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The Oil Conundrum Explained
Submitted by Brandon Smith of Alt Market
The Oil Conundrum Explained
Oil as a commodity has always been a highly valuable early warning indicator of economic instability. Every conceivable element of our financial system depends on the price of energy, from fabrication, to production, to shipping, to the consumer’s very ability to travel and make purchases. High energy prices derail healthy economies and completely decimate systems already on the verge of collapse. Oil affects everything.
This is why oil markets also tend to be the most misrepresented in the mainstream financial media. With so much at stake over the price of petroleum, and the cost steadily climbing over the past year returning to disastrous levels last seen in 2008, the American public will soon be looking for someone to blame, and you can bet the MSM will do its utmost to ensure that blame is focused in the wrong direction. While there are, indeed, multiple reasons for the current high costs of oil, the primary culprits are obscured by considerable disinformation…
The most prominent but false conclusions on the expanding value of oil are centered on assertions that supply is decreasing dramatically, while demand is increasing dramatically. Neither of these claims is true…
The supply side of the oil equation is the absolute last factor that we should be worried about at this point. In fact, global oil use since the credit crisis of 2008 has tumbled dramatically. This decline accelerated at the end of 2011 and the beginning of 2012 all while oil prices rose:
http://www.energyasia.com/public-stories/markets-world-oil-demand-fell-3...
In its February Oil Market Report, the International Energy Agency (IEA) forecast a reduction in the growth of demand into the Spring of 2012, despite reports from the mainstream media that oil prices were spiking due to “recovery” and “high demand”. Simultaneously, the IEA reported that petroleum inventories rose to the highest levels since October, 2008:
http://omrpublic.iea.org/currentissues/full.pdf
The Baltic Dry Index, which measures global shipping rates and the demand for freight in general, has fallen off a cliff in recent months, hovering near historic lows and signaling a sharp decline in world demand for raw materials used in production. A fall in the BDI has on multiple occasions in the past been a predictive indicator of stock market chaos, including that which struck in 2008 and 2009. A sharply lower BDI means low global demand, which should, traditionally, mean decreasing prices:
http://investmenttools.com/futures/bdi_baltic_dry_index.htm
So, supply is high across the board, inventories are stocked, and demand is weak. By all common market logic, gasoline prices should be plummeting, and far more Americans should be smiling at the pump. Of course, this is not the case. Prices continue to rise despite deflationary elements, meaning, there must be some other factors at work here causing inflation in prices.
Ironically, stock market activity in the Dow has now come under threat from this inflationary trend in oil. Rising energy costs have essentially put a cap on the epic explosion of equities, and many mainstream analysts now lament over this Catch-22. The problem is that these investors and pundits are operating on the assumption that the Dow bull market is legitimate, and that the rally in oil is somehow an extension of a “healthier economy”. This version of reality, I’m afraid, is about as far from the truth as one can stretch…
In the candy coated world of Obamanomics, high priced stocks are a valid signal of economic growth, and oil is rising due to demand which extends from this growth. In the real world, stock values are completely fabricated, especially in light of record low trade volume over the past several months:
http://money.cnn.com/2012/01/19/markets/trading_volume/index.htm
Low trade volume means very few investors are currently participating in active trade. This lack of investment interest in the markets allows big players (such as international bankers) to use their massive capital to swing stocks whichever way they choose, even to the point of creating false market rallies. Throw in the fact that the private Federal Reserve (along with helpful hands-off approach by our government) has been constantly infusing these banks with fiat printed from thin air, and one can hardly take the current ascension of the Dow or the S&P very seriously.
Another issue which should be stressed is the renewed tensions in the Middle East, namely, the very distinct possibility of an Israeli or U.S. strike in Iran, and the possibility of NATO involvement in Syria (which has extensive ties to Russia and Iran). Certainly, this is a tangible danger that would have unimaginable consequences in global oil markets. However, the threat of growing war in the Middle East is in no way a new one, and has been ever present for the past decade. It hardly explains why despite hollow demand and extreme supply, the price per barrel of oil has been an unstoppable rising tide. Attempts by Saudi Arabia to reverse inflationary trends by promising increased production in the wake of Iran turmoil has so far been ineffective.
