Woodward Says What?
Again we get another interesting tidbit of information from James Hamilton. This one deals with the claim by Woodward that the Saudis are behind the current price drop in oil (and hence gasoline) and that they did it for the sole reason to help out President Bush. I already pointed out that this type of story didn’t really work for 2004. And now Prof. Hamilton shows that it doesn’t work now either because — Are you ready? — Saudi oil production has been falling. So, if the argument is that the Saudis have been pumping oil like crazy to drop the price, uhhh how come the Saudis are cutting production?
Of course, this doesn’t stop the conspiracy theorists. The story is that the Saudis didn’t cut production fast enough. That is, by cutting production slowly the Saudis, in effect, put more oil on the market forcing the price down. But as Hamilton notes, if a bigger cut in production is necessary to keep the price from falling, then doesn’t this demonstrate that the drop in price is due to something other than what the Saudis are doing?
Now some might be going, “Huh?” at that last one, so let me explain. If a larger production cut would have been necessary to keep the price from falling, that implies that demand has decreased by more than the Saudis’ production indicates. That means that the price decrease is due to that decrease in demand.
Oh well, I’m sure this conspiracy will mutate yet again and in a few days it will be something else.
I notice your chart doesn’t go back before the 2004 elections…I wonder why?
Gee Matt because in the linked post I point out that price didn’t drop.
Come on Steve its simple supply and demand. When the supply drops, the demand drops, which makes the price drops. What a minute, that’s not right.
When the the supply drops, the demand increase, which makes the price drop. No that’s not right either.
When the supply drops, the prices rise. Well that is generally true, but not what we are seeing now.
Wow, Rove is so powerful he can repeal economic laws at will, just using his mind bullets. Is this a Grand ol’ party or what.
It’s not about supply & demand, it’s about people’s willingness to believe crap. The next time the price of oil goes up, take notes on how long it takes for an increase to show up at your pumps. I bet it’ll happen a whole lot quicker than it would take for the oil bought on day x to be processed, refined, and shipped to the actual pumps on day x+y. In the intervening time, people are pumping gas bought at the lower price, but paying the “new & improved” price. But when oil drops, there’s always a lag time between that & the decrease hitting the pumps… that’s another nice little gouge.
It’s not supply & demand, it’s human nature & greed…
Legion,
You get an F in economics.
Steve,
I’m not talking about economics. At least not basic, micro-level S&D stuff. I’m talking about manipulating the system in a larger sense; I guess that’s more macro-econ stuff. Basic theory says a drop in the cost of supply or the amount of the supply _can_ lead to a drop in the cost of the product or demand for it. But there are other factors that influence the actual consumer price besides S&D, and that it’s a lot more complicated than just tracking what the Saudis did when to say whether or not it had a real impact on consumers.
Reasonable, but not necessarily the whole story…
Shhh. For Steve’s benefit, we all need to pretend that we don’t know that the Saudis are the world’s only current swing producer of oil.
I agree with Steve’s conclusion in this case, but his dismissive argument is bullshit. The Saudis in fact could have (and have) manipulated prices of oil.
So is this going to be the new conspiracy, they could have done it. Nevermind that the concensus seems to be that the Saudis have reached peak production for the near term at least.
Legion,
The reason why the price goes up at the pump almost immediately is that there is (relatively) less gasoline then there was initially. Hence existing stocks become more valuable. Same goes in the opposite direction.
As for human nature & greed vs. supply and demand, what precisely do you think is behind supply and demand if not human nature and greed?
The Saudis could have, and they may be the only oil producer with the ability to tweak their output that much (I don’t actually know, but I’ll accept it for this discussion), but they’re not the only entity able to manipulate the pump price that much.
If (for the purposes if this discussion) the Saudis wanted to affect gas prices, the gas refiners could either increase that effect or delay the increases at the pumps until after the elections, as they saw fit. Again, I don’t have any evidence any of this actually happened; I’m oly pointing out that the Saudis aren’t the only potential agents here.
