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Releasing Oil Reserves. Thoughts?

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  • #31
    Originally posted by Zinja View Post
    Wont' those strategic reserve need to be replenished again? Don't we just love kicking the can down the road.
    I think it would be amusing to see President Obama squirm if a major player like China decided to use the current price climate to replenish or expand their reserves.
    Pharoh was pimp but now he is dead. What are you going to do today?

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    • #32
      Originally posted by highsea View Post
      We either were, or it was already full. We have a capacity of 727 Million bbl, which is where it was at before this release.

      I am all for using the SPR as a market weapon. I say we dump another 60 million barrels, chase a few speculators out of the market, then buy it back at lower prices.

      Whenever it gets pushed up, you make a surprise dump then buy it back at lower prices. Gotta keep those assholes guessing.

      Pipeline in Nigeria gets bombed? 20 million barrels. Hurricane in the gulf? 30 million barrels.

      Just announcing a release has an effect on the market. When Bush 41 did it in 2001, we didn't even have to sell but a tiny bit of what we said we were going to sell. The signal was enough, and we went right into Iraq without an oil price spike of any kind.
      Highsea,

      Are you sure speculators are responsible for oil prices?

      William
      Pharoh was pimp but now he is dead. What are you going to do today?

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      • #33
        Originally posted by Swift Sword View Post
        Highsea,

        Are you sure speculators are responsible for oil prices?

        William
        Best estimates are 30% of the current price is due to market speculation. I believe that, but oil trading is very opaque so it's hard to quantify.

        It's not like there is an actual shortage- tankers and barges full sitting at anchor because there's no one to take it. Inventories are high both in crude and gasoline.

        If we can't use the SPR for smoothing out market fluctuations, maybe we should create another reserve for that purpose. It's a cartel-controlled commodity. It's not like it's subject to normal market forces.

        Prices go up, production goes down because that oil in the ground is worth more there than if you run up production and lower the price.

        My customers use their purchasing power to beat on me, why shouldn't we use ours to beat on OPEC and hedge funds and investment bankers?
        "We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way." -President Barack Obama 11/25/2008

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        • #34
          But Gunnut, this is national emergency. Actually not only national but every other possible emergency you could think of.

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          • #35
            Originally posted by Versus View Post
            But Gunnut, this is national emergency. Actually not only national but every other possible emergency you could think of.
            Obama's low rating is a good thing
            "Only Nixon can go to China." -- Old Vulcan proverb.

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            • #36
              Highsea-After reading this post, I am reminded of what one beer brewer said to his partner, after inventing that little cardboard"thingy" that allows someone to carry six beers at once. Brilliant!

              Seriously, I have been trying to imagine a strategic response to the "OPEC" problem, and you really might be on to something here. You da man!
              Last edited by Laser; 30 Jun 11,, 11:11.
              Don't listen to me, I'm a wack job.

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              • #37
                Originally posted by Swift Sword View Post
                Highsea,

                Are you sure speculators are responsible for oil prices?

                William
                From the information I have there is NO shortage in production or in world accumulated reserves. I concur with highsea that much is down to futures traders. Since the banks are essentialy up the creek and so is the Euro etc they are all investing in sure bets - which drives the price up.

                Main problem is we are no longer living in democracies but in 'bankocracies' where the markets do not reflect the true nature of supply and demand.
                Last edited by snapper; 30 Jun 11,, 21:02.

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                • #38
                  Originally posted by snapper View Post
                  From the information I have there is NO shortage in production or in world accumulated reserves. I concur with highsea that much is down to futures traders. Since the banks are essentialy up the creek and so is the Euro etc they are all investing in sure bets - which drives the price up.

                  Main problem is we are no longer living in democracies but in 'bankocracies' where the markets do not reflect the true nature of supply and demand.
                  We now hedge on bets about what may happen instead of investing in tangible American stock. Doing that does not reflect the true nature of anything. I used to respect Wall Street, but no more...

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                  • #39
                    Originally posted by highsea View Post
                    Best estimates are 30% of the current price is due to market speculation. I believe that, but oil trading is very opaque so it's hard to quantify.
                    Highsea,

                    The way I understand it, people who trade oil buy at the Futures Price and the price the people who consume oil buy it at is the Spot Price. This makes the idea that a cabal of greedy guys can control the pricing kind of difficult for me to understand.

