Posted: Thu May 15, 2008 11:42 pm Post subject: Re: The Oil Nonbubble
Tex, If low yield is anticipated institutional investors will get out of the futures markets. There is enough nervousness about supply, for any number of reasons to keep the price up, but that could change. I agree with you, though, that anyone who thinks that we'll get back to 50.00 oil anytime soon, is likely mistaken. It is going to remain expensive and continue to drive inflation in a push/pull way.
Joined: Sep 25, 2005 Posts: 1985 Location: Waiuku, New Zealand
Posted: Fri May 16, 2008 3:04 am Post subject: Re: The Oil Nonbubble
I think this bears mentioning again.
According to the EIA, oil production has not kept pace with consumption for 16 of the last 18 months. Why would anyone think that the oil price would go down before this situation is rectified, either by a sustained production increase or a sustained reduction in consumption?
What is all this stuff about speculators and other premiums? It's the production gap, surely?
Posted: Fri May 16, 2008 3:28 am Post subject: Re: The Oil Nonbubble
FreddyH wrote:
The six bucks for spec activity is futures-activity based. Yes, the 4 & 2 split is subjective.
WRT futures/spot in general, they are not buying/selling oil. They are betting on where its Price will go in any of several optional time frames. Only 5% actually buy/hedge oil via this venue.
The Contract Price monitoring reflects the actual buying by refineries and other stakeholders. It is historically 6% to 28% below Spot Price:
a) 'cuz nobody buys oil at the Peak Price of the day. Refineries buy on long term contracts and only engage the spot market in localized emergencies and supply/demand mismatches.
b) 'cuz buyers paid between $99/barrel for Mexican heavy crude to $126/barrel for Canadian Extra Light in early May. Contract Price is weighted to the grade/volume purchased in USA incl domestic prod'n & imports.
that just baffles me more because in effect your saying speculators MUST be the end recipients of this (majority) spot/future oil contracts?
I don't understand how speculation can be significant in the long term for such a commodity as the practicalities of delivery make ownership expensive... say compared to financial instruments?
Boris
London
Last edited by mididoctors on Fri May 16, 2008 3:45 am; edited 1 time in total
Posted: Fri May 16, 2008 3:44 am Post subject: Re: The Oil Nonbubble
FreddyH wrote:
It's a nice theory and has some merit in explaining the secular upward trend. But models can predict the demand destruction created/relinquished by each $5/barrel incremental increase/decrease over an 8 quarter time span. Only 3 qtrs have gone by in the present cycle monitoring $70/barrel pricing and associated recessionary forcing.
.
the price has risen from 9 to 14
14 to 19
19 to 24
24 to 29
29 to 34
..... etc
to 125
over a period of 9 years over 4 8qtrly cycles..
what does this model predict for demand destruction in that time period from the 1999 position?
Joined: Mar 04, 2005 Posts: 2640 Location: New Zealand
Posted: Fri May 16, 2008 4:05 am Post subject: Re: The Oil Nonbubble
Some see oil bubble; others see trouble
Quote:
The recent trajectory of oil prices — a fairly steady increase followed by a much more vertical rise — has a familiar look to it. Remember those charts of tech stocks and housing prices? It's hard not to wonder: Are oil prices forming the next big “bubble?"
Those who see a bubble forming say you need look no further than the recent run-up in the cost of a barrel of crude to the current level of about $124.
“We were only trading at $86 about three months ago and not a whole lot has changed to move us to where we are now,” said Addison Armstrong, Director of Market Research for Tradition Energy. “There's no doubt in my mind — and most other people I speak to — we are in a bubble. And it's going to deflate at some point.”
Bubble proponents argue that if demand for oil continues to ease and supplies hold up, the speculative fever driving up prices could quickly evaporate, and prices could fall sharply.
But the forces that caused those oil “crashes” aren’t evident today. The 1986 slide was the result of heavy overproduction by OPEC, when Saudi Arabia opened the spigots after fellow cartel members cheated on their quotas. The 1998 pullback also resulted from a huge oversupply after the Asian economy unexpectedly slowed sharply as a currency crisis swept through the region.
