The Gravity Effect on Oil Prices

Surprisingly, I just read a liberal, mainstream media article about oil prices, and agreed with darn near every single point they made.  What the heck?

So I don't have much else to add, except to suggest having a read of this article by The Guardian:

Oil price keeps rising – will it come back to earth with a bump?

"Changes in supply and demand mean that current highs will be corrected next year"

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Has anyone considered that the basically-broke banks of the world may have an interest in keeping oil prices high as these high prices are one of only a few ways to get a return on investors' money today. All other asset classes are stretched to the limit (i.e either, already in, or near a bubble position) and an ever-increasing oil price will help steady these sinking ships. this game is not over yet, and as they say: "Follow the Money"!

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Interesting concept.  Now that you mention it ...

Is $70 Oil Enough For Shale Drillers?

" Shale companies "are just not generating enough cash to fund all of their investment in new wells,” James Williams, energy economist at WTRG Economics, told MarketWatch’s Myra Saefon."

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(edited)

3 hours ago, Tom Kirkman said:

Surprisingly, I just read a liberal, mainstream media article about oil prices, and agreed with darn near every single point they made.  What the heck?

So I don't have much else to add, except to suggest having a read of this article by The Guardian:

Oil price keeps rising – will it come back to earth with a bump?

"Changes in supply and demand mean that current highs will be corrected next year"

I probably agree with less of the reasoning in the article than you, Tom, but I have the same expectation. Because buyers are generally "stronger" negotiators than producers, the natural tendency of prices is to fall. Offsetting this downward force is the investment/speculative community that, generally, wants prices to rise. The result is prices that behave like a hot air ballon. They rise when the hype turns on the gas and they fall when the hype subsides. Until price management is introduced in the system, if ever, the fluctuations will continue.

Edited by William Edwards
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38 minutes ago, William Edwards said:

I probably agree with less of the reasoning in the article than you, Tom, but I have the same expectation. Because buyers are generally "stronger" negotiators than producers, the natural tendency of prices is to fall. Offsetting this downward force is the investment/speculative community that, generally, wants prices to rise. The result is prices that behave like a hot air ballon. They rise when the hype turns on the gas and they fall when the hype subsides. Until price management is introduced in the system, if ever, the fluctuations will continue.

Astute observation, William.  So where would one go to acquire one of those newfangled hype management regulator contraptions?  Um, asking for a friend.

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"Does your forecast always come true?" - "Always", answered meteorologist. -"It is just a matter of time"...

Best cure for low oil price is the low oil price and vise versa. High cost of energy is a known cause of recessions and we are overdue for one. The Big One ("Greater Depression" name is already suggested). No doubt, it will cause significant demand destruction and oil price will react. Fingers crossed financial sector will sort itself out and its spillover into real economy will be relatively brief (2008 scenario) but it may be a wishful thinking, considering hubris and irrationality there. Case in point - shale industry. Financial engineering forced investors to enter areas they have no clue about and won't take long for this house of cards to collapse.

Steve St. Angelo calls it a Ponzi scheme - it does meets the definition. 

Just don't blame hydraulic fracturing - nothing wrong with the process; it does create enormous value and permitted hydrocarbons production from the source rock; something which was unheard of.

 

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6 hours ago, Tom Kirkman said:

Astute observation, William.  So where would one go to acquire one of those newfangled hype management regulator contraptions?  Um, asking for a friend.

I think we all have one of these built-in :) If everyone would just start using them

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