# OKCpedia > Businesses & Employers >  "Major Crude Oil Crash Is Coming Says Analyst"

## ou48A

We have been here before and seen such predictions before. I have a hard time believing that oil would go as low as this prediction but never the less it’s noteworthy.
I don’t think I need to remind anyone what this would do to our local economy.
I don’t know how low it would go……. but a crash in crude oil prices is a distinct possibly. 
There is a good amount of new oil coming on line around the world and the demand is not strong due to a lousy economy. 
This IMO is part of the cycle.

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Look Out Below! Major Crude Oil Crash Is Coming Says Analyst

By Jeff Macke PostsWebsiteBy Jeff Macke | Breakout – 22 hours ago

http://finance.yahoo.com/blogs/break...170127530.html
Crude oil has fallen 20% in less than 2 months. The drop has been sufficient to prompt most bears to declare victory and cover their shorts or even ponder getting long near last year's lows in the mid-$70s. But Jeff Kennedy, chief commodity analyst at Elliott Wave International thinks those buyers are early by about $40.

He bases his outlook on pattern recognition and psychology. His work suggests crude will plunge to the December 2008 lows of $38 a barrel then pause prior to falling another 50%. All in, Kennedy is forecasting an additional 80% drop in crude to $16.70 a barrel; a level not seen since November 0f 2001.

As a technician Kennedy pays little heed to the standard crude narratives involving Middle East tensions, supply disruptions, and refining. To him the charts tell the story and "the story right now in the crude oil price chart argues for a further decline well into 2013."

One of the contributing factors for the drop in crude is strength in the dollar, particularly against the beleaguered Euro. The thesis for getting long dollars and shorting euros is simple: the Eurozone is perpetually on the brink of collapsing, taking its fake currency with it. Sometimes simple works.

Fundamentally, technically and in every other way Kennedy likes the dollar as a breakout play on the dollar index and a breakdown trade against the euro. You can quibble with his methodology but you can't accuse Kennedy of hedging his bets.

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## Maynard

> With West Texas Intermediate crude oil trading with an $80 handle, near two year lows, while stocks remain within a few percent of their four-year highs, one has to question just what it is that stocks believe about our bright new future of growth and demand that the all-important energy markets do not. *Between Europe's recession, last night's dismal China PMI, and a significantly trending rise in US unemployment claims, it seems more likely that the global demand picture painted by the oil market is a better reflection of reality than the earnings/multiple picture painted by the nominal price of US equities.* We know that bad is good when it comes to the front-running of Bernanke's print button but wouldn't bad being good raise the USD-nominal price of oil also?



(WTI, S&P 500, 10-Note overlay)

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## Just the facts

How come I can sit at home with access to very little charts and graphs and come up with same predictions (actually I am more right) as these multi-million dollar guys.  Hello!!!! Earth to investors... come in investors.  The US is going to into recession again - price of oil to drop.  Of course, we know the high price of oil is what causes the economy to stop expanding so we just have to wait for the price of fuel to drop, the economy picks back up, gas prices rise, economy tanks... repeat until ready to try some other kind of transit system (or until 2020).

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## 1972ford

Oil will never get that low as OPEC would make sure of it

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## ou48A

At the time of this post WTI = $78.30    down - $3.15 so far today.

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## Just the facts

> As the time of this post WTI = $78.30    down - $3.15 so far today.


That is because the oil nivestors look out across the country and ask - who is going to buy this gasoline with jobs declining, retail sales dropping, manufacturing dropping, etc...?  The answer, no one.  Your customers can't afford your product and 12 million of them don't need it anymore because they are save the inconvience of having to drive to work.  For my part, half of all my trips are now on bicycle.

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## Maynard

> As the time of this post WTI = $78.30    down - $3.15 so far today.




Oil's 2-day drop is the largest in 9-months.

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## SoonerDave

Interesting that in the last few months...really, weeks, we've seen oil lose about 40% or so of its per-bbl value, yet gas did a bizarre u-turn a couple of weeks ago...off lows of around $3.05 and back up to the $3.30's. Don't know if anyone tracks it, but it would seem to me that a ratio of oil price to gas price would be off-the-charts high right now. 

