Drop in oil prices?

Question

this increase and decrease in oil prices has been going on for over 30 years and each time seems to stay at a higher level.

How many of you feel that each time some alternate form of energy gets rolling, like every 10 yrs, the price of oil drops and that form of energy is dropped in favor of the cheaper oil?

I see a pattern, if someone was to be able to chart the emergence of alternate fuels, as they are getting close to being successful, the price of oil drops for 30 yrs and that shuts out the alternate fuel source

Answer 1

i totally agree with what you are saying.

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Answer 2

You're half right.  The trend in the past has been very up-and-down, but I don't think we're going to have that down swing this time.  Alternate fuels may be getting closer, but it'll be 5+ years before they claim even 25% of the market here in america.  Developing countries will likely take even longer.

They simply can't pump the stuff fast enough to meet demand anymore.  And even if they could, why would they?  They're making 3-4 times what they used to per barrel.

Answer 3

You are completely right. The oil companies know that we need the oil and that we have no other way to obtain it. They could come out tomorrow and say that gas is now $250.00 a barrel and you know, we would pay it. Why? Because we need it they have it. I know that all the other countries who need oil also would be up in arms probably ready to go to war if OPEC did something like that but I'm just making a point.

We need to drill our own oil. That way we will have enough money and less of a headache and we will then be able to really get down to the job of finding alternative fuel sources.

If we began drilling tomorrow, could you imagine what the new cost per barrel would be?

Alternative energy is the right solution, but wont fix the problem for a long long time. It's like having a torn ACL. Surgery and pain killers [drilling our own oil now] can get you moving again and not hurt as bad, but you have to go to physical therapy [alternative fuels] for the real healing so you will back to 100% in not to long. But if you decide not to get surgery and just do the theropy it will take you twice as long if not longer to heal. I know its not the best analagy but hopefully everyone gets my point.

Answer 4

It's not some big conspiracy, it's an asset that's traded on exchanges and over the counter and long positions are financed.      When the supply of money and credit grows too fast, that creates bubbles in credit-driven assets - bubbles that are self-perpetuating until the supply of credit is pulled back and margin calls are made - then the bubble crashes (there is no such thing as a soft landing - structurally it cannot happen).

The better question is, do the commodity markets, whose function is to smooth out such volatility or at least enable market participants to hedge their exposure to it, have systemic problems that could be fixed.

Another great question is, why do so few people outside of the Ludwig von Mises Institute, the Foundation for Economic Education and some commentators on CNBC hold the Fed accountable for asset bubbles?      The long term question being discussed is should the Fed step in to prick asset bubbles - - nobody's addressing the fact that the Fed creates them in the first place.

There are supply and demand factors that should be pushing prices up - but not nearly by this much.    And with oil there's a double whammy because, even if loose credit doesn't at first directly push oil prices up on the exchange, it pushes up business activity, thus demand for oil.  

I think pre-1980 what we had was a high-taxed private sector, with a lot of tariffs and other barriers to commerce, to the free flow of capital, thus a very inefficient global market.     Central banks artificially grew the economy with loose credit, until the asset inflation spilled over into consumer inflation (until which point the consumers didn't know anything was wrong).   Then the central banks had to pull credit back and the bubbles burst, the booms crashed.

Since 1980 you've had a lot of the barriers taken down - but the central banks inflated on TOP of that, for various reasons (misplaced concern over 'deflation,' political pressure to enable government spending, the desire to super-quickly grow developing economies and thus feed starving children).

So underneath the money supply issues the economy IS fundamentally much stronger than it was a generation ago.

But because there is a real increase in demand for money and credit - because there is a real increase in economic activity - there is on top of the profligate printing press, a legitimate reason to increase the supply of money and credit.     It is very difficult when the Fed is in the moment to determine what demand for money is real and what demand for money is driven by economic activity that was driven by the increase in money to begin with (call it 'feedback').    

As a result, the growth of money and credit are magnified, ironically, even though the need to grow them to artificially grow the economy has in fact diminished.

Answer 5

I do not think this is possible.. most of the oil in the world will be finished by the next 50 years, while the demand for oil is increasing, even in the pressence of other oil efficient energy source alternatives.. the increasing demand and decreasing oil amounts will always rise the price of oil

Answer 6

The pattern is we are wasting and consuming much more oil than 10 yrs ago. This was on the news.

Answer 7

Things that make you go hmmm! Yes you have given me something to think about.

Answer 8

I don't recall any alternatives ever "getting rolling."  There are ideas, like hydrogen, but most tend to have problems.  As long as the government stays out of it, the free market will find a solution.

The recent drop in oil prices was due to an announcement from the president that he wants the restrictions on domestic drilling removed.  It was the largest drop in recent history.  Shows how just announcing we will drill has an effect on the market.  Imagine how low the prices will get when we are actually allowed to get our own oil.

Over 80% of the country wants us to drill domestically, but the democrat congress probably won't listen to the people as usual, explaining why their disapproval rating is over 92% now.  Can you image how little they'd listen to us if they controlled all levels of government?

Don't worry, alternatives will be found, but they will be expensive at first.  Once a good alternative is found we will still need to use gasoline until the infrastructure is put into place.  No matter what, we will still need lots of oil since it's used in just about every product in your home, including clothes and shoes.