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On Future Oil Prices And The Economic Deterioration Should Crude Follow Gold's Surge

Tyler Durden's picture





 

With the value proposition of sell-side research now completely gone, as most of it has become merely a conduit for shot gun propaganda (is there even one sell on Goldman's most recent conviction list?), third party research shops such as Credit Sights are promptly becoming the only objective and impartial sources of analytical insight.  In its January 3 market commentary Credit Sights shares the first semi-official view of the adverse consequences to the economy should the current liquidity surge from the Fed not be moderated (and with such pundits as Fred "Dynamite" Mishkin telling Bloomberg earlier today that QE3 will not come, it is guaranteed that QE3 is imminent). In a nutshell: "a rising oil price creates economic headwinds via numerous channels
particularly if the increase is sudden. A decline in disposable incomes,
reduced consumer confidence, lower levels of travel, a decline in
demand for gas-guzzling larger autos and an upward bias to inflationary
expectations are all spin off effects on the consumer of a rapid ascent
in the price of oil
." Which is why as liquidity continues looking for paths of least resistance, and finds them in such places as commodities (especially now that China has all but shut down the door to importing US liquidity) it is precisely the risk of a price spike in crude that is rapidly becoming the biggest risk to the "wealth effect" derived from the continued lunacy out of the Fed.

That said, the crude market has long been one in which analysts realize that there is a massive disconnet between fundamentals and reality: if based on actual draw downs, the price of oil would have to be far, far lower. But when is that last time fundamentals mattered in anything. Here is where Credit Sights sees oil going in the next year:

With inventories, according to the US Department of Energy, sitting 4% above the comparable period last year and 8% above the five-year seasonal average, the CreditSights Oil & Gas team considers there to be little in the supply/demand balance that suggest prices will spike and stay at significantly higher levels in 2011. We expect prices to trend higher than in 2010 however, on the back of the more robust demand conditions currently being factored into forecasts. We expect that in 2011 oil prices will trade a $75/bbl-$110/bbl range with increased volatility but think it unlikely that the year-end average 2011 price will be in the triple digits. We note the conservative bias in our forecasts relative to mainstream market commentators given the follow on effect that the oil price has on our expectations for the cash flow and credit metrics of companies in the oil and gas sector.

So with fundamentals irrelevant, what is? Well, the value of the dollar for one. And as QE3 is rolled out the impact on the dollar will be anything but favorable.

Typically, those forecasters that are painting a picture of much higher prices throughout 2011 are not doing it on the back of divergent expectations about the supply/demand fundamentals. The effect of speculative trading and the impact of currency movements, most notably US dollar weakness, are prominent. In 2007, 2008 and 2009, the trade weighted value of the US dollar had a statistically significant inverse correlation with crude oil prices – a marked change from the 2000-2006 period. But in 2010 that correlation has fallen in an environment of greater currency volatility. That makes the impact of the dollar on oil prices in 2011 more difficult to ascertain as the outlook for the US currency is clouded. While the path of least resistance may be for a lower dollar given the Fed's monetary policy stance, the role of the dollar as the world's reserve currency - and hence a store of value that benefits from the flight to quality trade in times of heightened risk - cannot be ignored given the ongoing sovereign debt crisis in Europe. In 2011 we expect significant currency volatility and therefore believe the oil/dollar correlation over the course of the year will once again be relatively low. Nevertheless, the representation of short-term dollar weakness as a factor driving oil prices higher is likely to continue, particularly given comments by producers that differentiate trends in nominal dollar prices from the more subdued rise in "real" prices. Oil prices north of $100/bl are already being justified by producers on the back of the dollar's decline in 2010.

So if Bernanke were to succeed in further destroying the dollar, which is now collateralized by a whole lot of empty houses and taxpayer funded mortgages, the first thing that will be impact is the possibility of actual organic economic growth.

If our forecasts of even modest increases in the oil price are realized then the US consumer will be paying considerably more at the gas pump in the coming year than was the case in early 2010 and that will necessarily have an impact on their hip pocket. Although the impact of higher oil prices on the US consumer – and by default the US economy – is often mentioned, it is rarely quantified. This is partly because it is a somewhat amorphous relationship with far more nuances than can be addressed in a catchy headline. What is often reported is that the US uses approximately 20 million barrels of oil a day, with about 45% of that being used as gasoline for motor vehicles. If you assume that each barrel of oil produces 20 gallons, then the amount of oil consumed for driving in the US is 180 million gallons per day – or 65.7 billion per year.

This generates an impressive annualized number when talking in terms of the price impact for each $1 increase in the price of a barrel of oil and there is no denying that rapid increases in the "gas tax" do have an impact on consumer spending behavior. Few would argue that such a direct translation is accurate however, given the elasticity of gasoline demand and the significant potential for consumers to modify their behavior. Nor are empirical studies of the consumer effect of changing oil prices definitive given changes in the US economy's fuel efficiency, the overall impact of the most recent decade of low inflation and ongoing societal shifts on the back of technological developments. Nuances aside, a rising oil price creates economic headwinds via numerous channels particularly if the increase is sudden. A decline in disposable incomes, reduced consumer confidence, lower levels of travel, a decline in demand for gas-guzzling larger autos and an upward bias to inflationary expectations are all spin off effects on the consumer of a rapid ascent in the price of oil. These are among the impacts to search for should oil move outside of our forecast range early in 2011 and remain at elevated levels.

Bottom line: tax cut extension, meet gas tax. But at least everyone believes they are getting a little richer (on a nominal basis) even if all the real money is going straight into Wall Street's 2011 bonus accrual. Same as it always has.

 

 


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Mon, 01/03/2011 - 10:56 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

The price of oil long ago disconnected from reality and is now sucking, and will continue to suck, on the Fed's helium pipe.

Don't Bogart that helium my friend. Pass it on to me.

Mon, 01/03/2011 - 11:05 | Link to Comment umop episdn
umop episdn's picture

Take a loooong look at the helium suckers (robo, wanger) before you take a hit offa that thing. Just sayin...  :)

Mon, 01/03/2011 - 11:09 | Link to Comment goldmiddelfinger
Mon, 01/03/2011 - 11:25 | Link to Comment bigdumbnugly
bigdumbnugly's picture

http://www.youtube.com/watch?v=CxdmwoP-fIA

and the ever popular... http://www.youtube.com/watch?v=CxdmwoP-fIA

 

bernanke in the basket?  or is it unguided like balloon boy's?

Mon, 01/03/2011 - 11:30 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

This is Bernanke's early experiment in Helium ballooning. Solo sitting in a lawn chair attached to some weather balloons. His college thesis was about dropping money...........

http://www.youtube.com/watch?v=B-rKcqOK5qU&feature=related

Mon, 01/03/2011 - 11:47 | Link to Comment bigdumbnugly
bigdumbnugly's picture

lol, Ben just went by the pseudonym Larry back then.

somehow i think larry came out of this better than ben will tho, what with the soft landing and minimal damage and all.

i hear larry summers tried that stunt himself too but it didn't get off the ground as they say.

