As WTI Passes $105, Guardian Says Iran "Military Action Likely", Would Send Crude Soaring

Tyler Durden's picture

Between the Chinese 'surprise' RRR and the Iran export halt to UK and France (and escalating tensions), Oil prices are off to the races this evening. WTI front-month futures have just broken $105 (now up more than 10% in the last two weeks), the highest levels in over nine months and just 8% shy of the 5/2/11 post-recession peak just under $115. Brent (priced in EUR) remains off last week's intraday highs (as EUR strengthens) but still above the pre-recession peak but in USD it traded just shy of $121 - well above last week's peak. Of course, this will be heralded as a sign of demand pressure from a 'growing' global economy rather than the margin-compressing, implicit-taxation, consumer-spending-crushing supply constraint for Europe and the US that it will become in the not too distant future. As we post, The Guardian is noting that US officials are commenting that "Sanctions are all we've got to throw at the problem. If they fail then it's hard to see how we don't move to the 'in extremis' option." The impact of any escalation from here is gravely concerning with PIMCO's $140 minimum and SocGen's $150-and-beyond Brent prices rapidly coming into focus - and for those pinning their hopes on the Saudis coming to the rescue (and fill the Iranian output gap), perhaps the news that our Middle-East 'allies' cut both production and exports in December will stymie any euphoria.

From The Guardian: US officials believe Iran sanctions will fail, making military action likely

Growing view that strike, by Israel or US, will happen
• 'Sweet spot' for Israeli action identified as September-October
• White House remains determined to give sanctions time

"It's not that the Israelis believe the Iranians are on the brink of a bomb. It's that the Israelis may fear that the Iranian programme is on the brink of becoming out of reach of an Israeli military strike, which means it creates a 'now-or-never' moment," he said.

"That's what's actually driving the timeline by the middle of this year. But there's a countervailing factor that [Ehud] Barak has mentioned – that they're not very close to making a decision and that they're also trying to ramp up concerns of an Israeli strike to drive the international community towards putting more pressure on the Iranians."

Chart: Bloomberg

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tmosley's picture

If you can't stand the heat, get out of the Fight Club.

Edit:  I am retracting part of my comment due to LH deciding to retire.  It wouldn't be fair of me to characterize his withdrawal the way I did after reading his other comments downthread.

Think for yourself's picture

That second paragraph earned my +1

Mr Lennon Hendrix's picture

World production of oil platued in '05.  The House of Saud peaked it's production in '09.  If the reference to stockpiling was meant that the KSA is stockpiling that much oil then something is really up.

They have been getting desperate, using techniques like pumping saltwater.  This is a desperate measure.  The Kingdom says it can hold $100 oil, just like CEOs of financial firms came out in '07-'08 and said they were well capitalized.  Sound familiar?

I welcome an energy to mitigate crude.  Problem is, peak production is now, and we needed to start funding the research 40 years ago.  We didn't.  Now what?  Liquid coal?  Because that worked so well for the Nazis.  Liquid NG?  Too dangerous to ship.  Tar sands?  Poor EROEI.  Fracking?  It won't replace light sweet crude.

So while you want to go to the center of the earth and find the philosophers stone, I say do it.  Give me some evidence that we can all go about our business without crude.  That is when you start calling me names, saying I worship death.  You use ad hom.  You use strawman.

I've been mocking you. 

Xkwisetly Paneful's picture

If the US announced either: dramatic expanse of nukes or dramatic expanse of domestic drilling,

$100bbl would be a long distant memory.

Good thing no one started funding any alternatives forty years ago,

the first nuke plant popped up all on it's own like it was shat out of a unicorn.

I do find the devout belief in modern science rather entertaining as well.

Bought and paid for no different than anything else but looked upon as gospel by folks who otherwise would question the sun rising.

and not to mock anyone or anything, but it was posted 19023 times in the 70's that the world would  run out of food by 1990 but of course the avg acre now yields 12times what it did in 1970.

Mr Lennon Hendrix's picture

Petrofertilizer has a huge role in food production.  And although nuclear technology played a role in providing energy, research in developing it was stopped due to "accidents'.  This is happening in the solar industry by Midas man Obama funding the wrong solar voltaic makers.

