POLL: CLU08 went through $127/bbl today..so, in the next 60 days, the front month price of CL will...

hit $140 before it hits $114
39% (1608 votes)
hit $114 before it hits $140
22% (933 votes)
stay in a trading range between $114 and $140
32% (1312 votes)
it's still all geopolitics and other "above ground factors," so what does a price signal mean anyway?
3% (139 votes)
haven't you heard? it's all about the declining dollar and specs-not growing demand and a stagnant supply.
4% (162 votes)
Total votes: 4154

In our last poll on 27 JUN, 61% of you predicted that CL would hit $154 in the front month before it hit $126, and only 9% of you predicted that CL would hit $126. Well, we've briefly broke that number today, though we closed back above it, so I'll use the same numbers I used two polls ago with $127 as the basis.

Our last three polls have predicted 10% rises within 60 days of each poll and were on target, and now we have had our first 10% decline. Past performance is not a predictor of future values, YMMV, and as it says in the disclaimer, nothing here should be construed as investment advice.

As I said last poll, this is the point about a plateauing oil supply to me: increasing uncertainty and volatility over time. As far as I am concerned, it's a guessing game right now...and will be for the foreseeable future. I mean, what if the psychology changes because of government intervention in commodities trading and money flows out of those markets, etc.? (which I don't think will matter, folks will just go to London to trade oil instead of here, idiots...talk about a symbolic gesture...) Who f-ing knows?

One other thing to note, in a press release issued by the CFTC today, the CFTC report that they found little evidence that the recent price rise in oil was attributable to speculation. Here is a link to the press release which says:

The ITF’s Interim Report on Crude Oil studied fundamental supply and demand factors and the roles of various market participants, and it found that fundamental supply and demand factors provide the best explanation for the recent crude oil price increases.

Speculation? Yeah right. It's called supply and demand. Look it up.

And here is a link to the actual report (thanks Nate):


The question is ... will you ... or anyone elee put your money where your predictions are? I don't mean a five dollar bet, either.

Only a fool who is well capitalized ... will attempt to predict prices of anything ... rice, interest rates, gold, uranium ... in a narrow time frame. Markets will fluctuate.

The trend in petroleum is up; higher highs and higher lows. Ditto gold. Is there a 'bubble' in commodities? Is it possible for there to be a bubble in commodities? (There is a negative feedback mechanism in commodity price rises that does not exist in internet stocks or real estate.)

As far as the CFTC report; what do you think they are going to say? Their interests are aligned with the big players who are making the NYMEX and other exchanges into bling machines. "Yah, it's all fundamentals of supply and demand and let's not look at the man behind the curtain!" Lenin was half right; the capitalists are in the rope business and they will sell enough to hang everyone in sight including close family membars.

Question? What other exchanges are arenas for maximum profit? How about ANY profit? Who is making money, today? There is the 'Hot Money' ... this is going to China, which is trying to corral it .... and into commodities. Commodities is a small market. Big, hot money can distort those markets just by showing up at the door.

Gold is going up too. Are we nearing peak gold? (Probably ... ditto peak water.) Real estate is taking a nose dive, stock markets around the world are tanking, bonds are looking crappy ... the central banks are creating money ... where does it all go? Not to me! Not to you, either. The Chinese and Japan are swimming in dollars; 'native' currencies can only be repatriated to their countries of origin. (You cannot buy a loaf of bread in Kansas with Britixh Pounds or Euros) If you have dollars and are overseas, what can you buy ... for trillions of dollars? Treasury securities? Yield on the 10 yr today is 4.10 pct. Oil has doubled ... since last week!

The trend is up, higher highs and higher lows.

Oil and gold. Copper and iron ore. Buying oil allows Saudi Arabia and China to launder the dollars. The Chinese buy Saudi oil with dollars and the Saudis repatriate them by buying Fannie Mae bonds. They're backed by the US government ... it sez so on the box!

The Chinese have a trillion US cash dollars in reserve! They can outbid us for oil or anything else. Yes, we can print ... we can repatriate all of our 'discount4d' money, too; our Treasury bonds and notes by printing all the money we need ... but ... if it ever gets to that point ... and we are getting there, fast ... the world that we know is coming to an end ... even if oil costs $50 a barrel. Nobody will have any money or it won't be worth anything.

Welcome to Zimbabwe! When we have to sell apples, I have my spot already picked out!


So . . . are non gambling addicts no longer permitted to make non monetary wagers? Go ahead and gamble your money. I'll keep mine.

In our last poll on 27 JUN, 61% of you predicted that CL would hit $154 in the front month before it hit $126, and only 9% of you predicted that CL would hit $126. Well, we've briefly broke that number today

I'm wondering which benchmarks we're using for the oil price, because Tapis closed at US$152.38 on 16Jul08, I didn't watch for it but it may have hit $154 the next day before this week's drop.

So rather than saying that the price of crude dropped to $126, I think it would be more accurate to say that since your last poll, the price of crude rose steadily from $126 to $154, but in the last week has traded in the $126-$154 range.

I think it might be worth making these polls on a regular schedule - every month, or every quarter. Any period chosen is arbitrary - 15Jun-15Jul is neither more nor less meaningful than 01Jun-01Jul - but having the polls at these random intervals turns it into a cherry-picking exericse. By bringing up a poll on a price high we overemphasise the rises, by brining it up on a low we overemphasise the drops.

For example, because you put the poll today at a low you're getting a poll result of around 40% saying it'll rise; had you put the poll a week ago when Tapis was near the $154 mark, I think you'd have got the old results of 60% or so saying it'd rise.

It'd be a bit like polling Americans on how they thought WWII was going after the battle of Monte Cassino, and then a week later after the landings at Normandy. By choosing when to do the poll you'd get different results.

It'd be better to have the polls at regular intervals.

NYMEX CL, or the oil price that is in the yahoo box in the right. We have a new poll a) when 60 days have expired without hitting a boundary from the previous poll, or b) when we hit a 10% boundary. We did not hit 154 in NYMEX CLQ/U08 at any point, but we did go through 127 today briefly, therefore we hit a 10% boundary from the previous poll.

Regular intervals would be just as, if not more arbitrary; at least with these conditions, we have conditions for expiry. If oil goes through 114 tomorrow, then we will have another poll tomorrow night. If nothing happens in the next 60 days, then we have another poll then.

A Poll is a "sampling"exercise, and I agree with Kiashu that it would preferable to sample on a regular basis ..... and otherwise to sorta pay tribute to the sampling theorem in organizing the interval not only to be regular(ized), but also to be sufficiently fine to display the underlying process you want to elucidate ....
so as to avoid alias distortion.

I can assure you that there are few polling agencies out there who consistently use "time" as the basis of putting multiple polls into the field, even if they end up being non-random or event driven. If anything, the method I am employing here is more valid than what you propose because it attempts to capture the motivation/momentum after large moves in the market if they occur. Otherwise, it is exactly the design you propose with an interval, mine just happens to be 60 days instead of 30.

This news about Oman production and exports came out a couple of days ago, however I have not seen much discussion about it in the relevant energy website, the information reported may seem trivial since Oman daily production is quite small (739k bpd), however the trends demonstrated in the numbers have big implications for future oil prices:

Oman oil production rose by 3.6% in the first 5 months of 2008; however oil exports declined by 5.1% compared to the first 5 months of 2007, due to high domestic consumption, fueled by 12.9% growth in GDP due to the high oil prices.

In the Export Land Model developed Jeffrey Brown, oil exports are expected to decline at a faster rate then production, once a nation experince post peak oil production combined with rising consumption, however the trend with Oman is quite different and even more alarming, as oil exports may decline even if the country oil production is rising, due to internal consumption growing faster then oil production.

There has been other countries with flat production that had a decline in exports (most notably Russia), but I have not seen a country with 3.6% production growth, experince a 5.1% export decline, if this same trende continue and expand to other Gulf countries, the implications for oil prices will be very signifcant.


Oman news:

The US is the prime example of rising production and declining net oil exports. We went from a leading exporter, and the primary source of oil for the Allies in the Second World War, to net importer status in just a few years--in the late Forties, more than 20 years before our production peaked.

Of course, as you noted, when we see a combination of declining production and rising consumption, we tend to see an accelerating net export decline rate, which is of course what I believe is driving oil prices. I think that we are seeing brief periods of stability between supply & demand, and then net oil exports fall again.