 

 

Mon, 01/03/2011 - 12:59 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

If you listen carefully to the first 10 seconds of the video, the voice over says "Our dreamer, let's call him Larry." So it was Bernanke and the program was covering for him. :>)

Mon, 01/03/2011 - 12:00 | Link to Comment duo
duo's picture

You know we passed "peak Helium" a couple of years back.  I wish He was traded on the COMEX.

Mon, 01/03/2011 - 11:38 | Link to Comment malikai
malikai's picture

Funny, I would've figured it for a Nitrous Oxide balloon.

Mon, 01/03/2011 - 14:30 | Link to Comment Hook Line and S...
Hook Line and Sphincter's picture

Learn your gasses. These balloons are obviously filled with flatulence.

Mon, 01/03/2011 - 12:20 | Link to Comment High Plains Drifter
High Plains Drifter's picture

There ain't no damn way I am taking a ride in that contraption.

Mon, 01/03/2011 - 12:46 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

You have no choice if you live in the modern world.

Mon, 01/03/2011 - 10:57 | Link to Comment JW n FL
JW n FL's picture

And the Band Played on... in spite of the ship sinking...

 

http://www.youtube.com/watch?v=-qRDg9WS7fk

Mon, 01/03/2011 - 11:00 | Link to Comment Tic tock
Tic tock's picture

Plus the higher i%, more insolvency

Mon, 01/03/2011 - 11:03 | Link to Comment 101 years and c...
101 years and counting's picture

Isn't that the plan?  Print money to jack up oil prices, fund the taxpayer with lower PR tax in 2011 to placate them, and transfer all that $120 Billion out of Social Security and straight into the Wall St bonus pool???

 

 

Mon, 01/03/2011 - 11:59 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

$100 oil?  Don't panic!  Our central planners have been planning ahead.  That is why taxpayers bailed out GM and Chrysler with...

...loans to ramp up and produce the fuel efficient cars Americans want ...
http://seekingalpha.com/article/105660-reasons-to-bail-out-gm

You can select from a wide range of these "fuel efficient" Camaros, Yukons, Corvettes, Cadillacs, and Heavy Duty 4x4 trucks at your local GMC dealer. 

http://static.guim.co.uk/sys-images/Business/Pix/pictures/2008/02/13/generalmotors1.jpg

Yukon...with best in class 403 horsepower for 2011...

http://www.gmc.com/yukon/denali/index.jsp

...and 14 MPG, Bitchez!!!!

Mon, 01/03/2011 - 12:17 | Link to Comment FrankIvy
FrankIvy's picture

I love it when the idiots tell me I drive a coffin.  They drive 75, distracted, in a POS SUV getting 14 MPG.  I drive 60 in a Honda getting 40 MPG.  We'll see how they handle 5 dollar gasoline.  I imagine they'll be calling for govt. action.

Mon, 01/03/2011 - 15:24 | Link to Comment trav7777
trav7777's picture

you're only at a disadvantage in a collision with another car.  Trucks tend to fare rather more poorly than expected if they hit an obstacle, and they also roll over frequently

Mon, 01/03/2011 - 16:20 | Link to Comment tmosley
tmosley's picture

Having a high center of gravity can be a real bitch, though it is a trade off for the superior view.

As a lanky guy with jujitsu experience, I can tell you that collisions aren't fun, especially when it is between your face and the mat.

Mon, 01/03/2011 - 17:55 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

face and the mat.

Irony is funny.

*LOL*


Mon, 01/03/2011 - 19:05 | Link to Comment Confuchius
Confuchius's picture

Frank;

There are some of us who remember buying a VW in the 50's & 60's which guzzled 35 mpg at 100kph or (60mph) and saw the inside of a garage maybe once every ten years.

The cost of these "designed in the mid 1930's by Herr Dr. Ing. Ferdinand Porsche" hi tech wonders was a cash affordable $1450 USD.

What's not to like? Oh. Yeah! the weekly 10 gal fill up cost $2.50 plus or minus...

Mon, 01/03/2011 - 15:30 | Link to Comment trav7777
trav7777's picture

JFC, $53k for this Yukon POS?  I had no idea those buckets were that expensive

Mon, 01/03/2011 - 15:53 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Is it bucket seats, or maybe the union's wages, health care, and pensions pushing up the price?

It is all so confusing, since there is no inflation.

Mon, 01/03/2011 - 11:08 | Link to Comment total nonsense
total nonsense's picture

Lets get real,there is no inflation. Remember the GOVT does not include food or energy in there statistics!!!

Mon, 01/03/2011 - 11:15 | Link to Comment spongeBOB
spongeBOB's picture

Higher energy means higher input prices means higher inflation means higher GDP.  This way Obama can claim the economy is growing but CPI will not show inflation.

Mon, 01/03/2011 - 11:10 | Link to Comment Tic tock
Tic tock's picture

Expensive Oil could be to force China off the peg

Mon, 01/03/2011 - 11:55 | Link to Comment SheepDog-One
SheepDog-One's picture

No one yet discussing Iran taking control of OPEC this month...Im sure we'll get friendly oil treatment since we've placed sanctions on Iran, our new oil overlord. I wouldnt be surprised if they pegged up oil $20 or more the day they take the reigns.

Mon, 01/03/2011 - 14:05 | Link to Comment MachoMan
MachoMan's picture

I wouldn't be surprised if they did it, only to give us a reason the people can get behind to unleash the jews on them...  why would they be so stupid?  We're desperate and we have itchy trigger fingers.  Why do you build a massive military if not to use it?

Mon, 01/03/2011 - 15:05 | Link to Comment Terminus C
Terminus C's picture

Don't forget encircling them with those same massive military forces.

Mon, 01/03/2011 - 11:16 | Link to Comment tmosley
tmosley's picture

I thought oil inventories saw record drawdowns last year?  That is what they said in an earlier article last month...

Mon, 01/03/2011 - 11:19 | Link to Comment spongeBOB
spongeBOB's picture

At the end of the year oil stockpiles were down and that caused oil to shoot up $10 and th reason being is refinaries were trying to avoid paying taxes on the stored oil before the years end.

Mon, 01/03/2011 - 11:32 | Link to Comment tmosley
tmosley's picture

Sooo...are inventories up or down?

Mon, 01/03/2011 - 12:15 | Link to Comment Drag Racer
Drag Racer's picture

they are up. glut would 'almost' be a good term to use.

Mon, 01/03/2011 - 11:33 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

There's always an excuse or explanation for any price movement in any stock or commodity in either direction.

