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Thread: If you're the gambling type ...

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    Banned Melonie's Avatar
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    Default If you're the gambling type ...

    All indications are that the current record high prices for crude oil are an anomaly based both on middle east fears and on leveraged positions of market speculators. If you have a few hundred 'Las Vegas' dollars you'd like to gamble on a high risk very high return investment, you might consider short selling oil company stocks, or buying put options on oil company stocks (for those a bit less inclined to take high risks)

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    Veteran Member DJ_WuLf's Avatar
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    Default Re:If you're the gambling type ...

    Demand for Oil in China is skyrocketing and in the near future the USA will no longer be the major crude consumer in the world therefore having MUCH Less control on prices. I seriously doubt we see Oil under $40 a barrel EVER again. You know that $40/barrel oil = $3/gallon gas when its un-subsidize.

    A much better bet is to invest in those companies building alternate fuel vehicles because when the general public realizes that its going to cost half your annual income to HEAT your home and the other half to fuel your SUV.......theres gonna be sum changes.
    14 years working in Strip Clubs. "What a long strange trip it's been"

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    Default Re:If you're the gambling type ...

    A much better bet is to invest in those companies building alternate fuel vehicles because when the general public realizes that its going to cost half your annual income to HEAT your home and the other half to fuel your SUV.......theres gonna be sum changes.
    I agree with you in theory, but with the sole exception of Fuel Cells, every other alternate fuel technology i.e. electric hybrid, hydrogen, natural gas, is ultimately tied to the price of oil. Natural gas prices will always track oil, and unless America embarks on a huge nuclear power plant construction binge the price of electricity required to charge hybrids or to separate hydrogen will be tied to oil and gas as well.

    Unfortunately, much of the research into Fuel Cells is being done as a small segment of a much larger company (like United Technologies), such that buying the stock of the larger company amounts to a small bet on Fuel Cell success but a large bet on whatever other businesses the larger company is into (in UT's case, defense contracts, HVAC equipment ...).

    The handful of small independent companies involved in fuel cell development are risky bets at the moment. One day a couple of companies will emerge victoriously (modern day Intel ) but dozens of others will fall by the wayside ( remember Zilog, Intel's early microprocessor competitor ? no ?) . Check the charts on a typical independent fuel cell company at - typical opening hype, followed by a reality attack.

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    Featured Member GnBeret's Avatar
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    Default Re:If you're the gambling type ...

    If you're going to gamble on the price of oil, do it in the commodities market, not with the majors' stock - the correlation between % change in the price of crude and the price of their stock is not all that high, as there's much else that goes into the stock price.
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    Default Re: If you're the gambling type ...

    Quote Originally Posted by GnBeret
    If you're going to gamble on the price of oil, do it in the commodities market, not with the majors' stock - the correlation between % change in the price of crude and the price of their stock is not all that high, as there's much else that goes into the stock price.
    Obviously I agree with you. However, establishing a commodities trading account is much more difficult than a stockbroker account. Also, the risks involved in trading commodity futures can be significantly higher than trading stocks or stock options (i.e. if you don't watch the futures like a hawk, it's possible to not only lose 100% of your original investment but wind up owing lots of additional money as well !). Therefore I have hesitated in raising the subject of the commodities market on a stripper website.

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    Featured Member GnBeret's Avatar
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    Default Re: If you're the gambling type ...

    Fair enough. Isn't the kind of thing you'd want to get into without having a thorough understanding of the risks involved - and as you've pointed out, can lose much more much faster than in stock market.
    "That's your answer Old Man? I guess you're a Hard Case too...."
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    God/dess montythegeek's Avatar
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    Default Re: If you're the gambling type ...

    If one tries this be careful with the oil company you pick. Some companies are deep in reserves amd cam move with crude. Others are more marketers and move with refined product prices.

    They do not move in lock step. For example in July West Texas intermediate crude prices went up 10%, and because of falling gasoline prices, refined products as summarized by the producer price index for refined products FELL.

    Many of the majors are balanced between production and distribution such that their fortunes do not turn out that much different at $50/bbl or $30.

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    Default Re: If you're the gambling type ...

    this oil price "bubble" continues to expand ...



    I'm still of the belief that oil prices cannot remain at this level indefinitely, which will lead to a decline in the price of oil company stocks.

