CNN: "Why oil won't return to triple digits"

[aristotle]

http://money.cnn.com/2009/08/19/markets/oil_price_fluctuation/index.htm

Fools.  For me, as an oil investor since 2005, it's encouraging.  The lead financial stories in the MSM are usually wrong (perhaps deliberately) to mislead the sheeple and make sure they are on the wrong end of an investment.

$100/barrel by December 31, 2009.  I'm bookmarking this thread and will post again at the end of the year.

Oil was up $3.23 today at $72.42.

[jakinbr]

Saw that article - what a joke. In late 07 Cnn ran an op-ed saying oil wouldn't hit $100. I actually emailed the guy saying what a piece of shitty journalism that was. He didn't reply. Oh, well. $100 + is a certainty, but WHEN is the big question. Demand is still down from what I've been reading, and there is somewhat of a relative "glut" @ the moment. I'm thinking next Spring for a spike, but I wouldn't discount it this year at all!

[shaleoh2]

Triggering breaking points in individual nations around the world, most likely starting with Asian countries will begin the global restructuring act probably sooner than we all can imagine. Eventhough it is already underway the really significant modifications will not begin in earnest until much into the new decade when hundreds of billions of investment dollars being ploughed into new infrastructure will start to pay off. ( the peak oil breaking news threads, if you will)  If geopolitical tensions greatly increase or the price spikes are high enough in the next few years, the agenda for the restructuring will be accelerated. Then, the faster prices and tensions rise, the faster it will be compelled to do something about it. Because the economics of energy are not going to improve for all of the reason's we all hang out here, gov't policies will hone in and make the difference at how we evolve into it all. So they are allready looking forward to the economic growth sometime into the next decade.

As far as funding for new infrastructure and technology, it will be there, because that is how they do, they print more and more like we all crunch dorito's and it is still there for them the game changers and their energy policies, not us to mettle with because we all are the needers to heat our pot of soup around winter months and heat our shower water after we crawl out from under our down blankets not expecting to turn into a cryogenic experiment. So they have us covered.....just don't get tooo far behind in those energy payments.
It would be brutaler, not though brutal, nor brutalest.

[shaleoh2]

So yet the variety and smorgasbord of more remedies prevail.
So here is some food for thought, or some steam for the pipes.

Direct use of geothermal heat for heating homes and hot water has been developed in Japan, the territories of the former USSR, Bulgaria and Hungary. Small installations have also been built in Boise, Idaho, and Kalmath Falls, Oregon. According to the U.S. Geological Survey, geothermal energy at present supplies 1 percent of U.S. power and could supply up to 10 percent in the future. Geothermal energy already supplies 7 percent of the electricity in New Zealand, 21 percent in the Philippines, 18 percent in El Salvador and 11 percent in Kenya. Untapped resources are know to be available in Bolivia, Costa Rica, Ethiopia, India and Thailand, and may be available in two dozen other countries, including Brazil and Pakistan.

Making use of all the world's superficially available geothermal energy to meet our need for electricity would certainly give us time to develop nuclear fusion (note NOT FIssion but FUssion) energy from hydrogen. Development of this unlimited form of energy is being carried out in many scientifically advanced countries of the world and expected to become available within the Early Decades (go f figure) of the twenty-first century (oh that's us all). BUT the supply of superficially available heat energy is limited and hence exhaustible. Although drilling deeper into the magma's high temperature--to 800 degree's celsius (5,000 degrees F.) -- would melt the drills needed to reach it even if they were made of tungsten steel, the most temperature-resistant metal available today.

Yet are rapidly advancing materials technologies suggest to the optimists that we should not give up this wonderful dream of tapping the unbounded energy of the deep magma.

"Hope is the last goddess to die" said the Romans, and how about the addendum, the best road to success.

BUT, however, do you think donkey ass's should at least move a little faster with the tech. maneuvers.? to at least keep the oil digits as low as it
can possibly go? And wow it took them long enough to monopolize the advantages of our new societal prominence of available energy efficiency to the market and market value. Hmmm economics or greed? or both?

[shaleoh2]

To build up to a billion barrels of strategic reserve will (SPR) require additional storage infrastructure; more importantly hoarding will take valuable oil away from commercial use. And why should we believe that the United States is alone among the world's nations urgently filling up its SPR? Though statistics are difficult to uncover, its almost assured that China and India are stockpiling their own strategic reserves. Wouldn't you if you needed to be confident of not running out of supplies. Hoarding is not just a reaction to driving when gasoline becomes uncertain, hoarding starts to manifest when there is a sense of occurrence.