I can't imagine how declining oil prices to prop up the US economy will play on the Arab street, more importantly, how should it??

US politicians seem never willing or able to accept less revenue than last year, quarter, etc...

Going to get interesting.

Who is that guy who always says "have popcorn roll film"


I think that looking at monthly data tends to smooth some of the noise out, and it is more representative of what is actually going on regarding supply & demand. Since May, 2007, oil prices have increased on average at about 6% per month. Within this time frame there have been two down months, followed by strong rebounds. In any case, note that oil prices probably averaged around $140 for the first half of the July, and by the way, we did not average over $100 for a full month until March, 2008.


It was silly to think that the price would be a curve almost straight up without a break. And it was for quite a while, so its no surprise to me that a fall back occurred. Now we can play the game of predicting how deep the retrenchment will be. I have to admit that so far it is more than I expected.

OTOH, all the Saudis have to do is close the valve just a tad . . . . Will they do it?

I'm convinced there really is a $120 price floor. But prices may go lower because the futures dealers won't necessarily realize that. The market isn't perfectly information-efficient. Expect oil to hit $110 and the bears to lose their fur when it goes up $30 the next week. Also I'm still bearish on the tropics, because I'm not seeing upper ocean heat content in the Atlantic basin sufficient for rapid intensification. On the other hand, I voted for $154 the last time, because I wasn't sure serious demand destruction was possible. I still don't think it's possible...

Of course it isnt possible. Demand is on the march like never before seen in world history. 10.5m vehicles will be sold in China this year, double the amount from only 4 years ago! Annual vehicle sales in China is on the way of reaching a whooping 20m in 5 years, surpassing America by a wide margin. Vehicle sales in Brazil: up 30% from last year, sales in Russia: up 40%, on the way of becoming the biggest market in Europe this year. Demand destruction? I see massive demand boom.

I agree with you and when Hurricane Dolly hits it will be the excuse again by TV's talking heads when the bounce occurs. In Australia they are now saying the bubble is bursting and lower fuel prices are on the slide!! And most will believe them !!

G'Day Cooma,
Commenators should be licensed - there was a raving idiot who got air time on Radio Aunty this morning saying words to the effect of..
"Oil prices will fall further as the US$ STRENGTHENS".. Surely a recovering US economy would stimulate demand???

The paradigms people use to understand events are so broken people cannot make sense of the data. In some books, if the US economy and dollar strengthened, then yes, prices of imports would fall.

In a world without limits, that is. But we're past peak everything - because energy underlies everything. Peak economy - in the biggest sense of economy. The attempts to force facts into old paradigms will get increasingly absurd - like all those epicycles pre-Galileo. This commentator, the politicians, the media, the public.

A square peg doesn't fit into a round bump. But if all you have is a hammer, you will cause immense destruction trying to make it work Until you change paradigms, all you can do is cause damage - and the harder you hammer, the worse it gets.

cfm in Gray, ME

It is truly totally irresponsible of these people to even suggest such a thing. The demand boom is just getting started. The average Chinese uses only 2 barrels, while the American uses 25. The average Mexican uses 7 barrels, while the average Indian uses 0,8 barrels. The room for further demand is just incredibly huge and we're seeing it in the vehicle sales and energy demand across the world. And now the Tata Nano car is about to be launched as well, the "people's car". India has 40% more people than all the western countries combined...


I also agree with you. Not only millions of Chinese, but also millions of Indians will be buying cars for the first time thie year.

Matthew Simmons has me convinced. Oil-based products, such as the case for my notebook PC that I'm using to type this, fertilizers, pesticides, asphalt, and many more necessities are produced from oil. People are fools if they think that if everyone used electric light rail powered by nuclear energy, demand for oil will fall so dramatically that prices will be $10 per barrel. I cannot see oil ever going back down below $100 per barrel again.

I'm buying my oil stock on the dips. My oil trust stock has a yield of 14.75% rignt now. I haven't bought any stock for several months and I'm happy to see that it dropped 15% lately.

In the long haul, I hope we build nuclear power plants like crazy. We are running out of cheap oil. I think investors are seeing that Bush wants to drill, but the reality is that it will take ten years for the first drop of oil to come from the new digs. This drop in crude oil prices is wishful thinking. The alcohol will wear off and the hangover will take over. oil will certainly go up above $140 again this year. Bye bye $114!

Indeed, and its not just these countries either. There's huge growth in a lot of countries, from latin america, eastern europe, middle east, southeast asia, combined they add alot of weight as well. There's less than 50m vehicles on the roads in China today, but that number is set to triple by 2015...Add in the rest of the world and the new "people's car" by Tata, we're looking at adding another America to the global vehicle fleet in the next few years.

In retrospect the US hit the 'sweet spot' in the decades after the 2nd world war as there was very little global demand for a product that was in massive potential supply. The leverage cheap oil/energy has given enabled the country to keep its #1 status.

It remains to be seen whether the intellectual base built in the latter half of the 20th Century can help the US maintain its hegomony going forward or whether the inneficiencies its reliance on cheap oil has bred will be its undoing.


In the short term, I can see only one way for oil prices to fall drastically, and that would be severe global recession (or even depression), which remains a distinct possibility. But that's the only way I can see demand slackening. And as soon as any recession ends globally, the Chinese and Indian people will be off to the demand races again. China says that 300 million Chinese have entered the Chinese "middle class" and there are 35 million of them that own cars so far. China has another billion people wanting into that same middle class. Even if car per capita ratios do not expand, that's another 105 million cars minimum.

As Prof. G. notes, markets can be short term volatile. But the longer term trend line has not been seriously broken yet, anymore than the quiet period in 2007 when many thought oil had "stabilized" in the $60 range was a break in that same trend line.

Note: I should say I see only one peaceful way for prices to collapse, that is via a global recession. If we decide to throw a global nuclear bomb party, all bets are off.

If China is at 10.4 million (and rising fast) and the US down to 12 million from 16 million- then maybe the poll should be on which of the following months has China with a bigger monthly sales figure than the US.

Don't confuse us with the facts. Be like CNBC this morning and use no facts, just that the market says the bubble is bursting. I guess all those people buying new vehicles in China and Russia plan not to drive them. Also ignore the fact that we are adding 70 million people each year to the planet's population.

The problem is that $110 oil seems cheap from $140 but seems like a scary breakthrough coming from $90. My fear is that people are psychologically adjusting to these new prices, especially if they go down.

We need a permanent price floor for oil.

I'm convinced there really is a $120 price floor.

There is NO (short-term) futures price floor, nor ceiling - for two major, reinforcing reasons:

1)oil is priced at the marginal above ground barrel. Markets care about how much is available this week/month. If the market is oversupplied, prices will drop until supply and demand equal out. If demand drops alot (due to some exogenous event), prices will freefall - there is no correct fundamental price for oil. If there was it would be a great deal higher than here. The markets do a very good job of pricing current supply and demand correctly. (And, contrarily, the markets do a terrible job of pricing in long term scarcity.)

2). The amount of dollars that have been printed over the years and the amount of credit that has been 'created' absolutely dwarfs the amount of open interest contracts available on various commodities, especially oil. As we saw with Amaranth (whose nat gas portfolio has STILL not been entirely liquidated but subsumed by JP Morgan and Citadel), prices will move in futures as a reaction to supply and demand of securities representing commodities as opposed to supply and demand for the commodity itself. I am hearing rumors that the natural gas selloff this past week is due to some large hedge funds selling large amounts of $10 puts and as we approach $10 they have had to sell futures to hedge. Remember - for $7,000 you can control 1,000 barrels of oil - which if we have 1 trillion barrels extractable left is about 7 times yours and your descendants all-time allotment.

Supply of money is greater than supply of futures. Prices can (and will) move way further in both directions (in the very short term) than anyone can imagine.

The market isn't perfectly information-efficient.

Agreed! And neither are we.


I asked you the other night about this whole supply/demand vs. speculators issue. I find it very interesting because this seems to be the new "its all fine" excuse like the "Jack" discovery was touted earlier.

When I first started lurking before I actually logged in to comment it was the strength of the arguments against the deniers that made me keep up with the whole PO thing. And as things started to pass, I started making changes in my life. When you guys used to crush Freddy (who by the way now is in the peak oil camp--HA!) it was the ability to knock down his weak arguments that won me over.