Would gas suppliers be seeing this price drop and using a gas spike as a hedge in some way? Companies that have opted to go long on oil may be in for a very bumpy ride even if only current pricing holds for much longer...if you can find someone that's sold short, they're in a position to do quite well if this persists....

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## ou48A

> Oil will never get that low as OPEC would make sure of it


I have a hard time believing that it would go that low but there are members of OPEC who do not want Iran to develop nuclear weapons and they will use oil as a weapon to put pressure on Iran’s economy.

Saudi Arabia is producing at record rates this despite the recent decline in prices. The Saudi’s also wanted to strengthen the western economies. They need us for protection as much as we still need their oil. 
More new oil from Iraq is going to be coming on line. Some project that Iraq can eventual produces 3 times their current rate. They also need a strong USA for their protection.
 Other producers have been ramping up their production. The USA has seen production increases with lower demand. The demand is also down in Europe.

We may not see $16 crude but barring an unforeseen event a major decline from here ($78.30) still seems likely IMHO?

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## ou48A

> That is because the oil nivestors look out across the country and ask - who is going to buy this gasoline with jobs declining, retail sales dropping, manufacturing dropping, etc...?  The answer, no one.  Your customers can't afford your product and 12 million of them don't need it anymore because they are save the inconvience of having to drive to work.  For my part, half of all my trips are now on bicycle.


 I don’t disagree. 
This is all part of the cycle that in time will be repeated time and again. 
You can make a lot of money by timing the cycle.

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## ou48A

The Dow was down 250 points today….. The likelihood of a deeper recession is increasing. 
But cheap oil would help us pull out of it quicker.

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## Maynard

> The Dow was down 250 points today….. The likelihood of a deeper recession is increasing. 
> But cheap oil would help us pull out of it quicker.


The bond market seems to be pricing in a depression -- 10-year note @ 1.618%!

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## 1972ford

gas is up due to a few refineries have unscheduled shutdowns those refineries in turn have stopped buying oil.   Saudi Arabia has no choice but to produce more more oil in times of declining prices since they started giving the people more of the oil revenues. oil prices will continue to drop to around $60 before speculators say hey time to jack up the prices again right now they are selling in mass to lock in profits

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## Just the facts

> Interesting that in the last few months...really, weeks, we've seen oil lose about 40% or so of its per-bbl value, yet gas did a bizarre u-turn a couple of weeks ago...off lows of around $3.05 and back up to the $3.30's. Don't know if anyone tracks it, but it would seem to me that a ratio of oil price to gas price would be off-the-charts high right now. 
> 
> Would gas suppliers be seeing this price drop and using a gas spike as a hedge in some way? Companies that have opted to go long on oil may be in for a very bumpy ride even if only current pricing holds for much longer...if you can find someone that's sold short, they're in a position to do quite well if this persists....


Gasoline is not oil.  One of the hidden dangers (although it can't be too hidden since I know about it) is that oil refiners are not making a profit at current gasoline prices.  For them to be profitable gasoline has to be over $4/gallon but the economy can't support that price.  We run the risk of having to not only import our oil, but our gasoline as well which will put the US on the international gasoline market which is north of $8 per gallon.  Good luck surviving in an automobile dominated economy with $8 gasoline.  We need to be pursuing alternative forms of transportation - and we need to do it real soon.  We need to have economic activity without everyone needing a car.

In the 70's we had a fake fuel shortage, in the 2010's we might have a real one.

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## ou48A

> The bond market seems to be pricing in a depression -- 10-year note @ 1.618%!


WOW
The economic outlook doesn’t look good. 
There are some who seem to feel that we will see our national debt downgraded again.

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## Spartan

I have been saying for a while that OKC is going to be in trouble if we don't diversify. However I am personally rooting for high gas prices.

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## SoonerDave

> The Dow was down 250 points today….. The likelihood of a deeper recession is increasing. 
> But cheap oil would help us pull out of it quicker.


I, for one, never believed the gov't kool-aid that we truly emerged from the previous one. We were klunkered and stimulused into believing we had.

