Quiver0f10 Posted October 10, 2008 Share Posted October 10, 2008 A few weeks ago oil and thus gas was through the roof because of "high demand". Now, the economy is tanking and suddenly demand is low and oil/gas is falling. Why would demand suddenly be lower? I don't think people are using less? Winter is coming and it's already cold in some places. Am I missing something? Quote Link to comment Share on other sites More sharing options...
clwcain Posted October 10, 2008 Share Posted October 10, 2008 Oil and gas weren't up due to higher demand, despite the "peak oil" scaremongering. They were up largely because of the deterioration in value of the US $ relative to other currencies. In the current financial panic there is a "flight to quality", which means US $ and US Treasury-issued securites (Notes and Bills). Thus there has been a reversal in the value of the US $ relative to other currencies because of the increase in demand for US $ and $-denominated securities. That is why oil's price has plummeted and OPEC is having emergency meetings about curtailing production to drive the price back up. They were also up due to concerns about refinery capacity being destroyed by hurricanes. We're nearing the end of hurricane season, so some of that fear is subsiding. HTH Quote Link to comment Share on other sites More sharing options...
Quiver0f10 Posted October 10, 2008 Author Share Posted October 10, 2008 Thanks, that does help. Quote Link to comment Share on other sites More sharing options...
Sara R Posted October 10, 2008 Share Posted October 10, 2008 It doesn't make sense to me either. I don't think Peak Oil is scare mongering. I've listened to interviews with Matt Simmons (an oil industry guy who wrote "Twilight in the Desert" a few years back) and he's a pretty level-headed nerdy guy. Most of the big oil fields that give honest reports about their output say that output is decreasing, and what oil is being produced is "heavy sour crude" (as opposed to light sweet crude), which requires a kind of refinery that we don't have many of. Saudi Arabia say that they have plenty of oil, but they don't allow honest audits of their fields, so we're taking their word for it. The oil rigs are old and rusting, and all of them are in use. The oil producing countries have younger populations that want to use the oil themselves, and their national oil companies do not necessarily have the goal of making the most money, but doing what they see as best for their country. So it's likely that their oil exports (from other countries to us) will go down faster than the supply of oil pumped goes down. There's some "demand destruction" (people using less oil) in the US and Europe, but China is buying lots of new cars every month. I remember hearing that China had decreased factory production to clean up air to prepare for the Olympics; I wonder if that decreased the demand for oil. What clwcain said about the dollar has something to do with it too. However, I don't think this is long term. Inventories (extra gas that stations and others keep on hand) are at all time lows (which is why you had all of the shortages down south). Demand in the developing world is still high. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.