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    Featured Member GnBeret's Avatar
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    Default Re: If you're the gambling type ...

    Quote Originally Posted by montythegeek
    If one tries this be careful with the oil company you pick. Some companies are deep in reserves amd cam move with crude. Others are more marketers and move with refined product prices.

    They do not move in lock step. For example in July West Texas intermediate crude prices went up 10%, and because of falling gasoline prices, refined products as summarized by the producer price index for refined products FELL.

    Many of the majors are balanced between production and distribution such that their fortunes do not turn out that much different at $50/bbl or $30.
    Exactly. Moreover, everybody BUT the majors generally runs on enormous revolving lines of credit, which require them to mortgage all assets of the company against the loan and, more importantly for instant purposes, contain extensive "hedge" provisions - which means that anywhere from 20%-80% of company's production is hedged at a set price number, and banks are beneficiaries of prices exceeding same, such that high prices have little to no effect on company's income.
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    Default Re: If you're the gambling type ...

    Well .... I hate to say I TOLD YA SO ...but ....

    This Just IN: India is consuming more and more Oil just like China. Seems the economic growth in India (due in large part to outsourcing of American jobs to India) is "fueling" a demand for Oil that exceedes production and continues to grow while Indian production continues to decline.

    This is the same situation we had in China 5-7 years ago when Taiwan was nationalized and all that production/technology went mainland which was the FIRST Outsourcing of american/european Jobs that created the current HUGE Demand for Oil in China.

    I re-state my position that we will NEVER See Oil under $40/barrel again. I predict $65 peak before it settles back to $45. Watch and see.

    Something alot of us forget is that we still have HUGE reserves of Crude right here in the US. I own the mineral rights on 640 acres of Wyoming land that CAN Produce 1000 barrels a day with hydro-thermal (steam) injection yet ALL the wells on this land sit IDLE. They tell me it takes a price of $80/barrel to make hydro-thermal pumping efficient. Weird thing tho .... Marvin Davis pays me to lease my rights every year. Ya gotta wonder what HE knows that the rest of us don't? Oh well ...someday we WILL run out of dead dinosaurs and my grandkids can collect the royalties.
    14 years working in Strip Clubs. "What a long strange trip it's been"

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    Featured Member GnBeret's Avatar
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    Default Re: If you're the gambling type ...

    Quote Originally Posted by DJ_WuLf
    I re-state my position that we will NEVER See Oil under $40/barrel again. I predict $65 peak before it settles back to $45. Watch and see.

    Something alot of us forget is that we still have HUGE reserves of Crude right here in the US. I own the mineral rights on 640 acres of Wyoming land that CAN Produce 1000 barrels a day with hydro-thermal (steam) injection yet ALL the wells on this land sit IDLE. They tell me it takes a price of $80/barrel to make hydro-thermal pumping efficient. Weird thing tho .... Marvin Davis pays me to lease my rights every year. Ya gotta wonder what HE knows that the rest of us don't? Oh well ...someday we WILL run out of dead dinosaurs and my grandkids can collect the royalties.
    Disagree. New floor's probably $30 - $32, but it'll be awhile yet before you'll see it down there again - probably at least year, and possibly as long as 3 years. Somewhere in that time frame either Mid-East will calm down enough to lessen speculative fears or drilling will catch up with demand again and enough new supply will come on-line to rein the speculation in. In the meantime, may jump up as high as $80 or so - not because there's any basis in fact for such a ridiculously high price, but because of way commodities market works when it gets out of whack for awhile.

    As for "HUGE" reserves of crude" in U.S., I don't know what you consider "huge" or where you got your information, but that's just not the case... in fact, not even close. There are 3 known "elephants" in the U.S.: the East Texas Field, Prudhoe Bay, and the Gulf of Mexico. The East Texas Field is long past its prime, with most wells down below 1000 barrel/day rate; Prudhoe's about 3/4 depleted; and GOM, while still prolifically producing, is only doing so from Deepwater finds, where costs are unbelievably high.