As demand for oil continues to grow at an aggressive clip, the world's oil industry is finding it increasingly expensive to supply, and the pressure of our energy cycle is building. Volatile and rising price is a blaring signal telling us that something is going on. It doesn't get much simpler that that, but id does get more complicated.
Watch out for the geopolitical tension, environmental issues, social forces, AND most enormously the business and government policy.

[SoundSquirrel]

From an uneducated perspective, if oil doesn't hit at least $100 again, won't it be because so few people can afford to run cars, the airline industry has shriveled up and died, and most of the industrial plants have shut down?  In other words, demand destruction?  Seems to me that's a more likely scenario than a return to a beast in every garage.

On the other hand, hay will be $250 a bale, ethanol shipments will be guarded like pepper was in the Middle Ages, and people will flock to see the latest model of athletic shoes, then go off and find an old tire to cut up like always. 

[Ty Fjoyd]

Saw that article - what a joke. In late 07 Cnn ran an op-ed saying oil wouldn't hit $100. I actually emailed the guy saying what a piece of shitty journalism that was. He didn't reply.

That was an extremely poorly written article.

[kats]

You are reading it wrong. Agreed it's badly written, but it actually says:

but don't expect a return to triple digits anytime soon

Anytime soon appears to mean the end of the year.

[Rock_nj]

http://money.cnn.com/2009/08/19/markets/oil_price_fluctuation/index.htm

Fools.  For me, as an oil investor since 2005, it's encouraging.  The lead financial stories in the MSM are usually wrong (perhaps deliberately) to mislead the sheeple and make sure they are on the wrong end of an investment.

$100/barrel by December 31, 2009.  I'm bookmarking this thread and will post again at the end of the year.

Oil was up $3.23 today at $72.42.

I did not understand that article at all.  The body of the article did not lay out a case regarding why oil will not return to triple digits.  It talked about a variety of oil matters, but not $100 oil.  Stupid headline.

[Jeromie]

There are reasons why oil might not go above $100.  For one, OPEC now understands that  King Abdullah  was  right on target with high oil prices destroying  demand by creating vicious downturns in the West.   Jeff Rubin, in his new book makes that point in a  number of places.     OPEC will do all it can to break prices at the top edge of where economic damage is inflicted?   Remember, King Abdullah's little confab in the late spring of 2007 where the King said it was  manipulation  and he knew who the parties where. The big oil price collapsed almost immediately in the aftermath of the Sem  bankruptcy and went straight down.  Others were  feeding into creating the SEM losses that killed them.  They were funded by Lehman which also collapsed only weeks later.  Been wanting to study that   . It is on my list.  But clearly the King was correct about the feared effects of oil mania.... economic  collapse because the populaces in the west could not absorb the retail prices of petroleum products.

This time, the oil states prevent that from happening.   They all have studied John Davison Rockefeller who solved the ruinous competition problem along with Henry Flagler.   Similarly, the Nobel's, Rothschild's, Samuel and Deterding also saw fit to use the Rockefeller  solutions to boom, bust  and ruinous competition.    It is not like the price problem is unique.

It would be nice to see a balanced piece by pro's .

[doctor zaius]

Fools.  For me, as an oil investor since 2005, it's encouraging.  The lead financial stories in the MSM are usually wrong (perhaps deliberately) to mislead the sheeple and make sure they are on the wrong end of an investment.

$100/barrel by December 31, 2009.  I'm bookmarking this thread and will post again at the end of the year.

Oil was up $3.23 today at $72.42.

Well, I agree with you that the long-term trend of oil is up because of dwindling investment and production. However, I think we're going to have another mega-crash sometime this September or October at the latest and the price of everything is going to crash, even oil. Just like last year. The stock market will crash, more banks will go bust, more corporations will go bust, governments will run out of money to give away. This will keep oil from skyrocketing.

[kenjamkov]

OPEC may keep the price of oil artificially lower than $100, but if oil is still rare, gasoline (and other oil derivatives) will still increase in price.

[Jeromie]

Not necessarily, one way out of the box there is an excess profits tax. The US has had a number of those and they worked tolerably well .  There are other ways too.

[TheDude]

I see that many here attribute a significant amount of importance to last year's oil prices and the current economic downturn. I disagree with that assessment.  The oil spike was an anomaly - due in large part to speculation.  Many banks and investors saw that the securitization market was collapsing and there was a subsequent massive exodus of capital out of the credit markets and into the commodities markets.  Thus the oil spike...  everyone went from one side of the boat to the other, so to speak.  the boat listed - badly so.

