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SocGen's Three Scenarios For Oil See Crude Price Between $110 And $200

Tyler Durden's picture





 

After Nomura released a report two weeks back predicting oil could rise to $220 if the MENA situation escalates, this morning SocGen's Michael Wittner has released his own scenario analysis on the possible outcomes of the 2011 revolutions. His three cases see oil within the following escalating thresholds: $110-$125; $125-$150; and $150-$200. We are fairly confident that the worst case, which as expected involves all sorts of bad things happening in Saudi Arabia, is missing an extra zero somewhere. Some key observations from the report (attached below): "The forward curve for Brent, the better indicator of global oil market fundamentals, is currently in backwardation (nearby premium, forward discount) for the next 5 years, reflecting concerns over growing physical tightness in the crude markets. The oil markets are pricing in an extended Libyan shutdown of crude exports (see below). Even on the WTI forward curve, where prices are still under pressure from local mid-continent US market conditions, the contango has eased and now only extends through 2011; from 2012 through 2015, WTI is also in backwardation. As the Libyan crisis has escalated, the latest US CFTC data show that non-commercial net length for NYMEX WTI futures has reached an all time high. This is a key indicator that a new wave of investor flows is now moving strongly into WTI and the oil complex in general. With the widespread unrest in the Middle East and North Africa (MENA) region expected to continue, and the oil markets worried about further supply disruptions, the attractiveness of commodities and oil to investors has been underscored. With oil prices driving heightened concerns over inflation, oil itself is seen as a good hedge against inflation." In summary, SocGen sees about $15/bbl risk premium built into current prices, which could jump to as much as $110.

Full SocGen Oil Market Scorecard:

Scenario highlights:

Geopolitical Scenario 1: Libya shutdown, plus widespread unrest in the Middle East and North Africa. Brent price range of $110-125/bbl

This is the scenario that we are in right now. Current shut-in Libya crude production - lost supply - is roughly estimated at around 1.0 Mb/d by the IEA. This leaves crude output of around 600-650 kb/d, compared to normal crude production of 1.65 Mb/d.

Crude exports were estimated at 500-600 kb/d in the past week by the IEA, compared to normal crude exports of 1.30-1.35 Mb/d.

With refinery operations disrupted, almost all crude supply was exported, though the export figures also include crude drawn from inventory at operating export terminals.

Will the shut-in volumes go higher? The answer is "yes". As the conflict drags on, it is entirely possible, and maybe even probable, that Libyan oil production and exports will drop all the way to zero, without foreign personnel from oil and oilfield service companies.

So far, in response to the loss of 1 Mb/d of Libyan crude, Saudi Arabia has reportedly increased production by 0.4 Mb/d to 9.0 Mb/d; the Saudis are probably in the process of increasing output further. As we have previously noted, the Saudis can make up the volumes but they cannot make up the quality. In contrast to high quality light sweet Libyan crude, most Saudi spare capacity is medium sour. The Saudis have said that they have some spare crude capacity that is comparable to Libyan grades, but it is unclear how much, and there is market skepticism about these claims.

Importantly, before the Libyan crisis, according to the IEA, Saudi Arabia had spare crude production capacity of 3.5 Mb/d (crude output of 8.6, compared to capacity of 12.1 Mb/d). But now, after increasing output by 0.4 Mb/d, Saudi spare capacity is down to 3.1 Mb/d. As they increase production, Saudi spare capacity will go lower. If Libyan exports go to zero and the Saudis make up for the entire 1.5 Mb/d by themselves, Saudi spare capacity will fall to 2 Mb/d.

Aside from "how big will the Libyan shut-ins get"?, another critical question for the oil markets is: "how long will the shut-ins last"? This is a huge wildcard - a "known unknown"  - and it depends on whether and when Gaddafi steps down or is forced out, and how long the developing civil war lasts.

Judging by elevated price levels across the crude forward curves, as well as the backwardation, the oil markets appear to be pricing in an extended Libyan shutdown, lasting several months. The markets are also pricing in continuing widespread unrest in MENA, but are not assuming actual oil disruptions in other countries.

