a large metro area. But the oil companies do have control of the distribution, all the way through. So that should tell you something is wrong. I lived in Albuquerque for years, and the lag time for the synchronized price fixing lagged some due to so many stations. But it was there too.

  47. 47
    SiubhanDuinne says:

    @ruemara:

    Dollops, incoming.

  48. 48
    cmorenc says:

    @General Stuck (Bravo Nope Zero):

    I can drive any day into town, and like Synchronized Swimming, every gas station has identical prices. That ain’t natural and it ain’t competitive.

    Um…yes this phenomena DOES have a completely natural, bona fide rational free-market explanation, even if the behavior of the oil-production players does not.

    Any gas station that attempts to maintain a retail price for e.g. regular-grade gasoline that is more than a small fraction (two or three cents per gal) above that which car owners know to be available within a conveniently very short driving distance will attract dramatically fewer people to buy gas at their stations. Along therewith, higher-price stations will also attract dramatically fewer customers for the products sold in the convenience-store section that is now typically an integral part of most gas station operations (and also the most profitable part of most such operations). The gas stations I’ve observed that seem better able to withstand a slightly higher margin over the cheapest stations are those which also successfully offer substantial auto maintenance and repair service departments, with an established clientele for those services. But even at these stations, the variation within which they can stay competitive is generally at most around three or four cents per gallon relative to the cheapest stations within a relatively short commute out of three-fifty per gallon gasoline, i.e. about 1%.

    But the basic point stands: at the local retail gas-station level, the relative uniformity of price across different stations is a reflection of an intensely competitive local free market, and not the product of price-fixing. Now whether the price of bulk gasoline from their suppliers and oil production companies is affected by anti-competitive behaviors with price-fixing type effects, that is a much more plausible possibility.

  49. 49
    chopper says:

    @Frankensteinbeck:

    when supply can’t meet demand in any commodity, much less one as universally important as oil, the market pricing mechanism gets crazy and you can see some amazing changes in price.

  50. 50
    Samara Morgan says:

    @gene108: its not speculators– its mostly sanctions on Iran and AmerIsraels uberstupid ME policy.
    alsotoo, when oil prices rise, Iran makes more per bbl.

    of course, if Israel bombs Qom then global oil prices will instantly go to 200$ bbl. or more, no matter what Our Friend the House of Saud does.
    that might be what Bibi relly wants.
    there is a lot of noise about how the US and the Euros and Brits dont get much oil from Iran– you know who does?
    China.
    doesnt China hold a lot of US paper?

  51. 51
    Marcellus Shale, Public Dick says:

    oil is currency, when currency falls or is expected to, people holding that currency put it in oil.

    it was dollars to euros that mirrored the spike in oil in 2008, i bet its the euros to dollars now.

  52. 52
    General Stuck (Bravo Nope Zero) says:

    @cmorenc:

    But the basic point stands:

    No it doesn’t. The market competition you describe is contrived around monopolies that set the prices in unison before it even gets to the gas station. Just enough to allow for such parsing to provide a veneer of normalcy per REAL competition. You can buy that if you want. I won’t be.

  53. 53
    chopper says:

    @Yutsano:

    SA and iran have both recently mentioned that their new target for oil is about 100/bbl in order to be able to balance their budgets.

    given that, with population and economic growth, more and more of their own product has to be burned ‘in house’ every year (the so-called Export Land model), it means they need to see oil go up in price even faster every year, since they’ll be exporting less and less as time goes by, while their internal costs for upholding an expanding population go up.

    to balance X rise in internal costs and Y drop in export profits you need oil costs to go up by X + Y or you lose your head.

  54. 54
    PeakVT says:

    Here’s some data if anyone cares to examine such things. Units are millions of barrels per day. Total consumption is forecast to increase by ~1.3 mpbd in 2012.

  55. 55
    Chris T. says:

    @SpotWeld: You are correct, sir!

    (In this case, the hedgies are betting other people’s money, and get to take 20% regardless of results.)

