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Guest Post: IEA Oil Dump A Disaster In The Making

Tyler Durden's picture




 

From Brandon Smith at Alt-Market

IEA Oil Dump A Disaster In The Making

It’s amazing. In the wake of the 2008
derivatives and housing bubble collapse, created by the U.S. Treasury
and the private Federal Reserve with engineered low interest rates and
easy money designed to artificially pump up the economy after the
effects of the dot-com bust, the faltering markets of 2000-2001, and the
rapidly depreciating dollar, we have now seen these same entities pour
Trillions, yes, TRILLIONS in fiat injections into every conceivable
corner of the markets. They have spent incredible sums on
toxic equities (worthless equities, and don’t let anyone tell you
different) to “ease” the debt spiral, they have propped up almost every
large international bank, they have propped up the Federal Government
and the Dollar itself with sizable purchases of our own Treasury debt,
and, they have even thrown money into the pockets of foreign
institutions and corporate beggars. Keep in mind, that all
the debt that these actions generate is eventually placed squarely in
the lap of one group of people; the American Taxpayer!

They have manipulated unemployment figures. They
have consistently released completely fraudulent CPI (inflation)
figures based on calculations which neglect numerous factors that used
to be counted only two decades ago. They have used
coordinated naked short selling in precious metals markets to hold back
the natural spikes in gold and silver values. They have
blamed every negative development in the economy (that they could not
hide) on extraneous circumstances and outside culprits rather than
themselves. They have done all this, to conjure the illusion of recovery for an increasingly agitated general public.

So much tap dancing and snake oil selling, and all it took, was the pain of $4 a gallon gas to wipe everything away…

That’s right, when the cost of driving to work,
driving to shop, or driving for vacation doubles, the naïve notion that
everything is perfectly normal goes right out the window. Americans complain a lot, but they rarely accept a bad situation as inexorable and take measures to fix it themselves. There is always the “chance” that things will get better tomorrow, or so we tell ourselves. We
just ride the wave, and expect the pack of sharks at our back will
never quite catch up to our boogie-board of blind optimism. However,
when something takes a Great White sized bite out our very wallets, we
take notice, and search the horizon for a bigger boat.

I have commented in the past that after only a few
months of high gas prices, the wind would easily be knocked right out of
our puffed up bailout driven recovery, and so far, that is exactly what
is happening. Retail sales are fumbling, vacation
destinations are crippled, the housing market continues to dive, in part
due to the relentlessly high price of energy. When people travel less, they spend less, they buy less, and they relocate less.

In response, the IEA (International Energy Agency),
an organization of 28 countries, has made a very sudden and startling
announcement; each member nation will begin dumping their strategic
crude oil reserves onto the global marketplace to flood the supply side
of the equation, and, in theory, drive down overall oil prices. The
IEA will release over 60 million barrels a day for at least 30 days
into the markets, half of which will come directly out of the strategic
reserves of the U.S. This is only the third time in the 37 year history of the IEA that this kind of action has been taken. Surely,
governments around the world have finally realized that inflation in
energy is going to completely derail what’s left of our financial
structure, and they are working to prevent this, right…?

Some economists and many in the public will cheer this decision as a fast and decisive solution to the growing oil crises. These people would be foolish. But,
perhaps we should look at the debate points from their side of the
field, or even the U.S. government and the IEA’s side of the field. Below, we will look at the arguments made in support of the IEA oil dump so far, and why they are utter nonsense…

Lie #1: Oil Prices Are High Because The War In Libya Has Diminished Supply

Better throw on some boots and grab a shovel! Digging through this crap might take all day…

I’ll tell you a little secret, something mainstream economic analysts would rather you didn’t hear: there is NO lack of supply in crude markets. Sorry, the facts are clear. I
realize that there are also proponents of ‘peak oil’ out there that
fervently want to believe that there is a current and substantial supply
side crisis in crude. Whether they are correct or not
about the eventuality of peak oil remains to be seen, however, we are
certainly not seeing any semblance of an oil shortage today, despite
events in Libya.

Libya’s crude production before the war accounted for only 2% of the world’s entire oil output. Oil prices were climbing back towards the high levels seen in 2008 long before the “Arab Spring” broke out in the region. In February, the IEA itself reported that the world oil supply rose to an all time high of 89 million barrels per day. After the Libyan conflict erupted, this production fell by a marginal 700,000 barrels per day:

http://nextbigfuture.com/2011/04/iea-reports-that-world-oil-supply-rose.html

The establishment’s assertion that Libya is somehow the direct cause of energy inflation is a distraction. Libya has little or nothing to do with anything.

Lie #2: The IEA Oil Dump Will Create A Supply Glut And Drive Down Prices

The position that a “lack of supply” is the culprit behind rising gas prices is an outright falsehood. In fact, markets are already awash in oil, and our government is fully aware of this. The
U.S. Energy Department has shown a global trend of falling demand for
gasoline, and, the IEA has even admitted that this trend is likely to
continue through 2011:

http://www.upi.com/Business_News/Energy-Resources/2011/05/17/IEA-sees-US-gasoline-demand-falling/UPI-99911305637281/

http://www.bloomberg.com/news/2011-06-23/-head-scratcher-petroleum-release-to-inflate-u-s-crude-glut.html

Anyone who follows the Baltic Dry Index also knows
that freight shipping has collapsed back down to levels near those that
appeared right before the 2008 debt bubble burst. This
means around the world there is less demand for nearly ALL goods, and
many commodities necessary for manufacturing, not just oil. Lower demand means greater available supply. Therefore, supply is in no way the issue when it comes to high oil prices. Again, the supply argument is a distraction away from the truth. Yet, this has been Treasury Secretary Timothy Geithner’s primary rationale for supporting the IEA dump:

"We saw a very substantial sustained
supply disruption. These reserves exist in part to offset those kind of
disruptions," Geithner told CNBC television.

http://www.reuters.com/article/2011/06/24/us-usa-economy-geithner-oil-idUSTRE75N5ZK20110624

So, to reiterate, there is ALREADY a glut in oil markets, and there has been since at least 2008. If there was actually a supply side crisis, trust me, you would know it. If
you want to study a true crude supply crisis, then you only need glance
back at the energy crisis of 1979 when Jimmy Carter ordered a cessation
of Iranian oil imports and the Iran/Iraq war began. When
you have to wait in long lines at the gas station just for a few gallons
of unleaded, then you might be in the middle of a supply crisis.

