Why Are Oil Prices Rising?

Ask Goldman Sachs who writes many of the oil contracts. Someone has to pay for all of those Derivative Exposures!
Percentage of total exposure to Risk Based Capital is over 1,000%. And we know every Memorial Day many take to the skies and highways, what a better way to pay off some of that Debt. Consumers get played with again.

Here's what I don't understand about the 'free' market: why are consumers the ones paying for an oil bubble? If it were truly a free market, the investors would be the ones paying for the bad bets and consumers would pay the true price based on supply and demand. The bubble became obvious in 2008 when the price of oil and gasoline both peaked on the SAME DAY. Economists claim that there is a disconnect between oil and gas prices, so how do you explain that event? Looking at the numbers, supply was UP while demand was DOWN during 2008. The oil bubble in 2008 was created by the same big investment banks that were losing big money on bad loans--the same banks that have received TARP money. Don't count on a 2009 oil bubble--Obama will not let the market run afoul as it did last year. Also, on the demand side, the number of vehicles on the road is actually falling and any new vehicles are expected to get better gas mileage as hybrids become mainstream.

Every time there is disruption or shutdown at a refinery the price of crude goes up. Can anyone explain why the price of a raw material, crude, would go up when there is less demand for that raw material. I could see the price of the refined product, gasoline, go up, but not the raw material.

It would be like the price of cane sugar going up if a sugar refinery burns down.

That is why I agree with a post on www.ProudlyMadeInAmerica.com that discusses the benefits of going to renewable energy technologies. We need to be energy independent.

China and Asia will drive the next price surge. The US will remain stagnant for the forceable future; however, increased demand from Asia will compensate for the very moderate drop in the US. Look for oil to break the $80 mark later this year or early next year.

China and Asia will drive the next price surge. The US will remain stagnant for the forceable future; however, increased demand from Asia will compensate for the very moderate drop in the US. Look for oil to break the $80 mark later this year or early next year.

Oil is a evil thing, I say let the big investment house soil their hands with inflated oil purchasing. let them buy up and store oil in every availble ship and let them even drain out lake superior just to store oil they bought on speculation. Oil should cost $200 a barrel or more. fat americains should pay $5 at the pump and goldman sachs ought to replace our government with it's great CEO style model.

Saudi need oil at plus fifty dollars a barrel to pay their rent without dipping in to equate of billions.

The US government should actively manipulate the oil market, to damage the speculators from time to time, while over the longer period slowly but dramaticaly building the US reserves ever higher when prices drop drastically.

This should be done by alternatively dumping large amounts from the reserve as necessary, and should also be done without warning, and without necessarily reporting the action or the true reserve amount. In this manner we ordinary citizens would have a beneficial stake as "players".

Gambling without a license is a felony.
Small potatoes beside the criminal racket known as the RePIGlecan party.

Gasoline has been more expensive than it should be ever since January and now already artificially high prices are on the rise purely on speculation imho, because consumption is surely down.

Another kick in the teeth for us cash srapped and credit-challenged consumers, but heaven forbid a trader misses a chance to make a dollar, but hey, have no fear. After the fun and games are over, we the taxpayers will be right there to bail them all out once again.

Here we go again! Maybe it's better that this happens again though. It might be the only way to get more fuel efficient cars on the highway. The car companies are as usual balking because of the lower prices the last 6 mos. So, let the greedy speculators drive the prices back up to $4.00 a gal. and trash any move toward recovery. All of this will allow the Obama admin. a free hand to whack BIG OIL with both hands and force a new breed of cars to appear. The Auto/OIL cartel PIGS need some restraint.

A big part of the current economically, challenged enviroment was due to these traders and hedge funds, who exploited the commodities(Oil,metals,etc.)on the backs of businesses and consumers. In a weak demand enviroment, business margins suffered tremendiously, as prices tripled over a three year period, even as demand softened. Price increases happened, as oil and metal prices escalated at an unprecedented rate, but no business could pass on the real cost to the consumer.
The net result was the biggest legal piracy of the consumer seen in modern history. And these guys ended up killing the very dog that took them to the hunt.
As you can already see, the thieves are back in black, ready to smother the next potential recovery,by extracting more financial blood from businesses and the consumer. They should be regulated, controlled, and put to sleep, permately.
No one can maintain, if the effort results in no reward.