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## SoonerDave

I fully realize that gas is not oil. But there's a non-trivial relationship between the price of crude and the price of oil, and there's a departure in the last few weeks that's just a little odd. Gas prices go up rapidly with increases in the price of oil, and go down slowly.

Refineries also don't derive their profit exclusively from gas, nor selling their gas domestically. I think the broader picture of refinery profit is more complicated than just the price of gas at US pumps.

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## soonerguru

> I, for one, never believed the gov't kool-aid that we truly emerged from the previous one. We were klunkered and stimulused into believing we had.


It's actually gone about how I expected, if not marginally better. Our recent history of recessions (and this one was by far the deepest), is that we have emerged from every one of them with a retracted employment sector. It was widely predicted that unemployment would stubbornly persist for years, as it has.

The risk of a second recession is real, but it has mostly to do with uncertainty about Europe. Until they decide to let go of the austerity campaign, we'll be at risk of another recession. 

The decline in gas prices is a welcome development, however, as it will prevent stagflation and acts almost like a tax cut. 

I've felt for some time that if we could get unemployment below 8% the momentum would carry the economy forward from its anemic pace of growth.

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## venture

So how bout them $5 per gal gas prices we were suppose to have...for each of the last 3 or 4 Summers. LOL

I'm going to be like Spartan here (gasp) and say DROP BABY DROP. Let oil freaking crash. My pay check will love em for it. Though OKC's economy is going to be pretty screwed because of it. Granted we've diversified a ton since the 80s, but there is still way too much exposure to oil/gas industries to avoid feeling what the rest of the nation has for years. 

Luckily I'm in an industry to where the lower oil prices go, the better position we are.

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## ou48A

> So how bout them $5 per gal gas prices we were suppose to have...for each of the last 3 or 4 Summers. LOL
> 
> I'm going to be like Spartan here (gasp) and say DROP BABY DROP. Let oil freaking crash. My pay check will love em for it. Though OKC's economy is going to be pretty screwed because of it. Granted we've diversified a ton since the 80s, but there is still way too much exposure to oil/gas industries to avoid feeling what the rest of the nation has for years. 
> 
> Luckily I'm in an industry to where the lower oil prices go, the better position we are.


The lower crude goes the more production will be shut in forever.
When the economy recovers this will set us for the next phase of the cycle for even higher price spikes than we seen before. Just as it’s done before, it will damage the economy.
Very few in the energy industry want extremely high prices, because they know that within a few months a crash is sure to come.

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## ou48A

A mandated US floor price for crude oil would level off the price swings and help protect the economy.
If set high enough (say $80) It would help keep low producing wells on line. It would protect US producers from OPEC’s over production. It would keep billions of dollars flowing to US, state, and local governments. If the world price fell below the mandated level the US government could collect the price difference.

The mandated level would also need to be high enough to keep conservation efforts alive but low enough to aid economic development.

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## Just the facts

> So how bout them $5 per gal gas prices we were suppose to have...for each of the last 3 or 4 Summers. LOL


The US economy crashed instead.

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## Just the facts

> The risk of a second recession is real, but it has mostly to do with uncertainty about Europe. Until they decide to let go of the austerity campaign, we'll be at risk of another recession.


You got that backwards I think.  The only thing keeping us afloat is the problems in Europe.  Our problem is that we have a currency system that requires exponential growth to work, and that simply isn't possible.  Our money supply is limited by the amount of debt we can take on and everyone is tapped out for debt.  there is nowhere to go but down - or if we can get a few million people to come here from another country and take out fraudulent home loans to pump money into the system... oh wait, we tried that.  Maybe then if we could get the federal reserve to pump money into the system... oh wait, we tried that also.  I know, let's get students to borrow massive amounts of money to go to college so they can apply for food serivce jobs - so far so good, $1 trillion in new debt.  Good thing college students are stupid.

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## Dubya61

> A mandated US floor price for crude oil would level off the price swings and help protect the economy.
> If set high enough (say $80) It would help keep low producing wells on line. It would protect US producers from OPEC’s over production. It would keep billions of dollars flowing to US, state, and local governments. If the world price fell below the mandated level the US government could collect the price difference.
> 
> The mandated level would also need to be high enough to keep conservation efforts alive but low enough to aid economic development.


