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The Bears Explain The Price Of Gas (Special GOP Primary Edition)

Tyler Durden's picture


In their own inimitable manner, the two bears are back to take on gas prices. Dismissing the higher demand thesis, concerns of the lack of supply, instability in the Middle East, and of course speculators (the same ones who were blamed for financial stocks' deterioration), our favorite speakers-of-the-truth point to what is the only relevant factor - the falling dollar. The Bernank once again stars for his schizophrenic perspective of asset price rises. Enjoy.



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Wed, 03/07/2012 - 15:39 | 2233177 spiral_eyes
spiral_eyes's picture

But I though Obama had saved us all by cutting U.S. reliance on foreign oil!!

Oh well, I guess not. 

Wed, 03/07/2012 - 15:41 | 2233184 SilverTree
SilverTree's picture

Take shelter!

Wed, 03/07/2012 - 15:50 | 2233211 NotApplicable
NotApplicable's picture


Somebody (ZHer?) took the Obama pic that Tyler always uses and shopped him up as Gilligan. Enjoy!


Wed, 03/07/2012 - 16:05 | 2233256 BigJim
BigJim's picture

I've been thinking about this 'increased gas prices are inflationary' meme.

Assuming the money from the rise in prices goes mainly to the countries of export (Saudi, Kuwait, etc), and they turn around and buy increasing amounts of US Treasuries, this could actually be deflationary, if the Fed needs to print less to fund the deficit as a result.

Think of it in this way - if the US government slapped a tax on gasoline imports, and hence reduced the need for the Fed to monetise debt, there would be price inflation, but less monetary inflation, correct? Same thing.

Obviously, if the oil exporters aren't buying more USTs, it won't work this way.

Comments welcome....

Wed, 03/07/2012 - 16:08 | 2233280 nope-1004
nope-1004's picture

More USD in existence = less value per.  Very simple, actually.  Buying UST's with any amount of printed money only extends the game in the short term, which is what we are living through now.  However, as velocity increases (and it has to if "growth" is to take hold), then inflationary pressures could be too hard to control.

At least the bears aren't now claiming some "inside information".  LOL.


Wed, 03/07/2012 - 17:17 | 2233542 economics1996
Wed, 03/07/2012 - 17:58 | 2233722 pupton
pupton's picture

But I thought Newt Gingrich was going to lower the price of gasoline to $2.50 a gallon???  If I were to believe this...well that might mean that Newt Gringrich is bullshitting us and fully talking out his ass to get a quick bumper sticker slogan.  He wouldn't do that, would he?  <sarc>

Wed, 03/07/2012 - 18:05 | 2233754 Flakmeister
Flakmeister's picture

Son, no need for the sarc flag....

Wed, 03/07/2012 - 21:21 | 2234393 Van Halen
Van Halen's picture

No need to waste time bitching about Newt Gingrich when Barack Hussein Obama is on a wild path of destruction! HE'S the one you should be concentrating on right now.

Thu, 03/08/2012 - 00:03 | 2234695 Seer
Seer's picture

And the irony is that a bunch of "conservatives" who lap up His "smaller gov BS" are all too happy to elect Him and have Him MAKE The govt do MORE.

A while back I provided simple math that a two-year-old could use to discredit his $2.50/gal and 2 million bbl/day increase in production.  As Ron Paul and Dr. Albert Bartlett can attest to, people just don't seem able to understand simple math any more.

As we speak, however, Mittens is pretty much tossing out the same, only he's not giving numbers: the polished marketers KNOW that simple "hope" and "change" trumps numbers (whether real or not).  Yeah, Mr. I KNOW BUSINESS Mittens is going to help America be strong again by ensuring that the major oil producers can pump oil out of the US faster.  Maybe we needn't be so cynical, maybe we can make a wager with this guy: we'll elect him, and if he turns out to be wrong we get to eat his children (the disaster might be prolonged until after his natural death, which is how the oligarchs play it- pass off the reigns to their off-spring and it's repeat performance time; by reaching into his genetic future we can wager OUR genetic futures- sounds fair).

Wed, 03/07/2012 - 21:56 | 2234461 BigJim
BigJim's picture

 More USD in existence = less value per.  Very simple, actually.  Buying UST's with any amount of printed money only extends the game in the short term...

Sure. But my point was that gasoline (and, I presume, crude) is largely paid for by not-freshly-printed money. Therefore, if more of this not-freshly-printed money is being recycled into Treasuries (by the crude oil exporters) so that less freshly-printed money is printed to buy Treasuries, there would be a deflationary effect (a la my tax analogy), at least, in terms of monetary inflation.

Wed, 03/07/2012 - 16:28 | 2233337 Flakmeister
Flakmeister's picture

Why don't you compute the flow of funds for the real exporters of oil to the US....

The US has more refining capacity than it needs, therefore as a result, those refiners able to deal with the increasingly sulphurous sludge that passes for oil on the market can exploit the higher crack spreads since the refined goods  are priced off of Brent.... The result of this is that the US exports more refined products than it imports while still taking a lions share of the worlds crude oil exports...

So a import gas tax would not do much...

And I posted this a while back, the oil exporters hold a relatively small fraction of outstanding US treasuries, the big dogs are China, Japan....

Wed, 03/07/2012 - 16:32 | 2233380 trav7777
trav7777's picture

Flak, the gulf recycles through the caribbean and UK

Wed, 03/07/2012 - 16:45 | 2233436 Flakmeister
Flakmeister's picture

True.... esp. the Caribb... but that still makes OPEC et al.  relatively minor players....

Back of the envelope estimate gives OPEC+CARIB+UK about 20% of the top 10 holders or about 10% of total foriegn holdings.... 

What is more interesting to me is the fraction of oil imports paid by the coupon (i.e. a captive source of US dollars) that China, Japan, Taiwan currently enjoy....

