Gas prices

[SoCal_Dad]

I think JWB is overreacting a bit to a minor blip in the market. These things happen regularly in the markets and I've become skeptical/cynical of the "reasons" that are provided each time.

The volatility in the price of oil is due more to the speculative trading of futures contracts than the producers changing their prices. An analogy is concert tickets being resold for far more than their original cost. Future's prices rise quickly when investors think they can make money by trading on them and that creates additional demand for them which pushes the price even higher. Investors don't really want the oil, so they have to sell it at some point and the price has dropped due to weak demand. I hope speculators are incurring big losses with the downturn, however some are profiting on it and driving it lower in the process.

There's also an increase deep-water offshore drilling in our Gulf (see Despite plunging oil prices, Gulf on brink of boom). Their break-even point is $20/barrel.

The global market has been fundamentally changed by America's increased oil production. We're now a market force like OPEC and we have far more control over our oil supply/costs than we've had in the past 40-some years.

 

[coachjwb]

SoCal ... it probably is an overreaction but so too may be the upward tick in gas prices. And I certainly didn't mean to imply gas prices going down would cause a recession. The point is there are puts and takes with a lot of things in our economy, with the most common trade-off being between prices and jobs. We've all had the discussion before as to what effect Walmart's relentless strategy to lower prices has had in the past on U.S. jobs. I may be a little over-sensitive right now since I recently lost my job in a Fortune 500 company trying to maintain Wall Street sales, profit and cash flow expectations while dealing with foreign competition on pricing that is in the fractions of a penny to you and me.

 

[GeneralsDad]

Just my .02...Oil was profitable in 2009, and it is still profitable in 2015... There are 2 sides to every coin. One can claim that the market is down due to lower oil prices. The other side of the coin is that people will pump their gas savings into different areas of the economy. For the average consumer the fuel cost savings are probably $15-$20 per week. (guessing) For businesses the savings are far greater. With my very small business, my contract prices are set. There are no fuel surcharges to offset the increase in fuel prices. My savings per month, should these prices stay around $1.80, would be $1,500-$2,000. I have reinvested my savings so far into additional softball camps, hotel stays, and new flooring at my house. Should the prices stay low, I will look at upgrading major equipment, and possibly adding another full time employee.

Just my small piece of the pie is stimulating the economy, and taking someone from unemployed, to an employed tax payer, who will further stimulate the economy. I'll be the first to admit that I'm no rocket scientist, but this process seems fairly simple to me. I am not okay with paying more.

 

[Pacerdad57]

I don't 5hink he inferred low gas prices equal recession, but the truth is the market dropped in correlation to the lower oil prices.
just ask my 401k......

 

[Louuuuu]

just ask my 401k......

My 401k doesn't talk to me. In order to avoid hurt feelings, we have a mutual agreement to avoid each other until I'm 95 - when I can finally afford to retire.

 

[SoCal_Dad]

I don't 5hink he inferred low gas prices equal recession, but the truth is the market dropped in correlation to the lower oil prices.
just ask my 401k......

Hmm, oil prices have dropped 50% over the past 6 months and the market rose over that time span. How does your 401k explain that?

The market overcame a few larger drops during that time span. What did your 401k say during those drops?

 

[coachjwb]

I don't think anyone would argue that oil and gas prices dropping is and has been good for the economy overall. From the things I have read and heard though, there may be some point when it's not good overall. Let's take an extreme example ... gas prices drop to the point where U.S. oil companies can no longer make a profit, but Middle East companies still can. Your 401K is made up of primarily U.S. based companies which includes oil companies and many other companies in their supply chain (drilling, pipelines, tankers, chemicals used in drilling, etc.). It gets to the point where some of the U.S. companies which do not have significant interests in the Middle East go out of business, and/or have to quit investing in U.S. exploration and refining. Then what could happen to gas prices? All of this is extreme and hypothetical for sure, but there were some yellow flags at least that went up on Wall St. around this recently. Meanwhile, the stock market has gone back up, so there probably is no cause for concern at this point ...

 

[SoCal_Dad]

The prices of oil futures for the next 5-6 years rise steadily to around $68, so the current glut of oil hasn't brought them down to the current price. I think they're a much better barometer for companies in the oil business. People put too much emphasis on the current 'spot' market.