I have been following the current financial crisis since early 2007, when most officials were still putting the risk of recession at less than 50%.  There are many factors, but I won't go into detail on that as it would involve a rather lengthy post, and i don't quite have the ambition for that right now.  I will say this: we are experiencing a deleveraging we have not seen since the Great Depression.  Money is debt and vice versa.  And when there is rampant debt default (deleveraging), you have a subsequent contraction in the money supply.  The fed and treasury and FDIC bailouts are merely balance sheet shifting exercises; there is no helicopter dropping vast amounts of money onto the populace, so inflation is not a current risk. (Cash for clunkers notwithstanding)

That said, I don't see oil prices rocketing skyward in the near future.  I see them being rather flat instead.  We have a long way to go to deleverage, and green shoots are merely manufactured results of government intervention.  They are not sustainable.

Look at this chart, and tell me where the secular bull market lies:




This chart is somewhat dated - we are currently at 375% of gdp.  So what is the source of our prosperity these past 30 years?  Debt - and lots of it.  Should we go back to historical standards of total credit of 150% of gdp - what do you think that would do to our current GDP - and to our oil usage?  We are 5% of the world's population that consumes 25% of the world's oil.  That's a lot of demand that may be shrinking.  This is catastrophic.  Currently the US Federal government is ballooning it's debtload because the private sector can no longer grow it.  Our entire financial system has been effectively nationalized.  (However, the losses are socialized while the profits still flow to the pigmen of Wall Street)

So...  the only demand out there that I see taking up the slack is from China.  But their current growth is a bubble too.  Anyone read Andy Xie?  We'll see what happens this Xmas.

A good article:

Rough Seas For Tanker Lines
Jesse Bogan, 08.13.09, 08:00 PM EDT

http://www.forbes.com/2009/08/13/oil-tankers-shipping-business-logistics-energy.html

interesting quote from same:

The price of oil has been oddly buoyant, holding above $70 Thursday, despite weak demand. Earlier this week, the U.S. Energy Information Administration lowered its forecast for global oil consumption for 2009 to 83.76 million barrels per day from 83.85 million; it also cut its 2010 forecast by 90,000 bpd to 84.7 million barrels per day.

"There is at least some implied demand increases in the fact that oil prices have run up, but we are certainly not seeing it in actual demand numbers, and we are also not seeing it for the number of tankers that are needed for voyage," says Scott Burk, a shipping analyst at Oppenheimer & Co. in New York.

I do believe in peak oil...  just not yet.  Who knows?  Part of me thinks that we exported this global depression to delay peak oil.  Or maybe we finally reached the end of any typical Ponzi scheme where entrants into the scheme can no longer support those above them.  That's our current economy of unsustainable "permagrowth."

[Jeromie]

I am personally not wed  to the idea of moncauses for anything.  Abdullah was very frightened of a consumer crash  in oil demand around May 2008 from material I read in places like Arab News.  That demand crash indeed did happen.  Jeff Rubin in his book  emphasized  the certainty that high oil prices kill economies and makes quite a point of it in his book. 

My post was to the idea that the big oil states , and Saudi Arabia in particular,  now understand and were reminded  that too high oil prices  cost them dearly. They understand the future need for steady higher prices.

I had a long thread going here around June of  last year  called " Bubble Bustin  Out All Over"   alluding to the idea that oil prices were mostly manipulation by the big firms due to the " Enron Exception"  .  We had a  heated discussion around the testimony of Fadel Gheit , of Oppy, that the fundamental oil price was NYMEX  $60. That was June 23, 2008.   Every single oil producer I held was reporting huge paper losses on contracts. They of course could  deliver being producers . SEM built up huge losses waiting for the price to come down closer to fundamental.  It did turn and go well below and my oil producers  all came out with huge gains.

So, I have no doubt the price itself was manipulation driven. I suspect it was to help cover the big bank losses from mark to market. Certainly , the trading arms of the big banks delivered huge profits from their positions as shown in their annual reports.

So , here we have the recent Chief Economist at CIBC  blaming oil for much of the fiasco.   His view is the effect was the same as 1973-74 and 1979 -80. I first got really interested in this aspect of  oil in 1974.   

But the reasons are multiple, of course.  One aspect really interests me and I keep looking for data that the Peak Oil frenzy was deliberately hyped to mainstream by the banks to drive the price up.  Certainly, every shill they had in their pockets seemed to be on the bandwagon.  That is a lot of shills too !