About Oil Prices

Pranav asked:


With ever increasing oil prices, i wonder if it is worth buying a petrol car?

Grace

skjhlkj asked:


We are in the middle of the hurricane season, and the oil price just went up to $80 at the highest level for a short time.
How does hurricane season effect oil price?
Does it has to be a major hurricane to spike up the oil price? Can a tropical storm, or small hurricane effect the oil price? If so, how?

thanks.

Tamara

Andrew Shiveley asked:


This article presents the unique opportunity for long-term forex trading gains that is made possible by the worldwide increase in oil prices.

More and more we are seeing evidence of the effects that increasing oil prices are having on the economy and certain energy-dependent sectors such as airlines. Oil is already over $100, and it is projected to exceed $150 per barrel with common gas prices exceeding $6.00 per gallon.

If you are a savvy investor however, this presents for you an opportunity to make hefty and reliable gains.There is a simple currency trading strategy that has been used consistently and reliably for large gains by many traders, and it is really so simple if you understand basic economics you will feel dumbfounded that you did not think of it.

Here is the strategy in a nutshull: (Once you know the strategy then we can talk about why and how it works.) Track the price of oil and look for a day when there is a large jump up in the price of oil (the close is up $.30 or higher). Once this happens, enter into a sell order with the USD/CHF currency pair that will stay open for 12 hours - 3 days with a profit target of 25 pips or more.

If you understand just basic economics and the nature of national monetary systems then you should understand why this strategy is so effective, and why it works the best when you are trading the Swiss franc. As it exists today, the Swiss franc is literally the only currency that is backed by gold (though that will change once Nesara is passed in America) and so it is much more immune to fluctuations in the values of important commodities such as oil.

The United States dollar is a fiat currency and hence has no fiscal backing. Combine that with deep Bush-instigated national debt and an addiction to oil and you have a huge economy that is highly reactive to the price of oil. So when oil jumps, the US dollar begins to lose its footing.

Many people are fear-mongers that keep saying things like “Oh my gosh the dollar is going to collapse!” and they are dead wrong. Yes our oil addiction is a bad thing, but no there is no big collapse coming especially with Nesara just over the horizon. And even if there was something like this, the lifestyle and standard of living of most Americans would be relatively unchanged (as evidenced by the collapse of the Soviet Union where the life of the average person was virtually unaffected).

So no the dollar will not collapse any time during our lifetimes, but yes it is highly responsive to the price of oil. Switzerland is also an economy that relies on oil, but because their currency is linked to gold then they have a fiscal ‘buffer’ that can soften the effect that increases in oil prices will have on the franc. So high oil prices will have a profoundly lowered effect on the franc, and the effect will take longer to set in. As you should see this affords a savvy trader the 12-36 hour window where the highly responsive dollar will drop but the franc remains relatively unchanged.

When using this strategy it is probably a good idea to stick with the lower 20-30 pip profit targets because you are looking for 100% reliability and guaranteed profits, and the more money you try to ’squeeze out’ of the market the more risky it becomes.

Angel

Palm Oil Truth Foundation asked:


By Frank Tate

Have you ever noticed that a herd of lembu or cows, all tend to move together in the same direction? Have you often wondered why this phenomenon occurs?

Imagine that you are taking a slow and leisurely drive along one of Malaysia’s lovely scenic country roads, away from the speeding juggernauts and cars on the North South highway. As you drive, you take in all the rolling fields of lalang, oil palm plantations stretching as far as the eye can see. Suddenly, something catches your attention. It’s a herd of lembu up ahead, in a nearby open field. Curiosity gets the better of you and you park off the road to investigate further. And there, you stand beside your car, in the middle of nowhere, watching the herd instinct in action.

For unexplained reasons, you scramble towards a low wooden fence and catch up to the lembu as the herd slowly makes its way across the field of lalang. Curious as to why they would all move in the same direction, you look towards the center of the herd and wonder aloud: “Why are all the lembu walking in this particular direction, as if on auto pilot?”

When I ask this question at all my seminars, the response I hear from delegates from all over the world is invariably the same: “They’re all moving in the same direction because everybody else is!”

