Skip to comments.Why $120 oil is good
Posted on 05/08/2008 9:35:15 PM PDT by kellynla
NEW YORK (CNNMoney.com) -- With $120 oil not seeming to follow the fundamental law of supply and demand many are wondering if the market is broken.
The Federal Reserve has been cutting interest rates, saving Wall Street but sinking the dollar and driving up food and fuel prices. Investors, also called "speculators" by some, have been pouring money into commodities of all sorts, artificially driving prices higher in an attempt to squeak out healthy profits in the face of falling stock values.
But to many, all the financial voodoo is merely a distraction. The fundamental reality of oil - and the thing that makes it so attractive to investors in the first place - is that we are using ever more and finding ever less. High prices are necessary if we are to reduce demand, find new oil, and develop alternative technologies.
"The market is starting to send a signal: You got to get your alternative in line," said Robert Kaufmann, director of Boston University's Center for Energy and Environmental Studies. "Societies that ignore this kind of signal do so at their own peril."
Kaufmann isn't promoting the so-called "peak oil" theory - he doesn't think the world is quickly running out of oil.
(Excerpt) Read more at money.cnn.com ...
This from people who ride limos and the subway to work.
With the dollar falling, I bet alot of the change in oil price is due to that rather than demand. Of course, demand is a factor, but throw in the dollar debasement and you get to 120 pretty fast.
The high prices are merely an artifact of our artificially-depressed dollar.
The Fed should be setting the interbank rate at closer to 5% rather than 2% - it’s widely recognized that this rate should be almost identical to the annual rate of growth of the economy, the GDP.
Of course, if we can import more cheap Chinese plastic junk toys and move them around and mark them up multiple times, we can make our GDP boom!!
The GDP gives such a false sense of prosperity when we get into imports.
Don’t forget butanol!
Everyone always says "it is different this time". It isn't different.
Real estate wasn't different in its 2001 to 2006 bubble. Tech stocks weren't different in their 1996 to 2001 bubble. Junk bonds weren't different in their 1986 to 1991 bubble. Etc. Etc. Etc.
Commodities are the latest, that is all. Oil is in a bubble, grains are in a bubble, gold was in a bubble and has already begun correcting. Brazil is also a bubble. China was a bubble and is already correcting.
People who know nothing of finance outside of the one market they are looking at throw a straw, think the world has changed when the bubble gales roll through their favorite asset. The world hasn't changed. Only the speculative plaything of the week.
1) Open all federal lands with oil and natural gas potential for exploration.
2) A Manhattan Project to build new nuclear power plants like nuanced, environmentally conscious France has done.
3) Stop using grain for ethanol production for fuel.
4) Use nuclear power generated for desalination to solve water shortages.
5) Continue to explore and develop alternative energy and fuels, but with the idea that these are long term, not short term priorities.
It's government who is manipulating the market, to achieve an objective which, if put up for a vote, would see them losing 100-0. We are sheeple.
Hello, kellynla, attack dog.
This is tennteacher signing off. You are a jerk of the first order.
No more posting. No more contributions. Enjoy.
Admittedly, at this stage of my life, a sector fund is rather risky. That said, however, I have no intention of switching to a balanced fund or an asset-allocation fund--or some other "safe" investment--just now. Oil will probably go much higher before it plateaus--especially if Israel should take out Iran's suspected nuclear facilities, as I expect to happen before 2008 belongs entirely to history.
I want one of those French cars someone invented that runs on compressed air. It is @4300 psi and you can fill the tank in 2 hours with a compressor that comes with the car. Runs like a regular car with 130 mile range. $7000 is the price tag. For 22,000 you can get one with a gas engine also. The engine refills the compressed air tanks....giving you 100 mpg.
My sediments as well, i.e. one doesn't need to read any further after the first sentence.
If we just had a Republican candidate with a pair who could say to the unions, “Back me, and I’ll push for oil drilling jobs in Alaska and North Dakota....”
Aren’t you cute.
drilling for more oil only delays the inevitable reckoning. Say ANWR has oil beyond the wildest geological expectations. It just puts more oil on the market to be bid up by China and India, and in ten years or whatever, we’re right back where we are now. Where’s the next big technology that gets us off oil altogether? I see news about little projects here and there, but no big breakthrough. We need another Manhattan Project, and I don’t see it happening. The Democrats want to tax the oil companies. The Republicans, when they talk about it at all, want to drill more wells and build more refineries. That’s great, but that alone won’t fix our long term energy problem.
I hate to be a pessimist, but I see nothing happening that will change things. The Energy crisis will be ‘solved’ when thw worldwide economy crashes due to stratospheric oil prices, and the price comes down because nobody can afford to buy it any more.
Unfortunately the government can step in and introduce external forces, like subsidies, which make for very expensive boondoggles, like ethanol from corn.
