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Why Oil Really Fell Today--and Could Keep Falling

Oil slipped below $120 at one point today and now overall is down nearly 20 percent from its July high of near $150. But I don't think the drop had much to do with the usual suspects--a weak consumer spending report, less risk that Tropical Storm Edouard will smack the Gulf Coast--which will surely be mentioned in the financial pages tomorrow.

I think the drop had everything to do with reports this weekend that MIT chemist Daniel Nocera seems to have discovered a cheap--by a factor of 1,000--and easy way to separate hydrogen from water.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Aug 5th, 2008 at 01:27:21 PM EST
A technology that could be "out in the wild" in "about a decade" has pushed spot prices down to $118?

This theory brought to you by a blogger who see the future and it is "heroic capitalism..."

by Metatone (metatone [a|t] gmail (dot) com) on Tue Aug 5th, 2008 at 01:31:01 PM EST
[ Parent ]
A linkto the article in Technology Review.   I don't know if further research is needed to replace the remaining platinum electrode at the hydrogen collection point, but I suspect so.  That is probably why they put in the 10 year figure. His oxygen catalyst is robust and brilliant.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Aug 5th, 2008 at 03:19:08 PM EST
[ Parent ]
Expect prices to fall further as the election gets closer.

Again.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Aug 5th, 2008 at 04:03:19 PM EST
[ Parent ]
Yes, driven down by an entirely different sort of technology.  Amazing but true.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Aug 5th, 2008 at 05:48:27 PM EST
[ Parent ]
There actually is a basis for that in economic theory.

A lower price for a 'backstop technology' (e.g. hydrogen fuel cells to replace oil) to a resource can reduce the 'scarcity rent' incorporated in the current price. However, this only functions through an increase in current supply.

IOW: the futures market would be expecting supply to increase in the near future. I doubt that.

Decreased demand is probably the only reason.

by nanne (zwaerdenmaecker@gmail.com) on Tue Aug 5th, 2008 at 05:27:48 PM EST
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I was referring to the "magic of the markets."  Their efficiency operates on so many levels, including regard for political necessities.  This efficiency was not perfect in 2006, as the cheapest gas prices came in December through the following few months, fortunately at the time I had to move my family and our RV from LA to Arkansas.  It would have been much more efficient had the price reached its minimum on Oct. 1 and been back near a peak by December 1.  But at least it was down substantially by election day.  I think that was what TBG was referring to with his "Again."

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Aug 5th, 2008 at 06:04:17 PM EST
[ Parent ]
Possible, but I guess that would involve considerable loss-taking -- and I'm not completely certain that it will really help McCain. Newt Gringrich's 'American Solutions', McCain, and the Republican party were doing quite a good job using the high oil prices to delude the electorate about manly-man red white and blue drilling.
by nanne (zwaerdenmaecker@gmail.com) on Tue Aug 5th, 2008 at 07:04:09 PM EST
[ Parent ]
I don't know if the Saudis have been willing or able to do anything this time.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Aug 5th, 2008 at 10:38:52 PM EST
[ Parent ]

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