Always!

Mon, 01/03/2011 - 11:50 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

Bingo.

Oil is just another table in the Wall Street casino, and you need to remember that the house always wins.

In the 2008 run up to $147, oil inventories were increasing from January to May, and the world was already months into the biggest recession since the Great Depression.  All fundamentals would suggest that oil should fall.  

Nope.

Oil rises to $147, and Goldman puts out rhetoric about oil in the $200/250 range.

By July, the oil lie just couldn't be maintained any longer, so it crashes to $30.  

*LOL*

Don't underestimate the power of these guys:

http://www2.goldmansachs.com/services/securities/products/sp-gsci-commod...

If you want to put your conspiracy hat on, then think about these guys running the GSCI in cahoots with the SPG desk.  Gotta cash in the Big Short.

Mon, 01/03/2011 - 11:59 | Link to Comment DaveyJones
DaveyJones's picture

The inventories in the ground are down. That's all that matters. Oil's not a casino table, it's the house. Money is nothing more than an exchange symbol for work and energy. Oil is the most unique and compact form of energy ever discovered and as a result, the entire world economy is built upon it. Everything is made from oil. Everything runs on oil. We are now consuming about 4 barrels for every one discovered. It's cost is going up and will continue. There will be blips in the road due the economic fallout but the long term trend is up, way up.  

Mon, 01/03/2011 - 12:00 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

Blah. Blah. Blah. Blah.

Please explain why oil went to $147 in the first half of 2008.

Mon, 01/03/2011 - 12:03 | Link to Comment DaveyJones
DaveyJones's picture

that new years resolution to talk with respect and detail didn't last long 

Mon, 01/03/2011 - 13:01 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

And on the third day he gave up and rested. :>)

Mon, 01/03/2011 - 13:29 | Link to Comment tmosley
tmosley's picture

Actually, he didn't even make it that far.  I think his third post on Jan 1st was a blatant and totally unnecessary personal attack on taraxis.  Out of the blue, really.

Mon, 01/03/2011 - 13:43 | Link to Comment DaveyJones
DaveyJones's picture

you're right, straight out of middle school recess 

Mon, 01/03/2011 - 13:47 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

For a bunch of (supposed) survival-of-the-fittest, ammo hoarding, anarcho-capitalists, you guys certainly have thin skin.

 

Mon, 01/03/2011 - 13:51 | Link to Comment tmosley
tmosley's picture

Just pointing out your lack of willpower.

Mon, 01/03/2011 - 14:03 | Link to Comment DaveyJones
DaveyJones's picture

and logic.

Mon, 01/03/2011 - 12:14 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Please explain why oil went to $147 in the first half of 2008.

Because it became obvious that world oil production had peaked. 

http://news.nationalgeographic.com/news/energy/2010/11/101109-peak-oil-iea-world-energy-outlook/

It took time for net importers (USA primarily) to negotiate a new deal with producers (KSA primarily).  Once this was accomplished, the price came down.   2010 price increases were so steady, statistically, as to be improbable for a free market. 

Mon, 01/03/2011 - 12:31 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

RE: 2010 price increases were so steady, statistically, as to be improbable for a free market. 

In 2010, the average OPEC oil price rose 26.5%. But that increase was pretty steady. The standard deviation of prices, measuring variance, was just $5.20, or 6.7%, of the average price of $77.25. That's the most stable it has been in the past five years and well below the 30.1% recorded in 2008, when oil prices peaked.

 

http://online.wsj.com/article/SB10001424052748704543004576051751951765900.html?KEYWORDS=2010+oil+prices+steady

Tue, 01/04/2011 - 03:05 | Link to Comment JW n FL
JW n FL's picture
by hedgeless_horseman
on Mon, 01/03/2011 - 11:31
#844351

 

RE: 2010 price increases were so steady, statistically, as to be improbable for a free market. 

 

We are not running out of oil... we are running out of $50bbl oil... and $100bbl oil is a lie... it should be $300bbl - $400bbl and with use of the dollar as the reserve currency... the rise due to printing?

 

http://www.youtube.com/watch?v=wYuLjGQQ-jg

The Business of Climate Change Conference 2009

Mon, 01/03/2011 - 12:30 | Link to Comment Drag Racer
Drag Racer's picture

be wary of what you read in NG. the guy who runs it, John Q. Griffin, is a Rothechild cronie and who is also Chairman of the Magazine Publishers of America, which is a Rothechild disinfo/control outlet.

Mon, 01/03/2011 - 12:30 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

I only read it for the pictures of naked pygmies.

Mon, 01/03/2011 - 13:16 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

You too? There's nothing quite like pygmy porn.

And here I thought I was the lone pervert. Perversion loves company. :>)

Mon, 01/03/2011 - 14:46 | Link to Comment Hook Line and S...
Hook Line and Sphincter's picture

My favs were always the women of the Watusi tribe. Their steep and alluring derriere curves reminiscent of the exponential curve we see in debt and fiat printing. In fact, I've recently developed a highly beneficial conditioned response...becoming quite engorged upon visiting shadowstats.

Mon, 01/03/2011 - 12:41 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

That research from 2 months ago does not account for price movements from 07/08.  In 2008, it was NOT obvious that world oil production had peaked. In fact, in 2008, the IEA had issued a statement saying that oil production would climb for several more decades

These large macro themes had NO role in the price of oil from Jan 08 to June 08.

It was the casino - fucking you.  While oil went to the stratosphere, the casino had all their chips on the armageddon table. 

The only real question is whether or not the price of oil was purposely bid to the moon to crash the economy.  If the proprietary desks at Goldman can manipulate the equity markets such that they are profitable nearly every single day, don't you think they can manipulate oil future contracts to their favor?  The best way to universally crash the economy is to send oil to the moon.  

The Big Short, baby.     

 

Mon, 01/03/2011 - 12:46 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

That research from 2 months ago does not account for price movements from 07/08.

Yes, it does.

Mon, 01/03/2011 - 12:53 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

No. It doesn't.

You're talking about macro themes, and how the oil price will be affected long term. No one disputes that. 

I'm talking about a very small window, and why oil - in that small window - had such profoundly irrational price movements that were totally detached from reality. 

Mon, 01/03/2011 - 13:01 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

We simply disagree.  I argue that the increase in price was more in touch with reality, and the decrease representes the manipulation.  Maybe we are both wrong.

Mon, 01/03/2011 - 13:04 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

Maybe we are both wrong.

Sorry. But I'm right. 

The price of oil in the first half of 2008 had absolutely nothing to do with reality, fundamentals or larger macro themes.



Mon, 01/03/2011 - 13:21 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

I believe we both know that pawning off increasing energy prices on speculators is only a smoke screen, but I guess that is the best/only option you and your .gov propagandists have.