Brent price range for Scenario 1: $110-125/bbl

Bullish factor: Saudi spare capacity declines, possibly all the way to 2 Mb/d.

Offsetting bearish factors: none. This scenario would not cause significant downgrades to global GDP growth or global oil demand growth. There is no chance of a release of IEA emergency strategic reserves in this scenario.

What if the situation in Libya is resolved and goes back to normal quickly? It would still take months for oil production and exports to get back to normal. Oil workers would need to return to Libya, and they would need to assess the condition of the oil fields.

Possible issues include reservoir damage and looting or sabotage of equipment at oilfields, pipelines, and terminals.

In addition, sanctions and legal restrictions recently imposed on Libya could complicate a return to normal trade and commerce.

Also, if there is a change in the state oil company due to a change in government, there could be contractual issues to deal with.

That said, our main concerns revolve around the oil fields themselves. The bottom line is that if the Libyan crisis ends, prices would fall, but not all the way to the pre-Egypt levels of $95-100 Brent, and not all at once. Prices would decline gradually, as flows are restored. However, the wider MENA unrest would still cause a residual risk premium in oil prices of perhaps $5.

Geopolitical Scenario 3: Unrest spreads to Saudi Arabia and threatens Saudi crude exports and any remaining spare capacity. Brent price range of $150-200/bbl.

In this most extreme, worst-case scenario for the oil markets, serious unrest spreads to Saudi Arabia. In this case, it does not really matter if Libya or any other producers are shut down or not. Saudi Arabia is OPEC's biggest producer and the world's biggest current holder of spare capacity. If production and exports are

Geopolitical Scenario 2: Libya shutdown, plus another shutdown in a medium-size producer, plus widespread unrest in the Middle East and North Africa. Brent price range of $125-150/bbl.

In the oil markets, there is a lot of concern and talk about more extreme geopolitical scenarios, although these are not explicitly priced in. One such scenario involves another supply disruption in another medium-size producer, while the Libya shutdown continues, and widespread MENA unrest also continues.

An example of this would be a supply disruption in Algeria, which exports 0.9 Mb/d of crude and NGLs and another 0.5 Mb/d of products. In total, this makes Algerian exports of 1.4 Mb/d very similar to Libyan exports of 1.5 Mb/d.

We must emphasize that we choose Algeria as an example here simply because of its export volumes. We do not believe that there is a high probability of unrest in Algeria, but will leave the geopolitical analysis of this country for another time. The purpose of this scenario exercise is to frame up broad price ranges and key market dynamics that need to be taken into account.

If Saudi Arabia starts with 2 Mb/d of spare capacity, because they are alone making up for a full Libyan shutdown, then they have enough left to make up for another 1.4 Mb/d of Algerian crude and product exports; we assume that Saudi crude will, in effect, substitute for Algerian product exports, and will be processed in spare refining capacity in Europe and elsewhere.

This would leave the Saudis with only 0.6 Mb/d of spare capacity. For oil market participants, this would be considered so low as to be "basically nothing left". This is especially true because in this scenario, we continue to have unrest and perceived threats to production elsewhere in MENA.

Also, remember that estimates of capacity in Saudi Arabia and elsewhere are not precise, and there is a range of uncertainty around the figures. There is no official source with "the right number". For the time being, we continue to use the IEA's capacity estimates; however, we note that we are in the process of reviewing our capacity estimates for OPEC countries.

Brent price range for Scenario 2: $125-150/bbl

Bullish factor: Saudi spare capacity declines to almost zero.

Offsetting bearish factors: yes, they increasingly start to come into play. In this scenario, with prices reaching the highs seen in July 2008, there would be significant downgrades to global GDP growth and to global oil demand growth. The "demand destruction" would be focused on the US, as was the case in 2007 and H1 2008. Because of the low tax burden on end-users in the US, consumers and businesses quickly feel the full brunt of higher market prices.