                    I suppose it might be possible for speculators to drive up prices in theory by taking physical control of the oil they contract for when their contract expires but oil storage capacity is limited so this possibility would be difficult to realize.

                    Think about what the Hunt brothers tried to do with Silver. Silver is much easier to store than oil but they lost their shirts when Futures Price did not justify the Spot Price.

                    Maybe somebody here with a better grasp of commodities trading could explain it better to the both of us.


                    It's not like there is an actual shortage- tankers and barges full sitting at anchor because there's no one to take it. Inventories are high both in crude and gasoline.
                    There is quite a glut at Cushing from what I understand: not enough pipeline capacity to move the stuff out. I suppose that is why the WTI price lagged the Brent price for much of this year.

                    If we can't use the SPR for smoothing out market fluctuations, maybe we should create another reserve for that purpose. It's a cartel-controlled commodity. It's not like it's subject to normal market forces.

                    Prices go up, production goes down because that oil in the ground is worth more there than if you run up production and lower the price.

                    My customers use their purchasing power to beat on me, why shouldn't we use ours to beat on OPEC and hedge funds and investment bankers?
                    Here I agree with you: strategic tools can make dandy strategic weapons!

                    Regards,

                    William
                    Pharoh was pimp but now he is dead. What are you going to do today?

                    Comment


                    • #40
                      Originally posted by snapper View Post
                      From the information I have there is NO shortage in production or in world accumulated reserves. I concur with highsea that much is down to futures traders. Since the banks are essentialy up the creek and so is the Euro etc they are all investing in sure bets - which drives the price up.

                      Main problem is we are no longer living in democracies but in 'bankocracies' where the markets do not reflect the true nature of supply and demand.
                      No, there is no shortage in production,Snapper that is not the issue.Yet. But the issue is that there is no increase in production and that is the problem.

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                      • #41
                        Originally posted by Versus View Post
                        No, there is no shortage in production,Snapper that is not the issue.Yet. But the issue is that there is no increase in production and that is the problem.
                        But no increase of production is artificial. There are ways to produce enough oil, for now.
                        No such thing as a good tax - Churchill

                        To make mistakes is human. To blame someone else for your mistake, is strategic.

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                        • #42
                          "Gentlemen, in these harrowing times, we should have a strategic petroleum reserve. We may find ourselves in a desperate battle for our very existence as a nation. Jet aircraft, tanks, transportation, all would be needed if the sea lanes were cut and domestic production cannot keep pace. Our very lives, the lives of our children, or perhaps the future re-election of a president, depend upon it."

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                          • #43
                            Originally posted by Swift Sword View Post
                            Highsea,

                            The way I understand it, people who trade oil buy at the Futures Price and the price the people who consume oil buy it at is the Spot Price. This makes the idea that a cabal of greedy guys can control the pricing kind of difficult for me to understand.
                            ...

                            Maybe somebody here with a better grasp of commodities trading could explain it better to the both of us.
                            William, some years back I delved into the commodities trading schemes, and I can tell you it had me talking to myself. I don't want to go through that again. Without really understanding it, the only conclusion I could reach was that they made money whether it went up or down, because they play both sides of the bet.

                            So if you bought a million barrels at yesterdays $100 and had to deliver it at todays $90, you just by another million at todays $90 and sell it at tomorrows $100. If you have the leverage, you can keep the pressure on the market because the demand is a known quantity.

                            It's nowhere near that simple- but investment bankers ALWAYS play both sides of the bet until the outcome is clear, then they jump in heavy and clean up. If you are losing your ass, you short like hell and either make it back, or you were going to get burned anyway so who cares.

                            The history of the Nymex and Dubai exchanges is kind of scary. A very few thugs from Brooklyn have an incredible level of power.

                            There is a function and a need for the trading- if you are Southwest Airlines, you need the ability to lock in a price.

                            Not so much if you are Goldman Sachs, if you get my drift. I am not thrilled with the use of oil futures as an asset class because it introduces a volitility that would otherwise not exist.

                            When Bush 41 made that release in 1991, it opened my eyes. It was purely a signal to the markets, and it was extremely effective.
                            "We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way." -President Barack Obama 11/25/2008

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