Joined: Oct 23, 2004 Posts: 5913 Location: New Jersey
Posted: Sat Jun 21, 2008 2:35 pm Post subject: Soros/Barrons says Oil Superbubble About to Collapse
First of all, I think these two articles have got it mostly wrong, especially concerning their analysis of oil. But in the sprit of free speech, I posted them to show just how misleading public media and especially the business media are about our energy situation.
This kind of misinformation is going to make the debate of how to adjust to the post peak oil world very difficult. Transitioning away from liquid fuels is hard enough; intentionally misleading the public is going to make it almost impossible to reach a consensus as to what to do.
As to the superbubble, depending on what happens in the next financial crisis and/or mideast war, we may see $300 oil or $100 oil within a year - that is if oil is still trading on financial markets.
Quote:
Soros predictis a "superbubble"
Greg Ip
21 Jun 2008 14:42
He has cried wolf many times, but this time George Soros says the beast is really upon us.
Mr. Soros, the chairman of Soros Fund Management, is best-known as a speculator, philanthropist and political activist. He made a fortune by doing things such as betting against Britain's currency in 1992 and Thailand's in 1997.
In essence, he argues that markets don't simply reflect fundamental determinants but can change those determinants in a way that causes asset prices to go to extremes. In his latest book, "The New Paradigm for Financial Markets," he argues a "superbubble" has developed in the past 25 years and it is now collapsing.
Home > News & Commentary > This Week's Magazine > Barron's Cover
MONDAY, JUNE 23, 2008
BARRON'S COVER
Bye, Bubble?
The Price of Oil May Be Peaking
By ANDREW BARY
The price of oil may be peaking in the current range of $130 to $140 a barrel. Here's where you want to be when the bubble bursts.
IT'S PERILOUS TO CALL THE TOP IN A BOOMING MARKET, but the price of oil may be peaking in the current range of $130 to $140 a barrel.
Oil's sharp move up -- prices have doubled in the past year -- caught the world by surprise, including almost everyone involved in the petroleum market, from major exporting nations to big energy companies to the global analyst community. The rally has emboldened oil bulls, who argue the world is bumping up against oil-supply constraints, and that demand will rise inexorably, despite sharply higher prices, as the four billion to five billion people in emerging economies like China and India get a taste of the energy-intensive good life, replete with the cars, air conditioners, refrigerators and computers that Americans and Western Europeans have long enjoyed. Statistics support their view that demand growth is in its infancy in the developing world: U.S. per-capita oil consumption is 25 barrels annually, while Japan uses 14 barrels per person. China's 1.3 billion people consume just two barrels each per year, however, and India's 1.1 billion use less than a barrel a year.
In the next decade, oil indeed may hit $200 a barrel. But prices could fall to $100 a barrel by the end of this year if Saudi Arabia makes good on its pledge to increase production; global demand eases; the Federal Reserve begins lifting short-term interest rates; the dollar rallies, and investors stop pouring money into the oil market. China raised prices on retail gasoline and diesel fuel by 18% Thursday, in a move that is expected to curb demand.
Barron's _________________ It's already over, now it's just a matter of adjusting.
Joined: Jul 12, 2004 Posts: 170 Location: New Zealand
Posted: Sat Jun 21, 2008 2:46 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
For oil to collapse in price the world economy will have to completely collapse first. In my opinion while oil may fluctuate in price the trend is up and I think Hirsch on CNBC predicting oil at $500 plus in 3 - 5 years is much more likely to be right, hence a hyperinflationary depression is on the way.
Joined: Sep 29, 2004 Posts: 2330 Location: Pennsylvania, USA
Posted: Sat Jun 21, 2008 2:58 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
Actually, I think there will be a bounce, but for different reason. Both China and India, with economies built around "in-sourced" manufacturing out sourced from the USA and other countries, will hit a roadblock with oil prices. Their labor costs are almost zero already and their margins are ultra slim. With no room in their profit margin for rising commodity costs, they will pass them on to the US, who is already in a recession and diverting money away from Walmart into their gas tanks and grocery shopping. Right now there are big deals on TVs and other electronics because US consumers have cut back on that spending considerably and it will only get worse. The Chinese in particular, will see declining orders as stuff sits on shelves in US stores. Less manufacturing production means less demand for commodities such as oil. China seems to make most of the worlds plastic, which has ethylene as it's primary ingredient. Declining commodity (oil) consumption in China, combined with demand destruction in the US will ease oil prices considerably in the short run.
However, this extra capacity will probably be answered by recovering economies and a return to high oil prices within a couple of years. I think it should work like a yo-yo for a while, with each recession deeper and deeper and each recovery more and more shallow. _________________ "That's the problem with mercy, kid... It just ain't professional" - Fast Eddie, The Color of Money
Joined: Sep 03, 2007 Posts: 620 Location: Sunny Virginia, USA
Posted: Sat Jun 21, 2008 3:14 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
WOW! Prices will crash all the way to $100 a barrel? We're Saved! Get out the party hats! That means gas prices will plummet to the $2.80 to $3.20 range and only 25% of the farmers will go bankrupt by this time next year! Inflation will stay below 10% (except for food) and gold will crash to $750.