Pat

You make this sound like a big surprise. As if oil SHOULD follow the simple supply and demand rule. Why should it now? IT NEVER HAS IN THE PAST.

Nationalize the oil companies. Use the profits to prop up social security and medicare.

My non-expert opinion is that oil speculation in particular has caused this financial crisis. And that the crisis started with the repeal of the Glass-Steagall act, and will last until it is re-enacted.

Financial asset bubbles is what happens when central banks and governments pump excessive liquidity into the financial market.

It created the dot.com bubble in the late nineties, the real estate bubble in early 2000, and the asset bubble in 2006-2008. This is just the next financial bubble.

What do all these bubbles have in common, the Fed pumping money into the economy to deal with one crisis or another. It's like drinking from a fire hose. All that liquidity ends up in all the unintended places.

Financial asset bubbles is what happens when central banks and governments pump excessive liquidity into the financial market.

It created the dot.com bubble in the late nineties, the real estate bubble in early 2000, and the asset bubble in 2006-2008. This is just the next financial bubble.

What do all these bubbles have in common, the Fed pumping money into the economy to deal with one crisis or another. It's like drinking from a fire hose. All that liquidity ends up in all the unintended places.

The world uses between 82-84 million barrels of oil per day. This corresponds to 82,000-84,000 NYMEX WTI contracts daily. However, 500,000-750,000 WTI contracts, 150,000-300,000 ICE Brent and an unknown amount of OTC crude oil contracts trade daily. At least 10 times as much financial oil trades as physical oil daily. This clearly, impacts directional oil prices adversely to the downside and upside and increases price volatility. Self serving studies by the NYMEX have said that this "price discovery" by trading is beneficial to the consumer and producer. That clearly is bull$$$t.

The beneficiaries are the banks (Goldman, Morgan Stanley, Barclays), the trading companies Glencore, Trafigura, the hedge funds Blue Gold and of course the oil companies. The victims are the consumers paying a higher price because of these actions.

Obama is seeking to repeal Section 1254 in the tax code that favors oil trader's tax treatment. The currently get 60% capital gains treatment @15% and 40% ordinary income @35%. He needs to take it a step further an enact a surcharge on non-hedged energy trades. It would be like a windfall profits tax on energy speculation. You could still do it, but it would cost a whole lot more and would reduce the idle speculation that creates adverse price movements. Let's STOP this legalized global thievery from energy consumers.

Obama will not let the market run afoul as it did last year - Good joke. Wait for 4 years, today's USA will look much better compared to what it will be by the end of his term.

Last year, GoldmanSach was yelling $200/barrel before everything crashed. But only LehmanBros crashed and burn, the remainders got $trillion taxpayer bailouts. The Big Crash taught GoldmanSach and other surviving financial firms that they have nothing to lose betting on Oil/Derivative/Swap because the Taxpayer will ultimately bail them out again if they collapse. The Big Boys are putting their TARP money on the table, double or nothing, rolling the dice Las Vegas style. What do they got to lose? It's only taxpayer money, and there's plenty more of that to come. As for you taxpayer, a word of wisdom: when rape is inevitable, bend over and enjoy it!

A lot of the 2009 muscularity in the price was driven by the Contango trade. Anecdotal evidence suggests Storage is choc a block, now. Overlaying this the recent quite endemic weakness in the $ has also tweaked and increased Flows into the Commodity complex as Investors look for hard assets versus Paper currencies. Copper's stellar rise in the teeth of an unprecedented demand destruction was the early signifier.

Crude, however, has not returned into a Demand Supply equilibrium and therefore, this rally looks overcooked and ripe for selling. Oil, always displays Fat tails and timing is a fine art.

Aly-Khan Satchu
www.rich.co.ke

Inflation will have the biggest effect, but we could fly through 1 billion barrels of oil very quickly with a couple hurricanes and a war or two. It's all speculation. Oil will eventually be more expensive the question is just when.

Well, this is a good reporting, it has been a long while, no one question what's gone wrong in our market economic system.