Simultaneously, large oil reserves have been discovered off the coast of Greece:
http://www.balkanalysis.com/greece/2010/12/08/greek-companies-step-up-offshore-oil-exploration-large-reserves-possible/
Off the coast of Ireland:
http://www.independent.ie/national-news/ireland-on-the-verge-of-an-oil-and-gas-bonanza-679889.html
Massive fields in Mongolia have been uncovered:
http://www.chinadaily.com.cn/bizchina/2009-08/08/content_8544985.htm
And of course, the vast shale oil fields in North Dakota and Montana are finally being tapped:
http://www.mtpioneer.com/archive-July-oil-reserves.htm
Oil supply has been ample and large oil reserves are being discovered yearly. Speculation would be the next obvious assumed culprit, and there are certainly some signals of such activity. Oil speculators traditionally use the forced accumulation of oil inventories to reduce market supply and artificially increase prices. Inventories have indeed been high. However, as previously stated, demand for oil has been static or fallen in most countries around the world since 2008, and there has been NO petroleum shortages due to manipulated markets. In fact, there have been no petroleum shortages period. Speculation has the potential to cause sharp but short term shifts in markets, but one must take into account the long term trend of a particular commodity to understand the root cause of its increasing or decreasing value. Again, inadequate supply is NOT the trigger for the ongoing oil price problem, whether by threat of war, or by reduction through speculation.
This schizophrenic disconnection between the stock market, and oil, and true supply and demand, is, though, a symptom of one very disturbing illness lurking in the backwaters of the U.S. fiscal bloodstream; dollar devaluation.
We all understand that the Federal Reserve has been engaged in non-stop quantitative easing measures in one form or another since 2008. We don’t know exactly how much fiat the Fed has printed in that time, and won’t know until a full and comprehensive audit is finally enacted, but we do know that the amount is at the very least in the tens of trillions (be sure to check out page 131 of the GAO report below to find their breakdown of Fed QE activities. This is just the money printing that has been ADMITTED TO, in excess of $16 trillion):
http://www.gao.gov/assets/330/321506.pdf
The dollar is being thoroughly squashed. Why is this not showing in the dollar forex index? The dollar index is yet another example of a useless market indicator, being that it measures dollar value relative to a basket of world fiat currencies, ALL of which also happen to be in decline. That is to say, the dollar appears to be vibrant, as long as you compare it to similarly worthless paper currencies that are being degraded in tandem with the greenback. Once you begin to compare the dollar to commodities, however, it soon shows its inherent weakness.
The dollar’s only saving grace has long been its status as the world reserve currency and its use as the primary trade mechanism for oil. This, however, is changing.
Bilateral trade agreements between China, Russia, Japan, India, and other countries, especially those within the ASEAN trading bloc, are slowly but surely removing the dollar from the game as these nations begin to replace trade using other currencies, including the Yuan. I believe commodities, especially oil, have been reflecting this trend for quite some time. The consequences of the dollar’s ties to oil are detrimental to all nations that consume petroleum, and they are clearly moving to insulate themselves from further devaluation.
Even after the release of strategic oil reserves back in the summer of 2011 in an effort to dilute prices, and the announcement of an even larger possible release of reserves this month, oil has not strayed far from the $100 per barrel mark. High Brent crude price have held for years, even after numerous promises from government and media entities admonishing what they called “speculation”, and promises of a return to lower energy costs. Not long ago, $100 per barrel oil was an outlandish premise. Today, it is commonplace, and some even consider it “affordable” compared to what we may be facing in the near future, all thanks to the steady deconstruction of the last pillar of the U.S. economy; the dollar, and its world reserve label.
Ultimately, no matter how manipulated and overindulged the stock market becomes, no matter how many fiat dollars are injected to prop up our failing system, the price of oil is the great game changer. As inflation is reflected in its price, and energy costs burn out of control, the Dow will begin to fall, regardless of any low volume or quantitative easing. In all likelihood, this conundrum will be blamed on as many scapegoats as are available at the moment, including Iran, or China, or Russia, or Japan, etc. Each and every American, and especially those involved in tracking the economy, will have to remind themselves and the public that at bottom, it was the Federal Reserve that created the conditions by which we suffer, including currency devaluation and high oil prices, NOT some foreign enemy.