People and organizations too are like this herd of lembu. They too are strongly influenced by the direction of the surrounding herd. Just take a look at the behavior of some NGO’s in the developed world.

First, we have the so-called Centre for Science in the Public Interest (CSPI). Helmed by its Executive Director, the infamous Michael Jacobson, and backed by an annual budget in excess of US$16 million, CSPI has launched disinformation campaigns against Malaysian Palm Oil. In fact, so disingenuous has been Jacobson’s claims that he has earned the rare distinction of being called various things in the media – ranging from the benign “Consumer Advocate” to the less flattering “Nutrition Terrorist”, “Terrorist”, “Food Cop”, “Killjoy”, “Food Fascist”, “Food Nazi” etc. In fact, the latter labels appear with such stunning regularity in the media that few men could have been so definitively defined.

Jacobson, to put it mildly, is guilty of utter disregard for the truth and scientific facts, frequently exaggerating figures and claims to advance CSPI’s own agenda

Having failed in a campaign in the eighties to portray palm oil as unhealthy, Jacobson and CSPI have been racking their collective brains as to how to discredit what is, inherently, healthy oil. Health claims or the converse, “un-healthy” claims, of course, have to be backed by rational science. However, these are matters that CSPI, despite their grandiose and associative-scientific sounding name, would have difficulty in delivering. Throwing figures and “facts” that would fail to pass muster for a secondary school science project, CSPI recklessly and with gay abandon, continues to launch fresh attacks, this time targeting the sustainability of oil palm cultivation. They argue, most deviously, that oil palm plantations have led to the destruction of rainforests and consequently, have deprived orang utans of their natural habitat. Interesting. Perhaps, even persuasive. If not, for the facts!

The superior sustainability of the Malaysian palm oil industry is patently obvious, and it is clear that the Malaysian oil palm cultivation is superior to any large scale agriculture in the tropics or the temperate countries in terms of sustainability parameters. The plantation industry is professionally managed, with many of them such as IOI Corporation, Golden Hope, PPB Group and KL Kepong, operating as listed corporations on the Malaysian stock market where corporate governance and corporate responsibility are well practiced more than farm activities in other parts of the world. The Palm Oil Truth Foundation (www.palmoiltruthfoundation.com) has sought to remedy the misconception that palm oil contributes to deforestation and enlighten the world of the fact that the Malaysian Palm Oil industry has always adopted sustainable cultivation best practices, including conservation and replanting. The MPOC, in fact has set up a US$5 Million Conservation Fund to assist in wild-life conservation.

But Jacobson understands the lembu phenomenon and knows that the herd instinct will take over. And sure enough, the NGO’s and other organizations have taken the bait and like the proverbial lembu, have predictably, blindly followed the herd.

First, the BBC sent a film crew to film the so–called deforestation and habitat loss of the Orang Utans. Then the NGO’s added their voices to the irrational chorus of calls for consumers to avoid palm oil products as they had allegedly come from unsustainable sources. The Friends of the Earth, a UK NGO alleges that “the palm oil industry is now considered by scientists as the biggest threat to the Orang Utan”! Scientists? Which scientists? The pseudo-scientists from the verbose sounding “Center for Science in the Public Interest”? It was almost hilarious to watch documentary after documentary warning of the dangers of palm oil because of the damage caused by the humble oil to Orang Utan habitats. Hilarious because nothing could be further from the truth, at least as far as Malaysia is concerned!

Comprehensive policies and laws on environmental protection are in place in Malaysia and are strictly enforced by the Department of Environment. Endangered species, including Orang Utans, needing protection are given priority with strong conservation programs put in place. Sabah, with a growing palm oil industry and one of the largest states in Malaysia had drafted a master list of protected areas based on the guidelines of the World Conservation Union (IUCN). In fact, 21.8% of Sabah is now protected, more than double the 10% recommended by the IUCN. It is also interesting to note that the Malaysian Palm oil industry is the prime mover for the Roundtable for Sustainable Palm Oil to encourage best practices and to minimize any adverse impact on the environment by the industry, long before the latest shenanigans initiated by CSPI started.

