8.9 Earthqauke in Japan: Huge Tsunami hits land
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03-16-2011, 07:29 PM
GO KINGS GO!!!!!!!!
Join Date: Mar 2008
Originally Posted by
Thus far in this thread, I have tried to explain the short term pricing fluctuation of crude (and by extension gasoline price, and even tried to rationalize local pricing for OC.) You now ask a very valid question regarding the long term price trend of crude.
Back to supply and demand. Supply has decreased (as measured by excess capacity to pump more crude oil out of the ground on a given day) and demand has increased. Namely, the BRIC (Brazil, Russia, India, & China) countries have exploded in terms of energy consumption. Did you know China overtook the US last year as the country that consumed the most energy (all sources of energy-- not crude). This gradual tightening of the supply demand curve for crude oil will inevitably push crude prices higher over the intermediate and long term. You will see short term fluctuations in the price of crude, but the price of crude will inevitably go up. Sorry to say, but all the easily developed oil fields in the world have already been discovered. This will push crude/gasoline prices higher in the future.
Also, be careful about "global gasoline prices." Its important to fundamentally understand what people pay in different countries. Countries like China, Malayasia, Indonesia, and Venezuela have fixed (subsidized) gasoline prices for their citizens (< $1-$2 / gallon). Countries like Norway and England (and anyplace in Europe for that matter) tax the hell out of gasoline, such that gasoline is $9 / gallon in Norway and $6-$8 in most of Europe.
Lastly, let me point out that oil as a global commodity is traded in US Dollars. Therefore, if crude oil rises, but the US dollar depreciates versus other currencies, the net result will be that US consumers will pay higher gasoline prices while European/foreign consumers don't see a change (since they pay for gasoline in Euros).
In summary, I personally expect crude and gasoline prices to increase over the intermediate to long term while short term fluctuations will be dictated by localized events (sadly Japan and the Middle East right now).
I guess I will start with noting that I didn't need you to explain the short term pricing fluctuation of crude pricing to me, you might have meant someone else as I didn't ask anything about O.C. either.
We may have somewhat different interpretations of the specific details of the concept but I feel that both of us have an obvious grasp on the machinations of how the petroleum industry comes to determine its pricing.
Secondly to answer you question regarding China my answer is yes, I did know that and I am pretty certain that most people who have any interest in the matter did as well as it was widely published.
The most interesting statement that you have made and one that we are in total agreement about is the speculation that North American (not only u.s. consumers but us Canadians too) will indeed have to pay more for everything including crude and petroleum products due to the rapid depreciation of the U.S. dollar. Especially so as countries like China among other rapidly divest themselves of U.S. dollars.
Sadly I think that the U.S. is in for serious financial termoil for the next several years.
Interesting points all around.
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