Another key bearish factor would come into play. In this scenario, there is a good chance of a release of IEA emergency strategic reserves, with the probability increasing as Saudi spare capacity dwindles. See the chart above for the maximum drawdown rates of IEA strategic crude and product reserves.

Geopolitical Scenario 3: Unrest spreads to Saudi Arabia and threatens Saudi crude exports and any remaining spare capacity. Brent price range of $150-200/bbl.

In this most extreme, worst-case scenario for the oil markets, serious unrest spreads to Saudi Arabia. In this case, it does not really matter if Libya or any other producers are shut down or not.

Saudi Arabia is OPEC's biggest producer and the world's biggest current holder of spare capacity. If production and exports are affected, or even perceived to be seriously threatened, the impact on the oil markets would be dramatic, to say the least.

As with Scenario 2, we must emphasize that we consider serious Saudi unrest or a Saudi disruption a very low probability
scenario. We include it here because, in the current tense environment in MENA, and with severe and occasionally violent protest ongoing in Bahrain, Saudi Arabia's neighbor, oil market participants are discussing "what if the worst-case actually happens"? Again, we will leave the geopolitical analysis of this country for another time. Here, we simply try to estimate broad price ranges and key market dynamics.

Brent price range for Scenario 3: $150-200/bbl

Bullish factor: Saudi production and exports are reduced or are under perceived imminent threat, and any spare capacity is
rendered irrelevant.

Offsetting bearish factors: yes, they become major drivers in the oil markets. The higher the price spike, the more important they become. In this scenario, there would be large downgrades to global GDP growth and large downgrades to global oil demand growth ("demand destruction").

In this scenario, there is an absolute certainty of a release of IEA emergency strategic reserves. In addition, IEA "demand side management" measures, such as fuel rationing, would probably be imposed, as part of a full-fledged emergency response mechanism.

 

 


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Mon, 03/07/2011 - 11:11 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

Between $110 - $220??? That's what I call a BIG target...

Mon, 03/07/2011 - 11:30 | Link to Comment schoolsout
schoolsout's picture

Put 350 gallons in the boat this past weekend...Diesel at the marina was only $3.38/gal

Thought it would be much worse...hopefully, we'll get one or two trips offshore in before the coming storm in oil really takes hold

Mon, 03/07/2011 - 12:08 | Link to Comment French Frog
French Frog's picture

that's not a target, that's just a wild guess with as broad a margin of error as possible just to make sure that all bases are covered so in 6 months time (or less) the writer can say "see... i told you so";

by its own definition, a target is "a reference point to shoot/aim at" and should be concise, not vague

Mon, 03/07/2011 - 13:12 | Link to Comment financeguru500
financeguru500's picture

Here are my 3 scenarios for oil.

1) it goes down in price.

2) it stays the same.

3) it goes up in price.

Now prove me wrong. lol

Mon, 03/07/2011 - 12:11 | Link to Comment mophead
mophead's picture

*stealth devaluation*

Mon, 03/07/2011 - 11:14 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

It's somewhat odd that these analyses ignore that:

1) Oil hit 147 in 2008 without any of these "Mideast turmoil" stories

2) Oil has been above $90 in 3 of the last 4 years without any of these "Mideast turmoil" stories.

3) And hell, let's make that above $105 in 2 of the last 4 without any of these "Mideast turmoil" stories

 

Mon, 03/07/2011 - 11:18 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

These reports are junk; no one can predict this fluid situation or market reaction.

Mon, 03/07/2011 - 11:21 | Link to Comment RobotTrader
RobotTrader's picture

Exactly.

The next credit crisis could send oil back down to $35 within 6 months, easy.

With the outlandish leverage being used right now by the hedge funds, if this market cracks like it did in 2008, crude will get decimated.

Mon, 03/07/2011 - 11:29 | Link to Comment Long-John-Silver
Long-John-Silver's picture

Second dip hits any moment now. Jobs go in the crapper, oil hits $30, and Obama runs back to Kenya.