  56. 56
    Rawk Chawk says:

    or we need to have a little talk about rampant commodities speculation

    How about a BIG fucking talk about rampant commodities speculation, which should have been going on since the last go round of this bullshit four years ago?

  57. 57
    jeff says:

    @Brachiator:

    And yet it’s the largest manufacturing nation in the world.

  58. 58
    General Stuck (Bravo Nope Zero) says:

    And how do any of you explain the obscene profit margins for the oil cartels and their minions. That is the bottom line to tell you something is wrong. Or, should tell you that.

  59. 59
    catpal says:

    so is gas prices the New Repug talking point, because nothing else anti-Obama is working?

    well what do the repugs answer to this?

    gas and other fuels are top US export

    Measured in dollars, the nation is on pace this year to ship more gasoline, diesel, and jet fuel than any other single export, according to U.S. Census data going back to 1990.

    Of course high prices are a result of market speculation. Wall Street cannot stop being Greedy.

  60. 60
    jayackroyd says:

    @PeakVT: Thanks! I was trying to remember that web site’s url.

    This week in petroleum, from the same source:

    http://www.eia.gov/oog/info/twip/twip.asp

  61. 61
    Jay C says:

    Not that a little self-congratulation is out of order: but I’ll just note that this is, IMO, one of the better comment threads I’ve seen on Balloon Juice lately: everyone seems to have a reasonable handle on the fundamentals of the problem (oil markets) – maybe it’s because Veritas is back under his bridge, and unavailable to pollute the thread with gibberings about “Obambi”…

    Which leads me to my question: I realize that the Republicans are desperate to gin up any negative attitudes towards the Obama Admin that they can in the public mind: but I’m just wondering exactly how they can pin the onus of high retail gas prices on Administration policies (still less what magic solution would lower them in a GOP regime).

    I mean, there’s always hippie-punching (“we can’t drill-baby-drill ‘cuz Obama caters to those DFH tree-huggers who Hate America!”): but I can’t see this having much traction as a campaign issue – outside the 27% nut-fringe, of course; or some vague attempt to harness consumer dissatisfaction: the issue just doesn’t seem like a likely winner…

  62. 62
    chopper says:

    @PeakVT:

    1.3mbpd which will all have to be met by unconventional crude, condensate, NGLs and biofuels. actually more, since existing conventional wells will likely lose at least that much in daily capacity in 2012. likely a lot more.

    condensate of course isn’t crude oil, but it does help the gasoline market as it resembles gas and can be blended in with little refining. NGLs are not oil either. biofuels are a joke. so really all growth in the supply of actual oil, for pretty much the entire future, rests on shit like deep water heavy crude and tar sands and fracked wells that peak and peter out over the course of 12 months.

    this is the future of oil. it aint pretty.

  63. 63
    Marcellus Shale, Public Dick says:

    @Jay C:

    easy-peasy, if you believe there is a wedge of undecideds somewhere in suburbia or exurbia. you blame the “others”, its always demand in foreign countries that is shooting oil prices up, and obama is, therefore not tough enough on china, india, etc…

    smatter in some outsourcing half truiths, bury the fact that the gop pushes for the tax breaks that make it fun and profitable, tellum obama’s not only killing your jobs, but them people are buying up your cheap oil and making you pay through the nose for your god given right to ride solo 80 miles each way for work.

  64. 64
    Citizen_X says:

    If we continue growing anywhere near that pace and keep squeezing demand out of the system, that puts you in a world where we are not importing oil in 10 years.”

    [Emphasis mine.]

    Well, we’re not going to grow production at “anywhere near that pace.” Here is a good report on the effect of the increased domestic drilling on the domestic energy market (answer: not much at all.)

    Besides the global market that others have noted, overall US production will still decline. The rise in production from new fields is offset by depletion of the old fields. The US Energy Information Administration projects a maximum rise of 1.5 million barrels a day–not enough to get us anywhere near the US peak again.

    We are drilling here, drilling now, as fast as we can (lack of crews and rigs is restraining activity, not the ebil gubmint). Conservation has been just as important as drilling. Why aren’t wingnuts screaming “CONSERVE HERE, CONSERVE NOW?”

