On Wednesday, the price of crude oil plunged on world markets for the second day in a row. The BEARS were beginning to assert their control, driving the price done into the low $90's per barrel. Technically, the chart pattern suggested a downtrend that could take prices into the low $80's to high $70's per barrel..........Oh and then last night an explosion was reported in the Endbridge pipeline that brings crude oil down from Edmonton Canada, thru Minnesota and into the Midwest.
In Chicago, we were hearing reports of this on our news radio stations as early as 5:00 AM.
BIG problems ahead they said. Video of the event on TV showed a fire at night, calculated to subliminally suggest a MAJOR disruption in oil supplies, just as the winter heating season begins. Energy prices were likely to SOAR.
CWI didn't buy it.
Home video of a little bonfire we had in our backyard to burn some leaves a few weeks ago, looked AWESOME, because we shot it night. It was mesmerizing to watch on our TV (once I remembered how to hook our camcorder up to the darn thing!) So much so, the next day we shot some more video, at high noon, of an even bigger bonfire. And guess what....no big deal.....BORING.
CWI thinks this early morning Enbridge Pipeline report, complete with video of a night time fire that looked huge but probably wasn't, was calculated to test the resolve of the BEARS, to give them pause as they prepared to sell the market again Thursday.
And guess what, like the CWI, the trader boys didn't buy this head fake either. Initially crude futures were up over $4 per barrel. BY 7:00 AM CST the gain was less than $2 per barrel. Interestingly, a oil industry talking head was dispatched to do a 45 second interview on CNBC and he did all he could to say "FEAR FEAR FEAR!! Later, CNBC reported that the explosion happened on a pipeline that was ALREADY OFFLINE for maintenance, and the actually supply disruption might be minimal.
It was a nice try, but it only created some very temporary strength that traders could sell into
Don't forget, OPEC meets next week.....we might hear some rumours about production cuts and a repeat of this whole FEAR scenario.
Don't believe it. Oil is going lower, and so will gasoline prices.
Thursday, November 29, 2007
Sunday, October 28, 2007
Gasoline Prices Heading Higher ???
Well here we are, staring at $100 a barrel oil prices.
The pundits tell us that the price levels reached during the 1974 oil embargo and again in January 1981 equates to about $93 in present day dollars. We are likely to see the market trade above this level next week.
Conventional wisdom would dictate that we will be seeing all-time record prices at the pump very soon, as well right??? After all, when crude was trading at $60 a barrel earlier this summer, my fellow Chicagoans and I were paying $3.30+ for a gallon of get-me-there.
The Conventional Wisdom Inverter speculates that it's just not that simple. CWI thinks that any oil price increase will not be translated into higher gasoline prices, if at all, until well after the Christmas shopping season is over.
Here's why. American consumers get irrationally emotional about the pump price of a gallon of gasoline. So much so that they will sit on their wallets and not buy other things when they feel the pinch of paying over $50 to fill the tank.
That wouldn't be good heading into the Christmas shopping season. Especially when we are being surrounded by the ingredients for an economic Perfect Storm. Subprime mortgage market. Record real estate foreclosures. Rising credit card delinquencies & defaults. Credit crunch. Falling real estate prices. A very weak U.S. Dollar, especially against the Euro.
A weak dollar.....and yet we saw the Fed drop short term rates 50 basis points a couple of weeks ago which will only invite more dollar weakness. The Fed knows. The Fed knows what CWI has also figured out. We are at the proverbial Tipping Point.
Higher gasoline prices in the weeks ahead would mean consumers will have to pay alot more to fill their tanks just as they are heading en mass to the shopping malls to decide whether Uncle Frank will get that really nice sweater from Macy's or the bottle of cologne that's on sale at Walmart.
If gas is at $3.30 -$3.50 a gallon, I'm afraid Uncle Frank gets the cologne. Less consumer spending = weak retail sales during Christmas, which will lead to layoffs early next year, which effects consumer confidence and wah lah we are sliding down that slippery slope into recession.
And it could be a bad one.
We want those consumers at the mall. You need those consumers on the wall, I mean mall.
Oh if Santa could just insure stable gasoline prices for the next several months, we could have our cake and eat it too. Well CWI doesn't believe in Santa or that American gasoline prices are set by the free market.
Whether or not you believe as we do - that gasoline prices are "managed" in the U.S. almost as if it was a variable tax - we consumers get to dodge the bullet this time. Big Oil and Big Brother will see to that. Fortunately, we only get hammered with higher prices when it is relatively safe to do so and when there are convenient reasons lying around to explain it - like hurricane season (or my favorite, the mysterious annual refinery fire/explosion that we never seem to be able to see news footage of).
It is just not safe for the economy to have higher gasoline prices in November and December and January - so we won't. It's just that simple.
I can hear my old Economics Professor now, "Didn't you learn anything while you were here?!
The free market will set the price of gasoline (tho there is some price inelasticity) based on the law of supply and demand and the interplay of buyers and sellers acting in their own best interests. The invisible hand!!"
