[Revi]

Bread and circus are what keep empires running. Our "bread" is cheap gas, and the circus is the entertainment media. Things get ugly when bread goes up. I used to live in Guatemala. Things were really bad. People getting "dissapeared" and killed all the time. The thing that really ticked people off was a rise in the bus fare. In response I saw people burning busses and flipping them over. Scary. The thing those in power want to do is to keep the price of basic commodities low. People don't really care about anything else. The poll numbers show that. Bush's popularity went back up a bit. Why? Was it lower gas prices or his speeches on the Iraq war and terrorism? Who was listening to them? It's time to throw the people some more bread! More circus! Keep it coming until election time!

[Heineken]

If it weren't for the hurricane-season bust, I might be inclined to believe the drop was engineered.

But let's remember everyone was expecting, and being told by "experts," that this was going to be another hurricane season for the record books.

That got deeply priced in over the summer. It was a huge "risk" component of the price. Now the market is shedding that component. Plus we have El Nino returning and its promise of yet another unusually warm winter.

It's hard to see why Iran would cooperate with Bush in order to help reelect neocons this fall. Iran has shown very little fear of Bush and for good reason---it's a vastly more powerful opponent than a fatally weakened Iraq was.

In time, falling oil prices will spur demand and the price will go back up again.

[DigitalCubano]

But let's remember everyone was expecting, and being told by "experts," that this was going to be another hurricane season for the record books.

That got deeply priced in over the summer. It was a huge "risk" component of the price. Now the market is shedding that component. Plus we have El Nino returning and its promise of yet another unusually warm winter.

Kudos. That was succinct, well-written and solid. I would just add that profit taking may be afoot as well and, of course, the high invetories around the globe.

In time, falling oil prices will spur demand and the price will go back up again.

Perhaps, but I've made clear by now, I'm not sold on this kind of fatalism!

[Chuck]

If it weren't for the hurricane-season bust, I might be inclined to believe the drop was engineered.

But let's remember everyone was expecting, and being told by "experts," that this was going to be another hurricane season for the record books.

That got deeply priced in over the summer. It was a huge "risk" component of the price. Now the market is shedding that component. Plus we have El Nino returning and its promise of yet another unusually warm winter.

Agree, but why no combination of the 2.
When prices are falling due to fundamentals, it is easy to kick them down even harder by shorting millions of barrels.
Is there any proof for manipulation? Off course not, but if a suspect party (like Goldman Sachs or JP Morgan) is shorting a strategic market just to drive prices down, there is some reason to believe it is not done for profit.
You also have to look at the timing of such events.
Low commodities = low price inflation = no rate hike = higher stocks = extra GOP seats in November ?
But most people just want to see no evil, so there is no evil.

[Heineken]

Anything is possible, but the hurricane-bust factor is one we can be sure of. Also, as DigitalCubano noted, a wave of profit-taking.

Me, I'm holding on to my energy stocks and even buying more shares.

[nwildmand]

i posted this same question in the open forum looking for truth and facts and got none.

this is all just maket volatility compounded by circumstance ie weak hurrican season, end of driving season compounded by speculaters previously driving prices up. remember volatility is a sign of peakoil and its likley to get much worse. the spikes and falls to come will likely be much more dynamic.

tyler jc put a good write up in that thread. i hope he does not get upset about me reposting it here.

all you investors out there should get ready to buy real quick.

Oil price being manipulated?

First, what would it cost to do something like that?

The total value of the world's oil production every year is somewhere in the neighborhood of $1.5 trillion.

In the two months before the election, the world's oil market is, in effect, $250 billion dollars.

If you want to manipulate a market and cause a massive price swing (20% or more), you probably need to have assets worth at least 10% of that market. Otherwise, the world's other players will be able to take advantage of your illogical market position (read, manipulative market position.)

Think about that claim for a moment. If I want to make the price of oil artificially low, I have to put a lot of sell orders out there. If the world doesn't follow suit, I will lose my shirt.

So controlling 10% of the market is a laughably conservative estimate.

But let's pretend that The Powers That Be want to lower oil prices by 20% to give themselves a political advantage. Are they really willing to risk losing 25 BILLION dollars to do it?

What happens if a few of those powerful people decide to make a short term profit and undercut their peers?

And oil futures are not shares of Exxon stock. In 10 years, the October 2006 contract of oil will be in the history books...but Exxon will still be a company and you will collect a very hefty dividend payout in that 10 years, not to mention the possible increase in the value of your investment.

So there is a possibility that TPTB could end up losing BILLIONS of dollars in order to lower oil prices.

