69

I'm answering from my memory of Reddit comments like blitzkrieg9 and AdmiralAkbar1. Don't hesitate to edit this post to link to them, but I can't remember where exactly I saw them. And I haven't just copied and pasted – I've rewritten out typos. Alternatively, I would like to get paid for receiving a barrel of oil (I can keep it in my back garden) ...


21

This isn't the "oil price" that's going negative; it's the price of WTI Oil Futures contracts for May. WTI Futures contracts mean taking physical delivery in Cushing, Oklahoma (the hub of the US pipeline network). Many, many contracts was signed some time back, for the seller (at a future date, hence futures) to deliver X barrels of oil to Cushing and for ...


12

My understanding of the recent drop in oil price is due to recent changes in US drilling. They are now the worlds largest oil producer. This article by the economist does a good job explaining. My answer (borrowed very heavily from the economist.) Demand is low because of weak economic activity, increased efficiency, and a growing switch away from oil to ...


9

The oil spot price didn't go negative, this was future contract price. Basically the future contract expires at a certain date and they have to take delivery. The futures owners were dumping because the price of storage if they had to take delivery would have been very high, or even impossible. The people buying back the future contracts (at negative ...


8

tl;dr: it's basic engineering: efficiencies improved between 1970 and 2010. Additionally, net USA imports increased from 0.75 trillion cubic feet in 1970 to 3.8 trillion cubic feet in 2007 I think there may be some misunderstandings. Firstly: the first chart shows domestic gas production. "Domestic" doesn't refer to residential-only use - it just means ...


6

It's a holdover from the old Gold Standards. Gold standard regulation required all banks, including the central bank to hold gold as a regulatory asset. In the last gold standard, the Bretton Woods regime, the US in particular had to hold gold to back the dollar. The requirement went away with the collapse of the Bretton Woods agreement in 1973, but the gold ...


6

Usually, when people use non-equidistant axis, it is because they want to emphasize some variation more than others. For example, if most of your data is between 0 and 1, but you have one outlier on 100, then an equidistant axis would make it hard to analyze most the variation, because it emphasizes the wrong parts. In this case you have a log-scale, which ...


5

You have a few options for data. With questions of this nature, Quandl is your friend. See here for historical gold prices, 1833 until present. I've not read about the methodology here though. This resource has the gold/silver price ratio. Annual data. It seems pretty easy to transform this into price of silver. For platinum It also looks like the Perth ...


5

The OPEC scenario is quite well described by a market with Cournot Competition. That is, while collusion would lead the highest total profits to the sum of the participants, each invididual participant would gain by increasing his production a little bit. Without observing the quantity of each participant and proper enforcement, that's the outcome the model ...


5

The Brent price is for oil physically delivered in the UK. The price that went negative if for oil delivered in West Texas, US. The physical and economic conditions at the two places are different - volume available, flexibility of that volume, demand, storage, and so on. This leads to different prices.


4

I guess it is for the same reason that other countries hold foreign reserves. The argument is that for some reason foreign markets become suddenly very adverse to take your currency, you should have some other medium of exchange that allow you to finance imports or serve short term external debt. This is very related to the Guidotti–Greenspan rule.


4

From wikipedia: A commodity currency is a name given to currencies of countries which depend heavily on the export of certain raw materials for income. These countries are typically developing countries, e.g. countries like Burundi, Tanzania, Papua New Guinea; but also include developed countries like Canada and Australia. In a more practical sense, if the ...


4

MANGOES: MARKET STEADY. flats 1 layer [[cargo type]] HT [[Haitii]] Francis [[variety]] 9s [[9 fruits in 1 layer flat]] 11.00 [[price for 9 fruits]] 10s [[10 fruits in 1 layer flat]] 12.00 [[price for 10 fruits]] MX [[Mexico]] Keitt [[Variety]] 7s [[count]] 5.00-6.00 [[price]] few 6.50 [[a few at a different price]] ...etc... 25 lb cartons [[cargo type]] DR [[...


4

The problem in your question is the "and vice versa". To give a very simplistic view, the problem in the 2008 crisis was not on production side - companies had enough to produce, but no-one to sell to. Given this, excess commodities found no buyers, even as the price lowers. The inverse correlation of stocks and commodities supposes full capital use, which ...


4

A big part of the answer to this question must surely be network effects. Yes, Ford has a lot of engineering talent. But so has GM. This means that Ford has to compete with GM to sell cars, and this competition limits that amount of profit that Ford can make. Ride sharing is a different story altogether. Suppose you write software that completely ...