  65. 65
    PeakVT says:

    @Jay C: Americans in general are completely irrational about petroleum, so any vaguely plausible lie that promises endless happy motoring will work.

  66. 66
    General Stuck (Bravo Nope Zero) says:

    @PeakVT:

    We love our automobiles, and might marry them, if Santorum would let up on the bible thumping for a few seconds.

    This topic always gets my BP through the roof. And must repair to the fainting couch to recover from the excitement.

  67. 67
    catpal says:

    @jayackroyd: “spot price plus the cost of storage up to the delivery date” Storage? Delivery date?

    the entire bogus thing about oil speculation is that the Buyers Never Have To Take Actual Delivery. how great is that deal?

    and of course Koch aholes are big into this per ThinkProgress

    Experts contacted by ThinkProgress pin the blame for sky-high prices and record volatility on excessive oil speculation, the oil market corrupted by unregulated Wall Street traders who buy and hold onto oil futures contracts with no interest in the actual delivery of oil. and Even Goldman Sachs concedes that at least $27 of the price of crude this year has been a result of rampant speculation, not supply and demand.

  68. 68
    Nemesis says:

    Recently, at a rw site, I challenged thier fuming over the Obama Admins refusal to grant a permit for Artic drilling.

    I stated that oil would take years to come into production, so it could not be a basis for the cuurent jump in oil prices.

    Well, I was told it would take a few months to drill the well(s), build the pipeline and have the oil flowing somewhere near you. Facts be damned.

  69. 69
    trollhattan says:

    Piling on, the very folks who would have us drilling every corner of the nation to extract the final dino drop are the ones busy mocking the Volt/Prius/Leaf…anything that threatens the typical pump-to-drive relationship we car owners are shackled to.

    They really do think we’re that stupid.

  70. 70
    Zifnab says:

    @General Stuck (Bravo Nope Zero):

    And how do any of you explain the obscene profit margins for the oil cartels and their minions. That is the bottom line to tell you something is wrong. Or, should tell you that.

    Again, I don’t see anyone arguing that some degree of cartelization has occurred. I mean, for Christ’s sake, OPEC has the word “cartel” in its name.

    That said, oil is relatively cheap to produce, particularly in nations like Saudi Arabia where you basically just stick a hose in the ground and suck. However, demand for oil is very high, and tends to be flexible enough that lower price will increase demand. So if I’m sitting on an oil well, I know production has peaked but demand hasn’t, and I want to maximize profits, I don’t need to be in a cartel to know maybe I shouldn’t drain my well dry tonight. Might as well pace myself and ride the wave.

    We are seeing developers in natural gas begin to recognize this, too. The total supply of gas is finite, and the market price is the lowest that its been since the 70s. So frakkers are kinda easing up on production as they collectively realize the market is getting flooded and waiting a few months may produce a market with higher prices.

    Now nat-gas isn’t at its peak, and demand/supply ratios aren’t like that for light sweet crude. So the profits aren’t in nearly the same ball-park. But be patient, and in twenty or thirty years if all your competitors blow through their inventors while you camp out on your stash, they could be. That is the gamble plenty of oil producers (like OPEC) are savvy to make.

  71. 71
    Nemesis says:

    @catpal: I read where not only do speculators never take possession of the commodity, but speculators are able to play with millions of dollars daily while going “naked”. Naked means they have no money (I could say skin in the game, but that would be a bad pun, right?) in the game. Zero. They have been approved to trade a commodity and put up no money in order to do so. This is so wrong it hurts.

  72. 72
    trollhattan says:

    @catpal:

    I can no longer find a reference, but read a while back how many times crude changes hands before delivery to the refinery today, compared to what was once typical. Of course the increase has been huge and if each speculative step extracts a profit, somebody’s paying for those profits at the end of the chain. Who could that be?

  73. 73
    Brachiator says:

    @Jay C:

    Which leads me to my question: I realize that the Republicans are desperate to gin up any negative attitudes towards the Obama Admin that they can in the public mind: but I’m just wondering exactly how they can pin the onus of high retail gas prices on Administration policies (still less what magic solution would lower them in a GOP regime).

