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| Kudlow: Energy Prices Set to Drop? |
| 2006-07-05 |
| Interesting analysis over an anticipated drop in fuel prices at the pump. Relif may be on the way. |
| Posted by:badanov |
| #18 Actually, inventories these days are a bad thing in supply chains. The key is to optimize the processes (be them process industry related or manufacturing industry related) such that you can produce what is in most demand -- and meet that demand without having to utilize buffer stocks, WIP or worst yet Finished Goods stores. The burden on carrying inventory is unecessary and a complete waste, as is the application of resources to what is now (in view of the supply chain) a dead duck just sitting there. Yeah, yeah in the real world we have to have inventories, but the reduction of and the refinement of the process to build what is in demand ON demand is the prime goal of supply chain management. |
| Posted by: bombay 2006-07-05 22:18 |
| #17 Possibly. But it could also mean that when prices go up end use customers are cutting demand by driving less. So now the producers, who have responded to the higher prices by producing as much as they can, have more product than the market wants at the price they are charging. So they can lower the price or sit on the inventory. You can only sit on the inventory so long and then you have to cut prices. In the grocery business this is known as sell it or smell it. |
| Posted by: Nimble Spemble 2006-07-05 21:51 |
| #16 So when the price of the raw material is high, and inventories go up, that just means the speculators are buying on the hope of making even more money... or that wise managers are working against future price increases. Am I close? |
| Posted by: trailing wife 2006-07-05 21:16 |
| #15 Wife: Look at it this way. The price per barrel is at record highs. That is only a small component of the price you pay aqt the puump. As long as the finished product, gasoline, is selling high, buyers will stock up and inventory the raw material. If retail goes higher, they then have a supply bought at a lower than current market price and their profit is that much more. You don't really know what the price per barrel was of the gasoline you just put into your car. $40 or $70? Depending on the stockpile... |
| Posted by: Chuck Simmins 2006-07-05 20:50 |
| #14 I never got as far as Econ 101, phil_b. Can you explain, preferably using very small words? Thanks! *Rantburg U will be in session shortly, I hope* |
| Posted by: trailing wife 2006-07-05 19:12 |
| #13 Problem is, demand at these prices is falling. |
| Posted by: Nimble Spemble 2006-07-05 17:57 |
| #12 The Energy Department just announced that crude oil supplies rose 1.4 million barrels I don't know if the guy is being deliberately deceptive or just doesn't know what he is talking about, but the increase is in inventory not supplies. And as anyone who knows anything about supply chains will tell you, maximize inventory of the product(s) most in demand. So rather than being an indicator of prices going down, it's an indicator prices are going up. Economics 102 |
| Posted by: phil_b 2006-07-05 17:53 |
| #11 I could swear I heard recently that the government study on the impact of boutique blends found that they have no significant impact on gas prices (yeah, right). IIRC the recommendation was to leave the system as-is. |
| Posted by: AzCat 2006-07-05 17:14 |
| #10 Isn't W going to exec order that we don't need 95 different blends? Besides - September 1 - we won't need 95 different blends. Or is it 9/30? |
| Posted by: anonymous2u 2006-07-05 16:25 |
| #9 Oh, Larry, Larry, Larry. Wrong yet again. Why would producers keep oil at sea at $75 a barrel waiting for prices to drop? U.S. demand is only part of the reason that world oil prices are high. We produce almost half our need. China and India produce diddly squat [technical term]. As long as their demand goes up, world prices will too. The only producer ramping up production is Iraq and that new half million barrels is a drop in the bucket. And they licensed a new reactor. Whoopdie doo. They haven't even broken ground yet, much less addressed the avalanche of law suits that will have to be resolved before one electron is generated. As for oil supplies, the amount he shows in inventory is about 1 month of imports for the US or about two weeks of overall need. Yeah, that'll quench demand. Ummm..., larry, how ya gonna refine it? Refineries are at max and some will be going down for the usual summer maintenance cycle. A year ago, Larry was praising the Chinese for their stable currency policies. The ones that keep our trade deficit artifically high and help support the Ponzi scheme that is the Chinese economy. |
| Posted by: Chuck Simmins 2006-07-05 15:59 |
| #8 Drudge reporting oil nearin $75 today... |
| Posted by: Seafarious 2006-07-05 15:25 |
| #7 I think oil prices will spike as elections near. The OPEC nations see it in their interest to paralyze US actions and promote infighting. The best hope of that is to have Democrats gain control of the House or Senate. |
| Posted by: ed 2006-07-05 15:23 |
| #6 So we should hold out hope that it will be going down, sometime in the future? Won't happen, let me tell you why. The oil market is too easy to manipulate. Pirates in the Straits of Malacca, Rebels in the Niger Delta, North Korea, Iran, Iraq, Sudan, Venezuela, South Africa, Bolivia, the Gulf of Mexico, Mexico...ect. ect..ect. If any one of them have a bad day oil goes up If opec decides the price is too low, they cut production, the price goes up. If we have a hurricane in the gulf, the price goes up. If some asshole energy broker decides the gas inventories are a little too low, the price goes up. Getting the gist of this yet? |
| Posted by: bigjim-ky 2006-07-05 14:54 |
| #5 Steve Actually I think a lot of people think we may well get a $10 to %15/barrel decline in late Oct if gasoline use stays at the same level as in 2005 until then (where it has been the past two months), if we get no cat 3 hurricanes in the gulf of Mex and if the economy cools off (to say +2.5% annualized growth). But if we do get the decline the donks will say it is a Rovian plot. |
| Posted by: mhw 2006-07-05 14:25 |
| #4 Unfortunately, it won't happen in time for the November election. |
| Posted by: Steve White 2006-07-05 13:13 |
| #3 Funny thing is I read the same comment at Bros. Judd a day or before this article. |
| Posted by: anonymous2u 2006-07-05 12:56 |
| #2 Prices go up or down. And they tend to go which ever direction is not anticipated for reasons not forseen. |
| Posted by: Nimble Spemble 2006-07-05 11:33 |
| #1 I'm skeptical; this smells too much like wishful thinking. I wish it were true, though. |
| Posted by: Jonathan 2006-07-05 11:27 |