4

There are two ways to look at the value of a financial instrument. One is the underlying asset base, the other is the yield. Bitcoin has no underlying asset base and no yield. Therefore, its only value is whatever people imagine it to be. In other words, it's completely overvalued. But that does not mean it is on the verge of massive corrections. There is ...


4

I'll draw from John Cochrane's article and working paper, which provide some great points. Bitcoin doesn't provide dividends or an interest rate, there isn't any payment or reward for saving in Bitcoins by itself. Therefore, it has 0 expected value of dividends and should have a price of 0. But it has a positive price in real life. There are two reasons for ...


4

The example you've picked is slightly complicated, because I think there are two possible reasons for the difference in price. Both could contribute at the same time, depending on your view of how wood production works in your example. 1. The labour value invested in growing, harvesting and processing better quality wood (prior to furniture manufacture). ...


4

News say it is because sellers cannot sell it. But, why don't they just hoard it until the coronavirus crisis is off? They can't because their oil storage facilities have a limited capacity. According to this German article from Spiegel Online, there is currently less demand for oil than there is production. Oil wells are pumping oil which they can not sell ...


4

Since nobody is answering this, I will point out that the answer is half there. The cornering attempt directly affected the silver price, but gold went along for the ride. People treated gold/silver as an asset class - “precious metals” - and they traded them on a relative basis (the gold/silver ratio). The rules were changed, and the Hunts were forced to ...


3

I work for Quandl and on our site I can recommend two free historical databases that you may want to check out: The United Nations Industrial Commodities Database, I believe, shows production amounts for various commodities like steel, petroleum, glass etc. in metric tons for different countries: https://www.quandl.com/data/UINC The United Nations Energy ...


3

The benefits of market share in the somewhat-fungible oil market: pricing power (because OPEC is big enough to retain pricing power in the long term because they're a big % of the market. They're just choosing to not use that pricing power right now, perhaps because they're choosing to bankrupt competitors) geopolitical strength Note that there are ...


3

As it has already been explained, it's a logarithmic scale (also called log scale for short). The distance between values doesn't depend on their linear difference, but on their relative difference. The distance between 20 and 40 is the same as the distance between 40 and 80 or the distance between 60 and 120, because 40/20 = 80/40 = 120/60 = 2 or a 100% ...


3

Considering oil as a commodity that does not expire and can be relatively easily stored, I believe the reason for the recent price drop of oil is much more political than what it has to do with economics. Russia is a giant producer of crude oil and its governmental operation fund is tightly related the export tax of oil. By lowering the price of oil, the ...


3

The basic factors in the decline of petroleum prices is the increased production in the US in the North Dakota and Texas shale oil fields as a result of the use of hydraulic fracturing in conjunction with horizontal drilling (up to 2 miles horizontal in a single borehole. Furthermore, the Saudi Petroleum Minister chose not to reduce their output in order to ...


3

I'll go ahead and admit that I do not have any empirical evidence, and this is more of factor to consider when evaluating future movement in the oil market. As oil prices drop, some US oil producers will find continued exploration and production unprofitable. This will serve as a counter balance to the falling prices aa producers choose to reign in supply. ...


3

Most global commodities are quoted (priced) in US dollars. The more valuable a dollar becomes relative to other currencies, all other things equal, the more commodity prices have to fall to equilibrate. Imagine everything was priced in corn and people start to value corn more or the amount of corn falls. Either way, all the prices in terms of corn (e.g. ears ...


3

Major trading exchanges have order books that anyone can see, if they're willing to pay for the service. So in that sense, they are available to the public. For example, anyone can subscribe via a broker to the London Stock Exchange Level 2 data, which shows them the live order books for listed instruments. Very few have "secret" order books. I think you ...


3

So in modern English, a commodity is a raw material for production or basic agricultural good that can be exchanged for money. Labor, by this definition, is neither a raw material, no one grinds humans up to build stuff, I hope; an agricultural good, similar reasoning; nor exchangeable for money, as slavery and indentured servitude is illegal and efficient ...


3

It's highly likely that the coal will be pretty much worthless in 20 years from now. That's because we've got far more fossil fuels than we can burn safely: the negative externalities far exceed the consumer's private benefit. The world is on the edge of rejecting coal forever. Several countries have already done so, and that number is growing steadily.


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