Today, the world’s oil producers have little extra capacity, and the Asian economy is booming. Bubble skeptics say that while oil prices may be due for a pullback, the longer-term trend is clearly higher.
msnbc _________________ Human history becomes more and more a race between education and catastrophe. H. G. Wells.
Fatih Birol's motto: leave oil before it leaves us.
Joined: Mar 04, 2005 Posts: 2640 Location: New Zealand
Posted: Sat May 17, 2008 2:58 am Post subject: Re: The Oil Nonbubble
Oil's Murky Math
Quote:
At around $125 a barrel, crude oil has more than doubled in price since the end of 2006. How is it possible that the vast majority of government forecasters, stock analysts, economists, traders, and journalists who follow the oil market failed to foresee this? Moreover, how can it be that even today, the bulls and bears on oil are extremely far apart, disagreeing not only on the oil outlook but even the present situation?
The answer is simple. You can't predict what oil prices are going to do even in the short-to-medium term unless you have a good handle on the forces of supply and demand. And that requires thorough and reliable data -- which don't exist. Regrettably, the world oil market is no more transparent than a fragrant barrel of extra-heavy Orinoco crude. And the situation is getting worse because the world's fastest-growing oil consumer is also one of the most opaque: China.
The scarcity of good global data is a key reason why it's impossible to know for sure whether the next "super-spike" in oil in the coming three or four years will be up to $200 or more or down to $80 or less. Even though the statistics aren't exact, they're all anyone has to go on, so they still have an enormous impact.
One indication of uncertainty is the extreme range of bets being made in the oil options market. On May 13, bulls were willing to pay around $1.40 per barrel for a "call" option that will pay off if oil goes over $200 a barrel by next February. Bears, meanwhile, were paying about the same amount for a "put" option that will be in the money if oil goes below $84 by then. Larry Chorn, chief economist of Platts, the McGraw-Hill Companies' (NYSE:MHP - News) energy information unit, says the actual costs incurred in producing the most expensive oil is only around $70 or $80 a barrel, meaning that about $50 of the current price represents "the market's risk premium plus speculation."
yahoo _________________ Human history becomes more and more a race between education and catastrophe. H. G. Wells.
Fatih Birol's motto: leave oil before it leaves us.
Joined: Jan 14, 2008 Posts: 321 Location: The Yukon
Posted: Sat May 17, 2008 5:37 pm Post subject: Re: The Oil Nonbubble
mididoctors wrote:
FreddyH wrote:
It's a nice theory and has some merit in explaining the secular upward trend. But models can predict the demand destruction created/relinquished by each $5/barrel incremental increase/decrease over an 8 quarter time span. Only 3 qtrs have gone by in the present cycle monitoring $70/barrel pricing and associated recessionary forcing.
.
the price has risen from 9 to 14
14 to 19
19 to 24
24 to 29
29 to 34
..... etc
to 125
over a period of 9 years over 4 8qtrly cycles..
what does this model predict for demand destruction in that time period from the 1999 position?
per capita?
overall?
Boris
London
A fair query, Boris. Price increase are analgeous to the carbon decay rate. They infiltrate the marketplace over time, but then dissipate out...
Every year more comes in, but each year some is divested from the past. _________________ www.TrendLines.ca/scenarios.htm Home of the Real Peak Date ... set by geologists (not pundits)
Joined: Mar 04, 2005 Posts: 2640 Location: New Zealand
Posted: Sat May 17, 2008 9:04 pm Post subject: Re: The Oil Nonbubble
Excess Money, Deficits and the High Price of Oil
Quote:
Paul Krugman (“The Oil Nonbubble,” column, May 12) refers to a statement I made two and a half years ago that the oil surge was a “huge bubble.” It was — and still is.
And it is not only oil — we are experiencing a commodity bubble not seen since the 1970s and early ’80s. The cause of the commodity bubble then, and now, was excess money creation by the Federal Reserve.
nytimes _________________ Human history becomes more and more a race between education and catastrophe. H. G. Wells.
Fatih Birol's motto: leave oil before it leaves us.
Posted: Sun May 18, 2008 5:58 am Post subject: Re: The Oil Nonbubble
Boris
With the massive population growth that fossil fuels have facilitated over the last century world wide, do you or anyone else have any imformation as to what measures there are or indications there may be to the amount of oil/gas reserves that remain and what the forecast might be in terms of decades or centuries before this stuff runs out?