I understand that one doesn't want to tie oneself to a price since they are as fickle as the weather and now that the peak oil idea is gaining credibility in larger circles then if oil goes to $50 and then everybody says HA! what a bunch of Chicken Littles.

I agree wholly that the market only cares about today and sadly does not price long term scarcity so I agree that prices can move up and down based on how the oil stocks are looking right now and traders perceptions. And now that we are in bigger prices, a $10 move today is less than 10% where it used to be 50%. So the nominal $ volatility certainly can be huge.

But I don't understand the other argument. I agree that the amount of credit and dollars created and in existence could buy all the oil trading on a certain day in an instant. I also agree that the price on the futures market is about the supply and demand for those future contracts. And a person can control 1,000 barrels of oil very easily.

I'm trying to understand the mechanics of trading oil futures.

Karl Denniger states that there was about $5 of speculation (trading in the supply and demand of securities) that collapsed on June 27:


He's smarter than me on these issues, but he seems to say that the supply and demand of contracts doesn't seem to matter much with prices.

He goes on to talk about the money supply. I agree the money supply can greatly affect the nominal price of oil, but I think he misses the boat a little along with Mr. Masters. They say the injection of credit to increase the money supply has raised the price of oil.

I agree sort of, but I think they are confusing causation.

In my opinion, the supply/demand issues require a larger portion of the money supply be devoted to oil. For instance, if I had $100 as my total money supply and oil was plentiful to satisfy all bidders then I might only have to devote $10 to buying oil. But if oil was scarce, and I wanted to outbid the other bidders, I might have to devote $30 to buying oil and cut back elsewhere. If my money supply dropped to $50 in the first case the % of money supply would be the same--except oil would be $5 in the first case and $15 in the second case.

Mr. Masters points to the huge growth in money invested in oil related assets and says "look at all that money--its the money pushing the price up!" But I think he has got it backwards and its "look at all the money, all this money needs to flow to oil now since its value has increased because of its scarcity."

Change in money value is simply the effect not the cause. The financial economy's tail does not wag the real economy's dog. It was the change in underwriting standards at banks (real economy) allowing people to borrow like crazy (I know when I talked to the loan officer to buy a house in 2004 I was flabbergasted they would loan out that kind of money on that kind of income with 0% down) that created the boom in housing prices (financial economy). It was the change in oil supply/food price (real economy) in the 1980's & 1990's that allowed a much larger portion of one's income to be dedicated to debt service creating asset inflation and allowing stocks to trade at a higher multiple of earnings than historically (financial economy).

The Fed's injection (and now soon the Treasury's :( ) was to keep stable/allow a controlled drain like in Japan of the money supply since the amount of credit is basically the money supply. This was done to slow the massive destruction of credit from the global housing pop and now that the Fed is exhausted they are digging into the Treasury.

So Karl's kind of right, without the Fed intervention in March we would have quickly went to depression dragging the money supply down and also the oil price. But I don't believe that the Fed's intervention expanded the money supply, only prevented it from quick and severe contraction, and its still declining--but at a more manageable rate--but now they need the Treasury money to keep another quick and severe contraction away. But the intervention did not artificially inflate oil prices, as I believe the money supply is lower today than last year. In other words, without the housing bust I think oil would nominally be much higher right now.

Basically I only see two main factors affecting nominal oil price--the money supply and short term supply/demand. Without increased production, however, the real oil price has only one way to go--UP!

Just my thoughts, I'm only trying to make sense of these events. I think I get my dopamine from better understanding how things work.

Contrast supply of dollars with supply of euros.

If the supply of dollars increased dramatically (the fed lowers rates), then dollars lose value compared to euros, and still more dollars are required to buy the same amount of oil as before, whereas the euro price has climbed just a little bit.

The same goes for roubles, renminbi, rials, pounds, yen, krugerrand, etc.

Markets care about how much is available this week/month. If the market is oversupplied, prices will drop until supply and demand equal out. If demand drops alot (due to some exogenous event), prices will freefall - there is no correct fundamental price for oil.

I think there are informal floors and ceilings out there. If producers and/or consumers overwhelmingly feel that today's price is too good to pass up, they will lock in the price for months (or years) in advance.

I am hearing rumors that the natural gas selloff this past week is due to some large hedge funds selling large amounts of $10 puts and as we approach $10 they have had to sell futures to hedge.

Some readers may be interested in how/why this is:

Delta Hedge

The markets do a very good job of pricing current supply and demand correctly. (And, contrarily, the markets do a terrible job of pricing in long term scarcity.)

Very true, and everyone needs to be constantly reminded of that fact. Drill, drill, drill (it into their heads). Sad but true.

The interesting thing is that the markets we get are the markets we want (or at least the markets that our politicians want). So sad.

As prices drop I am guessing many suppliers might start having 'outages'. Once you and others in your supply chain have tasted that sweet and very profitable $140/bbl there will be a cutback to keep the price where it belongs.

On the demand side, the price drops a nickle and it resets the consumer brain (if it can be called that) all over again.

"I wasn't sure serious demand destruction was possible. I still don't think it's possible..."

Really. So you believe that petroleum is somehow exempt from the law of supply and demand? For the record:

US: U.S. oil demand in April was 863,000 barrels per day less than previously estimated and down 811,000 bpd from a year earlier, putting petroleum consumption at the lowest level for any April month in six years, the Energy Information Administration said on Monday.

U.S. oil demand in April was revised down 4.2 percent from the EIA's early estimate of 20.631 million bpd to the agency's final demand number of 19.768 million bpd, and was 3.9 percent less from 20.579 million bpd a year earlier.

By the way a drop of 863,000 bbls is quite large. Worldwide growth in oil consumption from 2006 to 2007 was 990,000bpd, according to the BP Statistical Review 2008). It is enough to wipe out two years worth of consumption growth from China.

Japan: Japanese oil consumption has been declining since 1996. Think of this as peak demand for oil, Okay?
Israel: Demand in Israel peaked in 2001, and it is now 16% less from it's peak level in 2001.
Italy: Italy’s demand peaked in 1995 and it is currently down 14%.
Sweden: Demand peaked in 1996.
Denmark: Demand for petroleum is down 20% from its peak in 1996.

I suggest that maybe oil is a commodity that still obeys the laws of supply & demand, no matter if we “feel” otherwise.

Please note I happen to believe that the overall trend is up, but I am not surprised that we are now seeing a 20% “correction” in prices.

I think its certainly possible oil could go lower, and I've been prepared for this for a while so its not academic for me. I sold all my energy holdings back in April which turned out to be a good move as the producers never did benefit from the gap up in crude back in June.

I won't short crude but I will short something else dollar-dependent - gold. Last week I built a big short position in gold based on expectations that the EURUSD had completed a failed test of top.

So far, so good.

Commodities in general will be affected by the unwinding of the Euro trade if the rising wedge on the chart does play through - bringing the Euro to May lows as a first target and substantially lower - ~1.46 - the attached chart provides a clue:

If the relationship between the Euro/dollar trade and oil were 1:1, a decline to May lows would suggest another 10 - 15% decline in crude.

A decline to Feb lows would imply a very severe correction in crude.

I am not suggesting this will happen; nor do I think the latter scenario is even likely as there isn't enough time, probably, before the weather changes in the high use countries.

That said the Euro, GBP, Yen - the USD has significant room to appreciate against these, and there is a dawning realization out there that other countries, with bid up currencies, are going to suffer just as much as the US from this recession.

Surely a short respite due to a small lessening in demand and a small uptick in stock level. What do the numbers tell us?

We'll certainly enjoy the 4 pence off a litre while it lasts, yay!

The real reason why oil prices are down is the fact that Mr Pembleton of Bognor Regis returned his garden chairs, his wife didn't like the colour, and that's just as good a reason as any proposed by the MSM.


Actually, Professor Goose is the mastermind of a global oil price conspiracy, and he decided that it was best to have a short term retreat in oil prices.

In the immortal words of Homer Simpson, I'd like to say "Woo-hoo!" and "D'oh!"

Both astute phrases capture the grand sentiment I feel after being given such power.

