posted on Sep, 22 2005 @ 07:10 PM
Expect $4+ a gallon really soon in the U.S. Hurricane Rita is going to destroy the major refineries in the gulf region. Keep in mind it doesn't
matter so much what OPEC says about pumping out barrrels, what matters is what oil futures traders think, and you can count strongly on them thinking
oil will go up.
There bets move oil up. Commodity/Future trading is how oil is traded, bought sold, via commodity contracts, prices are locked in, etc. So be
prepared to see something crazy soon. Right now they are probably mostly traded, as more refineries go down and oil becomes more scarce, you can look
forward to those oil traders actually exercising more of the future contracts (requesting delivery).
Requesting delivery then causes oil to go up even more because the contracts are hypothetical. They are saying no matter what it's at I will sell it
to you for such and such because I think it will go down, if it then goes up and they exercise, the seller has to go and buy it to deliver, as more
buy it to deliver, it pushes it up.
So my speculation is that oil will top $100+ soon.
That's what Warren Buffet did when he wanted to stockpile silver. He cornered the market, then started requesting delivery. His request of delivery
was so massive it shot silver up alone. Supposably he bought so much silver that they didn't even have it all to deliver and had to go
drilling/exploring just to complete his order!
The thing about oil prices that a lot of you guys don't get is that it moves up not because oil is finite (technically we really don't know how much
oil there is), it's that the distribution is controlled. It takes time to have the oil ready for consumers. An increase in the request of oil or
"buying time", is what moves it up. Traders say well I like it at this price, let me lock it in. Then more and more do it and the distribution
channel gets bought up moving prices up. But they are just buying prices for the most part and not exercising, wait until the start requesting
delivery (major oil companies).
I think we'll see a chain reaction. Oil companies taking large positions to hedge, oil traders speculating on futures moving up prices, Oil
companies then exercising/requesting delivery to make a profit on the spread moving it up, speculators playing the move up (momentum play), and on and
The real question is, where is the ceiling. What will it really take to make speculators feel it's gone too far? Price? You need gas to work, need
work to survive. Gas is like food. They've done surveys and most people say they would pay anything for gas cause they have to have it. I think
the real ceiling will be technology and moving people away from it. Save up your money and buy a less dependent form of transportation. Eventually
more people will do that and I think it will come back down or eventually collapse.
So we'll see.
Mod Edit: Fixed all CAPS title
[edit on 22-9-2005 by Lord Altmis]
[edit on 9/23/05 by FredT]