Berkeley CSUA MOTD:Entry 51569
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 2008/10/17-22 [Science/Disaster] UID:51569 Activity:kinda low 10/17 http://tinyurl.com/55qdqa Article speculating that "oil bubble" was caused by hedge funds and that oil prices are down now because hedge funds have had massive redemptions. Where are the peak oil weenies now? Oil -> $50. \_ What are you, twelve? A drop in price is an opportunity to fix our oil dependency once and for all. \_ Peak Oil is not a matter of it, just when. As I said before, oil prices are very inelestic and since demand is down, prices should be way down. They will be back up again soon enough, take advantage of the respite to save. \_ Uh huh. Obviously oil prices are not that inelastic, because they've fallen like a stone. \_ Inelastic does not mean what you think it means. Oil consumption in the US is expected to decline, in spite of the fact that prices are down. Worldwide demand is still going to go up, just less than before. \_ So worldwide demand is going up, but prices are falling like a stone. Please start making sense. \_ Go read an econ textbook or something. Elastic == price and demand are tightly correlated. Inelastic == demand stays constant (relatively) no matter what happens to price. http://en.wikipedia.org/wiki/Price_elasticity_of_demand http://tinyurl.com/634txb (this is better actually) \_ I've taken more econ. than you have I bet. Please to be explaining why the price of oil is falling. If demand is constant no matter what then what incentive is there for the price to fall? \_ Hmm, let me think, it is called a supply/demand curve. I wonder what variable other than demand could be in play here... \_ You think supplies are increasing that much, huh? Kinda blows away the idea that we are close to peak oil, wot wot? 2008 production is 1-2% higher than last year: we are close to peak oil, wot wot? (2008 production is 1-2% higher than last year: http://tinyurl.com/yprlk . Clearly that's enough to cause the price to fall in half. WTF do you think these curves look like? No, the issue here is with the demand side: specifically, speculators. \_ I think it is pretty obvious what the curves look like and that you are in denial about it. A very small increase or decrease in production over demand has a huge impact on prices. No one (or no reasonable person, at least) would claim that the "Peak" event will happen all at once. There is always going to be small movement up and down, as global events influence production. Also, as prices go up, new sources become economically recoverable. You should consider the strengthening dollar in your analaysis of how much prices have moved. Priced in Yen or Euro's, oil prices have moved quite a bit less. Don't mistake dollar volatility for commodity price volitility. \_ http://www.guardian.co.uk/business/feedarticle/7875749 The IEA still believes crude consumption will be higher than in the same period last year (+400,000 bpd) \_ sure, lots of levered long plays on oil by all sorts of funds (hedge, pension, other institutionals). with global slowdown, everyone ran for the exits. this is common knowledge for many traders. those evil speculaterss!!1 \_ I hope they're topping off the Strategic Petroleum Reserve. \_ Peak oil isn't scheduled to arrive until around 2010-2012 -- I said multiple times only a global recession could drive down prices which is exactly what is happening. Since the market is projecting a global economic contraction, demand will be reduced so prices go down. This all has nothing to do with peak oil, which is about the peak in oil *SUPPLY*. \_ Peak oil weenies claimed that the reason prices were so high was because the world was going to run out by 2020 or something. That was fear mongering. There's so much supply that OPEC is talking about reducing output. The current price is a good indicator that we're not close to peak oil yet. You don't go from "plentiful oil" to "peak oil" in 2 years (or whatever it was), sorry. \_ Peak oil specifically says the second 1/2 of the world's total usable oil will be so expensive to extract that it'll cost MORE to extract with current technology than to sell the oil, hence no one will extract it anymore. \_ Okay. And what evidence is there we are at the halfway point? \_ If the definition of "plentiful oil" is "more than demand" then indeed it's easy to do that. Oil supply has been flat for about 3 years now, and there is no proof that it's going to go up anytime soon. \_ Supply is going to (roughly) match demand. When you can say there's a problem is when supply cannot be met. One indicator of that is when production decreases even as prices rise. Clearly, we are not there yet. \- A good (non-ideological) question is "why do oil prices have so much more volatility than the instability of supply and demand". the simple answer is the