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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: Nadine Carroll who wrote (256082)	6/29/2008 7:14:13 PM
From: carranza2	Respond to of 793845

Oil is fungible Not really. Many different grades exist. The cost is different depending onn the difficulty to refine. Venezuelan oil, for example, sells at a substantial discount to West Tex Intermediate, which is a widely used benchmark. Yes, but that hardly means that smaller numbers don't matter. It doesn't take a huge number to change the market from 'not enough supply' to 'enough supply', which in turn makes the difference between 'rising price' and 'stable price'. Agree. Pricing takes place at the margins. I took a fairly detailed look at oil supply and demand a few weeks ago. It seemed not to be hugely out of balance. I concluded that there was some speculation taking place as well as - probably - some minimal amount of increased demand which was not being met. Nothing huge, mind you, but enough when tied to speculation to probably give us the rise we have seen in the past few weeks. In the pre-Peak Oil days, the increased demand would be met by the producers with excess capacity and the price would remain stable. As there is little if any excess capacity left, and the price gets set at the margins, the price has risen quickly and severely. It should go down to some extent as high price destroys demand. Ultimately, however, excess capacity will cease to exist and all hell will break loose. I figure about 2-3 years for that to happen. In other words, buy oil when it falls and do not sell it unless there is a gun to your head.