Wed, 03/07/2012 - 17:08 | 2233514 DaveyJones
DaveyJones's picture

China buys Treasuries and oil and they're buying more and more of one and less and less of another. Both factors in the  game

Thu, 03/08/2012 - 02:45 | 2235019 merizobeach
merizobeach's picture

"What is more interesting to me is the fraction of oil imports paid by the coupon (i.e. a captive source of US dollars) that China, Japan, Taiwan currently enjoy...."


Please tell me more..

Thu, 03/08/2012 - 09:15 | 2235497 Flakmeister
Flakmeister's picture

Japan has rought 1T of treasuries at an average of ~3.8% coupon, that's $38 billion p.a. or ~$100 million per day, that currently translates to ~800,000 barrels per day or ~20% of imports payed by interest..., 

Now go through and do this for oil importers and you will see that the foreign held US treasury is generating dollars to purchase ~8% of the worlds oil that is freely traded....

Wed, 03/07/2012 - 22:10 | 2234482 BigJim
BigJim's picture

 So a import gas tax would not do much...

I wasn't suggesting there should be an import gas tax, I was using it as an analogy to explain how increased oil prices might actually have (at least, monetarily) a deflationary effect if the additional USDs were being recycled into buying USTs, thereby reducing the need for the Fed to monetize the deficit (ie, just as an increase in taxes would, in theory, reduce the need to monetize our debt).

Most oil is paid for in USDs... most oil is consumed by nonUSD creators, so they need to buy more USDs to purchase the more expensive oil (though I suppose holders of large amounts of USD reserves, might just draw on those reserves directly). This pushes up the price of USDs (relative to other currencies), yes, but then some percentage of those dollars are then sold by the exporters in exchange for USTs, reducing yields, thereby reducing pressure on The Bernank to hit the 'print' button.

I've had too many beers, so I'm not even going to attempt to work out even some of the ramifications of all this. But I'd be jolly grateful if some of my more ruminatively-unchallenged fellow ZHers would take this thesis a bit further...

Thu, 03/08/2012 - 00:30 | 2234751 Seer
Seer's picture

I'm not sure how, but I think I follow your reasoning (and, really, I tended to think the "other" way).

"Most oil is paid for in USDs'

What IF that "Most" is decreasing?  Seems that there's increasing pressure to drop the USD: (Iraq - fail; Libya - fail) Iran, China, Russia, Japan (I thought that they'd gotten mixed up in this a bit).

I'm thinking that all sorts of things are being off-set by lots of other things.  The markets, as hammered as they are, are still fairly dynamic.

I personally have never fixated on price, as I figure that the "winners" will always play the other side of the bet and force it their way: side with high oil, then when enough suckers are on board they push the low oil price button as they kill employment and, thus, demand.  At some point, when very few have chips to play, it'll be over: I'm seeing that govt has only been playing the part of the "straight guy," as it and business are just one act; no more middleman left to actually make the game look like there are multiple players.

Wed, 03/07/2012 - 15:51 | 2233212 TruthInSunshine
TruthInSunshine's picture

An instant 'Bears' classic.

Even tards of the world can now understand.

Wed, 03/07/2012 - 16:02 | 2233249 resurger
resurger's picture

let the sheeps feed on hope TIS...


Wed, 03/07/2012 - 16:07 | 2233271 eatthebanksters
eatthebanksters's picture

I'm a 'Tard' and the bears are awesome....Bill O'Reilly needs to watch this so he can figure out what the fuck he is talking about.  I wish some MSM news would have the balls to play this....maybe Dylan Ratigan?

Wed, 03/07/2012 - 16:24 | 2233339 kridkrid
kridkrid's picture

Bill O'Reilly is simply doing his job.  Divide and conquer.  The purpose of the MSM to 1. obfuscate and 2. pit have-nots against each other.

His job isn't to know what he's talking about... anyone's guess as to whether or not he does.

Wed, 03/07/2012 - 16:46 | 2233439 resurger
resurger's picture


Bill O'Reilly, his job is to rile up people!

why you have mentioned him krid?


Wed, 03/07/2012 - 16:55 | 2233472 Bitchin Bear
Bitchin Bear's picture

Naw man - he's just looking out for the folks don'cha know? 

Wed, 03/07/2012 - 17:31 | 2233615 Flakmeister
Flakmeister's picture

The only way he is looking out for folks is if they could take his bullshit and fertilize the south forty....

Wed, 03/07/2012 - 17:00 | 2233495 ken4aub
ken4aub's picture

I agree 100%. If O'Reilly can't understand the BEARS simple logic.......he's a PINHEAD!!

Wed, 03/07/2012 - 17:21 | 2233569 tmosley
tmosley's picture

The peak oilers still don't get it.

Which puts them where, exactly, in relation to tards?

Wed, 03/07/2012 - 17:29 | 2233612 piliage
piliage's picture

Judging by some of the comments on this thread, you might be wrong on your second point. The normal tards' ability to ignore facts is a bottomless well, the depths of which have yet to be fully plumbed.

Wed, 03/07/2012 - 18:23 | 2233825 Fedaykinx
Fedaykinx's picture

there's lots of tards out there living great lives.


my wife used to be tarded, now she's a pilot.

Wed, 03/07/2012 - 19:22 | 2234023 Sunshine n Lollipops
Sunshine n Lollipops's picture

I was once a total tard. Then I got me some ZH. Now I are smart.

Thu, 03/08/2012 - 00:34 | 2234764 Seer
Seer's picture

As in "airplane" pilot?  WOW, how NOT future!  People are finding it more difficult to move around in automobiles; the trend is pretty clear...