prices are also a function of changing information/expectation *and* given a production cartel and other influential players with "market power" [to abuse that term a bit]. so in addition to speculators, there is strategic production strategy. it's not reasonable to write another 1000 words on this and frankly i dont understand it that well, but there more to it than supply and demand and elasticity. You may also want to look up Contango and Backwardation. Per my earlier link about manipulation in the copper mkt, the way these mkts work is very far removed from theory ... i.e. there is no simple answer. [if you are familar with economics, part of thinking about this involves the "art" of teasing out short run phenomena from long run equillibria. for an analogy in FX, say DORNBUSCH OVERSHOOTING vs convergence to PPP "eventually"]. 2019/01/21 [General] UID:1000 Activity:popular  1/21 You may also be interested in these entries...  2008/10/9 [Science/Disaster] UID:51452 Activity:high 10/9 I'm just wondering where all the "peak oil" morons are now that oil prices have fallen almost in half. Anyone who looked at consumption versus production could plainly see that, peak oil or not, the recent spike was mostly speculative. \_ the speculation of peak oil fueled it out, though peak oil is not an effect that will never happen, but it's really more ...   2008/6/12-13 [Science/GlobalWarming] UID:50244 Activity:very high 6/12 By the way, the Government estimates that the outer continental shelf, (the one they said no to yesterday), has 76 billion barrels of oil in it that are recoverable and that's with today's technology. Let me put that into perspective. 76 billion barrels is enough to replace every single barrel of oil that we import from everywhere outside of North America for the next 34 years at our current pace. That's in the one ...   2008/5/22 [Science/GlobalWarming, Politics/Domestic/California] UID:50026 Activity:high 5/22 We brought together the heads of big oil. See that big head over there? Yeah, he runs Shell. That one? That runs ExxonMobil. Mr. Big oil, we're here to talk about the high price of gasoline. How could it have possibly gotten this high? Let me tell you what we've done here in congress. We told you that drilling in ANWR is off limits. We told you that drilling off the ...   2008/3/7-9 [Science/Disaster, Science/GlobalWarming] UID:49375 Activity:high 3/7 So what's the truth about oil prices? I'm sure supply is about where it was 5 years ago and I cannot imagine demand is that much higher and yet prices are almost triple. Is this a speculative bubble where investors are buying oil because they perceive the price of oil to be rising, is this manipulated by OPEC, or have costs of doing business risen dramatically? ...   2007/10/24-26 [Science/GlobalWarming] UID:48438 Activity:nil 10/24 "Peak oil projections from Chevron's CTO | Tech news blog - CNET:" http://www.csua.org/u/jtf I don't get the math. If "there is a trillion gallons left for human consumption" and human are consuming "about 3 billion gallons a day worldwide", doesn't mean that we will use up what's left in one year? \- world stock is probaby barrels. ...   2007/6/14-19 [Science/GlobalWarming] UID:46938 Activity:high 6/13 Guess what liberal urbanists-- automobile is not going away! Boohoo! Go ahead and cry you cry babies: http://www.ti.org/vaupdate56.html \_ the author clearly doesn't understand the concept of peak oil. -tom \_ tom clearly didn't read #1 carefully. We've already tapped and used up 1 out of 6-7 units of estimated oil on earth. ...   2007/3/5-7 [Science/GlobalWarming] UID:45879 Activity:kinda low 90%like:45867 3/4 So much for the peak oil myth http://www.nytimes.com/2007/03/05/business/05oil1.html http://preview.tinyurl.com/2yovom (nytimes.com) \_ I am NostraMotd. Oil price will peak in 2010. World War III will happen in 2012 in a blink of an eye. -nostramotd \_ So you went into a trance and your assistant recorded your ...  Cache (2471 bytes)  tinyurl.com/55qdqa -> www.marketwatch.com/news/story/marketwatch-first-take-opec-laid/story.aspx?guid={D4E24BFF-BDC4-4B75-9C98-D06DD1C80A5F}&dist=hplatest Election 2008 latest news MARKETWATCH FIRST TAKE OPEC left to its own devices Commentary: Hedge fund redemptions lay bare the role in oil speculation By MarketWatch Last update: 2:52 pm EDT Oct. SAN FRANCISCO (MarketWatch) -- The Organization of Petroleum Exporting Nations has called an emergency meeting for Oct. Crude, despite an uptick Friday, has crumbled to$72 a barrel, half the price it fetched in July. Gone is the fear that we are in the pockets of "folks that don't like us very much." Prices are down at the pump, and talk radio has moved on, feasting now on banks, bailouts and rampant greed and corruption on Wall Street. As the industrial world withdraws into a recessionary shell, it takes oil demand with