No credit card required
Browse credit cards from a variety of issuers to see if there's a better card for you.
Hi Everyone,
Well, it looks like low oil prices might be with us for only 12 more months.
All of you should get to know a new term: Contango.
That's what happens when oil traders buy and store crude oil at a low price
(instead of delivering it) and then sell it at a higher price sometime in the future.
Apparently, there's so much excess oil on the market and such low global
demand that this is becoming a very attractive and conservative way for oil
traders to make money and force prices higher in the future at the same time.
What a racket.
Here's a Bloomberg link with all the details.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aL2dc1mwHOdo&refer=home
I'd be very curious to hear your comments on this one. Don't be shy.
CanDo
"The right attitude is everything"
It depends what side of the hoarding equation you're on.
If you're a consumer, it means higher prices. If oil companies
and traders keep this up, we'll pay higher prices at the pump
a lot sooner than natural supply and demand forces dictate.
Right now prices are coming down and people are enjoying them,
but they don't trust that prices will stay low...and hoarding or contango
are good reasons why.
Banks are hoarding capital right now. This means we pay higher interest
rates and need higher FICO scores just to get the money. They are creating
the perception that money is tight so they can force rates higher. You'd think
during a recession they'd be doing everything possible to generate business,
not push it away.
So like I said, it depends which side of the equation you're on. In the case
of oil contango, an artificial shortage could be created to inflate prices just
so companies can make money in the short term at the consumers' expense.
It may be business, but I don't think it's smart business....
Edit to Add: Do you remember the gas lines of the 1970's. Even days, odd days,
lines stretching for miles just to fill our tanks??? There was no gas "shortage"...
oil companies just said there was so they could make obscene profits at our
expense. That's the potential danger I see with oil contango.
CanDo
"The right attitude is everything"
Hey jmeek,
My advice is focus on what you can do, and don't worry
about what you can't. If you drive to work, you gotta buy gas.
Off the top of my head, I'd say take a practical
approach and curb your fuel usage as much as possible.
Even though we're in a recession, that's what people
are doing now...driving only when we have to and, where possible,
frequenting stores that let us get multiple things done in one
location (like a Kroger, Walmart, Target, etc).
And if you live in a place with good public transportation, I'd use
that as well. Let someone else worry about the driving while you relax
and take it easy. Anything to reduce your consumption helps to
reduce demand. Lower demand eventually leads to lower prices.
And of course, there's always walking. Lots of Americans are moving
back into the city and parking their cars. They carpool or take mass
transit to work, and they live in areas where everything they need is
within walking distance (shopping, restaurants, movies, etc).
This is not just a fad. People are very conscious of their environmental
footprint and they want to keep it as small as possible.
Politically, I'd put pressure on your members of Congress via email or
phone call. They don't like Big Oil as it is now, so giving them another
reason to pile on should get the ball rolling on your behalf.
The media is also an excellent lever to pull. It doesn't matter if it's local
or national, most offices have entire staffs dedicated to investigative
reporting in the consumers' defense. If you read the Bloomberg article,
I'm sure you noticed that the oil companies and traders engaged in
oil contango refused to comment on their actions. This tells me that
they know Bloomberg is aware of the potential abuse in prices that
could take place...and believe me, they will stick with this story.
So like I said, the media is very powerful. Let's leverage them on
our collective behalf.
30 years ago when the gas lines of the 70's took place, communications
technology wasn't anything close to what it is now. Everything happens
at Internet speed these days, just about everyone has a camera on
their cellphone and we blog/forum like crazy (this room included). So if
we speak up and use all the resources afforded to us, we can get almost
anything done.
CanDo
"The right attitude is everything"
Contango-Balloongo
The phenomenon where people are taking out balloon mortgages to live in houses much larger than they can afford to store barrels of oil they bought on speculation that prices would rise in a few years.
That's cute, debtisgood. I like that idea.
Along that same vein, perhaps we should engage in
"Gold Balloon Contango". American homeowners take out those
same balloon mortgages and buy up all the gold we can get
our hands on. When prices rise in the future, we sell enough
to pay off our houses and donate the rest to Fort Knox.
Then every homeowner in America would actually own their
property free and clear, and there'd be so much gold at Fort Knox
that we could return the dollar to the gold standard. A dollar
would actually be worth something again, as opposed to the
fiat currency it is now (backed by the full faith and credit
of Uncle Sam).
One US Dollar would equal $1 in gold. If the Treasury wanted
to inject more greenbacks into the market, they buy enough
gold to pay for them. Goodbye, inflation!!!!
Wishful thinking, I know. But it is something to think about...
CanDo
"The right attitude is everything"