You might have heard that CLX07 hit $86/bbl today. Oil--in the next month--will...
Posted by Prof. Goose on October 15, 2007 - 6:53pm
Here's an open thread and a poll for you to discuss the fact that oil went through $86/bbl today.
The five options in the poll are, "in the next month, oil will..."
1. hit 93 before it hits 79
2. hit 79 before it hits 93
3. stay in a trading range between 79 and 93
4. it's all geopolitics, what does a price signal mean anyway?
5. haven't you heard? it's all about the declining dollar. it has nothing to do with growing demand and a current lack of supply.
Enjoy. :)
[UPDATE by Super G] Poll is here.
You might have heard that CLX07 hit $86/bbl today. Oil--in the next month--will...
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117 comments
You might have heard that CLX07 hit $86/bbl today. Oil--in the next month--will...
PDF version
117 comments
“Men argue; nature acts.”
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I think it's all because of Daniel Yergin--when he said in late June that oil prices should be back down to $60 next year, which based on prior performance suggests a price target $120 within one to two years.
Who knows?
So many factors to consider. Peak diesel?
An attack on Iran?
Well, the chart says:
Source: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID897936
What you will see in this chart (and analysis) is that there are no targets. Only tendencies. And the "picture" can change daily. But remember, the trend is your friend, and that hasn't changed in the past 5 years, right?
Cheers, Dom
------------
Just remember the Golden Years, all you at the top!
When oil was $70+ in 2005 following Katrina the MSM were reporting that it was still below its inflation adjusted price in 1972-1980 of $80. Now oil is $87.60 (Bloomberg: Nymex Crude Future 05:30EST 16 Oct) and the MSM are saying that oil is still cheaper than its inflation adjusted figure in 1980 of $101.
Does the law of receding horizons impact oil so directly as well? In other words, is the $87.60 worked into the inflation figures. And if so will oil ever exceed its inflation adjusted 1980 value?
What you're really asking is if there is anything like infinite petroleum. The answer is no. 101$ will be reached, and the 1980 figure will be topped.
Geez dude, that is not even close to what he was asking.
Mostly, yes. Oil is an input to near everything and, so, inflation tends to go toghether with its price.
today
As I see, two factors can change real oil prices:
1 - A recession, where people stop buying lots of goods and concentrate their spending on oil. That would make oil prices go up.
2 - Food inflation, where people stop buying other goods to concentrate their spending on food. That would make oil prices to go down.
And 2 seems to be dominating 1 by now.
But forget about all that. Current oil prices are due to the weak Dollar (and a weak Dollar is partialy due to peak oil, but that is another topic). Have I said that gasoline prices are falling as a rock at Brazil?
I'm sorry, I couldn't disagree more.
1. IF there's a recession, that'll mean less, not more oil demand, thus leading to lower prices.
2. Food inflation does not impact oil inflation unless there is a recession, in which case, oil goes down.
The dollar has stabilized at 1,42 in euros since last month, when oil hit 82. The current 5$ rise is therefore not because of the descending dollar. And oil is also rising in euros, so this is no "excuse" at all.
The underlying fundamental is shrinking supply (non-OPEC), shrinking stocks (USA) and growing demand (Chindia). Demand has been higher than supply all year long.
"1. IF there's a recession, that'll mean less, not more oil demand, thus leading to lower prices."
Ah, but you discount the effect of panic and hoarding (personal and national) on prices.
People don't 'hoard' during recessions. They bemoan their woes to congress and the Democrats give them $5000 baby bonds.
I am talking about inflation adjusted prices.
On a recession, every price go down (deflation), but oil moves less than average. On a food inflation, every price go up, but oil, again, moves less than average.
And remember that the universe is expanding, which means that a barrel of oil today is actually larger than a barrel of oil from 1980.
true enough. But the cylinders in the engines are expanding at the same rate, and the distance from place to place is growing, so the fuel mileage should be the same. At the same time, the dollar is shrinking, so the US economy must not be tied to the cosmological constant after all.
:)
"You can never solve a problem on the level on which it was created."
Albert Einstein
I was thinking the exact same thing, that a couple of years ago they were saying that in inflation adjusted dollars the all time high was about $80/barrel. What gives?
Look at my post downthread.
The question is when it will pass the inflation adjusted high and be a new record. That'll be uncharted water.
