Joined: Dec 18, 2004 Posts: 4134 Location: One Mile From the Columbia River
Posted: Thu Jul 17, 2008 8:16 pm Post subject: Re: WTH is going on with the markets right now?
JoeW wrote:
eastbay wrote:
I do have one little issue with the chart. I'm no expert, but aren't 'demand' and 'supply' supposed to be in synch, so to speak? Or at least very close as portrayed on the left side of the chart?
you might be right about that based on the x-axis being time. i would expect the production and consumption to be very close.
usually, you plot quantity vs. price for demand and supply at a particular point in time, and where those two curves meet is the market price. i don't like the labeling of this graph as supply and demand. i think production and consumption makes more sense.
And if production was to exceed demand excess would have to be stored somewhere, and if less, storage would have to be tapped. Simple. _________________ Everything is Impermanent. Shakyamuni Buddha
Posted: Thu Jul 17, 2008 8:21 pm Post subject: Re: WTH is going on with the markets right now?
eastbay wrote:
nobody panic,
Nice chart. I see this as a plausible scenario too. Nothing can lower prices enough to trigger another SUV buying frenzy ever again.
I do have one little issue with the chart. I'm no expert, but aren't 'demand' and 'supply' supposed to be in synch, so to speak? Or at least very close as portrayed on the left side of the chart?
i get what you're saying. my guess is the author of the chart just took a little bit of poetic license in order to get the point across. of course, that's me putting words in his/her mouth.
Posted: Fri Jul 18, 2008 5:50 am Post subject: Re: WTH is going on with the markets right now?
JoeW wrote:
colin campbell predicted volatile prices for this reason--because the demand-side response is extremely sluggish. add that to high prices and stagnant (not declining) production, you get this volatility.
That makes sense. How will it change when there's declining production? Is that when prices will go up-up and away with fewer hiccups? _________________ ~Laura
"If you weren't smart enough to plan ahead then Doom on you!" ~Dodo bird
Posted: Fri Jul 18, 2008 7:25 am Post subject: Re: WTH is going on with the markets right now?
Mominator wrote:
That makes sense. How will it change when there's declining production? Is that when prices will go up-up and away with fewer hiccups?
Prices will be much higher. They may spike faster, but they will still surge and retrace. Oil will be a much more valuable commodity, but the markets will still be trying to sort out its value in relation to other really valuable things. What may happen at some point is that politicians will decide to abandon the free market concept. They may decide at some point that they don't like the answer the market is giving them about how much oil is worth and they may decide to try to fix the price. They've been hinting at that for the last few months. The problem with trying to fix the price is that when you fix the price below where the market would set it, you assure that demand will be higher than supply and there will be shortages. That's the fundamental beauty of free markets is that they adjust the price to prevent shortages. _________________ "I was born in a deep forest
I wish I could live here all my life
I am made from stones and roots
My home, these woods and roads
All my life I loved this sound
Of the woods all around
Eagles fly where the winds blow free" -Korpiklaani
Joined: Apr 12, 2007 Posts: 1162 Location: Central NC
Posted: Fri Jul 18, 2008 7:51 am Post subject: Re: WTH is going on with the markets right now?
Seems so coincidental that "expectations" by the experts are consistently company after company, below results, horrendous as they are, so the billions of losses can be reported as "better than expected".
Tinfoil hat off. _________________ "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place we are entering a period of consequences…"
Sir Winston Churchill
Posted: Fri Jul 18, 2008 7:51 am Post subject: Re: WTH is going on with the markets right now?
Quote:
That's the fundamental beauty of free markets is that they adjust the price to prevent shortages.
I don't think that statement is quite accurate. Free markets keep shortages from being distributed throughout the system. They keep shortages at the bottom tier of those that can not afford the new higher price, but you still have shortages. _________________ There will come a day when we would have wished to do a little evil for a greater good.
Joined: Apr 12, 2007 Posts: 1162 Location: Central NC
Posted: Fri Jul 18, 2008 7:54 am Post subject: Re: WTH is going on with the markets right now?
HEADER_RACK wrote:
Quote:
That's the fundamental beauty of free markets is that they adjust the price to prevent shortages.
I don't think that statement is quite accurate. Free markets keep shortages from being distributed throughout the system. They keep shortages at the bottom tier of those that can not afford the new higher price, but you still have shortages.
Totally agree. How higher prices restricting access to those that could previously afford a commodity not be seen as shortages is beyond me. _________________ "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place we are entering a period of consequences…"
Sir Winston Churchill
Posted: Fri Jul 18, 2008 8:01 am Post subject: Re: WTH is going on with the markets right now?
HEADER_RACK wrote:
I don't think that statement is quite accurate. Free markets keep shortages from being distributed throughout the system. They keep shortages at the bottom tier of those that can not afford the new higher price, but you still have shortages.
Fair enough. How about this "They maintain an orderly though not necessarily fair system for distributing commodities." _________________ "I was born in a deep forest
I wish I could live here all my life
I am made from stones and roots
My home, these woods and roads
All my life I loved this sound
Of the woods all around
Eagles fly where the winds blow free" -Korpiklaani
Joined: May 13, 2007 Posts: 601 Location: Athabasca, Alberta
Posted: Fri Jul 18, 2008 8:08 am Post subject: Re: WTH is going on with the markets right now?