Wed, 03/07/2012 - 15:43 | 2233189 overbet
overbet's picture

100 miles to the gallon possible back in the 30s

Wed, 03/07/2012 - 15:56 | 2233231 resurger
resurger's picture

Shale gas in the United States is rapidly increasing as a source of natural gas. Led by new applications of hydraulic fracturing technology and horizontal drilling, development of new sources of shale gas has offset declines in production from conventional gas reservoirs, and has led to major increases in reserves of US natural gas. Largely due to shale gas discoveries, estimated reserves of natural gas in the United States in 2008 were 35% higher than in 2006.[1]

Thu, 03/08/2012 - 00:46 | 2234807 Seer
Seer's picture

And, for those who just accept this reference, here is the source:

  1. ^ Jad Mouawad, "Estimate places natural gas reserves 35% higher,", New York Times, 17 June 2009, accessed 25 October 2009.

Citing an article in the New York Times.  Hm... I wonder if there's 35% more WMD in Iraq now?

OK, so the RAG references the "Potential Gas Committee" (how fucking Kremlin-esque is that name?), so who are They?  From

Rather than explain to its readers why the Potential Gas Committee (or its member volunteers) might have a vested interested in encouraging hydraulic fracturing as a new energy policy is hashed out in congress, the paper of record simply states that for “advocates of the gas industry, the report vindicates the potential of natural gas in the economy.” Then they close by quoting the managing director for policy analysis at the American Gas Association, Chris McGill, failing to mention that it is one of the institutions listed among the Committee’s volunteer members. Not only that but McGill himself, according to Committee program assistant Linda D’Epagnier is an observer with the PGC and, in his role (he’s been involved for several years), handles all press releases and acts more or less as a PR official for the organization. He’s also a Director on the board of the Potential Gas Agency. That’s a fact the Times should have pointed out.

Yup, we can all TRUST lobbyists!  There's a reason GW Bush was "elected" twice; same reason why Obama was "elected" (number or times TBD).

Wed, 03/07/2012 - 15:59 | 2233240 Flakmeister
Flakmeister's picture

Wow... that is some serious spin...

Riddle me this, how could the fraction of distillate from foriegn sources go down during a period of increasing imports and demand...

Could it be that refined goods are being slyly equated to crude?? Or some other slight of hand, the homespun figures are not standard measures....

Looks just like the games that guys like Lindzen play...

And no, I am not defending Obama by any stretch.....

Wed, 03/07/2012 - 17:21 | 2233568 r101958
r101958's picture

Agreed Flak. It is amazing that the only finite resource recognized here is the money printed by the Fed (not really finite in the truest sense). Of course; no, no, no way is oil a finite resource! We use less now so demand is down and that means higher prices have to be caused by the Bernank. Yes, in part, they are. But, the other part of the equation is that 1; Other members of the world community are demanding more oil and so they hungrily consume all that we don't use and 2; Oil is finite. Oooops! Sorry! Too much reality there.

Wed, 03/07/2012 - 17:27 | 2233598 DaveyJones
DaveyJones's picture

they would never lie about this subject

Wed, 03/07/2012 - 16:15 | 2233313 piliage
piliage's picture

No silly, he did it by giving us a big warm hug and pissing away gobs of tax money for solar panel producers. Can't you just smell that low carbon economy coming? It smells like...victory....

Wed, 03/07/2012 - 18:58 | 2233944 Flakmeister
Flakmeister's picture

Where were you when Bush's baby Range Fuels bit the biscuit?

Similar amount of money, but wait, it gets better, a completely undemonstrated technology...

You were aware that the Repubs put into a law a mandate that required an unproven technology to be producing millions of barrels of ethanol by now...  Now that is what I call *winning*.....

PS I know why you did not know about Range Fuels... Rush and the Boys at Fox swept that one under the rug....

Wed, 03/07/2012 - 19:02 | 2233970 tmosley
tmosley's picture

Fallacy: Piliage opposes solar boondoggles under D, therefore he supported other boondoggles under R.

Wed, 03/07/2012 - 19:44 | 2234104 Flakmeister
Flakmeister's picture

Nope... I never implied he supported Range Fuels...

I only implied his outrage at Solyndra should have been matched by outrage at Range Fuels...

If he was really being upfront and honest about flawed energy policy, he would be aware of the larger Administration failures and evenhanded in his criticism...

My main point being the Faux News crowd never mentioned Range Fuels because of the politics....and given other things he has parrotted here, it is pretty clear where he gets his news...

So, if anything I am suggesting that he has been manipulated....

Nice try Cliff....

Wed, 03/07/2012 - 20:10 | 2234211 tmosley
tmosley's picture

Bullshit.  You are explicitly excusing Solyndra and decrying his justifiable outrage about it by citing some bullshit that no-one has ever heard of before, and telling him his opinion of it.

Nice try, church lady.

Wed, 03/07/2012 - 20:27 | 2234268 Flakmeister
Flakmeister's picture

You really got to work on that reading comprehension Cliffy...

You can't just see what you want to see....

And another strawman, no less... I should start keeping track...

Wed, 03/07/2012 - 16:18 | 2233319 Silver Bug
Silver Bug's picture

All you truly need to know is that the bernak will continue to print massive amounts of money. Therefore the price of real goods will continue to go ahead. Hold your wealth in the ground.

Thu, 03/08/2012 - 00:59 | 2234852 Seer
Seer's picture

But... as long at the EU continues to do the same, and as long as the US continues to steal from the future to feed its MASSIVE military, well... the USD will continue to be the best looking horse at the glue factory.  Yeah, eventually it stops.

If you really want to meet the future head-on you'd look to be sustainable outside all this make-believe world.  Works for the overwhelming majority of people on the planet.

Wed, 03/07/2012 - 16:20 | 2233326 BeerBrewer09
BeerBrewer09's picture

Anyone else get that advertisement about Obama's foreign oil dependance on pandora?

They left out the part about oil prices rising. Honest mistake I'm sure.

Wed, 03/07/2012 - 16:29 | 2233370 Gully Foyle
Thu, 03/08/2012 - 01:07 | 2234866 Seer
Seer's picture

Someone mentioned that it's been on the statements for years.  What I found more disturbing (well, I'm over-reacting, because I have spent time in Canada) is reading the same right-wingish/neocon warmonger/racist/xenophobic shit as here in the US.

