Nations emergency oil stockpile

[D._Frederick]

Our monday  paper had about 3 lines about the "Bush administration agreed to tap the nation's emergency oil stackpile in light of supply problems expected as results of Hurrican Ivan".

Does anyone know more than this about the oil reserve?  Whats the odds that it will lower diesel prices?  Last week N0.2 off-hiway diesel was $1.60 a gallon for 400 gallon price.

[rebocardo]

> Whats the odds that it will lower diesel prices?

I would guess it will just keep prices stable.

[Jason_WI]

The emergency stockpile is a spit in the bucket compaired to the the U.S. uses in a day. I don't see how that would even help.

Probably the main reason for why diesel went up as they are starting to blend #1 in for the winter already.

Jason

[beav]

   Crude oil over $50 a barrel this morning.Diesel last weekend over $2.10 a gallon. Could be these are the new low prices :'(

[EdK]

There's a US Department of Energy web site at http://www.fe.doe.gov/index.html with plenty of info.

The bottom line is we've only got 53 days of import protection.

[OneWithWood]

Add to the weather woes and new insurgency in Nigeria targeting the oil fields, terrorism in Saudi Arabia, and the ongoing mess in Iraq and I think it is a safe bet we will not see prices coming down in any significant amount in the near future.  The growth of the Chinese and Indian markets will continue to add pressure keeping the barrel price of oil near the current rates for some time to come.
Good time to buy a diesel and learn how to convert ot bio-diesel. :P :P : :-/

[Ron Wenrich]

Part of the problem is that they keep adding to the Strategic Oil Reserve.  I think that's a good thing to do when prices are low, but not when they are high.  It helps to contribute to the high prices.

When oil prices started to inch up during the Clinton years, he said that he would tap the reserve.  That held prices at bay and they eventually declined.

My opinion is that they should say they will open the reserves until the Gulf producers are back on line.  The message will help keep prices at bay.

Oil costs will strangle whatever recovery they think they have.  August personal spending was down due to higher energy costs.  I don't see anything any different for September, and when the cold weather hits, it will be worse, even if oil drops $10/barrel.

It really isn't that the oil costs that much more, but it sure makes you feel poor.

[Fla._Deadheader]

  What about the futures traders??? Don't they have a direct impact on the price ???  I would think that the producing countries have not raised prices that much, at all, just the traders ???

[Ron Wenrich]

The futures have 3 things factored in.  Current price and the price of time or interest and risk.  What you are seeing in the futures price is the high cost of risk associated with world events.

Most commodity contracts are liquidated before they expire.  At expiration, if you aren't liquid, then you owe someone the contract size at a certain price.  Speculators add liquidity to a market, and producers can either hedge or sell at a guaranteed price.

The commodity markets are free markets.  They go at the whims of buyers and sellers.  Right now, the high prices comes from more buyers than sellers.  In a falling market, there are more sellers than buyers.  

Stocks do the same thing.  They rise due to speculation that the underlying company will make tremendous profits.  P/E ratings go through the roof.  Then you get some insider trading and the rug is pooled out from underneath the speculators.  Commodities work the same way.

The nice thing about commodities is the amount of leverage your money has.  A margin on crude is $6K.  I think you control 1,000 barrels of oil.  So, if it goes up $1, you get $1000 if you are long.  If you want some real fun, grab a contract and see where it goes.   :D

Right now, the market is descending in price from the current price, out in time.  That means that a November contract is higher in price than one for November, 2005.  That doesn't add too much stability to the underlying market.  This bubble is due to speculation.

It doesn't really extend to the market.  That commodity price arguement doesn't really hold water.  The underlying price is fueled by supply and demand.  Not speculation.  That is between 2 traders.  

[Rod]

I was looking a March 2003 futures of corn and it was $3 and today its saling for $1.82 and 2003 Murch futures soybeans were saling for $7 and today they sale for $4.95.

I haven't looked at timber futures yet

[LeeB]

well guys, I know it won't make much diff on the price of a barrel of oil, but I'm back hard at work out here in the Gulf of Mexico doing what I can to keep us in lights and heat. LeeB

[Ron Wenrich]

Rod

Last year future prices have little bearing on today's prices.  Soybean prices are driven by Asian demand and Brazilian growing season.  

Grain futures in general are only a reflection of the Midwest.  When we had severe drought in the East, our corn prices were much higher than the futures market.