As US Energy Secretary Expresses "Great Concern" Due To High Oil Price, OPEC Oil Shipments Decline

Tyler Durden's picture

With the market now only capable of kneejerk headline reactions which end up being immediately priced in, in the pursuit of the mythical Russell 36,000, it completely ignores the actually important news (whose interpretation has not been programmed into the algos trading the S&P) such as input costs and their derivatives, which will inevitably crush margins and lead to the same market reaction as that seen in the summer-fall 2008 transition. And since leverage on all cash flow producing assets will be at the same level as US banks circa 2008, the result will be an even worse wipe out. It has gotten so bad that US Energy Secretary Steven Chu was dragged out of his office to present his version of the "irrational exuberance" speech so pervasively ignored by the stock market until it was proven to be the only sensible thing ever uttered by the maestro. At a news conference on clean energy, Steven Chu said on Thursday high oil prices posed a threat to the global economy. "The oil producer countries and the oil consuming countries are concerned because it does have an impact on a very fragile economic recovery. There is great concern," Chu told a news conference while attending a clean energy conference. "There's ongoing discussions ... I'm not going to go into any of the details of the discussions. There is a concern about trying to stabilize prices. There is a concern about rising prices," he said." There may be a concern, but according to the president there isn't really much that can be done about said prices. The best people can do is learn to cope. Especially since there is no chance that the commodity complex will be declining any time soon: to many today's ECB decision was a potential catalyst. And instead the market took one look at the number, listen for 2 minutes to Trichet's rambling remarks and bid everything up.

From Reuters:

Oil prices vaulted to their highest level since September 2008 this week, stoking concern among analysts and economists that the higher cost of fuel will crimp consumers' spending.

OPEC ministers, however, have said the organization cannot do anything to stop the rally as the market is already well supplied.

OPEC is not due to meet to discuss output policy until June, although Saudi Arabia has increased its own production to help compensate for the loss of Libyan oil exports amid fighting between rebels and forces loyal to leader Muammar Gaddafi.

Chu said he was aware that the Libyan rebels had been able to sell a cargo of crude oil but he did not have any details on the transaction.

"We know it has occurred. The United States is supportive of that sale and is supportive of the Libyan transitional government for that sale," he said.

Chu was in Abu Dhabi for the second Clean Energy conference along with ministers approximately two dozen other countries. Chu said the ministers made progress on international cooperation for the development of smart electricity grids, home appliance efficiency and electric vehicle deployment.

What is concerning is that according to Oil Movements, OPEC was set to ship 1.6% less oil in the 4-week period. Well, since prices have only been going up, obviously OPEC is not chasing a drop in demand. Instead, OPEC may have well reached the proverbial peak in production. Sure enough this does include the offline capacity from Libya, although that conflict is far from over. What is troubling is ongoing preponderance of free money in margin accounts: with the market topping at the 1,330 level, the only asset classes that continue to push ever higher is the energy space and of course, precious metals.

Expect to see even more buying of oil as speculators keep their mouth shut for fear of breaking the trade and end customers keep their mouth shut for fear of upsetting the status quo.

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Cdad's picture

Equity market volume now approaching a gaseous level slightly lower than vapor.  Nice.  Confidence inspiring.  After all, HFTs are long and strong...30 seconds at a time.

Joke.  What a complete joke.  They have killed the damn market!

blindfaith's picture

And what is with MSM...every 1/2 hour giving stock market scores.  It used to be at the end of the day.  Someone is influencing this hype reporting it can not be by accident.

zeek's picture

It isn't like Obama stuttered when said his energy plan included "... necessarily higher prices..."


NOTW777's picture

chu obama and the libs want higher gas prices

Gordon Freeman's picture

Just buy crude futures, and chill...Who gives a shit what Steven "pinhead" Chu has to say, anyway?

Abner Doon's picture

Did increasing amounts of money, debt, energy and people

enable the world to consume more raw materials in the last 75 years than in recorded history?


If US mainland oil discovery peaked in the 1930’s

leading to a production peak in the early 1970’s

and world discovery peaked in the 1960’s


when should global oil production peak?



Drag Racer's picture

well lets think about all that.

If US mainland disclosed oil discovery peaked in the 1930’s

leading to a policy enforced production peak in the early 1970’s

and disclosed world discovery peaked in the 1960’s


when should policy enforced global oil production peak?

and how much oil is actually there? no thats a real question that actually changes all the time...

trav7777's picture

yes, let's start out with the OBSERVATION that the perpetual ponzi growth society has been astoundingly GREAT for the upper crust and then jump to the conclusion that they want to kill it.