    FYI, 1000 barrels/day is nothing. We consume about 20 million barrels/day, and while we do have proven reserves of about 20 billion barrels, we can only produce at a rate of about 8 million barrels/day and the lifting cost is relatively high. And even IF ANWR is drilled and proves to be the "elephant" some claim it will be, best case estimates are about 11 billion barrels - with a VERY high lifting cost.

    So, in the end, IF ANWR's drilled and is everything claimed, we have about 1500 days worth of crude, IF we could produce it at 20 million barrels/day - which we can't.

    What we have is a fair amount of natural gas... but between the incredibly short-sighted "drain America first" policy we pursued for so long and acting as the major supplier for most of free world throughout 1930's - 1940's (the East Texas Field WAS the fuel source for the Allies in WWI), we've largely exhausted our reserves... and what's left is either difficult to produce, expensive to lift, or being produced through the several hundred thousand stripper wells we're still operating that produce less than 10 barrels/day.
    "That's your answer Old Man? I guess you're a Hard Case too...."
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    Veteran Member DJ_WuLf's Avatar
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    Default Re: If you're the gambling type ...

    I agree that "Elephants" are rare in the US but we do have alot of "Jackrabbits" that I believe YOU are ignoring Mr. Green Jeans. Those who READ too much and SEE too little are subject to the beliefs of those who do the writing but the REALITY is ...there are thousands of small dormant fields (not included in your 20 billion number) in the US where 1000 barrels/day could be produced by Bob Barker "If the price was right". (reasonably long term too). I also agree that "MY" measley 1000/day is a drop in the bucket ....but remember ...thats 640 acres of Jackrabbit Wyoming. There are 1000's of those small "jackrabbit fields" out there where it IS expensive to lift the oil but at what price of Crude is it COST EFFECTIVE to lift that oil?. Im going to trust Marvin Davis (you do know who Marvin Davis is ...right?) over YOU on this issue but hey ....we're all in the same boat ...semper fi and all.

    As for the long term price of Crude ...regardless of its source .... Do you see demand in China or India decreasing? Do you see overall production increasing? Where in the law of supply and demand do you see a CAUSE for this price drop back to $30?
    14 years working in Strip Clubs. "What a long strange trip it's been"

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    Senior Member commando's Avatar
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    Default Re: If you're the gambling type ...

    HEY! If you want to bet on the price of oil, trade futures E-Minis! you can trade futures contracts on almost anything! The price of oil, the presidential elections, finding osama Bin Laden, hurricanes, whatever! And yes, it's even easier than setting up an online brokerage account! go to http://www.intrade.com it's lot's of fun!

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    Featured Member GnBeret's Avatar
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    Default Re: If you're the gambling type ...

    If the price is right there are undoubtedly several large fields in 5000' of water and 30,000'+ down, too...

    Where to start...

    OK, first, assuming these fields you're describing are already drilled, you don't just turn wells on and off like a light switch. Workovers, frac jobs, re-perforating and replacing tubing, switching to CO2 or waterflood injection.... all of these things cost much money, and the price not only has to get pretty damn high, but show every sign of remaining there for quite some time before it's worth undertaking the risk of investing the monies necessary to get many, if not most of the fields you're describing on-line at the increased rates of production required to make it economically justifiable.

    Second, the single biggest driving factor behind the surge in the price of crude right now is the uncertainty in the Mid-East. While there are other factors, such as the rising demand in the Far East and the mess Chavez has made of things in Venezuela, there's no real "shortage" of production that would justify even the current price, much less higher prices. But, brokers being brokers, refiners being refiners, and Iraq being the f***** up mess that it is has led to pure panic buying for insurance purposes... 'cause if we have an extra cold winter and Iraq REALLY goes to hell, this is as cheap as you'll have been able to buy it.

    Third, there's the Saudis... suffice it to say that things will only be allowed to go so far for so long before they'll ratchet up production by a million or two barrels/day and drive price back down a bit.

    Finally, over the 2-3 year haul, there are a couple of pretty good finds coming on-line (mostly offshore West Africa) that will help, the way things have been going in Venezuela, Chavez' days are numbered, and Pemex is already in the process of trying to crank things up a bit.

    GB

    PS - Not only do I READ, I trade O&G properties of the sort you're describing... a business based on INFORMATION, much of which is acquired on the ground, not out of books. Beyond that, I've litigated quite a few blowouts, mineral rights disputes, platform fights, and royalty entitlement disputes along the way, so I have a damn good idea of what I'm talking about when it comes to reservoir engineering and lifting costs.