You want conspiracy theory, start wondering about what’s really in those energy council-oil company meeting minutes Cheney won’t let out to the public. Muahahahaha….
You are assuming what you are trying to demonstrate. Boring logic types like to call this circular reasoning. Besides, in 2004, the price decline for the elections was non-existent. In fact, prices were rising all through September heading into the 2004 election.
I know, I know…there I go looking at the data again and not pondering woulda, coulda, and shoulda.
And the ONE thing we call all agree on is that it would be IMPOSSIBLE for the Saudis to fake the numbers one way or the other. That’s just ludicrous to think. It would imply a level of deception that is just impossible. The Saudis are just too moral a people to get involved in American politics. Lunches at the Ranch with the Bush Clan; cruising the Bahamas with the girls (Gin and Juice); investing billions in Bush controlled companies…no problem. But they would never cross the line to voter manipulation.
Weren’t some of the hijackers from Saudi?
Enjoy.
“If a larger price cut would have been necessary to keep the price from falling, that implies that demand has decreased by more than the Saudis’ production indicates. That means that the price decrease is due to that decrease in demand.”
I am losing what little mind I have……
Is it possible that the the above should read
“If a larger production cut would have been necessary to keep the price from falling,…..
Legion, you are in trouble. You guessed it. Rove controls the world, and his secret police are comming after you. Do not go outside or communicate with anyone, lest they find you sooner.
Actually, one of the main reasons that the price of oil has decreased is that Wall Street has stopped speculating in it.
Why is it, that 60-70 dollars a barrel for oil, increase gas from around 2.20 to 3 dollars.
Anyone care to comment on the recent NYT article by Heather Timmons which described how Goldman Sachs dumped $6 billion in gasoline futures on the market this summer, starting at virtually the same time that former Goldman Sachs CEO Henry Paulson became Secretary of the Treasury?
Or is that too conspiratorial for you guys?
Wow, I linked here from Wonkette… but boy I’m going to stay for the rampant idiocy in the comments.
The price of oil is dropping like POTUS’s approval because of three (well, two if you want to split hairs lump Wall Street) reasons: the two (Goldman Sachs & nixed oil speculating) mentioned above and that the mix in your behemoth of steel that passes for a family vehicle changed to a dirtier, winter blend of oil.
Saudi production has dropped not because of the all powerful Darth Rove, but because Ghawar hit peak production about a month and a half ago. It ain’t that the handholder-in-chief’s buddy Abdullah is doing a favor, it’s that there’s no there there.
Good God, we are back to Goldman Sachs being behind this?
But Steve, don’t you know the Jews are behind _everything_?
[:-), for the humor-impaired]
And it’s not circular reasoning if you look closely. I state the Saudis may be the only _oil producer_ able to manipulate pump prices, but they’re not the only _entity_ that can. Hamilton’s article takes apart Woodward’s statement that the Saudis were responsible for gas price drops, and I’m agreeing, albeit for a different reason – That the Saudis are hardly the only ones capable of causing a price drop.
Here in Idaho, while the rest of the country’s gas prices dropped to sub-$2.50 at the end of the summer, ours stayed up around $2.90-$3. The only reason is that there’s only one or two sources for getting gas into the state. After a while, “dropping gas price” stories started to hit the national news, and Idahoans started saying “what dropping gas prices?”. The State AG started making investigatory noises, and “magically”, the price of gas has fallen literally $.50 per gallon in the last 3 weeks. No Saudi intervention required…
Okay, so now the new variant is that it is going to be the refiners. Nevermind things like seasonality…that the price for gasoline tends to drop from summer highs practically every single fall (barring some other factor). Further, that factors such as demand also play into it as well. If the economy is slowing or people expect it too slow they might cut back on various expenditures where they can. Given all the posts about how the economy is probably going to slow…you’ll simply ignore this.
They are also still very high here in California as well. When a region doesn’t drop like the rest of the country isn’t very surprising given the various local/state rules/regulations on gasoline.
Post hoc ergo propter hoc.