The one positive element of this entire disaster (if one can call anything “positive” in this mess), is the manner in which the high price of oil tends to dash away the illusions of the common citizen. It is an issue they simply cannot ignore, because it affects every aspect of their lives in minute detail. Costly energy awakens the otherwise ignorant, and forces them to see the many dangers lurking on the horizon. Hopefully, this awakening will not be too little too late…
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absolutely agree
I was more commenting on the idea the planet is in danger therefore we should stop using oil.
I agree with finding solutions now, local gardening, etc. I again, was more questionning what seems to be popular in ecoterrorist logic, and the president's, and most malinformed or ignorant leftists tha we should just stop using oil now in lieu of battery powered cars (where does the electricity come from) and so on....
I'll give you an up on both comments!
Thereaeretoomany.... what you are saying echos the tenets of Agenda 21. Are you suggesting that Agenda 21 is the way of the future?
Don't even know what agenda 21 is...I've been hearing about it but I'm so busy going down so many rabbit holes....I have to give up on some of 'em
I'll check it out. I'm I'm not supposed to be for it well then I guess I won't be :-)
When it comes to energy, I have a lot of problems with the "there is nothing that delivers the power the petroleum products deliver" talking point.
There is ample evidence out there documenting the suppression of alternative energy technology - engines that ran on water, super efficient carburetors, all of Tesla's inventions, solar technology, etc. Keep in mind that the same families who own the Federal Reserve system also own the oil companies, outright or by proxy - - the two main survivors of the Standard Oil monopoly were Chevron and Exxon Mobil, to say nothing of the British royals control of BP and Shell.
Solyndra is an excellent example of how the game is played for the masses. Obama's naive base of environmental supporters laud him for investing in solar technology and ignore all facts otherwise, the right blasts him for fraud and more wasted democrat spending on a technology that isn't viable to replace oil, and the owners of the oil cartel laugh as solar technology is set back another 10 years. The Presidents' are puppets, I would think this didn't need to be pointed out anymore.
My point in all this being: if these families will go to such extensive lengths (murder, threats, pay-offs) to suppress alternative energy technology that would truly be a game changer for humanity, would they not also aim to shape the perception of the oil market to be that of ever-increasing scarcity? A monopoly maximizes profits by producing fewer goods and selling them at higher prices than would be the case for perfect competition. In a monopolized market where the demand for the good is inelastic, such as gasoline here, the cartel can set the price arbitrarily at whatever level they want, and then fudge the numbers to justify it. Demand might decrease in response to higher prices and people try to drive less but drive they must - especially in suburban America. Am I missing something? Does this not explain the oil market?
Couldn't one also make the argument that the Iraqi war was about controlling their oil fields - - not to increase access to oil but to suppress future production - - that otherwise might have increased if it traded in Euros, or would have started a domino effect leading to a free market outside the petro-dollar cartel? Win-win for them right? Maintain the cartel and the Peak Oil story.
I understand the EROI argument for light sweet crude, that makes sense in the context of the fact that we literally use oil for everything. I also understand the fact that all oil fields peak and so intuitively it makes sense that collectively the same will happen to the world's oil supply if population growth and Eastern consumption maintains its present course. However dollar devaluation in a petro-dollar system also makes sense as an explanation for rising prices in the face of decreased demand and relatively stagnant supply.
This is a complex issue that admittedly confuses me. However a theory like Peak Oil that will allow patsy criminals like Bush, Clinton, Cheney, W and Obama to justify the massacre of Middle East brown people in history book hindsight immediately puts me on the defensive. It's also pretty convenient how the Peak Oil narrative of the end of civilization as we know it fits right into the current end of the world assault on our psyches.
Regardless whether Peak Oil is real or not, seems to me like these families are going to use it carry out their agenda one way or the other. Either it actually is happening or they make it seem like it is happening. The end result is the same, more control for them, less freedom for us.
Also, our great Booberment has figured this out... when in trouble, blame each other. Yes now 'the Obomber' and 'the Republidems' are in full playground fight mode blaming one another over 'the pipeline', which is 'the problem'. Oh it makes for great theater, you know when the pols see the sheeple are very angry at them because gas is $4 they provide entertainment and cover in the form of WWE Pro Wrestling cage matches. What a great world.