Stall, bitchez?

Mon, 01/03/2011 - 16:22 | Link to Comment tmosley
tmosley's picture

This thread is like an argument between second graders.  "Yes it is." "No it isn't."  "You're wrong!"  "I'm right!" 

What's next?  Yo mama jokes?

Tue, 01/04/2011 - 01:23 | Link to Comment goldfish1
goldfish1's picture

Yo mama so fat when she step on the Weight Scales it says.. 'to be continued'...

 

Yo mama so ugly hotel managers use her picture to keep away the rats.

 

Yo mama so fat her logo is "we are family, burger king, mc donalds and
me..."

 

Yo Mama so ugly when she was a baby they stuck her in a corner and fed her with a slingshot.

Yo' Mama is so stupid, she sold her car for gas money.

Mon, 01/03/2011 - 12:56 | Link to Comment DaveyJones
DaveyJones's picture

See below. FrankIvy beat me to it. Specultation on oil price has little to do with peak oil and nothing to do with it's cause. Nothing you've said counters the existence, intensity or trend of peak oil.  

When you say "the best way to crash the economy is to send oil to the moon" you are arguing its fundamental, irreplacable role.

Ps. "fucking you" is not a term in logic, economic or geology courses   

Mon, 01/03/2011 - 13:04 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

Ps. "fucking you" is not a term in logic, economic or geology courses

Unfortunately, "fucking you" is a term that is alive and well in the derivatives and futures market - and that is where you need to look to understand what happened to oil prices in the first half of 2008, and more broadly speaking why the entire banking system went insolvent.  

Mon, 01/03/2011 - 13:40 | Link to Comment DaveyJones
DaveyJones's picture

you forgot to add that it's all the republicans fault. Speculators speculate. The smart ones understand oil's roles. The timing of this spike coincides with the beginning  of a wider audience for and the beginning of what many think is peak oil. This moment in investment history was not that difficult to forsee. It would likely be an over reaction, of course it would correct, and of course reality would steadily march the price right back up.   

Mon, 01/03/2011 - 15:52 | Link to Comment trav7777
trav7777's picture

it wasn't?  JFC, dude...IEA was lying in 2008.

There were those of us out there - I was rather vocal on forums such as TF - who were directly pointing out the material C&C peak in the data from late 2005.

As far as oil to 147, wtf difference did that make to you?  The oil you consume does NOT come off of COMEX trades ok?  These supply contracts were negotiated years ago.

I don't much believe DOE's inventory figures and anomalies were pointed out in these vis a vis firsthand eyeball reports on tanker volumes even as far back as 07.  Where IEA's forward estimates are concerned, I had been arguing with morons about how laughable those were for half a decade.

Mon, 01/03/2011 - 18:44 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

Ok...please help me understand something....

According to you, in 2008 the Department of Energy was lying about inventories, and the IEA was lying about production.  Supposedly, the oil market knew that the data from the DOE and the IEA was fraudulent, and priced oil into the stratosphere based on the larger macro view of diminishing reserves. And the oil market did this in front of the backdrop of a looming world-wide depression.

Ok.  Fast forward to today.

This same oil market certainly hasn't forgotten the larger macro view of diminishing reserves, right? In fact, today more people (those that had been "duped" before) understand that production is diminishing because the IEA now openly admits it. 

Consumption:  Consumption was the same or higher in 2010, than it was in 07/08 (see chart below).  

http://www.eia.doe.gov/emeu/steo/pub/gifs/Fig6.gif

All those points considered, why would the same oil market that is savvy to diminishing reserves price oil at >$100/barrel in 2008, yet keep the price of oil <$100/barrel for all of 2010 if the consumption in 2010 was the same/greater than 2008?  That's not a small discrepancy. That's a 50%-60%-70% discrepancy in price from 2008.  Not to mention that today the market faces the threat of inflation, a declining dollar and China gobbling up all commodities like a blunt-smoking PacMan with the munchies; the backdrop has changed dramatically since 1H 2008.

 

 

 

 

Mon, 01/03/2011 - 12:14 | Link to Comment FrankIvy
FrankIvy's picture

Red Neck Republican wrote: Please explain why oil went to $147 in the first half of 2008.

Who cares?  It's not material to the long term out look for oil.  It's no more relevant than oil crashing to 35 bucks a barrel within a year later.  Those are just the warning tremors.

I'd say, retrospectively, BTW, that oil went to 147 because oil production was flat out and because oil got caught up in a general commodity bubble as money fled real estate.

Mon, 01/03/2011 - 13:23 | Link to Comment DosZap
DosZap's picture

Speculators ran the price up, pure and simple.

There was NO shortage period.Leased tankers were/are anchored off the coasts, and are full of oil.

They were full of $30.00 oil, when it went to $147.00.

Bottom line, WE just got SCREWED.

Mon, 01/03/2011 - 14:30 | Link to Comment AnAnonymous
AnAnonymous's picture

There was NO shortage period.

 

If speculators can operate efficiently, that is a sign of shortage. Only one thing is known to curb speculation: mass production/extraction.

In case of oil, as one plateau has been hit, speculation can be picked up.

Mon, 01/03/2011 - 13:19 | Link to Comment Hulk
Hulk's picture

Because there were buyers at that price FH

Mon, 01/03/2011 - 15:27 | Link to Comment trav7777
trav7777's picture

consumption was greater than production for much of 2007 and before; the trend ran a little past the fundamentals.

Sure there is and was some speculative froth in the oil futures market, but there is no glut of oil.

Mon, 01/03/2011 - 12:12 | Link to Comment FrankIvy
FrankIvy's picture

Davey Jones Wrote: Money is nothing more than an exchange symbol for work and energy.

Truth.  Pure, no tincture.

Mon, 01/03/2011 - 12:57 | Link to Comment packman
packman's picture

In the 2008 run up to $147, oil inventories were increasing from January to May, and the world was already months into the biggest recession since the Great Depression.  All fundamentals would suggest that oil should fall. 

Yes they were increasing, but not on a seasonally-adjusted basis.  They always increase from January to May.  Key is that in the May-July period, when prices spiked up - crude oil stocks were falling rapidly, and were below the "normal" range.  So yes - the price increase did have at least some basis in fundamentals.  Throw in a dose of inflation expectations and voila - you get $140+ oil.

http://img21.imageshack.us/img21/8205/2008crudestocks.gif

It's worth noting that right now crude oil stocks are *above* the average range.  If they were to take a dip down like they did in 2008, we will easily see $200/bbl crude.

 

 

 

Mon, 01/03/2011 - 12:58 | Link to Comment packman
packman's picture

P.S. I will agree that before May the increase in prices were indeed not due to fundamentals.  But that was before they hit $147.  The very top, above $120 or so, was based on a hard drop in reserves.