Waitasecondhere:
In 2005 the "Inflation adjusted" [edit]peak[/edit] price of crude was $80/barrel, and in 2007 it's $101/barrel? Does this mean the MSM is claiming a 12% annual inflation rate for the past 2 years?!
Funny, I heard on Jim Lehrer yesterday that the inflation-adjusted number was $90.
The Energy Outlook blog has an interesting post about this:
How come gasoline isn't following suit?
Earlier this month gasoline forced oil down a couple bucks.!!??!
Shouldn't gas be around $3.50?
If the crack spreads ever get back to where they were, gas will be at $3.50/gal pretty easily.
However, I gotta say, I am really starting to think that $100/bbl oil isn't going to "flip the light switch" like many thought it would.
Just another day of slow secular bleed-out and destruction of ye olde middle class.
The price of oil has tripled under the current administration and our economy hasn't collapsed. Not until there are actual shortages...
I'm also thinking like that.
If there is plenty of juice and the price is high, it will cause the regular Joe to modify his habits regarding his/her use.
But if there are ongoing and worsening shortages, that is a different kettle of fish.
First instincts will be to buy as much as possible when its available and hoard, which will of course exacerbate the situation.
It hasnt been as bad for us in the developed world where we can simply pay up and go about our daily business. THe third world is taking it on the chin as oil just gets too expensive to afford anymore and more do without.
Thanks guys for freeing up the black stuff for us up here. My big honkin' H2 thanks you sincerely!
Seriously, at this point demand destruction is working. Not equitable but effective. Look for it to start occuring in greater amounts in our own under class and more fossil fuel aware contingents. Me personally, I've only purchased 36 gallons of gas this year, mostly by getting myself situated where biking and walking makes a bunch of sense.
I have purchased zero gallons of gas this year, although I do ride public transit to work for five minutes every work day.
If you say so...
Well I know our economy is in big trouble (deficits and falling dollar, subprime meltdown, etc.) and you know this too, but the average Joe doesn't. Yet.
If Average Joe doesn't know it yet, then at least for the purpose at hand - guessing consumption's effect on oil price - it hasn't happened yet.
But the market is very good at preventing shortages. It prevents them by increasing the price.
Fuel shortages come as a result of dramatic events like acts of terrorism, natural disasters, wars or boycotts. Depletion will not by itself cause shortages.
Just because the first tripling of the price of oil didn't cripple our economy does not mean the next tripling won't do it.
I agree. Deffeyes kind of predicted this. He said there would be a lot of volatility (typical when a resource is scarce), and that this would disguise the peak and keep people from making the changes needed for the post-carbon age.
The runup has been so gradual compared to the oil crises 30 years ago. And prices have gone up and down, so people are hoping that they'll go down again. Especially since the talking heads keep saying that there's no shortage, nothing to worry about, refinery issues, weak dollar, etc. While in the '70s, everyone knew that we'd been cut off.
There actually have been shortages in part of the country this year. In the middle of the country, at the end of the pipelines, just as you would expect. Oil companies are pulling out of the area. There were gas shortages over the summer, and now there's a diesel shortage that is hurting farmers trying to harvest their crops.
But it doesn't even make the news, except locally.
Local stories ... that's true for sure. North Dakota has a diesel issue and in the Northern Marianas they are having problems with keeping the power on because of the high price of oil. The reason for that,I guess, is that the Commonwealth wants to do some sort of price control thing and it's causing the utility some concern.
Elsewhere, I don't know. Most places in the developing world really subsidize their fuel so the citizenry are somewhat insulated (until the the price controls come off and the riots start).
Some countries have to buy at spot prices too, since they have no capacity to store fuel, so that's got to hurt their budgets.
I'm actually quite surprised at how little disruption this is causing ... load shedding seems to grab the headlines though.
Well, not the US or Western Europe perhaps... But $80/bbl oil is already flipping switches in the developing world.
Yes, we should be measuring this in Yergins. You know, like a 3-dog night. We are likely to have a 3-Yergin day (but will we singing Daniel was a bullfrog?).
Jeremiah was a bullfrog. Daniel is a toad.
| The problem will solve itself.
| But not in a nice way.
"Daniel Yergin was a bullfrog!"
With such a perfect ring to it, I believe we will indeed be singing this. Now to get this little jingle out of my head...
LOL
Daniel Yergin was a bullfrog.