FOR WHAT?  This makes NO FUCKING SENSE whatsoever!

What fucking enterprise WILLINGLY sells less product than they can?  Why in the hell would "TPTB" want to DESTROY the system of perpetual growth that has made them masters of the world?!??

Flakmeister's picture

  I have to laugh... It amazes me that people even have to have this explained to them..

trav7777's picture

people are fucking stupid.

They will not contest that growth in oil production can't go on forever.  Nor will they argue that oil is infinite in quantity.

Just NOT NOW.  Not in MY LIFETIME.  So, they persist in a state of denial because it just can't be that we will be the ones to cross this epoch.  Please, let it be a future generation.

Everyone implicitly knows that the world runs on oil and a scarcity in that product or even a failure to grow its availability will be incredibly disruptive.  So they invent psychological devices to permit themselves to remain in denial.  This isn't even dissonance; it's straight out self-delusion.

long juan silver's picture

Never. Abiotic oil, baby. It's the new black gold.

-Do you really believe there were that many dinosaurs?-

samsara's picture

Sorry to break it to you sparky, but decaying Dinos didn't create the oil.  It was shallow sea algae.

ZackAttack's picture

Heathen! Gawd will provide!

Our new energy policy is Abiotic Theism.

r101958's picture

Abiotic oil.......bwahahahhahahahahahhaha. Also, there is a nice bridge in Alaska for sale.

Idiot Savant's picture

There may be a concern, but according to the president there isn't really much that can be done about said prices. The best people can do is learn to cope.

He's right, oil prices have been rising since 2000, and especially since 2003. Americans have had plenty of time to prepare and buy/trade for fuel efficient vehicles. I have a hard time feeling sorry for anyone. Newsflash, it's not your god given right to drive a gas guzzler just cause you're 'merican.

Robslob's picture

your name suits you well....

zeek's picture

wouldn't it be nice if this is the only aspect of family finance high oil prices affected...?!

Fidel Sarcastro's picture

You are correct idiot.  Moreover, isn't it odd that oil prices have been TRENDING for 11-YEARS, yet is still considered too "volatile" to include in inflation?  Shouldn't it be volatile both above AND below the mean to be discarded?

Just sayin'

tekhneek's picture

Agreed 100% actually. I don't feel the gas prices. I bought 1/4th an acre from a farmer near where I live and I put a 600 gallon storage tank there. I bought a ton of gasoline from a fuel processing plant for wayyy under what other people were paying (I got it for 2.28/gallon and it was I think 2.69/gallon at the pump) but I had to buy a minimum of 300 gallons, but who cares? So I spent $1400 or so + some fees for a few friends to help and I've had gas (35mpg from my Honda) for months now.

Robert Neville's picture

Good for you. Make sure you read about long term fuel storage or you'll loose your investment.

samsara's picture

Stabil  Buy it, use it in the 300 gallons.

Gas Preservative

r101958's picture

Is there by chance another 1/4 acre for sale near by?

GOSPLAN HERO's picture

You need to buy fuel stabilizer.

Gasoline starts to go bad after six months in storage.


tekhneek's picture

Yeah. I put several STA-BIL's in it. The one's I got from tractor supply only cured 55 gallons (made for the drums I think) so I had to buy several of those but it's good for 2 years.

earnyermoney's picture

Why was I forced to bailout GM?

Urban Redneck's picture

Not because I am American, but IT IS MY GOD GIVEN RIGHT TO DRIVE A 6000LB 7.3L FORD POWERSTROKE WITH PROPANE INJECTION CRANKING 900 FT/LB OF TORQUE.  As long as I can afford to fill it with diesel that is my right.



Hedgetard55's picture

Shut your pie holes, whiners, and trade your gas guzzler in for an energy efficient, gas saving Volt like our President sagely recommends. He remembers what it was like when he had to pump his own gas, and pay for his golf rounds.

Fidel Sarcastro's picture

Concern?  WTF is wrong with these people?  Oil prices do NOT MATTER...just ask The Bernank!  He guarantees it (not an actual guarantee).


OIL approaching $110 as I type...booooo ya!  So "bullish!"

samsara's picture

Instead, OPEC may have well reached the proverbial peak in production.

