The Triple Digits Welcome Back Crude: WTI Back Over $100 Once Again

Tyler Durden's picture


So much for the IEA's intervention. Crude is once again comfortably over $100, and by the looks of things will be heading far higher before long. Yet the climb back to triple digits was not easy. Note the numerous plunges in CL where crude prices would tumble for no other reason than having way too many trigger-fingered headline scanning algos trading each and every commodity, and massively overreacting to the smallest piece of good or bad news. Elsewhere, we expect rumblings about gas at the pump, which is now set to resume its climb to $4.00/gallon to once again return, as economic models have to be adjusted even lower as that great whooshing sound is America's marginal discretionary purchasing capacity entering millions of gas tanks side by side with the unleaded.

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mfoste1's picture

qe lite july 26: success!

Popo's picture

This is the achilles heel of the entire ponzi construct.  

Gas prices are going to soar much sooner than most people believe.   And there's fuck-all that Bernanke can do about it.    

 

'Try QE'ing to infinity when gas at the pump is $8 per gallon, Ben!

Gas is going to be everything that Bondzilla was 'supposed to be'.   Bernanke may have neutered the Treasury market by juicing the Primary Dealers into buying his paper.  But this... this is something beyond the powers of the little man behind the curtain.    Welcome to your worst nightmare Benny boy...  "Gas-zilla" is coming.  When gas at the pump hits $5, America grinds to a halt.  At $6, America falls to pieces.  

Ready for QE3, Ben?   Go for it, big guy.

 

Archimedes's picture

America can't handle Gas at $4.50/gal let alone $5.

TheGameIsRigged's picture

I hope we get there soon so we can oust the members of congress.  They are the biggest bunch of idiots.  To think , when they call their congressional hearings, that they have ANY CLUE what they are hearing in testimony, or any idea what to do with that information.

There should be base IQ levels that one should need to surpass before being ALLOWED to make decisions for the rest of us.

And for those of you who would say "Well, YOU elected them"  I say - it's tough to elect who one wants, when you want no one who is running, and the votes are manipulated ANYWAY.

 

We need a revolution ---- NOW

SheepDog-One's picture

Actually it seems when gas pops over $4 avg is when things start grinding big time. 

r101958's picture

Better learn, and quickly. My guess, around September we go over $4 again (U.S. avg).

hedgeless_horseman's picture

This is the achilles heel of the entire ponzi construct.

You said it, Popo. Kunstler is right.  We have squandered our debt/wealth on building an unsustainable suburbia. 

Read this book.

Popo's picture

'Know it well!   Great read.   

Incubus's picture

Suburbia is disgusting, anyway.  Who wants to see worthless malls and shit?

Smarter infrastructure development is the only way forward.  Suburban America was only viable when the US had the run of the world.  We don't anymore, so it's time to "get real."

hedgeless_horseman's picture

Suburbia is disgusting, anyway.

You think the suburbs are bad now?  Just wait.  They are the slums of the future.

SheepDog-One's picture

Many suburbs I see around here are already slums, what were once nice neighborhoods 20 years ago are just hoods today.

r101958's picture

Agreed. Excellent book. I read it about 5 years ago. In 2006, we bought a new 2007 Yaris. One of the first here in Jacksonville. Got some strange looks back then....something like 'what the hell is that thing'. I just smiled to myself looking at all the huge SUV's driving by. Now, we don't get those looks anymore. However, I still get some condescending looks from guys driving pickup trucks/SUV's........they seem to expect some little lady to get out of the car and can't accept that a guy is driving a Yaris.

Ned Zeppelin's picture

A real eye-opener of a book.  But it's too late.

TruthInSunshine's picture

Gas prices are going to soar much sooner than most people believe.   And there's fuck-all that Bernanke can do about it.   

 

Falling gas prices run contrary to the Bernank's core area of academic (i.e. theoretical) expertise, which is the hazard of deflation and depression era dynamics.

At a time of high unemployment, lower purchasing power (due to falling real wages), immense slack in demand, trillions in wealth stripped away from the middle class in everything from falling home prices to failing business, the Bernank says inflation is good for you, and eat your cauliflower.

A Man without Qualities's picture

I just can't help thinking about all that shadow housing inventory the banks are holding.  They are praying the Fed can stimulate the economy enough that house prices start to recover (and they don't care if it's growth or inflation as long as prices pick up).  But all the while oil moves higher, those McMansions 30 miles out in the "suburbs" become less viable as it costs too much to get to where you need to go (5 miles to the mall, 30 miles to get to work, it all adds up).

 

CrashisOptimistic's picture

There is talk . . . .

Some Federal agency has floated an intriguing idea.

They will forbid banks to sell foreclosed property and force them instead to rent the property to renters.

Yeah moral hazard blah blah and imperial govt blah blah, but this would put a floor on prices and hold rents down.  

Interesting.

A Man without Qualities's picture

...and the bank can keep the asset at par forever.  

 

StychoKiller's picture

Market forces are already keeping most defaulted property from even getting foreclosed on!

Sudden Debt's picture

it's because so many people are on vacation with their car and driving thousands of miles.

YEP!

NO INFLATION HERE! Now move along workdrones!

redpill's picture

It's those legions of untaxed private jet owners I tell you!

redpill's picture

Ironically, one of the most enviable aspects of private jets is not champagne and caviar (you can get that in first class on a commercial flight), but because it allows you to bypass the government molestation of security scanning.  So instead of making regular air travel less hellish, why don't we just demonize those who are willing to pay more to avoid the rubber-gloved hand of the TSA.