Rumours persist that Saudi over estimate their reserves by 40%, going further back a whisper of this to their ally George Bush caused mayhem to be unleashed. To suggest we're not past peak cheap oil extraction is absurd..if China and India consume at the rate of the USA inside the next twenty years then there isn't even four decades left in the ground..
The dollars were printed to stuff into the black hole caused by the derivative/housing bubble. Had all things stayed the same, the US could have exported those dollars to the third world, via oil payments in diluted dollar values, thus getting the same barrel of oil for dollars worth less money.
i wonder of there are any number-crunchers out there who can quantify the inflationary costs of the non-dollar trades going on right now? For instance, if China barters disrectly with Iran for oil, using yuan/gold/tea leaves or virgins, how exactly does that trade, now bypassing the dollar (sorry US, we don't need dollars any more, here, you can have them back now) affect dollar inflation and oil prices at home? That there is a correlation makes sense, I'd just like to se the chart porn.
Sorry not me!
Not sure the case of China would work that way right now. Assuming that they have more Dollars than they know what to do with, wouldn’t it be more convenient for them to spend them on oil rather than buying US treasuries. Of course the outcome of China being hell-bent on exchanging their dollars holdings for oil wouldn’t exactly support the dollar or drop the oil price.
If the Saudi’s see that this is happening they might get worried about holding allot of Dollars themselves and try to exchange them for hard assets asap, or just demand payment in something else, or just decide to store some of their wealth in oil, i.e. just leave more in the ground for later sale (not feasible I admit).
So countries that don’t have enough dollars should try hard to get some so they can buy oil, countries that have allot of Dollars should invest them in US treasuries so that they don’t flood back into the world market. This how the petro dollar works ?
At least my new Suburban will look good parked in the driveway.
I can always use it as a storage shed.
...or a place to live...
Greed and $$$$$ no conumdrum here.
"http://www.bloomberg.com/news/2012-02-13/speculators-lift-wagers-to-high...
Speculators Hike Commodity Wagers
Hedge funds increased bets on rising commodity prices to the highest since September on mounting confidence that growth in the U.S. will strengthen demand."
AND
"http://www.usatoday.com/money/industries/energy/story/2011-12-31/united-...
In a first, gas and other fuels are top U.S. export
NEW YORK (AP) – For the first time, the top export of the United States, the world's biggest gas guzzler, is — wait for it — fuel."
Of course this:
"US Inches Toward Goal of Energy Independence http://www.cnbc.com/id/46831786/comid/1/cache/416#comments_top"Let's make sure that we eliminate all taxes on overseas profits and just watch what happens in the USA, fewer jobs and less supply of anything that can be exported.
WOW, what a patriotic bunch we have in Congress. Wait, I'm wrong they are patriotic to the 400 hundred familes at the top that they work for. Silly me, here I thought it was about all of us.
Stopped reading after seeing "In the candy coated world of Obamanomics". Shows that this is a partisian analysis. Thinking that the current party in-charge is the only one to use the stock market as a guage of economic health is idiocy. The author needs to look into who presided over the creation of the "Working Group on Financial Markets".
f*** off idiot...who presided over the creation the of the Federal Reserve??
I believe it's called "It's not my Messiah" Syndrome.
Don't know who was over, but I heard your grandmother was under sucking.
Gee, who would have thought that the FED's great plan to save themselves would have resulted in the rest of us getting totaly bent over a barrel?
I'm only a bit surprised that gas is only $4 by now....should be about $7.
I love any article involving a commodity market analysis that tells you to first disregard the supply side of supply and demand, then tells you what you think you know about demand is a complete falsehood.
Just don't ever, ever say "peak oil". If you do, the media, mainstream or otherwise will label you a heretic.
What are you talking about. Saudi has plenty of excess production to bring online. You think Obama would direct them to say they will raise production to squash the price of oil? Please, the oil market is the only unmanipulated market out there.
</sarc>
The Saudi's claim 12 million barrels per day of production (extraction) capacity but have never, ever, no matter what, exceeded their record extraction below 9.5 million barrels per day. No matter how much went off-line in Libya, Tunisia, Iraq, Nigerian oil strikes, rebel coups, global demand. Nevever exceeded 9.5 million per day. Now...
Oh, wait. Sorry. My bad. I just realized you were being sarcastic.
