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Markets learn. The mkt participants were well aware of what happened to crude prices the last time a war kicked off in the Muddle East (no typo). The very day of Schwartzkopf's invasion, crude prices fell like a rock (and US bonds and 10-years, and Eurodollars, went crazy to the upside). Clearly, this was going to happen again to some extent when this war kicked off...but markets learn, ok? Markets are an anticipatory discounting mechanism of price...and the participants, knowing the past, were -- guess what? -- anticipating future developments by starting to sell crude ''early''.

I agree and disagree. One of the reasons crude prices fell like a rock when Schwartzkopf attacked was that US / coalition forces completely kicked ass on Iraqi forces--it was a great maneuver to go completely *around* Iraqi lines rather than slogging it out. :-)

I agree the markets "anticipated" a similar occurrence in the latest Iraq War, but the outcome was not *guaranteed*.

$17-18? Don't think so. Effective price of crude (i.e. the front-month future) was over $19 for the bulk of the month.

Point taken, BUT...$19 is still an *awful lot* less than the $70-plus we saw earlier this summer. :-)

Prices do not move for no reason, or because of ''Peak Oil'' or similar nonsense. They move because of the expectation of the mkt participants regarding future developments in the specified mkt.

My point was not attempting to do a month-by-month matching of the futures contracts with external events--but rather to show that at some point "any news would do" to jack up prices. And the comments about "$100 / barrel" or "$262 / barrel" which I gave hypertext links to near the bottom of the article, sure looked like speculators trying to drive the expectations for oil prices ever higher so that they could make out like bandits.

One or two other points -- I agree that anxiety over excess capacity could drive prices, but...!

Bill Clinton opened the US strategic oil reserve back when gasoline was only $1.59 or so a gallon. Presumably, Bush 43 could do the same. Some pundits suggested he do just that to temper prices.

Also, in terms of expectations. Another thing that happened is that (IIRC) oil companies greately curtailed exploration in the Bill Clinton era of $10-$20 / bbl crude. With prices up over $60 / bbl, not only did exploration begin again, but a number of alternatives (shale oil, coal, even nuclear power) began to be looked at. Not all of those are cost competitive with oil at $30/ bbl, or politically feasible.

When and how the alternative energy sources come on line, and how that interacts with expansion of reserves due to exploration, will be very interesting to watch, in terms of its effect on oil futures going forward.

Again, thanks for the correction; but for my thesis, I was not doing detailed analysis of the numbers to correlate on a month-by-month bases; just trying to show an overall trend, and a disconnect between prices and the causes normally given in the MSM.

(What do you know, I answered before going to bed anyway.)


6 posted on 10/16/2006 12:22:23 AM PDT by grey_whiskers
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To: grey_whiskers; SAJ
Just clicked on your freeper page.

You *are* a trader...

I agree the UN f*llates deceased canaries, or worse.

And your *Time and Timing* looks really cool: I used to do time series analysis on retail data, so I'm rather interested in mathematical modeling of seasonality, etc.

I'd ask more about your product but it'd probably involve you having to give away trade secrets :-)


7 posted on 10/16/2006 12:27:54 AM PDT by grey_whiskers
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To: grey_whiskers
Bill Clinton opened the US strategic oil reserve back when gasoline was only $1.59 or so a gallon.

Yep. And that staggeringly stupid effort at a clumsy mkt manipulation affected prices for, what?, 3 days? Five? No more than a week, if that. I'll look it up, if you like; ought to be a cinch.

Which adjective would you like to describe Xlintoon's ''genius'' move here? Wrong-headed? Short-sighted? Venal? Incompetent? Economically illiterate (wups, sorry, that's an adjectival cheating allowed).

I'll go for 'All Of The Above' for $1000, Alex.

9 posted on 10/16/2006 9:35:16 AM PDT by SAJ (debunking myths about markets and prices on FR since 2001)
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