    The GOP loves to indulge the fantasy that there is an endless supply of US American(tm) oil just offshore, and if the Democrats let the oil companies drill baby drill, then there will be oil for everyone forever. It’s a big lie, but it works surprisingly well.

    Amazingly, some people also still believe that BP is an American oil company.

    But then again, some people believe that the Green Energy Fairy will also bring endless supplies of free energy.

  74. 74
    catpal says:

    @Nemesis: I know. funny that I am not able to purchase anything, or gamble at the casino with Zero money. how do I get into that scam?

  75. 75
    PeakVT says:

    Let me attempt to address the two largely separate lines of arguments here by pointing out that the way to at least get a sense of how much speculation or “uncertainty” is adding to the price would be to find the cost of production from the field that fulfills the last bit of demand, ie. the most costly active field. AFAIK this is not commonly available data, so we’re not going to resolve the issue within the confines of this thread.

  76. 76
    Yutsano says:

    @Brachiator:

    But then again, some people believe that the Green Energy Fairy will also bring endless supplies of free energy.

    Well it’s not green, it’s yellow. And it will eventually burn itself out but it will take billions of years. We’re still just barely learning how to harness it even though plants learned the trick billions of years ago. Someday (hopefully really soon) we’ll even be able to mimic that closer to home. Until then we idiotically keep burning a finite resource.

  77. 77
    chopper says:

    @Brachiator:

    there is an endless supply of US American™ oil

    such as in the Iraq. it’s funny cause that’s pretty much why we invaded.

  78. 78

    It is pretty important to consider just how much energy was added to organic matter to make oil/gas/coal from seed to the stuff that gets drilled for. This is what we are trying to replace with alternate energy sources. That is a really big hurdle.

  79. 79
    Brachiator says:

    @Yutsano: RE: But then again, some people believe that the Green Energy Fairy will also bring endless supplies of free energy.

    Well it’s not green, it’s yellow. And it will eventually burn itself out but it will take billions of years. We’re still just barely learning how to harness it even though plants learned the trick billions of years ago. Someday (hopefully really soon) we’ll even be able to mimic that closer to home. Until then we idiotically keep burning a finite resource.

    Maybe fusion power will be the ultimate answer. But who knows when and how we will get there. But unless we turn into magic flying chlorophyll creatures, there still really ain’t no such thing as “clean” energy. There are always byproducts, and in massive quantities, those byproducts will create problems.

  80. 80
    Svensker says:

    Watch the saber rattling by Israel on Iran and watch the oil prices. When one gets loud, the other goes up. Don’t blame the speculators — they’re anticipating a bad outlook for oil prices (for consumers, including business) if Israel succeeds in attacking Iran, or getting Uncle Sam to do it for her.

    War mongering and war are bad not only for people but for economies dependent on scarce commodities affected by war. It’s not the speculators, it’s the war mongers.

  81. 81
    Amir Khalid says:

    @Zifnab:

    I mean, for Christ’s sake, OPEC has the word “cartel” in its name.

    Actually, no.

  82. 82
    Downpuppy says:

    Considering the 2 parts of the hydrocarbon market should quiet most worries about manipulation:

    Natural gas is basically a North American market. Increased supply has utterly tanked the price.

    Oil is a world market. Crashing the world economy tanked the price, but a little growth in Asia brought it right back.

    If you must have a conspiracy, a more interesting question is : How much of the otherwise inexplicable austerity economics that the major countries have been pushing is due to them understanding that opening up growth would lead rapidly to an oil crisis?

  83. 83
    cervantes says:

    Alas, I arrived here too late, but let me give you the 4-1-1. It’s not speculation. The fact is that the marginal increase in production in the U.S. is a fart in a whirlwind compared to global production, and global production has been unable to increase in response to the rising price. That’s called Peak Oil, folks. It’s here, it’s now, and it’s never going away. Get used to it.

