OK, you big oil fuckers; OPEC crude is now down to nearly $85 a barrel

[cali]

When are gas and heating oil going to reflect that? Oh, they're not? What a surprise.

[fascisthunter]

1. I Hear Ya....

[MercutioATC]

2. When our refining capacity matches demand.

Imagine that you have cheap wheat but only enough bakeries to supply 90% of the demand for bread.

Wheat prices can drop, but bread prices will still rise.

[cali]

3. What's changed in the last year regarding refinery capacity?

[Renew Deal]

12. Gustav and Ike

:shrug:

[pnutbutr]

18. limited

Ike has limited our refining capacity due to the lack of power right now. Once they come back online we should see prices start to drop again. Or we could build some more refineries to reduce the effect natural disasters can have on prices. No matter what though, we need to push alternatives to oil so we can stop providing money to corrupt leaders

[Virginia Dare]

21. Nothing, nor will anything change in the near future..

this is how they can manipulate the market.

[rucky]

4. Upswings are tied to crude production.

and downswings are tied to refining capacity?

[leftofthedial]

6. and they will never build refineries

because artificially restraining supply (a la Enron) and then spending millions on advertising to blame Democrats is big oil's MO.

That way, they can endlessly play this game--any glitch or threatened glitch or invented imaginary glitch in supply drives prices higher, but nothing ever brings them back down. Meanwhile, apologists roll their eyes and "explain" to the rest of us how this is a natural consequence of that greatest force for good in the universe, the "free" market.

[jimmil]

7. Well, I know of one refinery

in Louisiana that was brought back on line since gas started to rise in price. I would seriously doubt that capacity has lessened and demand has risen here in the 48. So, yawn, the oil companies are just screwing us and we let them.

[TahitiNut]

14. Under the macroeconomic theory of a "free market" SOMEONE will always be priced out of the market.

No producer wishes to invest in production capacity that's not totally covered by revenues. Excess production capacity is all expense and no revenue ... i.e. a LOSS. When the market sets a price that balances demand against supply, there will be 'demand' that is unable/unwilling to pay the price. That's how the price is set ... just high enough to create a below-the-waves (drowning) demand that's not met but not sufficient to warrant investment in higher production capacity (which is usually a step function incrementally, not smooth).

So, when you hear the supposed 'virtues' of a "free market" extolled, particularly with regard to essentials such as food, shelter, clothing, and health care, understand that the economists DELIBERATELY include the result that SOME people cannot have their needs met in that market. This, as a matter of fact, is one of the more basic rationales for federal agricultural subsidies and government purchase of food surpluses. To create an 'artificial' demand that's sufficient to feed a revenue stream into that "free market" that warrants the production capacity.

I've said it before and I'll say it again: "Excess capacity" is considered an EVIL in business but ESSENTIAL in civil governance. The ability of any nation to meet the unforeseeable and irregular demands of natural disasters, wars, and other catastrophes is premised on the creation and maintenance of "excess capacity." Indeed, the Depression-era investments in civil infrastructure - power, transport, etc. - were an exercise in 'banking' a national "excess capacity" upon which our ability to not only meet the demands of WW2 but sustain globally-preeminent industrial capacity in the post-WW2 era was founded. No "rational" businessman would make such investments without a near-term foreseeable return on investment evident.

[DemoTex]

5. The subpoenas have been served here in SC ..

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4019499&mesg_id=4019499

[Warpy]

8. That's getting close to what those futures should have been

all along.

Two things are at work: first, institutional investors are dumping commodities futures to generate cash for their balance sheets; and second, they're all beginning to recognize that the Pentagon has consistently blocked Stupid's quest to start another war, this time against Iran, and that the $200/bbl oil is just not going to materialize.

Gas won't reflect much of it because the spot futures are only a small part of the overall cost of a gallon of gasoline. Most oil refined into gasoline is contract oil. Gas prices went up because contracts were renegotiated and reflect the fall in the value of the dollar. The same goes for heating oil.

[Tandalayo_Scheisskopf]

9. Latest market prices:

CLV08.NYM Crude Oil Oct 08 94.02 11:09am ET Up 2.87 (3.15%)
HOV08.NYM Heating Oil Oct 08 2.7406 10:44am ET Up 0.0209 (0.77%)
NGV08.NYM Natural Gas Oct 08 7.647 11:09am ET Up 0.368 (5.06%)
PNV08.NYM Propane Gas Oct 08 1.475 9:16am ET 0.00 (0.00%)
RBV08.NYM RBOB Gasoline Oct 08 2.4132 10:44am ET Up 0.0124 (0.52%)

Prices started climbing back up last night, during GLOBEX trading, because of the perception that the AIG deal would stabilize demand destruction. Our Asian friends at work.

That said, Gas is 2.41 on the market. That means quite a spread between the market and the pump, even when you strip out taxes, which you should for accurate numbers. Even more impenetrable is Heating Oil/Diesel(same thing, actually). That has maintained itself rather nicely, even though it is CHEAPER to produce.

The facts are that something is quite rotten in the oily state of Denmark. Something is very broken. Sadly, they have no hope of being addressed until Jan 20, 2009 and only if Obama gets back in.

Oh, and watch this:

http://www.youtube.com/watch?v=_DY8pUTTNuk

One answer on the spread is that those who have hoarded stocks want to move those stocks out NOW, but want to keep the prices up as much as possible, to get the most back on their initial investments.

[lifesbeautifulmagic]

10. not an economic expert here, so I imagine this will sound

kind of dumb, but isn't this filed under "whatever the market will bare", I mean once the oil companies see that we can and will pay $4.00 a gallon, why would they reduce the price of gas? Oil companies are notorious greedy bastards.

[pampango]

15. Why does any retailer ever reduce prices? They only do it when they think they will make more money

than by raising the price or keeping it the same.

If the oil companies thought they would make more money by selling gas at $4.25 (which it was here a few weeks ago), they would be charging that instead of $4.00.

[ThomWV]

11. Cali, I know full well you remember my predictions on oil prices and the hoots it got

I am sure you will remember this past spring and summer when I was saying that oil would drop back down to the $60-75 range and I'm equally sure you recall the responses that statement got. The peak oil folks were out full force telling me I was an idiot and that oil would never see $100 again. That this was a problem of supply and demand or that it was a problem of the world running out faster than thought or it was one of a zillion other intractable problems. It was horseshit then and it is horseshit now. There is no reason on earth for the price of oil to be one red cent more than $60 and barrel and it probably should be a lot less than that.

[cali]

13. I'm sorry Tom, but I don't remember those threads.

Good for you for seeing so clearly though. Looks like oil may well drop to the levels you predicted.

[hunter]

16. I said to look around if prices got that low...

... and you'd see a market that was a smoldering wreck.

Or something like that.

Shit.

[Virginia Dare]

20. Yep, I remember those threads....n/t

[RB TexLa]

17. If demand will support a price that is where the price will stay. Demand hasn't gone down

that much for gasoline with the increase in price. At least it hasn't gone down enough to justify lowering the price. Nothing requires the oil companies to remain at a 9 to 10% profit margin.

[hunter]

19. Supply-demand models assume stable markets.

This market ain't stable.