Aldus Huxley was right...

Wed, 03/07/2012 - 19:05 | 2233974 tabasco71
tabasco71's picture

I'm even more proud to be a bear now :-)

Wed, 03/07/2012 - 19:34 | 2234057 solgundy
solgundy's picture

talking about high gasoline prices is blantant racism.....




Wed, 03/07/2012 - 15:42 | 2233179 Flakmeister
Flakmeister's picture

Beg pardon...

Falling dollar? Not against other fiats....

Falling wrt to the 2 alpha assets? Oil and Gold?

Wed, 03/07/2012 - 15:46 | 2233199 trav7777
trav7777's picture

Peak oil is too scary for cartoon bears.

I'll laugh if the cretins get the Fed burnt down like they want and more oil doesn't magically start popping out of the ground

Wed, 03/07/2012 - 15:54 | 2233225 TruthInSunshine
TruthInSunshine's picture

We're swimming in oil.

I'll laugh if a congregation of the Church of Peak Oil has one of their temples flooded to the roof trusses with oil.

Get frackin', cracklin'.

Wed, 03/07/2012 - 16:04 | 2233258 Flakmeister
Flakmeister's picture

Swimming in oil... wow...

Wow, where's the pool?

Do you mean the Bakken, that wonderful field that will yield less oil (and at a lower rate) than Prudhoe?

I'll grab my towel and flip-flops....

PS If we be swimmin', why are net Oil Exports down ~10% since 2005?

Wed, 03/07/2012 - 16:07 | 2233273 tarsubil
tarsubil's picture

"If we be swimmin', why are net Oil Exports down ~10% since 2005?"

Global Warming.

Wed, 03/07/2012 - 16:56 | 2233481 Flakmeister
Flakmeister's picture

There I knew you would figure it out eventually....

Would you like to make a bet?

I'll bet that the next El Nino will result in one of the top 3 warmest years for the globe in post Industrial Revolution era provided there is not a coincident major volcanic eruption...

Any takers?

Wed, 03/07/2012 - 17:31 | 2233616 r101958
r101958's picture

Thanks for some sanity here Flak. It is amazing that posters here still buy into the 'endless' oil mantra. Please some studying about EROEI and about actual production of actual crude oil. Not the 'all liquids' that is now touted as the 'real' oil number.

Wed, 03/07/2012 - 18:37 | 2233857 Baleful Runes 4 U
Baleful Runes 4 U's picture

Don't worry scrote. Abiotic Brawndo will fill the tanks. It has what civilizations crave!

Wed, 03/07/2012 - 17:49 | 2233669 Idiot Savant
Idiot Savant's picture

I'll bet that the next El Nino will result in one of the top 3 warmest years for the globe in post Industrial Revolution era provided there is not a coincident major volcanic eruption...

Flak - I always enjoy your posts in energy related threads, but I'm totally missing your point. Mind dumbing it down for me? What's the correlation between peak oil/declining exports and climate change?

Wed, 03/07/2012 - 17:53 | 2233692 Flakmeister
Flakmeister's picture

Tarsubil thought he would make a funny and I replied in kind...

I should dig up the posts where he argued with me that global warming was a hoax because you could not define a temperature for the earth.... (or maybe it was some other denier, their ignorance tends to blur after a while)....

Wed, 03/07/2012 - 20:57 | 2234341 tarsubil
tarsubil's picture

No, that was me and some prestigious chemist moron. Haha! What a maroon!

Wed, 03/07/2012 - 16:20 | 2233315 TruthInSunshine
TruthInSunshine's picture

Flak, I don't know enough to render an intelligent opinion on peak oil and freely admit it, hence my flippant quip.

I'm just fukkin' with Trav due to his incessant pussy-groaning about silver and insinuation that The Bernank's ongoing debasing of the Federal Reserve Note isn't a prime catalyst for the rise in oil-gas-petroeveything prices/

I extend the same offer to Trav as I did to Johnny Bravo; they can charge me $20 for every ounce of silver they dig from their backyards, and I'll buy (by whatever methods I have to) all their production.

Bravo won't even comply at a time when his cost of production is $5 an ounce.

Wed, 03/07/2012 - 16:23 | 2233338 trav7777
trav7777's picture

your first admission was obvious to everyone.

And, why the strawman?  I never claimed silver costs $5 an oz to produce, moron.

Yes, I pick on silverbugz, because they're idiots.  Can you really blame me?  I know, it is wrong for me to use my vastly superior intelligence to make fools of you all, but you can forgive, can't you?

Wed, 03/07/2012 - 16:32 | 2233350 TruthInSunshine
TruthInSunshine's picture

You should have just said, "[y]eah, anyone who can't see there's a direct relationship between Fed monetary policy and the price of oil in the U.S. is blind."

...instead of launching into an irrelevant and hollow wail/rail against silver.

That is all.

Wed, 03/07/2012 - 16:35 | 2233396 trav7777
trav7777's picture

I don't mean that at all.  The real price of oil is rising.  So are the prices of a lot of other things.  Any commodity that is past-peak is going to get a tailwind.

The problem is that oil is what is used to PRODUCE every other commodity...including the vaunted gold.  The days you can pan this shit from a crick and make a fortune are OVER.  You need a mountain of diesel fuel and big ass machines to go up to the Klondike...and a "reality" TV show won't hurt either.

Wed, 03/07/2012 - 17:04 | 2233506 tmosley
tmosley's picture

Here is a chart showing how fast the real price of oil is rising:

99% of the gold supply in any given year is already sitting in a vault.  A rise in oil prices doesn't directly impact the price of that 99%.

Wed, 03/07/2012 - 17:25 | 2233589 blunderdog
blunderdog's picture

You're confusing "price" and "basis."

Wed, 03/07/2012 - 18:09 | 2233778 tmosley
tmosley's picture

Please expound.

Wed, 03/07/2012 - 18:25 | 2233824 blunderdog
blunderdog's picture

The cost of producing the gold that was mined in the past cannot change--that's the "basis." 