There is a movie from the early '80s called Rollover that I always liked.  According to the critics, it sucked as a movie, but the plot has always intrigued me.  Something like:  all the markets and funds are so closely linked together that if one entity decided to do something rash, we'd all fall like a house of cards.  This thread makes me think of that plot.

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## Jersey Boss

> A mandated US floor price for crude oil would level off the price swings and help protect the economy.
> If set high enough (say $80) It would help keep low producing wells on line. It would protect US producers from OPEC’s over production. It would keep billions of dollars flowing to US, state, and local governments. If the world price fell below the mandated level the US government could collect the price difference.
> 
> The mandated level would also need to be high enough to keep conservation efforts alive but low enough to aid economic development.


Sounds like a quote straight out of Lenin

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## WilliamTell

> A mandated US floor price for crude oil would level off the price swings and help protect the economy.
> If set high enough (say $80) It would help keep low producing wells on line. It would protect US producers from OPEC’s over production. It would keep billions of dollars flowing to US, state, and local governments. If the world price fell below the mandated level the US government could collect the price difference.
> 
> The mandated level would also need to be high enough to keep conservation efforts alive but low enough to aid economic development.


Let me get this right, you have a 28 page thread on this board(amoung numerous other energy threads) where you literally post hundreds of times about how obama is causing the price of gas to skyrocket, how the government needs to get out of the private sectors way because they are purposely hindering domestic fuel production (while ignoring US production is at the highest level EVER), how Obama is a socialist hell bent on destroying the world and spreading his socialist agenda------------------- and no more than 2 months later when your job is on the line you want the government to get involved and set a minimum price on oil.....

I wish I could truly understand the mind of the hypocrite.

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## jn1780

> You got that backwards I think.  The only thing keeping us afloat is the problems in Europe.  Our problem is that we have a currency system that requires exponential growth to work, and that simply isn't possible.  Our money supply is limited by the amount of debt we can take on and everyone is tapped out for debt.  there is nowhere to go but down - or if we can get a few million people to come here from another country and take out fraudulent home loans to pump money into the system... oh wait, we tried that.  Maybe then if we could get the federal reserve to pump money into the system... oh wait, we tried that also.  I know, let's get students to borrow massive amounts of money to go to college so they can apply for food serivce jobs - so far so good, $1 trillion in new debt.  Good thing college students are stupid.


You know the world is screwed up when the Europeans are accused of not spending enough.
I like how slightly slowing the rate of debt growth is called austerity and they are barely able to fund that as it is. Spending more isn't going to help in their ability to sell bonds.  Only thing left for the EU to do is to set the printing presses to overdrive. At this point I say go for it. Lets just make sure all the people who advocated and voted for this are recorded in the history books.

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## ou48A

> Let me get this right, you have a 28 page thread on this board(amoung numerous other energy threads) where you literally post hundreds of times about how obama is causing the price of gas to skyrocket, how the government needs to get out of the private sectors way because they are purposely hindering domestic fuel production (while ignoring US production is at the highest level EVER), how Obama is a socialist hell bent on destroying the world and spreading his socialist agenda------------------- and no more than 2 months later when your job is on the line you want the government to get involved and set a minimum price on oil.....
> 
> I wish I could truly understand the mind of the hypocrite.


First, I never said I wanted this plan. I first heard about it in the 1970s when I was in junior high school.....

Second, the plan I mention offers a degree of protection for the nation against foreign interest who have embargoed oil to us and could use it as black mail. It would make our nation much less susceptible to price spikes, Middle East turmoil and the resulting economic damage...

Third, Obama and most dems have historically stood in the way of energy security. Image where we would be if our nation would not have suffered this economic damage at the hands of democrats.

Fourth, you can usually spot a flaming liberal by the way they always seem to assume so much. 
My job is not even remotely on the line. Other than trading my personal investments I have been retired for almost 9 years. 
Although I am far from an expert (mostly self taught) I was able to retired at the ripe old age of 45 in large part because of my ability to understand these and other economic matters.

