Guest Post: Oil Price Could Doom Obama

Tyler Durden's picture

Submitted by Llewellyn King of

Oil Price Could Doom Obama

Like death and taxes, the price of oil is always with us. And like
taxes, it may be President Barack Obama’s worst nightmare at election
time next year.

Among forecasters, there is a sharp division between those who see an
inexorable rise in the price of oil and those who believe it will
stabilize about where it is now.

The hawks see gasoline streaking ahead to $4-a-gallon this year and $5-a-gallon in 2012.

Others say demand will collapse and it won’t go that high. The Energy
Information Administration is very conservative in its forecasts and it
gives very high prices only a 10-percent chance of coming about.

Adding to the confusion is a nasty little spat between the
International Energy Agency in Paris and the Organization of Petroleum
Exporting Countries over price, inventory and what OPEC calls “technical
factors,” such as pipelines down for repair or the loss of the Deep
Water Horizon rig in the Gulf of Mexico last year. IEA is saying that
OPEC is keeping its production quotas low to jack up the price—currently
just over $90 a barrel and the highest grade Brent crude from the North
Sea as high as $99 a barrel—and it is endangering the global recovery
with its actions.

But OPEC Secretary General Abdalla Salem el-Badri has taken issue
with the IEA for roiling the markets with weak data and speculation.
“Supplying the world’s media with unrealistic assumptions and forecasts
will serve only to confuse matters and create unnecessary fear in the
markets,” he said.

OPEC, which drastically cut back its targets for production in 2008
with the collapse of the global economy, has, in fact, increased its
production by 2.3 million barrels a day while formally not changing its
declared targets. OPEC controls about 42 percent of the world’s oil

What is certain is that world is slurping up more oil than ever. The
latest IEA prediction is that daily consumption is increasing and will
reach 89.1 million barrels a day as the recovery proceeds. Emerging
markets and China in particular are held responsible for the surge.

With the exception of two of the savants of the oil industry, the
legendary T. Boone Pickens and former Shell Oil Company chief John
Hofmeister, comment in the United States has been muted. When asked why
the price of oil was so high despite the recession, White House Press
Secretary Robert Gibbs brushed aside the question, recommending the
reporter ask the secretary of Energy, a physicist who has not spoken on
oil pricing.

Jack Gerard, president of the American Petroleum Institute, did not
offer an explanation when he was asked the same question at a meeting in

The fact is that the price of oil is not determined only by simple
supply and demand but by complex premiums and market sensitivities. It
is a market that is roiled by wars and rumors of wars and, because oil
was the first truly globalized commodity, the premiums can have their
genesis far from the futures markets of New York and London.

Uncertainty in Russia, turmoil in Central Asia, the ongoing suspense
of Iran’s nuclear plans and even corrosion in the Trans Alaska Pipeline
System are cranked into the price. No wonder so many hedge funds are
involved in oil. Instability is mothers’ milk to hedge funds.

There are left-wing blogs that maintain that the price of oil and its
occasional spikes are created by elaborate speculative plays on the
futures markets in New York and London. The left is traditionally
paranoid about oil and oil companies, but who is to say they are not
right this time? The memory of Enron is still fresh.

One way or another, two things stand out: The chances are that the
summer driving season will put pressure on gasoline prices this year,
after an extremely cold winter all over the Northern Hemisphere. The
conservative (10-percent chance of happening) scenario by the Energy
Information Administration says $4-a-gallon gas would come at the end of
the summer.

The second reality is that the world thirst for oil has not been slaked; as the world prospers, the greater that thirst.

In 1974, the heads of 23 democracies lost their jobs because of surging energy prices. Obama, beware.

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william the bastard's picture

We'd be at 36K w/o Obama

financeguru500's picture

If we start running out of oil Obama will just ask Bernanke to print more oil. If that doesn't work well start a war on oil for bringing down our economy.

