I think this is the beginnings of an economy based on perpetual growth and fossil fuel energy running headlong into geological energy constraints. Basically I see an undulatory downward path for the rest of my life. From here out, I think any rallies in our economic condition are going to be met with spiking commodity prices that knock us right back down.
Posted: Thu Mar 31, 2005 11:44 am Post subject: Oil Surges $2 on 'Super-Spike' Prediction
WOW! Is this a hint or what?
Reuters
Oil Surges $2 on 'Super-Spike' Prediction
Thursday 2005-03-31 12:38 ET
LONDON (Reuters) - Oil hurtled back up to $56 a barrel on Thursday as Goldman Sachs bank, the biggest trader of energy derivatives, said prices could ultimately surge all the way above $100.
The Goldman Sachs report strengthened gains driven by a fall in U.S. gasoline stocks and fresh buying from investment funds as the dollar weakened.
U.S. light crude (CLc1) jumped $2.11, or 3.9 percent, to a high of $56.10 a barrel, within $1.50 of a $57.60 record high struck on March 17.
Benchmark Brent futures (LCOc1) leapt $2.76 to $54.85, catching up with Wednesday's late recovery on the New York market, which this week closes an hour later than the London exchange.
Oil prices have climbed around 25 percent this year as signals that rapid demand growth in emerging economies China and India will strain world supply ignited heavy buying from big-money funds.
Goldman Sachs bank (NYSE:GS - News) said in a research report on Thursday that oil markets have entered a "super-spike" period that could see prices rising as high as $105 a barrel.
"We believe oil markets may have entered the early stages of what we have referred to as a "super spike" period -- a multi-year trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return," Goldman's analysts wrote.
Goldman's Global Investment Research note also raised the bank's 2005 and 2006 NYMEX crude price forecasts to $50 and $55 respectively, from $41 and $40.
These forecasts sit at the top of a table of predictions from 25 analysts, consultants and government bodies surveyed by Reuters (O/POLL).
U.S. oil futures on the New York Mercantile Exchange have averaged $50.02 per barrel so far in 2005 up from a record $41.48 last year.
The U.S. government reported on Wednesday that U.S. gasoline supplies fell 2.9 million barrels to 214.4 million barrels last week, the fourth decline in a row ahead of summer when consumption peaks.
Gasoline demand has been running two percent higher than last year in the past four weeks, despite record prices at the pump, making the 6.3 percent inventory surplus versus last year's level less comforting than it would appear.
Also encouraging gains, the dollar -- the currency of global oil trade -- retreated further on Thursday from a five-month high against the yen.
A weaker dollar has encouraged funds to switch money from treasury markets into commodities, as well as insulating fuel consumption in non-dollar economies from the impact of higher crude prices.
The Organization of the Petroleum Exporting Countries raised its formal output ceiling by 500,000 barrels per day (bpd) to 27.5 million bpd in mid-March to pump up second-quarter global stocks, creating a cushion for anticipated year-end demand.
Still a few hours before the markets close, too.
soon as this snow melts, I'm dusting me bicycle off, mate. _________________ "By the time individuals discover that remaining resources will not be adequate for the next generation, the next generation has already been born. " David Price
Joined: Sep 25, 2004 Posts: 4690 Location: Boston, MA
Posted: Thu Mar 31, 2005 2:42 pm Post subject:
This is bad news (or good depending on your point of view). Oil spikes on the news that some company said a spike was possible!?!? That's scary.
Yes, Norway's statement, Nigeria's oil strike possibility and the dollar's weakness all have an impact. However, in the past the volatility of the oil market was nil. Oil didn’t spike 2 dollars on anything other than a major war or a revolution. We now have spikes is an Exxon employee sneezes . Today’s events are just further evidence of the tightness of the oil market. Any little occurrence can trigger a major spike. Imagine what would happen if OPEC announced in a formal way that global oil production had peaked. Imagine the effect of a Saudi Revolution…on second thought, don’t think about it. _________________ "www.peakoil.com is the Myspace of the Apocalypse."
Joined: Jun 02, 2004 Posts: 1078 Location: Bristol, UK
Posted: Thu Mar 31, 2005 2:57 pm Post subject:
Tyler_JC wrote:
Imagine what would happen if OPEC announced in a formal way that global oil production had peaked. Imagine the effect of a Saudi Revolution…on second thought, don’t think about it.
To me this is the scariest part... literally any minute of any day there could be Saudi Revolution, or a major co-ordinated 'terrorist' attack on Middle East infrastructure, The Saudi's could announce they are reducing production by 1mbpd effective immediately due to 'production difficulties', masked for the last year by making up the shortfall from stored reserves, earth quake in the Middle East damaging oil infrastructure... I'm sure others can think of similar events. The point is supply is on a knife edge. We agree inevitable decline is imminent, there is however the chance that 5mbpd could be lost tomorrow.
