Crude Oil = $120

As per your last sentence…

HENCE, the Rally!!!!

With the way it’s done (been over that before) I’ll give you props and put down that oil should be about $80 even with the BS fear mongering that occurs daily.

Strikes in Nigeria
Mexican Pipeline troubles (that’s the best one yet!)
Japanese Tanker Problems (close second)
Rebels in Nigeria
Fog in the Houston ship channel

Any of these “incidents” have an effect on less than 3% of the total supply we are pricing in our “efficient markets”..

IMO It is a bigger scam than our “elections”..

Ciao
MS

Oil is the latest target of speculator’s money.

As soon as Dick and Jane start getting in, the floor will drop out from under oil. This is classic speculation, nothing more.

As always, there will be some people getting hurt in the end. Some times, sheep deserve what they get. Wake up!!

In the backdrop of a slow down at least in the US, oil is WAY AHEAD of itself.

If anyone here thinks that oil will pull back to $80 a bbl in the next few months, then you have a chance to double your money by buying DUG.

This site is usually light on specific buy tips, so there’s one.

“There is a huge contingent that simply refuses to believe in the rally in Oil — since around $40”.

This is true… and it’s not just about oil. Many people are blaming all of the rally in agricultural commodities on the corn/ethanol fiasco. Some blame the rally in commodities as being due simply to the creation of ETF’s and ETN’s. Then of course there are the evil hedge funds causing commodities to rise.

There are others who argue that as soon as the Fed stops cutting the Fed funds rate, commodities will plummet.

I’m going to bet with Jim Rogers on this one.

Seems like the folks objecting to the high price of oil are the ones not owning any.

Price is reality no matter the ’cause’. But I guess we are ‘entitled’ to cheap oil and the sinister evil-doers must be brought to justice.

Alfred, 30-40 USD oil? It can happen. Markets……….fluctuate.

Wow. After all this time I am surprised to see that so many think this is all a conspiracy by greedy oilmen and their associates. Oil has a long way to run.

Of course, corrections (usually due to WS shorting) come and go. Demand for crude will not abate.

The US is not driving this.

The US is no longer in the driver’s seat for the world economic growth.

I don’t know where this thing goes; but, it is not based on fundamentals. It is nothing but hot money. If it were not in commodities, it would be showing up somewhere else. Even though it affects us all directly, recognize it for what it is…speculation among the future traders. (They are loving this!!)

I am still curious as to whether Wall Street trashes the markets if a Dem wins the election. I think we are witnessing the last great money grab. Anything that can be exploited is fair game. Get it while you can before the party (the Republican party) ends.

The Party currently in power is throwing in their cards (capitulating if you will) knowing full well that they are going to feel the wrath of the voters in November. They see a tidal wave and are scrugging their shoulders saying “Oh well…What the hell!”

Mark my words, oil will go down after the election.

You can’t put online economies representing close to 2 billion people (China and India) and expect demand to stay quiet and placid as if nothing happened, can’t you?

That said, if we had been a little more generous in the use of our common sense, we would have listened more carefully to Jimmy Carter in the 70’s, then Al Gore during the 2000 election not to mention the true experts (that would be those who are not beholden to the various don’t-think-tanks) who all told us the same thing: no matter how efficient we become at the margins it won’t make any difference until we learn to address the core problem a.k.a. conservation.

But noooooooooo! Conservation is for those damned libruls, tree-huggers, weed-inhalers potheads idiots. Cheap oil is a political thing dude! It’s our God-given right, ‘no watta’m sayin’ man?

On top of that, this stuff called petroleum derivatives and compadres such as Nat gas are used quite a bit in agriculture, which has had a rather good run of its own…if you were long on them, of course.

Right now, the Ag market is getting rather screwed up, to the point of impeding price discovery. ( http://tinyurl.com/3feym9 ) And that can’t be good for anyone.

We live in interesting times, no doubt about that.

Jubak has a great article on this today. The countries who most need the income do not have the cash to increase production. Actually, lack of funds (Nigeria and Mexico), governmental policies restricting US involvement (Mexico) and government taxation of oil profits (Russia) will lead to DECREASED production by these countries. The countries which could increase production have no incentive to do so, as they are receiving a gazillion dollars for the oil that they are providing.