 

Mon, 01/03/2011 - 13:48 | Link to Comment Flakmeister
Flakmeister's picture

  You are basically correct, OECD stockpiles were in freefall, smart money front ran the global macro situation. I had estimated that $125 was the top "fair-price", $134 was the monthly average at the top, $147 was a blow-off. The drop back down to $30 was a gross overshoot and the buying oppurtunity of a lifetime (heh, heh, heh)

Mon, 01/03/2011 - 12:30 | Link to Comment Blindweb
Blindweb's picture

"There's always an excuse or explanation for any price movement in any stock or commodity in either direction."

 

It's called reasoning.  Civilization has been doing it for thousands of years.  Why are we here at ZH if not to come up with explanations

Mon, 01/03/2011 - 13:06 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

I love it when an excuse is used in the morning to explain a rise in price and the same excuse is used to explain the collapse in the afternoon. Saves on brain power I guess.

Mon, 01/03/2011 - 13:22 | Link to Comment Blindweb
Blindweb's picture

That's called stereotyping.  When you lump different people together and draw a conclusion about the whole group.

Mon, 01/03/2011 - 11:21 | Link to Comment spongeBOB
spongeBOB's picture

deleted, duplicate

Mon, 01/03/2011 - 11:16 | Link to Comment lieutenantjohnchard
lieutenantjohnchard's picture

remember the good old days (60 days ago) when the fed took the position that a rising price of oil was gdp stimulative.

Mon, 01/03/2011 - 12:21 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

America's oil bill was equivalent to 4.8% of gross domestic product in 2008, crudely calculated by multiplying the average oil price by consumption. At more than double the 2.1% average of the prior 20 years and the highest since 1982, this strained the economy. Using forecasts from the International Monetary Fund and the International Energy Agency, $100 oil in 2011 would equate to an uncomfortably similar 4.6% of GDP.

 

http://online.wsj.com/article/SB10001424052748704543004576051751951765900.html?KEYWORDS=2010+oil+prices+steady

Mon, 01/03/2011 - 11:25 | Link to Comment ejmoosa
ejmoosa's picture

Let's not forget that the the Feds also collect more in taxes on the higher fuel prices, as well as the states.

 

Revenue any way they can get it is never a problem for those that tax.

Mon, 01/03/2011 - 11:59 | Link to Comment SheepDog-One
SheepDog-One's picture

Higher tax revenues, well that assumes consumption stays the same at any price? Doesnt work that way. Wait until gas hits $4, then $4.50 and on up while truckers cancel their routes. The economy is in no shape to absorb a high gasoline situation like it barely did a couple years ago.

Mon, 01/03/2011 - 12:10 | Link to Comment FrankIvy
FrankIvy's picture

It didn't a couple of years ago.

It's like it was shot, and for the last 2.5 years has been simply flopping around, bleeding out.  Takes a long time to bleed out sometimes.  I've had Beef animals still kicking 5 minutes after I opened their throats to their vertebral column.

Mon, 01/03/2011 - 12:30 | Link to Comment deagle44
deagle44's picture

They could issue gas subsidies.  The way our system is designed, they can do anything they want, whenever they want.  It's called a central planned economy.

Mon, 01/03/2011 - 22:52 | Link to Comment Jerome Lester H...
Jerome Lester Horwitz's picture

The higher diesel prices have the effect of putting smaller carriers out of business. There is only so much fuel surcharge that can be passed along to customers until they decide to go with large carriers (JB Hunt, Schneider, etc) who can absorb the higher fuel costs without increasing their fuel surcharges as dramatically as the smaller carriers. The profit margin in trucking is one of the smallest in any type of business and for many smaller carriers a steep rise in diesel costs whittles the profit margin down to zero. Time to sell the equipment and go out of business. For smaller carriers to survive and compete it means less compensation for their employees and putting more miles on tractors than they would otherwise. Truckers don't cancel routes. At least not in the sense of owner-operators, they just sell their equipment and find some other means of making a living. The mega carriers love when this happens because it wipes out alot of their competition. 

Mon, 01/03/2011 - 12:42 | Link to Comment Drag Racer
Drag Racer's picture

not just about tax but profits as well. as volume drops profits will rise. just look at the tabacco biz and why the put so much resources into propaganda against smoking. you need to understand the beast to grasp its moves.

Mon, 01/03/2011 - 12:50 | Link to Comment NotApplicable
NotApplicable's picture

Let's not forget that the the Feds also collect more in taxes on the higher fuel prices, as well as the states.

That's incorrect. The federal tax rate is not percentage based, but set in cents per gallon. Most states are set in cpg as well. Of course, as prices climb, you can be sure that the various legislatures will adjust their rates, but it doesn't happen automatically.

http://www.gaspricewatch.com/usgastaxes.asp

Mon, 01/03/2011 - 11:42 | Link to Comment spiral_eyes
spiral_eyes's picture

if anyone wants to say a crash or correction is imminent, this is probably their best hope. oil slices into everything, and at $150 was a contributing factor to the bursting of the housing bubble way back when. but china won't let their debtors destroy themselves 'til they've squeezed every last oz of gold, and they're taking it real slow. i, for one, think bernanke can print his way out of this one, and the treasury will be pretty happy that more of china's money is going to the house of saud -- the middle eastern wing of bush family -- and less of it is going to buying american infrastructure.

Mon, 01/03/2011 - 11:50 | Link to Comment chistletoe
chistletoe's picture

I would be so happy to see Tyler or some other frequent contributor

apply their same incisive, erudite logic to this oil inventory nonsense

that they apply to CNBC, Goldman's conviction list, Blythe, and other notables.

 

From my purely amateur point of view,

I would expect that pretty much the same people who make the decisions about how much oil to store, and where, such as at Cushing, or in ULCC's parked in Singapore Harbor, or whatever,

that those are the same individuals who are most likely to have the best "inside" information or numbers

about current worldwide production, current worldwide use, and trends,

and be best positioned to cut through the nonsense that comes out of DOE, the IEA, Saudi Aramco press releases, and so forth.

 

Being also profit-motivated like some of the rest of us,

when they see the potential for a large price increase on the horizon,

they might actually ADD to inventories if they can,

sort of like buying futures contracts,

or even like taking delivery on physical silver or gold coins.

 

The media and the "professional economists" who insist that a large inventory of oil is bearish,

are just as right on this one as they are on everything else, right?

Mon, 01/03/2011 - 13:49 | Link to Comment Flakmeister
Flakmeister's picture

No argument here....

Mon, 01/03/2011 - 11:50 | Link to Comment Oh regional Indian
Oh regional Indian's picture

War will more than make up for any consumer consuming slack in oil. The march-up (hah!) will continue unabated this time. Such a convenient uprising queller eh? Americans can't get anywhere without gas. And they are nicely spread out in the burds. Brilliant! Checkmate.