I'd like to thank the Academy, Arthur Schopenhauer, Ali Al-Naimi, my mom, Karl Rove, Michel Foucault, Heidigger, Pootie-Poot, Che Guevara, Benito Mussolini, Jean-Paul Sartre, and the Beach Boys; without them none of this would have been possible.

Oh yeah, and I forgot Oprah. How could I forget Oprah?

Professor Goose wrote:

I'd like to thank the Academy, Arthur Schopenhauer, Ali Al-Naimi, my mom, Karl Rove, Michel Foucault, Heidigger, Pootie-Poot, Che Guevara, Benito Mussolini, Jean-Paul Sartre, and the Beach Boys; without them none of this would have been possible.

or Necessary?


I'm here all week - try the veal...


So, has the predicted 'demand destruction' started to bite?

I don't think so. Tensions about energy (and especially gasoline) are still at near terror levels, so at the first serious hiccup in predicted (or actual) supply the price is going to blast past $200 like 'Wrong Way' Corrigan crossing the 50 yard line.

The operative word in 'demand destruction' is DESTRUCTION. It's not something anyone in their right mind would want or hope for because relying on 'demand destruction' to bring down oil price is comparable to expecting famine to bring down food price... sure it will, but it's not exactly a viable strategy. By such reckoning I guess we could eventually bring back two-bit gas and the nickel beer, but the handful of survivors who got to enjoy them would be awfully lonely.

Naw, this recent dip is more like 'demand delay' or 'demand abeyance' , and during the delay all underlying needs to 'burn gas and make money' are just building to higher levels of urgency. You can almost hear the markets draw in their collective breath every time a hurricane starts to brew anywhere or Iran flips off the USA again.

When supply is actually interrupted (and it will be) the pent up need will express itself, probably as panic buying and a really impressive spike. I'm more interested in where it settles afterwards so that we can get a better prediction on how the trend line is going to play out.

Something to consider:

Early July 2006 Oil was trading around $75
Size of Oil Stocks
341.3 million barrels US "well above average range"
Size of Distillate
127.3 million barrels US "well above average range"

Warm Winter + Large Stockpiles =
October 2006 Oil traded around $60 a barrel as smaller need to take much oil off the stockpiles and refine into diesel and heating oil and summer driving season was over.

Early July 2007 Oil was trading around $72
Size of Oil Stocks
354 million barrels US "well above average range"
Size of Distillate
121.6 million barrels "well above average range"

Cold Winter + Smaller Stockpile of Diesel =
October 2007--Giant drawdown of oil stocks to refine into diesel and heating oil (if I understand right these are made from the same cut of the barrel which is different from gasoline) resulting in big price spike that continued throughout the winter and spring. Also created big gasoline glut as stocks were refined into heating oil and diesel a bunch of gasoline wasn't used. Note that in September of 2007 price was trading around $69 before spike--this corresponds to when diesel stocks were highest.

Early July 2008 Oil was trading around $140
Size of Oil Stocks
299.8 million barrels US "near the lower boundary of the 5-year range"
120.7 million barrles US "middle of the average range for this time of year"

What type of winter? + Smaller Stockpile of Diesel =
Oil stocks are already low so they can't take down inventory to build distillate stocks and will have to buy more on the market. Between now and September a lot of inventory building will have to occur, but I expect some to occur. Distillate stocks are lower than last year.

Moe Gamble has said diesel demand is controlling the oil price. If so, then if we have a cold winter and heating oil adds yet another burden on the production of distillates it appears traders will have to bid up the price of oil to replenish stocks for converting to distillates.

Demand destruction is occuring, but it seems to be mostly in gasoline, although reduced economic activity would dampen diesel use, I don't know if its as "voluntary" as consumer gasoline reduction through purchasing more efficient cars, less driving, losing their jobs, etc.

Time line seems short--winter will be here soon--and even if stock market dives the real economy will lurch on for a while. Remember it was 4 years after the crash of 1929 before things really got bad on main street.

I voted $114, but I don't think it will last long.

The lowest usage time during the year seems to be September generally absent a hurricane. I would think prices would drop this month and the next and even possibly into September for a while, but by October I think we will have an answer. I think the coldness of the winter to be a major factor.

I do think this appears to be a decent test of the speculation/supply demand argument.

Of course, I could be wrong.

If the "secret conspiracy" wants the Republicans to win, in November elections, then GWB's hand waving and arm twisting will "appear" to have affected the oil price downward. Thus giving Repubs the claim that THEY should be elected. So I suspect that CL will hit the lowest price in October.

On the other hand, if the "hidden menace" wants the Democrats to win the presidency, then oil should jump sky high, and thus repudiate the efforts of GWB.

As the oil goes, so does the election.

Of course, no matter who wins, we all lose.

Government is no solution. Government gives nothing except that which was taken from someone else. Government makes nothing but more government. And that won't change, no matter which partisan party appoints the executive officers or makes the "laws".

The unseen hand doesn't care who is in power, so long as they control the money supply. No matter who is in power, certain interests will be served. Obama seems to be the selected one this election cycle, so the only question is whether he will goof so badly that he will lose.

If exporters feel an election-related SPR release (like Bill Clinton's in Sep. 2000) is probable, they will sell future production at these prices. I think we may see a further, small dip in prices due to that fear.

I guess I'm a freak believing we probably won't hit peak production for a number of years.

But if I believe oil prices will continue to soar, why are privately owned reserves being taped at all? If I owned an asset, and I believed it's value would double in three years, why would I sell today? The belief in scarcity benefits the owners of the oil. I don't know how much recoverable oil still exists in the world. Just that the owners are the primary source of reserve information. Does Saudi Arabia benefit from under or overestimating reserves? A complicated question.

I believe the recent increases in price is a result of owners and traders taking advantage of fearfulness of shortage. So I predict the medium-term price will reflect what these people can "get away with".

I'm not saying at some point demand won't exceed supply. But we're not there yet. So I believe price increase is either manipulation or owners valuing their assets at a higher value.

Producers can be cornucopians too, and some may think that $147 is the "top". They may also believe that economies can't handle $200 oil. I think there was an article posted a couple of days ago about Pemex locking in these high prices for months (or more) into the future.

I'm not saying at some point demand won't exceed supply. But we're not there yet.

Although a reasonably well-educated person, I never quite know what a writer means by this. Absent crippled refineries or embargoes, and the introduction of rationing, it seems to me that, since demand is effectively infinite, consumption pressure is measured by price. So in that sense, demand always "exceeds" supply. There are no ads on TV saying "Buy more oil", just as there are none in poor countries saying "Eat more food".

It's not the same as Colorado River rafting, or seats to the Super Bowl, where the demand for them relative to availability is measurable. These are solved by first-in first-served, a ballot, or an allocation by some other means - and not by price as such.

With a commodity that has direct alternatives your probably right that my sentence doesn't make a lot sense. I was thinking in terms of countries not able to meet local demand. China securing long term energy contracts - that sort of situation.

I'm not saying at some point demand won't exceed supply. But we're not there yet.

I agree the concept is meaningless without the addition of the price factor. More logical to say "I'm not saying at some point demand of $140/bbl crude won't exceed supply of $140/bbl crude. But we're not there yet." Without the price, the statement is essentially void of meaning.

The price of beer may rise,
the price of beer may fall
but if we drink all the beer at any price
are we left any beer at all?


in heaven there is no beer,
that's why we drink it here . . .


I will have you know that that was intended as an oil song, not a beer song. I merely use beer as a literary device to stand in the stead of oil, as I am sure, you, in all sobriety, would know that no one, except for possibly Matthew Simmons, would drink oil from a cup. So piss off you uncouth beery bugger, come back when you are sober enough to stand, to stand dry-legged and sing of oil, of oil the resplendent, oil of our fathers , the blood that courses in this mighty nation where we all stand bent oily as bejesus, one and all, four-square with turkey bibs waiting for a Thanksgiving we likely won't soon forget.

I beg to differ. In Heaven, there are the Beer Volcanoes, conviently located across the street from the Stripper Factories.

I'm suffering from heat stroke since the temperature got above 10C for the first time this year in Scotland and I've celebrated with friends who have not yet died from hypothermia.

I voted 114 before 140 cos I think we are in a volatile period where demand destruction is wreaking havoc.

