How are Gas Prices affecting you?

[Clifford Mescher]

Clifford, you and I are in agreement on nuclear power. But, the petroleum issue is not just about burning it for fuel/heat. Everything you use, pretty much, has a petroleum factor. So many things derive from petroleum, asphalt, lubricants, industrial compounds, fabrics, etc. Unfortunately, it seems we will always need oil. If we change our tariff structure, encourage domestic production, find other transportation and heating sources, and use our oil for non-fuel purposes, we could gain some independence from foreign oil. Sounds a little to simple and utopian, I guess. For an interesting video check this out http://www.youtube.com/watch?v=ZPch2k63uj4

There are alot of exciting energy solutions that will do us good in the future. Short term (50-100 years) calls for oil exploration, drilling, building new refineries, and building more nuclear plants. The people that told us it won't work for 7-10 years are the same short-sighted people who said the same things in the 70's. Think where we would be today if we had done those things 30 years ago instead of being held hostage by special interest groups. Clifford

[Joe Mioux]

Only if congress will put a stop to the "speculators".

I used to be one,

No, Congress should stay out of that. The futures markets work pretty well. All those speculators, commodities futures traders, hedgers, whether in the pits or online provide liquidity, ration supply and manage profit.

Commodities Futures trading provides a means for businesses to protect themselves from rising costs or dwindling profit. It is called hedging.

For Example I could hedge my Natural Gas needs for next Winter's heating season. If for example the price of Feb Natural Gas contract is selling at a price that I find affordable, I could buy a contract and lock in my NG at that price. Come January, I would sell back that contract. During the spot month, the futures price and the cash price merge together.

What you look at is the spread between futures and cash price.. That is fairly consistent.

Speculators serve a valuable purpose. They provide liquidity for the commodity.

[John Keeton]

Guys, I think we are on our way to solving this energy crisis thing! Give this thread a few more days, and we could have a viable solution. Now, somebody needs to step forward and volunteer to put it together for Washington - use simple language so they can understand! I can see the headlines now - "World energy crisis solved by woodworkers!" Hummmm???!!

In all seriousness, it has been a good exchange and informative. There is a lot of insight and wisdom amongst this group!!

[Dennis Peacock]

Guys, I think we are on our way to solving this energy crisis thing! Give this thread a few more days, and we could have a viable solution. Now, somebody needs to step forward and volunteer to put it together for Washington - use simple language so they can understand! I can see the headlines now - "World energy crisis solved by woodworkers!" Hummmm???!!

In all seriousness, it has been a good exchange and informative. There is a lot of insight and wisdom amongst this group!!

You are exactly correct John....lots of stuff I've learned and been exposed to here in this thread. Been good so far.

[John Schreiber]

. . . We either find new energy sources, and/or get serious about drilling and refining our own HUGE resources, or . . . .

The facts I can find indicate that the USA has between 1.5 and 3% of the world's oil reserves. I really don't want to drain what is left of our reserves first, then still be totally dependent on other countries.

I'd rather that we import 100% now. Then in 50 years we will be in a relative position of strength with a larger percentage of what is left. Even though I don't support further exploration/drilling in the USA now, in 50 years, things might be different.

The real solutions will involve massive, culturally difficult, changes in fuel use. We have just begun to scratch the surface in the stretch toward efficiency. Alternative sources of energy will be important, but we will never find sources as cheap as coal and gas. Completely new alternatives are possible, but I'm not going to hang my hope on them.

[Jeffrey Makiel]

I used to be one,

No, Congress should stay out of that. The futures markets work pretty well. All those speculators, commodities futures traders, hedgers, whether in the pits or online provide liquidity, ration supply and manage profit.

Commodities Futures trading provides a means for businesses to protect themselves from rising costs or dwindling profit. It is called hedging.

For Example I could hedge my Natural Gas needs for next Winter's heating season. If for example the price of Feb Natural Gas contract is selling at a price that I find affordable, I could buy a contract and lock in my NG at that price. Come January, I would sell back that contract. During the spot month, the futures price and the cash price merge together.

What you look at is the spread between futures and cash price.. That is fairly consistent.

Speculators serve a valuable purpose. They provide liquidity for the commodity.

