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me
Oil is at all time high of $145. WHAT will make this go back down?
This is screwing up the entire world, economy, stocks, etc. The projected value isn't even $125, it's wierd speculators driving it up, ultimately they are only hurting themselves. When will oil go back down so the rest of the economy can recover? What will make is go back down?
                     
 




FatHalo
Rating
I am not quite sure, there are many unknown variable to us who are not market insiders, as it is a very opaque one. Anyway, we say that the solution for high prices is high prices.
As oil prices get higher, less people consume it, and they dedicate additional, and higher, portions of their budgets to buying oil, therefore less money for other products and services. Since consumers represent about 70% of all GDP, higher prices will lead to less consumption elsewhere, driving a recession (of which I am not sure about the shape and length). Companies start to layoff people and could not increase their salaries at the same rate as commodity prices are rising. Consumers have less disposable income to spend (more exacerbated by credit bubble as banks are becoming reluctant and unable to lend). People will be FORCED to consume less of oil. US consumes about 40% of world crude oil, as consumption in US and other countries wane (because of recession), demand drops and prices are supposed to go down.

But this is only a part of the issue, as reality has many faces, demand plays only a partial explanation of high oil prices. First, even if US goes into a recession, we are not sure that demand will dip, as there are other countries that will be glad to fill the slack of global demand (emerging markets, especially China). Most importantly, the case of the US is complicated because oil is priced in dollar (considered reserve currency) and even if US demand goes down, the world still needs to buy their oil using dollar. The dollar has lost value during last few years and the pace accelerated since last year. As the dollar goes down, all assets denominated in dollars should rise in price to compensate for the lost value. If the US goes into a recession, this will put even more risk the dollar will continue down, therefore increasing the price of oil in dollar terms (but not necessarily for other countries as their currencies appreciate against the dollar). Also, there is the issue of supply. As the US consumption wanes, we are not sure if the OPEC and other exporting countries would decrease their production too keeping demand/supply in tight equilibrium and prices relatively high (the supply side is related to legitimate and other not quite so reasons. Many think that we are approaching peak oil production, less reserves (the case for Saudi, Russia, Mexico ...) limited storing capacity and refining running at full capacity also make any attempt to increase production without much effect on prices - and also, which is understandable, that OPEC just want to get the maximum prices for their oil). Add to that that oil price contains a political risk premium (risk an Israeli-iranian war).

And even if oil prices go down, I suspect it would not good either for US. Most US banks (broke by mortgage crisis) speculated heavily in the oil futures market. If the oil bubble (I do not know if it is a bubble) melt down, most of these banks (that are mainly behind the speculation mania in oil) will just get broke, adding insult to injury.


The Joe
Some say our low interest rates is causing a weak dollar. It takes less of other currencies to buy $1 then it used to. Since oil trades in dollars, as our currency gets weaker the price of oil gets cheaper to all other countries. Part of the solution then, it to raise interest rates, but our economy is too weak to handle higher rates. It might help the price of oil come down but it would dampen any recovery in housing prices.


abradley57
What will make it go down is when everyone stops driving their gas hogs and stays home.


Cysteine
When the consumption of crude oil goes down over 10%. Until then the oil producers have no incentive to lower the price. If you where running a business, and had a 100% sell rate just overnight, why would you lower the price?


Pancho Refries
Rating
Unfortunately, this is a global issue and as long as there is continued demand for petroleum products the price of oil will continue to remain high. A reduction in the demand for petroleum products like gasoline and diesel fuels is unlikely unless there is a major uprising by the masses to stop purchasing these products and rely on other means of transportation.


A nobody
Rating
The gas price will take a tremendeous drop when the United States announces that they will start drilling in the Artic or in the Coastal waters. According to politicians it will take over ten years to get the oil, according to the oil industry it will take no more than 3-5 years.

We need to get away from dependency on foreign oil and out of the world market place. With China and India' rapid expansion the demand will be getting worse, and we don't need the US to be in the mix. We should be suppliers to the market place, not users.

The government by prohibiting drilling is keeping the prices high since the demand is greater than the supply. The government has banned the building of new refineries to product gasoline (which we will be doing for Mexico)

Speculators are a necessary function on any market place, and as a group they are not all getting rich, people forget that for every buyer there has to be seller - one win, one looses.
The speculators provide product when needed to those that need it at the current market price.