TorchFire's picture

I'd pay $100 a gal for fuel if Obama and his puppetmasters would agree to retire to their fortress island.  More than a fair exchange.  A truly free market would solve the issue rather quickly in their absence.

financeguru500's picture

Lol, that guy looks like he's rallying people to go eat at olivegarden. Who the hell riots in a button up shirt.

flaunt's picture

If you'd actually been following the protests, you'd know that the vast majority are not rioting, they are peaceful protestors demanding an end to a repressive regime.  But I suppose it's easy to be dismissive when you're thousands of miles away safe and sound.

TruthInSunshine's picture

Somewhat OT, but a whole lot of EPS misses today/tonight, and crude inventories building on weekly basis.


Freddie's picture

LOL!  Maybe he likes their salad and bread sticks.  The Ben Bernank's printing press has made bread stick pretty expensive in Egypt.

That picture was worth what?  I could get a tan or put on bronzer - stand in the street with some dude near me and make a fist.  Would that picture be worth....?

RichardP's picture

I have a shirt just like that one.

Freddie's picture

Amazing!  Some Obama boot licker junked your post.  What POS did it?  Hairy Wanker?   Bush may have sucked but the Kenyan with The Bernank are pure evil. 

whatz that smell's picture

headless democracies, bitchez!

HungrySeagull's picture

I don't care how high the prices go as long we have sufficent net pay to commute to work.


We figure to stop driving totally at 12.40 a gallon. At that point we would quit the jobs and stay home for a long time.

Oh regional Indian's picture

There will be no election next year. There has been no election for a while now. Only selection.

"Mommy, why does the new president wear a green uniform? He has so many shiny medals. He must be very brave".

"Yes son, thank god we have such brave men to run the country for us."


Twindrives's picture

Obama doomed Obama.  The man is worthless unless your a TBTF banker.

NewThor's picture

Isn't Obama the turbo douche dumb dickhole that 

reappointed Bernanke? He shall go down as the Worst. 

President. Ever.

And I voted for the Son of a demon.



OnTheFelt's picture

It's not that I don't agree with you contextually, but brother if you think it makes one bit of difference which puppet is being pulled by the strings then you got another thing coming.

Whether it's Obama, Bush, Clinton, or Shit<insert name>Head, business is business as usual: Eugenics, Globilization, Economic Destruction.

...And the same goes for Bernake as well, just a different puppet being pulled by a different string.

Lord Koos's picture

Correct, people just prefer to bash the ones they didn't vote for.

TorchFire's picture

The problem is not Obama, except to the extent he was willing to be the whore of the elite.  The problem lies with the damn puppetmasters.  I don't give a damn who was "voted" for and that wasn't the point.  The wretched fucked up, criminal system must fall and then there can emerge an organic method to assemble it by reading the original instructions. My fear is that the bastard "string pullers" already have their next show ready to go on the road after the curtain closes on this one.

Calmyourself's picture

Lets just banish this bullshit here and now.  It does matter greatly who occupies that seat.  Yes, both parties are corrupt but one believes in a fairly gained profit and one for all intents and purposes does not.  If you cannot see the moral or operative difference you are intellectually lazy.  I do not remember any other president having his signature legislation kicked to the curb as unconstitutional?  Bueller, bueller, anybody?  The current dull tool occupying my house cannot even be bothered to release his college transcripts or one paper from his days as Harvard law Review president..  Why, because he is purely and simply an affirmative action fraud.

TorchFire's picture

Well I still tilt towards the party you favor in a world of no choices, however I can't seem to digest this new definition of "fairly gained profit" that was launched by Bush and co. Don't let the tyranny of divide and conquer get lost as you ponder the validity of faith in one party over the other. You will likely end up with the conviction that there is something terribly wrong with this country. The people no longer have a voice. One side anesthetizes the reasonable into a coma, the other subsidizes and placates the lazy. 

Calmyourself's picture

That is all I am saying "tilt"  They are both corrupt, but the tilt is a small but important point.  Bush and co. launched fairly gained profit ?  I will have to study,I thought it was Adam Smith..   Next thing ya know GWB will have written the darn constitution, learn somthing new every day around here..