If we had been addressing peak oil for the last 40 years, private companies would have been trying to make solar and nuclear alternatives.  I could say those who oppose peak oil are to blame for the destruction of our planet but have not because I don't like to judge people.  But since TMosely openly judges me, you know what....

Hey Tmosely, because you don't understand peak oil and you think we live in a utopia, you are to blame for whatever goes wrong in the world from now on because in your heart you want thumanity to not overcome the obsticles.  You want to fail.  You are the pessamist.  You worship death.  You are the demon.

tmosley's picture

Thanks for totally mischaracterizing my positions.  By doing so, you reveal without the shadow of a doubt that you are totally wrong, and are childishly trying to misdirect attention and blame away from yourself.

My REAL position is that government needs to cut all subsidies and regulations on all forms of energy production, because their interference in the market has created vast inefficiences and slowed needed change.  This will allow the market to redirect resources effectively, and will ensure that energy prices are and will remain a useful indicator of under or overinvestment in the sector.  I never said anything about a utopia--you just made that up.  The rest of your argument is just childish babble.

Mr Lennon Hendrix's picture

You use ad hom and strawman.  Now I am going to write a bunch of shit that has nothing to do with the arguement.  And by the way, you are stupid and childish and you worship the devil.

-TMOSELY, while he sips his lemonade

tmosley's picture

You seem upset.  Can't even see my arguments.  Only focusing on the personal critiques.

That's just sad.  Take a break.  Calm down and come back into the ring to debate the important points.

Mr Lennon Hendrix's picture

Yeah, you're right.  I'm done.

LetThemEatRand's picture

Who will prevail... the anaconda or the alligator?  It's like watching Fatliners or Life in the Fatlane.  In the end. Nobody wins.

Mr Lennon Hendrix's picture

Thanks for the laugh.  I just realized this myself.  I tap.  I'm done.

LetThemEatRand's picture

I fucking love fight club.  I'm considering changing my avatar to Meatloaf.  

tmosley's picture

That is something I would like to see.  Mind if I call you Bob after doing that?

LetThemEatRand's picture

He would do anything for love.

LetThemEatRand's picture

We have a common ground, guys.  Fuck.  The.  Oligarchs.  We may have different ideas about how to take our freedom back, but we all want our freedom back.  

I know you guys love Ron Paul's every man for himself ideology, but I think that's that one thing he has wrong.  Nonetheless, I voted for the guy anyway.  Not that it counted.  I'll vote for him again in November.

 

Mr Lennon Hendrix's picture

Good.  You have depth. 

Glad to have you in the club.

trav7777's picture

"Hey Tmosely, because you don't understand peak oil and you think we live in a utopia, you are to blame for whatever goes wrong in the world from now on because in your heart you want thumanity to not overcome the obsticles. You want to fail. You are the pessamist. You worship death. You are the demon."

There's a word for what just happened here, Mr. Hendrix; it's called "epiphany."  welcome to a greater understanding.

Cliff is transparent when you understand what you are looking at.

Taint Boil's picture

 

 

Godwin's Law

As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1

Looks like Godwin's Law is spot on.

Mr Lennon Hendrix's picture

Considering that WWII was lost by the Nazis because they had no crude to run their machines, I think this example is apt.

tmosley's picture

Except that isn't what happened.  They were simply overwhelmed by the industrial might of the United States turned to the doctrine of total war.

The US supplied all of the allies around the world with seemingly endless amounts of materials.  They never had a chance after the US entered the war.

Mr Lennon Hendrix's picture

Yeah it has nothing to do with the fact that they couldn't run their tanks because they had no oil for them.

tmosley's picture

You are assuming the question here.  At what point did they not have fuel for their tanks?  Was it before or after their country was shredded by American bombers?

Mr Lennon Hendrix's picture

FDR cut STandard's oil and then went to war.  That will be the last comment I make.

nmewn's picture

The Fischer-Tropsch substitutes kept Hitler in the game a lot longer than most experts predicted or could have imagined.

Of course, if your plants are being bombed into rubble faster than your slave labor force can rebuild them it doesn't work out so well...sayin.

msamour's picture

Actually the Nazis could not get a hold of the oilfields in the Ourals, so they lost precious time there. If they had not attacked Russia right away, and instead bought, or traded for the oil they needed, the war would have probably lasted another 10 years. In the end their own nuclear bomb project would have been successful (remember a lot of scientists that worked on the Manhattan project were actually German.)