Almost all oil palm expansion in Malaysia is pursued through the conversion of existing rubber, cocoa and coconut plantations or from logged over forest areas which have been earmarked for agriculture. Moreover, out of the total land area of 30.2 million hectares, only 6 million hectares have been designated for agriculture under the Third Malaysia Agricultural Plan. Oil palm cultivation falls well within the area zoned for agriculture. Ironically, the area still under forest cover remains at well over 60 %, certainly much higher than that of the developed nations from which all this brouhaha over Orang Utan habitats are originating.

Recently, the European Free Alliance MEP’s together with an MEP grouping known as The Greens in the European Parliament (together, they form the 4th largest grouping in the European Parliament) lent their not inconsiderable voice to the issue. Lobbying the European Parliament’s “Industry, Technology, Research and Energy Committee”, which is tasked with proposing energy policies with an agreed EU target of 25% biomass renewables by 2020, this grouping managed to get the Energy committee to include, inter alia an amendment to “ban the use of palm oil for feeding our cars” due to the “lack of environmental standards and safeguards” leading to “an increase in tropical deforestation”, whilst “failing to reduce greenhouse gas emissions significantly”! Couching their proposal in euphemistic language, and this really takes the cake, the grouping went on to justify their proposal on the basis that the emergence of a European biofuels sector would offer opportunities for biofuel technology transfer to developing countries crippled by rising oil prices! It is this last statement that gives a clue as to the grouping’s real agenda and intentions. The proposal is designed to protect their turf, to protect the European biofuel sector! So much for all the WTO rules against protectionism.

It is about time that the world wakes up to such insidious and deceptive campaigns and that can only be achieved when the world develops the discernment to see through the veil and stop being lembus. That may be counter-intuitive but the herd instinct can only be overcome through education and clear branding and communication programs. Programs that will, ultimately, expose the lies and half-truths that appear to be the penchant and almost exclusive purview of CSPI and others of their ilk.

Tyler

tess_d2 asked:


What are the potential causes of the price changes in oil over the last 30 years? Also, what are the potential impacts of increasing oil prices on the world economy?

Jeremy

Mike Wright asked:


According to Michael Cartine of Thomson/ Reuters “The danger from inflation comes in from its inherent volatility; when prices rise 3% the first year, 5% the next, 10% after that, but then stagnate or even drop for a year before trending higher again. This type of environment becomes increasingly difficult to make economic decisions in. Market participants around the world will certainly attest that the last year or so has been a particularly volatile time.”The FTSE sold off hard, falling further than most other global stock indices on the week. UK top tier stocks, led by banks and real estate shares, fell on fears of negative equity in the UK housing market leading to trouble for banks and consumers. Retailers including Marks and Spencer were being punished as UK shoppers face the prospect of not being able to bank on further house price rises to fuel further spending. The bricks and mortar ATM is no longer paying out.The plight of UK equities was not helped by that fact that even with oil hitting $135; UK oil stocks were strangely subdued towards the end of the week. Oil & gas stocks make up nearly 20% of the FTSE by market capitalisation. The question remains whether this relative weakness is the start of a rotation out of this sector, or whether it is just a couple of days profit taking. Markets gave us a significant ‘tell’ on Thursday as equities spiked following a natural gas inventory report which indicated increased levels of storage. Oil fell back and stocks surged in the opposite direction. Unfortunately, the rally didn’t last as crude reaches back to previous highs. However, the way that markets reacted was certainly telling and could be an indication of how things will play out when oil finally stops going up.Crude oil has now accelerated by 30% in under two months and 80% in a year.  It is little wonder that the MPC voted 8-1 to keep rates on hold with  inflation running so high. However, there are some potential weaknesses in  crude which are worth pointing out. According to Mike Rothman of ISI, global  demand growth for oil is now well below last year’s increase. In addition  there are reports of the Gulf being crammed with oil tankers chartered by  oil producing nations to hold oil they cannot sell. This suggests there are  no buyers at this price and when this happens, the laws of supply and demand  come into effect. Goldman’s Analyst Arjun N. Murti recently predicted that  oil could hit $150-$200 in the few years. While this prediction may still come through, there are increasing signs of this oil bubble over stretching.With bank holidays in both the UK and US, it is a quiet start to next week on Monday. The most notable release on Tuesday is the US new home sales data which is expected to show indicated further pain for US home builders. The only question is the degree of acceleration in this decline, as is expected to be the case with the UK’s Nationwide House Price index released some time on Wednesday morning. The week’s top announcement though is likely to be the US GDP figures on Thursday as the US economy weighs up the benefits of the Bush tax rebate against the rising cost of oil.After experiencing a much needed sell off, there is the potential for the  FTSE to stabilise over the next week said BetOnMarkets.com traders, especially if (big if) oil manages to go a week without making a new record high. With that in mind a bull bet on the FTSE to be higher than 5900 on the 9th of June could yield around 19%.