    And as long as we're here, it's "Beret," not "Jeans," "Semper Fi" is the Corps, and SF is Army, NOT the Corps... but hey, I understand - kind of thing you have to BE THERE AND SEE to remember, not just READ about, right?
    "That's your answer Old Man? I guess you're a Hard Case too...."
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    -Cowboy Junkies

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    Veteran Member DJ_WuLf's Avatar
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    Default Re: If you're the gambling type ...

    You CAP a well but the rigging usually stays put and it requires very little to "enable" the well again. You did know that ...right? Most of these dormant wells are what is called Heavy Crude (as opposed to lite crude) and require heating of some sort to pump. The energy costs of that heating is what makes production expensive. When Nat. Gas costs lag well behind Crude price as the situation should be NOW ..... it can become cost effective to pump that heavy crude. Shallow Heavy crude is MUCH easier to "Lift" than deep sea or otherwise deep lite crude. This you learn as a geologist and wildcater. It doesnt surprise me that lawyers and commodities traders don't understand this stuff.

    I Disagree on the compelling factor driving oil prices UP ... I say its the geometric increase in ACTUAL DEMAND due mainly to the FACT that crude shipments to China have increased 10 times from thier year 2000 volume. OPEC production is NOT DOWN despite the uncertainties over Iraq. As you state ...Saudi Arabia could fill any void in oil shipments that Iraq might potentially lose. Also remember that MUCH of Iraqs production has been nationalized and is unreported now. I do wonder what Halliburton is doing with that oil tho?

    I understand from a traders POV you want prices to flucuate but wishing doesn't make it so. The reality is that we are dealing with a dwindling supply of a resource that is currently experiencing a geometric increase in demand. It's just like OLD Money. You develop a lifestyle that (due to inflation) becomes geometricly more expensive while income increases artihmaticaly. If you choose to SPEND MORE to maintain that lifestyle you can do it ...For a while but the real result is you go BROKE Faster. Typical trader mistake tho.

    I assume you're a lawyer so when you say you have litigated thses cases you mean you Talked about them in a courtroom right? Read about the pertinent information in your office right? I Admit that someone in that confined position has no alternative to being subject to the INFORMATION provided to him ..... The smart money knows that the real BANK is guessing what it is that they didn't tell us. Your Information is available to anyone who expends the effort to read it. As Paul Harvey says ...I wanna know the REST of the story.

    Mr Green Jeans was the logical intelligent one. I thought it was a compliment Captain. Now beam me up cause I gotta go babysit 65 naked PMSing women.
    14 years working in Strip Clubs. "What a long strange trip it's been"

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    Featured Member GnBeret's Avatar
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    Default Re: If you're the gambling type ...

    Quote Originally Posted by DJ_WuLf
    You CAP a well but the rigging usually stays put and it requires very little to "enable" the well again. You did know that ...right?
    Really??? Clueless. Absolutely clueless. Let me know when you get around to actually working in an oilfield... maybe then we can have an intelligent conversation.
    "That's your answer Old Man? I guess you're a Hard Case too...."
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    -Cowboy Junkies

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    God/dess montythegeek's Avatar
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    Default Re: If you're the gambling type ...

    Want a really simple, straight-forward look at energy?

    Go to this page and do a little analysis.
    http://www.eia.doe.gov/emeu/mer/inter.html

    Take world oil production 11.1b last column
    Subtract OECD consumption 11.2 (the only countries where physical consumption is half-way accurately measured)
    You get a number which is usage in nonOECD plus what everyone in the world is doing with inventories (May about 24 million bbls/day). Except for weather effects which can distort demand the pure consumption part of this is something that grows about 2-3 % per year. What is being transacted has grow about 25% in 18 months. This number cycles +/- 15% from this extreme. The fundamental is in the range of 21million bpd, not 24.

    Bottom line--it is a speculative bubble (hedging gone wild) exacerbated by short-term phenomenon like the Yukos, Gulf of Mexico, and Persian Gulf. This sucker is gonna break and oil prices will be under $25/bbl within 2 years. May be $60 first, but it is gonna be under $25.