The new billionares of America are now hedge fund managers. Apparently, there's a lot of money in betting against Americans.

But what did they actually do to improve the product in a tangible and realistic sense? In the natural gas example, did they improve the caloric energy content of natural gas?

Perhaps this explains why the USA is producing fewer and fewer engineers, physicists and scientist. Who needs them?

-Jeff

[Cliff Rohrabacher]

Gas is still among the cheapest things going.

Adjusted for inflation it's only about twice as much as it was in the 1960's

I'm waiting for it to hit $12 a gallon. Then I'll let someone pay me to take away their fancy schmancy Hummer and turn it into a 2 seat-er to make room for all the Lithium Ion batteries it'll take to make it go on NukUUler elektrikal

[John Sanford]

Alternative sources of energy will be important.

Oil is an "alternative source of energy". As for the doom and gloom about how "we'll never see gas prices this low again", so what? Do you have any idea how much a gallon of whale oil goes for today?! Yet, oddly enough, it doesn't matter much, does it? Human ingenuity will, unless derailed by massive external application of human stupidity, come up with sources of energy that are even cheaper than oil and gas, once the "hump" of the development costs are affordable compared to oil and gas.

Part of me is looking forward to the whole fuel cell cars swooshing silently around the highways thing, but it sure is gonna be boring without the throaty growl of a big block V-8 or the wail of an inline 4 revving at 14,000 rpm. Maybe its time to start sound sampling the great engines of our age so we have a good library of sounds to sell to the retro-tuners of the fuel cell age!

[Lee DeRaud]

Commodities Futures trading provides a means for businesses to protect themselves from rising costs or dwindling profit. It is called hedging.

For Example I could hedge my Natural Gas needs for next Winter's heating season. If for example the price of Feb Natural Gas contract is selling at a price that I find affordable, I could buy a contract and lock in my NG at that price. Come January, I would sell back that contract. During the spot month, the futures price and the cash price merge together.

That model of commodity futures trading works quite well indeed, but it's based on the assumption that most of the people doing the hedging/speculation/whatever are (eventually) consumers of the commodity at some level. In other words, the assumption is that, next January, you will exchange those futures for natural gas, hopefully at a better net rate. But when pension funds start treating the commodity futures themselves as long-term investment vehicles (as opposed to a way to stabilize future needs for the underlying commodity), it effectively removes that amount of the commodity from future consumption, reducing tradable supply: come next January, if the price is still headed up, they have zero incentive to sell because they have no use for the actual commodity. And that, in itself, exerts upward pressure on the price. (In engineering terms, that's called "positive feedback", and it's not a good idea if what you're aiming for is a stable system.)

Another (much less verbose) way of looking at it: at sufficiently high investment levels, "hedging" is indistinguishable from "hoarding".

[Rick Gooden]

Let's just put our heads in the sand...........and do nothing!

[Mitchell Andrus]

Let's just put our heads in the sand...........and do nothing!

Well, part right. "WE" can't do anything but buy the products that are brought to market. Profitable, and ONLY profitable technology will make it to the marketplace, SOOOOOO.... watch your wallets. Today's gas may seem cheap 10 or 20 years from now.

Would anyone like to foot the bill to place charging stations in one of the apartment complexes in YOUR town???

[Greg Peterson]

Nuk-lear energy is fine and dandy. We had a nuk-lear reactor out here. It was decommissioned and the cooling tower was imploded.

The spent fuel rods? They are still laying in the bottom of a nearby swimming pool.

Hanford, just a short jaunt up the Columbia from here, is packed with radioactive waste in below ground holding tanks. Some leakage is already detected.

Out here in earthquake country, we're only a healthy jolt away from complete disaster. Hanford would contaminate the Columbia river all the way to the Pacific ocean. And where it would go from there is any ones guess.

I'm all for nuk-lear power. But not until we can build a repository to store the spent fuel rods. Talk about short sighted.

There is no way to drill our way out of this. It's impossible to produce enough oil from our own reserves to have an effect on what is an international commodity.

And there is no shortage. Supply still exceeds demand. Look it up. If there were a shortage, no matter how slight, trust me, it would be headline news. Garaunteed.