Lisa

William Kurtz asked:


We often hear of the “Austrian School” of economics, or of the “London School,” or of the “Chicago School.”  I would use the word “school” in another sense – identical to a “gaggle,” a “flock,” a “pack,” or a “herd.”  Indeed, economists are a “herd” all to themselves; and as is the case with all herds, they indulge in group-think; that is to say, they speak to and with each other in round-robin terms, and when one idea begins to reach acceptance it becomes a self-reinforcing process as the conversations and opinions spin ‘round and ‘round.
 
Such is the case with Crude Oil.  We are told that the “fundamentals” simply require that the price of Crude Oil must rise higher and higher – because of intractable demand increases in China, India, Malaysia, and other Far Eastern countries, among other reasons.
 
One problem with the hypothesis is that the foreign increase in demand is not a foregone conclusion.  Much of foreign demand is being maintained at a high level by price subsidies, which are paid for out of the public treasuries in order to keep the local economies running and, especially in the case of an ever-worried China, to stifle dissent and outright resistance.  China is holding its breath with fingers and everything else crossed, hoping to just get through the Olympics without a significant uprising.
 
Within our own shores, we see that absolute demand for gasoline is falling.  Demand for fuel oil this coming winter may fall too, as families cut way back on household heating in the face of crippling prices for fuel oil.  Airlines will be significantly reducing their schedules after Labor Day, which will reduce demand for jet fuel as compared with recent years.
 
The bottom line is that it is nowhere written in stone that Crude Oil prices must inevitably rise higher and higher.  Reference to Japanese Candlestick price charts signals otherwise.  In fact, on a purely technical analysis basis it can be argued that, within the foreseeable future, we will see Crude Oil prices at $80 per barrel.
 
 

Ashley

Andy Smith asked:


Oil prices are going up, up and up. They are expected to go up to 200 Dollars a barrel. Every one of us who thinks about this has different perspective. Consumers blame the government for allowing the prices. Some blame the oil producers while others blame the users for rampant consumption. How about the Iraq war and oil prices?

I have not been able to find out the amount of oil that is consumed in the war in Iraq everyday. Similarly the peacekeeping efforts in Afghanistan must be consuming lot of oil everyday. Why does the US not stop the war and save oil so that prices can come down? US government has huge resources and can buy oil at any price to continue with the war. But what about an ordinary citizen- how is he/she going to survive?

India and China are being blamed for increasing oil prices. Imagine what will happen when other countries become prosperous. The whole of Africa is waiting for prosperity. Lot many South American and smaller Asian nations are waiting to grow. What will happen to oil prices when these countries begin using more oil?

Clearly the aim should be to use less oil and develop other energy sources. Gone are the days of oil guzzlers. And most importantly the war must be stopped to save oil. Has any estimate been made about the oil consumed in the World war Second? Why do not we stop exporting democracy to other countries and take care of our citizens first?

The world leaders do not act for the good of the ordinary person. They only promise to do that during elections. After the elections get over the leaders act to satisfy their own ego and prove to the world that they were right. This causes most misery in the world. Unless this senseless war is stopped oil cannot be saved.