it. China and India's insatiable thirst for oil looks meager now as factory output slows to a trickle. But there's also been a rush of roving capital out of the market. According to the latest data from Hedge Fund Research, third-quarter hedge fund redemptions hit a record-high $210 billion, spearheading an exodus wealth that burst one of the biggest commodities bubbles of all time. It's no coincidence that oil prices plunged in tandem with these record withdrawals, exposing for all to see just how much of the summer's oil-price spike was driven by speculators. While oil's deep "correction" alarms Big Oil, it's even more alarming to producing nations whose economies are entirely grounded in petro-dollars. The extreme pain caused by this sudden revenue loss can be gauged by OPEC's decision to move up their next meeting from November to October, less than two weeks ahead of the US presidential election. This raises the likelihood of another severe tongue-lashing by a politically supercharged Washington, but that's clearly better than enduring further losses. With speculators fleeing, the cartel is going to have to build a floor under oil prices through disciplined production cuts. And given the wheezing global economy, OPEC has only an outside chance of pushing prices back up to$100 a barrel even if they manage to significantly slash output. Unless, of course, another war or natural disaster disrupts supply lines -- at which point all bets are off, and OPEC has us all once again over the proverbial barrel. NASDAQ traded symbols and their current financial status. Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. SEHK intraday data is provided by Comstock and is at least 60-minutes delayed.
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 en.wikipedia.org/wiki/Price_elasticity_of_demand Drinking water is a good example of a good that has inelastic characteristics in that people will pay anything for it (high or low prices with relatively equivalent quantity demanded), so it is not elastic. On the other hand, demand for sugar is very elastic because as the price of sugar increases, there are many substitutions which consumers may switch to. The demand for a good is relatively inelastic when the change in quantity demanded is less than change in price. Goods and services for which no substitutes exist are generally inelastic. antibiotic, for example, becomes highly inelastic when it alone can kill an infection resistant to all other antibiotics. Rather than die of an infection, patients will generally be willing to pay whatever is necessary to acquire enough of the antibiotic to kill the infection. A set of graphs shows the relationship between demand and total revenue. As price decreases in the elastic range, revenue increases, but in the inelastic range, revenue decreases. A set of graphs shows the relationship between demand and total revenue. As price decreases in the elastic range, revenue increases, but in the inelastic range, revenue decreases. undefined), any increase in the price, no matter how small, will cause demand for the good to drop to zero. Hence, when the price is raised, the total revenue of producers falls to zero. A banknote is the classic example of a perfectly elastic good; An example of a perfectly inelastic good is a human heart for someone who needs a transplant; neither increases nor decreases in price affect the quantity demanded (no matter what the price, a person will pay for one heart but only one; nobody would buy more than the exact amount of hearts demanded, no matter how low the price is). edit Mathematical definition The formula used to calculate the coefficient of price elasticity of demand for a given product is E_d = - \frac{\%\ \mbox{change in quantity demanded}}{\%\ \mbox{change in price}} = - \frac{\Delta Q_d/Q_d}{\Delta P_d/P_d} Conventions differ regarding the minus sign, considering remarks like "price elasticity of demand is usually negative". are the original or final values for quantity and price. This formula is usually valid either way as long as you are consistent and choose only original values or only final values. edit Point-price elasticity * Point Elasticity = (% change in Quantity) / (% change in Price) * Point Elasticity = (DeltaQ/Q)/(DeltaP/P) * Point Elasticity = (P DeltaQ) / (Q DeltaP) * Point Elasticity = (P/Q)(DeltaQ/DeltaP) Note: In the limit (or "at the margin"), "(DeltaQ/DeltaP)" is the derivative of the demand function with respect to P "Q" means 'Quantity' and "P" means 'Price'. We wish to determine the point-price elasticity of demand at P = 80 and P = 40. First, we take the derivative of the demand function Q with respect to P: {{\partial Q}\over{\partial P}} = -06 Next we apply the equation for point-price elasticity, namely E_p={{\partial Q}\over{\partial P}}{P \over Q } to the ordered pairs (40, 976) and (80, 952).
