May 8, 2006


Oil prices fall below $69 (Associated Press, 5/08/06)

Crude-oil prices dropped below $69 a barrel Monday on rising U.S. gasoline supplies and a letter from Iran's leader to President Bush proposing "new solutions" to escalating tensions. [...]

Oil futures have been on a sharp down-swing since last week, when the U.S. government showed an increase in U.S. refining and gasoline supplies. Still, concerns about Iran, unrest in Nigeria, violence in Iraq and rising resource nationalism in South America underpin oil prices.

The over-supply is fact, the rest psychology.

Posted by Orrin Judd at May 8, 2006 4:45 PM

It's concern about the future. If nothing bad happens to oil supplies for several months, everyone will relax a little and prices will come down.

Posted by: Brandon at May 8, 2006 6:00 PM

Uncertainty means more risk, higher risk means higher prices. That's not psychology, but economics.

Posted by: Chris Durnell at May 8, 2006 6:28 PM

Economics is psychology.

Posted by: b at May 8, 2006 6:33 PM


Nothing bad has happened for three years and they've stayed too high--it's just psychology.

Posted by: oj at May 8, 2006 7:01 PM

oj. Psychology spelled m e d i a ?

Posted by: erp at May 8, 2006 7:13 PM

The Chinese economy has been growing at what, a 10% annual rate for a while now while the Chinese state has been subsidizing the cost of oil to the Chines consumer. India is building out basic infrastructure and the threat of supply disruptions is on the mind of every energy centered industry.Maybe the increase in incremental demand caused by China and India coming on-line, economically, should have no effect on the world price but it's probably unlikely.

Posted by: Tom C.,Stamford,Ct at May 8, 2006 7:40 PM

It's certainly had no effect on the excess supply.

Posted by: oj at May 8, 2006 7:44 PM

One nit: crude supply is not the same thing as refined product supply.

Posted by: ghostcat at May 8, 2006 7:49 PM


Too high for three years? What do you think the price should be right now, and why?

Posted by: Brandon at May 8, 2006 7:59 PM

$40-$50 a barrel, that's what reliable analysts like Daniel Yergin say.

Posted by: oj at May 8, 2006 8:03 PM

Yegin would probably be in agreement with the idea that increases in incremental global demand in conjuntion with ideologically driven political instability and counter-productive government policy are responsible for the current price. There is plenty of oil and the investment capital coming into the sector along with better technology could probably cut the current price by 30%. So, what's the problem? Policy.

Posted by: Tom C.,Stamford,Ct at May 8, 2006 9:25 PM

Hedge funds.

Posted by: oj at May 8, 2006 9:32 PM

Wasn't there a story on here not long ago saying that the Chinese & Indians were trading in their bicycles for cars? That probably affects demand.

Posted by: sharon at May 9, 2006 12:58 AM


That is correct.
Increasing demand from India and China, not just for gasoline for cars but for all forms of petroleum products, is 75% of the reason that oil prices are higher than $ 20/bbl.

But Tom C. has part of the truth too.
Bad American gov't policy concerning exploiting known oil reserves in Alaska, California, Florida, the Rockies, and in the Gulf of Mexico have driven up prices by at least 10%.

Posted by: Noam Chomsky at May 9, 2006 7:15 AM


That's quite wrong. There's ample oil for China and India.

Posted by: oj at May 9, 2006 7:20 AM

Actually, WRT reserves off California/Florida, if you're inclined to think that offshore oil drilling creates its own heat source, and that heat source greatly fed Katrina, you may want to think carefully about exploiting such reserves.

Otherwise, I will continue to maintain this whole oil price kerfuffle is but a mere attempt by energy traders to game the system, using the available data that predates even the Iraq war.

Posted by: Brad S at May 9, 2006 9:14 AM


You may wish to consider reading something on the subject.

Posted by: Noam Chomsky at May 10, 2006 4:51 AM


Daniel Yergin has been spot on about oil for several decades now:

Posted by: oj at May 10, 2006 7:13 AM

Presuming Castro lives another 5 years, there could be Chinese, Indian, and Russian oil/gas rigs off the Cuban coast, 40 or 50 miles from Florida, sucking up NorteAmericano energy. Would Bill Nelson propose that we destroy them to save the environment?

Posted by: ratbert at May 10, 2006 9:53 AM


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