Jamie

Jaci Rae asked:


With the onslaught of Katrina, how will the world survive the economic chaos that is about to unfold? Our economy cannot sustain any more surges in oil prices with the AP wire reporting $5.96 a gallon for regular gas in some areas of the U.S.
Most U.S. cities aren’t set up with mass transportation, and the typical American is required to travel up to 50 miles a day or more for their job alone.
U.S. resident made less money than they spent for basic necessities prior to Katrina, how will they cope after?
*Average Monthly expenses, based on two incomes
Telephone $37.93
Electric bill $99.65
Water w/garbage $80
Food $575
Gasoline
(two cars, $2.53 per gallon.) $969.60
Mortgage Payment $2321
(Based on a three bedroom home in GA. East or West you are looking at least a $5463 mortgage.)
Car Payment $289 (based on one car only)
Cellular Phone Bill $89.99 (family plan)
Quarterly Car Insurance $789 (two cars)
Total basic expenses, with nothing extra like car repairs, co-pays, medicine, school supplies, clothing, and household necessities: $5251.17
The average pre-tax income based on the location above? Female $2,047; Male $3,089
If you live on the East or West Coast, while income can be higher, the average male making $4497 and females $3189, monthly bills are substantially higher. The total average monthly expenses in those areas? $9535.83. Pre-tax income? $7686.
How can the economy continue to thrive, when most people in the U.S. can’t afford their monthly bills? A large mortgage broker stated that 100% of their housing loans are now interest only with buyers using their mortgages as loans. Buyers have been banking on an escalating housing market. What will happen to them once the full force of Katrina hits its mark?
Now with gas prices skyrocketing, people may not be able to keep their jobs or they will have to “pay” to go to work, and with the jobless rate of Katrina expected to hit 25%, how can the economy survive?
What’s the answer to our imminent economic catastrophe? I don’t know, but I can tell you that it feels like we are heading for economic disaster of epic proportions if something isn’t done and done quickly. The end result will be a society that is based on the really rich and the very poor. There will be no “middle class.”
With standards already being set at poverty stricken or destitute, how much more can we sustain? How much more can the world sustain?

Alvin

Ted Hebert asked:


In America today the average price of gasoline has skyrocketed past $4.00 per gallon with no end in sight. Oil prices have doubled since the end of 2007 with $200 per barrel conceivable within months. Still, no one seems to have a solution. The government is inept, and only seems willing to add to the problem rather than solve it.

If the Congress had any concern for you or me they would lift all Federal gas taxes to help us out. That would cut out about 15% of the price per gallon of gas. If they had any concern for us they would allow us to drill for oil within the United States. They would allow more refineries to be built. They would approve clean, cheap, nuclear power.

Instead, politicians have done nothing except talk about idiotic proposals to tax oil company profits. That will only raise gas prices further because the oil companies sure aren’t going to give away their profits and make less money. They will pass on the cost of tax increases to US, and probably 3-4 times the amount they lose from increased taxes.

The bottom line is we cannot trust useless politicians to change anything. We have to do it ourselves, and force idiot politicians to go along with it. Like it or not. That would be change we can believe in.

It would be great if we could all plug in our electric cars tomorrow, and never use a drop of gas again. However, we can’t. We need to build a bridge to energy independence that will not bankrupt us. In the short-term we need cheap oil to keep our cars and trucks on the road. As new technologies develop over the next ten years we can shift to electric and hydrogen fuel cell vehicles. We could then realistically no longer need oil for any transportation by 2020.

How do we build the bridge, and how do we force oil prices down by 50-60% in a matter of weeks?

It’s already begun. American Solutions, a group started by former Speaker of the House Newt Gingrich, has begun an online petition asking Congress to allow us to “Drill Here, Drill Now, Pay Less.” More than a million people have already signed the petition. Poll after poll shows that Americans overwhelmingly support domestic drilling for oil to lower prices.

Those opposed to domestic drilling argue that even if Congress approved domestic drilling tomorrow, it would be 2-3 years before that oil would get to market. They argue domestic drilling will do nothing to lower oil prices because the global market sets the price of oil.

Wrong. In the last few weeks since gas went over $4.00 per gallon in the U.S. the people of America started making their voices heard. They want something done about the high price of gas, and they want to see action now. We have also started driving less, which has decreased demand. Just the notion that Americans are angry, and want something done has already prompted the Saudis to announce they will increase production. They also held a summit of oil producing nations to discuss the “crisis” of high oil prices.