Such a good friend of mine.
NEVER UNDERSTOOD A SINGLE WORd HE SAID
But he always had some mighty fine.
yes he always had some mighty fine wine
Sing joy to the world (wow)
all the boys and girls now
Joy to the fishies in the deep blue sea
Joy to you and me...
makes me want to drive my car with the radio on
3,4,5 (with a possibility of 1).
Which will happen first - down 7, or up 6? i think that depends on the weather - certainly there is a moderate risk premium atm, but i don't see that going away.
i guess i'm sort of in the 4 or 5 category, as that can explain some of the current increases, although the current price signal (especially the longer term futures curve) can be an indicator on which way prices are likely to move in the future. Medium term i would guess up, but not by much, unless something "unusual" happens. (unusual = a cyclone, random invasions, civil unrest in Venezuela or somewhere else, or almost any other trivial supply disruption).
Longer term it all depends on weather economic demand "destruction" happens faster than decline - one will cause a large slump, the other will cause a large spike, with little middle ground left.
best of luck with a more decisive future than me,
Andrew
--
A farmer in India says he now has to pump water from 300 feet below the surface, compared with 70 feet 10 years ago. (Wall Street Journal, July 28-29, 2007, p. A10)
you're funny.
made me think of Lem's Futurological Congress, which y'all should read if you haven't yet..
Given the $1,000 bet, I'm wondering: Is Robert Rapier sweating bullets yet? Or, does the first $100/bl WTI still seem like a thing for, perhaps, 2008 or 2009?
-best,
graywulffe in CVO, OR
A $14 rise when oil is already in record territory in three-and-a-half months would still be a noteworthy event. So I'm guessing he's not sweating bullets yet, but is probably paying attention.
Then again, I wouldn't sweat one $1000 bet and I'm sure that Robert does better than me. Of course, there are better places that I could put $1000 to work (like on a wood-stove for the cabin I'm building).
OK here is a question for oil drum readers.
If everyone reading this site drove and electric car or bike fueled by solar power, how much would the price of oil go DOWN by?
www.zevutah.com to see my EV
It doesn't even take that much of a sacrifice. Just everyone walk to the corner quikkee mart.
RobertInTucson
I haven't escaped from reality. I have a daypass.
The problem with that is that it's just not feasible yet. Solar car/bike sounds great and I'm all for it, but it comes down to economics. An electric bike and the solar infrastructure to go along with it is EXPEN$IVE. You can't carry much on it, can only take one other person with you (at best) and isn't whole lot of fun in the rain, and in the winter.
There are many other options people will go for before they opt for that. The last time I checked, you can buy a Honda Fit for ~$12K. That will halve fuel consumption for a whole lot of people. Then, there are hybrids, which do better on fuel consumption, but are more expensive.
There are scooters and motorcycles, as well. (I've been motorcycling for 26 years now :-) But, that won't be for everyone, either. I'm betting that people will slowly start opting for either public transportation or carpooling.
My wife drove an Explorer for a few years. Last year, she got a Scion xB - double the mileage of the Explorer. Now, she's into walking for exercise. She's been making noises about taking the bus into work one day a week and then walking home. (~7 miles) Around my town, I starting to see more bicycles being used. My veterinarian now rides a scooter.
Changes will happen. Right now solar sounds good, but doesn't offer the return on the investment - yet.
I just ordered me a scooter. At 60+ MPG...5 fold increase over my F-150. I'm in Florida...until the ice melts ;-)...so I should be able to ride most anytime of the year and hope to make my investment back on the scooter with-in a year or two.
Hurricanes teach the hard lession of lack fuel and I had thought about a scooter since Ivan. You can go 5 times the distance versus my truck on a gallon of gas and pass all the closed gas stations because of lack of power and/or fuel.
Mitigation...That's my plan.
Scooters have tee-tiny gas tanks...plan on siphoning from your own truck?
Good point and one of the limits of a 3.5 gallon tank, I figure a range of about 200 miles on a tank. Another hurricane lesson is plenty of stored fuel. I calculate around 20K scooter miles then I would resort to siphoning from the boat’s 80 gallon tank 1st.
Hey a new term ‘scooter miles’ as a gage instead of MPG. Maybe I can mount gas cans on it like they do on the back of jeeps to increase range? They would need to be small 1 gallon versions of the army jeep 5 gallon.