Mon, 03/07/2011 - 11:57 | Link to Comment pslater
pslater's picture

"...and Obama runs back to Kenya".

Let us pray.

Mon, 03/07/2011 - 11:59 | Link to Comment william the bastard
william the bastard's picture

QE ends abruptly (sooner than June) as a salute to gas prices, SPX goes in crapper, PMs go in crapper, Obama runs back to Chicago to hand out pipes to crack heads.

Mon, 03/07/2011 - 11:36 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

From the junk predictor himself:

Gold brutalized, down $10 already from its highs
RobotTrader - Mon, Mar 7, 2011 - 09:39 AM

Here comes he Cartel with its "Midnight Massacre"

Probably a key outside reversal day for the CRB Index

 

 

 

Mon, 03/07/2011 - 12:34 | Link to Comment Hulk
Hulk's picture

"big leak in the gulf proves there is no such thing as peak oil" my fav robo quote...

Mon, 03/07/2011 - 12:50 | Link to Comment DaveyJones
DaveyJones's picture

Pure genius. I mean, all we need are more disasters to divert one.

Mon, 03/07/2011 - 11:40 | Link to Comment AbandonShip
AbandonShip's picture

Credit Crisis?  Who you kidding? Haven't the CBankers proven they will do ANYTHING to prevent another credit crisis?  They'll sacrifice everything to make sure banks stay alive.

Mon, 03/07/2011 - 14:49 | Link to Comment redrob25
redrob25's picture

Outlandish leverage?

 

Let me guess, you were educated at Princeton, recruited by one of the big banks, and after the initial downturn, they told you that to keep your job, you had to run a bunch of bulletin board accounts under different accounts telling everyone nothing is wrong. What do they pay you a month? 5-6 grand?

Mon, 03/07/2011 - 11:20 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

And as usual they left out a black swan scenario... What if Hezbollah and Israel decide to have another go at each other? What if a small space rock lands in downtown Saudi Arabia? What if a tanker dies and sinks of natural rust in the Straits of Hormuz?

Too many variables to imagine them all...

Mon, 03/07/2011 - 12:34 | Link to Comment Drachma
Drachma's picture

I think the price of oil has less to do with the Middle East and more to do with gold. $200 oil quite possible in that respect.

Mon, 03/07/2011 - 11:15 | Link to Comment Flakmeister
Flakmeister's picture

We are at the tipping point based on effect of historical oil spikes. The higher oil spikes, the harder the economic fall. Unlike Au, oil spikes are highly deflationary.

Recommend very short term trades only or aquiring US/Cdn oil assets for a long term play.

Mon, 03/07/2011 - 11:28 | Link to Comment AbandonShip
AbandonShip's picture

+1 see my post below too.

Mon, 03/07/2011 - 11:41 | Link to Comment Flakmeister
Flakmeister's picture

+1 see my reply to your post below... tag, you are it!

Mon, 03/07/2011 - 11:22 | Link to Comment Seasmoke
Seasmoke's picture

why not $221 ???

Mon, 03/07/2011 - 11:33 | Link to Comment schoolsout
schoolsout's picture

220....221...whatever it takes

http://www.youtube.com/watch?v=iX3kxAA2L4Q

 

Mon, 03/07/2011 - 11:22 | Link to Comment locinvestor
locinvestor's picture

Here's another angle. Some reports say the States are trying to get Saudi Arabia to supply the Libyan rebels with arms (to do our work for us?). If that's true OR if Obama was stupid enough to acutally let one of our soldiers get killed there, how would that play into this?

Based on what's happened so far in Iraq and Afghanistan, my prediction is nothing would happen. Some like Stephen Lendman are saying that MSM outlets like the NYT are effectively govt. propaganda outlets. Which in many ways is true.

Is it once again a matter of out-of-sight-out-of-mind? I'm too busy trying to keep my home. What the fuck do I care about Libya? Acutually, you should give a shit.