Just the threat of possible Congressional action to allow domestic oil production already has the Saudis spooked. If Congress actually took action the real source of high oil prices, the speculators who make money trading oil futures, would begin to dump their oil future holdings. They would know that domestic oil production in the United States would reduce the future price of oil significantly. That would drop the price of oil on the international market by 50-60% almost immediately.

To insure that oil prices stay low for Americans Congress should demand that all oil produced in the United States only be available to the American market. It is conceivable that we could produce enough oil domestically to supply 80% of our consumption needs within 3 years. Some believe there may be enough oil in shale in the Rocky Mountains to supply all domestic oil needs, and even have a surplus. If American oil was only sold in America the price would likely be in the $30-$40 per barrel range. That would bring gas prices down to a reasonable $1.50 per gallon range.

Now, that is the bridge. This is not a permanent solution. No matter how much oil we can produce in the U.S. it will only last for a finite amount of time. It would be foolish to think that even if we had 40-50 years worth of oil that we should just wait until it runs out to replace it as an energy source. Not to mention the environmental impact of continuing to burn fossil fuels. We need to develop clean, renewable sources of energy.

Another provision Congress should include in allowing domestic drilling is that oil companies invest 15% of their profits in new energy sources. Rather than tax oil profits, which does nothing except put money in the government coffers to be wasted on nothing, Congress should demand those profit dollars be spent on developing new, clean forms of energy. The oil companies can then transform themselves over the next decade from oil companies to energy companies. We will need the oil companies’ massive infrastructure to deliver these new sources of energy, and the government cannot demand the oil companies spend money to put themselves out of business.

The most important investment would be to begin replacing one or two gas pumps with hydrogen refueling pumps. The hydrogen fuel cell car is already a reality. They are being sold in Japan, and tested in Southern California right now. The hurdle is that no one wants to buy a car they can’t refuel at the station down the street. If hydrogen pumps began to appear at local gas stations all over the country, the demand for hydrogen fuel cell cars would grow exponentially. This would drive down the price of hydrogen fuel cell cars, and of hydrogen fuel.

Automobile manufacturers would make more hydrogen fuel cell vehicles, and more hydrogen pumps would be added. Over the next 10-15 years there would be no gasoline powered vehicles made anymore, and the term “hydro station” would replace “gas station.” The massive investment in hydrogen and other forms of energy would not just be for automobiles, but for jet engines as well. Air travel would be transformed with clean fuel sources, and air planes would be built with lighter, more fuel efficient materials. We would be free of fossil fuels for transportation.

What about energy to power our homes and businesses?

Congress also needs to approve new nuclear power plants to supply electricity for our homes and businesses. Nuclear power is cheap, clean, and now more than ever safe. The country needs 50-60 such facilities to handle the power needs of today, and to prepare for the power needs of the next 50 years.

Another solution to power needs is solar and wind power. It is unlikely that massive solar or wind power facilities will ever be effective sources of power for millions of customers. However, solar and wind power can be effective power sources for individual homes and small businesses. The major hurdle today is cost. A single wind tower costs up to $50,000 to install. Solar panels are not as expensive as in the past, but are still expensive enough that many homeowners are not able to easily afford them.

The solution is for Congress to approve tax incentives for homeowners and small businesses to install solar or wind power. By allowing a tax incentive of up to 75% of the cost of a wind tower or solar system homeowners and small businesses would be far more likely to install such systems. Such incentives would create a massive reduction in demand on the major power grids. This would then make these grids more capable of handling spikes in demand during summer months, and make the grids easier to maintain and upgrade.

These rather simple steps, if enacted now would make the United States completely energy independent by the mid 20’s. We would also be green and clean, which would benefit the environment immensely. Further, we would be the leader in clean energy development, and the rest of the world would follow, as they always do.

Demand that Congress take action now. YOU have the power. Let your Senators and Representatives know that if they don’t support building a bridge to energy independence you’re going to fire them. Forget which political party they belong to. This is not a Democrat or Republican issue, this is an issue that affects our very future. Stand up, take action, and forcefully demand that Congress and the President take action NOW.

Gina