Joined: Jan 18, 2006 Posts: 289 Location: Bordeaux
Posted: Mon Mar 06, 2006 4:48 am Post subject: Re: The Proposed Iranian Oil Bourse
MrBill wrote:
I know I am the most boring person, but I have pointed out time and time again how all these technical details do matter. No infrastructure, no bourse. No delivery point, no physical delivery, no futures market....
Yeah that must be it
Why do you have no conspiracy, no cataclysmic collapse, no upcoming war to announce in your posts ?!
And I'm sure you'll be back on March 20 and after to say "business as usual", "barrel price fluctuates about 2% around 62$", "$/€ parity is around 1.2 +- 3%" and so on...
You'll definitely NEVER equal Euric in conspiracy and paranoia
Posted: Mon Mar 06, 2006 5:12 am Post subject: Re: The Proposed Iranian Oil Bourse
miniTAX wrote:
MrBill wrote:
I know I am the most boring person, but I have pointed out time and time again how all these technical details do matter. No infrastructure, no bourse. No delivery point, no physical delivery, no futures market....
Yeah that must be it
Why do you have no conspiracy, no cataclysmic collapse, no upcoming war to announce in your posts ?!
And I'm sure you'll be back on March 20 and after to say "business as usual", "barrel price fluctuates about 2% around 62$", "$/€ parity is around 1.2 +- 3%" and so on...
You'll definitely NEVER equal Euric in conspiracy and paranoia
Hmm, what keeps me awake at night...
Human to human transmission of avian flu
Katerina/Rita/Wilma supply interuptions
Terrorism and al Qaeda attacks on oil infrastructure
The Straits of Hormuz and their importance to ME oil supplies
Sanctions on Iran and their reaction
Civil wars in Sudan and Dafur and the civil world's inability to confront genocide
Climate change leading to desertification, rising sea levels, unpredictable weather patterns, etc.
Population growth far in excess of earth's carrying capacity
Unrest in the Nigerian Delta and other oil exporting areas
The US' fiscal imbalances
Chinese/Indian/Asian demand and their appetite for commodities, energy and other resources
The effect of the yen/dollar carry trade on emerging market debt and countries' ability to repay
A 9/11, London, Madrid terrorist attack
And especially those events which one cannot predict, but happen none the less with alarming regularity, like a blow up in the global market for credit derivatives for example? _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Mon Mar 06, 2006 5:19 am Post subject: Re: The Proposed Iranian Oil Bourse
Mr. Bill's post on infrastructure brings up another point about USD hegemony. It has been very difficult for 3rd world countries to develop industrialized economies because of their lack of a physical infrastructure. I remember when Saudi tried to build its first oil refinery. When a piece of heavy equipment broke, they had to put in on a barge to England because they had no machine shops. Even Russia, despite the forced march of Stalinization, still only has a GDP the size of the Netherlands. Japan is the only example of a large country that has caught up to the West, although they did it with cheap labor and open US trade policies. Now China is trying to duplicate their feat. They have only been successful so far because they are following Japan's model. In addition, they have been helped by US companies abandoning the US to use China as a cheap manufacturing platform.
The USD financial infrastructure is unique in its breadth and depth. Excess global liquidity is trapped there. Even the Eurozone could not accomodate a substantial shift in reserve portfolios. It's possible that the unique role of the US in the global economy/money system has so far prevented it from experiencing an Argentina style crisis due to its high debt and trade/payments imbalances. It's possible a painful adjustment could be postponed indefinitely. Not likely, but possible.
Posted: Mon Mar 06, 2006 7:28 pm Post subject: Re: The Proposed Iranian Oil Bourse
Congratulations! You guys collectively talk the OB issue to death while overlooking the obvious -- in the same way that infantrymen 'would wish to keep their powder dry,' so too would the Iranians while the US tries to do an Iraq-Reloaded on them. If the Iranians can successfully prevent the US from the further intrusion into their business affairs, then that would make it safe for the Iranians to formally announce and then open their oil bourse.
Posted: Mon Mar 06, 2006 10:58 pm Post subject: Re: The Proposed Iranian Oil Bourse
Zentric wrote:
If the Iranians can successfully prevent the US from the further intrusion into their business affairs, then that would make it safe for the Iranians to formally announce and then open their oil bourse.
Exactly. The reasons given above why the IOB would fail are purely infrastructural. There is a strong drive for the IOB to happen and it is political. Russia and China would be interested, Arab countries would certainly like to have a couterwight against the threat of US unilateral actions. Should I add Venezuela? Why not the EU itself? Norway!?
I am aware this is the "Economics" forum, but we should not forget things are interlinked and IOB is going to be more political, not a pure-financial event. So far the Iranians proved they are not at all dumb and I cannot borrow the attitude "we're smart and they're stupid" from the "Independence Day"-like movies. They do not appear to me as helpless idiots waiting for somebody to give them good advice. If Iran manages to extrude US from its affairs it would be a major blow and IOB is not going to be the only consequence of their Iraq war leverage.