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## ou48A

> There is a movie from the early '80s called Rollover that I always liked.  According to the critics, it sucked as a movie, but the plot has always intrigued me.  Something like:  all the markets and funds are so closely linked together that if one entity decided to do something rash, we'd all fall like a house of cards.  This thread makes me think of that plot.


I am not saying this is the right thing to do, but it could introduce more energy stability? Ideally our energy needs to be more price stable, along with abundant, affordable, and reliable so that wild price swings dont cause so much economic harm.

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## Maynard

> Sounds like a quote straight out of Lenin







> "Let's drink to you, let's drink to us, let's drink to all the Russian gas, for those extracting the new sun, from down beneath the ground!"


Oh, worth noting that Gazprom is 50.002% state-owned.


Just sharin'.    :Smile:

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## Double Edge

> Let me get this right, you have a 28 page thread on this board(amoung numerous other energy threads) where you literally post hundreds of times about how obama is causing the price of gas to skyrocket, how the government needs to get out of the private sectors way because they are purposely hindering domestic fuel production (while ignoring US production is at the highest level EVER), how Obama is a socialist hell bent on destroying the world and spreading his socialist agenda------------------- and no more than 2 months later when your job is on the line you want the government to get involved and set a minimum price on oil.....
> 
> I wish I could truly understand the mind of the hypocrite.


Bingo not the clowno.

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## venture

> A mandated US floor price for crude oil would level off the price swings and help protect the economy.
> If set high enough (say $80) It would help keep low producing wells on line. It would protect US producers from OPECs over production. It would keep billions of dollars flowing to US, state, and local governments. If the world price fell below the mandated level the US government could collect the price difference.
> 
> The mandated level would also need to be high enough to keep conservation efforts alive but low enough to aid economic development.


So you want the government to get involved and dictate pricing?

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## mmonroe

get oil out of futures?

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## 1972ford

The feds should put an additional ta on booze and use the money to help subsidize the price gap between new CNG vehicles and gasoline vehicles.  This would help keep gas prices down in america as well as allow america to keep more of its energy dollars in america.  Imagine what that would do for OKC.

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## WilliamTell

> Fourth, you can usually spot a flaming liberal by the way they always seem to assume so much. 
> My job is not even remotely on the line. Other than trading my personal investments I have been retired for almost 9 years. 
> Although I am far from an expert (mostly self taught) I was able to retired at the ripe old age of 45 in large part because of my ability to understand these and other economic matters.


I am the farthest thing from being a 'flaming liberal', but if it helps you sleep better at night knowing that a 'flaming liberal' wants to keep the government out of dictating and then controlling prices and profits in the private sector then so be it.

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## ou48A

> So you want the government to get involved and dictate pricing?


Where did I say that?
I didn’t…… but a few others have long proposed this as a partial solution.
I just think it’s an interesting idea that would need further study before implementation.

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## Just the facts

What OU48A is suggesting is the same thing the USDA does with milk.  Every week grocery stores pour out thousands of gallons of milk.  It has become so bad that we pay milk producers not to produce.  Sure it sets a stasble price for milk and ensures that there is always milk at the store but it has so much waste in the system.  I can't believe anyone would actually suggest we do the same thing for oil.

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## ou48A

> What OU48A is suggesting is the same thing the USDA does with milk.  Every week grocery stores pour out thousands of gallons of milk.  It has become so bad that we pay milk producers not to produce.  Sure it sets a stasble price for milk and ensures that there is always milk at the store but it has so much waste in the system.  I can't believe anyone would actually suggest we do the same thing for oil.




It would not be like the milk. This plan would appear to help level out the destructive extremes to our most important commodity in today’s modern society. The minimum price would only kick in once crude reached a certain predetermined low level. Also under this proposal that I read about many years ago when oil reach certain very high levels additional taxes would be taken from producers and from imports.