Poor middle-class. 

ORI

http://aadivaahan.wordpress.com

Mon, 01/03/2011 - 12:09 | Link to Comment plocequ1
plocequ1's picture

Yes, The poor middle class. High oil prices affect no one but the poor middle class. Everyone else is immuned, Right? Its all good.

Mon, 01/03/2011 - 12:46 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Okay, I sense disdain in your post, so I'll assume you are a moron and need things explained.

poor people don't or hardly have direct use for fuel. Those that have cars have old beaters, little pick-ups and CVCC's that give great mileage and fully paid for. They largely use public transport. Most live in an energy poor environment and can withstand higher prices any day. I'm sure you can extrapolate that reasoning across "poor" strata. Yes? It don't matter that much to their lifestyles.

Rich people could drink $15 dollar a gallon gas all day if they felt like it and never feel the pinch. They can last for years in the face of increasing gas prices.

The middle class: Huge, expensive, credit purchased SUV's (majority), huge, energy in-efficient homes, far away from cities. Themselves, huge, needing to visit huge, energy hungry/dependent hospitals, huge, energy and retail in-efficient malls.....

Who is going to suffer?

I had not pegged you as a moron prior to this, but now, you sir, may consider yourself pegged. Moron!

ORI

http://aadivaahan.wordpress.com

Mon, 01/03/2011 - 13:03 | Link to Comment TDoS
TDoS's picture

But the poor do eat.  10 hydrocarbon calories go into the production of every one food calorie in the west.  Not to mention the other 500,000 products made from petroleum.  This translates to across the board price hikes on pretty much all the necessities of life.

Mon, 01/03/2011 - 13:13 | Link to Comment Oh regional Indian
Oh regional Indian's picture

TDos, my point is that the poor can scale back much more easily than a bloated middle class. It's easier to drop to a 1000 calorie diet from a 1,200 calorie diet than from a 3,000 calorie one.

The poor, in addition, live closer to the source of their food. I'm not speaking of SNAP dependent city poor so much here. That is a wierd, metated version of "rich" poor people.

In real terms, I'll include them in with the middle class.

 

ORI

Mon, 01/03/2011 - 14:29 | Link to Comment TDoS
TDoS's picture

For sure, and I'm not trying to debate your point, just to flesh out that oil is not just about gasoline prices, as so many assume.

Mon, 01/03/2011 - 14:08 | Link to Comment DosZap
DosZap's picture

ORi,

While I agree with most of your post,I do not agree with the poor having small,paid for, fuel efficient vehicles.

Its just the opposite, they buy old HUGE clunkers 8-10mpg, and suck fuel like crazy.IN your world yes, likely its as you say.

Here its the exact opposite,the poor here,for the most part do not work(Welfare), and they will buy the most expensive gas guzzler they can afford, and live in a shack.

At least this is in Texas.

Mon, 01/03/2011 - 16:33 | Link to Comment trav7777
trav7777's picture

Concur.  A meme I've been articulating for some time is that the US is being Argentinafied.  Or pick any south american country.  The middle class is downwardly mobile, while the upper classes in those nations can still afford fuel and cars.  When I filled my gf's car up with premium in brazil the last time, the attendant was somewhat incredulous.  People with cars like that always buy alcohol.  But, it's typical for a family or extended family to have but one or maybe 2 very small cars for everyone.  Also, lots more people per unit, way fewer sqft per person.  As an Indian, you're doubtlessly well-acquainted with this.  That is the future for the US.

Mon, 01/03/2011 - 12:51 | Link to Comment SheepDog-One
SheepDog-One's picture

What middle class?

Mon, 01/03/2011 - 13:26 | Link to Comment Ricky Bobby
Ricky Bobby's picture

LMAOF

Mon, 01/03/2011 - 11:52 | Link to Comment I think I need ...
I think I need to buy a gun's picture

The system is broken and the downward slide continues.......

Mon, 01/03/2011 - 11:53 | Link to Comment Cdad
Cdad's picture

Raymond James upgrades British Petroleum to outperform.

And yet another criminal syndicate Wall Street firm sets fire to any remaining sense of the concept of credibility, upgrading the shares of the most pathetic and disgraced company in its industry, a company that is going to be sued into oblivion by first the fed and next pension funds in each of 50 states.

As such, and showing no sense of intelligence or ethics, Raymond James now comes into Cdad's view as a company that needs to be sold into oblivion until it rediscovers things like honesty, integrity, or truth.  I guess, until then, it is only profit via creating short squeezes, ultimately ending in cliff diving positions for their clients.

Sweet...another criminal syndicate Wall Street bank bites the dust.  I await with baited breath...the layoff announcements.

[In this case, unlike the GM case this morning, no analysts name has been put to this stupidity yet...or at least that I can see.  More when details become available to me]

And any post about oil or related oil companies in 2011 should also include a middle finger to Ben Bernanke.  Thanks for jamming it up my keester, sir!

Mon, 01/03/2011 - 12:04 | Link to Comment SheepDog-One
SheepDog-One's picture

January the month that Iran takes the OPEC reins, those who the US places sanctions against now sets the OPEC price...yea Im sure we'll get real favorable treatment. $150 barrel oil by Feb anyone?

Mon, 01/03/2011 - 12:09 | Link to Comment Cdad
Cdad's picture

Jan Hatzius just got pants'd by Larry Cudlow.  Did you catch that, dog?

Mon, 01/03/2011 - 12:36 | Link to Comment SheepDog-One
SheepDog-One's picture

No if it was on CNBC, I didnt catch it. I asked for a new trash can to hurl in but didnt get it for Christmas so there will be no CNBC viewing around here!

Mon, 01/03/2011 - 14:12 | Link to Comment DosZap
DosZap's picture

Sheep,

True, is there an ETF for oil futures, or must you pick particular stocks?.

Mon, 01/03/2011 - 12:03 | Link to Comment FrankIvy
FrankIvy's picture

Love ZH.com running oil stories.  Oil is the biggest story.  It is the unifying theory of what is going on in the world.

Here something fundamental that I'll always be amazed at people not understanding - oil underpins the modern way of life.  As oil goes, so to does the modern way of life. 

Why is that so difficult to comprehend?

If oil increases in price, so too do diesel and gasoline.  And so the costs of virtually everything traded in commerce <b>must</b> increase.

If you like brocolli, well, it's planted in fields tilled, planted, sprayed, and picked using diesel.  It's trucked to your market in diesel trucks.  On roads made from oil-derived asphalt, and so on.

What is so hard to understand about that?

When oil doubles in price, there will be a definite and proportional rise in the cost of doing everything.  Some increases will be relatively small, and some relatively large.  But everything will be affected.