After we accept the fact that supply is high and
demand is low, we are then faced with an important question; why in the
world would the IEA report high supply and low demand, and then expect
to have any significant effect on oil markets by dumping our strategic
reserves?!

Lie #3: The IEA Oil Dump Was Designed To Hit “Speculators”, Who Are The “Real” Cause Of Energy Inflation

Back in 2009 after the first
major gasoline spike subsided, I spoke often about the mainstream
financial media’s strange obsession with “speculators”, and the
consistent use of talking points obviously designed to condition the
American public into associating all oil price jumps with scheming
investors in the shadows out to corner the market. My
theory back then was that once oil began to skyrocket again due to the
crumbling value of the dollar, establishment pundits and government
officials would come back once again to point a finger at the speculator
boogie man, and draw attention away from our inflating currency. Sure enough…

http://www.foxnews.com/politics/2011/04/22/obama-form-task-force-tackle-rising-gas-prices/

As we have seen, supply is not an issue, and so speculation should not be either. However,
if speculators have actually been hoarding stocks and supplies in order
to artificially drive up the price of crude, then the IEA announcement
should have sent them scrambling to phone their brokers to
sell-sell-sell! The shock to oil markets should have been extraordinary. But what happened? Not much to write home about…

The Brent crude index saw a relatively moderate
price drop from around $113-$115 a barrel down to $105 a barrel, and
currently, the price is showing potential to climb back up!

Initiating the release of the strategic oil reserves of nations across the globe caused an overall price drop of a few bucks? I guess speculators weren’t having much of an effect on the market after all.

So, if speculators aren’t the cause, and neither is
limited supply or high demand, then what IS the phantom driver of
inflation in energy? There is only one other possible answer; devaluing currencies. The
IEA can pour all the oil they want into the markets and it won’t change
a damn thing, because higher supply does nothing to strengthen the
foundation of the dollar, which is being swiftly eroded by the Federal
Reserve. Have they accomplished a minor halt to rising prices and visible inflation? Yes. Will prices bounce back even higher in the near future as the Fed continue to inject fiat into the economy? Absolutely.

The Consequences Of Reserve Depletion

The IEA announcement comes directly after the last
OPEC meeting ended in a bitter split between member countries over
whether to raise crude production levels. The decision by every country except Saudi Arabia to keep production steady was the right one, of course. However,
elements of the U.S. and the EU were downright unhappy with OPEC’s
unwillingness to help hide the weakness of their respective currencies. An
OPEC decision to increase production would have at least influenced
market psychology, and allowed prices to soften for a short time. So, without OPEC support, the central banker controlled apparatus turned to the IEA to open the floodgates of petroleum. OPEC nations, as one might imagine, are not happy…

http://www.reuters.com/article/2011/06/23/us-opec-iea-idUSTRE75M6J520110623

There are several threats associated with this
development, and there is a distinct possibility that these have been
deliberately provoked, if one considers that a weakened America ripe for
centralization is the true goal.

First, OPEC countries could easily retaliate against the IEA by dropping their own production levels. Not
only will the IEA action be meaningless (as we have shown above), it
could also directly trigger a REAL supply crisis if OPEC decides to dam
up the river. The U.S. is very unpopular in the Middle East, Africa, and Venezuela already. Now, the IEA has just given these regions a perfect excuse to dish out some economic vengeance.

Second, traditionally, if there is a real supply
side crisis caused by OPEC, our most important stop-gap would be to tap
into our strategic reserves. Unfortunately, we have just put those reserves on the market without batting an eye. So, in essence, we paid a very high price for a bullet that we will one day shoot ourselves in the foot with. That
is to say, we have dumped our strategic reserves and set in motion a
possible disaster which those reserves were supposed to save us from! Its mind boggling!

Third, there is very little stopping OPEC at this
point from decoupling from the U.S. dollar completely, especially if
crude prices continue to rise despite the IEA dump. The
fact of currency inflation and dollar implosion will be so exposed that
no one, not even “Tiny Tim” Geithner, will be able to deny it. Once
the illusions of “limited supply” and “speculation” are cast aside, the
global focus will end up squarely on the dollar, and the IEA dump will
have sped up the process dramatically.

I don’t know if anyone else has noticed, but this country has been thoroughly gutted over the past few decades. Our industrial base has been dismantled and shipped overseas to the benefit of foreign nations and corporate feudalists. Our grain reserves, once ample, have been depleted to an all time low.  Our currency has been systematically debased.  And
now, our oil reserves, without rational cause, are being sold off only
to feed the catastrophe our government is supposedly out to stop. Are
the American people being prepped like a glazed ham for the fires of
the globalist oven?  Is this really all due to coincidence and stupidity
as skeptics claim, or is there something else at work here?  I
find it hard to believe that the IEA and our government are not aware
that their proposed strategies conflict with their own source data, or
that they are completely oblivious to the destruction they are about to
reap upon our economy. The latest IEA decision is just one
more piece of evidence of an agenda of deliberate financial
destabilization trending towards a disaster that serves the interests of
a select few, to the detriment of all the rest.

 

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Tue, 06/28/2011 - 10:02 | 1408566 Everybodys All ...
Everybodys All American's picture

2012 can't come soon enough.

Tue, 06/28/2011 - 10:16 | 1408618 66Sexy
66Sexy's picture

Low oil prces make the dollar look stronger and covers up the consequences of raised debt ceilings..