As it stands, if the original article is correct, people will soon be back to buying gas guzzlers when gasoline is selling for under $2 like it was about 3 to 4 years ago. Other progress on the alternatives will be killed or slowed. Mass transit improvements suddenly become a less important issue. Tens of thousands will be thrown out of work as they are at either extreme.
It would not be like the milk. This plan would appear to help level out the destructive extremes to our most important commodity in today’s modern society. The minimum price would only kick in once crude reached a certain predetermined low level and it would be a requirement. Also under this proposal that I read about many years ago when oil reach certain very high levels additional taxes would be taken from producers and from imports.
As it stands, if the original article is correct people will soon be back to buying gas guzzlers when gasoline is selling for under $2 like it was about 3 to 4 years ago. Other progress on the alternatives will be killed or slowed. Mass transit improvements suddenly become a less important issue. Tens of thousands will be thrown out of work as they are at either extreme.

This helps reduce the impact that OPEC has on us.

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## blangtang

I can't help but wonder if the bottom is in for oil, when the articles arise suggesting an imminent oil price collapse...however thats not my call, i'm just watching and seeing if the downtrend continues.  

The current downtrend will be great when it translates to lower gasoline prices.  

On another note, its pretty clear that the Saudi's can huff and puff all they want, but they carry zero weight when it comes to controlling global oil prices.  Don't get sucked into that game...

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## Spartan

> A mandated US floor price for crude oil would level off the price swings *and help protect the economy.*
> If set high enough (say $80) It would help keep low producing wells on line. It would protect US producers from OPECs over production. It would keep billions of dollars flowing to US, state, and local governments. If the world price fell below the mandated level the US government could collect the price difference.
> 
> The mandated level would also need to be high enough to keep conservation efforts alive but low enough to aid economic development.


I don't understand how protecting oil translates into protecting the economy; the two often move in opposite directions. 

I think you have one thing spot-on and one thing just a little bit off. The spot-on assessment is that oil is being over-produced right now, and it's not just OPEC, but it's also "America's energy independence" that we gush about. Obviously that's a mixed scenario though, because it would be great if U.S. could pump a ton while everybody else stopped, allowing us to reap high oil prices - obviously that will never happen.

The second thing that I think you're off about (because I believe that the over-supply is the single largest issue facing oil, not the demand everyone is talking about), is that if supply is so much greater than demand, how is a mandated floor price going to better facilitate the sale of oil? That will just translate into cheaper oil for China and Europe. Bigger question, how do you mandate a U.S. floor price for a commodity sold on a world market? I'm just curious, would that work like OPEC? Might not be a bad idea, especially if we're serious about becoming a top oil producer again.

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## Teo9969

> I can't help but wonder if the bottom is in for oil, when the articles arise suggesting an imminent oil price collapse...however thats not my call, i'm just watching and seeing if the downtrend continues.  
> 
> *The current downtrend will be great when it translates to lower gasoline prices. * 
> 
> On another note, its pretty clear that the Saudi's can huff and puff all they want, but they carry zero weight when it comes to controlling global oil prices.  Don't get sucked into that game...


That's unlikely to happen. Gasoline prices are as much reflecting the inflation of the Dollar as they are anything that's going on with Oil. I would be shocked if we saw gasoline prices drop below $2.75 (in OK) unless we see a major collapse in Oil (down to like $50/bbl)

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## Bellaboo

> That's unlikely to happen. Gasoline prices are as much reflecting the inflation of the Dollar as they are anything that's going on with Oil. I would be shocked if we saw gasoline prices drop below $2.75 (in OK) unless we see a major collapse in Oil (down to like $50/bbl)


Saw a news report over the weekend that gasoline was $2.79 a gallon in South Carolina.............at current oil prices.

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## Just the facts

Maybe this is a good time to trade in the wife's Armada for a more fuel efficient vehicle.  Much like Cousin Eddie's kidney - sell it now while someone still wants it.

