Word: oiling
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...July 11, when the price of crude oil peaked at $147.27 per bbl., SemGroup, a major oil distributor based in Tulsa, Okla., was only a week or so away from a potential $5 billion payoff. Instead, the company imploded. And soon afterward, so did the price of oil, dropping some 60% in the subsequent months, to a recent price below...
Clearly, demand for oil didn't fall that much, but the price of oil isn't set by demand alone. It's the product of an extremely volatile mixture of speculation, oil production, weather, government policies, the global economy, the number of miles the average American is driving in any given week and so on. But the daily price is actually set - or discovered, in economic parlance - on the futures exchange. In late June and early July, speculators in oil futures battled one another, suspecting that a top was near. In the ensuing weeks, oil would come crashing down...
SemGroup was short oil. Massively. That is, it had bet that the price was going down by contracting to sell millions of barrels of oil it did not own at a future date, on the assumption that the price would fall and SemGroup could supply the barrels at a lower price and pocket the difference. Three days after oil peaked, as it still threatened new all-time highs, the New York Mercantile Exchange (NYMEX) called margin on SemGroup, forcing the firm to put up more cash collateral to back its losing positions. Unable to raise the capital, SemGroup sold...
...brainchild of the Bush administration, it should not be thrown out with the bathwater. The Russians, meanwhile, need to be called out on their ridiculous gambit. Medvedev cannot realistically be prepared to attack Europe, with Russia’s recent economic slide and much of its revenue coming from oil sales to the very countries it now claims it will threaten. Obama will have many chances to improve on the Bush administration’s record in his willingness to use diplomacy instead of resorting to force. His interactions with Russia, however, will have to be characterized by firmness...
...that produce wind and solar energy and energy conservation products like fiberglass insulation. According to Hendricks, there are companies ready to build wind farms in the Midwest and solar farms in the Southwest if they can be guaranteed that there will be a market for their products even if oil prices drop. • Construction of a new "smart" electric grid to deliver the power generated by wind, solar and geothermal plants in rural areas to the major population centers. This would be a down payment on the $400 billion over 10 years that Al Gore has estimated the new grid...