So I'd bet we see 114 first and then over 140 in the next 60 days. The floor is somewhere between 110 and 120 so maybe we don't quite see 114.

But all this doesn't really matter. The trend is ever up. And if you are not using energy very, very efficiently you will be outbid by someone who is.

That is the key point that americans need to get through their skulls. If it costs $5 or $8 or $10 a gallon for gasoline, it is not worth it for an american to buy it if it only gets them 20 miles. But if someone in Europe or even China can get 50 miles out of that gallon of gas, then they are going to be able to outbid us even if their income is half. Or alternatively, they might use that gallon of gas to help power a factory to build bycycles. Or do any number of things with that gallon of gas that we cannot do because we are not that efficient with it.


Nice weather aint it?

I voted 114 - 140. - But only after I double took the specific time frame.

It is summer, a correction is due (look at the dog-tooth corrections over the last couple of years).

But short of a massive global depression, the overall trend will be upwards.

The poster up top from Oman was very revealing: Production up, but not out-performing domestic consumption.

Enjoy the weather. ( we'll pay fer it y'ken!)

Bush's suspension of the executive order on offshore drilling probably helped cool off prices a little but depending on how strong Dolly becomes, prices could rebound again...

reading Energy Bulletin and Peakoil.com, i noticed that Russian oil production has been forecast as declining by 3% this year from last...noticed that lower-48 is down 2.2%...also noticed that PEMEX/Mexico is cutting exports to U.S. by 15%...this is a serious situation and these exports could cease altogether as early as 2012 given the breathtaking and continued collapse of Cantarell...Oilwatch Monthly [July] has spare supply capacity at ~1.2 mb/day and it's been falling for a few months now, along with OPEC exports...

i have a feeling that if oil does'nt fall to $114 before IEA makes public their bottom-up study in November then it may NEVER happen, especially if the report ends up confirming what most of us have been speculating...the mid-term analysis seems like a serious hedge and an ominous portent of things to come...downward revisions are all but assured.

finally, tropical weather could end up shutting in supply along the gulf coast, especially with major hurricanes (cat 3 and above)...it's not only the shut ins but the hoarding as coastal residents flock to fuel stations, top off, and take flight on the interstates (it took 6 hours to reach Lafayette from New Orleans, normally 1.5-2hr...Katrina and Rita both wreaked havoc here in Louisiana in 2005...a disruption of that magnitude in the current climate could spell real trouble along the gulf coast...

I believe in a bumpy plateau, therefore I think it will be difficult to get people to recognize the real problem we're facing. Every time there is a big price drop, it makes people believe better days are ahead. Too many people want to simply blame speculators or the oil company bogeymen. I haven't given up all hope, but the longer I see lack of adequate action the more my hope diminishes.

It will be interesting to see what happens in the 4th quarter. That's when I think we're most likely to see prices rise to $150/barrel or higher. I voted for $140 before $114. It's possible in theory for prices to hit $114 or lower, yet that will probably signal global depression. We're not quite to that point. I'm betting on a timeframe of 2010-2012.

I agree, it's definitely the start of The Bumpy Plateau Syndrome, that consists of

  • demand destruction at the fringes (some people in developed countries drive less, some people in developing countries stop driving)
  • inventories rise, people start shorting oil, investors lose confidence and it all compounds
  • wave of optimism in media, everyone talking about the "spike" in retrospect
  • "sucker rally" occurs in stock markets (which will impoverish many people, if it happens repeatedly)

Welcome to the Oil Roller Coaster!

Well, I voted for the high scenario. I do believe we are seeing some demand destruction here. I do not see the Far East as capable of picking up this slack in demand to any great extent. Too much news from that region contraindicative. Which would seem to be bearish towards crude prices going forward. However, there would seem to be evidence of too much slippage in exports from some major exporters.

Hence, I think we'll see some welcome time spent in consolidation mode for a while and then resumption of the trend upwards.

Of course this all falls apart if Messrs. Paulson and Bernanke miss a gear at all with the banking situation. Which I see as all too possible, even probable. Sigh...

I was thinking we'd see an average price for the year of around $120/bbl. Well ahead of that, need a correction here, lol.

To the poster above thinking that Diesel and Heating Oil are similar. I seem to recall selling Diesel, Heating Oil, X Grade and #2 Fuel Oil out of the same tank... Hmm, did I miss one?

Fascinating how limited the News is regarding an understanding relating to price fluctuations. One of the major news talking points in the past few days is the 'Historic' drop in oil prices that was occurring. Well, sure, but it's all relative as they say. And when the price of oil was at an unprecedented high, it's not much of a leap to expect large, historic shifts in price. But to the news it was something to emotionally express in highly dramatic verbiage. "Oh my God, look at the drop in the price of oil - its effin Historic!!!" Yet, as a change measured in percentages, it probably was not that historic.

Also, if the price stays in the realm of the high 120's it will still have a dampening effect on the economy. We are not back to business as usual. I for one hope the price remains high to continue to provide incentive to develop alternative forms of energy.

And lastly, regarding the polls. The greater point is that most of us are just poking in the dark to have any inclination as to where price will go. Up, down, in a range, are really just backdrops to a greater global understanding of peak oil that has recently taken place. I hope it sticks enough to initiate change.

One of the major news talking points in the past few days is the 'Historic' drop in oil prices that was occurring. Well, sure, but it's all relative as they say. And when the price of oil was at an unprecedented high, it's not much of a leap to expect large, historic shifts in price.

I quite agree. I'm far too ignorant to speculate on where prices will go next, but I think that the current fall in price should be kept in context. A price drop like this a decade ago would have made oil practically free, but as things currently stand prices are still stratospherically high, from a long-term perspective. I'll believe this is all a 'bubble' when we have a sustained period of oil prices at historically 'normal' levels (20-30$/barrel).

We'll probably see $80 a barrel fairly quickly. I doubt we'll see sub-40's. But,you never know with bubbles.

AMR is up over 100% since oil peaked. It was up 37% today. Other airlines have seen similar gains. Obviously,the market is expecting a much bigger haircut for the oil speculators. And,the market usually turns out to be right.

It's called a short squeeze.

A bit off topic, but at the gym tonight, I was shocked to see a commercial with Boone Pickens on it talking about alternative energy. The words on his website www.pickensplan.com are even more interesting.

World oil production peaked in 2005. Despite growing demand and an unprecedented increase in prices, oil production has fallen over the last three years. Oil is getting more expensive to produce, harder to find and there just isn't enough of it to keep up with demand.

The simple truth is that cheap and easy oil is gone.

It's been extensively discussed in the drumbeats each day, especially the day the TX legislature voted on wind. We are waiting on more of the details before we put it through the meat grinder, right now it's a smidge vague and does not explain where the infrastructural support needed is going to come from.

Yes, Boone's plan is better than nothing--nothing only being a little less than we have gotten thus far from Congress, especially after events like the recent non-renewal of incentives struggle therein, etc. Perhaps with the seating of the 111th Congress, things will change--but I am not holding my breath. I continue to fear that coordination at the federal level will be very difficult, even with a stimulus like >$120/bbl oil--though the demand destruction that is being caused by our recent economic turmoil may break oil prices down further, which will in turn prolong urgently-needed investment in alternatives due to the volatility and uncertainty as well. This one may still end being mostly up to the states, localities, and joint private-public efforts such as Boone's plan...so, I'll say it again: it's better than nothing.

There are still a lot of problems with Pickens' plan, mostly infrastructural (wind, LNG, support structures, grid problems, etc.), but also policy-oriented as well.

REMEMBER, and this is very important: we will not get a panacea out of anything we do...so, I'll say it again: it's better than nothing.

Perhaps, as many have said, combine it with Alan's plan and a massive tax increase to fund the infrastructural buildout necessary...and then you might have a solution--but it will only be a solution after we endure a good amount of going backwards economically.

(Though I must admit, when I heard Boone Pickens, one of the principal agents behind the "Swift Boat" ads in 2004 (e.g.,
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/111707...), say that Al Gore should be energy czar of Obama's administration, well that is when we know that traditional partisan politics are gone, thrown out the window due to the growing importance of issue of energy--as in people in hell are getting popsicles out of their freezers. (If you're on a campus, etc., you can view this interview with Pickens where he says the above: http://www.nationaljournal.com/njonline/no_20080718_4628.php))

Perhaps there is reason for hope of people working together to find solutions. Let's hope so.

