Oil tumbles to lowest level since June 2005

[Don_1967]

LONDON (Reuters) - Oil briefly dropped below $55 Friday to its lowest level since mid-2005 amid fund selling across commodity markets on worries of an economic slowdown in the world's largest energy consumer, the United States.

High U.S. oil inventories heading into winter, and selling pressure ahead of the expiry of the front-month U.S. crude contract at the close of trading Friday, fueled the selling.

U.S. crude was down 61 cents at $55.65 a barrel at 1600 GMT after hitting its lowest level since June 14 last year at $54.86. The price has fallen nearly 30 percent from the record of $78.40 in July. London Brent crude rose 11 cents at $58.65.

http://today.reuters.com/news/articlenews.aspx?type=businessNews&storyid=2006-11-17T175417Z_01_SP247384_RTRUKOC_0_US-MARKETS-OIL.xml&src=rss&rpc=23
Then why is the price at the pumps going up ?

[caseycoon]

1. And gas prices soar...

for the expected Holiday travel season.
:mad:

[bullimiami]

2. ALL a scam of market manipulation and monopolies.

[soothsayer]

3. "Oil barons react to a Democratic victory, realize they can't

continue raping the US public with inflated prices"

[Possumpoint]

4. Lack of Knowledge of How the Markets Work

Your comments show a lack of working knowledge of how the oil markets work. I have to be careful here in that I only have a sketchy knowledge myself. Oil is bought and sold by futures traders who bid on it in large blocks for future delivery to refiners or other wholesalers. Their bids reflect a number of factors such as demand, supply, interruptions to supply, world events and anxiety levels.

Those funds then are paid to the producers. Producers may decide to ration output to increase the price they receive. That purchase price is then passed onto the refiners with shipping costs and used in part as base to start from. Then the questions of supply, demand, refinery capacity and marketing come into play again.

My description may be vastly over simplified but hopefully gives some insight. Despite what you think energy cost in America are a bargain when compared to some other countries. Yes, the retail energy companies are making money hand over fist. That raises the question of should excess profits be taxed? That's a subject for a whole thread in itself.

[B Calm]

5. Feel free to express your thoughts on this thread about taxing excess profits.

I would love to see your opinion on taxing big oil..

[Possumpoint]

8. Yes To Taxing

My opinion is yes to taxing. After Katinia, the supply situation drove the price way up giving the oils companies windfall profits. Turn the money back to those most hurt by the situation. Be careful in what rate you tax at; there could be unexpected consequences. Oil companies have a funny habit of saying scr$w you, we'll stop exploring for new oil till we get our way.

[B Calm]

9. and in turn we could use the tax dollars to say screw you back and

use the dollars searching for alternative energy..

[Possumpoint]

15. That May Not Work

In our economic system, who other then big oil is going to have enough money to buy both the technology and resources needed for any alternate energy source. This includes the viable ones I'm aware of. If a new source is found, I'm sure they'll buy it.

[dubykc]

13. Absolutely tax the excess profits.

[dubykc]

6. I understand your explanation of the "futures" market, but...

how does the price in the futures market justify the huge, sometimes overnight, increases in the retail price of REFINED fuel that has already been bought and paid for and is sitting in the underground tanks at the gas stations. No one can tell me the BIG oil companies don't use their political and economic clout to take advantage of the American people at the pump.

[Possumpoint]

10. Here Goes

Again, with sketchy knowledge, gas stations, whether privately owned or owned by big oil, finance their future purchases of their products by what they sell today. So when they learn that a wholesale price increase is coming they must increase their prices to cover it. It is my opinion that they make the most money in a declining market where they slowly decrease their price at the the pump.

[dubykc]

12. OK, that makes sense, and I agree with your analysis of ..

making the most money when the pump prices go down, ever so slowly.

[B Calm]

14. Hopefully the democratic congress will put a stop to this gouging

and windfall profits!

[dubykc]

16. Indeed, we can hope.

[Strelnikov_]

17. You Are Correct As I Understand It. Commodities, Such As Gasoline,

are priced at the replacement cost of the commodity. If the wholesale price of gasoline goes up 5 cents, the gas in the retailers tanks will now cost 5 cents more to replace, so the gas in the retailers tanks is essentially worth 5 cents more. Hell, it probably works that way for most goods. I am sure when Piggly-Wiggly receives a price increase from the wholesaler, they don't wait until all the lower priced boxs of cereal are sold to raise the retail price.

As for 'big oil' there is really no such thing anymore. Over 90% of the worlds remaining reserves are in the hands of state controlled companies (Pemex, Aramco, etc.). Refining, a low margin business, has mostly been offloaded. The big money now is in who holds the reserves. Why? Because now that the world has reached peak production, the big time gouging is about to begin.

All the wailing over gouging will not change the reality that WE have placed ourselves in an oil trap. Conservation, energy transformation and societal transformation are the only solutions. In other words, we have to kick.

The oil companies, and their Quislings in government, build an intricate scaffolding and place a big rock over our head. We have been standing underneath the whole time it was being built, ignoring the warnings, holding a wad of cash in our hand. Occasionally we become nervous, and they use a combination of ridicule alternated with promises of unlimited prosperity to keep us in place.

Eventually, they drop the rock, knock us out, and steal the cash. When we wake up, who do we blame? Why gravity, of course! Because without gravity those criminal oil companies would not have been able to steal our cash.

[originalpckelly]

7. And it has absolutely nothing to do with the Republicans...

in the Senate being in hock to the big oil companies. ;-)

Yes, it's a complicated process of bending the consumer over to receive the high gas prices right in the ass.

[Toots]

11. Oil is bought and sold by futures traders

And those "future traders" have a fairly good insight into how America will be managed under Democratic rule. Hence oil prices falling and Stock Market booming.......or do you think it is because Bush* is doing such a fine job in Iraq?

[leftofthedial]

18. congressional oversight is amazing

ain't it?

[praeclarus]

19. every time price of gasoline goes up...

... we have those who come on here telling us how
complex it all is and how we don't understand how it
really works and how it's a supply and demand thing
and how it is tied to the PRICE OF A BARREL OF OIL.

No such thing as it goes down for elections, that's
just an amazing coincidence.

Then, when the PRICE OF A BARREL OF OIL goes DOWN,
they come on here telling us how complex it all is
and how we don't understand how it really works.

So price of barrel goes up, price of gas goes up...
immediately.

Price of barrel goes down ... well who knows. Gas might
go up or it might come down but slowly. It's just so
complex <insert sarcasm>.

They always somehow fail to look at the rise in profits
for the oil companies. For example, period 2002 - 2006.

[Kerrytravelers]

20. Funny, isn't it.

Amazing the responses that come out before and after election season.