It silmply enables more government debt through the deception of a stable dollar. Consumers see price stability in oil and think 'all is well'.

Tue, 06/28/2011 - 10:45 | 1408732 narapoiddyslexia
narapoiddyslexia's picture

Its bullish for stocks. Apparently. 

Tue, 06/28/2011 - 11:54 | 1409060 SRV - ES339
SRV - ES339's picture

2012 can't come soon enough

... assuming you mean getting rid of Obama, who will replace him, and do you actually believe the Banksters grip on world finance will fade with a (Kleptocrat backed) Tea Party wacko in the White House?

best of luck with that... rotflmfao!

Tue, 06/28/2011 - 11:59 | 1409088 NotApplicable
NotApplicable's picture

Ha! Voting is exactly what caused this mess. Good luck on fixing it with that lousy tool.

Thu, 06/30/2011 - 07:48 | 1414890 Zero Govt
Zero Govt's picture

"2012 can't come soon enough"

Like that'll change anything ...Dream On Bro

Tue, 06/28/2011 - 10:09 | 1408589 AnAnonymous
AnAnonymous's picture

China's benevolent role over the world is growing each day.

Tue, 06/28/2011 - 10:12 | 1408607 Azannoth
Azannoth's picture

I bet it was made from 9/11 scrap metal, chinese have a sense of humour

Tue, 06/28/2011 - 11:34 | 1408963 Byronio
Byronio's picture

I think you've offended the Chinese readers here...

We are supposed to be grateful for losing our country, our jobs, our habitat to them and others.

China Wants To Construct A 50 Square Mile Self-Sustaining City South Of Boise, Idaho

The following quote originally appeared in the Idaho Statesman, but has since apparently been taken down....

"The Chinese are looking for a beachhead in the United States," said Idaho Commerce Secretary Don Dietrich. "Idaho is ready to give them one."

Indeed.

If relations between the U.S. and China go south someday, we will deeply regret giving China so many open doors.

 

Tue, 06/28/2011 - 12:36 | 1409197 AnAnonymous
AnAnonymous's picture

50 square miles in Idaho? But laughable.

The US is buying front and center land in other countries by square thousand miles and what? 50 square miles?

 

The US is not the solution, the US is the problem.

Tue, 06/28/2011 - 10:01 | 1408570 Flakmeister
Flakmeister's picture

First off, oil production is not 89 mmbpd.... that is "All Liquids".  He looses almost all credibility with this error.

Moreover, Libyan production was close to 4.5% of net exports, i.e. oil on the market. Moreover, as a fraction of the sweet crude on the export market, the ratio is closer to 10%...

That being said, the IEA release is a mistake. Note that the amount matches up with the total loss of sweet crude from Libya and is also timed to have the maximum effect given well known seasonal factors. It is an attempt to drive the price down in order to give The Bernank and the ECB some breathing room. No way QEIII or any other form of monetization can occur with oil above $100....

 

Tue, 06/28/2011 - 10:12 | 1408599 AnAnonymous
AnAnonymous's picture

The article's author is part of US citizens for whom propaganda is making a living. Still the same drivel over and over again. Best is that guy must think he deserves every single cent he earns. That is the only credibility propagandists bother about. Facts, who care about them as long as misinformation, disinformation brings money?

 

US world order.

Tue, 06/28/2011 - 10:32 | 1408670 Raynja
Raynja's picture

Its 60 mmb total, not per day.
The whole analysis ignores the elasticity of demand and geopolitical concerns.

The release is a bad for citizens, just not for the authors reasons. Maybe someone should let our transitory chairsatan know that flow is actually more important than stock

Tue, 06/28/2011 - 10:42 | 1408728 CrashisOptimistic
CrashisOptimistic's picture

The ZH folks really HAVE to understand this, Flak

"ALL LIQUIDS" IS NOT OIL.  There is not 89 mbpd of oil being produced and that is why things are disintegrating.

Guys, heads up.  When oil comes up from the ground, it brings with it Natural Gas Liquids (which is not the same as Liquid Natural Gas).  Things like butane and ethane come up.  They have only 60% of the energy density of crude.  They Are Not Oil.  But they are counted as All Liquids, and because fields are dying, more and more of production that comes up is NGL.  

There is another category called Condensate.  This also is a bit light in energy density and is not crude.

Bottom line: You can't pour 1 barrel of NGL into a refinery and get out the same number of gallons of gasoline power as you would get if you poured 1 barrel of crude into the refinery.  Period.  This is a crushing reality of physics and the numbers are being juggled.

Read the NYT article about natural gas in shale of a few days ago to see how the industry obfuscates numbers to attract the greater fool to buy a lease overpaid for.  This is the nature of oil/nat gas plays.  The whole industry is based on camouflage.

You have to understand it deeply at a geological and physics level or you have no hope.  An economist out of Yale assigned to be an "oil analyst" at some bank will not understand all this.  Beware.

Tue, 06/28/2011 - 11:10 | 1408837 Flakmeister
Flakmeister's picture

Another bit of smoke and mirrors is "Refinery Gains" where the volumetric gains in cracking the heavy sludge left at the bottom of the column is counted as "production".... moreover, the result of the hydocracking mainly Ethane which is primarily a feed stock for plastics.

Refinery gains do not represent new supply in the sense of "new energy"...

Tue, 06/28/2011 - 12:32 | 1409187 Citxmech
Citxmech's picture

Take a gander at any of the net EROEI over time charts and you'll quickly see why we're in a world of hurt. 

It's got nothing to do with what's available coming out of the refinery - it's got everything to do with what it takes to get the raw product from ground to market - and those required expenditures are rising exponentially.

Decreasing marginal returns and debt-based societies don't mix. 

Tue, 06/28/2011 - 10:01 | 1408571 aerial view
aerial view's picture

Time to remove the meaningless words free markets, democracy and capitalism from all American dictionaries as well as truth, justice and the American way.