Posted: Sun May 18, 2008 5:58 am Post subject: Re: The Oil Nonbubble
Boris
With the massive population growth that fossil fuels have facilitated over the last century world wide, do you or anyone else have any imformation as to what measures there are or indications there may be to the amount of oil/gas reserves that remain and what the forecast might be in terms of decades or centuries before this stuff runs out?
Joined: Oct 23, 2004 Posts: 5891 Location: New Jersey
Posted: Sun May 18, 2008 9:04 am Post subject: Re: The Oil Nonbubble
Graeme wrote:
Excess Money, Deficits and the High Price of Oil
Quote:
Paul Krugman (“The Oil Nonbubble,” column, May 12) refers to a statement I made two and a half years ago that the oil surge was a “huge bubble.” It was — and still is.
And it is not only oil — we are experiencing a commodity bubble not seen since the 1970s and early ’80s. The cause of the commodity bubble then, and now, was excess money creation by the Federal Reserve.
As I have explained in the Housing Collapse thread, the US dollar - which actually is a Federal Reserve paper note and not issued by the US treasury - is now more than 50% backed by assets of dubious and uncertain value. This debasement may have gone unnoticed by oridinary folk and even some economists, but a debasement of this magnitude must result in rapid price increases in basic commodities - of which oil is the most important.
Posted: Sun May 18, 2008 10:56 am Post subject: Re: The Oil Nonbubble
DantesPeak wrote:
Graeme wrote:
Excess Money, Deficits and the High Price of Oil
Quote:
Paul Krugman (“The Oil Nonbubble,” column, May 12) refers to a statement I made two and a half years ago that the oil surge was a “huge bubble.” It was — and still is.
And it is not only oil — we are experiencing a commodity bubble not seen since the 1970s and early ’80s. The cause of the commodity bubble then, and now, was excess money creation by the Federal Reserve.
Exactly. People think that money flowing into oil and other commodities is somehow divorced from the reality of diminishing supply, when they are actually tandem forces that act synergistically. (I hate that buzzword, but in this case, it's the only one that works!)
As I have explained in the Housing Collapse thread, the US dollar - which actually is a Federal Reserve paper note and not issued by the US treasury - is now more than 50% backed by assets of dubious and uncertain value. This debasement may have gone unnoticed by oridinary folk and even some economists, but a debasement of this magnitude must result in rapid price increases in basic commodities - of which oil is the most important.
Posted: Sun May 18, 2008 12:17 pm Post subject: Re: The Oil Nonbubble
DantesPeak said:
Quote:
As I have explained in the Housing Collapse thread, the US dollar - which actually is a Federal Reserve paper note and not issued by the US treasury - is now more than 50% backed by assets of dubious and uncertain value. This debasement may have gone unnoticed by oridinary folk and even some economists, but a debasement of this magnitude must result in rapid price increases in basic commodities - of which oil is the most important.
There are several forces pushing up oil prices and they will continue to do so. The declining dollar is certainly having an affect, falling AvailableEnergy is significant and amounting to an annual loss of 5% of oil’s energy contribution. J. Brown’s Export/Import Land model is now becoming reality, as exports are beginning a precarious decline. The present price increases we are seeing in crude are not strictly an oil production problem. To view them as such would be naive and it would ignore what is probably the most significant aspects of this crisis.
Posted: Sun May 18, 2008 12:50 pm Post subject: Re: The Oil Nonbubble
desyk wrote:
Boris
With the massive population growth that fossil fuels have facilitated over the last century world wide, do you or anyone else have any imformation as to what measures there are or indications there may be to the amount of oil/gas reserves that remain and what the forecast might be in terms of decades or centuries before this stuff runs out?
How far away from complete anarchy are we?
no idea.. ... well thats dishonest
complete anarchy may never occur... your asking an agnostic non doomer.
some claim we are 1 cubic mile from total exhaustion.
I think in terms of significant figs they are correct.
time wise is a different kettle of fish. the whole anarchy thing is predicated on declining states of consumption feedbacking into socio-political effects... which is a very speculative arena.
however I get the feeling things could get rowdy even if i find many predictions overly detailed.
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