Gas prices are high? Enter Enron Loophole

The numbers don't support

The price changes.

Average annual increase in worldwide consumption since 1980 = 1.15%

Average annual increase in worldwide consumption since 2000 = 1.61%

2007 consumption data are not available, but the largest annual changes since 1980 were 3.41% from 2003 to 2004, and -3.44% from 1980 to 1981.

Average annual increase in worldwide production since 1980 = 1.07%
Average annual increase in worldwide production since 2000 = 1.79%

So supply and demand don't change much from year to year, and they stay closely coupled.

There's nothing in the data that supports the price increases we've seen in the last year. I've seen numbers that suggest that all of the price increase since 2006 can be explained by the decline in the dollar and the increase in oil futures investment.

There's also a consensus (albeit from the same people who pooh-poohed the idea that both the internet stock and real estate bubbles existed) that what we're seeing in oil futures is the result of money bailing out of the real estate crash and landing in commodities. It makes sense, although I don't know how to verify it.

But no asset class is immune from speculative bubbles. And no investor class is either.

--Shannon
 
So supply and demand don't change much from year to year, and they stay closely coupled.
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Where is your data from; because I am not seeing that in the spreadsheet I linked to (which only goes back to 2003 and does have 2007 data).

Looking at these two tables:
World Crude Oil Production
World Petroleum Consumption

It looks like there is a much larger delta than your numbers suggest and strong evidence that consumption exceeds supply.
 
Got 'em from the DOE

Data can be found at:

Consumption Tables

Production Tables

I used the "All Countries" spreadsheets... it's the first one in each table.

I had to apply the % change formula ((x2-x1)/x1)*100, since the deltas aren't in the spread sheet, and then to averages of those calculated deltas across the entire range (1980-2007) and a more current range of 2000-2007.

Check it out... good info in there.

--Shannon
 
hard to debunk facts

when they are presented. Now that does not mean all the fact are relevant but never the less when presented with facts you need to either verify them or dispute them with other information. Not simply claim the facts are wrong because your don't like them.

There is little room for doubt that those involved with the Enron loophole have been involved from the onset and continue to be involved today. Except for a few in jail or those who died. Congressional records and proceeds of congressional hearing are hard to falsify and make pretty reliable standards of who said what in reply to a specific question. So try if you like to discredit Olbermann or O'Riely on this. But show me the facts and not your opinion.

Eghad yes there is billions in tax revenues from gas and diesel sales. However the actual tax is based on a fixed rate of 18.4 cents per gallon and 24.4 cents per gallon. The tax rates have not changed while retail selling prices have almost tripled. If anything the tax revenue is probably down as people are driving less and conserving fuel. That results in less gallons being sold and less tax collected.
 
Is Congress going to hold investigations on the billions of dollars the federal and state governments have taken in on revenues from gasoline sales that make the oil companies profits look like chump change?
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Definitely! Then we can maybe find out WHO KEEPS BUILDING ALL THE ROADS! Stupid infrastructure, allowing people to get places... :rolleyes:
 
Thanks tube_ee! There is a lot of data there and I missed that.

I think one thing that is tripping us up is that consumption is by definition not the same thing as demand (especially when it outstrips supply). I am not sure how EIA developed the numbers in the first spreadsheet but that one seems to show the demand exceeding the supply. I'd agree that the difference alone probably doesn't account for all the price (weak dollar being another place to look); but in all the speculator discussion the part I don't grasp is "How does the speculator avoid being stuck with a contract nobody will buy?"

Nobody seems to be explaining that part and the oil business is way too cutthroat for one company not to undercut another.
 
Interesting exercise is to list out investment banking firms heavily into energy (specifically oil) futures then overlay on that list the investment banking firms who were heavily into subprime loans and subsequent variants. Just like any good business a portfolio of products levels out income fortunes.

Great capitalist explanation, right? Right up until fraud enters the picture then the issue becomes criminal and not "free market" operations. The subprime mess was a criminal operation sanctioned by everyone in the food chain. In an effort to correct the losses caused by conscious decisions to deceive the general public is expected to pay increased energy prices. Object and you are greeted with cat calls.

I don't necessarily favor congress doing anything but when you have daisychained criminal activities something must be done. I am perfectly happy for people to pay the price for their own stupidity. I have a major problem when I am expected to pick up the tab.
 
Happens all the time...

but in all the speculator discussion the part I don't grasp is "How does the speculator avoid being stuck with a contract nobody will buy?"
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He can't. If the price goes down too far before he can sell the contract that he paid too much for, he's screwed, and loses his shirt, along with everyone else who paid what he paid. When you have something that's appreciating faster than ever before, and everybody's jumping on the bus, it becomes very easy to assume that today's ridiculous price is tomorrow's bargain, and you'll always be able to sell.

See also dutch tulips, kansas land, florida swamps, pork bellies, pets.com, and your house.

Commodities trading is a huge gains / huge losses kind of deal. You can get returns that are so far beyond what anything else will yield that it looks to an outsider like you're doing something illegal. We've seen examples of that before, eh? You can also lose astounding amounts of money in almost no time at all.

A lot of this was made even worse by the deregulation of the commodities markets, especially the near-elimination of margin caps. Now, your commodities investments can be leveraged to whatever degree you can convince an investment bank to lend the money. That only works so long as the banks don't buy into the hype, and stick with sane risk models. But when everyone's making money, the guy who says "no" tends to lose out.

Positive feedback systems are nasty things.

--Shannon
 
Definitely! Then we can maybe find out WHO KEEPS BUILDING ALL THE ROADS! Stupid infrastructure, allowing people to get places...
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Actually most goes into the Highway Trust Fund with some going into the Mass Transit Fund.

Then why do people complain about gas prices being high then if the roads are being kept up?

In California about 82 cents of the price of a gallon is federal and state taxes.

70% of the cost of gas is the price of the barrel of oil according to the
federal governments figures

the average cost in California is $4.32
- 82 cents states and federal taxes =$3.50
$3.50 x 70% =$2.45

Leaves $1.05 to be split up between the retailer, wholesaler and producer to include any labor, transportation and production costs.

So Federal and State taxes and the cost of oil dictated by OPEC and speculators = $3.27 cents of your gallon of gas costs in California.

so tell me again that the oil companies are responsible for the high cost of your gasoline.
 
so tell me again that the oil companies are responsible for the high cost of your gasoline.
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Surely. Taxes were the same when gas was $2.00/gal. These haven't changed. I don't blame nothing changing on making gas $4.00/gal. Thus taxes ain't the problem.

I only blame oil companies to the extent that they having driven out independent gas stations, and are now pulling back themselves from that market.
 
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