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## Oil Capital

> I can't help but wonder if the bottom is in for oil, when the articles arise suggesting an imminent oil price collapse...however thats not my call, i'm just watching and seeing if the downtrend continues.  
> *
> The current downtrend will be great when it translates to lower gasoline prices. *





> That's unlikely to happen. Gasoline prices are as much reflecting the inflation of the Dollar as they are anything that's going on with Oil. I would be shocked if we saw gasoline prices drop below $2.75 (in OK) unless we see a major collapse in Oil (down to like $50/bbl)


It has already happened and continues to happen.  The average retail gasoline price peaked in mid-April and have since fallen $.503 per gallon

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## ou48A

> I don't understand how protecting oil translates into protecting the economy; the two often move in opposite directions. 
> 
> I think you have one thing spot-on and one thing just a little bit off. The spot-on assessment is that oil is being over-produced right now, and it's not just OPEC, but it's also "America's energy independence" that we gush about. Obviously that's a mixed scenario though, because it would be great if U.S. could pump a ton while everybody else stopped, allowing us to reap high oil prices - obviously that will never happen.
> 
> The second thing that I think you're off about (because I believe that the over-supply is the single largest issue facing oil, not the demand everyone is talking about), is that if supply is so much greater than demand, how is a mandated floor price going to better facilitate the sale of oil? That will just translate into cheaper oil for China and Europe. Bigger question, how do you mandate a U.S. floor price for a commodity sold on a world market? I'm just curious, would that work like OPEC? Might not be a bad idea, especially if we're serious about becoming a top oil producer again.


Putting partial restriction on the price of oil provides a degree of protection for the economy by reducing the price spikes. It keeps energy business and their production alive during times that would otherwise see them shuting down due to extremely low prices. This increased production would help hold prices down on the high end.


If the floor price kicks in and there is an oversupply on the US market the surplus should be used to fill and expand our strategic oil reserve, with the excessive oil. We could release the oil when the prices spike on the high end at a predetermined set price. This would also protect the consumers of petroleum products and help protect the parts of our economy that are harmed by high oil prices. If nothing else it could be made available for export or it could be shut in for a period of time. I don’t think it would take long for the markets to adjust.

The mandate the price would be based on a US law that require any crude oil being sold for consumption in the USA be purchased at a price set no less than the set floor price. OPEC sets production quotas that are price driven. Obviously this idea may need some tweaking but I believe most of us are sick and tired of the price swings that cause so much economic destruction that are often caused by forces beyond our control and by people who are not friendly to the western way of life.

There was some talk of an organization of oil consuming nations being formed about 4 years. 
Perhaps we could gain further leverage though such an organization.

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## WilliamTell

> Putting partial restriction on the price of oil provides a degree of protection for the economy by reducing the price spikes. It keeps energy business and their production alive during times that would otherwise see them shuting down due to extremely low prices. This increased production would help hold prices down on the high end.


So you want to socialize the oil industry loses....

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## Just the facts

Can we do the same thing for my income?  Guarantee me $100K per year and anything I make more than that I will give to the government but if I fall below that the government will give me the difference.  Then let’s do that for everyone and see how well it works.

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## ou48A

> Can we do the same thing for my income?  Guarantee me $100K per year and anything I make more than that I will give to the government but if I fall below that the government will give me the difference.  Then let’s do that for everyone and see how well it works.


It’s not the same. Financially this would be more like a minimum wage on one end and higher taxes on the high end. By releasing massive amounts of oil that were bought on the cheap when prices become so high that they start causing significant harm we take more control over our own future. This does the economy far more good than any train.
In a modern world oil is the most vital commodity. If we can figure out how to provide more price stability and security people and businesses of all types can better plan and become more prosperous. That adds to the GOV revenue base and makes our nation less affected by foreign events beyond our control.

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## Bellaboo

I don't think OPEC will let the bottom fall out of the oil market. I read where they said they would be comfortable with $70 - $75 a barrel oil.

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## ou48A

> I don't think OPEC will let the bottom fall out of the oil market. I read where they said they would be comfortable with $70 - $75 a barrel oil.


What they say and what they do are very often different. They have a long history of this.
Just a few months ago they indicated that $100 crude was their goal but production hasn’t slowed since in spite of below $80 crude.
 I don’t think anyone really knows with certainty what prices will do.

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## Bellaboo

So much for a crash, up $7 bucks a barrel today.