But in the real world I would need to use my truck at times, plus the wife’s car, plus that chain saw, plus the boat if the ice melts to fast :-)
What is ironic…the boat with a 80 gallon tank has around the same range as the scooter with a 3.5 gallon tank.
Not ironic at all.
People who are in the sweet spot between sea level rise and the new coastline should be in a good spot for providing logistics when the interstate trucking industry goes belly-up.
I have an appointment with the dentist in a few minutes and its across from the local Hondo/Yamaha dealer. I am debating a TW200 vs. the Honda Ruckus. Both have nice balloon tires, the bike will stand up better to bad roads, but it only gets around 60 MPG as opposed to the scooter's 120 MPG.
Decisions, decisions ... and I really need to know *which* if any of the two jobs I've applied for is going to come through.
I hear you SCT, I went for a China import from the internet versus Japan import due to budget. I think I have correct expectations on quality. I researched online for awhile. Time will tell...
"Right now solar sounds good, but doesn't offer
the return on the investment - yet."
Eventually people need to stop thinking just
with the eyes of short term financial payback.
Investing in renewables is a long term payback.
After all, what is the payback of a habitable
planet for future generations? What are the
paybacks of less wars for resources?
And while I am at it, why must the price for
clean renewable energy always be compared with
the subsided prices of polluting fossil fuels?
Todd
I fully agree that we need to move to a non-polluting, secure energy source. But, we already have trillions invested in oil fueled infrastructure. I'm sure many people think of the long term, but the reality of the situation is that they just can afford to junk their existing car, and go with $50K+ worth of solar infrastructure that won't offer a great feedback in the winter or on cloudy days, and so on. If you're living paycheck to paycheck, that's a nice thought, but not realistic. I'd love to take my house completely off-grid. Why don't I do it? I can't swing it.
Solar is a great source, but it does have drawbacks. The efficiency is getting much better, and I think the next 10 years are going to yield amazing advances. Right now, if you can take a loan for the infrastructure, it's very close to conventional electricity in terms of price. The drawbacks of not working 100% of the time and battery technology for storage make it not quite ready for prime time. I think if the technology gets closer, people will opt to 'do the right thing'. We can barely get Americans to get off the couch to vote (!), so selling solar had better be an overwhelmingly convincing pitch.
We've spent ~100 years building oil based infrastructure, and it's going to take a while to adapt or replace it. I'd imagine that will be a transition involving an oil weaning, and a taper to other sources. The only question, and a fundemental one that's asked here, is will that transition be abrupt and harsh or longer and less painful?
I think it's a real shame that, even among those who are fully aware of the dire situation we're in, almost nobody is willing to make any real sacrifice, or any real effort. Bicycles work - have have worked - just fine WITHOUT any energy inputs besides human legs. And yet almost everyone who thinks about these issues at all - which is almost nobody to begin with - seems obsessed with finding a new way to have their asses moved around with making any effort. Just switch out another source of energy. I realize this reply may be offensive, but some of the ideas I see come across as completely pathetic. Apparently, Americans have forgotten how to walk. Our obesity epedemic is the biggest "duh" in the history of the world.
Not lost here kmcrawford111. I live within 2 miles of a Win-Dixie that gets bicycle trips for the milk and bread runs. But that will not be usefull for work in our neck of suburbia.
Mititgtion is my plan...
Same here. It's always uplifting to see others who are willing to use human power to get along. Bravo. Now, if only more people, including the peak-aware, would realize the benefits of getting along without being enslaved to their cars. It's going to happen eventually, but how much suffering will come first? That's the thought that scares me.
damac said
"The problem with that is that it's just not feasible yet. Solar car/bike sounds great and I'm all for it, but it comes down to economics. An electric bike and the solar infrastructure to go along with it is EXPEN$IVE. You can't carry much on it, can only take one other person with you (at best) and isn't whole lot of fun in the rain, and in the winter."
My electric motorcycle did not really cost that much. You can see the cost sheet on my web site, it was only about 4200 Total.
The solar system cost me about 5800 for 4 panels and the controller, inverter and batteries. So for about 10k total I do have an electric vehicle with solar charging. Yes I had to build it myself to get that price, but it was a fun project.
Glad to hear you like the xB
ZERO.
Much as I would like to think otherwise, we simply don't have that many readers. And many of us already bike, use highly efficient cars, and/or don't drive much, so what we don't won't make much of a difference. It's a drop in the ocean.
