Has the price of oil actually gone down?

[the_lyniezian]

It was mentioned on the news yesterday morning as being alongside a fall in some other commodity prices, and I did notice based on the oil price indicator that shows on here that the price had gone down below $100/barrel for the first time in weeks (and then went back up again by day's end). Then the guy at the place we get our eggs mentioned the fact, and that Morrison's had slashed petrol prices by 3p/litre.

So is this really true, and what is the cause of it? How long before it goes back up as inevitably it will when decline sets in?

[UndercoverElephant]

It was mentioned on the news yesterday morning as being alongside a fall in some other commodity prices, and I did notice based on the oil price indicator that shows on here that the price had gone down below $100/barrel for the first time in weeks (and then went back up again by day's end). Then the guy at the place we get our eggs mentioned the fact, and that Morrison's had slashed petrol prices by 3p/litre.

So is this really true, and what is the cause of it? How long before it goes back up as inevitably it will when decline sets in?

http://www.theglobeandmail.com/report-o ... ticle20113

It's not just oil. All sorts of commodities went down in price at the same time, especially silver. Even gold dipped, but it was the first thing to turn around and head back upwards again.

[the_lyniezian]

http://www.theglobeandmail.com/report-o ... ticle20113

It's not just oil. All sorts of commodities went down in price at the same time, especially silver. Even gold dipped, but it was the first thing to turn around and head back upwards again.

I thought I mentioned other commodities, but thanks for the elaboration.

BTW I am told I can't access that article without being a subscriber.

[emordnilap]

So is this really true, and what is the cause of it?

It's the way the world is run.

Extract maximum profit till the poorest can't afford your product.

Demand thus down, you have tempt people to start handing over their money again by dropping the price ever-so-slightly.

You end up with a jagged, but always upward, graph of prices.

[the_lyniezian]

I'm not that naive, I'm just wondering if it is just plain economics or if some geopolitical changes (no doubt having some relevance to MENA) had anything to do with it as opposed to natural economic cycles.

[emordnilap]

Didn't mean to imply you were callow, merely pointing out the obvious.

It's interesting to speculate on whether the price can keep going up above the rate of inflation indefinitely, as there will always be demand destruction to bring the price back down.

There again, a barrel of oil really should be priced at around $2,000, with each extra $1,900 being used to create a negative-CO2 society.

[RGR]

[quote="the_lyniezian"]

[the_lyniezian]

So is this really true, and what is the cause of it? How long before it goes back up as inevitably it will when decline sets in?

Oil prices go up, oil prices go down. Right now, they are higher than their historical average, but lower than, say, what they were in 1864, or during the 70's. Or 2008.

Yes, but what specific factor is causing them to go down this time?

And what decline? Haven't you heard? We are in the midst of yet ANOTHER peak oil!

http://earlywarn.blogspot.com/2011/03/i ... -fuel.html

Unless you can prove that oil is somehow a non-finite resource (is abiotic or whatever) then a decline will happen eventually. Just because some peakers are perhaps a little enthusiastic (not in the positive sense) about considering the latest local (i.e. not overall) peak to be the 'big one', doesn't mean it won't happen eventually. Or that this one isn't the 'big one'.

Like the boy who cried wolf, eventually his elders stopped believing him... and then a real wolf came and destroyed the flock.

[RGR]

[quote="the_lyniezian"]

[postie]

The invisible hand of Adam Smith. I take the position that it does not matter. If you don't like what you pay for fuel, buy less.

..

AH! ... I finally get RGR with the Adam Smith reference.

And therefore, everything he's said before this point...of enlightenment.


....


... is bollocks.


RGR. You really are an arse. " If you don't like what you pay for fuel, buy less." is the most bollocks you've spouted. Really it is.

If you're quoting Adam Smith, then you're saying the market dictates the commodity price.
This is quantifiable bullshit. When, due to drought, wheat is expensive, people starve (or have starved). People NOT liking the price of wheat... has F--k all to do with the price of wheat, or their ability to drive the cost down.. It's expensive.. cos of the drought. It's a sellers market.

If there is a drought in the supply of oil, or the ability to refine oil (to mill wheat cos of a lack of windmills!).. then the price, of a scare commodity goes up. Simple as...

Not buying oil, cos you can't afford it.. doesn't make ANY more oil. The oil is still on the market. It's just bought by less people. Thereby temporarily increasing it for those who CAN afford it. (those who can afford to buy bread.. and not starve)

Unfortunately for your argument, RGR.. oil is so complex, that.. it drives up prices, because, in business, factories, windmills etc, they need power.. to produce the things. So everything goes up in price, not just wheat because of the drought (in oil). People not buying oil to put in their cars, the petrol pump price... isn't the end of the problem. It's the knock on cost of oil.. the scarcity making everything more expensive..

Now you tell me one thing.. using your Adam Smith argument. If consumers lead demand, or destroy demand. Why is oil at such a price.. AND.. what does the consumer do to lower the price? And why aren't diamonds the same price as coal?

[clv101]

Now you tell me one thing.. using your Adam Smith argument. If consumers lead demand, or destroy demand. Why is oil at such a price.. AND.. what does the consumer do to lower the price? And why aren't diamonds the same price as coal?

Urm, consumers are setting the price of oil, have done for at least the last five years. The price of oil is not the cost of oil plus a normal profit margin, like it is with most products and like it used to be with oil. These days there is a large gap between the cost of production and the price at which the market clears.

Oil is currently $100 (for sake of argument) as that is the price that demand = production. It's not $50 as then demand would be higher than production, nor is the price $150 as at that price there isn't enough demand.

The consumers can lower the price by lowering consumption - just like we did in the 2nd half of 2008 as global GDP fell - right back down to something like $40, before producers were able to reduce supply enough to bring the price up a bit.

[RGR]

[quote="postie"]

[ziggy12345]

Neat trick RGR. How exactly did you reduce your fuel bill by 90%?

Why do you think EROEI is nonesense?

Cheers

[RGR]

[quote="ziggy12345"]

[PS_RalphW]

RGR most of us on powerswitch have adapted our lives to a greater or lesser extent to cut our fuel use - but I would declare that your fuel use is still higher per capita in your family than mine, if you take into account all the fossil fuel used to sustain you directly (heating, cooking, electricity) and the embedded energy used in producing your house and vehicles and your extended transport costs (do you or your family ever fly ?) or the fossil fuels used in your food production, transportation, cooling, cooking and waste disposal, and the energy expended in your children's education (admittedly you probably have less direct control over that) etc. etc.

My commuting costs are almost zero - simply a few extra calories of (vegetable) food intake and faster wear on the seat of my pants.

[edit]

I should mention that I paid handsomely to live in this locality - most people who work in Cambridge cannot afford to live there. I paid as much for my 3 bed semi 3 miles out of the centre as people pay for a 2 up 2 down 1 mile from the centre, or for a 5 bed detached 8 miles out of town.

Living cheaply is a luxury that only the wealthy can afford.