There is not an oil shortage per se, but if access to known oil supplies and increased use by emerging market countries is considered, we have a very tight and probably increasingly tight market for oil. Oil future were recently running at over $110 a barrel through 2016. Ugly.

eat my dust…. i am holding oil stocks
and some gold stocks.
Barry is right, all you guys are laughing at
the oil rally. Go ahead and laugh while
my portfolio gets bigger.

There will be a top/bubble one day, maybe in 10yrs
when posters here like KEN H start buying oil futures.

History lesson–the last great run in oil, from 73 ’til about ’82 saw similarly high prices plummet in short order to the low $20’s by the mid-1980’s–all because the dumbass fed woke up and realized it was all about the dollars. The only difference between now and then is that we have such a sophisticated financial system today until any moron w/ that knows how to point and click can get in on a rally. I just hope the fed doesn’t socialize their losses, too, when they inevitably come.

Reminds me of an old joke at the time: Know the difference between a seagull and a Houston oilman? The seagulls are still making deposits on BMW’s.

Hemingway described it:

“The first panacea of a mismanaged government is inflation of the currency. The second is war. Both bring a temporary prosperity; both bring more permanent ruin.”

rickrude,
We are SO not impressed. No one here is in the market for used cars.

Down on the farm

Interesting anecdote about a farmer friend here in East Texas.

This family has owned a goodly chunk of land since before the War Of Northern Aggression. They farm about 1,000 acres. Like any good asset manager, they have a diversified portfolio consisting of hay meadows, pasture, plow ground for the grain de jure, five kinds of livestock , if you don‘t count the kids(four edible and one rideable) and a few acres for truck farming.

I noticed last Fall that they plowed and disked their pasture (about 270 acres) and planted winter wheat. As a consequence they were forced to sell over 200 head of cattle. These people are conservative farmers and do not make rash decisions. I talked with Bill, the owner, at the volunteer fire dept. bar b que and he had some interesting observations about the ag markets. He is a sophisticated ’investor’ and has used the futures markets to hedge exposures in the past.

It is his opinion that there has been a fundamental change in the ag markets that he has not seen in 40 years.
I’ll paraphrase. Energy prices, diesel, nat gas, lpg and as he calls it elec-atrocity has killed the margins on every commodity he produces. Recent price increases for grains are only now catching up to his input costs. As higher prices slowly move through the system, people will freak and he is afraid there may be some form of price controls on the horizon. He ordered a new Deere tractor in January but won’t get delivery til mid 09. The price he paid was double the price he paid for essentially the same machine 12 years ago and he admits not reserving enough to replace it.

His bottom line is this. It will take 3 to 5 years at these prices to restore his profit margins to where they were in 1999. If prices decline significantly from here, especially grain and vegetables, he will simply quit planting. He completely understands that ag is a cyclical business but since farming is so capital intensive and he is under reserved to replace equipment, he is afraid he’ll go broke while showing a profit. He also stated that the bank has tightened credit standards and his brother who farms down the road a few miles had to borrow money from him since the bank rejected his loan app for the first time in 20 years. He truly believes that grain prices may double from here in the next 3 to 5 years.

Oh, he got rid of the cattle because he was losing $145 a head.

We have a guy at the Fed who promised to throw money out of helicopters. He kept his promise.

Forget about investing and all the high-minded things. You know what’s the best investment for many of you personally? Run to the nearest Costco and load up on rice, macaroni, and canned meat/vegetables – the best return on investment for years to come. Here, in Mountain View rice has disappeared from the shelves, and is rationed one bag per person.

Am I the only one who thinks oil is cheap here?

Petrodollar recycling is the last remaining leg of the stool the dollar sits upon. Lower oil means lower dollar, mean higher oil. It will continue until there is serious demand destruction – which is a long way off.

thanks for the story Ross

your neighbor – maybe a couple wind generators and an electric Deere or manure gas to electric … but all thats more money to borrow

if he can pay his property taxes on horse power production – wrangle up some working animals – screw feeding the east coast – and sorry we have a society of leaches feeding off the producers

Ross,

I don’t see oil company profits growing wildly either, at least not any oil company of significant size.

Take Exxon/Mobil for instance. Back in 2000 oil was selling for about $20/barrel and XOM was about $40 or $45 per share. Now oil is $120/barrel, 6 times what it was in 2000, but XOM is only selling for about $95 per share, slightly more than double. Just imagine, if profits went up as fast as the price of oil, the stock would be fetching $250 per share.