Building An Edifice To Withstand The Storm

People concentrate on the details of the PickensPlan. This causes them to miss the great philosophical breakthrough: Pickens, a lifelong oil and gas man shifts renewables to the CENTER of the energy production landscape, away from the fringes.

For decades, solar and wind have been described as great clean energy sources, but "marginal". Pickens plan is revolutionary in breaking out of this paradigm. The Pickens Plan, as presented, is just a skeleton around which to build the rest of the renewable landscape. All the proper elements are there, including a renovated grid system to carry the energy from multiple widespread production points to multiple widespread consumers. The plan places at the center of the American energy landscape the electric power grid, NOT liquid fuel. It plans for a volume of liquid high density powerful fuel to be consumed (compressed natural gas) knowing that compressed natural gas does not have to be the only fuel used. Recaptured methane from waste, sewer systems and agricultural byproduct can also be included as can propanes and ethanes from the NGL (Natural Gas Liquids)spectrum. If biofuels can ever be efficient enough, they too can be included. But with the expansion of grid based autos and trains (ala Alan Drake) we are seeing the outline of the STRUCTURE that will replace the fossil fuel system.

The Pickens Plan reminds very much of the original Toyota Prius. Many dismissed the car itself saying "it doesn't get that much better mileage, why not just buy a tiny car, or better yet, get a Diesel, they get even better mileage."

What most people missed was that the Toyota Prius was not an end in itself, it was intended from the start as a means to a revolutionary grid based transportation system. Now with Diesel fuel more expensive than gasoline, and having to consume natural gas in it's production to clean it to a socially acceptable level, we see what a dead end the other alternatives to a grid based system are turning out to be.

With the Pickens Plan we are seeing one more building block coming into place. The whole edifice will be of a reach and vision that will drawf the Pickens Plan when it is done. The Pickens Plan, Calcars, the Toyota Prius, NevadaOne Concentrating Mirror Solar station, these will be seen as just the first of the building blocks of an edifice that will take a century to build, and like the original industrial revolution, will begin to spread rapidly until it reaches into the far corners of the world.

Soon, as we realize what is happening, we will only be able to sigh, perhaps even weep, that we will not live long enough to see the magnificant outcome of the thought and work that is being undertaken today. Again we will be reminded of the tragedy of the brevity of life.

Yes, Prof. Goose, it is indeed "better than nothing."


Pickens also says that conservation is paramount. The most important insight on his part, however, is that we cannot drill ourselves out of this problem. Meanwhile, however, we are too buy pissing our capital away on other more "important" matters, like the war in Iraq.

Pickens also said that in 500 years, future generations will be astounded that this generation actually burns oil for power. Might as well be burning gold.

Notwithstanding Pickens, however, the drilling lobby in congress wants to drill everywhere as soon as possible. Pickens, I think reluctantly, supports this. Maybe it is just an old habit as an oil man. This is the kitchen sink approach. It is still flawed, however, because we are burning up an increasingly precious resource. Might as well just throw the furniture and maybe the roof in the fireplace to keep warm.

We've been talking about this at work today, and it would make real sense if Obama embraced Pickens platform. Pickens is out to make money & indeed, his support of renewal energy brings wind power from the fringe to the mainstream. I live in Calgary, AB, an oil city and Pickens is a well respected man who just donated 28 million dollars to our University. When "the God" of the oil industry says "embrace wind" that's going to bring alot of credibility to alternative energy

Where Obama could win is the highest wind speeds are in traditional republican country. Start putting in turbines in the Mid West and it brings needed work for those people & they're going to remember that on election day. The farmers benefit from leasing their property with little to no impact on their farms (unless a turbine fell down and killed a cow).

One other thing I think that Pickens does is bring "hope" to the whole Peak Oil argument. He's the first person to come forward with a real plan to fix things & that real plan does everything right. He doesn't sell Peak Oil...he tells America to wean itself from foreign energy, keep it's own money & it's a good ole boy from Texas saying it. Can you get any more beautiful than that?

If his plan works, it would be the irony of all ironies. A man who made himself a multi-billionare drilling for oil turns around and tells the country to stop using it & start using wind power...and then profits from it. Brilliant.

Why use natural gas for vehicles? Why not just drop that, keep the gas in the power generation, which makes the NG plant owners happy too, and go for electric vehicles and plug-ins?

NG in vehicles is much more efficient than making electricity with NG to charge vehicles. Also, a tank of NG has more energy than $10K of current batteries. Battery tech. is holding back electric vehicles.

Part of this is not correct. Combince cycle turbines get close to 60% efficiency while ICEs get 30 or so. Since EVs have greater than 50% efficiency, the combination of turbines plus EVs uses less gas than burning the gas in a vehicle.


He also testified in congress yesterday. Although he supports more drilling, he is careful to point out that it will not do much to change the fact that we will have oil shortages and high prices going forward. He also said something interesting. If we had drilled ANWR ten years ago, we would have already consumed half of it. He also said that if we had drilled ANWR years ago, it would have been sold for a pittance compared to what it could get now. Sure, he follows the party line on drilling but also provides some ammunition for those who want to not drill or delay drilling. He also said that once you consume oil, it's gone forever. We are exporting $700 billion per year to get imported oil and then we just burn it. Compare that to solar and wind which just keep giving and giving.

I think the main reason people push drilling now is that they have a short term perspective that just looks at those dollars that could be going to the oil companies.

Anyway, shouldn't we be glad we didn't drill ANWR ten or twenty years ago. If is still available when prices are much higher.

Well, I voted for down three times in the last poll, twice in the previous and once in the one before that. So, I'm getting it right in half my votes ;-)

It is worth remembering that the final price for oil is going to be zero when we've got better substitutes. You won't be able to give it away. Just like stone axes. Thus, down votes are going to be more correct on average in the long run.


When do heating oil inventories in the U.S. need to seriously start building? Would that naturally lead to an increase in demand in North America even if we are driving a bit less?

I'd expect sometime before late Sept.

It seems to me that it is immediately cheaper to go out and buy space heaters and use electricity for heat than to use oil, so that substitute for heating oil is less expensive within a season. Heat pumps can pay for themselves in not too may seasons as well. I doubt we'll see the year-on-year demand for heating oil go up while this is the case. People will keep a tank of oil for backup but they won't be using it much.


For the time being electric heaters may be cheaper, but look at this:

AUGUSTA (July 23, 2008): Just when people thought the news about energy costs couldn’t get any worse, increases in the price of natural gas are expected to cause higher electric rates this fall and into the winter.


We're seeing increases in the price of coal too, so don't think that switching to electric heat may be a very short-term solution, especially if people start doing en mass.

More than half of Maine's generation is renewable, 22% hydro and 30% other, mostly biomass. http://www.eere.energy.gov/states/electricity.cfm/state=ME

Options to respond to the way that gas is tied to oil in price include importing hydro power fomr Canada, increasing biomass use and starting to do more with Maine's good wind and solar resources. I suspect that the hard wired link between gas and oil prices is going to get severed since gas is not currently facing the same kind of supply issues as oil because it is not really traded in the same manner. Substitutions such as Maine might make could drive that cutting of the link. I doubt elctricity rates will keep pace with the cost of oil in Maine.


(1) the available amount of power from those renewable sources is finite and already spoken for. Thus an increase in use of electricity for heating will get supplied from the only easily-added source: natural gas fired generators.

(2) the price of electricity (from all sources) tends to be set by the price of natural gas, exactly because that's the easily turned-on marginal KW.

(3) I expect rolling blackouts in New England this coming winter due to too many people realizing that, for the moment, electricity is cheaper than oil/propane/kerosene.

Seems to me that Canada wants to sell power.

Maine certainly has the solar resource to meet all of its electricity use so while finite, the resource is more than adequate.


I've wondered about baseline vs. peak load outside of California. We, of course, have our biggest need and fluctuation in the summer with mid afternoon need being double that of early morning. (Accepting that A/C is "need")


To me it is obvious that solar is the answer, but everyone still argues that solar is too expensive/doesn't work at night/etc., without considering that coal power will also sit idle for much of the day where that our only way of meeting the full demand at peak.

