Uh oh......this looks bad!

Sorry I'm not one of those people who think 5.00 gas and 5.00 loaf of bread is good because it punishes us "bad Americans" for being greedy and glutinous and forces us to be frugal and live by someone else's subdued guilt standards. Thats crap...The oil situation is because of the speculator trading and the trading company's owning their own oil tank farms pushing their own profit agenda. Only reason oil has dropped is because the stock market fell and they are now running for cover. The curtain is being pulled away reveling the "wizard" as big greedy trading company's who are manipulating the market. I believe in peak oil don't get me wrong but the tree huggers can go ride a bike and live in a cave because they feel guilty but don't leave your guilt at my door expecting me to trip over it.

The price of oil dropped for a number of reasons. Yes, some was speculation, but some was also refinery capacity issues, some was supply efficiency issues, and some was strong demand through 2007 and the early part of 2008. A very weak dollar was also a very significant reason (in 6/07 it was $2.06 to the UK Pound, but started to strengthen over the summer of 2008 and by 9/08 it was $1.77 to the Pound. Currently it's about $1.51, last I checked). Oil is traded around the world in US Dollars, so we're currently benefiting from a lack of velocity in the money supply (M1), which brings up the value of the dollar around the world. A stronger dollar means oil is proportionately cheaper.

Another reason oil prices are currently so low is because demand is down from 20.68mbpd in the US in 2007 to 19.51mbpd in 2008. That's a 5.6% drop in consumption because of high prices early in the year and a slowing economy in the later part of the year. Much of the world showed a similar drop in demand over the same period. OPEC continues to restrict supply and will until they've succeeded in getting oil back up to $75 per barrel, if that's within their power. If they succeed, they essentially guarantee the recession/depression will be even deeper and longer that it would be with cheap energy prices.

The fact is this depression is buying us time before oil prices turn up the heat on the competition for resources and food prices. If consumption can be reduced by another 3-5% over the next 2-5 years and grow more slowly than 2000-2007 after that, then we may avert the worst possible peak oil scenarios.

Mudduck, if you see a benefit to using up all the oil in the world as fast as possible without alternatives in place and I'm missing it, please share. My previous post was attempting to explain that while the high price of oil and current recession may hurt now, it could in fact avert far worse disasters down the road if we proceed wisely. Furthermore, there's scientific studies that demonstrates that it is easier to endure suffering when the individual knows there is a benefit down the road. That's what motivates athletes to train so hard and that was part of my intent with this and my previous post.

Canadian said:

Gas prices have gone up around here. They just tuned off the taps. Reduced supply = higher prices.

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They're up around here and nationally, too. I play the market a little on the side with regard to gas prices and so I watch supply very closely. This week doesn't make any sense to me. What's odd is that last week the supply of unleaded was the highest it has been since April 2008. Crude is down to $37/barrel and actually hit a low under $35 this week, where it had been $45-50 two weeks ago. So it's not the price of input and it's not a finished product supply issue, at least not from what I can see. Here's the best source for supply information in the states. Look at the days of supply for unleaded and crude. While it appears they cut refinery production the week of 1/9 for unleaded, it wasn't a dramatic cut. I'll be interested in seeing next week's report of this week's numbers. Clearly I'm missing something or the price wouldn't continue to rise.