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    Featured Member GnBeret's Avatar
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    Default Re: If you're the gambling type ...

    Agree with everything except your anticipated "floor price," and that's only because the Saudis have held the line in the twenties for so long that they're due - and we know it - so they'll once again play the role of the "swing" producer and rein it in when need be to artificially set the new floor no lower than $30. Fair's fair - they've played ball with us for long time to keep in $20's, and value of dollars they've been receiving has been shrinking whole time.
    "That's your answer Old Man? I guess you're a Hard Case too...."
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    -Cowboy Junkies

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    God/dess montythegeek's Avatar
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    Default Re: If you're the gambling type ...

    GB.

    I was not setting a floor. If I was it would be closer to $16/bbl which is what it was in 1999 ($13) adjusted for the purchasing power of the Euro. I just said $25 as the middle of the OPEC band.
    And if anyone takes this as an indication to sell big oil do not. Compare the Exxon stock price in 1999 to what it was in 1984. It was several times higher in 1999.

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    Featured Member GnBeret's Avatar
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    Default Re: If you're the gambling type ...

    mtg - Pure economic vs. socio-political economic perspective? Is that how the differences would be characterized? In any event, the only difference I can see in our views is that I think the Saudis have been given a "green light" to do whatever they/OPEC can manage to do to set a new "floor" price at or about $30, and either you don't or you think the realities of the market will exceed their capabilities to actually manage to do so.
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    Veteran Member DJ_WuLf's Avatar
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    Default Re: If you're the gambling type ...

    Well I survived dormotory syndrome..... Now: WHAT FANTASY WORLD ARE YOU GUYS LIVING IN?

    To think that the Saudi's or any OPEC member nation needs a "Green Light" from US is hilarious. Isn't Bin-laden a Saudi Prince? I Guess closed minds just can't get the fact that WE (the US Govt and Oil companies) are no longer the controlling force by consumption in the Oil based world. We may still be the richest nation but the rest of the world knows it's FAKE WEALTH with most of that being inflated stock prices. Value your stock at BOOK and see what you're really worth. Sorry guys but "WE" just don't have that kind of power anymore.

    The ONLY thing that will bring prices down is the possibility of mass concervation efforts or alternative energy sources being cost effective at a certain level of Oil price. That price used to be $20/barrel. NOW That price is mich higher because there are several new HUGE consumers in town. Do you guys not believe that the Chinese and Indians are challanging "US" for Arab produced Oil? Wake up and smell the Mobil 1 (synthetic motor oil ...what a concept)
    Last edited by DJ_WuLf; 10-25-2004 at 07:23 AM.
    14 years working in Strip Clubs. "What a long strange trip it's been"

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    Featured Member GnBeret's Avatar
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    Default Re: If you're the gambling type ...

    Quote Originally Posted by DJ_WuLf
    Well I survived dormotory syndrome..... Now: WHAT FANTASY WORLD ARE YOU GUYS LIVING IN?

    To think that the Saudi's or any OPEC member nation needs a "Green Light" from US is hilarious. Isn't Bin-laden a Saudi Prince? I Guess closed minds just can't get the fact that WE (the US Govt and Oil companies) are no longer the controlling force by consumption in the Oil based world. We may still be the richest nation but the rest of the world knows it's FAKE WEALTH with most of that being inflated stock prices. Value your stock at BOOK and see what you're really worth. Sorry guys but "WE" just don't have that kind of power anymore.

    The ONLY thing that will bring prices down is the possibility of mass concervation efforts or alternative energy sources being cost effective at a certain level of Oil price. That price used to be $20/barrel. NOW That price is mich higher because there are several new HUGE consumers in town. Do you guys not believe that the Chinese and Indians are challanging "US" for Arab produced Oil? Wake up and smell the Mobil 1 (synthetic motor oil ...what a concept)
    Do you really think the only thing that OPEC in general, and the Saudis in particular set their production levels on the basis of "pure" market conditions, and nothing else? That the price of crude, the base fuel for the entire economy of the Western World is a function of nothing more than the intersection of x and y on a graph? That with 2/3's of the Petrodollars sunk in our economy for safe-keeping and Trillions worth of Carrier Battle Groups, etc. built since the 1980's we don't have bottom-line say-so, much less "meaningful input" when it comes to production levels and pricing structures? Now whose living in a fantasyland? Do you really think, for all our faults and mistakes, we're THAT cavalier when it comes to the base driver of our entire existence? WAKE UP AND SMELL THE CRUDE WE JUST WENT TO WAR OVER!!!

