Posted on 09/16/2007 6:52:09 PM PDT by shrinkermd
So what are people missing?
I have never seen the gap between reality and the perception of reality as big as it is right now. The perception of what I call Chindia, the idea that demand growth globally is robust and is going to be led by the emerging-market economies of China and India, is still strong. It is a great idea. But when you look at the data, you will see it doesn't match, and when you talk about peak oil and see what is happening to non-OPEC supply, there is a problem because supply growth this year is going to be one of the largest in almost 30 years, and next year looks like it is going to be similar to this year. [Also], Guys like me care about the totality of non-OPEC supply growth, even biofuels, or non-oil fuel, which are a subset of the non-OPEC supply curve. Biofuel supplies, which include soybeans for diesel fuel and corn for ethanol, will be up this year roughly 350,000 a day versus last year.
I don't think people are aware that demand has really fallen off so much. The rate of global oil-demand growth has really slowed pretty dramatically since '04. I've had to make a large downward revision for the second quarter, and it looks like I am going to have to make another one for the third quarter. A chart of the OECD [Organization for Economic Cooperation and Development] countries shows demand growth has been negative, with the exception of a small gain in the second quarter; that's the first time since 2005 that there's been some growth in demand, and it was modest. That's the worst showing since the '80-'82 recession.
(Excerpt) Read more at online.barrons.com ...
As to the pundit: "...we naturally turned for the inside scoop to Mike Rothman, head of integrated oil research of the ISI Group, an economic research and investment-strategy firm based in Manhattan. A regular at OPEC meetings since 1986, a top-ranked energy analyst and a consultant to governments, Rothman is nothing if not in the know. Before joining ISI in 2005, Rothman was the former chief energy strategist at Merrill Lynch, where he worked for 20 years. It has been his contrarian contention the past few years that the dynamics surrounding the spike in oil prices have been out of whack with certain fundamental industry truths, and a day of reckoning is at hand. Here's his case for $45 oil and why investors should be underweight the energy sector..."
He also pointed out hedge funds have been net long in crude since October '03. If they decide to go short or sell the market could collapse. Oil OTC derivatives have never been higher and did not exist in last oil spikes.
He also expressed concern about
bump
To say that the “rate of growth of consumption has slowed” is vastly different from saying that the rate of consumption has slowed.
I don’t hear anyone saying the latter, and until they do, oil prices are not going to drop.
I’ll say it again, not while GWB is in office. When he announced that he wants to buy 250,000 barrels of oil for the next thirty years and day and pour it into the dirt, that was the end of even $55 oil.
let’s try that again
I’ll say it again, not while GWB is in office. When he announced that he wants to buy 250,000 barrels of oil a day for the next thirty years and pour it into the dirt, that was the end of even $55 oil.
If there is a significant drop the price of oil (>/50%), this would be a lagging indicator, meaning the economy would be in recession.
Huh? Maybe we should convince the citizens of the US that it is the RATS who are preventing us from drilling for, and refining our own oil.
Hedge funds are why oil is 70+ a barrel.. and the only reason it is... its a $35-$45 a bbl commodity based on fundamentals.. everything over that is contract churning by these guys ... Greed Tax is it.
Well, you did say it again!
Seriously, what happened to all of the wailing and gnashing of teeth that occurred when oil hit $ 40.00/bbl about the poor third world countries not being able to survive with oil that high?
All I hear at $ 80/bbl are crickets chirping.
Yippeee! I will live long enough to again fill my tank with premium gasoline price at 25 CENTS PER GALLON just like 40 years ago?
I'm not betting on it!
Yes, he stressed this in the interview. I am allowed only 300 words from the lengthy interview; therefore, I have chosen what seems to be the summary paragraphs.
He also left OTC derivatives as the big unknown since they did not exist when oil last surged.
There is nothing magical about this. Global demand is going up at a greater rate than global supply...so, oil prices will continue to rise.
Well just call me cynical.
"The market" in a perfect world could be relied on for that, but we don't live in a perfect world. Unfortunately someone located all the Go-Juice underneath the feet of a race of fanatics. I guess they figure it was Allah's Will.
But whoever's will it was, it is a challenge to us to figure out new ways to maintain our standard of living while denying them the political and economic power the Black Goo confers.
We might save a lot of cash by simply committing genocide in the Middle East, but that's a bit problematic....we are Christians, right? Or at least most of us.
So that option's mostly out. In the meantime, we should foment a technical revolution that makes their stuff irrelevant.
And live happily ever after. Behind a 500 foot tall wall running along the Southern edge of Europe, and from Matamoros to Chula Vista.
So when they buy, it makes the price go up. Why doesn't it go back down when they sell?
Simple...
Oil is an inelastic good.. if you have enough access to capital you can buy up all futures contracts and drive the price up... since the good is inelastic sooner or later someone will buy the good from you, because its not an optional good. When they do, they have no choice but to purchase it at the price the people holding the futures contracts decide to sell for.
Its flat out fraud and manipulation, only this time they are doing it with an inelastic good. So long as capital is loose, they can keep the pyramid going... when credit crunches... the funds collapse and the price falls.
“He also left OTC derivatives as the big unknown since they did not exist when oil last surged.”
True. there are a few other things, like Bush’s oil buys and dipping dollar exchange rates, but the new phenomenon is massive investing by funds in commodities. That is a new phenomenon, that kind of investing had not been a major factor in prices before.
Essentially, a lot of billionaires are parked their money in commodities - will this be a temporary phnomenon? Don’t know. IIRC a few Repub congressmen offered an idea to up the margins on oil trades to 15 %, but that died. I would like to see it proposed but there is no way Bush the oil man would sign off on that, or so I think now. The only “solution” Bush can offer to our “addiciton to oil” is to give more money to corn farmers.
The Democrats have been quiet on gasoline prices because they are now the party of the financial firms and hedge funds. Well, they have a “solution” - but it helps those same benefactors - carbon credit trading.
Buy up all the contracts? How many are there?
since the good is inelastic sooner or later someone will buy the good from you,
A futures contract is an inelastic good?
When they do, they have no choice but to purchase it at the price the people holding the futures contracts decide to sell for.
So if a refinery wants to buy some oil, they have to buy it from a guy who owns a futures contract?
Oil industry 'sleepwalking into crisis'
Former Shell chairman says that diminishing resources could push price of crude to $150 a barrel
By David Strahan and Andrew Murray-Watson Published: 16 September 2007
Lord Oxburgh, the former chairman of Shell, has issued a stark warning that the price of oil could hit $150 per barrel, with oil production peaking within the next 20 years.
“Lord Oxburgh, the former chairman of Shell, has issued a stark warning that the price of oil could hit $150 per barrel, with oil production peaking within the next 20 years.”
Uh, didn’t Nixon also make dire predictions back in the early 1970’s?
At some point it might be true... but everytime someone has made dire predictions about oil in the past century, someone else found more oil (or a better alternative to oil).
100+ years ago, whale oil provided a great amount of the world’s lighting. At that point, one could’ve made the prediction that the world would soon go dark as the number of whales declined.
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