However the "price" of a commodity is determined through the ongoing negotiation known as a "market."

If people believe (for whatever reason) that it is going to become more expensive to produce gold in the future, the "price" of ALL GOLD EVERYWHERE goes up, even though the sunk costs of having mined the first X metric tons can no longer be changed.

(EDIT: I'd add, myself--I don't really believe that "price" is a number which can be stated in a vacuum, although we do all tend to act like it is.  A "price" can really only be a historical record--you need a transaction in order to have a price, and every transaction is instantaneous and largely independent from every other transaction.  So it gets a bit hairier at that one ever said this would be easy.)

Wed, 03/07/2012 - 18:38 | 2233861 mr. mirbach
mr. mirbach's picture

COST is the tabulation of the imputed resources committed to the production and presentation of an item to the marketplace.

PRICE is what that item is sold for in terms of current units of local currency.

Niether terminology has anything to do with the VALUE or UTILITY of the item. 

Wed, 03/07/2012 - 22:47 | 2234552 WmMcK
WmMcK's picture

Madame Bovary, bitchez.

Wed, 03/07/2012 - 18:39 | 2233869 tmosley
tmosley's picture

Your argument is self referential.  

If that were the case, then the price of real estate would be set by the price of artificial island creation.

But that clearly isn't the case.  Gold is too big to be swung around by speculators.  It is set by supply and demand, just like oil.

Last year, there was a cotton shortage.  Cotton priced in gold went up by a large amount.  The same thing should happen with oil if oil is in short supply.

The fact is that these PO idiots see prices rising in terms of dollars, and are falling all over themselves to claim credit when credit isn't due.  It's not due now, just like it wasn't due in 2008, just like it wasn't due in the 1970's.  This shit is all MONETARY.

This isn't rocket science.

Wed, 03/07/2012 - 19:03 | 2233971 blunderdog
blunderdog's picture


Virtually all of the gold market is "speculators."

It's not an industrial metal.  There's jewelry, but the whole point of fabricating jewelry is that it's made of GOLD. 

The only thing that impacts gold price is changing sentiment--there's supply and demand, sure, but based solely on what people think about stuff.  Gold doesn't "do" anything for the holders.  That's pretty close to the basis for the concept of a "speculative commodity."

Real estate can be similar, but there are too many enormous differences for the gold/land analogy to be much use.

Wed, 03/07/2012 - 20:17 | 2234240 tmosley
tmosley's picture

That is like saying the people who earn and save in dollars or other currencies are speculators.

There are too many differences between gold and oil for there to be shaped by the same fundamental factors.  Other than a falling dollar, of course.

Also note that the only thing affecting ANY price is changing sentiment.  This is especially true of the dollar, and other fiat currencies.  It is exactly that sentiment that is shifting as a result of the constant flood of liquidity we have seen since QE began.

Wed, 03/07/2012 - 20:56 | 2234339 blunderdog
blunderdog's picture

   That is like saying the people who earn and save in dollars or other currencies are speculators.

Not quite--because fiat currencies are legal media of exchange, most individuals have no choice but to work for and collect them. 

Your logic is sound, though: people who buy ALTERNATIVE currencies are indeed exactly speculators.  (If you call gold a currency, you'll see this supports my point.)

MOST PEOPLE are not speculators or investors by intent--that's the thing.  MOST PEOPLE don't give much consideration to behaving like a rational consumer. That's always been the biggest joke about economic theory--it starts with an obviously false axiom. 

Human behavior is not code--our impulses are random twitches of a nerve in a jar, and most of the complex explanation we offer for our behavior is post-hoc rationalization.

Wed, 03/07/2012 - 22:32 | 2234514 geekgrrl
geekgrrl's picture

"...most of the complex explanation we offer for our behavior is post-hoc rationalization."

Precisely. The pattern we're exhibiting is the same as yeast in a fermentation vessel, and the outcome will be exactly the same. Are humans smarter than yeast?

Your post reminds me of an extract of a poem by Ranier Maria Rilke:

"We play with obscure forces, which we cannot lay hold of, by the names we give them, as children play with fire, and it seems for a moment as if all the energy had lain unused in things until we came to apply it to our transitory life and its needs. But reapeatedly ... these forces shake off their names and rise ... against their little lords, no not even against - they simply rise, and civilizations fall from the shoulders of the earth."

Thu, 03/08/2012 - 12:38 | 2236285 blunderdog
blunderdog's picture

It's always kind of amazing when you see how far ahead of the biologists the artists are.  We know a lot as a species that we haven't sketched out the science for yet.

Sat, 03/10/2012 - 01:38 | 2242611 geekgrrl
geekgrrl's picture


And thanks for for your thought-provoking posts.

Thu, 03/08/2012 - 01:05 | 2234863 mr. mirbach
mr. mirbach's picture

So if I buy my wife a gold bauble hoping to get sex, is that speculative?

If the wife gives me sex for the gold bauble, is she a prostitute?


Thu, 03/08/2012 - 12:25 | 2236203 blunderdog
blunderdog's picture

Humor!  Ar ar!

The fact that your wife's a prostitute has nothing to do with the bauble, chum.

Wed, 03/07/2012 - 19:10 | 2233992 Flakmeister
Flakmeister's picture

You like to create a strawman that the PO is being heralded by the price in dollars...

or that anyone expounding on PO is a doomer...

I never argue that because of the increasing price in dollars we must be at PO. I argue PO based on the amount and quality of oil being produced and what is available on the market...

The economy could completely collapse and the price of oil plummet, but that doesn't change the geology...In fact that is what happened in 2008-2009...

And guess what, the first signs of life in the world economy and we just hit our heads on the ceiling again....

Then again all your arguments are based on strawmen and ad hominems... even when you deal with the PM trolls... 

And I am not the only respected poster here at the Hedge that has reached this conclusion....