    The Saudis do not just sit over there with their hand on a valve going "tra-la-la," think I'll do X with it this week - they're very aware of what recession does to their ammassed wealth, as well as their income stream, and have always well understood the bottom line premise of our "deal" with them: "We'll be more than fair - we'll make you wealthy beyond your wildest dreams..... but make no mistake about it - that's OUR OIL."
    "That's your answer Old Man? I guess you're a Hard Case too...."
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    Veteran Member DJ_WuLf's Avatar
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    Default Re: If you're the gambling type ...

    This just in: OPEC asks the US to release OUR strategic oil reserves to bring market prices down. Hmmm , I wonder why THEY can't handle it themselves? Could it be because ALL thier production is going somewhere else? Hell WE can't even get the salt mines full again( The Strategic reserves).

    Newsflash: Oil prices receede slightly BECAUSE China says it will RESTRAIN it's economic growth? WTF. Oh and because The US DOE magically found 4 million barrels of oil. (whooopee)

    As for our "DEAL" With the Saudis .... I think it probably included a promise that they wouldnt let thier Kids fly airplanes into our tall buildings ...and we all see how well that one worked out. And ...If we have so much control ...why did we HAVE to go to war for Oil? And shouldn't we at least TRY to win such a noble war? I Guess a draw is about as good as our military can get nowdays anyway. Too many billion dollars carrier groups maybe? I bet the "resistence" in Iraq is telling thier suicide bombers not to Blow till they see the whites of our eyes. I think the last war WE Won was won on that same theory. Those Brittish guys had fancy ass boats and cool uniforms but WE beat em by hiding behind trees and dressing like racoons and deer.

    Honestly I think we're more Jaded and stuck in the past then cavalier about Oil outside our own territories. I think Washington and Houston (read that as Halliburton +) still see the Arabs as a bunch of goat herders who got lost in the desert. Poor guys sure got typecast because of one story in an old book.

    China and India are the 2 most populous countries in the world. They WANT OUR OIL. I say the Herders are gonna sell it to them. Capitalisim, they learned it from US and we're sending them the CASH to buy ....OUR OIL from the Arabs. We shot ourselves in the foot ...again.

    Possession is 9/10 of the law. I just got a report from the social security admistration that said I had ALOT of money in my account. Is it MINE? Yes. Can I HAVE IT? Ummm NO because I gave up possession. I trusted the Govt. to babysit that money for me. They TOOK it because they needed it to fulfill another need. Maybe I can HAVE it later IF they don't run out first. See the analogy here? The Arabs OWE us some oil. They might TRY to pay us that oil BUT ...they might run OUT first.

    THATS Why I say invest in alternative energy sources and use the same retirement plan as Howard Stern's Cab Driver.
    14 years working in Strip Clubs. "What a long strange trip it's been"

  24. #24
    Banned Melonie's Avatar
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    Default Re: If you're the gambling type ...

    Whatever the behind the scenes conspiracy theories, oil has in fact dropped below $50 per barrel again, and I earned enough on my 'put' contracts to cover Christmas !

  25. #25
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    Default Re: If you're the gambling type ...

    Sooooo what did ya get me? I got a present for you but I need you to help wrap it. Anyway ....... Congrats on the investment. I hope you realize that short term I agree we are not yet finished with price swings so day trading in Oil stocks may pay off several times before Christmas.

    In New York you're gonna NEED it to pay your heating bill this winter. As a proponent of alternative energy I have to offer to come chop some wood for you ....and help with the friction heat as we enjoy the roaring fire. Ohhhhh .... don't forget that warm fuzzy feeling afterward and then theres the snuggling. All in the name of conservation of course.
    You're too late ! I've already cut and split 14 face cords of firewood for the coming winter ! How else do you think I get my upper body development workouts in ?
    Last edited by Melonie; 11-06-2004 at 05:08 AM.
    14 years working in Strip Clubs. "What a long strange trip it's been"

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