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| Home Front Economy |
| Oil prices plunge more than $10 a barrel |
| 2008-07-15 |
| Damn! Mahmoud! Photoshop more missiles! NEW YORK - Oil prices tumbled Tuesday as U.S. stocks sold off amid worries about the nation's economic health. Prices dropped more than $10 a barrel from their highest point of the day. At midday, light, sweet crude fell $6.27 to $138.91 in an extremely volatile session. The turnaround may not signal a lasting shift in sentiment — prices have swung violently in recent days as they flirted with record highs. But it does underscore investor uncertainty about the sustainability of sky-high prices and their effect on the broader economy. "They're slamming this pretty good. But remember, these $10 moves are becoming a little more commonplace," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago. Earlier, the contract rose as high as $146.73 and fell as low as $135.92. The ingredients for further gains were in place early on. The dollar fell to a new low against the euro, prompting investors to pour money into oil as a hedge against inflation and made crude cheaper for overseas buyers. Meanwhile, threats to supply from Iran, Nigeria and Brazil provided a solid floor on oil prices. But neither were strong enough slow oil's rapid decline before noon. "Traders are always looking for signals. When they see the market fail to respond to bullish news, they sometimes sell their positions," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "Traders get spooked." Mounting worries about the health of the U.S. economy helped spur the sell-off. Federal Reserve Chairman Ben Bernanke told Congress that "numerous difficulties" are racking the economy of the world's largest oil consumer, and warned that rising prices for energy and food are heightening the risk of inflation accelerating. At the same time, the Labor Department reported that wholesale inflation jumped by 1.8 percent last month, a larger-than-expected gain. Over the past year, wholesale prices have risen 9.2 percent, the most since 1981. Bernanke's sobering comments and lingering concerns about the health of the financial sector helped drive stocks down sharply. In midmorning trading, the Dow Jones industrial average was down 180.51, or 1.63 percent, to 10,874.68. Broader indexes also sank."The oil market appears to be paying more attention to a 200 point drop in the Dow Jones rather that the new highs for the euro," Ritterbusch said. A five-day strike by Brazilian oil workers that began early Monday also seemed to have less effect than feared. The action cut production of government-run Petroleo Brasileiro SA, or Petrobras, by only about 4 percent by Monday evening. Petrobras produces about 1.6 million barrels of oil a day."We are not making a big case of the strike in Brazil as it is well defined in time, hence carries little un-priced risk. Furthermore the output loss estimates have been continuously revised down during the day," Olivier Jakob, an analyst at Petromatrix in Switzerland, said in a research note. Soaring oil prices are taking a toll on drivers the world over, stoking fears that sustained high fuel costs could crimp global demand. General Motors Corp., the leading U.S. automaker, said it is assuming oil prices will hover between $130 to $150 a barrel next year. The company made the prediction as it laid out plans to slash jobs and truck production, suspend its dividend and borrow up to $3 billion as it grapples with an ailing U.S. economy and record high fuel prices. Retail gas prices in the U.S. remained at a record near $4.11 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel rose six-tenths of a penny to its own high of $4.83 a gallon. |
| Posted by:tu3031 |
| #11 President Bush says DRILL and backs it up with words and deeds: he removes the execute ban. Prices drop $10 in a day. Cause and effect. I didn't read the link itself, but funny how the article doesn't even mention your point, isn't it? |
| Posted by: Raj 2008-07-15 21:19 |
| #10 Yes, I am aware crude oil has recently fallen nearly $10. per barrel. I just wish it had not fallen so fast. |
| Posted by: Obama 2008-07-15 21:18 |
| #9 Yeah, Queen Nancy Pelosi said that drilling would not have any effect before 10 years. This woman is incompetent and out of touch. She doesn't understand economics or markets. No wonder Washington limousine liberals are so eager to spend, spend and spend and regulate, regulate, and regulate. |
| Posted by: JohnQC 2008-07-15 19:30 |
| #8 The other parts needed are the remove the ability to trade futures on margins, and to restrict the market participants to those who either produce or consume the oil, or their direct agents. It's a nice idea but the net effect of those moves would be to relocate lucrative futures trading to foreign markets where we exert no control. If the money's going to be made it might as well be made here. |
| Posted by: AzCat 2008-07-15 17:30 |
| #7 It came back. Down 16 cents. |
| Posted by: tu3031 2008-07-15 15:57 |
| #6 Oil is being used in much the same role that gold has been in the past. The idea being that oil would maintain value in the face of dollar fluctuation. We have major financial institutions buying and storing large quantities of oil for use as a hedge against the dollar. Gold can't be used in that context anymore because the supply of it is too small. Purchasing a few hundred million dollars with of gold has a greater impact on market prices than a few hundred million dollars worth of oil does. But it does cause some change and that change is amplified when thousands of individuals sitting on the sidelines suddenly jump into the market. The financial institutions are in it for the long term. The intend to take delivery and store the oil. The speculators simply want to turn a quick buck and be out of the contract before it expires. So the speculators are easily spooked out of the market if they believe prices will stabilize or if they believe OTHERS will believe prices will stabilize. It is a psychological game with the speculators. If Iran launches another photoshop, it might send "supply jitters" into the market and lead speculators to believe the market will rise. This might cause them to flock back in and the market does indeed rise ... and the bet one makes is that one can get out of the market with a profit before it falls again. But after Iran's last fisaco, this might not fly anymore. |
| Posted by: crosspatch 2008-07-15 15:56 |
| #5 US Public pressure to drill increases, President Bush says DRILL and backs it up with words and deeds: he removes the execute ban. Prices drop $10 in a day. Cause and effect. OK all you who said drilling will have no short term impact, care to admit those of us who said the opposite were right? Care to read up on the marketplace, and how futures work, and how speculators exploited it with cheap money (margin)? Futures are being driven by speculation and supply-demand of contracts, not supply-demand of oil. That's a fundamental cause of this mess. Increasing supply, even the threat of it, will drop prices since that removes one of the things they depend on- continued constrained supply in the face of rising demand. The other parts needed are the remove the ability to trade futures on margins, and to restrict the market participants to those who either produce or consume the oil, or their direct agents. Get a marketplace that will base the price on supply and demand of the commodity in question, not the supply and demand for contracts by speculators. Bring the market back to producers and consumers. |
| Posted by: OldSpook 2008-07-15 15:24 |
| #4 The Oil price represents the future expectation of demand. If it falls without dollar movement it means that traders are expecting oil demand to fall. This basically means they are expecting people to be poorer. |
| Posted by: Bright Pebbles 2008-07-15 14:15 |
| #3 "Oil prices plunge more than $10 a barrel" Expect Iran to photoshop another "missile test" to scare prices back up. |
| Posted by: crosspatch 2008-07-15 14:01 |
| #2 no thanks to the incompetent pukes in the U.S. congress. |
| Posted by: Broadhead6 2008-07-15 13:58 |
| #1 a number of people are predicting that the Chicoms will stop subsidizing gasoline consumption or, at least, drastically reduce it subsequent to the summer Olympics. |
| Posted by: mhw 2008-07-15 13:34 |