Wed, 03/07/2012 - 20:13 | 2234226 tmosley
tmosley's picture

>>posts nothing but ad hominem, appeal to authority, and strawmen

>>accuses others of posting nothing but ad hominem and strawmen

>>implying Flak is a douchebag.

Wed, 03/07/2012 - 20:29 | 2234274 Flakmeister
Flakmeister's picture

You must have failed that Intro course in Logic....

Wed, 03/07/2012 - 21:49 | 2234444 VisualCSharp
VisualCSharp's picture

lol @ 4chan greentext.

Wed, 03/07/2012 - 17:18 | 2233405 Flakmeister
Flakmeister's picture

Hey, I like silver, I own a fair amount of it..

But the Silver bugs here are tiresome and anyone listening to to them over the past 9 months  or so has been blowtorched... (I am sure someone can cherry pick dates to show otherwise)...

And they are *so* funny when their chain gets pulled...

Wed, 03/07/2012 - 16:17 | 2233318 trav7777
trav7777's picture

somebody needs to tell the church that only 54/65 oil producing nations have already peaked and are in decline.

The US did so, um...40 years ago?


Wed, 03/07/2012 - 17:14 | 2233532 Flakmeister
Flakmeister's picture

Don't confuse them with facts....

Wed, 03/07/2012 - 18:36 | 2233856 Flakmeister
Flakmeister's picture

Why don't you get Turd to run that puppy back a few years...

Enough to show that WTI oil is a buy relative to gold by historic ranges....

Previous to Nixon closing the window the price of oil in gold was ~12:1, that has varied anywhere from 7 to 20... 

Currently, Brent/Gold ratio is about 13.4....  

Take off your blinkers....

Wed, 03/07/2012 - 18:48 | 2233905 tmosley
tmosley's picture

Uh, DUH!  That's the point!  Oil is not expensive when priced in gold.

If we were having supply problems, oil would be skyrocketing in terms of gold, just like cotton did last year.

But it isn't.  Oil and gold and everything else are rising in tandem.  The only variable is the DOLLAR.  As such, it is the falling dollar that is causing the rise in EVERYTHING.  Not Peak Oil.  

Wed, 03/07/2012 - 19:15 | 2234010 Flakmeister
Flakmeister's picture

So based on the number of dollars floating around and the essentially free cost of capital, some major oil company should be able to increase their production by a few % (say 500,000 bpd) and reap the tremendous profits...

Why can't they?

What I described is  what classic free market capitalism predicts should happen....

There must be a reason why, eh?


Wed, 03/07/2012 - 19:50 | 2234125 piliage
piliage's picture

How about demand is still falling, primarily.


Wed, 03/07/2012 - 20:09 | 2234204 Flakmeister
Flakmeister's picture

Have you been following the meteoric rise in Chindian demand??

Wed, 03/07/2012 - 22:44 | 2234547 WmMcK
WmMcK's picture

np, they'll pay for it with rupyuans.

Wed, 03/07/2012 - 23:38 | 2234642 FeralSerf
FeralSerf's picture

$200/bbl should help stem some of that chindian demand. It might even stem a little non-chindian demand. Maybe mom can car pool the soccer team, eh? Or not use the boat quite as much this summer? Sacrifices!

Wed, 03/07/2012 - 21:12 | 2234378 tarsubil
tarsubil's picture

How do I get this "essentially free" shit? Is that in Wonderland with the "free market"? I've only heard about that place in campfire stories.

Wed, 03/07/2012 - 15:55 | 2233226 Unmisinformed
Unmisinformed's picture

Whenever I see a new post from you I say this:


[Loud Retard Voice]




[Loud Retard Voice Off]


I can't help myself.

Wed, 03/07/2012 - 16:07 | 2233275 TruthInSunshine
TruthInSunshine's picture

Silver is abiotic, so Trav's right.



Wed, 03/07/2012 - 17:52 | 2233691 zelator
zelator's picture

and only $5 to mine it.

Wed, 03/07/2012 - 15:58 | 2233237 spiral_eyes
spiral_eyes's picture

Trav you crack me up.

Wed, 03/07/2012 - 16:04 | 2233259 tarsubil
tarsubil's picture

That's what I was expecting! You sayin' it isn't going to happen?

Wed, 03/07/2012 - 16:07 | 2233276 walküre
walküre's picture

Try and run global agriculture to feed 9 billion people with $200/barrel or higher.

Hunger and malnutrition hurt everyone.

Our population explosion over the last 100 years has been made possible by cheap oil and the distillates.

Heavier bitumen from the tar sands is not a replacement for most applications. Shale oil is a death sentence to the local aquifiers. Perhaps we will accept poisening some in order to satisfy the oil demand of most. Wouldn't be the first time.

Wed, 03/07/2012 - 17:26 | 2233594 tmosley
tmosley's picture

Replace "dollar" with "deutsche mark", and let us know how hard German hyperinflation was on the rest of the world.  Clearly, it was all caused by peak oil in Germany.  I heard everyone in the world starved to death and now we are all dead, except for Haley Joel Osmond.

Wed, 03/07/2012 - 22:42 | 2234543 WmMcK
WmMcK's picture

Still waiting for the new mark, I mean "Northern Euro".

Wed, 03/07/2012 - 17:57 | 2233715 Cadavre
Cadavre's picture

You must be one of them Bambi "Truth Droids" working for Stratfor, err Alex Jones. However, if you're not, and you are simply a poor poor victim of a low iodine childhood diet, or depleted genetics, or self taught ignorant - or any other reason you claim put you in this position, I am still not going to buy that useless wad of long Carbon futures your "skinned" pink German helmeted whimsied midnight massage confessional fantasies, and entertaining visions of whipping up gallons dragon lotion on a floating mattress stuffed with Oil GE and Solaris paper while thumb frantically plies pressure to Mary Jane Crotchrot's spice girl sugar plumb G-Spot as Mommy beats  the door demanding to know why you're taking so long to get out of the bathroom, made you buy.