Now, how much of a political advantage does oil at $60 instead of $75 buy them? Maybe 3%-5% of the electorate? Probably less?

Now, if you take one hundred million dollars and buy advertizements you will swing probably the same number of voters with zero risk. Also, you will be free from the possible legal consequences of manipulating the commodities market.

So would you rather risk billions and possibly have nothing to show for it or spend a couple hundred million the legitimate way and accomplishment the same result?

Remember, if TPTB don't lose money on the manipulation, the price of oil will sky rocket up the minute that the manipulation stops (have you ever seen this happen?)

Also, remember that the VAST majority of the players in the oil market don't actually want the oil showing up at their door. Meaning, the real size of the oil commodities market is much larger than my $1.5 trillion figure. I could be off by a factor of 10!

I'm sorry, the math just doesn't make sense.

If they wanted to manipulate prices, it would be MUCH easier to lie about oil inventories and claim that we have a multi-million barrel extra stockpile. This can be done by moving oil out of the SPR (or just lie about the whole damn thing) and calling it additional "inventories".

But as for direct manipulation of the NYMEX? Not a snowball's chance!

[DantesPeak]

It appears that some recent weakness in the energy market lead to panic liquidation of energy positions. Seems like Wall Street, at least temporarily, betted on the downside:

A Hedge Fund’s Loss Rattles Nerves By GRETCHEN MORGENSON and JENNY ANDERSON
Published: September 19, 2006

Enormous losses at one of the nation’s largest hedge funds resurrected worries yesterday that major bets by these secretive, unregulated investment partnerships could create widespread financial disruptions.

The hedge fund, Amaranth Advisors, based in Greenwich, Conn., made an estimated $1 billion on rising energy prices last year. Yesterday, the fund told its investors that it had lost more than $3 billion in the recent downturn in natural gas and that it was working with its lenders and selling its holdings “to protect our investors.”

Amaranth’s investors include pension funds, endowments and large financial firms like banks, insurance companies and brokerage firms. The Institutional Fund of Hedge Funds at Morgan Stanley was an investor in Amaranth; as of June 30, it had a stake valued at $124 million. The turnabout in the fortunes of the $9.25 billion fund reflects the decline in energy prices recently; natural gas prices fell 12 percent just last week.

New York Times

Amaranth Natural-Gas Losses
May Have Far-Reaching Effect

Despite the losses suffered by Amaranth, several winners emerged. Among them, Centaurus Energy, a Houston hedge fund run by former Enron trader John Arnold that is now up more than 100% for the year. It continued to make profits in recent days trading in the same markets that scorched Amaranth, according to investors familiar with the situation.

According to prime brokers who deal with hedge funds, funds-of-funds executives and others active in the commodities market, winners during the recent downdraft in natural-gas prices also included Tudor Investment Corp. and four Wall Street firms: Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and J.P. Morgan Chase & Co.'s J.P. Morgan Securities. Traders at the Wall Street firms stressed that they weren't actively trading against Amaranth.

Representatives at Tudor and the Wall Street firms declined to comment.

A spokesman for Amaranth declined to comment.

Wall Street Journal
Subscription required

[uNkNowN ElEmEnt]

Wall street prices (futures, actual stocks etc) are based on perceived value. If they say its depletion, hurricanes etc, the prices are going to go up. If they say there are no more issues to threaten oil supply then prices go down.

That has little to do with what the price at the pump is right now as contracts are bought 3-6 months etc into the future. The price at the pump is controlled by the gas companies, they call down and tell the retailer to raise or lower the price.

Therefore they project into the future to decide what the price is going to be and set their prices accordingly. This is very easy to manipulate because oil companies have reserves too. If they bought 80mbl at 60 and the price goes up to 74, its all profit and ALL of the oil companies have been listing record billion dollar profits for the past year.

For all the threats to supply nothing has really come about. We had a bit or rationing in some parts of the US but thats it (for the western world).

So its easy to devalue or lower the price at the pump because they've still come out ahead thanks to all the people who refused to change their driving habits at all.

[Tyler_JC]

As I said in my long and moderately hard to follow post...

Manipulating a market as large and dynamic as the crude oil futures market is very risky, very expensive, and very noticeable.

After a period of manipulation (say, the election season), the market will re-adjust back to its "real" value based on the available information.

Granted, the "real" value changes every second, but if that's what how the information is leading investors to act, so be it.

A 30% price drop does not automatically mean that a stock is being manipulated. If Google misses its earnings forcast by, say, 10%, the stock could be punished by dropping in half.

Why?