Wow, I was beginning to worry. _________________ When somebody makes a statement you don't understand, don't tell him he's crazy. Ask him what he means. -- Otto Harkaman, Space Viking
Posted: Sat Jun 21, 2008 7:06 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
Dubya better make another speech about Iran, quick. _________________ People first, then things, then dollars.
There will be enslavement, cannibalism, & zombie invasions.
Posted: Sat Jun 21, 2008 7:11 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
My guess is GS doesn't understand the net-export theory. (Not really a theory). Even big shots like him who are aware of the problems associated with a global peak seem to have huge blind spots including being totally ignorant of the implications of net-exports peaking. _________________ http://www.peakoil.org
Posted: Sat Jun 21, 2008 7:14 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
It could collapse. It really could, but then again it might not. People seem happy enough to pay $4 a gallon around here. They are still driving around in their Ramchargers and Avalanches. They seem not to notice the price yet. That tells me that they'll keep paying it. So why should oil go down? Unless Saudi really comes up with an extra million barrels per day we are probably going to stay up around $125 a barrel now. I could be wrong. _________________ Deep in the mud and slime of things, even there, something sings.
Joined: Aug 03, 2006 Posts: 4313 Location: Graceland
Posted: Sat Jun 21, 2008 7:26 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
Kingcoal wrote:
However, this extra capacity will probably be answered by recovering economies and a return to high oil prices within a couple of years. I think it should work like a yo-yo for a while, with each recession deeper and deeper and each recovery more and more shallow.
I think that in 50 years people will look back and see that the graphs of population growth, oil production growth, and worldwide economic growth all followed more or less similar paths up...and then back down.
We have become accustomed to 7 year economic expansions followed by 1-2 year economic contractions. Once we hit the peak of oil production, we are likely to see an inverted version of this pattern--7 years of economic contraction followed by 1-2 years of economic growth. _________________
Posted: Sat Jun 21, 2008 8:06 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
Quote:
But prices could fall to $100 a barrel by the end of this year if
*Saudi Arabia makes good on its pledge to increase production;
*global demand eases;
* the Federal Reserve begins lifting short-term interest rates;
* the dollar rallies, and
*investors stop pouring money into the oil market.
Looks like oil is going to $150 + to me. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Posted: Sat Jun 21, 2008 8:07 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
MattSavinar wrote:
My guess is GS doesn't understand the net-export theory. (Not really a theory). Even big shots like him who are aware of the problems associated with a global peak seem to have huge blind spots including being totally ignorant of the implications of net-exports peaking.
Haven't you buged out yet Matt?? I thought by now you and the LATOC crowd would be heading to the hills by now.
Joined: Jun 18, 2005 Posts: 3909 Location: In a van down by the river
Posted: Sat Jun 21, 2008 8:16 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
I think Matt is correct. GS maybe a smart guy and he is definitely an expert when it comes to making money off of the currency trade but he may know very little about oil production.
Robert Hirsch has actually look into the numbers my money is on him.
Posted: Sat Jun 21, 2008 8:18 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
Revi wrote:
It could collapse. It really could, but then again it might not.
That's my thought too. The long term supply/demand math is pretty clear. That doesn't mean that markets can't do very irrational things for short periods of time. If we hit a major economic slowdown AND China didn't step up it's usage, we could have a shift in the demand enough that it would drop to $100 or maybe even lower for a while. That doesn't at all mean that it's not going to $300 eventually, just that it's hard to predict how it will get there. _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
Joined: Apr 27, 2007 Posts: 4353 Location: The Great Sonoran Desert
Posted: Sat Jun 21, 2008 8:23 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
BigTex wrote:
Once we hit the peak of oil production, we are likely to see an inverted version of this pattern--7 years of economic contraction followed by 1-2 years of economic growth.
I could not disagree more strongly.
Economic growth?
What would be the energy source?
PO will be defined by economic collapse.
There will be no New Deal - there will be no energy to fire up the moth balled factories.
WRT the OP...Then GS should be short oil...I'll bet he is not. _________________ "There must be a bogeyman; there always is, and it cannot be something as esoteric as "resource depletion." You can't go to war with that." Emersonbiggins
"... hope is a rotten-thighed whore" Niko Kazantzakis
Posted: Sat Jun 21, 2008 8:27 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
roccman wrote:
WRT the OP...Then GS should be short oil...I'll bet he is not.
Being long on almost anything else in the US economy kinda amounts to a short position on oil doesn't it? _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
Joined: Apr 27, 2007 Posts: 4353 Location: The Great Sonoran Desert
Posted: Sat Jun 21, 2008 8:36 pm Post subject: Re: Soros/Barrons says Oil Superbubble About to Collapse
smallpoxgirl wrote:
roccman wrote:
WRT the OP...Then GS should be short oil...I'll bet he is not.
Being long on almost anything else in the US economy kinda amounts to a short position on oil doesn't it?
Every stock is overvalued.
The longs in equities are going to get slaughtered.
No cheap fuel...no widget factories.
No jobs...no spending...even less widget factories.
Rinse and repeat. _________________ "There must be a bogeyman; there always is, and it cannot be something as esoteric as "resource depletion." You can't go to war with that." Emersonbiggins
"... hope is a rotten-thighed whore" Niko Kazantzakis
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