Tue, 06/28/2011 - 10:24 | 1408652 jerry_theking_lawler
jerry_theking_lawler's picture

america is not a democracy. america is a democratic republic. that was written in blood in some old 'useless' documents in Washington DC that can be 'interpreted' to fit the needs of the leaders....what a sham.

Tue, 06/28/2011 - 19:05 | 1410260 CH1
CH1's picture

On paper it is a democratic republic.

Congress is for sale to the highest bidders. K Street dictates what they do.

Tue, 06/28/2011 - 10:39 | 1408722 cossack55
cossack55's picture

Add the words "Agenda 21". Sleep tight.

Tue, 06/28/2011 - 10:06 | 1408574 overmedicatedun...
overmedicatedundersexed's picture

Anyone who makes sense or has policy that is correct..need not apply. The bilderbergers the trilateralists the sociopaths in change have a plan that is working and the serfs better like it.

Tue, 06/28/2011 - 10:03 | 1408576 Greeny
Greeny's picture

Obama, collecting Fat paychecks from Fat Cats of the Wall Street

for his Election campaign, His target is 1 Billion $USD.

Imaging to spend that much for another 4 years of doing nothing?

Tue, 06/28/2011 - 10:15 | 1408614 Joe Davola
Joe Davola's picture

Giving a politician a billion to do nothing would likely save us a trillion or two in the long run.

Tue, 06/28/2011 - 10:07 | 1408578 oldmanagain
oldmanagain's picture

Mostly garbage.

But it might sell on Zerohedge.

Tue, 06/28/2011 - 10:14 | 1408602 AnAnonymous
AnAnonymous's picture

Yep, that is the goal.

Tue, 06/28/2011 - 10:08 | 1408579 speedy
speedy's picture

The IEA will release over 60 million barrels a day for at least 30 days into the markets

 

Err. not 60 million a day, 60 million over 30 days.

Tue, 06/28/2011 - 10:17 | 1408612 Smokey1
Smokey1's picture

+1

Yes. That small oversight tends to nuke the entire article.

Wed, 06/29/2011 - 08:15 | 1411167 Bringin It
Bringin It's picture

Agreed.

Tue, 06/28/2011 - 10:16 | 1408619 Flakmeister
Flakmeister's picture

Well done... I missed that.

Tue, 06/28/2011 - 10:24 | 1408649 AnAnonymous
AnAnonymous's picture

If you are after each mistake the article propagates, good luck. It is a useless task. Propagandists make their money out of making errors, distorting truth etc People buy their propaganda (id est funding the propaganda effort) because they want to believe in the distorted facts.

 

Bringing back factuality is useless and vain; in this US driven world, it does not bring money.

 

The US citizens nature is eternal.

Tue, 06/28/2011 - 12:45 | 1409208 Libertarians fo...
Libertarians for Prosperity's picture

The author of this article has zero understanding of how speculators affect oil prices. ZERO. ZILCH. NADA. When oil went cuckoo for cocoa puffs in 2008, the amount of speculative money in the commodity complex was over $250B, an increase of over 20X from 2003-2008. Furthermore, if margin requirements are typically less than 10%, that means speculators could take multiple trillion dollars worth of commodity positions if they wanted to. One million oil contracts are traded on the NYMEX daily. If the size of an oil contract is 1,000 barrels, this means the amount of "paper oil" traded each day is over 12 times daily world oil consumption.

http://www.marketwatch.com/story/ice-brent-futures-volume-set-new-record...

And all of that means.....   nothing?  

Brandon Smith is just another bugged-out doomer goon with 50 canned hams under his porch. He should stick to writing articles like, The Art of the Bug-Out Bag and Final Survival Preperations.

http://www.alt-market.com/articles/121-the-art-of-the-bug-out-bag


Tue, 06/28/2011 - 18:46 | 1410227 JeffB
JeffB's picture

On the other hand, there is some pretty solid evidence that "speculators" were not the driving force in the big runup in oil prices leading up to and including the 2008 spike:

http://www.aspousa.org/index.php/2009/05/peak-oil-not-speculation/

"...After many years of solid growth, oil production plateaued in October 2004. Regardless of the price level, the oil supply simply stopped responding, and from then on, the world had to make do with broadly flat supplies. Ordinarily, the expansion of the world’s economy would be accompanied by increased energy consumption and an inelastic oil supply might have been expected to hinder economic development.  It didn’t. In the four years to mid-2008, the world economy expanded by 18%. The global economy boomed, even without new oil.

However, this came at a price. In the absence of oil supply growth, demand accommodation was required. This was achieved by secular prices rises averaging 25% per annum from 2003 to the end of 2007. In other words, the price of oil went up, and this constrained consumption by causing the marginal consumer to drop out of the market. This proved a workable solution for a time, but the global economy could not sustain 25% annual price increases indefinitely, and by second half 2007, the situation was becoming critical. Consumption was being maintained by continuing draws on inventories averaging 1.4 million b/d, and virtually every producer, with the possible exception of the Saudis, was running flat out. By early 2008, even the Saudis were throwing the kitchen sink at the market - all to no avail. On paper, it looked like a peak oil nightmare.

Of course, consumers were responding. From 2005, the EU and Japan began to shed consumption and, from late 2007, US consumption also began to decline as the US consumer sought to escape high oil prices. Notwithstanding, developed economy consumers were not abandoning the market as fast as Chinese consumers were entering it, and prices continued to rise. In early 2008, prices took off and some argue that speculation took over. Still, as inventories continued to fall until May 2008 and all the oil producers were running at full output, the case for market manipulation at that time is hard to make. Indeed, the market was in backwardation most of this time. In backwardation, futures prices are lower than spot prices, the equivalent of the market saying, “Well, prices are high now, but they’ll be lower later.” The market - those very speculators - believed that oil was over-priced but was continually surprised as demand kept pushing up prices.