So..my curiousity...how does solar fit into the mix in ME? Hydro can be shut down when the solar is productive (or do the rivers all freeze in the winter?), but what is the grid demand over the course of the day? If electric power is used for heating, I would think that solar does not match up well with demand.


how does solar fit into the mix in ME?

There is all sorts of interesting stuff going on with energy in Maine. Maine is building capacity to export power. The state negotiated - secret until cover got blown - deals to extend licenses of dams that will destroy several species: Maine's atlantic salmon and the eels in particular. Every bit of Maine's forest is overcommitted. Essentially, Maine is being used as a natural resource plantation to be stripped for those paying higher rates. No doubt the Governor will hold a few spaghetti suppers this winter to help raise money for those without heat and he'll whine and spurn that evil devil Chavez again.

Maine is in seriously deep shit. The political classes - which typically make maybe three times the average income - are totally clueless and beholden to BAU. The Democrats are "led" by a couple of economists. The Governor is trying to stick his economic development hack onto the PUC - meaning more tax breaks for big industry (after all, doesn't Nestle's really need cheaper power to pump our water out?) Oh, and then there is the "SmartGrowth" crowd advocating more or less for fascism: those private-public state-corporate partnerships that work so well for the average joe. Convert everything to fee-for-service.

Solar. There are tax credits for the wealthy to do various sorts of solar. Nothing for Main Street or the other side of the tracks. The budget is too tight, after all. Insulation, public transit, food security and improved public health would make sense, but policies are otherwise. An appliance upgrade plan as part of basic utilities services? What a silly idea I was told. Better to sell off Central Maine Power (distribution) to a Spanish company. CMP's generating capacity was sold a few years back largely
to Florida Power and Light. Maine used to have a good future oriented energy policy. Like the solar collectors on the White House, it's been junked and looted.

I'm lucky enough to live in a solar home. If I can stand 55 it works pretty well. We get long strings of gray overcast winter days. Solar makes no sense in Maine - generally - until we do a much, much, much better job insulating, tightening and replacing appliances. And the Catholic in me points out that it must also be done with "preference for the poor", not tax breaks for the wealthy.

cfm in Gray, ME

Sorry to hear about the dams. Maine was making progress in restoring rivers in the past.

The reason solar makes sense in Maine is that it tends to have a little more clear weather so the resource is pretty good. But, you might need to do something tricky, like storing heat in the ground in the summer to use in the winter,


Yes, and all those solar panels will be scrapped as useless, wasteful and non-sustainable, once we go fusion or whatever comes next (according to the techno-fix ideological mantra).

What is your point?

It is a mathematical truism that I thought amusing.

It is worth remebering that solar panels are already fusion power so local fusion will need to do a pretty good job to be competitive.


Now I've been able to vote down twice in this poll. We'll see what that does to my average.


I voted for $140. In fact, I think 60 days is a long enough window that we could see yet another new all-time high above $150.

I think the current low and declining price will be short lived - 2 weeks at most. Because there are few major suppliers combined with too high a probability for geopolitical or weather related bad news.

If suppliers see demand destruction in the USA offset by continued increase in demand from India and China, then they have both a vested interested in seeing prices maintain an upward trend and a safe vantage point. Remember that in India alone, the middle class population is pretty much the same size as the entire population of the USA! Changes in European demand are probably a wash, given the historic high price (due mostly to high taxes) - which caused most Europeans to tighten the belt a long time ago.

Enron, demonstrated the ease with which markets can be manipulated when an entity is in a position to schedule 'maintenance'.

I voted trading range. I believe that demand "destruction" (an oxymoron, if I ever heard one, to call a 2-3% reduction in oil use "destruction" of demand)will moderate as oil goes down, and I would not be surprised to learn that Saudi Arabia has reversed part or all of its recent 500kbpd increase in production if oil approaches $100. They might announce this or they may do it on the sly, but I think they will reduce production if oil threatens to approach two digits.

I see a moderately likely bottom of around $110, but I think it is equally likely that we bounce back off $120 without visiting below.

Domestically, it seems Dolly won't be a factor, but we're now just getting into the busiest 60 days of the hurricane season (late July to late Sept), so the "E", "F" or "G" tempest may well Goose (pun intended, given his annointment as chief controller above)oil and gas prices and provide the "usual suspect" cause for reversing course on this correction.

On the upper end, however, I do believe that economic slowdown here and demand "moderation" (forget destruction)will keep oil south of $150 for the foreseeable future.

Jack Yetiv

I have been an oil investor since the 1990's. I believe in peak oil. Over 50% of my porfolio was in oil and gas I have been greatly rewarded. The dot.com bust did little to me.

Last week I sold about 20% of my oil investments.

I sold shares in a natural resource fund that I have owned for a long time. Ten years ago I was buying the shares for $7. I sold for $42 I didn't quite get the top of $46. In Febuary, in the middle of the SoGen crisis, I was buying oil and gas mutual funds for $18 a share. I sold for $24. A very nice return for 5 months.

Sometimes you are so far ahead that you just have to take profits.

There is demand destruction out there. We have all sorts of stories about parked cars, increased transit use, etc. In my life and business I have cut my enegy use in half in the past three years and I am going farther. I will probably cut my use in half again.

This week, I may begin driving an electric vehicle. The old SUV will only be used for about 500 miles a year for the heavy hauling that justifies its size.

Higher interest rates and an economy in long term reccession may push the price of oil even lower. Who needs gas to get to a job, when you have been laid off? Better to spend the money on food, seeds and insulation.

I think I will be able to buy all my shares back with oil at $115. I will buy them back in small lots at a lower price. I think the Saudis will cut production at $100 and definitely at $80. They want to preserve their resources for future generations.

$80 to $115 could be the buying opportunity of a lifetime.

Parked cars? Did you know that vehicle sales are up a whooping 40% in Russia so far this year? Across Eastern Europe there's a huge boom in auto sales. And then there's the Middle East which is going through a boom never before seen in the region's history, flush with petro cash. And let's not get started with the 3 billion people in Asia with 7-9% growth rates year in year out. 7-8% growth is expected this year in the so-called "recession year" and "high oil prices"...7-9% growth among a 3 billion+ people base really adds up a to a whole lot of consumption after a few years...7-9% growth is a doubling every 9 years. We can expect everything to roughly double over the next 10 years with that kind of growth. China adding one half of America's total power generation on-line in 5 years from 2005-2010 really ought to wake people up.

I agree, but its tough not to take some profits. I was massively overweighted in oil. Higher interest rates and a deep recession or worldwide global Great Depression could make oil prices drop lower for a while. However, long-term I am very bullish on oil.

If you want to bet with real money on any short term increases, there are many ways to do it. The dropping price has many people running for the doors out of the oil game.

If you are bullish, now is your chance. It will take guts, but go ahead and buy. It could be a great move.

The Middle East uses 3 times as much oil as India though, and the growth from that much higher base is faster as well (5% annual growth). Expect the Middle East to gobble up 12 mbpd by 2020 (it was 6 mb in 2006)...India is very important in a few years as the economy continues to grow, but currently it is largely a medieval society and those 1.15 billion Indians uses about the same amount of oil as South Korea.

Hi, I'm wondering if there are articles people have written on
the impact of the collapse of medicare and social security in
the united states on peak oil.

People have written about global recession slowing down demand
and therefore delaying peak oil. But here in the U.S. we have
a more serious people of Medicare going cashflow negative
in the next couple of years. And social security of course will
go bankrupt when massive number of baby boomers retire.

The U.S. economy will go down the toilet for the next 10-15 years.
Oil demand in the U.S. will go down with it. But the question is,
how much will U.S. slowly impact the peak oil plateau?

I would like to read about some actual numbers or models giving
different projections.


Another issue that I have not seen covered is that the price [say - monthly trend] used to follow an annual pattern which reflected the largest consumer at that time - the USA.

Now the demand is worldwide you cannot assume that it should follow the old cycles.

Maybe Asians drive less in the summer when its hotter? This could be the annual low point now.

Seeing Thailand in the summer, it's hard to believe that is true. Perhaps it's a combination of factors, including Beijing putting limits on Chinese emissions because of the Olympics? On July 20th, Beijing banned 300,000 "yellow grade" vehicles from the road until Sep 20. That artificial demand destruction is having a bigger effect than it normally would because of increased Saudi output. They are going further than that by limiting factory emissions. I'm not saying that this entirely accounts for the drop we've seen, just that certain things are favoring a somewhat lower price until late September.