I am glad Tyler has finally busted the myth that we are "running out of oil". You cannot debase your currency 99 percent and expect oil prices to stay at 10 cents a barrel. The price has to go up with the money they print. As mentioned before, oil is actually not expensive in gold terms on a historic basis and it also not very expensive in Swiss Franc terms (although it has become more expensive after the SNB pegged the Franc to the Euro).
Of course. Running out of things is impossible. All commodities are infinite. Use the relative value of one commodity and compare it to another. See? Infinite AND Cheap, if you look at it the right way.
Look! Oil in Mongolia! That's my favorite.
My friend, I URGE you to go long by the millions of barrels on the futures market and STAY LONG!
If all you peak oilers are right, then oil is going to the moon and the world is coming to an end. You simply cannot lose on that trade. I hate people lecturing me with mathusian theories. If you think those theories are right, put your money where your mouth is and go for the jugular.
He who is right stays solvent, he who is wrong gets wiped out. That's a fair trade, no?
That's why I buy PMs. Peak oil does not imply assured oil company profits into the foreseeable future. It does imply industrial/economic collapse, which means one thing: Money printing.
It's not a lecture. It just feels like one.
Oil prices are going to the moon and the world as we know it is ending.
It's not really a malthusian theory. If you drink a milkshake through a straw, you're not really producing anything. You're extracting it until it's gone. Like in Titusville, Pennsylvania, the entire Texas oil patch. None of this is theory. Oil field extraction rates peak and their rates of extraction fall. They just do.
Sure, you could long oil futures or just short airlines. Either way lots of smart money is banking on peak oil. Arguing against peak oil makes those investments that much more valuable, especially if you can do it on TV.
So go long oil in the futures market. It's a no brainer. I can never take people seriously if they gab around in academic theories like French intellectuals in cafes. The people I have any repect for are those that put their money where their mouth is. Imagine you were running a $100 million fund and had to preserve wealth against peak oil. What would you do? It seems to me that the simplest thing to do would be to go long oil. I think you should do the same.
As for the smart money, it can change views rather quickly. Smart money is not loyal to any theory. The only theory it is loyal to is capital preservation.
By the way, that straw analogy is nonsense. Venezuela alone has nearly 1 Trillion barrels of recoverable oil with current extraction techniques. Clearly, if Venezuela had a different regime, large oil companies would invest billions into production and this production would come on stream. But it does not happen due to political reasons. The straw analogy assumes that the amount of extractable oil remains constant regardless of technological change. Were that the case, Canada would produce no oil today. The straw analogy holds true if you are talking about freely flowing crude oil as was discovered in East Texas or in the early years in the Middle East. But that analogy breaks down the moment you expand the scope of extractable oil with technological improvements.
There isn't an infinite amount of oil on earth. That is a given. But it would be comical to think that current rates of production cannot be increased due to geological limits when so many parts of the world are off limits to the more technologically advanced oil companies.
By the way, I used to be a peak-oiler myself and have educated mysef out of it. Unfortunately what starts off as a plausible theory turns into a myth that the crowd runs with in no time. I have no interest in running with the crowd. Whenever I have done that, I have had my fingers burnt badly.
Last point: the idea that comparing oil prices to gold is comparing one finite asset to another and, therefore completly wrong-headed masking scarcity, is also a nonsense. For example, how much did a house cost in 1910 and how much does it cost today? Jim Rogers bought a house in the Upper West Side in 1977 for $107,000 and sold it in 2006 for $15 million. Clearly, the world is not running out of houses, is it? So why do people get their knickers in a twist when comparing oil prices but forget the larger conext of everything going up in price? Houses in England cost 12 times what they did in 1984. No one is suggesting that England (after a decade long contrsuction boom) is running out of houses. So how are we running out of oil based on current price? Compared to houses, oil is dirt cheap!
Don't worry, Venezuela has lots of our oil- we just have to go get it from under those folks. It may be unproven and heavy and low/no EROI but it's there! We'll just use the cheap fracked gas to process it.
I agree, oil is too cheap!
I'm sure you have all the calculations dead on right, but what about the enviromental cost?
Brazil, Equador, Nigeria, Gulf Coast and so on.
Who will pay that?
Will the consumers in US accept the cost so they can waste energy like there's no tomorrow?