Never mind the whole Jevon's paradox thing...
1 is what a bookie would pick.
If you look at it most of the price change is dollar devaluation.
http://www.x-rates.com/d/EUR/USD/graph120.html
If the fed doesn't lower rates further it may be 3 but I wouldn't count on it.
If the fur starts flying it's off to the races and it goes sky high.
If someone honest from Mars takes over and raises interest rates on Oct 30 then it would go below 79, but the odds of that are very small.
EDIT just saw the poll, several correct answers but I vote 1
A bookie wouldn't pick 1. A bookie would give you odds on each of the choices. 1 might have the shortest odds, but the others would also be available for betting at various rates.
The economy could tank in the next 2 weeks and give you a 2, while 4 and 5 are sort of ill-defined. The bookie would need to have a more clearly provable outcome than "declining dollar" even though that's also true.
| The problem will solve itself.
| But not in a nice way.
I guess I should have said "as the most likely scenario"
You guys want silver BB's, I just hose them. LOL.
Hmmm...with commodities, isn't it the rule not to give both a date and a price? And isn't the short term price volatile, "noise >> signal"?
I have examined my pizza dinner entrails and have determined that the future price of oil will be.....
I have NO IDEA!!!
Option 6: None of the above
I have long since given up trying to predict. I have my gaze fixed firmly in the rear view mirror.
That's the only one that the general public and politicians will take notice of - eventually.
But how far in the rear view mirror do we have to look? If it's too far back there won't be time to change smoothly to some other way of doing things.
Xeroid.
an increasing number of people, including prominent money managers, are reading theoildrum.com (why not) AND, if jim cramer's 4 horsemen of tech nonsense can double, triple, indeed even rise 6 fold in a year while chinese stocks go parabolic, then $86 oil is still cheap indeed. weimar ben is stuck, given the housing and credit turmoil, so any restraint is up to the dollar peggers. how long can they take the heat?
http://politics.reddit.com/info/5ydgq/comments/
:)!
The oil supply situation is a guitar string tensioned by the pull of demand vs supply. The price is the musical note the string plays. As supply can't balance demand the basic note rises. If supply outstrips demand the note falls and can even become unplayable. Above ground factors are the players fretting and strumming. If the string is tight no matter what fret they pick the note goes higher and they can make the note rise very high. If they strum too hard they can break the string completely (cause world wide economic demand destruction). Some believe that OPEC (or the KSA) is the capo controlling the note and capable of lowering the pitch as long as they just let go. From the past months of discussion on TOD it doesn't look like the string tension is going to be relieved by supply. Especially with the industry media saying more and more things like this:
http://realtimenews.slb.com/news/story.cfm?storyid=644893
And there is an unending supply of pickers and strummers: Turkey attacking Kurds, MEND,the weather, Iraq, Dubya bombing Iran, terrorism, old refineries, fear, greed, speculation etc. Even if one of these plucks too hard and breaks the string the note will rise very high first. The basic tension seems to have the note in the 80s. I think we are going well up in price before the world economy breaks the guitar completely. I think number one is it.
I wish we could afford the life we are living.
I wanna buy a new car with a 5 year loan, should I go for it?
http://www.montagueco.com/
or
http://www.austinev.org/evtradinpost/
Homebrew,
I think you should buy that new after all.
http://www.teslamotors.com/index.php
Just make sure you have one of these to park it under.
http://global.kyocera.com/news/2005/0602.html
Hey, I could get you $50/month payment on a 50 year loan. Of course, the first 25 years is all interest, but what the hell.
Wow folks talking smack about little danny yergin. just because he has been consistently wrong in each of the last five years of predictions regarding things petroleum doesn't mean he's an idiot (who is treated as the oracle of all things oil by the main stream media for some strange reason, oh yeah not that strange it's called SLOTH on the part of reporters). okay, okay he is a complete idiot.
Yea, Yergin really is an idiot. Probably about a year ago, I was blown away after viewing a link posted on TOD to a video of Yergin, Marc Faber and Jim Rogers talking economics, globalization, oil and politics. In the first part Yergin voices a few opinions then quickly realizes he's in over his head with these two guys and mostly asks questions even though he is the invited guest whose brain Faber and Rogers were supposed to be picking. At one point he demonstrates complete ignorance about the commodities boom and China's role in it, when he asks:
"Let me ask you, this growth in imports into China, that is a striking statistic you have. What is it? Is it mainly commodities that are coming into China? Are they importing manufactures from anybody else?"