I have two points I would like to add to the chart.
(1) If we are pumping at maximum rates now, how can more crude be added to the mix?
(2) Falling prices will mean decreased exploration and workovers which will decrease supply. _________________ Appuis ait fabrum esse suae quemque fortunae.
Alias Redneck
Posted: Fri Jul 18, 2008 8:19 am Post subject: Re: WTH is going on with the markets right now?
smallpoxgirl wrote:
HEADER_RACK wrote:
I don't think that statement is quite accurate. Free markets keep shortages from being distributed throughout the system. They keep shortages at the bottom tier of those that can not afford the new higher price, but you still have shortages.
Fair enough. How about this "They maintain an orderly though not necessarily fair system for distributing commodities."
I can go along with that Although I think my opinion doesn't carry any weight. _________________ There will come a day when we would have wished to do a little evil for a greater good.
Posted: Fri Jul 18, 2008 8:40 am Post subject: Re: WTH is going on with the markets right now?
Blacksmith wrote:
(1) If we are pumping at maximum rates now, how can more crude be added to the mix?
It can be added because non-conventional oil, oil that is difficult to refine, or wells in hostile environments that are difficult to drill may not be economically feasible at one price, but may become feasible at a higher price. _________________ "I was born in a deep forest
I wish I could live here all my life
I am made from stones and roots
My home, these woods and roads
All my life I loved this sound
Of the woods all around
Eagles fly where the winds blow free" -Korpiklaani
Posted: Fri Jul 18, 2008 8:57 am Post subject: Re: WTH is going on with the markets right now?
SPG, You're starting to sound like one of those the markets are going to save us types. _________________ There will come a day when we would have wished to do a little evil for a greater good.
Joined: May 19, 2005 Posts: 762 Location: Merry Ol' USA
Posted: Fri Jul 18, 2008 8:58 am Post subject: Re: WTH is going on with the markets right now?
JoeW wrote:
eastbay wrote:
I do have one little issue with the chart. I'm no expert, but aren't 'demand' and 'supply' supposed to be in synch, so to speak? Or at least very close as portrayed on the left side of the chart?
you might be right about that based on the x-axis being time. i would expect the production and consumption to be very close.
usually, you plot quantity vs. price for demand and supply at a particular point in time, and where those two curves meet is the market price. i don't like the labeling of this graph as supply and demand. i think production and consumption makes more sense.
I read "demand" as "potential demand" rather than "actual demand". Obviously actual demand cannot exceed actual supply. But there's going to be a whole lot of people (just like now) that want oil, but can only buy what they can afford/what's available. I feel reasonably certain that Indians or Africans don't enjoy 18 hour blackouts due to diesel shortages
Quote:
The main question is: Did the crash cause the depression, or did it merely coincide with the bursting of a credit-inspired economic bubble?
Hmm...sounds like a contemporary situation I know of... _________________ After fueling up their cars, Twyman says they bowed their heads and asked God for cheaper gas.There was no immediate answer, but he says other motorists joined in and the service station owner didn't run them off.
Posted: Fri Jul 18, 2008 10:15 am Post subject: Re: WTH is going on with the markets right now?
HEADER_RACK wrote:
SPG, You're starting to sound like one of those the markets are going to save us types.
Define "save". I think that left to function, markets will continue to feed the wealthiest 20% of the population for a good long while. If you're an American or a European, you're probably in that 20%. The open question is if and when the have-not's get fed up with the situation and decide to try to forcibly take some resources for themselves.
10% or even 75% less oil than we're producing today is enough to feed a lot of people. The question is whether the rest are willing to peacefully starve to death.
Personally, I think that at some point people around the world will become dissatisfied with the answers the markets are giving them and that political upheaval will result. That has the potential to kill a lot of people much more quickly than resource depletion itself would. I think the other thing that will happen is that governments will start to tamper with the markets and try to rig them. We're seeing that now with Congress trying to meddle with the futures market, SEC prohibiting shorts on it's pet stocks, etc. When that happens, shortages will result. As you pointed out, there have always been shortages, but people accustomed to being able to buy gas quickly and efficiently are unlikely to accept 3 hour gas lines and rationing for very long. Again, political upheaval, riots, wars, etc are the inevitable result of that and those things stand to kill large numbers of people. _________________ "I was born in a deep forest
I wish I could live here all my life
I am made from stones and roots
My home, these woods and roads
All my life I loved this sound
Of the woods all around
Eagles fly where the winds blow free" -Korpiklaani
In an open letter to Congress Thursday, Robert G. Pickel, chief executive of the swaps industry’s trade association, argued that the Reid proposal “could actually make things far worse” for consumers by impairing the effectiveness of the hedging markets.
Of concern to the swaps dealers, Mr. Pickel noted, is a provision in the bill that would allow commodity regulators to order companies to liquidate their swaps transactions if it concludes that a major market disturbance has occurred.
In effect, he said, this would require companies “to break their privately negotiated risk management contracts,” even if the swap complied with trading limits that were in place when it was originally negotiated.
The Futures Industry Association, which represents futures brokers and derivatives exchanges in more than 20 countries, has also expressed its opposition to the bill, saying it “would amount to liquidity-robbing, regulatory overkill.”
_________________ Cogito, ergo non satis bibivi
I'm just gonna find a cash machine.
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Although I think my opinion doesn't carry any weight. 