But production costs go up 15% to 20% per year. Drilling and development costs go up 15% to 20% per year.

But the biggest problem facing oil companies is that, if they want to stay in business, every year they have to replace the reserves they produced. And that is extremely expensive. I live in Mexico and I remember Pemex commissioned a study a few years back that analyzed the exploration costs for the trailing three years of the world’s largest publicly traded oil companies. At that time the cost to find a barrel of conventional oil reserves averaged something like $60 per barrel.

Then there are the resourse plays like the Athabasca Oil Sands in Canada. I suppose the reserves are massive and the oil is there, so there’s no risk of drilling a dry hole. But the capital costs are huge, I think on the order of $150,000 to $200,000 per BOPD of production capacity. And the operating costs are extremely high, $50 to $70 per barrel (also increasing 15% to 20% every year).

I think that Conoco/Phillips perhaps made the right decision. They said they are going to cancel or delay some projects that are just too expensive, buy back stock with the money instead. And I am in total agreement. What’s the logic in spending $100 per barrel to find new reserves and another $30 per barrel to get it out of the ground in order to sell it for $120? That only works if you believe the price of oil will continue to go up. There are plenty of oil producers out there playing that game, especially independents, but that is pure speculation.

In the short run, we’d love for other countries to send us their finite natural resources on the cheap… But, I don’t think that’s a good long-term plan — for anyone.

Down South wrote:

“The U.S. no longer has the military or economic might to make it otherwise.”

Hmmm! That may be true. But you know what? I think we are forgetting the biggest might we have around here: innovation.

This is the 3rd time since January that I listen to a Science Friday segment* on NPR dedicated to the Energies of the Future. Let me tell you that what these guys and gals in white coats are cooking in their labs and industrial prototypes is nothing short of mind-blowing.

In some cases, oil companies have invested and partnered with these startups, and for good reason IMO.

*”Scientists Seek New Ways to Produce Biofuel” 04/11/08

“The Potential of Solar Power” 03/14/08

“Biodiesel Hits the Big Screen in ‘Fields of Fuel'” 01/18/08

Worth listening to me say. If only to be reminded that creativity if always a force to be reckon with, and that Scientists do not merely talk about energy independence; they’re doing something about it!

US population: ~300,000,000

World population: ~6,000,000,000

“The 2% of the world’s population that lives in the U.S. currently”

No wonder people can’t figure out what’s going on with the economy.

Posted by Greg0658 08:00 AM on 04/23/2008 on Huffington Blog

Here’s another one everybody is running with.

55% Clinton 45% Obama = 10%
NOT
Thats 5%. If 5% of the Clinton voters had voted for Obama it would be a TIE.

The MSM needs to advertise a double digit win. I don’t know if its
for the ad revenue by keeping this primary going or they need a
proven globalist in the White House.

I saw this in a movie “you know when you put a stamp on that and put
it in a mail box its called mail fraud, punishable by 5 to 10 years
and $50,000 each offence”.

No rick, I’m out of oil now because it’s pretty much a joke. I think its pretty obvious. Never look back. I got out of real estate early too. Too early, yes but I’m fine with that.

Your argument reminds me of real estate speculators getting on blogs to refute the obvious. “Your just a jealous renter who is going to be priced out forever!” Guess Not.

The problem with oil is that I get dragged into it whether I like it or not. I run a business and every aspect of our economy is going to be affected going forward. the other is how unregulated speculators continue this madness using taxpayors money.

“me” What a load of crap. First of all, why don’t you use the whole quote from the article you used.

“Chinese demand for oil is accelerating ahead of the Olympics with crude oil imports up by almost a quarter to 4.07m barrels a day in March, compared with the same month last year. For the first quarter, crude imports rose by 14 per cent compared with the same period last year.”

source: http://royaldutchshellplc.com/2008/04/23/oil-nears-120-as-demand-from-china-increases/

The article also goes on to state how opec ministers believe the run up to be….caused by speculators and a weak dollar which I agree with. They also state that they are going to increase production to help bring down prices.

I will point out how the strength of the dollar has been pretty stagnant and oil has gone up from 104 to 120 a barrel since oh,.. March 14th. Gee, isnt that the day the fed opened the discount window to investment banks? HMMM. WTF are you smoking!