Skip to comments.Supply gap could mean oil hits $200 a barrel
Posted on 08/08/2008 12:00:23 AM PDT by GregoryFul
State error led banks to ignore the lessons of history and overdose on too-cheap money, writes Ambrose Evans-Pritchard
Three years ago, the world's top watchdog warned that the global economy was veering out of control. Defending orthodoxy against the easy debt policies of the Greenspan era,
America had embarked on an unprecedented experiment. The US savings rate had fallen to near zero for the first time since the Slump. The current account deficit had reached levels that were incompatible with the dollar's role as the anchor of the global system.
The rising powers of Asia were preventing adjustment by holding down their currencies, and flooding the world with cheap credit in the process. Incipient bubbles were ubiquitous. "Most industrial countries are showing symptoms of over-heating in the housing market," it said. # More on the financial crisis # More by Ambrose Evans-Pritchard
New-fangled securities were allowing banks to take "highly leveraged positions". It was unclear how these untested inventions would "handle a string of credit blow-ups".
"One simply cannot ignore the number of indicators that are now simultaneously exhibiting marked deviations," concluded the BIS. That was in June 2004.
Regrettably, governments did exactly that. They ignored manifest risks. Real interest rates were held near or below zero in the US and a large arc of Europe until well into 2006.
By then, the damage was done. US housing had succumbed to full-fledged mania. Variants were emerging - later in the cycle - across the Anglo-Saxon world, the Baltic, Club Med, and Eastern Europe. advertisement
What occurred was a fatal cocktail, a mix of too much and too little government intervention at the same time. Bureaucrats (central banks) held down the price of credit: other bureaucrats (regulators) turned a blind eye
(Excerpt) Read more at telegraph.co.uk ...
I stopped reading after the appearance by Ambrose Evans-Prtichard.
He does mess with one’s mind.
What a backwards rag the telegraph is. Everyone else is saying oil will probably be $100/brl by Christmas or sooner.
Won’t we be lucky!
I believe that the dollar price of oil is going to go up as the Telegraph says.
Not because the supply margin is going to decrease - your President has made it clear that America is becoming serious about its supply - but because the dollar is going to go down sharply in value when Fannie Mae expires later this year.
Hmmm.... demand is dropping due to conservation & price, supplies go up, therefore price begins to drop from the unprecedented highs. Good for the public, bad for the democrats who really need / want the “evil” U.S. economy to tank. So, low & behold... just a few days after oil begins falling... out comes a report saying (based upon no real facts or evidence) that it’s going up to $200.
Can you say “manipulation”?
Nobody really knows nothing about where the px / barrel of crude or anything else will be.. If you humble yourself to the market it will exault you and if you exault yourself to the market it will humble you.
Yet, recent oil price pullback is very instructive. Note well that last XOM profit report can very easily reverse to a profound loss in the next cycle. It all relates to their cost of product vs retail sales price. All major US Oil firms are MARKETING companies who now mostly buy their oil in COMMODITY Futures markets. Their cost of oil acquired in APR-MAY-JUN-JULY 2008 for future delivery at the pumps might haunt them as demand continues to deminish.
“.. the dollar is going to go down sharply in value when Fannie Mae expires later this year.”
CBO released a letter this morning that analyzes the Administrations July 14th proposal to provide temporary authority to the Secretary of the Treasury to purchase obligations and other securities issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The authority provided under this proposal would expire on December 31, 2009.
September futures show the pound down to 1.90+, the Euro at 1.50+ and the $US at 75+. There has been quite a rally in the dollar this past few weeks, even while Fannie and Freddie were being exposed in the press.
It doesn’t matter what happens, the media can find an “expert” that predicted it.