I heard some clown on the radio recently say that "the world is awash in oil."

I'll never understand that, either.  A huge portion of exportable oil comes from Saudi Arabia, and the amount of oil they have left is a state secret.

Paradigms coming down.  Soon.

Mon, 01/03/2011 - 12:10 | Link to Comment SheepDog-One
SheepDog-One's picture

Last time oil was at $150 and gas around $4.50 avg wont be as easily absorbed today at all, Bernankes not sending out $1,000 checks to consume gasoline like he's doing for Wall St to consume stocks. Now with IRAN taking the OPEC reins this month, I'll expect huge mark-ups in oil not some gradual inching up to test the consumer. I think one morning we'll see our OPEC oil jump up by $10 or more. Venezuela will be happy to jump onboard too. So while the anal-ysts yelp about how great everything is one day soon it will all mean nothing as we're staring at $110, then 120 and higher oil.

Mon, 01/03/2011 - 12:12 | Link to Comment Cdad
Cdad's picture

Dog,

I'm just not at all sure, Dog, that OPEC matters...at all.  Oil prices are being driven by the criminal syndicate known as Wall Street.  Period.

OPEC, ultimately, will do what it is told to do by its primary purchaser...the US.

But I am not a sheik, so what do I know?

 

Mon, 01/03/2011 - 12:19 | Link to Comment SheepDog-One
SheepDog-One's picture

With oil showing as the liquidity blowoff path, everyone knows and admits its going up so whoever gets more now for the USD while they can looks like the only trade around.
I wouldnt count so much on Iran being Bernankes buttboy, yea Iran is still pretty pissed about things like a couple years of sanctions, STUXNET, so while it sure seems everyone in the world lines up to blow Bernanke Im not sure thats reality with people like the Iranians and Chavez.
Eyes wide shut as we in america sit here assuming the world works to provide us with cheap oil backed by up in flames USD's. Like Tylers article from the weekend about a nation with their hands over their eyes hoping the monster will go away.

Mon, 01/03/2011 - 12:28 | Link to Comment Cdad
Cdad's picture

Please Dog,

Come off it already.  The market is moving up on what?  Oil and banks.  You get that?

This is the syndicate at work...doing what it does best...manufacturing nothing save for quick gains on trades regardless of the damage they do to millions of folk.

In the Saudi dessert, those guys do as they are told.  Now I know folk want to go all Peak Oil on this subject...but you need something for that to work.  It is called DEMAND!

So let's ease up on the talking points...and assess oil where it stands...another ponzi scheme...about to do tremendous damage to us.

Hello DC...anyone there interested in pursuing corrupt CFTC judges?  Bueller...Bueller...

Mon, 01/03/2011 - 12:34 | Link to Comment SheepDog-One
SheepDog-One's picture

Oil is going up because no one wants the dollar anymore, oil is the blowoff valve for all this bullshit money printing.

Mon, 01/03/2011 - 12:43 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

Gold is a much better blowoff valve.  If Gold goes to infinity, main street will not have a heart attack.

Mon, 01/03/2011 - 13:00 | Link to Comment SheepDog-One
SheepDog-One's picture

The only backing for the USD Fiatsco FRN is oil. No one wants dollars anymore. Gold is in no way BACKING for the Fiatsco. What did everyone think, trillions could just be printed out of think air and the effects would never be felt? Oil to $150 and beyond, last time was just a trial run.

Mon, 01/03/2011 - 13:12 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

It may have been a trial run.  It failed.

I can't help but think that maybe the US military backs the dollar.

Mon, 01/03/2011 - 14:00 | Link to Comment impending doom
impending doom's picture

Exactly. FRN's are backed by something: depleted uranium.

Mon, 01/03/2011 - 14:22 | Link to Comment MachoMan
MachoMan's picture

Well, I think the more accurate backing chain is Dollar>Oil>Stormtroopers.  Any attempt to depeg oil from the dollar results in stormtrooperape.

Mon, 01/03/2011 - 14:24 | Link to Comment impending doom
impending doom's picture

Jeebus! Never had an accidental quadruple post before. Too many martinis at lunch, I guess.

Mon, 01/03/2011 - 14:26 | Link to Comment Flakmeister
Flakmeister's picture

Hell of an echo in here....

Strictly speaking, FRN's are backed by weapons grade uranium, not the depleted stuff..

Mon, 01/03/2011 - 14:22 | Link to Comment impending doom
impending doom's picture

Deleted dupe...

Mon, 01/03/2011 - 12:13 | Link to Comment Cdad
Cdad's picture

Frank,

The world is awash in oil.  It is.  The stuff is everywhere.  Guys pay day rates on tankers at achor as storage.  Texas has been plumb full for more than a year.

What do you not understand?

Mon, 01/03/2011 - 12:45 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

Not only is the world awash in oil, natural gas and coal, but we ought to rename this planet.  Instead of "Earth" it should be called "Oil".

Mon, 01/03/2011 - 13:09 | Link to Comment TDoS
TDoS's picture

Yup, we're just awash in oil.  It's plumb everywhere.  That must be why we are drilling hundreds of miles out at sea, miles into unstable sediment beds in the gulf.  It must be why they are trying to separate tar from sand up in Alberta at a terrible EROI, and why Brazilians are dreaming of building underwater cities to get at pockets of crude that would last the US alone about one year.

The days of Jed Clampett are long gone. 

Mon, 01/03/2011 - 13:15 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

There could be lots of reasons for those activities that have nothing to do with the lack of oil in the planet "Oil".

Mon, 01/03/2011 - 14:37 | Link to Comment TDoS
TDoS's picture

And we can continue using 80 million barrels a day for infinite!  Yep, and I guess you also believe the Saudis started drilling off shore because they are saving their conventional reserves for future generations.

What most people don't understand about Peak Oil, is that no one is suggesting that we are running out of oil. What is being suggested is that conventional, easily accessible crude is gone, and all that is left is smaller pockets, deeper pockets, of harder to get, lower grade oil, in hard to reach places like under the arctic or in politically unstable nations.  All of these factors drive up the cost of oil to a point where it is untenable to run modern industrial society the way we have been, as oil is a component in virtually every product, every service, every convenience.

As our economy is already more brittle than a frozen tree branch, jacking up the price of every activity in every sector is not something we will weather.

 

Mon, 01/03/2011 - 13:35 | Link to Comment tmosley
tmosley's picture

No, we are drilling hundreds of miles offshore because of politics.  BP wanted to drill in less than 100 feet of water, but they were forced to move far offshore by the Feds.  NIMBY in action.

Mon, 01/03/2011 - 13:51 | Link to Comment Flakmeister
Flakmeister's picture

 Bullshit!

