Skip to comments.Lehman Bros. Report: Oil Bust in the Cards
Posted on 05/11/2008 4:38:50 PM PDT by TennTuxedo
Is $120 oil even real? Not if you ask the Saudis, or even Lehman Bros. The investment banks oil expert said this week that the oil boom is due to bust. Economic growth across the globe will slow just as new refineries kick in, raising supply.
(Excerpt) Read more at moneynews.newsmax.com ...
Not true. Most of the Bakken is wide open for development. It is also a fairly expensive place with very long horizontal deviations and massive hydraulic fracturing required.
The Bakken will produce a lot of oil, but it isn’t close to being a new Texas ... and the US needs about three new Texas sized increments of production [at the peak in Texas production] to get close to independence. Don’t hold your breath.
Hard to predict price, but the price you have suggested would probably require a massive depression. If you are not predicting a depression, where is the new oil going to come from?
How can it be tied up in court when so many of these oil rigs are being leased on private property? Some of these people were millionaires on their first royalty check.
You're right! He predicted before them all. What's he saying now?
On the upside and the downside.
Because inventories are adequate to meet demand. In fact, this very fact belies the notion that this is a speculation-driven “bubble.”
When the Iranians cut us off in the late 70s price increases were driven to a considerable extent by hoarding. That’s not the case this time. The price spriral is strictly a function of supply and demand, the former being driven by India and China.
People are in for a shock when the increases of the past few days start showing up at the gas pump. This is why I’m leery of McWeird’s proposed gas tax “holiday.” It’s not going to have any political mileage when you consider that the federal tax on gas becomes rather inconsequential when the cost per gallon tops $5.
Fact is, most everyone I know will greatly curtail or cancel summer trips when that 5-dollar barrier is crossed, which seems inevitable given the upward pressure on the cost/bbl.
Who knows? You don’t always get to drill where there’s oil.
My guess is that Brazil is a sure thing. I’ve read production will commence 2010.
The real answers are to go nuclear (on this, and perhaps only this, the French are right,) and to open ANWR and the central Gulf of Mexico by giving explorers maximum tax incentives.
As to the enviros’ objections: hit ‘em with SLAPP and RICO suits rooted in national security considerations. Toss any who defies the suit in jail—the price for their obstructionism and outright treason.
At less than 3.50 a gallon the little home brew E100 Machine has popped up. www.efuel100.com
Wait till gas hits ten a gallon! There will be dozens of US Entrepreneurs fielding alternatives.
You're right, I don't thing supply is the answer. But I think looking at prices just two years ago we were in the high $60's/bbl, so it's not unrealistic to think that we could correct that much two years from today.
And I don't necessarily think a "massive depression" would be the root cause. (maybe a 4 to 6 quarter recession would contribute)
Reverse Engineering Crude Oil Prices:
Let's chalk $25 of the $125 price to the futures traders being futures traders.
So now we're down to $100, $25 can reasonably be attributed to the weak dollar (inflation). The dollar is in uncharted terrority. Most commodities, including precious metals, have all gone insane in the last two years partly because of this.
Now we're at $75, and that 4 or 6 quarter recession that is coming will give the U.S. economy a sniffling sneezing coughing aching stuffyhead fever which will, of course, cause the rest of the world to need to be rushed to the E.R., thus driving down crude oil demand worldwide AND causing our dollar to make strong gains vs. those weakening currencies, which is bearish for commodities.
I know this is overly simplistic, but I just don't think it's as far-fetched as you and others might think.
Wouldn't surprise me. We've cut our driving by at least 15 percent. Multiply that several million times.
This is how it is usually presented, but believe it or not, I saw one analyst, or perhaps reporter, stating the opposite. They said the dollar is falling because of the rise in oil prices, LOL.
Funny that the dollar showed a small bounce in the last few weeks, while oil kept on going up. Helped by silly Goldman prognostications, no doubt.
I’m in DUG. For those interested, DUG is not a direct short on oil per se. It is an ETF that tracks 2X the inverse of the Dow Jones US Oil and Gas Index. Includes Exon, Chevron, as well as some DJUSEN swaps.
$50-$60 for oil feels too aggressive for me. I’m looking for a correction that will bring it back inline with the trend up, but am not willing to bet on a fundamental shift in the trend. The recent rise has been too steep (parabolic, quantum, exponential, whatever) and is mere speculative bubble garbage. It is the greater fool principle, in action.
I’m hoping for it to gap higher in the morning, as I’ve only accumulated about half of what I’d like to be holding. It could rise all this week (especially since too many people are looking for the crash at this point).
I can be patient.
I don’t think we’ll get $200 oil this summer like some have said. The Euro seems to be weakening slightly against the dollar after six years of dominance. And the Fed signaled that they would not lower interest rates immediately after the last cut because inflation is looming.
That is what I was wondering. It was a keyword or something and than it dissapeared. Hell, during the last Democratic debate both Hillary and Obama said nothing about Bakken. I want to know about the Oil that could’ve guaranteed us energy independence also.
It’s simply a matter of time before oil goes back to a dollar a barrel.
I can’t wait. Along with the magnetic fuel filter and the turbo velocity inducer I’ve already added to my car, I’m sure there’ll be many more to boost my mileage .... just kidding! I’m hoping we’ll see some significant advances.
Thanks, RWA ... the "quantum leap" thing is one of my pet peeves.
But I see FReepers on here everyday saying our only way out is to buy Oil company stocks. Just sit back and watch the profits roll in!
Everything but the True Cause.