gas prices, take 2 Options

[scotty914]

okay with the hurrican i have been watching a lot of fox news. according to opec they will pump more oil to help. here is the crazy part opec is going to hold a meeting next month to figure out why gas prices are as high as they are, they stated the opec pumps and sells the oil at 12 per barrel.

so who ever is buying the oil at 12 per barrel is marking it up to a current price of 67 a barrel, i wonder if this is along the lines of enron, artificially marking up the oil.

i have read a few things lately about oil wells, some thing like 70 % of the wells that were dry 10 to 20 years ago now have oil in them again, and but that they mean full flow pumping, not partial.

right now there is a 55 billion gallon oil surpluse ( just heard it ) in storage in this country.

[lapuwali]

There are "emergency reserves", which are held by the government, and Bush has been talking about releasing some to help smooth things out. 55B gallons, btw, is 6 months worth at current usage. It's not nearly as much as it sounds like.

The people doing the "marking up" are oil traders. The price of oil is set on various commodities markets around the world. The $70/barrel price is a futures price, which is a contract to buy a set amount of oil on a certain date. An oil company buys such a contract to guarantee a price for several months down the road, so they can do long-term planning. Oil traders sell such contracts. Enron was such an oil trader. Everyone is now convinced oil supplies will become tighter in the coming months, partly because they feel supplies will fall from Arab fist-shaking, and because demand isn't going to go down, prices have to go up.

Here's a graph showing oil prices in 2005 dollars.

(IMG:http://inflationdata.com/inflation/images/charts/Inflation_Oil_20050819.gif)

You can see we still haven't even approached the peak. In 1973, when the first OPEC oil embargo hit after the 1973 Arab-Israeli War, the prices rose only because people were convinced oil supplies were going to be reduced permanently. More panic ensured in the late 70s, partly caused by superinflation from Carter's economic policies. After a while, everyone calmed down and the prices fell to a price only a bit above what they were before the panics started. Another short scare in 1990 caused a near doubling in price in days, that only lasted a few days. Recently (over the past few years) oil prices have only just kept up with inflation, after years of being well BELOW inflation. Only in the past few weeks have they risen faster than inflation (not shown on that graph), which suggests they'll come down again soon, to roughly what it should be after inflation is accounted for. Squinting at that graph, that looks like gas prices will, therefore, come back down to $2/gal or thereabouts, but won't likely fall below that.