Crude Oil = $140

$150 a bbl. = R.I.P. for U.S. economy & world economy.

Stock market bulls have made the observation that each unit of GDP growth requires much less energy than was needed back in the 1970’s.

However, the fact of this can be used to support the argument that the price of crude can go substantially higher before GDP growth becomes clearly negative.

Boone Pickens’ (earlier) prediction of $150/barrel in 2008 now appears conservative.

Barry,
Sorry for this off topic thing but I thought you might enjoy this name asociation:
Supreme court returns Habeas Corpus to America in 5-4 vote. The 4 who voted against were RRRRoberts, AAAAlito, TTTThomas and SSSScalia. Since these “Judges” are all Federalist Society Republicans, we can now officially group them with an acronym composed with the first letter of their surnames….i.e. RATS

I don’t have a horse in the race, but I am wondering what to make of the fact that posts or comments related to oil here and at your better financial blogs everywhere, get far more comment responses than from average posts. There seems to be both a comparably high degree of interest and a high level of polarization: people declaring oil prices are here because of either 1) fundamentals and are going to $150-200 or else 2) damn speculators and about to crash. I ask, what does all this blog reader interest and polarization mean?

The reason why is because life is simple and so are prices.. Oil is a major commodity and it affects the end-price of a lot of things..

Yet, for some reason oil prices are argued to not be simple and everyone you talk to has a reason/excuse/argument/theory as to why they are complicated and why their reason/excuse/argument/theory is correct.

Yet, for those who we empower to produce facts and make things right, don’t seem to have the knowledge or know how on how to make things factual/right…..

No one knows for some reason why prices are soaring…

Here’s a quick solution (which I don’t see anyone pursuing)….
1.) If you participate in any way in the determination of oil prices, you must be either a supplier or a buyer (YOU MUST TAKE DELIVERY OF A CONTRACT)…

What does this due? This eliminates speculation….. Who the hell deemed it the right of some gambling clown to make money from betting/speculating on oil prices and translating the cost to consumers? O’ it’s only 2%/3% of the oil price picture? Cool, I want it to be 0% …. Go gamble in a casino if that’s how you want to make your money.

2.) Get together a global committee and once and for all develop a system which indicates supply/demand.

What does this due? Eliminates the b.s and uncertainty regarding global demand and supply.

Solve this two and you will have less clowns presenting their grand theories. It will be what it is. And everyone can go home and stfu…

Until then, you have what you have. It amazes me how we as a species have continued to flourish amidst a system built to reward lazy gamblers with the largest fruits in life…. O’, I know how, we decide to pass the (-) effects on to the lower class individuals via poverty,starvation, and sub-standard ways of life. Ying/Yang.. I guess things balance themselves out and we term it as “They way things have always been”.

What a sad realization for me indeed.. A hopeful 24 year old tried to make a difference in the world

Lets look at a human’s basic needs :
-> Food
-> Water
-> Shelter
-> Energy

Beyond that you have excess… There was enough excess companies on wallstreet from which money multipliers could make money…Times got tough… So, they decided to break some moral hazards and dip their hands into the basic needs….

Hmmm, housing.. That’s not off limits (pump/dump)….
That cash cow died.
-> Food
-> Water
-> Shelter (X)
-> Energy

… Hmmm, what’s next? Food/Energy.. Yeah… lets go for it…

I am sure in the next 1/2 years after that is done it will be on to water. People laugh but I don’t/won’t.

You want to fix a large number of our problems? Stop making it possible for people who don’t contribute anything to society to profit and make tons of money… O’ but I give millions to charity? O’, that’s nice…
So, steal ($10 million) .. give back ($2 million), and be declared a saint.. wow, that’s just nice..

Oil is a very polarizing issue in society at large as well.

Lately, I’m getting all kinds of email, from people smart enough to understand how things work, showing me that I’ve overestimated them.

Under stress, people resort to comforting dualisms. So they talk about boycotting Exxon, beheading the envirowackos, jailing the speculators, making sure Obama/McCain doesn’t get elected.

Last week, I even heard a belief system I’ll call abiotic theism – the belief that God’s in the center of the earth, making more for the benefit of his followers.

I think it’s coming back too, but I have only the sack to hedge my longs and sell a little coal. I’d likely be a buyer again in the 90s.

Like I said in an earlier post, we’ve never really seen a bubble before in something essential to the world’s continued operation.

No way of knowing where it ends up. On the great roulette wheel, I’d be picking $250 at some point before 2010.

Do yourself a favor and read ” Iraq and the International Oil System: Why America Went to War in the Gulf ” by Stephen C. Pelletiere.

Understanding the underlying machinations of one of the most important industries on earth will ultimately help people make better decisions.