Same goes for lesser degree in all developed countries.
Peak oil or not, the production is moving to more sensitive areas and more complex technology is needed, the oil companys are telling us they have everything under control, until they don't.
I get my salary from oil (in Sterling, fuck) and I wish there could be a more longer vision from our politicos then drill baby drill.
Global warming is a fact, if you get out of the AC offices, the damage to our enviroment by oil is a fact, if you get out from 5 star hotels.
Our way of living is not sustainable, that's a fact.
Thank you & brgds
"Proven reserves" mean nothing - production and export rates mean everything.
That is a very misleading characterization of the data presented in the GAO report page c.131.
there was a time that an ounce of gold would buy a barrel of oil...and we may well visit that day again before this economic catastrophe is played out...
Those times never lasted very long. The historic average has been about 15 barrels of oil for an ounce of gold. By that yardstick, oil is fairly priced. If you consider that gold is about 50 percent underpriced, oil should be trading at $230 a barrel at a minimum (if not $250).
And there's the REAL problem. When real price discovery comes around, people without gold or silver are going to see their purchasing power plummet. That purchasing power will transfer to those owning gold and silver, and to a lesser extent those owning and producing other commodities.
Yeah but then gold maintains its value at between 7 to 25 barrels of oil per ounce. I don't see how that means one ounce equals 1 barrel of oil.
Whocarz must have meant an ounce of Ag for a bbl of erl ?
Figuring out the relative abundance of the two would make for a very interesting related rates problem.
One of those radar graphs (FX chart) with the relative weights of basket-of-fiat, gold, and oil over time would be neat too.
And eventually 10oz then a kilo...energy is real...everything else is monkey-brain window dressing.
From the first source in the article:
" the IEA said it has trimmed its forecast for this year’s global oil demand growth to 1.07 million b/d compared with 1.26 million b/d in its previous forecast"
Smaller than expected annual growth of demand is still growth of demand no ?! The absolute demand dropping for one quarter (as also mentioned) seems like a blip in the bigger picture.
That said, I’d say it’s most likely a combination of both supply/demand and fiat devaluation.
The Enemy Within not the Barbarians At the Gates
Oil boom re-appears in Texas.
Time to cover and go short.
I would go straight Bullish, trade of the Century once the Middle East erupts. JPM bought the SPR at auction at $115.00 a barrel, so you know it will pass that price.
actually it was around 93$ at that spr release.
Never short anything when Uncle Ben is busy printing money.
It's because big dick cheney was stealing Iraqi oil and pumping it through texas pipelines claiming that it's US oil. open your eyes.
Holy crap! I heard that rumor overseas, but the first time I have ever seen that statement on a forum. Guess it was true. My Coast Gaurd friend told me he was on security details watching ships get loaded with oil. Wow. He described his back was towards the operations most of the time because they were being sniped at once in a while. Crazy.
"
The Oil Con-dumb-drum ExplainedIran Chairs OPEC now and will not accept the USD for purchase from their oil bourse on Kish Island. Done... #3 Oil producer in the world told the Petro Dollar fuk off on March 20th.
As nice as we have been to Iran, you think they would do us a favour and at least keep crude prices at 100 per barrel. We don't price oil, OPEC sets the pricing.
We, the USA, have more domestic oil rigs than the world combined. Little known fact.
Steven Chu, who runs our Department of Energy is on record stating they will be happy to see $8.00 - $10.00 per gallon gasoline, it's on video. Nice Energy policy Obama and czars! And yes! he said that!
Do I hear drums in the distance?
Good article! My guess is that if we got our hijacked military out of MENA and didn't print fiat FRN's like there is no tomorrow oil would be at $50 per barrel. Welcome to the New World Order!!!!!!!
Leading up to election time, Obama will approve the Keystone pipeline, open the strategic reserves and allow some off shore drilling.....the stock market will soar.....employment will pick up.....the Iran problem will be solved.....Syria will be solved ! It's called "Just in time !" electioneering ! The economy will be the October surprise....even though it's all MSM/BLS "Wag the dog" BS ! It's just a worst case scenario ! Monedas 2012 Comedy Jihad World Tour
From just before the R & D conventions up until election day the will be EEWD (Extreme Economic Window Dressing) ? If the economy is beginning to roar it will drown out the Republican convention and whip up the excitement at the Democrat convention ! It's "phoney baloney" but this is no time for the Democrats to get scruples ?