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 tinyurl.com/634txb -> economics.about.com/cs/micfrohelp/a/priceelasticity.htm Arc Elasticity) First we'll need to find the data we need. We know that the original price is $9 and the new price is$10, so we have Price(OLD)=$9 and Price(NEW)=$10. From the chart we see that the quantity demanded when the price is $9 is 150 and when the price is$10 is 110. Since we're going from $9 to$10, we have QDemand(OLD)=150 and QDemand(NEW)=110, where "QDemand" is short for "Quantity Demanded". So we have: Price(OLD)=9 Price(NEW)=10 QDemand(OLD)=150 QDemand(NEW)=110 To calculate the price elasticity, we need to know what the percentage change in quantity demand is and what the percentage change in price is. Final Step of Calculating the Price Elasticity of Demand We go back to our formula of: PEoD = (% Change in Quantity Demanded)/(% Change in Price) We can now fill in the two percentages in this equation using the figures we calculated earlier. We conclude that the price elasticity of demand when the price increases from $9 to$10 is 24005. A good economist is not just interested in calculating numbers. in the case of price elasticity of demand it is used to see how sensitive the demand for a good is to a price change. The higher the price elasticity, the more sensitive consumers are to price changes. A very high price elasticity suggests that when the price of a good goes up, consumers will buy a great deal less of it and when the price of that good goes down, consumers will buy a great deal more. A very low price elasticity implies just the opposite, that changes in price have little influence on demand. Often an assignment or a test will ask you a follow up question such as "Is the good price elastic or inelastic between $9 and$10". To answer that question, you use the following rule of thumb: * If PEoD > 1 then Demand is Price Elastic (Demand is sensitive to price changes) * If PEoD = 1 then Demand is Unit Elastic * If PEoD < 1 then Demand is Price Inelastic (Demand is not sensitive to price changes) Recall that we always ignore the negative sign when analyzing price elasticity, so PEoD is always positive. In the case of our good, we calculated the price elasticity of demand to be 24005, so our good is price elastic and thus demand is very sensitive to price changes.