When was the last time gas was rationed? Been at least thirty years to the best of my knowledge. But back then we did have a shortage.

[Jason Roehl]

Now here is the good news. Any policy that causes the expected future oil price to fall can cause the current price to fall, or to rise less than it would otherwise do. In other words, it is possible to bring down today's price of oil with policies that will have their physical impact on oil demand or supply only in the future.


For example, increases in government subsidies to develop technology that will make future cars more efficient, or tighter standards that gradually improve the gas mileage of the stock of cars, would lower the future demand for oil and therefore the price of oil today.


Similarly, increasing the expected future supply of oil would also reduce today's price. That fall in the current price would induce an immediate rise in oil consumption that would be matched by an increase in supply from the OPEC producers and others with some current excess capacity or available inventories.


Any steps that can be taken now to increase the future supply of oil, or reduce the future demand for oil in the U.S. or elsewhere, can therefore lead both to lower prices and increased consumption today.

Pity that not many in the media (or Congress) understand these few short paragraphs. It doesn't matter that drilling off our coast or in ANWR wouldn't likely yield oil for another 5-10 years. Just getting the ball rolling would affect the price of oil--either push it down, or keep it from rising quickly.

That's why I'm for some amount of research in alternative fuels, NUCLEAR power, more drilling and exploration, but axing the incredibly stupid corn-ethanol subsidy, starting with the "splash and dash", where tankers from another country can stop at our shores, mix in enough ethanol to qualify for the subsidy, then ship out to a different overseas country to sell the product, at a huge profit for the oil company, plus they get the subsidy (I heard something in the neighborhood of $9 million per tanker...!). In other words, I don't think we should put all our eggs in one basket. Let the market sift out what will work after some start-up help.

[Joe Mioux]

That model of commodity futures trading works quite well indeed, but it's based on the assumption that most of the people doing the hedging/speculation/whatever are (eventually) consumers of the commodity at some level. In other words, the assumption is that, next January, you will exchange those futures for natural gas, hopefully at a better net rate. But when pension funds start treating the commodity futures themselves as long-term investment vehicles (as opposed to a way to stabilize future needs for the underlying commodity), it effectively removes that amount of the commodity from future consumption, reducing tradable supply: come next January, if the price is still headed up, they have zero incentive to sell because they have no use for the actual commodity. And that, in itself, exerts upward pressure on the price. (In engineering terms, that's called "positive feedback", and it's not a good idea if what you're aiming for is a stable system.)

Another (much less verbose) way of looking at it: at sufficiently high investment levels, "hedging" is indistinguishable from "hoarding".

Nope.

There is no set quantity of futures contracts. More speculation provides better liquidity. Lee, remember for every buyer there is a seller and vice versa. Long-term vs short term investors is irrelevant. What is relevant is having a large population of both speculators and hedgers.

Joe

P.S. And for traders what is important are the commissions charged. One of my good friends is a trader. Cheap commissions for the traders make the markets liquid. EX: 5000 bu Corn contract's minimum price change is 1/4ct or $12.50. My buddy's commission on that trade is $2.50. he can sit there all day long and buy and sell OR sell and buy and in some instances he doesn't care where the price is as long as the price is moving.

When I was a broker my commissions on ag contracts were $82 per contract. The market had to move 2 cts for my clients to breakeven. That is easier said than done.

Thinking about: that is what speculators do.. they dont' care if if the price of oil is $50 a barrel or $150 barrell. It is irelevant to their profit goals.

[Rick Gooden]

Well, part right. "WE" can't do anything but buy the products that are brought to market. Profitable, and ONLY profitable technology will make it to the marketplace, SOOOOOO.... watch your wallets. Today's gas may seem cheap 10 or 20 years from now.

Would anyone like to foot the bill to place charging stations in one of the apartment complexes in YOUR town???

Today's gas may seem cheap 1 year from now. How soon will alternatives be on the market at a reasonable price for the masses to afford and in sufficient quantities to allow us to reduce oil consumption? Also, who's figures are we to believe? They seem to be all over the map. I hear that the speculators are the bad guys. Isn't anyone who buys futures a speculator? Should we also limit the profit margin that all companies make and say that 8% is the most you can make? As you can see, I don't have answers, just questions.