Well, had the war lasted another 10 years, there would be many different cities around the world turned into glass.

tmosley's picture

Fascism couldn't last that long.  It is fundamentally unstable, and can't withstand the stresses of war.

Look to Marco's Spain to see how economies and the associated industrial base fairs under fascism.

trav7777's picture

....which is why Stalinist fascism lasted what, fucking FIFTY YEARS?

Shut the FUCK UP, Cliff

Ghordius's picture

you definitely have to look up how long the most typical cases of fascism lasted and how well they are suited to war...

Moe Howard's picture

Franco, not Marco, and he's still dead.

Acet's picture

Actually the Fascist regimes from Franco (not Marco) in Spain and Salazar in Portugal lasted from the 30s till the mid 70s. In fact, both dictatorships lasted beyond the death of their respective founders.

Quite a lot of time for "fundamentally unstable" political systems.

 

Yen Cross's picture

  Keep up the " Intelligent, well versed posts, Mr. Lennon Hendrix, I enjoy having your knowledge on Z/H! I'm just as PISSED as you are! I'll take this over some really bad things that have been done to people I love.

   The time to rise is in your Heart. The time to conquer is (NOT)!

Mr Lennon Hendrix's picture

Thanks Yen.  I like reading your posts too, even if they are over my head.

tmosley's picture

You should post like this all the time.

Your other shit was just annoying.  Post real arguments so we can talk like adults.

As to your argument (yes!  a real argument!  THANK YOU!), looking at past data, I don't think you can really claim that Saudi oil production has peaked, given its rather odd non-trend in production over the last thirty years: http://www.indexmundi.com/energy.aspx?country=sa&product=oil&graph=produ...

I tend to give more credence to FOFOA's theory that the Saudis are actually being paid for oil in terms of gold, and when you look at the price of oil in gold, oil is not very expensive compared to most any point in history (http://www.incrediblecharts.com/economy/gold_oil_ratio.php), where the current price is 16.55.  I can't speak for what they will do about the fiat price of oil.  Honestly, I doubt if they can hold it, and I honestly doubt if they are stockpiling it, since their wells should act like strategic reserves, why go through the extra expense of pumping it out just to sink it down into another used up field.  But one should not simply dismiss the possibility out of hand.

Now, as to alternatives for energy, you need to understand the different functions of crude.  Crude can be used to produce electricity (rare), refined into an energy dense fuel for transportation (most common), or refined into chemical feedstocks for production of everything from plastics to pharmaceuticals.  By separating out these functions, we quickly see that the most important function of oil is to provide us with an energy dense fuel.  Thing is, there are CURRENTLY other technologies that mimic the energy density of liquid hydrocarbons, namely the various air-metal batteries that currently exist.  The existence of this alternative automatically puts a cap on the price of fuel, as if fuel rises too much in price, it will encourage the adoption of the infrastructure needed to service these types of batteries.  Of course, that ignores the literally thousands of different possible sources for liquid fuel, which include some of those that you noted.  Similarly, for the number two use, one can imagine the ban on industrial hemp being lifted to allow for a return to that as a source for those feedstocks.  In addition, great strides in genetic engineering have been made that have given us numerous strains of bacteria that produce different hydrocarbons quite purely.  These can also be adapted to that use.

The IMPORTANT issue is energy in general, namely the production of electricity for the grid.  Of course, the potential sources of new energy are legion here as well, anything from burning the fuels mentioned above to rapidly advancing solar technologies to new advanced thermovoltaic technologies to off the wall stuff like space elevators harvesting the rotational energy of the Earth or cheap placement of solar arrays in space or some kind of cold fusion device.  Possibilities range from the mundane to the wild.  But no-one can say what the future holds.  One can only be certain that there WILL be a future, and absent government interference, it will be better than the present.

Sorry for pointing out that you are a spade, spade.  Your unending characterization of any and all current and potential replacements for current uses of oil as "unicorn piss" is childish and reflects poorly on you.  If you wish to be treated as an adult, act like one.

And no, you haven't been mocking me, you have been denigrating yourself.