TruthInSunshine's picture

Don't worry.

The Bernank says its 'transitory,' and Dudley says you can substitute iPad2s, or in this case, homemade ethanol (made from potatos, and not corn - corn's too damn expensive), bitchez.

SheepDog-One's picture

I'd rather turn the potatos into rotgut vodka, we'll need something to dull the pain in the coming months.

TruthInSunshine's picture

We need to build motors that are plentiful, cheap to build and cheap to buy, that can run on rotgut vodka. In the coming times, we can both drink and drive on the same fuel.

BC6's picture

oil only costs like 10 bucks to get it out of the ground

BC6's picture

based upon a paradigm of facts from various experts who have posted on ZH and the correalation or relationship that it costs 5 dollars to dig up an ounce of silver. And i think that cost goes down signficantly if you dig up the silver or drill up the oil from your own back yard.

TumblingDice's picture

None of that makes any sense. If you're comparing oil to silver, as well not putting due wight to transportantion costs and all those other "factors" please label your ten bucks per barrel figure as something you just pulled out of your ass. Otherwise you can cite an article or some other evidence/reasoning for that number.

Personally, I would contend that the cost of extracting, refining and transporting a barrel of light sweet which turns into gasoline in an american gas pump is significantly higher than 10 bucks.

CrashisOptimistic's picture

I think he's being sarcastic.

 

That being said, oil's extraction cost per barrel varies widely.

The barrel that comes out of wells at Ghawar drilled 40 years ago is pretty cheap per barrel.  A lot less of it is coming out than came out 39 years ago, but what comes out is cheap.

On the other hand, a barrel of oil coming out of the Thunderhorse ultra deep platform in the Gulf of Mexico, amortizing platform building costs and operations . . . nah, sorry, that ain't $5/barrel.

adr's picture

Costs to pull oil out of the ground haven't gone up that much since oil was $17 a barrel in the late 1990s, if at all. All of the cost is in the initial drilling procedure. Middle East oil is pulled out of the ground for under $5 a barrel. I remember reading a story where oil from middle east nations are sold to the exchange for something like $7 a barrel. I was also told by an oil man that once a rig is operational the cost to pull a barrel out of the deep sea is something like $17. The total aggregate base cost of drilling oil is somewhere around $10-$11 a barrel.  An associate of mine left to follow his friend to the Dakotas to build oil pipelines and they are making a killing. Even tar sands and oil shale cost less than $25 a barrel to pull out. Most of the cost is due to environmental regulations, not the cost of getting it out of the ground. Fracking is actually very low cost compared to deep sea drilling.

$100 oil is complete BS no matter what anyone says. When oil was on its first BS record run every single analyst said that $60 oil was way overpriced and that a demand based case couldn't even be made for $40 oil. That was until oil went to $147 a barrel. Then they all said $60 oil was a fair price. Based on the increased demand from China and India oil should be trading at $35 a barrel, no more.

It is just bubblenomics 101. Run the price far above what any market scenario can handle and then drop the price back down once the sheep forget how much it used to cost. You'll settle at a price three times what the market should dictate but since it is less than what the top was the sheep will cheer. Meanwhile those responsible for the mess are laughing all the way to the bank.

Urban Redneck's picture

Between pulling the oil out of the ground and loading it on a tanker or into a pipeline there stands either a taxman or a government shareholder, and his substantial take isn't factored into your cost model. 

r101958's picture

adr - no problem, continue driving your 12 mpg SUV.

Popo's picture

Most of it ain't light sweet crude.

And most of it is under massive pressure at the bottom of the ocean floor.

 

 

sabra1's picture

and... it only costs pennies to put politicians into the ground!

pre's picture

Yes. You are right, but I forget the quantity of crude that one can obtain for $10 of infrastructure and operating costs.  Perhaps you can remind me.

TumblingDice's picture

aneurysm crude: where catching falling daggers is actually good for your health.

PulauHantu29's picture

There is a reason why oil is called, "Black Gold."

EscapeKey's picture

More like a case of Dollar Devaluation. DXY @ 73.6, USDJPY @ 78.02

r101958's picture

Early this morning the yen was up to 77.9.

CrashisOptimistic's picture

Sorry, bud.  The deniers of reality want to blame it all on dollar issues and printing money, but the spike of $147/barrel was in July of 2008 . . . BEFORE BEN STARTED PRINTING.

You're going to die from non natural causes.  Just accept it and try to get more than 5-10 more years, which is your likely expectancy at this point.

Urban Redneck's picture

ZIRP has the same effect on USD over time as direct printing, and Greenspan started it after 9/11.

ABCStore's picture

Comments are unreadable now.

Those scores need to be moved either to the top (and replace meaningless "Total Score:1") or to the very right part of the post window. And it needs to be much smaller, too.

ABC

bob_dabolina's picture

Eat your peas. Buy a car with better MPG

-Prez

hedgeless_horseman's picture

Eat your peas.  Buy Finance a [white] car GM with better MPG.

Now your post will pass the .gov censors.

http://www.telegraph.co.uk/earth/earthnews/5389278/Obamas-green-guru-calls-for-white-roofs.html

caerus's picture

pennant breakout in CL