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 www.guardian.co.uk/business/feedarticle/7875749 On Europe Falling oil demand puts OPEC in a bind: John Kemp * Reuters * , Wednesday October 15 2008 -- John Kemp is a Reuters columnist. The opinions expressed are his own -- By John Kemp LONDON, Oct 15 (Reuters) - For the last two years, analysts have argued about how far oil demand would respond to the rise in prices. But in the past few weeks evidence of a sharp decline in demand has become incontrovertible, resulting in big cuts in forecast oil demand, and posing a sharp dilemma for OPEC about how to respond when ministers meet on Nov 18. The International Energy Agency (IEA) has been steadily dropping its demand forecasts for more than a year, as surging prices have forced conservation measures and substitution for cheaper fuels, while a slowing economy, especially in the United States, bites further into demand. The IEA still believes crude consumption will be higher than in the same period last year (+400,000 bpd) -- but it would be the slowest rate of growth in more than five years, and the forecast increase relies on continued growth in China (+500,000 bpd) and the Middle East (+400,000 bpd) to offset projected declines in North America (-900,000 bpd). It is not clear how well emerging market demand will hold up if the advanced economies tip into recession. OPEC therefore faces an awkward choice over how to respond. It is under pressure to allow prices to settle at lower levels as its own contribution to stabilising financial markets in consumer countries and averting a deep and prolonged worldwide recession. Unless it begins to rein in supply now, the market could emerge from the winter heating season with higher stocks than normal, requiring even larger cuts in Feb 2009 or a vertiginous drop in prices reminiscent of 1998. The difficulty is judging how much to cut supply to avoid a massive stock-build, while at the same time allowing prices to fall to buy back some of the demand that has been lost. Despite its reputation as a profligate energy user, the United States achieved a real and lasting reduction in crude oil use following the oil shocks of the 1970s and early 1980s. Oil was substituted by natural gas for power generation, while much-maligned motor manufacturers achieved significant and durable improvements in engine technology. Per capita consumption was cut almost a third, from 34 bbls in 1976 to 23 bbls in 2008. Consumption per $1000 of GDP (2000 prices) fell two-thirds from 16 barrels to 06 Some of the decline is more apparent than real. "Contained" petroleum consumption has fallen by less than the raw figures suggest, and natural gas consumption has risen sharply. Manufacturing activity has shifted overseas to emerging markets such as China, and the attendant crude consumption moved with it. Nevertheless, the oil shocks were followed by a significant structural decline in oil demand that has never been fully reversed. Some of those gains were dissipated in recent years by the trend to larger cars, longer commutes from distant exurbs, and larger homes. But auto makers used the improvements to build bigger and more powerful cars. Average weight increased +28 percent while horsepower doubled. Meanwhile, the average floor area of newly built homes, and hence the space to be heated, has risen a fifth in just nine years. Efficiency gains ground to a halt in the 10 years between 1993 and 2003. But as crude oil prices surged from around$30 per bbl in 2003 to a peak of \$147 earlier this year, renewed pressure for conservation has been intense. Households have largely abandoned the market for sport-utility vehicles in favour of smaller and more fuel-efficient cars. Even where they continue to use the same vehicle, there is evidence they are driving less. It is the first year-on-year decline since the government began compiling the data in this form in 1983. Pressure for increased fuel efficiency is replicated across other modes of transport. Union Pacific railroad has cut its reported diesel consumption per ton-mile 8 percent. There are widespread reports of logistics systems reconfigured to produce shorter (less costly) supply chains and emphasise increased inventory holdings and fewer but fuller batch deliveries to minimise the number of miles travelled per unit sold. Airlines have slashed domestic schedules to run fewer but fuller planes and cut jet-fuel consumption. Even in the power sector, the remaining molecules in the power stack have been almost phased out. Generators are on course to cut consumption by -49 million bbls by the end of the year -- equivalent to a massive five days' worth of US crude oil imports. Petroleum demand was therefore falling sharply even before the credit crunch became a crisis. But following the onset of the credit crunch, consumption appears to have collapsed. During the four weeks ending Oct 3, product consumption was almost -8 percent lower than in the same period last year. The US economy looks set to slow further in the next six months as the credit crisis spreads from the financial side of the economy to the real one. Oil consumption is almost certain to soften further unless there is a very harsh winter. In the run up to the ministerial meeting, OPEC's task is to remove enough surplus barrels from the market to avoid a destabilising inventory overhang when the winter is over, while not encouraging a renewed spike in prices that would intensify the recession in consumer countries. But in stabilising inventories and prices, ministers will also have to estimate how much demand is being lost as a result of long-term factors linked to the escalation in prices, and how much is being lost from a short-term cyclical downturn. Cyclical effects should eventually reverse, but demand destroyed by structural shifts may be much harder to recapture. Finance Intern Summer 2009 purpose the leaders in finance tomorrow (lift) is an... lift finance project in addition to your finance assignment, the finance senior leadership...