Mr Lennon Hendrix's picture

You are a passive agressive fuck, aren't you.  You tell me to not act childish, you give me your arguement, then you insult me. 

Which leaves me to counter, and then insult you, which you love, since this is why you act how you act, you masochistic little fuck.

tmosley's picture

Sorry, but you are acting childish.  And you failed to respond to ANY of my argument.  

Take a break and come back.  You are too angry to form a good response right now.

tmosley's picture

Thanks for the debate.  I enjoyed it.

I'm glad you aren't pulling a Trav and letting a debate degenerate into a blood feud.

trav7777's picture

don't flatter yourself, cliff.

You really ARE a dipshit.  You argue with REAL scientists who are in the energy profession, right here on ZH.  You don't know who they are and you are too stupid to figure out the subtle jibes they put at you because the shit flies over your fucking head.

There is no blood feud between us.  I have NO respect for you, got it?  You are a worthless person, a liar, a fraud...I see right through you.  Do you not get that yet?  I toy with you when others just ignore you because I get a kick out of abusing you as much as you like being abused.

There was no debate between you and LH.  There was his posting of facts and conclusions and your response with the SAME OLD BULLSHIT as every other time.  You don't even know how space elevators would generate energy, the fucking earth's rotation?  LOL.  Not even CLOSE.  Movement through a magnetic field, dipshit.  Basic science.  Nevermind that space elevator is a misnomer, wtfever.  Get the EASY shit right for ONCE, you worthless miserable fuck.

LH bowed out because he realized as I have that there is no point in even attempting to "debate" anything with you because you are impervious to the facts.  So he just mocks you, as I do.  But, earlier, in a moment of clarity, he achieved a point of recognition about you that people simply cannot be led to, they must discover on their own.  And for that I applaud him.  He saw through you.  Having done that, it is inevitable that he will never again put any weight in what you say, won't respect you, will not regard you as even worth entertaining.

You should be used to this; don't pretend like it hasn't happened before.  Now, go on and bleat for me, I find you amusing.

ljag's picture

Are there any uses of oil that have no alternative....like tires? It is well documented that peak oil has come and gone.....so what exactly is the argument you 2 are having?

tmosley's picture

Oil is just a hydrocarbon, and hydrocarbons can be synthesized, so no, there is nothing that can't be replaced.

And peak oil is NOT certain.  Production could go in either direction from here.  The fact is that it has plateued, and is only slightly below the highest value from 2005.  I would wager that that has more to do with slowing economies than companies just not being able to produce the oil.

trav7777's picture

really?  Peak oil is "not certain," huh?

So in about 4 words, you assert (without realizing it) that oil production can grow forever?

GFD, they don't make morons like you anymore, do they?

Whether oil has peaked now or in 2005 or in the future is immaterial.  It will peak as an inevitable matter of what we smart people call basic mathematics and what people like you call incomprehensible voodoo.

At any rate, within the next doubling interval, oil production must climb 85mbpd against a backdrop of discoveries having peaked 50 years ago and demand growth outstripping production growth by 8:1.  Good luck with that shit.

Better get crackin on them "space elevators"

trav7777's picture

says Cliff "No, I am NOT smarter than a 5th grader" Mosely-Claven?

BWAHAHAHAHAHAHAHAHA

tmosley's picture

It's funny how you were able to prove my exact point in just one line.

trav7777's picture

what, that you AREN'T smarter than a 5th grader? 

BWAHAHAHAHAHAHAHA

Bleat for me...go on.

Matt's picture

May I suggest you read a book.

R E A D A B O O K! http://www.youtube.com/watch?v=GlKL_EpnSp8

EDIT: WTF is up with this crazy nesting? I was replying to Mr Lennon Hendrix ...

trav7777's picture

may I suggest you look up Export Land Model, IDIOT?

thatthingcanfly's picture

Seems like a certain Republican Presidential candidate, whose name the MSM dares not speak, predicted something like this back in 2002.

 

http://www.youtube.com/watch?v=zGDisyWkIBM&feature=player_embedded

Troll Magnet's picture

yeah but ron paul doesn't want to give billions of dollars to isreal every year for nothing. so we must not listen to him.

navy62802's picture

Military action in Iran = Game over for the global economy

http://www.youtube.com/watch?v=H6y8fc3n-mI