In early 2008, Goldman Sachs predict oil price will be in the range of $200 per barrel, the assessment was due to limited supplies, and huge increase China and India for oil to protect their Economic growth. When some of us questioned about what was the real culprit of soaring oil prices in the sort span of less than 2 yrs, they were perceived as being stupid and less educated, and those who didn't understand basic simple economy of supply and demand. In fact all of us were duped by analysts, news media and speculators who enjoyed huge bonuses and profits, while happily seeing majority of people suffering the financial hardship. As a consequence of the commodities speculations combined with irresponsible mortgage landings, these produced a catastrophic financial collapse, that hit hard on majority of people in the world, worse of all, while we still enduring hardship, we still bail these junkyard dogs using our tax payer money to prop them up, to allow them to give out their yearend bonuses, while many of us have to faced with harsh reality and powerless to stop these tugs taking more money from us.

Where is justice to all these greedy folks and fairness for all? Is freedom means the freedom for the rich and powerful could oppress the commons and the have-not?

@strategy:

How naive can you be to think Obama is going to do ANYTHING the banks do not want him to do? Look at all the things he has done since he is in office, phony stress tests, random bailouts, his "hope" is meant only for fat cat investment bankers!

Uh... Oil priced in dollars. Dollar falls. Price of oil appears to go up. This is not supply and demand. This is not speculation. This is printing presses gone wild. Get used to it....

As long as black stuff is irreplaceable for transport industry; consumer would pay in a way or other. But smart people could go for small cars rather than truck based SUV's to make a small dent at least.

The large supply of oil in storage is actually a great thing because it will limit post-recession demand based price increases. Whether it is a good gamble for speculators largely depends on inflation and exchange rates changes. If OPEC were to suddenly decide to no longer accept and set prices by dollar value gasoline could quickly rise to $10 a gallon, but that isn't likely.

You have to admire oil buyers for their willingness to take such large risks. If they chose wrong fortunes will change hands.

Our national oil policy should be for the federal government to buy oil to store in established oil fields whenever the price of oil falls to $30 a barrel. That would stabilize global oil prices while making sure OPEC producers don't try to take financial revenge for being forced to take till little for oil because of a lack of buyers. That would undermine cohesion within OPEC as well, since the $30 would become a de facto floor price. OPEC restricted production in the first place because they were not getting fair payment from major oil producers who were basically cheating oil rich nations.

The greedy oil speculators are at it again!There are elements in the USA,that are determined to deter our resolve to negate our recessionary dilemma.Disposable income is vital at this point in time.Energy consumption is anemic at best.It's time for our illustrious congress to nip it in the bud,RIGHT NOW!!

Supply and demand? Obama, Pelosi, and Reid all say oil is bad! Guess we should tell them they can use any more of it. For flyovers, trips to California on Air Force Jets, etc. Bet that would get their attention!

Peak Oil is nigh, people. You ain't seen nothing yet. China has only just begun to buy cars. As soon (hopefully) as this recession ends, fuel costs will eat up all extra disposable income that people now are saving. If a carbon tax is also passed, the economy will go into a super recession. Oh, and doesn't the Indian Nano run on gasoline ?

The only ones that allow to speculate oil price are those industries that rely on oil on a day-to-day basis, such as the airline and agriculture industries. Banks (all types) should be prohibited.

They say that if AIG would to be collapsed, every entities in the world would also collapse. In other words, no ones would be able to borrow money. What about if crude oil when up to $200+ per barrel, everything would slow to a crawl from businesses to consumers and employees. The airline industries were hurting tremendously last year because these Banks screwing around with oil prices. So, what can we do? The government needs to step in and seriously regulate it. We need to police it.

If the casinos have no policing, cheaters would proliferate, yes?

There is not much else to do with the extra oil at this point except to put it back in the ground. Watch oil crash to under $10. per barrel not rise to $80. by the end of the year. Unless investors get a grip on reality and eat their losses now it will be much worse. Oil is a waste product of mother earth. Trying to price it like it is the next miracle antibiotic is stupid.

Since Perez. O'bamboozler took office gasoline prices have gone up 50 cents/gal.
Bush/Cheney energy plan was the reason for the big drop in crude and gasoline prices.George were beginning to miss you.

If you want to understand what kind of business oil is read Sinclair's book "Oil" or rent the movie "There Will Be Blood"

Simply 'Google' this- DID SPECULATION FUEL OIL PRICE SWINGS, and watch it!!!!! That's WHY oil prices are going up!

The sudden upswing in oil prices has nothing to do with supply and everything to do with a perception that the summer demand is unstoppable. I have just seen pump prices go up 60 cents in 2 weeks. Will that make me stop and think before I spend? You bet it will. There goes the recovery for this summer. I and millions of others are not that ready to go back into a credit chasm.