Prices did ultimately fall, but not because the supply situation eased, nor because speculators fled the market, and not because inventories were released. Prices fell because the global economy collapsed. ..."

Tue, 06/28/2011 - 11:13 | 1408848 Blano
Blano's picture

My new favorite avatar.

Tue, 06/28/2011 - 11:36 | 1408995 Byronio
Byronio's picture

If they had an uprate feature I would give you one for your avatar.

Tue, 06/28/2011 - 10:04 | 1408583 Smokey1
Smokey1's picture

"Whether they are correct or not about the eventuality of peak oil remains to be seen."

It only remains to be seen by blind fools like you. Peak oil is screamingly obvious to anyone with half a brain.

Tue, 06/28/2011 - 10:15 | 1408610 Greeny
Greeny's picture

"Peak oil is screamingly obvious" What time frame you are talking about 1-2 weeks? then maybe you right. I see OIL at 140$/b again as soon as QE3 hits the street. Hey By the way, Brent now going up and pushing $109/b already. We gonna see $140 before $80, how about that?

Tue, 06/28/2011 - 10:21 | 1408616 Smokey1
Smokey1's picture

Do you even know what peak oil is?

Tue, 06/28/2011 - 10:28 | 1408648 Greeny
Greeny's picture

Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.

Tue, 06/28/2011 - 11:21 | 1408910 Silver Dreamer
Silver Dreamer's picture

There's also a large confusion over production and supply.  We may have plenty of supply, but we definitely have a production issue.

Tue, 06/28/2011 - 11:24 | 1408928 Flakmeister
Flakmeister's picture

You might want to complete that thought... as it stands, it makes no sense.

Tue, 06/28/2011 - 10:23 | 1408642 Sambo
Sambo's picture

No, it is not obvious. Peak cheap oil maybe but that is not the only thing left behind on the earth by dinosaurs & ...what they would have eaten but did not eat.

Tue, 06/28/2011 - 11:01 | 1408814 Flakmeister
Flakmeister's picture

Not obvious if you rely on MSM. Obvious to anyone that actually follows what goes on in the oil patch...try following the technical discussion at theoildrum.com

Wed, 06/29/2011 - 07:24 | 1411073 Urban Redneck
Urban Redneck's picture

The technical discussion at theoildrum.com tends to be focused on where management tells the little geologists in the silo of thought that they may look for and extract oil.  There are bigger strategic issues that materially impact supply and are too often neglected in the conversation.

Tue, 06/28/2011 - 10:09 | 1408586 treemagnet
treemagnet's picture

Apparently not enough folks have had enough bad experiences to take this shit seriously.  My father-in-law being a perfect example.  By the time enough folks are awake, the vise will have them pinched.   And since they're fucked like a drowning victim, we're all fucked cause they're gonna cling and panic and drown the rest of us.

Tue, 06/28/2011 - 10:12 | 1408597 Turd Ferguson
Turd Ferguson's picture

Well done, Brandon.

Tue, 06/28/2011 - 10:13 | 1408601 JW n FL
JW n FL's picture

the sheep dont care. they are not even watching of feeling this shit.. just another day in the sheeps life.

 

ignorance abounds!

Tue, 06/28/2011 - 10:13 | 1408611 JW n FL
JW n FL's picture

http://www.milidroid.com/2011/news/wsj-talks-about-upcoming-smartphone-tests-usual-ignorance-abounds/

WSJ Talks about upcoming Smartphone Tests. Usual Ignorance Abounds.

******************************************************************

You have to LOVE big brother! give yourselves over...

Tue, 06/28/2011 - 10:14 | 1408603 Sathington Willougby
Sathington Willougby's picture

See the funny thing about that is, we noticed.

It's just hard to shout above all the bleating.

Land of the fleeced, home of the slave.

Tue, 06/28/2011 - 10:11 | 1408605 Version 7
Version 7's picture

Saudi Arabia has likely peaked in 2005 (check BP Statistical Review), so roughly there's no spare capcity out there. And a small decrease in supply, ie Lybia, can trigger wild price spikes. Conclusion: not a very enlightening article.

Tue, 06/28/2011 - 10:25 | 1408631 Flakmeister
Flakmeister's picture

There is some spare capacity... there is no refining capacity in place to utilize the available grade of oil (low API, high sulphur) in those places where demand is being driven....

People tend to forget that refineries are not plug and play and that oil is not fungible....

Tue, 06/28/2011 - 11:08 | 1408826 IslandMan
IslandMan's picture

Libya, Libya, Libya.

Nowadays, even war is failing to teach geography to Americans.

Tue, 06/28/2011 - 11:20 | 1408887 Version 7
Version 7's picture

Thx, - and I'm not American :-)

Tue, 06/28/2011 - 10:12 | 1408609 RobotTrader
RobotTrader's picture

Looks like the lows might be in on the oil stocks.

The coming economic boom in 2012 will boost demand for crude oil, despite the massive glut we have right now.

Tue, 06/28/2011 - 10:29 | 1408672 Long-John-Silver
Long-John-Silver's picture

The coming economic boom in 2012

 

The only "boom" coming is the sound made by the implosion of the economy. Inflation of prices in the stuff you need and deflation price of products you don't need.

Welcome to Great Depression II.

Tue, 06/28/2011 - 10:38 | 1408696 Version 7
Version 7's picture

It's highly improbable that you're gonna have any economic boom over the next 100 years.

Tue, 06/28/2011 - 11:03 | 1408769 CrashisOptimistic
CrashisOptimistic's picture

Booms come from inexpensive oil.

Crashes come from expensive oil.  

Oil isn't inexpensive, and won't be again until 5.5 billion people of the global population disappear.  Conservation is the only answer, and population eradication is the only methodology that will work.