I really think that were the oil companies to be freed up from the government shackles, AND were the government to stop using tax penalties and breaks to influence what the energy companies do, we would have had alternate sources of energy decades ago.
To the nimrod author -- we can't develop resources when we know where they are but the frickin gubmint won't let us drill there.
Just as I bailed out of the tech market when some guy was telling me what IPO to buy as we sat in the hot tub at my friend’s condo, the fact that someone on FR is writing about their energy based mutual fund—and how it will go higher until it plateaus—is a an indication of froth at the top.
Really, I mean no offense to you personally. I am glad that you have done well. But the pole on oil is pretty high, and nothing goes up like that forever. You might get to $130, but by the end of summer, I bet we are back under $100.
Sure, you might be right. Sure, the ME could explode tomorrow. But my guess is that the price has gone up so fast over the past couple of weeks—without the corresponding fall in the dollar—that the bubble is about to take a hit. If the dollar were that bad, gold would not have fallen 20% from its high (or around 20%)
Just about the only Kennedy thing I keep in my head, is Joe Kennedy talking about getting stock tips from his shoe shine boy. When that happened, he bailed out of the market and turned to bootlegging. Not a bad story to remember.
Satire or nonsense?
I quote, you decide. That's almost as good as Yogi Berra's restaurant comment: "Nobody goes there anymore, it's too crowded. By the way, if you really hated being a pessimist, you wouldn't be one.
Harley hikes his leg on your rare Japanese maples!!!
And runs away!!!(boogity~boogity~boogity!)...;0)(snicker)...
6). Build oil refineries on shut down military bases
I think greed is ok if there is sunlight. Getting the sun in with the arabs is a pipe dream, and china and south america and the snakes in congress.
Uh, hello? Democrats in the house and senate?
Yep. Why read further?
Top of the mornin’, Marine!
Looks like somebody out there doesn’t like me.
As you can see, I lost a whole lotta sleep over it. LOL
Woke up this a.m. listening to “coast to coast”
Seems there’s a company out there with a gadget that improves gas mileage.
check this out
Have a good one!
The author makes a false statement. Proved Reserves continue to grow at an average faster rate than increasing demands.
In 1980 those estimates said we had 27 years left.
In 1990 those estimates said we had 41 years left.
In 2000 those estimates said we had 36 years left.
In 2005 those estimates said we had 41 years left.
In 2007 those estimates said we had 43 years left.
On average, the petroleum industry meets the rising demand and still adds more to the proved reserves.
But oil in the ground isn't the same as oil flowing from wells. The World's Margin of Supply is tight. This prevents producers from taking advantage of high prices and putting more oil (immediately) on the market. Nearly all of the excess production capacity is held by OPEC, as they are the only ones willing to hold back oil production to raise global prices. And their margin is near a historic low, although Saudi Arabia is completing some expansions projects that will raise it. Recent reports from them state they do not plan to do more (in the near future) once those are completed.
In the near future, Non-OPEC supply is forecast to rise by 0.6 million bbl/d in 2008.
A suggestion for you. Read the Posting Guidelines of FreeRepublic including:
Don’t jump threads - If you get involved in an argument in one thread, it’s considered poor manners to restart the previous argument in the middle of an unrelated thread
Re: Manhattan style Project...I agree, and I’ve made several posts to that effect.
Still, it makes no sense to kill off our economy, or being held hostage, whilst sitting on relief, albeit temporary.
Unfortunately, refineries are not very productive without being close to crude oil supply pipelines or refined product delivery pipelines.
It is not from a lack of land that new refineries are not being built.
Thanks again for the info.
I’m just wondering how much higher fuel prices have to go before the American public tells their congressmen, “Enough is enough with the polar bears; start drilling and start drilling more NOW!”
This is all so silly, here we are, with all the oil and coal reserves and nuclear power technology to be totally energy independent;
and we’re letting a small percentage of “tree huggers” run our economy & way of life in the ground!
John McCain are you listening?
I was sure we would have reached that point last year. It is a lot easier for me to understand the oil industry than understand how people in mass will react to it.
I like Free Republic, most days at least.
It is a better place when people play nice.
IMHO, there will be a “tipping point” or threshold price which will precipitate an unacceptable level of domestic violence.
unfortunately there are some people out there who are miserable and they aren’t satisfied unless & until they bring others down to their level of misery. As the old saying goes “misery loves company” holds true. LOL
Have a good one
They speculate that oil will reach $200 a barrel by the end of this year
nope, it’s not the government, at least not the US govt — it could be OPEC related, but I doubt it, it’s just market forces, pure and simple, no conspiracy theory
When the bubble bursts, and your 401K is valued at 25% of its original value, please don't whine and ask for a gubbmint handout.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.