Not to be Gloomy
Jun 27th, 2008 by DavidAnderson
This is my answer to my friends who disagreed with me on the Blue Water Wind deal.
Byron W. King, a respected market analyst said the following:
The price for oil has barely budged based on the Saudi Summit. There has been no summer sell-off, and I’d be surprised to see a significant pullback as the summer driving season kicks into gear. (Followed by hurricane season, and then the buildup for winter heating stocks, followed by winter.)
What’s going on? Well, what the Saudis give — in proposed, future increased production…the Nigerians take away — with ongoing oil patch carnage that forces the likes of Shell & Chevron to close vast pipeline systems. Apparently the present trumps the future, even in the futures markets. Everything is connected to everything else, isn’t it?
Here is my take on the exit polls from the Saudi Summit…
Consumers and their representative governments are desperate for an oil pullback. This $135 oil is draining budgets. The poor & working poor are already marginalized in this cruel world of ours. Now it’s the turn of the middle classes to get kicked into the cellar of the modern age. People are working time-and-a-half just to put food on the table and gas in the car. Retirees and others on more-or-less “fixed” incomes are impoverishing slowly.
Bankruptcy filings among the older and elderly demographics in the U.S. are soaring. The bottom line is that the conventional image of a “decent standard of living” is rapidly receding for many tens of millions of households. The 20th Century is truly over.
And it will get worse before it gets better. To be perfectly blunt, it might not even get better. Over the next year, and into the forseeable future, in the developed world people will go broke buying motor-fuel, heating oil and natural gas. (Wait until next winter… WOW!) In the less-developed world, people will go broke buying bread. And then the poorest amongst us will starve. Any way you look at it, it’s bad for business.
The guy doesn’t seem to happy with the trends. He goes on to point out that 87% of our energy comes from fossil fuels and is not optimistic that we will change significantly enough even in the next 30 years.
Bryon is usually not so gloomy, but I understand his concern. Oil should have had a correction. Its defying of it may be short lived or signal an entirely new dynamic. Supplies are too tight. Their has to be more supply in mid-run or we are not just in trouble now but for the next generation. Friends don’t let friends vote for Democrats–at least the ones who refuse to increase fuel supplies. That should also sober up the people who think we can ignore alternative fuels and who wonder why I am so adamant about wind and nuclear power.
His gloomy is reality, David, so there’s no avoiding it. My take, though, is that we have to be much more aggressive in establishing alternative fuels and the infrstructure to support them.
I keep meaning to do some homework on this, but BP has a campus near (or in) Frederick, MD that I believe is dedicated to R&D of alternative energy sources. I don’t do the corporate welfare thing very well, but damnit, if it truly, truly would get us there, within say the next five years, and all people benefit, then go for it.
“Supplies are too tight. Their has to more supply in mid-run or we are not just in trouble now but for the next generation”
David supplies are NOT too tight the world actually has a glut of oil right now. It is speculation and derivities and futures, markets and not the normal capitlistsic mechanisms that are driving this trend. It is NOT A lack of refining capability. And Byron is right. The poorest among us will starve. Including many of your fellow citizens. Sure we can use alternative fuel, but all we really need to do to create free energy is throw up Tesla towers. The problem with that is that people already think the earth is overpopulated so they will not do it until enough people have starved to make it seem like the only reasonable thing to do.
ouch.
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/25/AR2008062501942.html
Sorry Brian, but demand and supply are close to equal right now. There is no oil glut like we had in 2000.
The last part is what disturbs me the most. People will starve. It gives a moral imperative to finding alternatives and bringing more oil supply on line.
David,
Click my name for the business week article that points out the source of the problems. I have quite a few resources for you on this issue if you are interested and have been working on an article about it….but have not had time to write it.
Here is another article David….
David here is the OPEC press release. Now you can contrast these with internal memos from Chevron that say they need to create an “artifical shortage to drive up prices” -Assuming that is honest, becuase I saw at a consumer watchdog site. Eitherway here is what OPEC says.
OPEC Thursday, May 08, 2008
In recent months, oil prices have become increasingly volatile, mainly driven by financial market developments and the increased flow of speculative funds into oil futures. The turmoil in some global equity markets and the considerable depreciation in the US dollar have encouraged investors to seek better returns in commodities, particularly in the crude oil futures market. This has driven prices higher.
There is clearly no shortage of oil in the market. OECD commercial oil stocks remain above the five-year average, with days of forward cover at a comfortable level of more than 53 days. US crude inventories, meanwhile, rose by almost six million barrels last week, which is a further indication that oil supplies are plentiful. OPEC Member Countries continue to produce at more than 32 million barrels a day (mb/d). In addition, a number of new OPEC crude oil projects have started to come on-stream and OPEC spare capacity continues to increase, with the figure currently standing above 3 mb/d. At the same time, crude oil movements indicate that some Member Countries are unable to find buyers for their additional supply.
OPEC will continue to be proactive and monitor these developments closely. The Organization stands ready to act if the market shows a need for any further measures.
The Organization will continue to strive for a stable and balanced market, with prices that reflect fundamentals, and are favorable to both producers and consumers.
Its all about the bankster/gangsters in NY and London controlling the price of oil. Oil is now $140 a barrel! If the american sheeple continue to sit back and say nothing it will continue to rise. Gotta hand it to the California Guv…going against McMad. We have been “enronized” and until that Enron loophole is closed, it will continue to skyrocket. Check out Wendy Gramm, and Phil Gramm, McMad’s economic advisor…with these people advising McMad is it any wonder we are in this mess. If anyone thinks that Obama has all the answers, I would disagree with that as well. His take on ethanol is pure idiosy!
