Posted on 10/25/2009 11:09:08 AM PDT by blam
World Recovery Is In The Hands Of OPEC
Andrew Butter
October 25, 2009
In a recent interview posted here, Professor Nouriel Roubini said:
I worry that oil is going to go up above $100 for reasons that have nothing to do with the fundamentals of supply and demand. Oil at $100 would have the same negative effects on the global economy as oil did at $145 last year.
Last year, when oil was at $145, the global economy was still growing. Right now it has collapsed, and is recovering. Oil pushing above $100 would have nasty, negative real trade effects and real disposable-income effects on all importing countries: U.S., Europe, Japan, China, India; all the countries that were hit by the oil shock last year. So that’s an element that is in my view totally speculative, and dangerous to the global economy.
I agree with every word of that.
Except that the danger to the world economy is much more than those mild words suggest. Roubini has made warnings before, he is accused of being a broken clock that is right twice a day and he is lampooned as “Dr. Doom”.
[snip]
We are still being sold out.
We could bankrupt OPEC if we just drilled our own friggin oil that is on our own land. Cheap oil in the right hands can power strong economies. That is if our communist and socialist leaders are sent packing.
Oil above $60 will put the brakes on the recovery.
BTTT
We should dissolve OPEC, AND the EPA, and drill our own. We have so much, we could be exporting and could use it as leverage for peace in the world instead of our young men and women.
The United States of America has enough energy within its own geoconstitutional boundary to allow its legitimate taxpaying citizens (about 240 million) to live in paradise. Nuclear, coal, oil, wind, solar, geothermal, thermodynamic efficiency, it is there!
It is the leftist (feudal) world conspiracy that does NOT want that to happen.
That is why "they" hate Sarah Palin (and love Barack Obama).
How obvious is it?
Johnny Suntrade
Not sold out, sold in
in to slavery.
Which is why we should be building nuclear plants instead of betting the farm on so-called “green” technologies that haven’t proven to be viable yet.
Wind, solar, hydropower, geothermal, biomass, and wood, all the 'renewable energy' sources combined account for only 6%, and almost none of it as a motor fuel.
The price of oil is not controlled by treaty with anyone, but by refinery bid and production contracts.
We haven't stopped drilling here since 1998/9, and then only in some areas. As soon as the price went back up, drilling resumed.
Look at states where drilling is going on and you will see healthy economies, low unemployment, and growth. Higher oil prices will spur that activity, and all the spinoff shipping, steel, manufacturing, and associated service industries with it.
The oil industry also uses a tremedous number of vehicles and construction equipment, all of which mean jobs somewhere.
Considering the industry is one of the most conservative I have ever encountered, this is a good sector to have employed, and despite the last couple of decades of crap about "Big" Oil, and "Evil" Oil, isn't out to destroy the American economy nor sell anyone to the Saudis. The industry exists to provide a product at a profit, and has done so as best it can.
Now, people howl about the profits of Exxon/Mobil during the price runup, but the fact that remains hidden is that the ROI E/M got would have shut down most mainstreet businesses (10%), and it only works because of the huge volume of sales. A significant protion of that profit is reinvested to find the next fields before current reserves are depleted.
Coca-Cola made twice the ROI in the same year (almost 20%), and no one griped about that.
The other conveniently ignored fact is that the government collected three dollars for every dollar of profit E/M made, too.
We are being sold out, but that is happening in Washington D.C., not Houston, Dallas, or even Dubai.
First, there is no recovery, get that straight. There is only money printing that is temporarily holding up a failing system. The price of oil will be determined by how low the dollar goes. How low the dollar goes will be determined by the policies of the Bernanke and the Bamster. They show absolutely no inclination to change the policies that are quickly making the dollar into toilet paper money. The only thing that will save the dollar and stop oil from reaching $200-300 per barrel is a complete reversal of the current policies. Cut government spending by 50 percent, eliminate the corporate income tax, the cap gains tax and the dividend tax. Roll back useless regulation, which is most of it. Adopt a sound dollar policy. Break up the too big to fails. Eliminate the too sick to saves.
This would lead to a spike in the dollar, a crash in oil and a deflationary depression in the US, which is far preferrable to the inflationary depression we are headed for.
Expensive energy equals extended recession.
While that might be nice, I do not see it. Keep in mind that the Popular Science covers of my youth promised things like flying cars, and nuclear energy was supposed to be so cheap the power compaines would give it away.
Well, there are a few flying cars out there, but they are far from cheap or common, (and the way people drive, who would want them to be!)
For now, though, we are here. Oil is not just a fuel, but a tremendous chemical feedstock for everything from paints, pharmaceuticals, fertilizer (although natural gas is more commonly used), and plastics, as well.
The thing that shut down oil shale, aside from the environmentalists worried that we might have enough oil, is that at $35/bbl, the extraction of shale oil becomes far less economical. It was done in the '80s, and low prices caused the facillity at Parachute, Colorado to be closed. It was hoped new technologies would make extraction more economical, but political maneuvering added tremendous cost and cut large areas from leasing.
Note that the Bakken is not an oil shale, but the reservoirs being exploited are in the middle member of the formation and are either carbonate or mixed clastic and carbonate reservoirs charged by the oil generated in the shale(s) which are the source rock for the oil.
Closure of Continental shelf areas, the revokation of drilling leases in Utah and other parts of the American West, the continued battle over the most barren part of ANWR, and other official hostility toward producing our own oil, coupled with price corrections from the high of 147/bbl to a more sustainable 80/bbl (driven as much by inflation in the commodity market--an indicator or dwindling currency value) have caused activity in domestic oil drilling to resurge to some 60% of pre-correction levels, from a low of 40% just after the price drop.
I don't think oil will be replaced any time soon, either as a motor fuel, lubricant, or for most of its other myriad uses unless there is a significant technological breakthrough.
Even if that happened tomorrow, the implementation of that technology would mandate changes in infrastructure and would take time to get into the marketplace and be accepted, some couple of decades, especially in a questionable economy and with a political future which is uncertain.
Environmentalists do not care about the price, they just want to stop drilling and oil production, even when it is done right (and in many areas, it is environmentally low-impact).
The real fallacy of stopping drilling in the US for environmental reasons is that it will just happen in other areas where the environment is of less concern than the revenue generated, so it is NIMBY at best.
Here, at least, the oil companies generally don't make a mess, and then not on purpose (too expensive to clean up).
Oil will continue to go up in dollar terms ,, it’s been rising on VERY WEAK DEMAND and HUGE STOCKPILES for months, the problem is the USD .. China posted big growth numbers (even if fake or gov’t inflated it still helps them/hurts us) and Germany , the motor of the EU/Euro is cutting taxes drastically ,, the world is going PRO-Growth while we raise taxes and beg for others to loan us money.. This is not a short term trend.
Good for you Joe...I agree. We ought to burn DC to the ground.
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