He even realized he couldn't pass his oil B.S. on them, his supposed area of expertise, and never spoke with any authority on that issue. Couldn't find the video link, but here's a transcript.
http://www.financialsense.com/transcriptions/2003/Riverside.html
Video:
http://www.amago.nl/91TRC.html
I'm not smart enough to choose a number but ....
Oil going up and gas (petrol) prices going down in the US means, to me, well, oil going up but the American Consumer(tm) doing worse so they're buying less gasoline. So the gas stations lower the price to try to sell the stuff - each gas station owner wants people to drive into THEIR station to buy gas and hopefully the sodas, cookies, cigarettes etc that they actually make money on.
I think it is Bush's buddies, selling gasoline at near cost to keep the stressed out consumer and under water home buyer from blowing a gasket. At $88 per bbl the crack spread goes negative with heating oil and gas prices this low.
not.
the thing is that crude stocks are lower than expected BUT gasoline stocks are higher than expected. There is a lag between crude production and gas production. Expect higher gas prices in the coming winter.
I don't know the situation now, but exactly the inverse situation was true a month ago. Oil stocks highter than expected, and gasoline stocks lower than expected.
Both prices had the same behaviour they have now. So, I think that is not the cause.
Luis, the exact opposite is the actual situation. Please read This Week In Petroleum on a weekly basis and you can see the issues. US gasoline stocks still stand near historic lows of about 193 million barrels, down from 215 million barrels one year ago at this time. Crude stocks are at 320 million barrels, down from 330 million barrels a year ago at this time. The gasoline number is well below the prior 5 year average for this time of year and has been for the entire summer. The crude number is near the upper bound of total crude inventories and has been for the entire summer.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
First of all, in reference to #5, does anyone know if the price of oil has peaked in Euros (nominal, not inflation-adjusted). Whether it has or not, oil is still up a significant amount in any currency.
I picked #1 contingent on my belief that inventories will continue to decline supplies will be inadequate in the face of rising demand. I think at 93 you are very close to the point at which significant, price-dampening demand destruction occurs. More long term though, like in '08 I expect oil to easily surpass $100 unless recession hits before then. Even if said recession does occur, it will be a temporary dip in prices.
Question I want to pose to people is if it would make sense to invest in gold as a hedge against the dollar. It nearly hit a 28 yr high today. Is it possible that it could hit $1000/oz or beyond?
$1000 gold is nothing. You should ask yourself if it is possible that gold won't surpass 1000.
Can Saudi engineer a dogleg up from Khursaniyah? My guess is yes, at least enough to get the Chinese their alottment. I suspect at this point the US is price takers, not price makers, so next month prices ease. So I pick #2. And $100 by Valentines Day. Abdullah, we love you ,man, love you...
I keep watching the price of oil drop below $80, and then something sucks it up again. I voted for #2 -- it seems to me there will continue to be fluctuations, and even though the low point is rising, a pull back to $79 is still within reach.
Will it go to $93? I think it will on the way to $99 and higher. There are so many people out there (many of them talking heads on CNBC) who want the price to drop; they are fixated on the fact that there must be something that is artificially holding the price high, and they keep providing the faith that the price will drop. But at the same time there are too many things that will force a spike in the price, and the trend will follow the fundamentals of supply and demand, making the $93 figure inevitable.
Two steps forward, one step back.
Sam Penny
the Prudent RVer
I think the poll should have multiple choice at the same time option. Yes, wouldn't be as much fun, but would be more accurate.
The fact is of course, there is no way to know, as so many have said already.
We can all guess, based on our presuppositions, but to know requires a rear view mirror and time to pass.
This is a mischaracterization of what is happening. The falling dollar is a primary form of demand destruction and by itself a signal of resource constraints.
I'm expecting a hover just below $90, but not for more than a week, at least one upward spike before any major downward spikes, general trend upward through at least $110.
It has already passed 87... it is on rampage!