Mon, 03/07/2011 - 11:23 | Link to Comment Robslob
Robslob's picture

or just stay i cash until everything blows up like last time...although in reality...2008 was probably a "worldwide bankers dry run" on how to completely fuck everyone on the planet...

Guns, ammo, soldiers, gold, silver, food, water and clean burning natural gas bitches.

Mon, 03/07/2011 - 11:25 | Link to Comment Stroke
Stroke's picture

Looking forward to the"Day of Rage"....lawn-chair & popcorn ready

Mon, 03/07/2011 - 11:26 | Link to Comment AbandonShip
AbandonShip's picture

If SGen is right, this will kill the airline industry (especially those with unhedged fuel costs).  Anyone notice the recent ticket price hike?

Why don't these politicians & central bankers see that inflationary monetary policies will crush petro-chemical based economies?

Mon, 03/07/2011 - 11:40 | Link to Comment Flakmeister
Flakmeister's picture

The inflationary policies are only exacerbating the underlying tend.

Net oil exports, i.e. the oil on the market, is down ~5% since 2005

The overall energy content of what we call "oil" has been flat since 2005 despite modest increases in production rates.

http://www.aspousa.org/index.php/2011/02/egypt-a-classic-case-of-rapid-net-export-decline-and-a-look-at-global-net-exports/

http://www.theoildrum.com/node/7385   (figure 6)

 

If you read this, it will also give insight into what happened in Egypt. To futher illustrate this, go to

http://mazamascience.com/OilExport/

Select Egypt.  You may want to play around with other countries to get a feel for what is going on.

Mon, 03/07/2011 - 11:57 | Link to Comment AbandonShip
AbandonShip's picture

So in addition our fresher oil has a downtrend in energy yield.  Excellent! Can't we just print more of it?  Works for debt.

Mon, 03/07/2011 - 16:44 | Link to Comment Flakmeister
Flakmeister's picture

  No, not fresher, just a changing composition of what is called oil...

Thermodynamics is a cruel heartless bitch...

Mon, 03/07/2011 - 12:07 | Link to Comment DaveyJones
DaveyJones's picture

not sure our grandkids will ever fly on an airplane 

Mon, 03/07/2011 - 11:32 | Link to Comment bankonzhongguo
bankonzhongguo's picture

Just saw protesters in Kuwait starting up against the government.  Nice.

You can't tell what is actionable information anymore from what is market pumping dis-information.  Which means everyone is on their own.

No real newz out of Bahrain either.

Is the House of Saud in da house?

Mon, 03/07/2011 - 11:48 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

There is no actionable information.  Oil is not about markets.  It's about death.

Mon, 03/07/2011 - 11:37 | Link to Comment TideFighter
TideFighter's picture

The Saudi Arabia National Guard (SANG) is already on full military alert and began building "pre-battle" inventories of ammo, food, and fuel. I have two very close friends in SA, one who has just completed a major SANG order for provisions. SANG was one of the first on the scene in the Gulf war.

"Units include 3 Mechanized Brigades; 6 Infantry Brigades; 2 Separate Battalions; Security Force to include a Special Brigade, Special Security Battalions, Military Police Battalions and two Guard Battalions; Headquarters and Regional Signal Units; Regional Logistics Base Commands; one Engineer Battalion; Medical to include Military Field Medical Command, King Fahd Hospital, Falcon Peninsula Hospital, and Regional Medical Units"

 

 

Mon, 03/07/2011 - 11:38 | Link to Comment economists_do_i...
economists_do_it_with_models's picture

Perfect storm right now between QE2 ending/no QE3 and things calming down in the Middle East for the dollar to strengthen and oil to drop.  Energy stocks like COP & MRO are very overbought in my humble opinion.

Mon, 03/07/2011 - 12:08 | Link to Comment web bot
web bot's picture

I think you're right.

What's your view on PMs, especially silver?