Oh but Professor, you also made me learn about monopolies and oligopolies and cartels. And in my lifetime since college, that is what the U.S. gasoline market has evolved to - a few big players controlling the action....pricing power concentrated in fewer and fewer hands.
Heck if OPEC can successfully manipulate the world price of oil to all countries, certainly the American Oil giants and their refining arms can control the price of gas in a single country....ours!
Perhaps this is just the inaugural ramblings of a newbee blogger. I know this type of forum allows me to anonymously voice a position I would never admit to around the water cooler. I've kind of loosely connected alot of dots and tried to see in through the looking glass. Or maybe, just maybe I've managed to turn the wisdom of conventional thinking on it's head. So for now I remain CWI, the Conventional Wisdom Inverter!
The pundits tell us that the price levels reached during the 1974 oil embargo and again in January 1981 equates to about $93 in present day dollars. We are likely to see the market trade above this level next week.
Conventional wisdom would dictate that we will be seeing all-time record prices at the pump very soon, as well right??? After all, when crude was trading at $60 a barrel earlier this summer, my fellow Chicagoans and I were paying $3.30+ for a gallon of get-me-there.
The Conventional Wisdom Inverter speculates that it's just not that simple. CWI thinks that any oil price increase will not be translated into higher gasoline prices, if at all, until well after the Christmas shopping season is over.
Here's why. American consumers get irrationally emotional about the pump price of a gallon of gasoline. So much so that they will sit on their wallets and not buy other things when they feel the pinch of paying over $50 to fill the tank.
That wouldn't be good heading into the Christmas shopping season. Especially when we are being surrounded by the ingredients for an economic Perfect Storm. Subprime mortgage market. Record real estate foreclosures. Rising credit card delinquencies & defaults. Credit crunch. Falling real estate prices. A very weak U.S. Dollar, especially against the Euro.
A weak dollar.....and yet we saw the Fed drop short term rates 50 basis points a couple of weeks ago which will only invite more dollar weakness. The Fed knows. The Fed knows what CWI has also figured out. We are at the proverbial Tipping Point.
Higher gasoline prices in the weeks ahead would mean consumers will have to pay alot more to fill their tanks just as they are heading en mass to the shopping malls to decide whether Uncle Frank will get that really nice sweater from Macy's or the bottle of cologne that's on sale at Walmart.
If gas is at $3.30 -$3.50 a gallon, I'm afraid Uncle Frank gets the cologne. Less consumer spending = weak retail sales during Christmas, which will lead to layoffs early next year, which effects consumer confidence and wah lah we are sliding down that slippery slope into recession.
And it could be a bad one.
We want those consumers at the mall. You need those consumers on the wall, I mean mall.
Oh if Santa could just insure stable gasoline prices for the next several months, we could have our cake and eat it too. Well CWI doesn't believe in Santa or that American gasoline prices are set by the free market.
Whether or not you believe as we do - that gasoline prices are "managed" in the U.S. almost as if it was a variable tax - we consumers get to dodge the bullet this time. Big Oil and Big Brother will see to that. Fortunately, we only get hammered with higher prices when it is relatively safe to do so and when there are convenient reasons lying around to explain it - like hurricane season (or my favorite, the mysterious annual refinery fire/explosion that we never seem to be able to see news footage of).
It is just not safe for the economy to have higher gasoline prices in November and December and January - so we won't. It's just that simple.
I can hear my old Economics Professor now, "Didn't you learn anything while you were here?!
The free market will set the price of gasoline (tho there is some price inelasticity) based on the law of supply and demand and the interplay of buyers and sellers acting in their own best interests. The invisible hand!!"
Oh but Professor, you also made me learn about monopolies and oligopolies and cartels. And in my lifetime since college, that is what the U.S. gasoline market has evolved to - a few big players controlling the action....pricing power concentrated in fewer and fewer hands.
Heck if OPEC can successfully manipulate the world price of oil to all countries, certainly the American Oil giants and their refining arms can control the price of gas in a single country....ours!
Perhaps this is just the inaugural ramblings of a newbee blogger. I know this type of forum allows me to anonymously voice a position I would never admit to around the water cooler. I've kind of loosely connected alot of dots and tried to see in through the looking glass. Or maybe, just maybe I've managed to turn the wisdom of conventional thinking on it's head. So for now I remain CWI, the Conventional Wisdom Inverter!
What This Blog Is All About
The Conventional Wisdom....Inverter???
Let me explain that title a little.
Information presented via mass media is filtered thru the prism of conventional wisdom. Now I don't know about you, but I have noticed that conventional wisdom is often turned on it's head, turned upside down and proven to be wrong ......inverted.
My knack for sometimes seeing this before the Conventional Wisdom changes is what this blog will be about.
So welcome to my work in progress.
Let me explain that title a little.
Information presented via mass media is filtered thru the prism of conventional wisdom. Now I don't know about you, but I have noticed that conventional wisdom is often turned on it's head, turned upside down and proven to be wrong ......inverted.
My knack for sometimes seeing this before the Conventional Wisdom changes is what this blog will be about.
So welcome to my work in progress.
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