I know nothing about the normal year "schedules", this had to do with OPEC saying that non-OPEC didn't produced what they expected. If no more news are expected until the end of the year, as in the winter contracts already being done, I wouldn't expect it to climb much more. But that's a I don't know. It depends pretty much on how things operate. Last years, oil descended in the winter, only to go even higher the following year, so even if it climbs to 90 (could be even this week!), or even 95, or even 100 (nothing special, goldman sachs had predicted it in the beggining of the year, remember?), it will back off a little to maybe 70.
And then next year it will jump again to 100, perhaps 120? Too many factors involved, anything can happen, but. the. trend. is. up.
Shit. it is going through the roof. 87,5.
The amazing thing is that MSM/CNBC blows it off like it's no biggie.
IIRC, just a few years ago, oil passing above $45 was a biggie for "The Market".
_____
This little yergin went to market.
And this little yergin stayed home.
And this little yergin went whee whee, running off at the mouth
I get up this morning, to find Ali Belshi on CNN saying oil is at $87.97, and talking about how it might hit $100 soon.
have a good morning ahaha
wasn't CNN's site touting "Why oil wont hit $100 a barel" ? There was a great typo on CNN World Business site this morning:
http://www.cnn.com/2007/BUSINESS/10/16/oil.prices.ap/index.html
Folks
While many of you have been sleeping Tapis has traded at $89.43 a barrel today.
http://www.upstreamonline.com/market_data/?id=markets_crude
I feel sorry for Pablo, he's going to have to recalculate the *true* cost of designer bottled water all over again.
http://www.treehugger.com/files/2007/02/pablo_calculate.php
If that is linear it'll hit $100 some time tomorrow and we'll all be badly wrong on dates. Perhaps the traders know something about Turkish military disposition in Kurdistan?
A few months ago, it always seemed to be the case that a rise in oil would signal a rise in the avereages: "Oh boy, oil just hit $65. My Chevron stock went up."
Now it seems that rising oil is cited as a reason for despondency in the market: "Stock futures drop as oil hits fresh high"
| The problem will solve itself.
| But not in a nice way.
We are into phase 2- oil companies struggling while oil prices pass $86.
IIRC, Ace predicted an oil price shock in October.
Congrats, Ace, you "aced it"!
umm depends if the Saudis open the taps, or not...
Then we'll know if Ace is the prophet, or if it's just those little random forces.
Not sure, tomorrow will bring a new range of questions.
The kicker is here:
"Oil thundered towards $88 a barrel on Tuesday, hitting a new record and extending a rally that has added eight dollars in a week on tight supplies, strong demand and tension in northern Iraq.
Oil is closing in on the inflation-adjusted high of..XXXX...seen in 1980, the year after the Iranian revolution and at the start of the Iran-Iraq war."
http://news.yahoo.com/s/nm/20071016/ts_nm/markets_oil_dc;_ylt=AtDXDLcQxT...
It never seems to pass that inflation adjusted high. Each new high finds a new higher inflation adjusted number to beat.
The question is when will it surpass all inflation adjusted records.
Yah think the Ministry of Truth* is at work here?
(*From the Orwell novel, 1984, for those out there that didn't have to read in grade school.)
I voted #3, but that's just a guess. One reason oil price predictions are tricky is that the sale price ($86 per barrel now) is so much greater than the price to produce. Saudi Arabia, Kuwait, and some others can still pump crude oil at a cost of less than $5 per barrel. As a result, the cost to produce oil does not provide a realistic "floor" to the sale price. This is unlike most other products in a market economy.
Therefore, oil supply/demand problems can drive up the cost rapidly, but a falling oil price will not naturally curtail the supply much at all. This produces a situation where sharp drops in price are also possible.
It is not the low end of the production cost spectrum that defines the value but the high.
Further, I would suggest it is the cost of replacement capacity that defines the value of capacity.... and that cost is approaching $100,000 per BPD if you look at the acquisition market.
FF
I agree. However, I think that the high end is still only about $25 per barrel or so.
Could you expand on your comment about cost of replacement capacity? It sounds important, but I didn't understand it.
Take a billion barrel Tar Sand Project. Spend 25 billion in 2007 dollars to implement. Spread the billion barrels oil recovery over 20 years. Assume constant $75 per barrel price. Discount the future revenue at 6% per year. Year 2027 dollar is not worth 1/3rd of 2007 dollar. Average 2007 dollar price received is $35/bbl over twenty year life. The cost of discount alone was $40/barrel.... plus your $25/ bbl development cost. You made 10 billion dollars for risking 25 billion. Was it worth it??