  84. 84
    Chris T. says:

    @cervantes: That’s the long-term picture, over the next few decades. Over the short term, the fact that demand is nosing right against supply means that the market is ripe for manipulation. Manipulation is therefore occurring.

    Manipulation leads to spiky prices, so we should expect gasoline to be (e.g.) $5, then $2.80, then $9, then $2.12, then $7, then $4.50, then $11, then $5, etc., with the long term overall average rising, but with sudden, vertigo-inducing high and low prices.

  85. 85
    chopper says:

    @Brachiator:

    Sorry, that’s not how it works.

    it’s exactly how it works. go look into the rates at which china and india have been buying up oil over the past few years. it’s insane.

    oil is a global commodity but there are local and export markets and both are very important.

  86. 86
    Brachiator says:

    @Downpuppy:

    Natural gas is basically a North American market. Increased supply has utterly tanked the price.

    Russia has a significant natural gas supply and has been using it to apply political pressure.

    At least eight EU countries, including Italy, France, Germany and Austria, were affected by a cut in Russian gas supplies to the EU in early February as cold weather hit Europe.
    __
    At the time, Gazprom said it was exporting gas to Europe at maximum capacity, and said it was not contractually obliged to send additional volumes to meet extra requests.

    Good times.

  87. 87
    Brachiator says:

    @chopper:

    it’s exactly how it works. go look into the rates at which china and india have been buying up oil over the past few years. it’s insane.

    The world expects China to make all its stuff. It’s only reasonable that their oil consumption would increase significantly.

  88. 88
    Downpuppy says:

    You don’t need manipulation to get spikes. Any overly simple ecosystem – lynx/hares, lemmings – with long lead times and random shocks is more likely to go through severe cycles than to find an equilibrium.

    Natural gas fits the conditions for instability perfectly. There’s the stampede into shale, time delays from rig leasing to initial production, hurricanes or their absence, this year’s lack of winter – all of which can turn a slight deficit into a 5% surplus, and blammo.

  89. 89
    chopper says:

    @Brachiator:

    you’re acting as if all of the increase in china’s energy use corresponds solely to its factories exporting crap. it doesn’t. china and india are both in the process of westernizing. the middle class in china is exploding. that’s more cars, bigger cities, more infrastructure, more energy.

  90. 90
    El Cid says:

    Oil and gas companies should just choose to abandon market incentives and increase the supply and lower the price of gasoline for U.S. consumers, even though it’s astoundingly profitable right now for them to produce and sell at current limited demand levels at quite high prices.

    After all, conservatives want them to, and perhaps believe that oil & gas suppliers will lower the price of gas to us and thus undercut their profits in a situation of controlled cost of production with limited demand because they’re nice.

    Lots of other businesses would happily continue to produce and sell a certain amount of product in a domestic market when demand is limited and high prices lead to huge profitability, but I’m sure that oil & gas companies will be different because right wingers want to believe that they will.

    We’ll ‘let them drill’ and they’ll spend more money on production for some reason or other, and hold onto the supply, I guess, and even though we’re driving less and buying less gas, and yet buying that amount constantly, the oil and gas companies will lower prices just to meet our consumer expecations of what would be nice. Or in gratitude.

    For some reason, surely, because they don’t have a market incentive to do so.

    Oh, right, I forgot — maybe it’ll give an opportunity for all those spry local small business oil & gas companies to compete with the big boys, because it’s not like it’s hard to get into that business.

  91. 91
    Downpuppy says:

    @Brachiator: Why, yes, Europe/West Asia is having gas shortages (and deadly cold) at the same time we have a surplus (and I’m going out for a walk on yet another perfect day.

    That’s exactly what I meant by not a global market.

  92. 92
    chopper says:

    @Downpuppy:

    well, oil moves around much more freely than gas. pipelines are great but jesus, is it annoying to send the stuff by ship.

  93. 93
    jayackroyd says:

    @catpal:

    As I said, the speculator component of any futures market is a small fraction of the participants. The market is driven by the people who deliver the actual product, and those whom receive it.