Yes the US Liberal Democrats are scewing up the world market, but what's new. The Liberal have screwed up everything they have become involved with


Stanley
Rating
1. the Fed raising rates will do it. there will always be speculators, but low rates makes it very cheap and tempting to gamble in commodities.
2. a greater then expected surplus of oil reported. motorists driving less, more fuel effecient cars on the road, really high unemployment.
3. counties that are subsidising oil (like China) no longer being able to afford to do so


David M
Rating
The world needs to reduce it's consumption of oil. That means smaller cars, more public transportation, less driving, reduction of of other energy consumption (including heat, A/C, industrial use, etc.), more efficiency and the use of alternative sources of energy including nuclear, wind, hydroelectric, geothermal, solar and others. It also means drilling for more sources of oil including ANWR, offshore,etc. Something Obama and the Democrats are absolutely dead set against while at the same time saying they are for reducing the price of oil and gas. I find it silly that we can't drill off the coast while China is about to drill 45 miles off the coast of Florida. Next time you hear a Democrat say they are against high energy prices, remember this FACT.


David V
Rating
Never! America needs takes over opec.


The Tycoon
I'm not sure.


Rogue Trader
It's not speculation! It's ROW (rest of world) demand. China and India are emerging economies and they use more and more oil. Think about it....

Ten years ago one would see a broadcast from China and everyone was riding bicycles. Nowdays, you see traffic jams!

The other MAJOR factor is the lack of new sizable discoveries and the WEAK US dollar. As oil is denominated and priced in USD as the dollar gets weaker it is relatively less expensive to other countries..

Example. The Fed has has been lowering rates to help stimulate the economy and help those with loans.

As the Fed lowers the interest rate (Fed funds) the dollar gets weaker. Why? The major other interest rate determined in Europe (LIBOR) stays the same (just today got raised to 4.25%).

The dollar is weaker as a result vs. the euro currency. Why? Investors want higher yields or higher interest rates and will pay more for that interest rate denominated in that currency. Hence, the euro is at an all time high compared to the us dollar.

Anyhow...we complain about $4 gasoline. In Britain, the same gallon costs about $8. Europe has traditionally had higher fuel costs due to higher taxes. That's why you always see such small, fuel efficient cars in Europe.

In other parts of the world, such as China, fuel is capped at non-market prices. Meaning that it's artificially low. It's a government policy to encourage economic growth, a stable political situation, etc. These countries tend to use more and more due to these policies as well as growth in general.

The only thing that will make oil go back down is reduced world wide consumption and or a major shift to alternative energy. The current high price of oil does create a so called "demand destruction", meaning people consume less of the product as it's price goes higher.

In my opinion it could pull back somewhat, but I believe $100+ oil is here to stay for the next year and a half at least....


J Man
get rid of all the cars that use gas


Jon Humes~Orange Graphics Design
Rating
If we pressured capitol hill to drill our own oil, we have the largest amount of oil reserves in the world. Yet the "save the earth" people wont allow us to drill even though these places are desolate. Some of the places already drilled have seen a greater animal population because of the warmth put off by the platforms. this in turn creates a better environment for trees and plants which will help solve some of our so called "global warming" problems. It is all really just a matter of getting the idea that we are "hurting the environment' out of our heads and focusing on ways to "co-inhabitate' the two (oil production and ecological stability)


muncie birder
Rating
I don't believe I have ever given so many thumbs up to so many answers ever before. Too bad the government is not so astuted as the folks who answer these questions. The plain truth is that the supply of oil is deminishing but not the demand. There is a supply demand inbalance which until corrected will mean no lower price for oil. Of course speculators are taking advantage of the situation. Why should they not? We had an opportunity to prevent the sudden run up in price back in the 1970s, and we did for a while. But Washington shut their eyes while Detroit convinced the car buying public that what they really needed was a gas guzzling 400 hp SUV or pick up truck rather than a 38 mpg Escort. Smart. Very smart. Then to add insult to injury Washington decided that what the U S really needed was a weaker dollar, so they drove down the value of the dollar and drove up the price of oil. Cute, really cute.

The U S might very well be the only country in the world where public transportation does not exist from 90% of the cities. And for the other 9% the only form is air transportation. We can take a train from only about 10 cities on the east cost not counting commuter rail. I suppose bus travel still exists somewhere. I don't know where.

In the UK trains run every 1/2 hour to darn near every city in the UK. In South American buses run every 2 hours to almost everywhere. The U S is so far behind the public trasportation curve, it may never recover. Maybe we are about to find out.

Got to go now. Got to jump in my SUV and drive two blocks to see my buddy.


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