Cost of capacity must be related to price someone is willing to pay you for existing capacity you own via acquisition. Otherwise if it were cheaper to develop themselves, they wouldn't buy it from you.
FF
Hi Fractional,
Thanks and I second Nguy, if any chance you might explain this a bit further - including "acquisition market" - ?
What a laughably loaded "poll".
"5. haven't you heard? it's all about the declining dollar. it has nothing to do with growing demand and a current lack of supply"
"haven't you heard?" LOFL.
I was in central London today where the price of regular gasoline was around $3.80 per US gallon. Drivers were filling up and paying their $16 per day congestion charge to drive around. Civilisation as I know it seemed reasonably intact. I wonder is there more adjustability in the system than we sometimes think.
Alexander
$3.80? Civilisation is still intact at $7.50 per US gallon (UK average is 97.7p/liter today).
Who are you going to believe, TOD or your lying eyes?
___
Today's quotes from the Yergin Institute of Undulating Truths: The price of oil will go lower before it goes higher. Happy Days were here once before.
I ran out of gas last week and ended up paying $50 for three gallons; got me thinking that $17 a gallon is probably fair value. Call that $460 per barrel. Let's face it, $3 gas is like nickel beer at a college bar on a Friday night. If you live in Chicago and commute 30 miles each way to work and you are off the train lines, what do you pay for gas in January so you don't have to buy a sled dog team? I pay less than 1% of my net after tax income for an irreplacible product that makes my life infinately easier.
When the knuckleheads with the crude realize what we will pay in the States for our heroin-oil, then we will get b-slapped by the invisible hand of a parabolic price move. $125 in '08, $250 in '09 and $600 in '10 before we come back to $200 after the demand destruction. Remind me to schedule lunch with Yergin in a couple of years... I'll buy.
Let's see then we will be 1.5:1 to the CN$, 2:1 for the Euro and 3:1 to the pound. What fun!!
In Pittsburgh the price of gas increased about 30 cents in one day.
Associate Professor of Geophysics
with the dollar that cheap, think of all the jobs and manufacturing that will be coming back home . . .
At $250/bbl the US oil import bill alone will be $1.2 trln. Compare this to the trade deficit now standing at some $800 bln.
While I don't doubt that US could
printfind this money by tapping into the bottomless well of fractional reserve banking, I doubt that the chinese, japanese etc. would be willing to pay our exported inflation bill forever.In short while I think that $250/bbl is feasible I don't agree with your optimistic projection for the USD that came with it. 2$ for an euro would be cheap; I'd put it more like $3-$4 for an euro.
Speaking of bets....
This May I finally tremulously and experimentally bought my first "crude call option" with a strike price of 80 dated Dec 07. It cost $1300. Cheap and "out of the money".
That was the first bet. I didn't realize that there would be other bets as well. So once the price finally rose above 80, the option became desirable and "in the money" and my broker urged me to sell. "When to sell" became the next bet. He urged me to do it on Friday when I could have sold for $4000. I told him to wait, but decided I'd probably be smart to be prudent and take anything over $5000. So by Monday it sold at $5300. So I should be delighted with a 4k profit.
Except that today, one day later, I could have sold it for nearly $7000. D'oh. So I managed to make a decent profit and still feel stupid. Will I feel more stupid later in the month? Bet on it.
Still, I remind myself it's the trend and not the volatility I should count on.
I do find it interesting that someone like me (poor & cheap) can control 1000 barrels of oil for a relative pittance. But those interested in indicators may wish to note that since I always do the Wrong Thing, now that I've sold the option oil will probably be at 100 in a month, and I'll be fretting about the electric motorcycle I could have had. Ah well, gambling is gambling - but knowing about peak oil may give the "house advantage" to those who bet accordingly.
$100-150-200/bbl... I wonder at what exactly level third world countries will start going belly up? I mean in a really big way, not the isolated riots we see now and then.
It seems to me PO will turn to be a problem for the poor (surprise, surprise). When oil gets to $200 we will finally start driving plug-in hybrids and building rail, while India and Bangladesh are going back to the middle ages...
The last comment is what they want us to think and the pundits are loving it a lot. Inflation seems to be under control and the food and gas prices are being held stable.
I'll vote for that. for a while yet.
God Grant you peace.
God Grant you Love of your fellow man.
God Grant you Faith and Trust.
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