Oil Futures

grand_master_d · 10-06-2008, 08:08 PM

I brought this up in a thread about drilling a few weeks ago, but I never got an actual response.

Opponents of drilling give the same line each time the topic comes up. I even heard it a half-dozen times in the VP debate last week: "We wouldn't see any of that oil for at least 10 years." (Which is flawed to begin with because many of the areas we could open up for drilling have already been explored and have platforms installed.)

But how soon we "see" the oil isn't even my point...

I'm mostly interested in how opening up ANWR, or lifting other bans, would have an impact on oil futures. Oil is a futures market, Congress could say the word "drill" and traders would go crazy.

I'm not an economics genius, so I'd love to hear all of your thoughts on this.

(Plus, why is it the candidates never talk about this? We get the same one-liners that only barely touch the surface of the debate...)

Ryan Freeland · 10-06-2008, 08:13 PM

Quote:

Originally Posted by grand_master_d

(Plus, why is it the candidates never talk about this? We get the same one-liners that only barely touch the surface of the debate...)

Because they stick to buzzwords, things that the average uninformed American could relate to.

Looking strictly at supply/demand, opening up ANWR and offshore drilling sites would increase supply. But, it would not necessarily affect the futures market. That has been evidenced over the last 6 months. The $140/barrel bubble that was created was speculation, not really supply/demand.

But, with our current economic crisis, oil futures have really taken a backseat to the financial sector.

**nbfan** · 10-06-2008, 09:26 PM

Quote:

Originally Posted by Ryan Freeland

Because they stick to buzzwords, things that the average uninformed American could relate to.

Looking strictly at supply/demand, opening up ANWR and offshore drilling sites would increase supply. But, it would not necessarily affect the futures market. That has been evidenced over the last 6 months. The $140/barrel bubble that was created was speculation, not really supply/demand.

But, with our current economic crisis, oil futures have really taken a backseat to the financial sector.

This. And now, with less speculation, oil is $90/barrel. I'm not sure the exact figures, but I know that opening up ANWR to drilling wouldn't have as huge of an effect as some politicians would have us believe.

grand_master_d · 10-06-2008, 09:37 PM

So, increasing the future supply wouldn't create speculation that could lower current costs?

normajean777 · 10-07-2008, 01:46 AM

I don't really know futures (I couldn't handle the risk, so I've never bought any), but I'm pretty sure most futures have a maximum life span of 1 year, and lots are 1 month (please correct me if I'm wrong). So if the US opened up ANWR to drilling and it took 5-10 years to start up some major drilling, the price of a 1 year oil future would likely stay unchanged.

The price of gas could possibly go down if more refineries were built. . .

Also the oil sands project, which is currently the US's largest supplier of oil (Canada as a total supplies 10% of US needs) is possibly tripling production by 2020. This is likely much more than ANWR would produce anywhere in the near future, and that news doesn't exactly move the price (although obviously you could argue, its not new news so its already built in).

JerryLove · 10-08-2008, 07:51 PM

Quote:

Originally Posted by grand_master_d

Opponents of drilling give the same line each time the topic comes up. I even heard it a half-dozen times in the VP debate last week: "We wouldn't see any of that oil for at least 10 years." (Which is flawed to begin with because many of the areas we could open up for drilling have already been explored and have platforms installed.)

Firstly: I'm dubious of the claim that we have areas not open to drilling which have functioning platforms on them.

Second: I don't beleve "we won't see it for 10 years" is *why* the opponents oppose it. I believe it's the counter to "drill here drill now because gas is expensive now and drilling is the immediate solution"... and it seems a valid response to that.

The *case* for objecting to drilling is usually related to the evyornment, either directly or indirectly (our objection in Florida is centered around the effect of thing like tarballs on our tourism trade).

Quote:

I'm mostly interested in how opening up ANWR, or lifting other bans, would have an impact on oil futures. Oil is a futures market, Congress could say the word "drill" and traders would go crazy.

Per butterfly effect "yes". But if you are asking "will drilling, with reasonable ertainty, have a positive, noticeable effect on gas prices", it's "not likely"

Quote:

(Plus, why is it the candidates never talk about this? We get the same one-liners that only barely touch the surface of the debate...)

1) Details cause people to tune out. Chants and simple rhetoric are better (Kerry lost to Bush mostly out of his inability to give a clear, simple message).
2) More details = more things to dislike. Why the monster in the movie is always scarier when you *don't* see it. *any* real-world plan always has drawbacks. Drawbacks that can be expolited by an opposition that never got specific enough to show its own.

grand_master_d · 10-09-2008, 12:20 AM

Quote:

Originally Posted by JerryLove

Firstly: I'm dubious of the claim that we have areas not open to drilling which have functioning platforms on them.

I've read that there are locations off the coast of California. It didn't seem like a misleading source, though I'm not about to go digging for it now...

Thanks for your response. It's very helpful.