Peak Oil

I am Jobe's picture

Deaf leading the blind in the USA. Its over folks. Yak Yak Yak is all one hears.

r101958's picture

"Drill motherfuckers...we got oil..." Yes, we have oil......but can't produce enough of it at reasonable price (EROEI). That is what peak oil means. It doesn't mean we are 'running out'. It just means the world can not produce enough to keep up with demand and indeed the world has reached 'peak' production. This is one reason the world economy is on the rocks. The world needs ever more inexpensive oil to continue growth and to service debt. That is not happening and we are seeing the unhappy results. The world burns through better than 33 Billion brls of oil a year. So a find of 20 billions brls, although seeming large, really is less than a year's supply and that is assuming that all of the 20 bil brls is actually recoverable.

FrankIvy's picture

They'll never let J6P understand that the world is running out of oil and that the only option is a continuous downsize for a few decades.


Instead, a false flag attack on Saudi Arabia will occur, gas prices will go to 15 a gallon, there'll be rationing, and imaginary terrorists will be blamed for our dilemma, thereby perfectly setting up the expansion of the resource wars.


Am I really the only one to whom this end is obvious?

samsara's picture

No, you're not alone.  Have seen this coming for the last 5 - 10 years.  Been watching Peak Oil unfold since then,  had the same belief.



FrankIvy's picture

Good to know.

Many of the PO aware crowd irritate me because they believe that a day will come and the President and the EU president and the Chinese premien and Putin will all stand up and say, "people, Peak Oil is here and we have to talk about mitigation."


That's never going to happen.  Ever.  It's going to be skulduggery right to the last drop.

r101958's picture

Perhaps some do, but I am not in that crowd. I believe they will continue to try to prop up the status quo as long as they possibly can. Then, when it is too clear that production can not meet needs, the problem will be blamed on other geopolitical or natural occurences.......oh, wait, that is happening right now........

r101958's picture too. Glad someone else has done their studying and is not buying all the distractions.

AlaricBalth's picture

Do not expect much cooperation from the Saudi Arabian government concerning much of anything, including increasing their oil output. King Abdullah has been livid with Mr. Obama ever since the President backed the outer of Hosni Mubarak of Egypt. The Saudi decision to disregard Obama last month and send in troops to crush an uprising in neighboring Bahrain was a slap in the face to the U.S. administration. The Saudi's are currently embracing closer ties with Russia and China due to the inept, poll driven policies of the Obama regime.

Muir's picture

Well, yes, absolutely, and I guess we should have invaded Iran at their bequest, just as wikileaks pointed out.

Of course, we should not seek energy independence in the form of electric cars, windmills, solar and, least of all, cutting back on energy usage, because, God forbid, we mustn't forget that Americans are God's chosen people to liberate and educate humanity, and even hinting that God failed to give his chosen people in the Western hemisphere insufficient means and resources, is, well, blaspheme.

Abner Doon's picture

"Higgins (Cliff Robertson) - It's simple economics, today it's oil, right?

In ten or fifteen years, food, plutonium, and maybe even sooner

Now, what do you think the people are gonna want us to do then?

Turner (Robert Redford) -  Ask them

Higgins -   Not now, then, ask 'em when they're running out

Ask 'em when there's no heat in their homes and they're cold

Ask 'em when their engines stop
Ask 'em when people who have never known hunger start going hungry

You wanna know something?

 They won't want us to ask 'em, they'll just want us to get it for 'em"

Three Days of the Condor, 1975

samsara's picture

There you go.  Have quoted that numerous times in the last 10 years.

tarsubil's picture

10 to 15 years after 1975 is 1985 to 1990. 1990 was 21 years ago. I'm pretty sure that the Jehovah Witness's have been predicting the end of the world for the last 21 years too.

Muir's picture

So, who is going to spin this into higher gold, silver prices?

Robert Neville's picture

Help me! I'm hypnotized by your avatar. I can't stop looking.

ZackAttack's picture

Mmmm... compelled to post here just so I'd be surrounded.

monopoly's picture

What planet is this? This is not real, is it?

Drag Racer's picture

Of course higher oil prices make that Chevy Volt that Obombhead pitches more appealing to the ignorant that don't see renewable subsidies...

GE to build nation's largest solar power plant

tarsubil's picture

All the little obedient serfs are going to buy one except for those riding that incredibly fast, convenient, reliable, and efficient light rail.

j0nx's picture

I'm glad he's concerned but his concern does jack and shit for me when I'm filling up my whip with premium at $4.25 per. I give it another 50c before Americans start to get riled up.