Why $120 oil is good

cnnmoney.com ^ | May 8, 2008 | Steve Hargreaves

[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.

[tennteacher]

Aren’t you cute.

[tennteacher]

JERK!

[balch3]

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.

[MarkL]

"Speculators are often blamed for artificially inflating crude prices, but some experts say high prices are needed to cut demand and develop new resources."

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.

Mark

[webschooner]

and develop new resources."

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.

[Vermont Lt]

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.

[SaxxonWoods]

“...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.”

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.

[1COUNTER-MORTER-68]

Harley hikes his leg on your rare Japanese maples!!!

And runs away!!!(boogity~boogity~boogity!)...;0)(snicker)...

[spokeshave]

6). Build oil refineries on shut down military bases

[machenation]

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.

[LjubivojeRadosavljevic]

Aren’t you cute.

yitbos

[Caipirabob]

"Societies that ignore this kind of signal do so at their own peril."

Uh, hello? Democrats in the house and senate?

We're doomed...

[Loyal Buckeye]

Yep. Why read further?

[never4get]

..Oh com’on everybody, the dems, repubs in the senate/congress, and their families, many of whom own oil stocks and love the increased values and high dividend pay outs, will make sure that the industry they are there to regulate will drill more, will build refineries....Our elected officials and families who are swimming in the stock profits, dividends, will make sure to protect the electorate interests and work with the oil companies to produce and refine more oil so prices can drop.....Yes, I am positive they will do that.

[kellynla]

Ruff!

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
http://www.water4gas.com

Have a good one!

Semper Fi,
Kelly

[thackney]

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.

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.

http://www.eia.doe.gov/pub/international/iealf/crudeoilreserves.xls

http://www.eia.doe.gov/emeu/ipsr/t44.xls

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.

[thackney]

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

http://www.freerepublic.com/help.htm#guidelines

[papasmurf]

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.

[thackney]

Build oil refineries on shut down military bases

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.

[thackney]

Seems there’s a company out there with a gadget snake oil that improves gas mileage takes money from the gullible who believe you can get more energy out of a system than you put in.