Mon, 03/07/2011 - 12:55 | Link to Comment Shoegazer
Shoegazer's picture

There's no way in hell I'm betting money against QE3.  I don't see Benny telling the banks and treasury that he's closing the free money tap.

Mon, 03/07/2011 - 11:44 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

It's not about markets.  Oil won't even be traded publicly in a few years.  Most oil long term contracts are now non public.

Oil is the alpha asset of civilization.  Life at the 6.8 billion level depends on it.  It is one of very, very few that disappears entirely with use.  It's not infinite.  The planet's volume is not infinite so it cannot be.

Therefore it has to be gone or all but gone sometime.  Whenever that time is, rest assured there will be a majority who deny that time has arrived.

Mon, 03/07/2011 - 12:42 | Link to Comment FrankIvy
FrankIvy's picture

I've always thought that somewhere between 200 and 300 a barrel the .gov steps in to the oil market, ending public trading in the U.S..

Mon, 03/07/2011 - 13:39 | Link to Comment flattrader
flattrader's picture

Crash,

>>>Most oil long term contracts are now non public.<<<

Could you elaborate?

I am assuming you mean direct contracts with producers/suppliers like BP.

Or are you talking about something different?

Thanks in advance.

 

Mon, 03/07/2011 - 18:27 | Link to Comment Flakmeister
Flakmeister's picture

So called sovereign deals. Google up the relationship between Venezuela and China. That is one I am definately aware of. Oil that would otherwise be on the free market is tied up in quid pro quo or fixed contract price deals. I believe, but may be mistaken, a similar relationship exists between China and Iran.

Edit: I should add these sovereign deals are part of net exports discussed above, but the oil is not on the open market.

Mon, 03/07/2011 - 12:16 | Link to Comment earlthepearl
earlthepearl's picture

Do you think contract expriations in a few weeks will cause a pull-back

is some of the Oil future ETFs a la USO?

 

I just closed out some call options on this ratioanlization, but now i think I just had a

shaky hand

 

Mon, 03/07/2011 - 12:42 | Link to Comment FrankIvy
FrankIvy's picture

Have conviction because you've done your due diligence, follow through, never second guess.

Mon, 03/07/2011 - 12:27 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

On Morning Joe today former Senator Judd Gregg along with former Presidential canidate and White HOuse avidisor under Ford, Nixon and Reagan- Patrick James Buchanan

...said a "collapse of the dollar= near certainty" and that US Foreign Policy would soon "change completely".

Who is telling the truth, folks?

I don't want to be caught with my pants down if I can help it! I am scared!

People's lives are being messsed with!

http://www.msnbc.msn.com/id/3036789/ns/msnbc_tv-morning_joe/

Mon, 03/07/2011 - 12:33 | Link to Comment FrankIvy
FrankIvy's picture

Any Saudi issues means +200, no questions asked.  Everything is hanging on by a thread.  KSA having riots and or a couple of pipeline attacks sends oil booming, because, if you don't have your contracts set when the KSA is forced to cut exports by 25%, you may not get any oil.  Oil at 220 is much better than no oil.

Mon, 03/07/2011 - 12:43 | Link to Comment Atomizer
Atomizer's picture

Going back to Early 2008, we bottomed at 69.69. Still have a little wiggle room.

http://www.chartingstocks.net/wp-content/uploads/2009/09/US_dollar.png

http://www.fxtrademaker.com/usdx.htm

 

Mon, 03/07/2011 - 13:01 | Link to Comment r101958
r101958's picture

Since 11am somebody has been buying dollars. Taking down gold, silver and oil. Not for long me thinks.

Mon, 03/07/2011 - 13:24 | Link to Comment 10kby2k
10kby2k's picture

Was that Larry Kudlow arguing for the end of QE2 and/or a rate hike to achieve a stronger dollar on  CNBC to lower oil and all commodity prices?  And he got no opposition.....even from Liesman (who said $4/gas was the freak out price). Or was I hallucinating and/or flashback.