The rise in pump prices could be a blessing - when the recovery picks up, people will more likely by fuel efficient cars. There is another option for consumers benefiting from rising oil prices. Individual States could incrementally add 10 cents every month to a gallon of petrol, and refund it to the public, similar to tax refund. So the price signal heads towards European/Japan levels of $8-$10 a gallon, while making sure the money doesn't go to the oil companies/speculators :) China and India's oil demand will likely be heading one way, upwards - and OPEC is looking to keep output down. Maybe sooner than we think supply and demand will also affect prices. Washington politicians seem to be reactive, will State Governors be pro-active?

Oil price can go up above 60 but will stay there for too long. Obama will release the Strategic Petroleum Reserve to push it down.

Quite informative!
Thanks for this nice post!
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Karl, I watched. Wow!

[http://www.cbsnews.com/stories/2009/01/08/60minutes/main4707770.shtml]

The price of oil hasn't been going up as dramatically as the price might suggest, Instead, the value of the US$ is in fact going down due to all the stimulus being pumped into the economy.

AAA says gas prices are going up because there will be more people traveling on Memorial Day. Have they taken into account that the last two years most Texas schools are now having to go to school on Memorial Day? I know we won't be going anywhere that weekend.

Last year's $147 price spike was ample demonstration that there are numerous fools trading the oil market. Less than a year later they're back for more. The definition of a true sucker.

I suggest a tax floor on OPEC oil of about $60/bbl. This would do two things: 1. The price of oil would immediately stabalize at a price below $60 which would completely ruin the speculators day and 2. would allow alternate sources of energy in the U.S. to come on line at a known price which would greatly increase investment. It would also increase oil and gas production in the U.S. since U.S. producers would not be subject to the tax, only OPEC.

I am sick of all those speculator. they should be jailed.

If the people jumping back in on Wall Street are in a sucker's rally then the people trying to bet oil up when its running all over the ground are in an even bigger sucker's rally than Wall St.

The speculators are gambling on an economic recovery. Problem is, they're killing the very recovery they're betting on. And then there's that pesky electric car thing.... Even if GM goes bankrupt, their Chineese partner will still have the rights to the Volt. Think they won't bring it to the American market? Think again.

With the Enron loophole in the Commodity Futures Modernization Act still in effect. The likelihood of high energy
prices, at the pump and at the wall socket, are almost assured. As far as being suckered, I think a lot of the guys
in CEO-ville were out of the oil business long before the 32 dollar mark. Remember the profits are privatized, but the risks are socialized. Or the losses belong to those with long range retirement accounts.

What many of you are missing the fact that the Oil Companies are cutting back on the production of gasoline. PRICE FIXING!!

The oil companies have and financial companies have lied to us. They have price gouged us to the point where they made RECORD windfall profits.

The refineries are only running at a 83% of capacity or so even though they know we drive more during the summer, why are they cutting back production? Price Fixing!!!
Another example is maintenance.
They know they will be offline for Maintenance, its already scheduled annually.

They will blame "hurricanes" for another bump in price, even though the oil companies and the insurance companies have factored them into the price already.
They expect there will be 8 Hurricanes in the Gulf of Mexico so why do they seem to think we will accept this as a reason for a price increase. Does the price go back down if the hurricane misses?
Because we have allowed it. We believe what ever we are told by the press. And the press believe what it is told by the traders/speculators.

We need to think for ourselves and start to hold people accountable for their actions and not allow these LIES to become anything more then they are.

The Democrats have control of all 3 Branches of our government.
The Democrats want higher gas prices and a carbon tax to boot.
Get used to getting screwed at the pump. Your government doesn't want the increases to stop. What do you think will happen? DOH!

Big oil must keep searching and drilling for oil. we will need oil for along time in the future. We never want to be held hostage again. Our government is so against big oil that it can't see what we should be doing. We have no one in government that should be in government. These people are a complete disgrace. Remember, the person who rocks the cradle, rules the child.

If we all would drive electric cars then we wouldn't need oil. Electric cars don't need energy because you just plug them into your house electricity you are already paying for. Think about it, more polar bears and peguins to hunt. YUM!

Has it ever crossed anyones minds that yes there might be billionaires in the oil industry but behind those billionaires are some hardworking people that make their livings in the oil field industry. So if it means my husband is working---then let it go up. You don't hear anybody complaining about the price of groceries that went up last year and never went back down when the gas prices did!!!!!!