Loved the Supremes ruling on the Consitutional right to bear arms. That is not a right or left issue that is a consitutional issue.
I missed the link, but WDEL had someone calling for $7 gallon of gas in 2010.. maybe by next summer.
It was based on global trends and not on speculation…
However if we properly taxed earning coming off of energy, then companies would bury their profit into their businesses creating prosperity for us all…
As much as I agree with that sentiment Kavips, I think there is a bigger issue here that has not been addressed. We have technology to move beyond oil; but most of the price increase we see is a result of instability in the market due to our threatening posture toward Iran and Russia and other countries threat to cut our oil supplies off if we invade Iran. If that hppens we will be at
7-10$ a gallon in a week or two after the invasion. (OPEC estimated oil would rise to 400$ per barrel….)
So the argument that we are out of oil does not make sense, but rather we should be asking have we grown beyond oil and can we use other forms of energy and if not why?
If we have the technology to do all this remarkable stuff why not open it up so we can start exploring Mars and the Moon and doing all kinds of scientific reserach for the future. Tesla had it, lots of scientists have had some wonderful discoveries in the past few years regarding turning light into energy, now we may not implement them but I know China and Japan will….So whay can’t we be innovators? Not just with wind but with all kinds of stuff? Is there some reason why we should not have the same advanatges for the future? Why do we have to stay tied to one market? That is not good for business…
Here is a quote from the Business Week article Bryan was refering to (There Is No Gas Shortage)http://www.businessweek.com/lifestyle/content/apr2008/bw2008041_945564.htm?chan=top+news_top+news+index_businessweek+exclusives
…no less an authority than ExxonMobil (XOM) Chief Executive Officer Rex Tillerson was quoted by Marketwatch as saying, “The record run in oil prices is related more to speculation and a weakening dollar than supply and demand in the market.” He added, “In terms of fundamentals, fear of supply reliability is overblown.”
As for the speculators, in 2000 approximately $9 billion was invested in oil futures, while today that number has gone up to $250 billion. Now, if any publicly traded company had an additional $241 billion put into its stock in the same period, its stock would rise out of sight too—even if the company was not worth anywhere near that amount of market capitalization.
Moving on to the weak U.S. dollar as a primary cause for skyrocketing oil prices—there is “some” truth in that statement. But consider this: The dollar has depreciated 30% against the world’s currencies since 2002, while the price of oil has gone up 500%. So is it the weak dollar that has caused a 500% increase in the price of oil, or is it the extra $241 billion worth of speculation? You can make the call on that one.
Possibly just to ensure oil prices don’t respond to real-world market conditions, Goldman Sachs (GS) forecast on Mar. 7 that turbulence in the oil market could cause oil to spike as high as $200 a barrel. This flies in the face of all known information—but then again, Goldman Sachs is the world’s biggest trader of energy derivatives, and its Goldman Sachs Commodities Index is a widely watched barometer of energy and commodities prices
It is a mighty sad day when the economy of our nation struggles and suffers as greedy speculators manipulate the market and our government sits idly by, sitting on their hands and their brains!!!
True, you and I bear some responsibility for this as we permitted our oil gluttony to neglect our mass transportation system. Western Europe, Japan and others have known better for decades, heavily taxing gasoline and using the proceeds to build mass transportation infrastructure. We should have done the same long ago. But that’s not our style, now we pay the price for neglect.
The unregulated easy mortgage market, sub-prime included, has contributed to our weak dollar, a second factor in the energy price spike. Now our national debt is about $10 trillion. We are now learning the hard way that this level of national debt (and personal debt) is unsustainable.
On top of all this we have tax and subsidy policies helping to make the wealthy grow wealthier while the middle and poor become poorer. How long do you suppose this is going to last before we have riots in the streets?
These are serious conditions that call for change. In addition to changing our lifestyles personally, we need to decide by November who can/will deliver the governmental policy changes we need so badly. We don’t need short term gimmicky fixes that really don’t help; we need a long term approach to fiscal responsibility and to non-fossil energy source innovation. Consequently, we need to realize that these changes will take time to implement; in the meantime, we will have to tighten our own individual belts to conserve in every way. Folks, in this we have no choice — we are where we are!!!
Follow the money and who’s making it
“It gives a moral imperative to finding alternatives and bringing more oil supply on line.”
Still no moral imperative for conservation, I see, even though it will affect the price far more quickly than any of your proposals.
How much of the oil is going for top price and where is it obtained? We hear only the price of the sweetest crude that is so easy to refine into gasoline.
Lower grade stuff goes for half that price but requires a more difficult refining process. A refinery that can turn the sweet crude into gasoline cannot handles the other stuff, oil from a lot of the Middle East and Venezuela. There are problems with refining capacity. Note that Iran imports gasoline.
We can talk about ‘new, green, technology’ but we need petroleum as a practical filler. We are likely to see ANWR coming to pump before some miracle cures are producing that many kW/hrs on steady basis.
I agree completely. I am all for pushing the development of alternatives with prizes and incentives to invest in them, but it is too big a gamble with our economy and national security to rely on that as our under 25 year strategy. We are unlikely to go from 87% to 25% of our energy coming from fossil fuel in that time. We need to do it all. Anything else is fantasy not policy.