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## Snowman

With the most likely cause of a crash being a crash in the US, Euro and/or Global Economies; we would hardly be able to keep out of some negative impact to our own local economy anyway. The original annalist that was making this argument is not talking about fundamentals but technical trends which many annalists do not use for their sole reason to base a position on, it even says many managers/traders were making bets that it had reaching a bottom and looking at it going higher from when the story came out.

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## Spartan

> So much for a crash, up $7 bucks a barrel today.


That's just what I was thinking..

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## Bellaboo

Up another 3 bucks today......

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## Achilleslastand

> Up another 3 bucks today......


Yep someone raised a sword in Iran so what do you expect..............

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## ou48A

> Yep someone raised a sword in Iran so what do you expect..............


The prices were getting too low for the Iranians so they had to start talking tough again.
http://www.nytimes.com/2012/07/03/wo...=MYWAY&ei=5065


Responding to the tightening of Western sanctions, Iran on Monday announced that it would consider proposed legislation to disrupt traffic in the Strait of Hormuz as well as missile tests, in a drill clearly intended as a warning to Israel and the United States. 

The Iranian legislation calls for Iran’s military to block any oil tanker en route to countries no longer buying Iranian crude because of the embargo

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## ou48A

http://business.financialpost.com/20...d-your-breath/

If you’re hoping for oil to bounce back like last year, don’t hold your breath

Jul 6, 2012 12:33 PM ET

The trend in crude oil prices through the first half of this year has hewed very closely to the pattern set in 2011 thanks to many parallels in the global economy.



But anybody hoping for oil prices to experience the same bounce back to US$100 a barrel levels seen last year will be left disappointed, new research from TD Economics suggests.



Dina Ignjatovic, economist with TD Economics, said oil price movements have been tracking those of a year ago almost dollar-for-dollar, peaking at US$110 through new optimism in the first quarter before plummeting to US$80 a barrel at mid-year thanks to assorted issues including the ongoing eurozone credit crisis, the U.S. economy, and global growth.



In the case of 2011, prices ended up rallying back to US$100 a barrel by the end of the year, but the prospect of this happening again for the second year in a row is unlikely, she said.



“While one can be mesmerized by the abundance of similarities, there is one important difference between this year and last that could keep prices from rallying back to the US$100 per barrel mark in the near term: the supply-demand dynamics,” she said.



Problem is, *the rebound last year was fuelled at least in part by an average deficit of 800,000 barrels a day for the year as a whole.



This year, that has reversed with an average surplus of 1.9 million barrels a day during the first five months of the year.* 

*“In fact, crude oil inventories in the U.S. are currently sitting around a 22-year high,”* Ms. Ignjatovic said.



*Production in the U.S. and Canada is up 8% and 11% respectively, while Saudi Arabia* — *the world’s largest producer — has also boosted production and looks comfortable with lower prices for the rest of the year, even as demand growth around the world has weakened.*


*“Lower oil prices can help rather than hinder growth,* by putting more disposable income in consumer pockets and reducing the amount that governments have to spend on subsidies in countries such as China, leaving more room for stimulus spending. The recent drop in prices has also helped to put the brakes on inflation,” she said. “Recognizing this, Saudi Arabia … has indicated that it would prefer to see lower prices while global economic growth is weak.”



As a result, *Saudi Arabia is expected to continue to produce oil at or close to the highest rate seen in 30 years*.



In Canada, concern is focused on the spread between West Texas Intermediate and the Canadian standard Western Canada Select, which has almost doubled in the past year.



A gap exists because the Canadian WCS product is less refined than its WTI counterpart, but it is the widening spread that is the problem for producers.



“While we expect the spread between WTI and WCS prices to narrow somewhat over the next few years, it is unlikely to return to 2011 levels,” she said. “Moreover, if the price that Canadian producers receive remains depressed for a sustained period of time, future supply growth could be constrained.”



With all this in mind, Ms. Ignjatovic expects prices to remain in the US$80-US$90 a barrel range for the rest of the year.



Next year, conditions will firm up as global growth stabilizes, lifting demand, and likely sending prices gradually back to the US$100 a barrel mark by the end of 2013.

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