Tue, 06/28/2011 - 10:48 | 1408766 PaperBear
PaperBear's picture

"naked short selling in precious metals" ?

They should be congratulated for dissuading additional silver production/recycling and for making physical silver so cheap that a few people like ZH readers loaded up and are going to have most of the stolen wealth transferred to them.

WOOHOO.

Tue, 06/28/2011 - 10:54 | 1408772 CrashisOptimistic
CrashisOptimistic's picture

Neither silver nor gold will power a John Deere agricultural combine that grows the food that a diesel powered truck brings to your grocery store shelf.  

They won't help you.

Tue, 06/28/2011 - 11:16 | 1408865 oldmanagain
oldmanagain's picture

"naked short selling" of futures is one of the most stupid concepts going around these silver sites.

With a likely 800 trillion of derivatives floating around the world, how can a person  be totally unaware of futures, bets, concoctions, contracts on price rather than product.

 

 

Tue, 06/28/2011 - 11:10 | 1408853 Blano
Blano's picture

An article with a mistake that blatant shouldn't even have been put here.  Makes the whole thing irrelevant.

Tue, 06/28/2011 - 11:19 | 1408879 Cynthia
Cynthia's picture

If it's true that Obama released oil from the Strategic Petroleum Reserve (SPR) in order to help himself get reelected next year, then this is a clear-cut case of abuse of presidential power. So in order to prevent this sort of abuse from happening again, any decision to release oil from the SPR must be openly debated in Congress and approved of by both branches of government. The same should apply to any decision to conduct military operations against another country. The only time when the president shouldn't be required to seek approval from Congress to release oil from the SPR or conduct military operations against another country is when our country is under attack by a foreign enemy or our people are out rioting in the street.

For the president to make these kinds of decisions behind closed doors without congressional approval not only smacks of monarchy but it also gives those who work closely with the president the unfair advantage in terms of knowing when to buy and sell oil commodities and defense-relate stocks. If it comes to light that Goldman Sachs and other of Obama's Wall Street buddies reaped enormous profits by being privy to his decision to release oil from the SPR, Obama should have his ass impeached and his buddies should be thrown in1 jail for insider trading!

Tue, 06/28/2011 - 11:26 | 1408917 Flakmeister
Flakmeister's picture

This is nothing to do with being re-elected... If this was the summer of 2012, maybe then. The price of gas in September 2011 will have no influence at the polls in November 2012. The timing is completely wrong, they are trying to drive down the price so that new forms of QE can be implemented.

Tue, 06/28/2011 - 11:32 | 1408952 Silver Dreamer
Silver Dreamer's picture

I see little difference between giving the power to a group of puppets compared to a single one.  Governments manipulate markets because the oligarchs in charge command it.  We the People, with the illusion of representation or not, have very little say in the matter.

Tue, 06/28/2011 - 11:33 | 1408954 oldmanagain
oldmanagain's picture

The word "if" cannot be used as a factoid.

Tue, 06/28/2011 - 11:22 | 1408915 Downtoolong
Downtoolong's picture

if speculators have actually been hoarding stocks and supplies in order to artificially drive up the price of crude, then the IEA announcement should have sent them scrambling to phone their brokers to sell-sell-sell!

Isn’t this what happened on the day of the release announcement, when the Brent futures price dropped over $6/bbl in two hours? I’ve never seen a market move that much based on pure talk without someone actually closing a transaction, and something tells me it wasn’t the Saudi Government doing the selling.  

The shock to oil markets should have been extraordinary. But what happened? …The Brent crude index saw a relatively moderate price drop from around $113-$115 a barrel down to $105 a barrel…

Why extraordinary? 60 million bbls is only a little more than 2 days of OPEC exports. The $10 /bbl drop we eventually saw was probably just about the size of any distortion that speculation can sustain in the oil markets. I agree, you can’t blame speculators for oil prices not returning to $30/bbl. But keep in mind, $10/bbl times the size of OPEC exports is about $250 million per day, or $100 billion per year excess dollars flowing from consumers into the hands of foreign producers, some of whom are our sworn enemies. I wouldn’t call that incidental. Furthermore, it’s a lot more money than the speculators and market manipulators probably profited on their trades. That’s what makes it so infuriating for consumers. For a small group to earn themselves $100 million, they cost the rest of us 1000 times more.

I haven’t heard anything yet to change my belief that one or the motives for this IEA release was to curtail speculation and manipulation in the oil markets, which is mostly done by big Wall Street banks and hedge funds, not doctors, dentists, members of the AARP trading club, or even major international oil companies. I don’t have great expectations of this move either, but, to the extent it worked at all, I’m on board.

Tue, 06/28/2011 - 11:25 | 1408935 Byronio
Byronio's picture

That last paragraph is outstanding no wonder Tyler used it in the promo.

You have to ask yourself how could a people, who were the biggest richest happiest, freest people in the world come to this. Well they've let things get so far maybe the Founding stock of America are destined for a fate they deserve, if you won't fight for your own, to save your own habitat then nothing that happens to you is undeserved.

Example:
06/27/11 - Moral Of That U.S.-Mexico Soccer Game: Say Goodbye to Los Angeles

Tue, 06/28/2011 - 12:24 | 1409160 ArrestBobRubin
ArrestBobRubin's picture

+1, with a key qualifier:

it is critical to recognize that Americans haven't "come" to this. Most have been driven. Like cattle. Or sheep. This in itself is very much the post-WWII history of the USA. But the kids won't find it in their textbooks. And Doris Kearns-Goodwin and the other court historians of the Evil Empire are either too stupid to recognize it or too complicit to tell lowly proles like you and I.

This transformation has been accompished via soft revolution. It was planned for decades in London's Tavistock Institute and other dark corners. Mind control is their key weapon. And their stock in trade. It's multi-level, accomplished via bad diet, estrogen mimicking plastics, information & content control, poisons of all manner, ill-serving education, and terror. Lots and lots of scary terror events sprinkled along the way. They get the cognitive dissonance way up there. And sustains it. Managed properly over time, this mental illness becomes an integral part of the zombified culture they desire tp produce. There are no easier marks than the terror-sticken.