Mon, 03/07/2011 - 13:28 | Link to Comment 99er
Mon, 03/07/2011 - 14:26 | Link to Comment Scorpio69er
Scorpio69er's picture

re: "Geopolitical Scenario 3: Unrest spreads to Saudi Arabia"

 

Saudis mobilise thousands of troops to quell growing revolt

Saudi Arabia was yesterday drafting up to 10,000 security personnel into its north-eastern Shia Muslim provinces, clogging the highways into Dammam and other cities with busloads of troops in fear of next week's "day of rage" by what is now called the "Hunayn Revolution".

http://goo.gl/1ZURq

 

Mon, 03/07/2011 - 16:09 | Link to Comment ivars
ivars's picture

There is only one scenario: relatively strong USD and punctuated supply and extraction investment disruptions continuing at least till the end of 2014, when oil will be 200 USD on average. This leads to steady upgoing oil price curve, with a little ( to Brent 130-145) drop after Q1 2012 when the USA will be in recession again. But this time, due to supply disruptions in all oil producing countries due to political instability, oil prices will NOT fall with 2012 -2013 recession in the USA ( and probably elsewhere) :

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&start=0

http://saposjoint.net/Forum/download/file.php?id=2608

http://saposjoint.net/Forum/download/file.php?id=2609

Graphs were made on february 6th taking into account typical decooperation patterns after too much cooperation (globalisation, cheap credit, herding)  caused sharp crisis ( Lehman-March 2009) and its effect on oil prices. Once oil started to grow with revolutions all over the place, further developments became clear, and mappable.

Decooperation as natural reaction to too much cooperation that lead to the boom and bust will ensure countries and companies will start to play zero sum game, leading to short term outlook and practical solution dominance over world wide Utopian schemes.

The logical thing is , that USA will be forced to return to fiscal prudence before it will run up real inflation by rising oil prices which renders all spending senseless. And return to fiscal prudence means strong USD and recession again.

 

 

 

Mon, 03/07/2011 - 16:10 | Link to Comment SparkyvonBellagio
SparkyvonBellagio's picture

Think they now suck aka tap the Gulf of Mexico Oil as a National Oil Reserve.

Just dip a hose into the bucket and bring it up?

 

 

 

Mon, 03/07/2011 - 16:12 | Link to Comment Scorpio69er
Scorpio69er's picture

The collapse of the old oil order

How the petroleum age will end

by Michael Klare

The world economy requires an increasing supply of affordable petroleum. The Middle East alone can provide that supply. That’s why Western governments have long supported “stable” authoritarian regimes throughout the region, regularly supplying and training their security forces. Now, this stultifying, petrified order, whose greatest success was producing oil for the world economy, is disintegrating. Don’t count on any new order (or disorder) to deliver enough cheap oil to preserve the Petroleum Age.

One conclusion isn’t hard to draw: Efforts by outsiders to control the political order in the Middle East for the sake of higher oil output will inevitably generate countervailing pressures that result in diminished production. The United States and other powers watching the uprisings, rebellions, and protests blazing through the Middle East should be wary indeed: whatever their political or religious desires, local populations always turn out to harbor a fierce, passionate hostility to foreign domination and, in a crunch, will choose independence and the possibility of freedom over increased oil output.

http://goo.gl/3Ojl0

Mon, 03/07/2011 - 16:24 | Link to Comment Scorpio69er
Scorpio69er's picture

Someone has decided to "junk" my last two posts -- without offering any particular reason why or any counter-argument to that which is posted.

Apparently, I've touched a nerve somehwere. Great!

 

 

Mon, 03/07/2011 - 16:43 | Link to Comment Flakmeister
Flakmeister's picture

  There are deniers of all stripes here....don't worry, take it as a badge of honor. Be ready to defend your honor though!

Mon, 03/07/2011 - 20:32 | Link to Comment lsjcma
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Tue, 03/08/2011 - 02:08 | Link to Comment PulauHantu29
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The Bankers testified (to their friends in Congress), "No one could have seen this coming...."

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