Mon, 01/03/2011 - 15:07 | Link to Comment tmosley
Mon, 01/03/2011 - 16:09 | Link to Comment Flakmeister
Flakmeister's picture

  They drilled the Macondo because the sesmic surveys told them it was the best place to drill. I know a number of people in the oil business, the shallow water oil drillers are predominantly small independents and juniors for which a 200,000 bbl find can be made profitable. Infill drilling to pickup the scraps left by the majors. The big boys only go for the lowest hanging fruit, problem is that the fruit keeps getting higher and higher up the tree.

Mon, 01/03/2011 - 16:26 | Link to Comment tmosley
tmosley's picture

Right, so regulation has nothing to do with it.  

Did you actually watch the video?  They were already cleared to drill in 500 feet, and the Feds stepped in and told them they couldn't.

Mon, 01/03/2011 - 14:17 | Link to Comment DosZap
DosZap's picture

Cdad,

True dat............been going on for years.

The Majors buy low, and store it.Sell at higher prices.

They lease these tankers by the year.

Mon, 01/03/2011 - 14:19 | Link to Comment DosZap
DosZap's picture

Dope

Mon, 01/03/2011 - 14:14 | Link to Comment DosZap
DosZap's picture

According to the King, Saudi has MUCH more opil than previously thought.

New technologies are allowing them to retieve more oil from old wells than was taken when fresh.

Mon, 01/03/2011 - 14:43 | Link to Comment Flakmeister
Flakmeister's picture

Please, please elucidate... I am all ears. Can you name any Saudi oil fields?

Mon, 01/03/2011 - 16:19 | Link to Comment Flakmeister
Flakmeister's picture

  Still waiting... I guess you clam up when your bullshit is confronted.

Mon, 01/03/2011 - 17:02 | Link to Comment TDoS
TDoS's picture

And of course, they would never lie about how much oil they had left.  Please ignore the fact that year after year, no matter how much is pumped out of the ground, their reserve estimates never change.

Mon, 01/03/2011 - 12:18 | Link to Comment plocequ1
plocequ1's picture

Yes, It appears stock symbol OIL is up today along with every other stock. Apple up 7.

Mon, 01/03/2011 - 12:20 | Link to Comment FreeMartinArmstrong
FreeMartinArmstrong's picture

a flight to quality, sure, makes sense, but concluding the dollar being the asset ment by it is far beyond me.

a far smarter guy then me once wrote oil and gold will not flow in the same direction, so discussing oil and currencies, but leaving out gold is losing more then half the picture.

 

Mon, 01/03/2011 - 12:30 | Link to Comment SheepDog-One
SheepDog-One's picture

We now live in a make-believe land in america, assuming we'll always be offered cheap oil backed by a currency no one even wants anymore. While the sheeple are fed their daily diet of 'all is well' from the media, its all just an illusion. We refuse to drill our own oil, all depends on imports from people who hate us and are only looking to get out of the dollar in 1 piece.
Then theres already the threats of 'hands off the FED' and the 'mutually assured destruction' warnings if the debt ceiling isnt raised to ever more insane levels whenever they feel like it.

Mon, 01/03/2011 - 14:28 | Link to Comment DosZap
DosZap's picture

SD1,

None dare call it conspiracy..............

Mon, 01/03/2011 - 13:29 | Link to Comment DaBernank
DaBernank's picture

Alberta tar sands, bitchez! (Yes, I know, it's practically energy negative)

Mon, 01/03/2011 - 16:40 | Link to Comment trav7777
trav7777's picture

no...tarsands are currently quite EROI positive, just nowhere near the ratio of the surface fields found 60 years ago.

Mon, 01/03/2011 - 16:51 | Link to Comment DaBernank
DaBernank's picture

I probably heard some peak-oil propagandist and didn't fact check. We could set up a 1GigaWatt nuclear reactor nearby and melt the stuff to our heart's content.

Mon, 01/03/2011 - 17:05 | Link to Comment TDoS
TDoS's picture

Hahaha!  And we can mine the uranium using power generated by windmills! Oh, and we'll build the windmills using energy gained from tar sands. 

Mon, 01/03/2011 - 17:04 | Link to Comment Flakmeister
Flakmeister's picture

Umm... and what would you do with liquid bitumen?

 

Mon, 01/03/2011 - 12:47 | Link to Comment Blindweb
Blindweb's picture

"That said, the crude market has long been one in which analysts realize that there is a massive disconnet between fundamentals and reality: if based on actual draw downs, the price of oil would have to be far, far lower. But when is that last time fundamentals mattered in anything"

ZH is so far behind the ball on peak oil.  I was so dissapointed when I read Tyler Durden's response to peak oil in the Chris Martenson interview. 

Just because you define something to be the fundamental driver of oil price, or the primary way to model the fundamentals (draw downs) does not make it so.  The name is not the thing named.   Not only is the map not the terrain, but sometimes it's the wrong map.  Fundamentally in my mind oil should be at least double the current price. 

The price has been manipulated down through ignorance of the masses.  I don't hear anyone complaining about that.  If people knew what was coming, the endless energy crisi, they wouldn't be wasting resources on 90% of the bullshit they do.  If we had continued on the plans made during the 80s we wouldn't be completely screwed now.  Transition plans had to have been started 20 years before peak oil happened. 

The real fundamentals are that entire bubble world was built to hide the energy problem.

 

Mon, 01/03/2011 - 12:56 | Link to Comment SheepDog-One
SheepDog-One's picture

Theres no question extracting oil is getting far more difficult.

Mon, 01/03/2011 - 13:03 | Link to Comment pazmaker
pazmaker's picture

Fundamentally in my mind oil should be at least double the current price. 

 

There is the key to your statement,..."in your mind"  not necessarily reality

Mon, 01/03/2011 - 13:14 | Link to Comment Blindweb
Blindweb's picture

On this site economists are called the high priests of today, yet their narrow metrics are used to determine oil price.  It's like a bird trying to explain physics in bird language.  It doesn't work

I actually was going to submit an article explaining why there is no magic technology that's going to save us from peak oil, and why it's a hundered times worse than most realize.  It's actually pretty basic science to figure it out.  Even Chris Martenson and Charles Hugh Smith don't seem to see the true size of the problem.

Mon, 01/03/2011 - 12:37 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

The oil market is pure manipulation.  Nothing more and nothing less.  To answer the man's question minus the BS, oil went from $50 to $147 to $35 due strictly to manipulation.

Now if you think the odds in the oil casino is better than the sports book in Vegas, step right up, playa!

Mon, 01/03/2011 - 12:53 | Link to Comment geminiRX
geminiRX's picture

Considering $100+ oil would disintegrate Wanger's margin and the rest of the economic "recovery", I fail to see the intent of manipulating oil at this point? My thoughts on the current price of oil is that investors are using it as a play against currency debasement.

 

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