Joined: Mar 04, 2005 Posts: 2576 Location: New Zealand
Posted: Tue Mar 07, 2006 12:04 am Post subject: Re: The Proposed Iranian Oil Bourse
Iran and Oil
Quote:
We can dismiss the second of the aforementioned concerns because Iran pricing its oil in euros will not have a material effect on the US dollar. If Iran wants euros or some currency other than the US dollar then it can simply convert any dollars it happens to receive into the currency of its choice on the foreign exchange market. And this is almost certainly what it has been doing for many years. Demanding that it receive payment in euros would therefore just mean that the conversion from dollars to euros happened at a different stage in the process, but the overall demand for each currency would be unchanged.
Some people have argued that the US can, and regularly does, create dollars 'out of thin air' and that this provides a substantial benefit to the US by effectively allowing it to get something (valuable resources such as oil) for nothing (dollars created at zero cost by the US Fed). This statement contains an element of truth in that today's monetary system exists for the purpose of allowing governments and banks to get something for nothing, but the US companies that import oil can't just print the dollars they need; they have to earn them. And again, the overall demand for US dollars will be the same regardless of whether a US oil importer pays for oil in dollars with the seller of the oil then converting the dollars to euros, or pays for it in euros.
In our opinion, the pricing-oil-in-euros issue is a storm in a teacup. It won't have a significant effect on the financial markets and it won't prompt a dramatic response from the US Government.
goldseek _________________ 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: Tue Mar 07, 2006 1:43 am Post subject: Re: The Proposed Iranian Oil Bourse
Quote:
Congratulations! You guys collectively talk the OB issue to death while overlooking the obvious -- in the same way that infantrymen 'would wish to keep their powder dry,' so too would the Iranians while the US tries to do an Iraq-Reloaded on them. If the Iranians can successfully prevent the US from the further intrusion into their business affairs, then that would make it safe for the Iranians to formally announce and then open their oil bourse.
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pogoliamo
Tar Sands
Joined: Dec 31, 2004
Posts: 35
Posted: Tue Mar 07, 2006 7:58 am Post subject: Re: The Proposed Iranian Oil Bourse
Zentric wrote:
If the Iranians can successfully prevent the US from the further intrusion into their business affairs, then that would make it safe for the Iranians to formally announce and then open their oil bourse.
Exactly. The reasons given above why the IOB would fail are purely infrastructural. There is a strong drive for the IOB to happen and it is political. Russia and China would be interested, Arab countries would certainly like to have a couterwight against the threat of US unilateral actions. Should I add Venezuela? Why not the EU itself? Norway!?
I am aware this is the "Economics" forum, but we should not forget things are interlinked and IOB is going to be more political, not a pure-financial event. So far the Iranians proved they are not at all dumb and I cannot borrow the attitude "we're smart and they're stupid" from the "Independence Day"-like movies. They do not appear to me as helpless idiots waiting for somebody to give them good advice. If Iran manages to extrude US from its affairs it would be a major blow and IOB is not going to be the only consequence of their Iraq war leverage.
Just as I predicted! Now the excuses and the back peddling start. Now that the IOB isn't going to happen on March 20th as planned. All its boosters will start saying, "it's a big secret", "they have to keep it that way", "they would have opened it, but they were afraid of Israel/USA", "the issue is not dead, they are just waiting for the right moment". etc, etc, ad naseum. Never expect a armchair conspirist to admit that their paranoid fantasies are not going to come true.
Iran can sell oil in euros anytime it wants to, as can any exporter! There are no shortage of enemies of the USA, so there is no reason to prop up the US' dollar hegemony. Therefore, there is no reason not to sell oil in euros.
I really do not understand you people? Are you really that gullible? It is quite simple. Sell oil in euros. Do not invest in US treasury bills. What does it matter if the price is based on the futures or cash price made somewhere else? You can sell oil in euros or you can sell oil in dollars and buy a forward outright or you can do a cross currency swap.
In the meantime, Iran is playing you like a card. They're keeping the world price of crude high with their threats of enriching uranium. They're not dumb. What they cannot accomplish through OPEC as hawks, they accomplish through their rhetoric. And plans to open an IOB are just part of that strategy. Just like Chavez is whipping up nationalistic support ahead of elections by arming peasants with outdated rifles and telling them to repell an imminent US invasion.
Speaking of George Orwell, Euric, if you cannot find an enemy to keep your people's minds off their troubles, create one.
