Why Do Oil Prices Keep Rising?

[Joanne98]

Inflationistas are crowing over the price of crude hitting $113 a barrel and the March Producer Price Index as well.

Indeed the PPI soared last month, primarily on account of energy and food.

Before seasonal adjustment, the Producer Price Index for Finished Goods climbed 1.9 percent in March to 175.4 (1982 = 100). From March 2007 to March 2008, finished goods prices rose 6.9 percent. Over the same period, the index for finished energy goods increased 20.4 percent, prices for finished consumer foods moved up 5.8 percent, and the index for finished goods less foods and energy advanced 2.7 percent.

Gasoline and diesel prices are soaring as well.

Gasoline Prices 2008-04-14
http://globaleconomicanalysis.blogspot.com/2008/04/why-do-oil-prices-keep-rising.html

[texastoast]

1. Mission Accomplished?

:banghead:

[Taxmyth]

2. unrest in the Middle East

makes speculators raise the price. Try to conserve and don't invest in any proposition that benefits from a rise in oil prices and watch how fast it comes down. Ths Saudi's might get pissed and cut production to keep the prices higher but since the 9-11 hijackers had direct relationships with the Saudi's, who cares.

[TheWraith]

3. Because they can keep raising the price.

It's certainly not cost--if it were, Exxon wouldn't be making $40 billion a year.

[no_hypocrisy]

4. Partly because the dollar does its value every day.

Why would anyone sell its product for less than it's worth? If a gallon cost $1.00 (100 pennies) on Monday, but on Tuesday, the same dollar was worth 98 cents, the Seller loses two cents for every gallon sold. So to keep the profit steady, it has to prospectively raise the price in anticipation of devaluation of the currency it's accepting in payment.

[truedelphi]

12. Ca-ching! That about sums it up. n/t

[Warpy]

5. Commodities jockeys are all betting Stupid will start

lobbing bombs at Iran. If that happens, the spot price will go to $200, minimum, and their futures they bought at $110 will allow them to make a killing.

The price of oil should be around $70. Speculation is driving the futures market right now, specualtion that Stupid will do the wrong thing and stick the next president with WWIII.

He's never let them down before.

[newfie11]

8. You are so right!

Commodities are also responsable for the rise in wheat and corn.

[Systematic Chaos]

6. There's only a whole Peak Oil forum here devoted to explaining it.

:shrug:

[phantom power]

7. I'm aware of three major structural reasons...

1) the supply has flattened out

2) the demand has not flattened: it is increasing, most especially in Asia

3) the dollar is devaluing (this one pertains to oil purchased in dollars, which is most oil, although that's changing)


And now, because of 1-3, there is some speculation adding to the price. In this case, I'd say the speculation is correct.

[Deja Q]

11. #s 2 and 3 are incontrovertible

#1 is up for debate.

I'd also suggest that people are being conditioned to accept higher prices; but that's what they say on morning radio shock jock shows.

[Art_from_Ark]

9. Well, there are two oilmen holding the reins of power

plus a secretary of state who had an oil tanker named after her. Oil Man #1 exchanges sloppy kisses with the crown prince of the world's number 1 oil exporter as they stroll hand-in-hand through the Maryland woods, while oilman #2 has his foot planted firmly on the neck of what could be the world's number 2 exporter, if they weren't being occupied. At the same time, oil man 1&2's buds in the private sector are raking in record profits with little if any government oversight.

Sure, crude oil prices are at record levels on the world market, but why is gasoline selling in Japan (which has no domestic oil reserves to speak of), at less than what it was selling for 17 years ago (130 yen per liter then vs. 120 yen/liter now)? Even though the yen is about 30% higher versus the dollar now than it was then, the price of oil on the world market in dollar terms has increased by roughly 600% during the same time.

[Captain Angry]

10. If large investors can't find a better return elsewhere...

They'll buy a sure thing. The demand created by this inflow of cash is increasing the price significantly.

If the big money sees a sector of the market that has hit its bottom and will begin to move upward, we'll see a decent drop in the price of oil as that money flows to the expected higher return in the new sector.

At some point, the people who follow this for a living will know we've hit the peak price for a while and will start selling oil short. As the price falls, they'll make as much money as they did riding it to the top.

Structurally, as long as China and India have growth potential, there is a lot of potential demand there. If the US economy does slow way down, oil prices could fall as demand falls.