Beijing Takes 300,000 High-Emission Cars Off Roadsj

Beijing claims to have already taken 50 percent of government cars off the roads, and will ban private cars on alternate days from July 20, depending on whether their number plates end in odd or even numbers. The authorities hope such a measure will take 45 percent of the city's 3.29 million cars off the roads and slash car emissions by 63 percent.

The capital has also announced a raft of factory closures and a ban on major construction to take effect for two months from July 20 to improve air quality.

Of course any number of factors is equally likely to make the price shoot back up. That's part of why I had to vote for the highest option available. Any price reduction is definitely temporary. The million dollar question is when will the upward momentum really kick in and erase the slight slump in prices we've seen lately. My best guess is sometime after September. I'm just wondering how gold will do in relation to oil... because it seems like we'll see a nice boost for gold too.

T. Boone Pickens is a day late and a dollar short. He should have put his billions into play before PHEV's and cellulosic fuels hit the drawing board. In three years,PHEV's will start turning the demand curve on its head. And the "last barrel out of the ground" will be produced by companies like LS9. Fossil fuels will be all but obsolete in 15 years. Useless for producers that can't get it out of the ground for less than $25 per barrel.

I am not surprised that oil has corrected. The recent jump was spectacular - $110-$147 in just 6 weeks.

I also sometimes think we have have been so desensitized by the recent spike in the price, that $126 seems low. It is still almost double of what it was last year at this time.

The long term trend indicates that nominal crude prices (that's what we buy and sell in anyway) has been increasing at about 30-32% since 2001. So $130 at the end of this year and $170 at the end of next is not inconceivable.


here is my theory:
we have several factors which are contributing to the short term price declines
1. China is shutting down industry and construction and auto driving for the Olympics. this equals significant reduction in marginal demand

2.According to megaprojects database, 2008 is the last big year for new incremental additions to production. This adds 2M/day, whcih may be hitting now

3. China wants to keep everyone smiling and thinking about the Olympics, not worrying about the price of oil, so they have taken steps to temporarily buy more US $ debt, thus raising the dollar, lowering the 10 year bond rate and lowering the price of crude

4 Bernanke's aggressive jawboning is having an effect, and bank results are coming in better than expected thus raising the dollar.

5. Its the summer doldrums. everyone is at the beach.

This is all a bear rally, nothing has changed, we will return to regular scheduled disasters in September

This news about Oman production and exports came out a couple of days ago, however I have not seen much discussion about it in the relevant energy website, the information reported may seem trivial since Oman daily production is quite small (739k bpd), however the trends demonstrated in the numbers have big implications for future oil prices:

Oman oil production rose by 3.6% in the first 5 months of 2008; however oil exports declined by 5.1% compared to the first 5 months of 2007, due to high domestic consumption, fueled by 12.9% growth in GDP due to the high oil prices.

In the Export Land Model developed Jeffrey Brown, oil exports are expected to decline at a faster rate then production, once a nation experince post peak oil production combined with rising consumption, however the trend with Oman is quite different and even more alarming, as oil exports may decline even if the country oil production is rising, due to internal consumption growing faster then oil production.

There has been other countries with flat production that had a decline in exports (most notably Russia), but I have not seen a country with 3.6% production growth, experince a 5.1% export decline, if this same trende continue and expand to other Gulf countries, the implications for oil prices will be very signifcant.


Oman news:

Demand destruction absorbed!

Despite all the talk about demand destruction, here is a number of interest for June 2008:

US June oil demand down by 388k bpd.
China June oil demand up by 475.2k bpd.

Net increase: 87.2k bpd.

Thus, for all the talk about oil demand destruction, Chinese oil demand alone compensated and more for US oil demand destruction.

Further more, oil demand continue to grow briskly in oil producing countries from Russia to the Middle East, as well as in Brazil and India.

Demand growth is certainly slowing, however overall demand is not declining, while on the other hand oil supply (and oil available for export) remain stagnant, this is why the upside risk to oil prices remain to the upside.

Support Link:


One wonders how long the Chinese will be able to continue their fuel subsidy though. As a conservative estimate, you can bet we won't see any change until after the olympics are over because the ensuing protests would be an embarrassment. They can't continue them forever though and when they do reduce them we might see a big change in demand in China.


I read an interesting theory last week that dropping the subsidies may actually increase consumption. Apparently, if the story was correct, the subsidies also carried a restrictive price control. Thus there was a limited amount of fuel in the market place. When the subs go away so does the price control. There is a report of a big unfilled demand currently that will start increasing consumption significant when it becomes more profitable to supply that demand. I couldn't find any other reports supporting that theory but I have seen that same effect in other countries in years past. Time will tell.

Rockman, the link I posted above confirm that Chinese demand has increased after the subsidies were lowered, due to refiners refusing to fully supply the market at a loss.


Nawar and Rockman,

I saw that part about the refiners, it's an interesting idea. I'm no economist, so I can't comment on it very well, but certainly stranger things have happened. Also, if the subsidy is removed the taxes that are going to pay the subsidy would be spent on other things, either kept in the pockets of the people or the government would do something with it that is presumably helpful and not harmful to the economy. That might also stimulate the economy in unforeseen ways I guess too. In my opinion, I think population will probably keep increasing for at least the short term and the increasing oil prices and removal of subsidies would only slow the growth in demand probably not reverse it. (If indeed subsidies don't stimulate the economy as you all say.)

Thanks Nawar

Sinopec a Victim of China's Price Distorting Energy Policy

In early March 2008, oil shortages in Southern China were spreading across the country to Shanghai and Beijing; China is now facing a new round of “oil dearth”. This has paved the way for renewed calls to increase the price of refined oil.

Quote taken from a story on ChinaStakes.com back in April. A bit old now but instructive as to how subsidies can suppress consumption even while nurturing demand, depending where they are applied in the supply chain.

Countries in the income per capita range of $8000 - $20 000 are the ones to watch. Thats the level the western world were at between 1950 and 1980, a period of massive consumer demand increase. China hasn't even reached that level yet, it will reach it in about 5 years, so the real boom is yet to come for the masses. Russia, Brazil, Eastern Europe, Mexico, Malaysia, Turkey, Argentina are some countries that are in that range and are seeing huge consumer demand growth.

I put my money where my mouth is this morning and went long oil(USO).
I'm unpersuaded US demand will subside much until new highs are tested.
Asian demand is relentless.
Supply challenges are inexorable. Rust never sleeps.
And so much of the promised future supply is deep-water, high-latitude, or poor quality, well color me skeptical.
Upcoming US elections could have an effect. Policy makers rigidly adhere to status quo so as not to skew the vote. (conspiracy theorists have no track record).
Since Reagan all presidential candidates have to ramp up sunny 'Morning in America' as election nears.
And try to out-do each other with how tough they will get with America's perceived opponents.
So I expect to hear veiled promises of subsidies on the domestic front and veiled threats to oil suppliers on the international front.
could be bullish for prices.

A significant world wide contraction of economic output can and will cause a reduction in the demand growth.

History has shown that oil price spikes - rapid change - can do more than slow growth.

So far this is playing out as it has in the past. Price can run far when driven by fear or greed.

I bought an oil industry position today but unlike you I bought at the close, although I wasn't intending to until I recalled that one of my go-to stocks, ECA, reports tomorrow. Prior to remembering this I'd expected to go home flat and try to buy a gap down open. That may still be the result tomorrow.

A generally positive report for COP today didn't help it, but after another sector wide haircut today, its possible a second positive report in the sector, assuming ECA delivers, could do the trick. The EURUSD is lifting a little off today's lows and if that persists it will help oil (and gold) too.

However if this doesn't play out at the open I will cheerfully book the loss rather instantly, knowing I can always re-establish positions again in the future - 5 minutes or 5 days or 5 weeks hence. It may be that the entire industry rally from January to May/June gets unwound, perhaps even more, for all we know.

Prices of sector names are starting to hit April lows. If this area does not hold, say hello to January's lows. Does it make sense? Probably not. Can it happen? Absolutely.

Its ok to try once in a while to buy the falling knife provided there was some extreme price action involved; the mistake many make is to keep on holding the falling knife, bounce or no bounce.