RE yen carry trade. Please check out Survey of the World Economy where I covered it in depth. Thanks. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Tue Mar 07, 2006 1:57 am Post subject: Re: The Proposed Iranian Oil Bourse
For that matter. France has always had super power envy. They would like to be the counterweight to the US. They believe they have inside contacts in the Arab world. They are part of the eurozone. Paris is losing influence to London and Frankfurt in financial circles. The CAC40 is largely forgotten. Why would it not be in their interest to open a rival oil exchange with contracts denominated in euros? They have oil companies like Total that would support it. They have the banks and the infrastructure to support an exchange in euros. None of the problems that I mentioned with Iran. No obstacles. Could be up and running in six months. Just open another trading floor next to Bourse de Paris or add another contract to the Euronext. Heck, I bet if they opened one that the very next day that Russia would join it. Then China. Then Venezuela. Then the world. The ICE and the NYMEX would simply disappear and then France would achieve its dream. It would be important and relevant again. Of course, it goes without saying that as soon as France opened an oil bourse in euros that the dollar would collapse overnight. Then you guys would finally be vindicated and everyone would live happily ever after. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Tue Mar 07, 2006 3:18 am Post subject: Re: The Proposed Iranian Oil Bourse
Mr. Bill -
There was a time not long ago when America - due to its traditional strengths of a strong economy and military, honest and transparent markets, and moral leadership - was looked upon as the place where international trade could get done, and/or whose currency was used to facilitate such commerce. But all these strengths have begun to seriously erode in the last several years, such that EU and China (and their currencies) now appear as likely competitors or replacements.
Since America is now mostly in the business of printing money and trading it to the rest of the world for commodities and hard assets, and, due to a reckless domestic monetary policy that quickly inflates away the purchasing power of that freshly-printed money, America's got a sweet thing going that it doesn't want to end.
A thriving Iranian Oil Bourse, if nothing else, would serve to strip whatever prestige and power that still remains with the US Dollar. It would mark a symbolic defeat. An emperor's new clothes event. And since perception is reality, and the American dollar is a faith-based fiat currency after all, nobody will value the dollar quite as much, and America would suffer this like a kick in the teeth.
This is why, one way or another, the US would stay motivated to interfere with the bourse. And why, one way or another, Iran is motivated to have the US buzz off.
So, okay, Mr Bill, you can feel all self-satisfied if it turns out that the Bourse doesn't open on March 20 (by the way, I myself, have no emotional investment in this date -but thank you for the insinuation just the same ). But this likely also means that a world-altering confrontation between the two countries would happen some time before or after March 20. Would you still feel as smug if this were to happen?
Posted: Tue Mar 07, 2006 3:20 am Post subject: Re: The Proposed Iranian Oil Bourse
[quote="shakespear1"][code]Speaking of George Orwell, Euric, if you cannot find an enemy to keep your people's minds off their troubles, create one.
Quote:
That's why Information IS Power.
Power to the People, man. Peace. Love. Ban the Bomb. Just say No, to regime change ; - ) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Tue Mar 07, 2006 4:35 am Post subject: Re: The Proposed Iranian Oil Bourse
Quote:
So, okay, Mr Bill, you can feel all self-satisfied if it turns out that the Bourse doesn't open on March 20 (by the way, I myself, have no emotional investment in this date -but thank you for the insinuation just the same ). But this likely also means that a world-altering confrontation between the two countries would happen some time before or after March 20. Would you still feel as smug if this were to happen?
No, I would feel smug if Paris opened an oil bourse denominated in euros and China, Iran, Russia and Venezuela started selling and buying their oil on it.
As for clash of the civilizations, no one looks at events in Iraq or Dafur or elsewhere and feels self-satisfied except for perhaps al Qaeda.
As for the strength of the dollar, the real drivers in 2006 are the yen and the yuan, not the euro. There is going to be a trade-off between strong growth and higher interest rates versus a growing concern over the size of the US' fiscal imbalances.
China would dearly love to diversify their exports away from the USA. Labor costs in China are rising. Infrastructure is straining. Commodity prices are higher. Energy costs keep rising. And the returns they get by selling consumer goods into America are falling. That is the price they pay by being the world's lowest cost producer. The last thing they need now is a customer who cannot pay or pays in depreciating dollars.
That is why I both laugh and get so exasperated with this conversation. There are real issues outside your door that will affect the value of the dollar this year. Take a look around. Metals prices are taking a hammering today on fund liquidation and nervousness about demand going forward. You may say, just a blip and a chance to buy on the dips, but we are at very high prices and inventories are also growing. Any shudder from China or elsewhere in Asia and it will come down like a house of cards, until the next boom comes along.
My forecast for year end is a euro of $1.2600 and a yen of 105-110 depending on whether the BOJ actually does start tightening on schedule or whether they just talk about it. I think China will also dramatically slowdown their accumulation of foreign reserves and end their ultracheap monetary policies which are distorting their economy and instead use those reserves to recapitalize, fix imbalances and perhaps start buying foreign oil to build-up their strategic reserves. Likely in Hainan so they can supply Japan and S. Korea as well as Mainland China at the same time.
Those are real issues. Those issues affect the value of the dollar and the price of oil. The IOB is a red herring. The Iran nuclear standoff though is also real. And that is why China and Russia are no longer on the sidelines this time and why even France is getting involved this time. When was the last time we saw this type of cooperation and a show of unity between these various players? Certainly not since Bosnia? _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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). But this likely also means that a world-altering confrontation between the two countries would happen some time before or after March 20. Would you still feel as smug if this were to happen?