Investors might believe that Google won't be able to produce better earnings growth in the future, making them unwilling to hold on to a stock that is valued at over a 100 times current earnings.

[Revi]

I was talking to Chris Miller, the former Peak Oil governor candidate here in Maine. He feels like it's rigged, and here's how:

The strategic petroleum reserve was used to ameliorate the effects of Katrina last year. It wasn't filled all the way back up. Now they are using it to drop the price of gasoline. He says he's been checking, and the levels of the SPR are going down. If this is true, we are in big trouble. They are manipulating the market to keep the price of gas down, but even more worrisome, they are using our reserve in a time of calm to do it. We may not have a super mild winter. People may be so impoverished now that even a mild winter with last year's energy costs will break them. Who knows what could happen in the next year or so? We may need that reserve. Why spend it for short term political gain? I'm not sure if it is the whole reason that oil has gone down, but I would like to know what people think about this. Are we draining the SPR?

[uNkNowN ElEmEnt]

There is also the arguement that so much of the US' manufacturing base has been moved off shore that the natural gas reserves they used up are now dropping in price because the demand has lightened up.

In the short term this looks good, especially with winter coming on, but you guys are in for a deep pile of shit if a depression does hit because you don't have any kind of manufacturing base to pull yourselves out of it with.

And buying stuff from CHina-mart, while it can be argued that this is keeping people under the impression of having a good economy because of how far their money goes and therefore spending more, it is depleting the number of jobs available and therefore undercutting your overall economic base. see the catch 22 forming?

[Niagara]

Fascinating discussion.

But it's all noise. Let's compare notes one year from now. Maybe look at the 50 and 200 day moving averages.

[lorax2012]

Oil's not the only commodity to have dropped recently - just about everything else dropped similarly. There's a lot of psychology behind short term price swings. Often it's just market momentum feeding on itself until people come to their senses. All that really matters is to keep watching those production/consumption numbers. I guarantee if production continues to flatten, the price will eventually pop back up higher than ever. In the meantime it's fun to watch the media's pundits in April '06 saying we'd see $100/barrel this year just because the price was rising, and now saying we'll see $40/barrel just because the price is falling.

[Revi]

I have been reading a lot of people's posts and have come to the conclusion that I don't know what will happen. Still I'm glad we did some things to lessen our fossil fuel use. We save $2655.50 per year from all the changes we've made. We bought oil at $2.50 for next winter, so we'll have to eat a bit of crow for preparing a bit too early this year, but over all the things we've done have paid off handsomely. Click on the button with www below to see what we've done so far. Next we are going to get a solar car and use it to get around. It can be seen at:

www.sunnev.com

The repugnicans may want us to get back on the fossil fuel bandwagon, but we've already started to figure out alternate transportation, and we won't get back on no matter how cheap the tickets get!

[Aaron]

I predict a post-election rise in oil prices to at least $70

Might take a few months...

[DantesPeak]

I predict a post-election rise in oil prices to at least $70

Might take a few months...

I agree, but that's not my biggest worry. With US battle groups hovering off the coast of Iran, I'll go with my earlier prediction we see $100 oil with the first bomb dropped on Iran - and maybe a spike to $150 with general hostilities between Iran and the US.

[Lighthouse]

Interesting discussion, but what a waste of time.

It seems that some don't even want to have lower prices, like "Damn you, now you ruined my doomerish PO attitude", others cry "conspiracy".

Get real kids, that's how the market works! Reading 101 of commodity markets could help.

And check out the fundamental data (50 day, 200 day average)

Before I forget, be happy that you still can fill up your car cheap ... enjoy as long as you can!

[Revi]

The price seems to have gone up a bit today. It's at 61.75. Is it coming back up off a floor, or is it going to go back down tomorrow? Who knows? It is a great time to enjoy being able to fill the car for less than $25. It may prove to be the calm before the storm. Enjoy these nice autumn days. I'm even thinking of a bit of leaf peeping next weekend, while we have the cheap gasoline to do it. The foliage should be at peak! (pun intended)

[Lighthouse]

... Who knows? ...

I do.

But wait a minute. Before I can tell you I have to polish my crystal ball first ...

[MonteQuest]

My take on the question: the price of oil has always been and will always be "manipulated".

How do you manipulate the movements on the three major international petroleum exchanges?

How do you force people to buy and sell?

They are the New York Mercantile Exchange (NYMEX, http://www.nymex.com), the International Petroleum Exchange in London (IPE, http://www.ipe.uk.com) and the Singapore International Monetary Exchange (SIMEX, http://www.simex.com.sg).