Oil prices skyrocket, and this time they may never come back down

Fear Factor? Are TV reality shows now involved in gas prices? This is going to far.

Tom

 

You can tell when there is raw speculation and fear when oil futures are at a higher point than the gasoline they produce. This was the fact in 2008. The high prices had to do with fear and speculation. This can happen again, but not for long periods of time, then recession hits and oil prices correct. The current prices are in the realm of rational fear of supplies. We get over $100/bbl and we are in irrational territory, and speculation can go much higher. Then again if we have a real revolution or war that gives a long term interruption of the oil supply, or opec blackmail the prices could stay high for years.

 

Refineries are rarely operating at full capacity. Even in 2008 with high gas prices and people were fond of saying we hadn't built a new refinery in decades (overlooking the fact we'd expanded existing ones), the refineries weren't at full capacity, although they were higher than today (about 85% now last I looked I think). They were running at highest capacity in the late 1990's in fact. ref

Inventories don't really mean a whole lot either, that will only supply us for about 3 weeks if I read this right, so we still need to be almost constantly refilling. A refinery can hold off for a few days for a better price, but eventually they have to buy oil at the current price. Okay, so petroleum coming in will take awhile to become gasoline at the pump, and pump prices rise faster than that. So there's definitely some 'anticipation' being done there.

Keep in mind that the prices quoted are usually the futures for the next month - ie. what they expect oil to sell for in March. There's still time for prices to drop before any of that actually takes delivery, so they're pricing in the future uncertainty. So yes, these quick price increases are based mostly on fear. Still, it does usually translate to actual price increases.

Here's some more good reading: EIA - Short-Term Energy Outlook
You'll see that our imports actually dropped the last couple weeks from 9.0 million bpd for week of 1/28 to 8.3 mbpd for week of 2/11. Refineries are probably hoping that prices will drop before their inventories get low. Our domestic production increased almost 1%.

 

Price of oil has gone up 9% today, and gas is about to above $4 per gallon.

Will this trigger a double dip recession?

 

I paid a whopping five bucks more than usual to fill my Prius.

The high prices won't affect people who learned from the last price run-up and bought fuel efficient vehicles.

 

It's not just how much you pay at the pump that's going to be affected. Oil basically moves everything.

 

That maybe true but I think you guys are all worry too much. Even if oil get back to where it use to be, you make adjustments and get on with it. Even if gas hits $5 a gallon, that will equal to about a extra $1000 or so for someone who drives 12k-15k miles. If you make say $50k a year (I know many here make a lot more), that extra $1000 will be noticeable but it's not like your going to go bankrupt because of it.

 

Agreed.

 

Ha. Well, no matter who is in charge over there, they will still be in the oil business--obviously. The difference is maybe more of the profits will trickle down to the populace.

The markets, like the media, always overreact to events. It will take a few days for them to settle down. But the intransigence of our stalemated government in energy policy could be devastating for the country. It's just a matter of time. It's pay me now--or pay me later.

 

So, basically it will affect almost everyone.

Average vehicle in US gets about 24-25 mpg it seems. Average family with two cars is doing about 25k/year. If gas goes from $3.50-5 that's over $100/month, which is significant. But oil prices impact food, energy, plastics prices, everything, so the real hit to the family would be much higher. I'm not sure how much but the "recovery" has been tenuous anyway. In fact, there has been no recovery if not for the ghastly deficit spending by the federal government.

 

Crude inventories at Cushing are high because 1. they always are at this time of year, and 2. futures have been in contango ... not because there's excess supply.

 

Agreed. Remember the food riots in 2008, mostly by people who didn't even own cars? Oil is critical for agriculture, and for shipping, and mining, and a wide variety of petroleum products (from cosmetics to paint to plastics of course).

 

$99.83 on the NYMEX futures right now.

Looks like $100 per barrel is mighty close....
.

 

wow what a load of Cr^&#B
maybe the biggist in that part of the earth but only 10e on the scale of oil producing countys
als speculation and panic!
after this there wil be democraty and peace

 

You could see the writing on the wall this summer and fall, it's a big reason we dumped our 16 mpg 4Runner for the Prius. The fact that we got it for 0% was just icing on the cake.

I'm proud of the people in those countries for ousting the Dictators..... we just need to hope they don't replace a bad guy with worse guy.