TorchFire's picture

The comment about Bush and "fairly gained profit" was satirical.  GWB actually oncce disparaged the constitution by equating it with toilet paper in one of his brilliant remarks.  And I voted for the man...twice. Comparing him to Adam Smith? Hell no.  Bush was the facilitator for the avalanche of free money into the hands of the oppressors. TARP started this conflagration, or at least provided an explosive fuel to the flame. 

Now the inertia of their cumulative mistakes appears to be insurmountable...that is unless they simply get out of the way and let the people sort it all out.  Only under those circumstances would the proper structure assemble itself in sustainable fashion.

Dash Riprock's picture

Well...people don't get what they expect. They get what they deserve. Congratulations!

Confused's picture

I junked you. Not because you are wrong, but rather, because that statement is just silly. 


"They get what they deserve." Really?

CrashisOptimistic's picture

It truly is astonishing, and becoming more so each day, that articles like this can be written without the slightest -- not even the slightest -- suggestion that oil production is what it is not because OPEC won't produce more, but because it *can't* produce more.

Why is that?  Why is this such an unthinkable thought?

And btw, how is it that the article postures itself as making some sort of prediction about super high prices and who gives 10% odds of it.

What in hell do they think $90/barrel is?

Devout Republican's picture

Instead of building islands of steel 200 HUNDRED miles off shore and drilling 1 mile into shifting salt sediment to get to oil thats down another 2 miles, why not just stick another straw in Texas and catch the oil directly into barrels? 

That would be cheaper wouldn't it? 

I can tell you why, because you dumb fucks used it all up!

You're all going to die.  Soon. Its all ready begun.  Mexico is next on the list.  They cross the Export Land Model predictions like now.

Between the high cost of commodities and income from oil drying up (pun intended) look for another failed state in the months to come.

Your next bitchez.

Mad Max's picture

Well you two are quite a peppy pair!

Shame that you're both basically right.

LowProfile's picture

It is unstated US policy to use up all other countries' resources first.

Watch:  As the dollar collapses, and people refuse to trade in dollars with us, new oil reserves will be 'discovered'...  And they will be in Texas.

Mad Max's picture

Well that's an interesting claim.  Why is it then that we're producing all the coal we can, greatly decreasing the quality, and are producing such a short-term glut of natural gas that it's depressing the price?  US oil production peaked in 1970 and has declined greatly since.  You really think that all the administrations and congresses in the last 40 years would all willingly throttle our oil production so that we could say "surprise" sometime long after most of their people are dead from old age?  I got a bridge for sale, just east of Manhattan.

OldTrooper's picture

The puppet administrations and congresses do what they're told.

I'd put nothing past those pulling the strings.

Freddie's picture

Why do they keep grabbing land and saying it is federal lands or a fed park now?  Energy.  Illinois is not even a big coal state but they have more coal that could be truned into diesel than Saudi Arabia has oil.  It could be done at about $25 to 30 a barrel.  This is just one state.  Totally bankrupt IL could easily pay off all their debts with a modest taxes on that oil/diesel.

Tedster's picture

In my more uncharitable moments even years ago I wondered if maybe the lock up of federal and state lands under the guise of protecting "the environment" (whose environment?) was a not so elaborate smoke screen - collateral, some kind of lease or outright sale, you get the idea.

IN aggregate, much of America's energy problems are entirely self inflicted.
Nuclear energy could have supplied most of the BASE LOAD requirement for the grid, that is now being produced by coal. How is that working out?

Not so well. No nuclear facilities have been built in over 30 YEARS.
WHAT is truly remarkable, a cabinet level position was created 30 YEARS ago - the department of energy - and presumably spent millions. What does the taxpayer have to show for it? I could go on, but you get the idea.

There is no "energy crisis" but we're plussed up on idiot obstructionist beauracrat control freaks.

cossack55's picture

We are producing and burning all the coal we can so the byproduct Mercury can be dissolved into the air and water, oh, and soil, in order to kill your stupid ass.  Drill, baby, f*ckin' drill.