I love it when people say for all of us to drive small high mileage cars. I would if they made them affordable. Also since when is changing one form of energy for another really helpful. For electric cars, where does the electricity come from? For all hybrids where do batteries come from?
However, the biggest problem is it doesn't matter if individuals drive smart cars, the big problem lies in everything else. All of our goods and services rely on tranportation. Trains planes, trucks, delivery vans, ships, etc. Until we can dematerialize our goods and rematerialize them where we need them there is a fuel cost to ship. That cost get's passed on to consumers. We end up paying for fuel one way or another.

I agree with ANNETTE's assessment of what we as the public are confronted with as oil and gas go up. No matter how conservative we are, by us buying smaller cars, driving less,we the people wind up paying again and again for something, it seems, we have no control over.What's the use of us trying to conserve on our use of gas, if the oil companies here and abroad are totally in control and squeezing our necks tighter and tighter till our country and world is financially broke, not only by Banks and investment firms but by big oil companies.
Is it ever going to end even if President Obomba is trying to get auto makers to make better fuel efficient cars and use Hybrid cars? The oil companies continue to raise prices so they can make there huge profits. Free enterprise is good but when it controls world economy, our country doesn't need to be threatened by terrorists, they just have to wait till our country is financially broke and come in to our country and buy up more Banks and other commode's. This now get us in the old pocket book another way. Something needs to be done and fast.
I am very mad, as a small consumer, that the government has let this go this far without doing something long before now. I think everyone knows that the government has know this was going to happen a long time ago, but our so called free Enterprise has been the scape goat for not stepping in and controlling this mess.

Demand building in developing countries...we are only 4% of world population also the dollar is weakening and since oil is traded in dollars then oil goes up.....this is very standard for it to be $60 and it will go even higher as the aforementioned continue their inverse trends.

The price of oil is going up because it is a diminishing resource like gold (unless god is creating more oil down there). It will diminish faster and faster because of Jevon's paradox.

Why are all the Daily Kos commies here?

Anyone that thinks oil prices are going up and that oil companies and traders are manipulating the market are free to buy all the oil and gas stocks they can get their hands on to take financial advantage of this perceived wrong and put all that money into their own bank account. If you believe prices are being manipulated and you do not take advantage of this then shame on you.

How do you keep gas prices down and keep more money in your pocket?

1. The government needs to lower the federal speed limit back down to 55 mph, as most of the country's speed limits are 65 m.p.h. and 70 m.p.h. Would save billions of gallons of gas a year..

2. Topping off your gas tank, would save billions of gallons of gas a year, as I drive a 2009 Dodge Journey and if I top it off, I can get up to an extra five miles per gallon increase per tank, on the freeaway and up to 3 miles a gallon increase in the city, saving me several hundred dollars a year.

3. Pass a federal law that makes speculating illegal, as gas is a liquid, not a piece of paper, so if you do not have it in a storage tank or have a refinery, how can you speculate on something that you do not own, that is considered gambling and that is against the law in most parts of the country and is a felony..like living here illegally is a felony to., but is our government doing anything about it...not...

Please note:

The reason the housing market crashed and Ford, GM & Chrysler got in trouble, is because of speculators..the rich get richer and the poor, get poorer as we have become mostly a country of greed, not prosperity..
* Face it, the more you pay at the pump, the more you pay for everything else, so when there is a politician out there that cares more about us, then their pocket book or having a lobbyist putting money under the table to get favors, then maybe someone will do something about this issue. *
I hope that we are not going to have another president, acting like a Robin Hood, who can talk the talk, but cannot walk the walk..

Appears lots of folks have the idea that smaller cars is the answer to the energy problem, that is like saying one size shoe fits all, only thing smaller cars to do is increase the bottom line for car makers. Auto makers already have the technology to make more efficient cars, they just choose not to do so, as they are invested in the oil business.

Look at the top of this page. The bastards declare, there is no demand for the oil.??? While yet hundreds of thousands of people, are starving to death. I be no part of the united states big oil companies, or the filth of the goverment who refuses to do FOR THE PEOPLE, but only for them.

GAIL, crude oil is not fossil made, as they want us to believe. the earth is making more every day.
and GARRY, that's what some people -called speculators- are doing: buying oil low and selling high; just like stocks. you didn't know that?