☺☺”At this point in the game, I would say that the bears are bears and the bulls are bulls. Out of pride or pure stubborness, we are not changing our minds.”
Posted by: cbit | Jun 16, 2008 3:40:41 PM

“In his many battles his tactical genius is apparent in the lightning-like speed with which he adapted his actions to novel circumstances.”–J.F.C. Fuller on Alexander the Great

“The carrying out of a plan, from its very beginning to the conclusion of an operation, is another process of knowing the situation; i.e., the process of putting it into practice. In this process, there is need to examine anew whether the plan corresponds with the actualities. If the plan does not correspond or does not fully correspond with them, then we must, according to fresh knowledge, form new judgments and make new decisions to modify the original plan in order to meet the new situation.”–Mao Tse-tung

“Victory smiles upon those who anticipate the changes in the character of war, not upon those who wait to adapt themselves after the changes occur.”–Douhet

“The hope of the wisdom essential to the general direction of men’s affairs lies not so much in wealth of specialized knowledge as in the habits and skills required to handle problems involving very diverse viewpoints which must be related to new concrete situations. Wisdom is based on broad understanding in perspective. It is never the product of scientific, technological, or other specializations, though men so trained may, of course, acquire it.”–Wallace B. Donham

“It is common to see men who have used all their limbs without once in their lives having utilized their minds. Thought, the faculty of combining ideas, is what distinguishes man from a beast of burden. A mule who has carried a pack for ten campaigns under Prince Eugene will be no better a tactician for it, and it must be confessed, to the disgrace of humanity, that many men grow old in an otherwise respectable profession without making any greater progress than this mule.”–Frederick the Great

“Education is a two-edged sword. If it indoctrinates with rigid principles, constantly hammering home the fixed and immutable nature of those principles, and if it offers neat solutions to every human problem in terms of these fixed principles, then change and development can not take place.”–Dale O. Smith

“A man who can’t make a mistake can’t make anything.”–Abraham Lincoln

Wow. Thanks Downsouth.

I can’t believe that you wasted that much space (and time) cutting and pasting quotations from historical icons. All for l’il ol’ me.

Let me see if I get the message. Are you trying to tell me that much wiser men than I have proven that adapting your strategy or decisions to the situation at hand yields the greatest rewards? In other words, God smiles upon those who are objective?

I get that. My point (my self-deprecating point) was that it is the same people on the board trying fruitlessly to convince the same other people on the board the same argument. No one is budging.

Will you be the first? Who should switch sides? Me or you?

Let me ask this…has ANYONE here changed theirr opinion on oil recently?

That chart above does not look parabolic. It looks like a simple upwards channel. I’m no expert but people have commented that the moves as percentages of the base price have not been historically high. There seem to be good arguments that Oil has a good way to go yet. It will correct just like it did last time in the 70’s. Hopefully by then sufficient pain will have been inflicted that people will be really really serious about reducing their dependence on the stuff.

TheGreatLibor,

The fact that people’s opinions are so polarized on such of an important issue the answer as to why we as humans can’t prepare for a future certainty until it is thrust upon us. No one thinks about conservation at $20 oil and only a VERY FEW think about conservation at $140 oil. I hate to think what price it will take for EVERYONE to think about conservation in a serious manner.

austincompany,

Whenever I say this, most think I’m nuts* but benchmark crudes’ prices are not determined by physical supply/demand; they are “market related”, i.e. made in financial markets which are taken to be efficiently ‘related’ to current and forward conditions.

Historically, and expressed in way too schematic fashion, crude oils have been managed for over a century but ‘who’ does the managing has shifted from, e.g. the Standard to the Texas Railway Commission to oligopoly of international oilcos to OPEC to futures markets. That is, free market theory and industry reality did and do not correspond. It would be nice if all the pundits et al bothered with at least a small amount of study.

*(which then means the IEA, Oford Instit. for Energy Studies, friends who were in the business for decades, etc, are also ‘nuts’)

The last few IEA reports have confirmed what Mike Rothman told Barron’s in Fall 2007. Demand is being revised down and supply is being revised up almost every month. Unlike in 2006 where it was really low, if you look at our own EIA numbers, there is more spare oil capacity now than there was in 2003.

The smart oil traders were long then and are out now. There are way fewer traders with long positions.

What has come in their place are the greedy, dumb followers who are not analyzing the data but chasing a trend. Today, the real news that Saudi Arabia was increasing production was greeted with skepticism, but the traders acted on the bullshit news: Britain’s raising the terror alert in the UAE, a fire in the North Sea that was easily handled, and a bill in Kuwait’s parliament calling for cutting oil exports.

And the bullshit news is coming fast and furious. When oil in U.S. storage was down last week, the traders drove oil prices higher. No one noticed gasoline supply was higher nor the reason why oil supplies were lower. It was assumed there was no oil to buy.

In reality, U.S. refiners have been exporting like crazy particularly diesel. For the first time, China was a net importer of finished products like gasoline.

And then a WSJ article comes out yesterday and says no refiner in the world right now even wants to buy more Saudi crude. So the reason for less U.S. reserves was less demand not less supply.

So every day I expect more fear mongering bullshit from oil traders to scare the market higher. That is the only bullet they have given the supply-demand numbers.

Friday’s news was Nigeria nationalizing a part of the country that was not producing any oil, but sure enough, oil analysts said nationalization of this area would result in a decrease in production. I don’t know how you go lower than zero, but that didn’t stop oil prices from surging.

Twice now, after hearing bullshit news about OPEC nations, I have shorted oil or an oil company and done great. I will continue to do so expect for Iran or Nigeria. When I hear Iran or Nigeria, I know the oil bulls are getting desperate and I will double my short bets.

I swear every time oil prices drop Bush pushes up the tension with Iran.