It's been a full-scale Psy-war unleashed on what was once the country you refer to above. This is Total War. Just because no one has ever called it that on TV doesn't mean the incoming shells haven't positively devastated the joint. Try looking around.

Tue, 06/28/2011 - 11:49 | 1409021 ian807
ian807's picture

For a long time, it's looked to me as if the dismantling of the USA has been conciously engineered.

Oil depletion, de-industrialization, the financial crisis, the "Patriot" act, all happening at more or less the same time to create the perfect storm. It's always seemed a little too neat. It's not something I talk about, because it sounds conspiracy-theory, BUT if I was a part of a consortium of the world's top wealthy, and saw that financial repression was working fine in 3d world countries (from my point of view), I might be inclined to wonder why that uppity USA was allowed to exist, with all their overpaid, noisy middle-class folks who couldn't always be persuaded to vote as desired. Why not take them down a peg or two, to say, the level of Brazil, or Mexico? They'd be much more manageable, use fewer resources and eventually, could be rendered toothless as they were forced to sell their nukes to fuel power plants.

After all, this strategy worked with the Soviet Union, eh?

Sound kind of crazy?

 

 

 

Tue, 06/28/2011 - 12:46 | 1409215 AnAnonymous
AnAnonymous's picture

Totally crazy.

 

US world order is a ponzi scheme. US citizens have worked to implement that Ponzi, they have been benefiting from it a lot.

It is quite expected that problems are building up when the Ponzi is going out of breath.

No power behind this, just the result of the US world order.

Tue, 06/28/2011 - 11:53 | 1409035 Diamond Jim
Diamond Jim's picture

Libyan problem erupted nearly 4 months before the SPR release. why wasn't the release done when crude was up at $110/b. and we knew there would be no oil production out of Libya as it was being bombed. BTW, Libyan oil goes to France and Italy. Let them handle this. Takes nearly two to three weeks to prep the SPR to get a release. If delivery into the market is so imperative , two to three weeks isn't exactly  "overnight delivery". Why only 1 MM barrels a day for a month. Hardly a drop in the bucket for an economy that uses nearly 9 MM barrels a day.

The Great One has been after the sheeple to cut back on their use of hydrocarbons...they originally figured they can force alternative green  energy on the sheeple by driving the cost of crude up to the moon..so you cut back on where one can drill, throw in a de facto moritorium on oil / NG in the Gulf and watch the people grumble about $4 / g gas....wait until $6 then the people will think they were getting off cheap at $4. The point...why  not simply open up Alaska a bit,actually  put some people to work, and get that 1 MM barrels of our own crude down here and open up the Gulf a bit more. No, its easier and far more stupid to take from the SPR sell it off at $90 a barrel and replace it later at $100+ a barrel, take the oil that really needs to be used during a true emergency. Pure idiocy....like everything else in the last few years.

Tue, 06/28/2011 - 11:58 | 1409059 blindman
blindman's picture


here here,
[KR159] Keiser Report – Waterboarding BB & Manipulating Oil Markets
Posted on June 28, 2011 by stacyherbert| 6 Comments
Stacy Summary: We interview Leah McGrath Goodman. (This really is a fantastic book, you should get it; absolutely gripping).

http://maxkeiser.com/2011/06/28/kr159-keiser-report-waterboarding-bb-man...
.

here the thing ....
the money supply is debt. first it is borrowed
into existence to the point of credit destruction
then stolen into existence by elites to finance the
final fraud.
either way, it is a failed ponzi scheme in full saturation,
the perfect instrument to do leveraged raids of sovereigns
stupid and corrupt enough to fall into the trap.
self induced monetary chaos can't end well for those
of us who don't appreciate the significance of the
nature of the money system itself. it is an energy
extraction tool and a whip sold as a medium of exchange.
.
financially engineered rolling leveraged sovereign take downs,
ongoing. the plan from 1913.
end the fed and their notes.
we are human beings. not sprogs for / in a corrupt and failed
design of a money machine. look and think
.
John Trudell , I'm crazy ?
http://www.youtube.com/watch?v=ctUecTdPEO0&feature=related

Tue, 06/28/2011 - 12:14 | 1409127 Bam_Man
Bam_Man's picture

They know that crude is insanely over-priced right now vis-a-vis supply and demand.

Hence the decision to unload strategic stockpiles now. They can be replenished later at a much lower price.

"We are all speculators now. Long live the Bernank!"

Wed, 06/29/2011 - 07:29 | 1411089 Urban Redneck
Urban Redneck's picture

If crude isinsanely over-priced right now then so is gold (regardless of central & bullion bank price suppression schemes) as is the whole commodity complex.  The fact is that dollar devaluation has been driving up the cost of oil and commodities broadly for years.

Thu, 06/30/2011 - 13:11 | 1416020 Flakmeister
Flakmeister's picture

Dollar devalation does not come close to explaining the rise in crude...maybe 20-25%

Fri, 07/01/2011 - 06:02 | 1418092 Urban Redneck
Urban Redneck's picture

I'm eyeballing charts today since I have other commitments, but I don't see any outsize or abnormal price increase specific to the oil markets over the last decade. 

