floydius it's almost like you've got nothing better to do

6Oct/08Off

buckle up.

I remembered reading this transcript back in May before I moved back up here to Searcy, when I was still just a fledgling conspiracy theorist:

Here’s the thing I want you to watch for. I want you to watch for a sudden fall in the price of oil. If you see oil spike downward to about $70 a barrel, $80 a barrel, if it goes from $110 to $80 a barrel, look out. It’s counterintuitive but you have to remember that the price of oil is based on futures and so what could possibly happen, a bad sign. If it drifts back down slowly over a period of time, that’s good. But if it suddenly drops down, what that means is that the conventional wisdom for the people who buy oil futures, these are the big — you know, there’s a lot of money. These people who are buying oil futures, what they’re saying is the economy around the world is going to slow down so much that people won’t be able to drive or fly as much as they have had to. They won’t be able to afford the oil or the gasoline or the diesel. So demand will go way, way down for oil. That’s what they will be betting on.

If you read the whole transcript, there’s further exposition. I don’t necessarily agree that we need to be hoarding food and gasoline like Glenn Beck does, but let me just ask you this — anyone noticed a severe reduction in gas prices lately? How about the fact that oil, which passed the $100/barrel mark a long time back is now, all of the sudden, under $90/barrel?

Interesting.

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  1. Well it has dropped, but the hurricane season is also over… but I wouldn’t be surprised to see prices rise again come November or December, as the North has to start using those oil heaters for their houses. But also keep in mind that Congress passed some legislation recently that, while certainly not perfect, did allow for some potentially higher production.

  2. That’s a good point Leslie, domestic production could have something to do with it. I don’t know if that would account for the overall price in oil exported from OPEC though.

  3. Well, the price for OPEC is not entirely determined by OPEC – it involves the market to a large degree. Now I know that was your point, but all I’m saying is the market’s decision about where oil prices are isn’t totally based upon where the economic situation is right now. It’s also based upon the future of oil in general. There have been several cars scheduled for release in the next couple of years, congress passed that law, and a number of other things. Honestly, I think the hurricane season ending could be one of the biggest things.

    Of course, the economic situation is a large part of it, but I don’t think that necessarily means things are going to the pits. In fact, I think this could help the economy. While a lot of people aren’t really making the connection from what I hear, this “recession” we’re having is, I believe, at least 25% due to gas prices. Raise gas prices by a buck and crunch the numbers, and look at how much less money you have a year. It’s insane. And we’ve jumped by nearly 2 bucks. If the market reacts by lowering prices, this could really help keep us out of something more serious by giving buyers more money, which could in turn work favorably for the market.

  4. The other thing that one has to remember, is that the dollar has been very weak, recently, which helped to push the price of oil higher.

    weak dollar = less buying power = higher prices

    However, what started as a struggling US economy has turned into a global financial crisis (did you hear the COUNTRY of Iceland might have to file for bankruptcy?), the dollar has regained some of its strength, and the current exchange rates are the best in over a year.

    strong dollar = more buying power = lower prices

  5. Lloyd, you are like Nostradomus (Sp?) What’s next? Will we be reduced to bartering with goats and cheese?

  6. for another perspective on the drop in oil prices, don armentano had a great piece back in May as well. he has a follow up piece too.

    http://www.lewrockwell.com/armentano-d/armentano13.html


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