It's the light sweet crude that is in easily accessible locations which is in rapid decline.
The extraction and refining process is only getting more difficult and expensive, and that's why the price will keep increasing even as global demand and production slips.
Rule Number One is to ignore anything about petroleum found at Zero Hedge. All ... total ... bullshit. What passes for analysis here is conspiracy theories and perpetual motion machines.
There is a world market for petroleum. World production has been steady since 2005 (while demand largely from China, India and the oil producing states themselves has been increasing steadily).
The price of oil is not Obama's fault.
Market prices are made worldwide in delivery (physical) markets. In physical markets, buyers are paying $125.50/barrel by the tankerload. All currencies that trade on F/X markets are accepted by oil producers, most of which are private companies.
The US is not petroleum self-sufficient ... by amounts of multiple millon barrels per day. The balance between imports and exports is indeed underway: the US economy is going bankrupt.
So are the European, Chinese, Japanese economies. Conservation by other means: you are living it.
Have a nice day.
Have a nice day in the red arrow zone.
Gasoline Alert http://www.traddr.com/profiles/blogs/gasoline-alert
I hate stupid people!
"In fact, global oil use since the credit crisis of 2008 has tumbled dramatically. This decline accelerated at the end of 2011 and the beginning of 2012 all while oil prices rose:"
Per the the sources cited in the article,
Global oil Demand
2010 88.3 million barrels per day
2011 89.1 million barrels per day
2012 89.9 million barrels per day
......
Having grown by as much as 5.0% in 2010, the global economy decelerated sharply in 2011, to 3.8%.
Global oil demand rose from 85.6 mb/d in 2009, to 88.3 mb/d in 2010 and 89.1 mb/d in 2011, implying
growth of 2.8 mb/d in 2010 and 0.7 mb/d in 2011. Admittedly, the 2010 trajectory was magnified by a
post?recessionary bounce, but the sheer scale of the 2011 slowdown surprised most analysts. Our own
projections for 2011 were progressively scaled back, from initial 4.3% GDP growth and 1.3 mb/d of
incremental oil demand.
I think the author is confused!!! (and that is all I have to say about that)
OIL CONSUMPTION IS NOT DECLINING, it is just not growing as fast..... very big difference. As a matter of fact it is an exponential growth rate (where growth compounds continuously/yearly in this case)!
The next thing to considers is if the supply side is "keeping up", as old reserves are depleted are new ones discovered and brought into to production to replace the depleted ones and to meet the COMPOUNDING GROWTH RATE........ and it is not just finding oil in the ground it is PRODUCING IT INTO A FINISHED PRODUCT!!!!
Many of the new discoveries have a "slow" production rate and a more intensive energy use to produce, causing "marginal compression"!!!
http://www.theoildrum.com/node/8936
We are in an inflationary currency trade. Stocks are a poor substitute for hard asset money because they have to operate in that inflation. Stocks are better than any form of paper money, but whe the inflation ends, stock specualtion will too and the markets will crater.
I knew the peAkoilErs would be in here screaming before I clicked in.
I don't care if you down arrow my ass to a Guinness world record, I also call bullshit on peak oil.
Yay! Because denial is the best way to deal with a fact.
Watch this: Global warming. Go!
Yeah...yeah. We saw your video:
Peak Oil debunked
http://www.youtube.com/watch?v=4bHZRSlhJxY
I think oil prices are high because Rush Limbaugh called that woman a slut.
You guys see American Idol last night? That was great.
this article is a wonderful truth elixir although we cannot under estimate the interference of the huge banksters who speculate wantonly in oil and are indeed a major contributor to its high price....
but yes, supply is plentiful and consumption down along with the even steeper decline of the usd.....a truth which gold speaks also...
I guess that Saudi Arabia doing offshore drilling means there's oil aplenty for me and my unborn children's children too...