Since before 9/11 and the first Greenspan ZIRP US GDP has grown 42%, since 2003 alone world GDP has grown 70%, there is a direct correlation between GDP growth and energy consumption.  Since 2000 the US population has grown 11% while the world population has grown 13%, neglecting increasing obesity food demand growth should correlate to population growth.  Since Aug 2001 the USD has lost 1/3 of its value against its G7 currency crosses (USDX).  The broader CRB index of commodities is up 230%, while Brent is up 330%.  This is more of an increase than food stocks (a little less than 200%),but significantly less than copper (industrial proxy) at 510% or gold (hard currency proxy) at 445%.  I chose Brent since it is a better proxy for global demand, with WTI (and the recent spread collapse and Cushing bottleneck) the increase is only 250% 

 

Metric  Aug01 Jun11     %
US GDP  10.2 14.5       42%
Avg WDP & PPP           70%
OilProd  74.9 82           9%
WordPop  6.1 6.9        13%
USPop  281 311          11%
USDX  113 75            -34%
CRB  60 198              230%
Brent  26 112            331%
Gold  275 1500          445%
Copper  0.68 4.15      510%
Corn  230 687           199%
Soybeans 480 1290   169%
Cocoa  1032 3071     198%

Tue, 06/28/2011 - 12:19 | 1409147 ZerOhead
ZerOhead's picture

Awesome writng Ty. Very readable and on point.

Kudos!

Tue, 06/28/2011 - 12:20 | 1409159 sbenard
sbenard's picture

In addition to the points made in this article, there are those made on another post here at ZH a few days ago, including:

1) By artifically suppressing prices, demand is going to rise. Thus, the demand side will increase.

2) AT artifically low prices, producers are less likely to increase production and to CUT production instead. Thus, if supply were truly the reason for the IEA reserve release, the artifical lower prices are going to cause even LESS supply.

Thus, while demand will rise, supply will contract, and -- voila -- we will end up in the medium to long term with even HIGHER prices!

Oh, and a smaller SPR stockpile also, which makes us even MORE vulnerable to a catastrophic event like an OPEC oil embargo or -- heaven forbid -- a war like the one that will inevitably come if the UN recognizes Palestine just two months from now and they begin importing their favor products -- arms and missiles to fire at Israel.

But not to worry. Wall St continues its Pollyanna Party!

Tue, 06/28/2011 - 12:58 | 1409228 TwoHoot
TwoHoot's picture

It is a government asset sale, pure and simple.

The US is at the debt ceiling, QE2 is over and sovereigns around the globe are finding it more difficult to borrow for current spending requirements.

This is just the first step toward a msssive Going Out of Business Sale.

Cordially,

TwoHoot

 

Tue, 06/28/2011 - 13:51 | 1409401 pops
pops's picture

"They" know we'll never accept NAU, Amero, NWO shit until and unless they break us all to the point where ANYTHING looks better than what we have.

Thank heavens for Reynolds Wrap.  It clarifies the thinking process.

Tue, 06/28/2011 - 13:58 | 1409427 DosZap
DosZap's picture

If there is anyone here, that actually thinks that this systematic dismantling is random, your short a few bricks.

We are facing, have been facing an EVIL so ugly, we dare not see it for what it is.This has been a 30-40yr process of killing the goose that laid the golden eggs.

Funny part, is they (unwittingly) are handing the ball off to China.

And they will do as they please, when and wherever they please.

Bank it.

Get ready for the Boot on the necks...........or get OUT if your able NOW.

Tue, 06/28/2011 - 14:49 | 1409594 el-greco
el-greco's picture

Who needs strategic reserves anymore? If a country or two can invent a pretext to invade another country with the backing of "the international community", strategic reserves are a thing of the past. To wit, the term "world order" must mean a ruling structure with no opposition. The ruling structure owns the security council, the press and the military. It prints money whenever there is a shortage of what it requires to achieve its imperialistic objectives. What more does such a structure need to usurp another country's resources? In the sixties we had nuclear missile heads pointed at us in every major city of the planet and somehow it felt safer than what is unfolding before us today. Even if i am on the winner's side (that's us, the bullies) somehow i think I or my children are in line for similar treatment in the future. This is an invasion of rights as much as it is an invasion of territory. It is a system that doesnt stop until it controls and enslaves everything that moves.  

There are no nations. There are no peoples. There are no Russians. There are no Arabs. There are no third worlds. There is no West. There is only one holistic system of systems, one vast and immane, interwoven, interacting, multivariate, multinational dominion of dollars. Petro-dollars, electro-dollars, multi-dollars, reichmarks, rins, rubles, pounds, and shekels. It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today. That is the atomic and subatomic and galactic structure of things today! 

Network - 1976 

Tue, 06/28/2011 - 16:18 | 1409847 Hayabusa
Hayabusa's picture

Some people might call this poster paranoid or give him some other derogatory name... however for those that are paying attention it is clear that so many bad decisions are being made on such a large scale to accelerate the degeneration it appears planned.  It's all about business/profits... businesses need cheap labor and have used up most of the world's cheap labor sources and oil/gas isn't getting cheaper so transportation is costing more and more and cutting into profits - can't have that.  So what to do... hmm, well it makes "cents" to destroy an economy on purpose and once the deed is done claim it was an accident caused by tornados, tsunais, the subprime mortage meltdown, etc., while the elite profit... when all the smoke clears you once again have a cheap hungry labor force minus overseas transportation costs... illegal immigration was simply another "on purpose bad decision" to facilitate this process.  The system is not profitible enough so it's time to turn it inside out, start over and once again maximize profits (for the elite of course, not the rest of us).  People are about to get recycled they just aren't smart enough to figure out what's happening and why... once they do it will too late.  The sheeple are being sheered and don't have a clue of what's coming their way... time for a branding.

Tue, 06/28/2011 - 16:21 | 1409876 widget
widget's picture

I have another angle on "Lie #3". We cannot rule out that the market is driven higher by speculators just because they are losing money on their bets. Let's say they have an alternate agenda - to bring down the US economy, cut off the supply from the whole middle east, and then cash in on their own domestic oil production at 200 "today dollars" / barrel)...

Tue, 06/28/2011 - 19:24 | 1410301 gerryscat
gerryscat's picture

"Whether they are correct or not about the eventuality of peak oil remains to be seen"? Are you on crack? No, oil will never peak because our finite earth has an infinite supply. No worries, move along.

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