Keep in mind oil prices are back down to where they were 5-1/2 years ago. I wonder what the 2014-15 futures prices were 5-6 years ago.

I'm curious which refineries JWB thinks will be impacted. Seems like they'd have to be new ones that are solely supplied by domestic production that is only viable at high prices, which would have been very risky undertakings. However, refinery output is a major factor in gas prices, so they're viability isn't entirely dependent on oil prices.

The drop in oil prices has triggered some cutbacks in domestic operations and future development - it's certainly not a new occurrence for an industry that goes through periodic booms and busts.

People are overlooking the geopolitical implications of oil prices. Some countries depend on high oil prices - e.g. Russia, Iran, Venezuela, etc.
- Russia's economy depends on oil prices of $100+, so don't be surprised if Putin does something provocative to raise prices.
- One factor in the Saudis allowing prices to drop is it hurts Iran a lot more than themselves.

 

[wow]

Remember gas futures are traded in the future. The March and April contracts are trading now. The stock market starts earnings season next week with AA (Alcoa) kicking it off. Watch the industrial names and see what the Oil does to these companies. The airlines will benefit and industrials will benefit. The problem is the price of oil wont be reflective for a few QTRS. These little up and downs in the short term in oil prices are not indicative of the overall economy. OIL below $40 is a problem. Its a balancing act. The DOW is lagging 6 months to where the economy really is. Remember 2007-2008?? By the time the DOW fell the economy was already in a recession. The 2 sequential QTRs of back to back -3% GDP had already happened!

 

[Pacerdad57]

Over the last 8 months...down flat up slow up faster flat down .....it never tells me I'm ready to retire, only teases me that now I'll only have to wait til I'm about 78..........maybe.....could be I'llbe down and flat by the time I can actually retire......

 

[coachjwb]

http://www.usatoday.com/story/money...st-hit-by-oil-slump-to-lay-off-7000/22042433/

 

[SoCal_Dad]

http://www.usatoday.com/story/money...st-hit-by-oil-slump-to-lay-off-7000/22042433/

"This is really the crappy part of the job, and this is what I hate about this industry frankly," Craighead said. "This is the industry, and it's throwing us another one of these downturns, and we're going to be good stewards of our business and do the right thing. But these are never decisions that are done mechanically."

Yeah, it sucks for those laid off - even if it is typical for that industry. I expect many were hired fairly recently with the boom, however some were probably oldtimers. I expect some will be brought back after oil prices bottom out, rebound a little and hopefully stabilize.

Workers in other industries are benefiting as people spend the money they're saving on other things. I heard sales of SUVs are up.

 

[CARDS]

http://www.bing.com/videos/search?q...&mid=405DED0B3FED83A73CD7405DED0B3FED83A73CD7

Other peoples money speech. Good movie check out the clip…
As oil prices drop we all know that the market will rebound but as auto manufactures are pressured for more fuel efficient vehicles and stringent EPA guidelines like Larry the Liquidator says change is coming and as we develop alternative energies and public transportation the need for oil is dropping and will continue to drop. http://www.bing.com/videos/search?q=Other+People%27s+Money+Danny+Speech&Form=VQFRVP#view=detail&mid=405DED0B3FED83A73CD7405DED0B3FED83A73CD7

 

[Louuuuu]

Let me guess: Since gas isn't selling in New England until the storm is over, they raise prices elsewhere to make up the difference? Marathon went from $1.98 yesterday to $2.15 this morning.

 

[HITTER23]

LOL, i always demonize Speedway, i chalk it up to just plain ole greed.

 

[longball00]

We still have a Get Go and Sheetz up here that is at $1.59 but the Speedway across the street is at $2.07 . All 3 are literally right next to each other. Get Go is ahead of the game because they are offering a $.10 per gallon discount when you pay inside even if you don't use your Fuel perks. Love a good gas war!

 

[Louuuuu]

they are offering a $.10 per gallon discount when you pay inside ...

... where you can buy a can of Mountain Dew for $3.27!

 

[HITTER23]

So much for the cheap gas, Speedways in the area up to 2.40 . Thats like 65 cents in 3 weeks.

 

[HITTER23]

8 inches of snow and Saturday, Speedway takes advantage and jacks prices back up tp 2.40

 

[GeneralsDad]

And oil prices went back down...SMH