Good article, but I would like to point out that the Mad Max documentary series (Mad Max, Road Warrior, Beyond Thunderdome) covered all these subjects in depth some years ago:
On the roots of the problem:
You have to go back to another time. When the world was powered by the black fuel. And the desert sprouted great cities of pipe and steel. Gone now, swept away. For reasons long forgotten, two mighty warrior tribes went to war and touched off a blaze which engulfed them all. Without fuel, they were nothing. They built a house of straw. The thundering machines sputtered and stopped. Their leaders talked and talked and talked. But nothing could stem the avalanche. Their world crumbled. The cities exploded. A whirlwind of looting, a firestorm of fear.
The fate of the central bankers:
But how the world turns. One day, cock of the walk. Next, a feather duster.
The future for our children:
They get so lonely for the high-scrapers and the video.
British housing is fucked. Petrol at 140p means the average motorist cannot meet his mortgage payments. Time to get the hell out of Sterling completely.
Man, this rant was all over the map, a hodge podge of disconnected facts, analysis and conclusions. Please, don't anybody start trading oil futures based upon the "knowledge" gained from this artcle.
Why isn’t Asia-Pa cific continuing to use local,
traditional sweet crude price benchmarks?
Historically, the pricing of sweet crude oil delivered
to refineries in Asia has been dominated by local
benchmarks.
Malaysia’s Tapis crude oil, from the South China Sea
offshore Malaysia’s Terengganu state, has been a widely
used benchmark for light (high API rating), sweet (low
sulfur) crudes and condensates produced in the Asia-
Pacific region.
Meanwhile, waxy Indonesian Minas (‘Sumatran Light’)
and viscous Duri (‘Sumatran Heavy’) from Dumai terminal
have served respectively as benchmarks for medium,
sweet crudes, and for heavy, sweet crudes produced in
the Asia-Pacific region.
But in recent years, production has dwindled from
these former giants. Tapis production has shrunk from
360,000 b/d (or 18 cargoes equivalent of maximum 600,000
barrels) to around 280,000 b/d currently; Minas from a
peak of around 420,000 b/d (or 18 cargoes equivalent of
maximum 700,000 barrels) to around 200,000 b/d currently;
and Duri from a peak of 325,000 barrels per day (or 14
cargoes equivalent of maximum 700,000 barrels) to
around 200,000 b/d currently.
Yes peak sweet has been around now for some time
You forgot to mention the logistics log jam. The right type of oil cannot get to the right location for refining. With all the different legislation in each state, the rules in the U.S. are complex. Each refinery is set up to handle different types of oil and meet different legislative requirements. And the pipelines are also set up in a complex logistical manner. With all the Obamanomics platform shutdowns in the Gulf, not enough of the right type of oil is getting to the proper refining locations, also a factor if the east coast refinery shutdowns. Keystone would have helped the situation but is not looking like it will happen anytime soon since Obama said to fast track the portion of the pipeline that is nowhere close to being ready for construction and is ignoring the portion that Canada has actually submitted the applications for. I hope the construction workers are not holding their breath waiting for all those jobs to construct the southern portion of Keystone. They are not coming anytime soon.
The pipeline between Cushing Oka. and the Gulf does not need Presidential approval or blessing to complete, only where it crosses from Canada into the US. A Repubican Kansas Senator is the one that actually got the pipeline stopped.
Does anyone actually look at the numbers? Ok here's the estimates from the sites he's touting, (without any consideration of EROEI, rate, etc.!)
Ireland - 10 billion barrels supply the entire world for 150 days if you get every drop
Inner Mongolia- why a link from 2009? Actual amounts are relatively small http://china.org.cn/business/2011-01/21/content_21791675.htm
Greece? Here's from the article linked-
"A more interesting aspect is the overall potential of all known offshore fields in Greece. Recent scientific and economic conferences have presented figures of approximately 22 billion barrels in the Ionian Sea (off the coast of western Greece) and some 4 billion barrels in the northern Aegean Sea. Of the aforementioned, 10% could be exploited and have a financially viable business plan."
So let's be super generous and say 25% could be exploited. That's 5 billion, not even enough to supply the world for 1/4 a year.
Now let's look at this http://www.mtpioneer.com/archive-July-oil-reserves.htm
haha well the Governor (is he a geologist?) says 40 billion, the government says 4 billion. Let's again be maximally generous and say its 40 billion. That's enough to supply the US for 5 years.
Now we all know the actual numbers are much lower. So tell us again how supply isn't a problem?