That's your dream. It's personal. Keep the paper - when your prediction comes true, use it to warm your fusion center cell.

The problem is not peak oil. The problem is peak oil prices. Every fool of a bank and hedge fund is sunk so long we can never go back to market priced oil.

The Chinese say, "Don't go wrong long".

For your mom's sake, for your rubbed raw love muscle's sake, isn't it about time you hung the soap on the rope back on the shower head and thought about a real date?

Wed, 03/07/2012 - 18:35 | 2233847 DaveyJones
DaveyJones's picture

bears will not joke about any sweet and sticky substance. 

Thu, 03/08/2012 - 01:11 | 2234873 Seer
Seer's picture

You know, Trav, you should rethink your racist position, as I'm guessing that the overwhelming majority of people who refute your allegations* that peak oil is anything other than a conspiracy are WHITE (males).

* Never mind that LOGIC backs up the point that this is a finite planet, but, as I was saying, I'm not so certain that you're correct on the race thing...

Wed, 03/07/2012 - 16:01 | 2233246 tmosley
tmosley's picture

I don't know how many times you have to see this chart:

Oil still significantly below the 50 year average priced in gold.

But you have extreme confirmation bias, and as such you will only look at the dollar price of oil and claim that is proof positive that peak oil is behind the rising price of oil.

Wed, 03/07/2012 - 16:07 | 2233274 Flakmeister
Flakmeister's picture

Why can't people increase the flow of C+C and sell into these high prices, given that the cost of capital is nil?

Can you hold 2 thoughts in your head simultaneously? That multiple things can be intertwined? Or is every thing simplistic, in a manichean sense??

Wed, 03/07/2012 - 16:15 | 2233307 tarsubil
tarsubil's picture

Doesn't the gold chart show that prices aren't high?

Wed, 03/07/2012 - 21:06 | 2234346 tarsubil
tarsubil's picture

<crickets> ...uh, der, Earth's temperature, der! Next El Nino will be cause top 3 brownest Ween albums! I bet you! Di der!!!

Wed, 03/07/2012 - 16:19 | 2233322 trav7777
trav7777's picture

his IQ is only 161, don't be so hard on him

Wed, 03/07/2012 - 16:28 | 2233351 tmosley
tmosley's picture

Keep it simple, stupid.  

A. what makes you think capital cost is nil?  

B. demand is down due to constant government meddling.

C. refineries are shutting down faster than the supply of oil is drying up.  

Cheap energy isn't a cure-all that can make government intervention in the economy go away.  The marginal costs are rising due to INFLATION.

As I have said a THOUSAND TIMES over the last few years, if this was peak oil, oil prices would have lead the price of everything else, including gold and silver.  But it hasn't.  They all increase together.  Pricing things in gold provides the perspective you refuse to consider.

Wed, 03/07/2012 - 16:36 | 2233401 trav7777
trav7777's picture

right, because oil isn't used for the production of everything

Wed, 03/07/2012 - 17:06 | 2233509 tmosley
tmosley's picture

What, did we use up the above ground supply of gold?


Wed, 03/07/2012 - 18:59 | 2233946 DaveyJones
DaveyJones's picture

so....the fundamental substance of the economy gets more and more difficult and expensive to obtain. The economy suffers. Society goes into greater debt on more and more innacuate projections of growth. The nation with both the greatest substance consumption per capita and the fiat currency suffers tremendously. In a desperate attempt to keep its position, that nation continues and expands fantastic schemes to try to prop up its currency and keep it pegged to this fundamental substance. Failing in its attempts and knowing its debt is unpayable, it continues to inflate its currency to make its debt easier to pay. Other nations respond and many currencies begin a downward spiral. Investors flock to gold perceiving unprecedented weakness and increasing unreliability in markets along with corruption.

Sure, oil has nothing to do with this...and the fact that gold is the only true currency and is a leading indicator of profound structural weakness has nothing to do with this mismatch. Likewise, the fact that the "true" cost of producing and transporting anything has risen has nothing to do with rising prices....of anything... including oil  

Wed, 03/07/2012 - 19:09 | 2233989 tmosley
tmosley's picture

So it's just a coincidence that everything is rising at the same rate, and it's all cause by oil cause you said so?

If oil was getting more expensive to obtain in real terms, then it should have started rising in price first, and it should have risen more than gold, which only increases in supply by about 1% a year.

But it hasn't.  Instead, oil priced in gold is AVERAGE to cheap.

This isn't rocket science.  You guys want to make it out to be because you have invested so much into the idea of peak oil.

Wed, 03/07/2012 - 20:29 | 2234273 DaveyJones
DaveyJones's picture

but, like you and many others point out, gold, like oil, is a very special thing. Gold is not just another unit to measure the "true" cost of oil. It has a very unique role to play when the shit hits the fan. And it doesn't matter if the shit hits the fan because we are running out of fans or running out of oil, people flock to it either way. On that same note, oil is very special too and society, especially the USA, has tremendous hidden costs buried in "the price." Neither of these items can be measured the way you are measuring them because your method assumes a transparent, accessible, playing board where all things are equal.   

Wed, 03/07/2012 - 21:54 | 2234455 VisualCSharp
VisualCSharp's picture

Just wondering about "oil priced in gold..."

Is there a visible market where oil is traded for gold, or are you relying on oil priced in dollars vs. gold priced in dollars, then comparing the two? Because if so, doesn't that assume the dollar itself has an immutable value and cannot manipulate the price of either commodity?

Thu, 03/08/2012 - 01:21 | 2234891 Seer
Seer's picture

"As I have said a THOUSAND TIMES over the last few years, if this was peak oil, oil prices would have lead the price of everything else, including gold and silver.  But it hasn't."

So, how sure are you that This is the ONLY equation that defines "peak oil?"

