Question:

Help me out here. Obambi wants to let oil out of the SOR to lower prices short term

by  |  earlier

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But thinks that drilling and keeping our money here won't help in the long term?

Anyone help me with this "logic"?

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5 ANSWERS


  1. If the oil is let out of the SOR that will only be 6 days of gas once it's refined. Then we have no more in the SOR. Not only will it have to be replaced but we will be SOL if we are attacked and the oil stops to our shores. That is the reason for the SOR.


  2. You are a bit confused.  He wants to release some sweet crude from the SOR in an attempt to decrease current gas prices.  Additional drilling cannot do this as it would take years for that oil to hit the market.

    Thanks for playing.

  3. Newt Gingrich says that would put a boot in oil speculator @ss, so that is one reason I will agree with Obama on the SOR!

  4. "You are a bit confused. He wants to release some sweet crude from the SOR in an attempt to decrease current gas prices. Additional drilling cannot do this as it would take years for that oil to hit the market."

    Actually, it is you that are confused. Current oil prices are heavily dependent on predicted future oil prices.

    For example, suppose drilling is opened up somewhere else. In, say, ten years, more oil will be available and prices will go down. As a result, the price of oil futures will go down immediately.

    Because oil futures go down, people who have stockpiles of oil will not want to hold them (because they'll have to sell them later when the prices are lower). This will result in them selling the oil immediately. The increase in supply will bring prices down right now.

    Many countries are currently pumping less oil now than they can. They are doing this because they'd rather sell the oil in the future when the prices are higher. But if new drilling will bring down future prices, they'll instead try to sell more oil now while the price is still high.

    You might think, okay, maybe this will cause the oil price to drop in eight years instead of ten, but eight years is still a long time. But that's not how commodity markets work. If this is going to drive the market down in eight years, then speculators will want to sell their oil *before* then. But they can't all sell their oil the same day (because if they did, the market would crash), so they have to space out over, say, the last two of those eight years. But now you'd have a price drop in six years instead of eight, which refutes our original assumption that the price would stay high for eight years.

    In fact, the current price of oil includes all available information about the future price of oil. Anything that affects the predicted future price will change how people buy and sell now, affecting the current price.

    Just as speculation can drive prices up in a market expected to rise, so it will drive prices down in a market expected to fall. In a rising market, you want to sell your oil tomorrow instead of today, so supply drops. In a falling market (or an 'expected to fall' market), you want to sell your oil today instead of tomorrow.

    Basically, market forces drive the current cost of oil towards the predicted future price of oil. Anyone who says that anything will only affect the future price of oil and not the current price has *zero* understanding of how a commodity market works.

    Literally, no understanding at all. This is the most basic thing about the oil market. It's not even in dispute or a subject of argument. Understanding this is the price of admission into the debate.

    But thanks for playing.

  5. Obama was probably making a reference to green energy in the latter part of your question. In the long term oil prices are supposed to continue to get higher. So if we termporily lower the cost of gas it will increase peoples dependance. While if we develop green energy it will lower are dependance. That's the idea ig, I'm a McCain supporter but it sounds like a decent plan all the same.

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