  94. 94
    Brachiator says:

    @chopper:

    you’re acting as if all of the increase in china’s energy use corresponds solely to its factories exporting crap. it doesn’t. china and india are both in the process of westernizing. the middle class in china is exploding. that’s more cars, bigger cities, more infrastructure, more energy.

    Let’s look at some of the data:

    China’s economic rise has required enormous amounts of energy—especially since much of the past decade’s growth was fueled not by consumer demand, as in the U.S., but from energy-intense heavy industry and infrastructure building.
    __
    The U.S. is also by far the biggest per-capita energy consumer, with the average American burning five times as much energy annually as the average Chinese citizen, said Mr. Birol.
    __
    The U.S. also remains the biggest oil consumer by a wide margin, going through roughly 19 million barrels a day on average. China, at about 9.2 million barrels a day, runs a distant second. But many oil analysts believe U.S. crude demand has peaked or is unlikely to grow very much in coming years, because of improved energy efficiency and more stringent vehicle fuel-efficiency regulations.

    So, yeah, the Chinese are using more energy, and may in the future, but the US is still the big energy hog.

  95. 95
    Chris T. says:

    @Downpuppy:

    You don’t need manipulation to get spikes.

    This is true. Nonetheless, there’s money in them thar spikes. Since there is money to be made, people go and make it.

    The side effect of this is to make the spikes bigger.

  96. 96
    chopper says:

    @Brachiator:

    thank you for finally coming around.

    now look at china’s growing oil consumption, and note that china and india are basically sucking up every drop of loose supply they can bid on.

    continuing at their 2005-2010 rate of increase of imports, china and india would basically suck up all global exports less than 20 years from now. of course that won’t happen, but it goes to show how much their consumption is increasing.

  97. 97
    chopper says:

    @Brachiator:

    also:

    The U.S. also remains the biggest oil consumer by a wide margin, going through roughly 19 million barrels a day on average. China, at about 9.2 million barrels a day, runs a distant second.

    we import 8.8 mbpd. china imports about 5.5. that’s not nearly as huge a margin, and the export market (where we buy our imports) is what really drives the price.

  98. 98
    Downpuppy says:

    @chopper: Even that obscures the massive progress we’ve made in going from from obscenely wasteful to merely outrageous in 5 years. In 2012, we’re down to 18 mmbpd, (from 20.5) including a lot of gas liquids and ethanol, and net imports are down to 8 (from 12), once you net product exports.

    When you start from as bad a position as the US was in 2006, progress isn’t that hard. All it took was $3 gasoline and a smallish depression.

  99. 99
    Brachiator says:

    @chopper:

    now look at china’s growing oil consumption, and note that china and india are basically sucking up every drop of loose supply they can bid on.

    You’re still confusing energy consumption, and oil consumption to overemphasize China’s impact on prices.

  100. 100
    chopper says:

    @Brachiator:

    you’re clearly confused. look up the consistent rise in china’s imports. and india’s as well. i’m still talking about oil, as I have been.

  101. 101
  102. 102
    GARY CAMPBELL says:

    @Bruce S: OH YES, God Damn crucify the bastards. There’s a limit to free enterprise and they have all crossed it. Tyranny deserves death!…. ORRRRRR, we could all just stop paying our taxes completely and starve the bitches at the trough!
    Either way Liberty deserves retribution. That’ll straighten these criminal bastards out in a day or two! Don’tcha think?

  103. 103

    […] if we can actually move this oil into our own domestic supply, these folks will eventually see the light. Share this:FacebookTwitterDiggStumbleUponRedditEmailPrintLike […]

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  2. […] Balloon Juice » At Least Have The Grace To Oil Up…Again […]We’ve now got evidence that increasing domestic oil production also does not lower the price of gasoline at the pump, because hey, we’re producing more oil domestically under this President. The United States’ rapidly declining crude oil supply has made a stunning about-face, shredding federal oil projections and putting energy independence in sight of some analyst forecasts.After declining to levels not seen since the 1940s, U.S. crude production began rising again in 2009. Drilling rigs have rushed into the nation’s oil fields, suggesting a surge in domestic crude is on the horizon. […]

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