"Peak Oil" ONLY means peak PRODUCTION.  Whatever excuse one wants to use (a snail got in the way and jammed the pumps, otherwise we WOULD have had a higher output) peak production WILL occur.  Your mistake is in trying to pigeon-hole it to be ONLY measurable on a single equation.

"Pricing things in gold provides the perspective you refuse to consider."

Oh, I see, we're comparing one thing in decline with another thing in decline and saying that because there's a match the one thing (oil) isn't in decline?

Wed, 03/07/2012 - 15:40 | 2233181 rosiescenario
rosiescenario's picture

I thought Nancy Paloozi had already given us a more than adequate explanation....

Wed, 03/07/2012 - 15:42 | 2233185 Arthor Bearing
Arthor Bearing's picture

Isn't this exactly the kind of speculation re: causality that Taleb warned us about in The Black Swan? Markets have fractal complexity and it is impossible to draw a reliable line betweeen cause and effect.

Wed, 03/07/2012 - 15:48 | 2233203 GeneMarchbanks
GeneMarchbanks's picture

Doesn't matter, everybody falls victim to the narrative bias and the algos are created on that basis. The petrobuck is, however, slowly but surely being rejected and unmasked for what it was and is: an instrument for exploitation of the worlds resources and labor. Even the Russians have tuned in to the game lately.

Thu, 03/08/2012 - 01:22 | 2234893 Seer
Seer's picture


Wed, 03/07/2012 - 15:57 | 2233235 VulpisVulpis
VulpisVulpis's picture

+1 for Taleb reference on the Problem of Induction

Wed, 03/07/2012 - 16:12 | 2233300 Unprepared
Unprepared's picture

True but a rational qualitative analyses would lead to qualititative weighting of different potential causes:

The Bernank according to any decent analysis is a heaving weight in the equation.

Wed, 03/07/2012 - 16:25 | 2233347 thedrickster
thedrickster's picture

Yes! This is what the apologists completely discounted when "debunking" the link between QE2 and Arab Spring food riots.

Wed, 03/07/2012 - 16:37 | 2233392 Spacemoose
Spacemoose's picture

absolutely true.  people here often lose sight of the fact that a chaotic system will exhibit signs of self organizing behavior and then tend to overlay their (often political) biases over that behavior to explain it.  

Thu, 03/08/2012 - 01:28 | 2234901 Seer
Seer's picture

And, funny, nature appears to be highly chaotic, yet, it's really far more stable than the virtual world that we've concocted.  I'm figuring that nature holds the real truth: and that truth is that this is a finite planet, and that by way of pure logic/reasoning, means that humans WILL hit the wall on oil production (whether this is due to a by way of direct physical inventory or due to geopolitical instability (no jobs = no demand = no production [exaggeration for effect]) doesn't change fact that there will be a maximum achieved.

Wed, 03/07/2012 - 15:46 | 2233197 Hohum
Hohum's picture

And I was thinking high gasoline prices could be explained by a rising DOW.

Wed, 03/07/2012 - 15:49 | 2233207 DeltaCharlie
DeltaCharlie's picture


Shit is going down soon enough... love to see Bernanke's face on TV when things really go tits up!

Wed, 03/07/2012 - 15:53 | 2233223 NotApplicable
NotApplicable's picture

There won't be any reason for him to go on then, as there won't be any financial "markets" left to BS. By then, he'll be living large on some private island far, far away.

Wed, 03/07/2012 - 16:11 | 2233294 azzhatter
azzhatter's picture

wonder if he'll roll over in bed and tell geithner he fucked up

Wed, 03/07/2012 - 15:50 | 2233210 brown_hornet
brown_hornet's picture

i(heart) the bears

Wed, 03/07/2012 - 17:03 | 2233504 resurger
resurger's picture


Wed, 03/07/2012 - 18:40 | 2233874 tabasco71
tabasco71's picture

Yes, the message is important... but these guys are cute too!

Wed, 03/07/2012 - 15:51 | 2233213 RingToneDeaf
RingToneDeaf's picture

We are so doomed.

I watch the white Obama and the brown Romney and want to puke.

We have lost our way.

Turned into a nation of whores, hustlers and pimps.

Nowhere to run, no way to hide, stuck on a ship of fools.

Wed, 03/07/2012 - 18:06 | 2233759 NotApplicable
NotApplicable's picture

Romney's actually more orange than brown.

Wed, 03/07/2012 - 19:36 | 2234068 zelator
zelator's picture

nawh...  you're thinking of Boehner.

Wed, 03/07/2012 - 22:07 | 2234476 TheFourthStooge-ing
TheFourthStooge-ing's picture

They all came out of the same bad batch at the clone farm as Angelo Mozillo.


Thu, 03/08/2012 - 01:32 | 2234913 Seer
Seer's picture

"Turned into a nation of whores, hustlers and pimps."

When your entire premise has been based on a lie you're surprised?

Go forth and multiply.  Growth is good.  There's plenty (as long as you can stomach killing others- must fight terrorists, wave the flag, wave the flag!).

Same as it ever was, same as it ever was...

Wed, 03/07/2012 - 15:56 | 2233232 Jason T
Jason T's picture

Confession: I'd rather see gas prices rise and stocks tank to spite this policy of money printing.

Wed, 03/07/2012 - 16:06 | 2233253 TruthInSunshine
TruthInSunshine's picture

I would love an inflationary spike to crush consumption and borrowing.

It would more quickly clear out & cull the last of the propogandists who profess to the sheeple that The Bernank has things under control, or that fractional reserve banking is anything other than one giant Ponzi scheme built on a foundation of illusions that depends upon the faith, CONfidence & CONviction that something that doesn't actually exist does.

Wed, 03/07/2012 - 22:10 | 2234480 TheFourthStooge-ing
TheFourthStooge-ing's picture

You mean it's CONtrived?


Thu, 03/08/2012 - 01:35 | 2234918 Seer
Seer's picture

It'll eventually happen.  Be prepared, however, for when those around you no longer buy gasoline, and when stocks are worthless.  From one hell to another...

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