Confused's picture

Just a heads up, might not mean anything. Rothschild interest in Coal has apparently increased, similar to the way they got out of gold years before the crisis.

trav7777's picture


we were a net exporter till 1970 whereupon we "let" our economy essentially collapse in order to use up others' resources first?!?!

The price of oil is set by the amount of slack capacity in the production base.  OPEC has been flat out for years

LowProfile's picture

Bullshit?  Just because we aren't pumping it out *right now* doesn't mean it's not in the ground!

That's just the beginning.  Watch and wait, there will be more.

And then there's Canada...

Peak oil my ass.

Here, let me get you a washcloth so you can clean that shit off your face.

EscapeKey's picture

Oh FFS, more Bakken disinformation.

Educate yourself. Head over to the oil drum and see what people who work in the industry say about this - so far - completely insignificant source.

An April 2008 USGS report estimated the amount of technically recoverable oil within the Bakken Formation at 3.0 to 4.3 billion barrels (680,000,000 m3), with a mean of 3.65 billion.

ronin12's picture

Admittedly, I have not thoroughly researched peak oil theory, but my gut tells me it's BS.

People tend to underestimate the vastness of the Earth, and overestimate the impact of human beings on the Earth.

For a prime example, look at the global warming BS...

AnAnonymous's picture

People tend to underestimate the vastness of the Earth, and overestimate the impact of human beings on the Earth.


The vastness of the Earth can be computed. No more uncharted waters, no more unmapped areas.


The 18th and 19th, when expansion in 'vacant' lands was so easy is over.

The probability that something like the North American continent is to be found is pretty low by now.

EscapeKey's picture

The mapping techniques (4D seismic) today are far superior to the ones employed 50 years ago, and yet we discover less oil.

Of course, there are the predictable opportunists (Lindsey Williams, etc) taking advantage of this to sell expensive bullshit "recordings of the elite speaking" to the naive.

nmewn's picture

"The vastness of the Earth can be computed. No more uncharted waters, no more unmapped areas."

And yet...scientists are "surprised" to discover previously unknown asphalt volcanoes only ten miles off the coast of Santa Barbara.

Just sayin.

EscapeKey's picture

If there is no commercial angle with regards to an asphalt volcano, why would anyone in the commercial sphere search for it?

nmewn's picture

My comment was to this;

"No more uncharted waters, no more unmapped areas."

They are always making new discoveries...therefore we have not mapped or charted everything or there wouldn't be discoveries.

Calmyourself's picture

Yeah, we are talking geological formations thousands of feet down in a 3d matrix.  But no more N. America's got it, thanks..

trav7777's picture

Quick question- are you a freaking idiot?

You haven't researched the topic yet you feel that you are justified stating an opinion about it?  From your "gut" no less?


If Peak oil is BS, then oil production has no limit and will grow forever to infinity.  Tell your gut to STFU as I am telling you to.

trav7777's picture

it's absolutely useless to talk to you people, isn't it?

You haven't a mfin clue about oil production yet you constantly tout the SAME SHIT over and over again.

There isn't 14mbpd worth of production in either of those resources, not even 1.4mbpd.  I mean, the most important discovery in FORTY years and right there in the text, they say 40kbpd.  That's 40,000 bbl/day.  Do you even grasp how minute a resource that is?

And later in the article, this guy talks about production falling from 1991 onward and muses that maybe the US had reached peak oil.  He's fucking 21 years TOO LATE.  The US's production peaked in 1970.  This is a researchable, easily-confirmed FACT.

If your moron writer cannot even get THAT right, well then wtf?  HE doesn't believe the US's just nonsense.

Listen, just for felonious crimes against the truth, you should STFU

PeterSchump's picture

And Obama is doing everything he can to save us.  Energy strategy/independence has been nothing but a talking point for every administration since Carter.  That DoE sure was worth it, wasn't it.  We have ourselves some real change in Washington too.