It's the speculators!!! (yup, oil again)

That is not true at all. Please reread my posts. I have said OVER AND OVER again that if a market bubble occurs, the pricing can't be sustainable. People won't pay more for oil than they have to. The "market manipulation" stuff is in response to Boom, who continues to claim the oil market was manipulated.

The NASDAQ is a different beast from the oil commodities market. Equities are generally priced based on the company's performance, or earnings--or the potential for future earnings. In January 2000, company's earnings looked much better than they do today. The market has probably overreacted to the credit crisis, and if it had, pricing of equities will drift back toward a higher equilibrium price that is rational. The way it does in every market.

As Barrack Obama would say, if it sounds unbelievable that I said "the demand for oil today is about 60 percent of what it was only 3 months ago," the reason is that I never said it. Don't quote me and make up stuff to attribute to me. I'm just not going to give you a detailed lesson on how futures markets work, but there has been a confluence of things contributing to the drop in the price of oil. But Demand for oil HAS dropped off precipitously--enough to explain a large chunk of the price drop. From the Wall Street Journal today:

What I *have* said is that the price of oil, whether it is a futures contract, or a barrel on the spot market, is set by buyers and sellers of oil. It is in the buyers' interest to sell for as much as they can, and it is in the sellers interests' to spend as little as they can. There are enough buyers and sellers -- with every purpose you can imagine: they need it for their business, they see an investment opportunity -- to keep pricing rational. When oil was $135 a barrel, it was so for a reason. At $70 a barrel, it is so for a reason. It was the equilibrium price that the marketplace was dictating. It's not surprising that when the price was $135 a barrel, the worldwide economy looked good, countries with energy demands increasing at a much greater pace than ours, were guzzling oil, creating demand and there were a lot of inflationary concerns that were driving up the price of essential commodities. It's also true that today, we have a credit markets crisis that has brought on a sudden halt in economic activity and inflation isn't a problem anymore. We finally got back to normality, in which inflation lowers when the economy grinds to a halt. As a result, the price of oil has dropped off a cliff.

Pointing out the obvious shouldn't make me foolish, but if you do want to characterize me, please do it with things I have said, not with wrong things you attribute to me.

 

If that is true, this enron loophole stuff also caused the U.S. economy to drop off a cliff like a road runner cartoon. Once again, from the Wall Street Journal today:

That "enron loophole" was an amazing thing. Whatever they did caused the credit markets to dry up, caused inflation to come back under control, made people start using less fuel, got people to tighten their belts and spend less on all non-essential commodities and is probably going to make this the worst Christmas in my lifetime.

Once again, you can't have it both ways. You won't correlate the obvious -- what is going on economically in the world and the credit market crisis, which is causing fears of a deep recession -- to corresponding events (drop in demand for oil, lower price for oil), but you WILL attach oil prices to something you don't even understand to make a specious correlation.Last night, I posted something about SSFs and what "the enron loophole" has to do with. Explain how this nonsense has ANYTHING to do with the crude oil commodities market. You can't. And you haven't.

Don't just keep shouting "enron loophole." Give an explanation as clear as the one I gave, please. Explain what the "enron loophole" is and give easy-to-follow evidence that it has anything to do with the price of crude oil. You haven't. And you can't. You don't even understand what it is.

 

Two, I'm not missing any point. Cheap financing (and low interest rates) DROVE DEMAND in the housing market. So did a good economy, which slowly disintegrated. Demand (and supply) are influenced by dozens of factors. The housing market WAS a function of supply and demand. Housing prices were a function of how much people were willing to pay for homes during the height of the housing boom (based on lots of factors, including cheap financing) and how much house sellers could get. Housing prices are STILL a function of how much people are willing to pay for homes relative to how much sellers can get for them.

That is how markets work!

What was it, then? Are you saying that people bought houses at prices that were going higher and higher by the day, and they were willing to spend those high prices for a houses they didn't actually want (or demand)?

That flies in the face of human behavior.

Demand has SURELY high in the housing market five years ago. Prices reflected it. Demand has SUREL dropped off in the housing market. Ask anyone trying to sell a home.

I'm not the one missing the point here.

 

Jay, Oil doesn't work on a spot market basis. Futures markets absorb price shocks based on things like unexpected economic events, natural disasters, wars, etc. Believe it or not, without prices being set farther out (and hedgers having the ability to lock in a price), if you were at the whim of the spot market, gas prices during the summer might have been $6 a gallon, and a few months from now they might be $1.75 or $2 a gallon if the recession deepens. What the commodities markets have done is leveled off these big spikes in price so you feel it gradually, rather than all at once.

You are not a proxy for the demand for oil in the U.S. Don't look at this anecdotally. For one thing, one guy's experience filling his tank is not the only user of crude oil. He's only a part of the picture.

Here is just one fact that is right there in the news today. For the four weeks before October 10, the U.S. consumed around 18.6 million barrels of oil a day, which is a drop of 1.8 million barrels. On a year-over-year basis, that is a drop of 9 percent. It's hard to put that in perspective, but that is a HUGE number. It is saying 1) that the U.S. economy is going into the crapper and 2) energy demands are dropping off a cliff as a result. Those kinds of numbers, when combined with other factors, including abatement of inflation fears, DO explain why oil on a futures basis has come way down in price.