What happens then? _________________ "Everything is proceeding as I have foreseen." The Emperor (Return of the Jedi)
The Oil Drum: Europe
Joined: Dec 08, 2004 Posts: 921 Location: 145'2"E 37'46"S
Posted: Thu Mar 31, 2005 5:53 pm Post subject:
Goldman Sacks, in now saying what M.Simmons first said ?2yrs ago, may be either trying to gain some credibility with small time market traders, or setting them up for slaughter. Their big money clients must have covered themselves by now, and be 'braced for impact'; only time will tell if they're also set to punish short term oil bears.
Joined: Sep 29, 2004 Posts: 2330 Location: Pennsylvania, USA
Posted: Thu Mar 31, 2005 9:49 pm Post subject:
Well, Peak Oil theory is based on the fact that oil wells generally don't "go quietly into that dark night" - they generally drop off rapidly in production, especially when enhanced recovery techniques are used. We on this web forum are all waiting for Ghawar or some other old, fantastically important field to peak. We are curious as to what effects such an event will produce.
One thing is pretty much taken as a granted - oil prices will go through the roof, at least temporarily. Then the fun starts, long lines at the gas station, $5/gal and rising gas prices and increased prices for everything, especially processed food products. Many businesses will go belly up, unemployment will shoot up to Great Depression levels.
Then the fun starts, long lines at the gas station, $5/gal and rising gas prices and increased prices for everything, .....
I think everyone here has to understand something very fundamental. The price stated represents only the American experience. That is less then 5 % of the world's population.
The majority of the world does not relate to American pricing or American units. The tax on a litre of gasoline (petrol) is low in the US compared to moat countries. The average tax on a litre of gasoline is about 10 US-cents or about 0.07 euro, whereas the tax in some countries can be as high as 10 times that.
The fact is, if Americans paid taxes similar to most countries, then 1 $/L pricing at American pumps would have been the norm a long time ago. If the oil price goes up to 100 $/barrel, then 2 $/L pump prices in most parts of the world will be the norm.
Joined: Aug 10, 2004 Posts: 1104 Location: San Diego, CA, USA
Posted: Thu Mar 31, 2005 10:21 pm Post subject:
Kingcoal wrote:
Peak Oil is so much fun.
I suppose it depends on how you define fun. Now, given that growth cannot go on forever, we might as well roll up our sleeves and get started on the depletion side of the energy graph.
The fact is, if Americans paid taxes similar to most countries, then 1 $/L pricing at American pumps would have been the norm a long time ago. If the oil price goes up to 100 $/barrel, then 2 $/L pump prices in most parts of the world will be the norm.
This doesn't change the fact that the US economy and in turn most of the World would go into huge recession caused by sky-high oil prices.
Besides although gasoline is taxed heavily in Europe, if crude oil price goes up governments are faced with a dilemma:
Either:
Keep gasoline price unchanged which would reduce tax income which would require raising taxes elsewhere or additional borrowing which would increase interest rates.
Or:
Increase gas prices which reduces gas demand which in turn reduces taxes.
I think what governments will do in Europe is a bit of both. Reduce a bit the taxes on gasoline and let the prices go a bit higher as well.
The tax on gasoline/petrol funds the construction and maintenance of roads. If it were decided to reduce the tax in order to keep the cost to the consumer down, then it is also possible some road projects would have to be scuttled. Shifting the tax burden to another location doesn't eliminate the pain of the burden. But cutting back on spending would be a viable way to lower taxes.
I think what governments will do in Europe is a bit of both. Reduce a bit the taxes on gasoline and let the prices go a bit higher as well.
The tax on gasoline/petrol funds the construction and maintenance of roads. If it were decided to reduce the tax in order to keep the cost to the consumer down, then it is also possible some road projects would have to be scuttled. Shifting the tax burden to another location doesn't eliminate the pain of the burden. But cutting back on spending would be a viable way to lower taxes.
They have already frozen road tax duty twice in the UK. What people have to remember is if tax is taken off road funds then the money must be found somewhere else, first if all that means no new roads, which in most people’s eyes on these boards is a good thing considering more roads = more oil use = higher prices. Further reductions would mean the tax would have to be found somewhere else, say income tax. And that won’t go down very with people on low incomes.
They have already frozen road tax duty twice in the UK. What people have to remember is if tax is taken off road funds then the money must be found somewhere else, first if all that means no new roads, which in most people’s eyes on these boards is a good thing considering more roads = more oil use = higher prices. Further reductions would mean the tax would have to be found somewhere else, say income tax. And that won’t go down very with people on low incomes.
More then likely the money will come from selling bonds. The US discovered the magic of bonds along with the petro-dollar. The two work hand in hand. This is why the US can lower taxes and everyone else is unable. Because of the petro-dollar, the bonds sell without problem. If the oil currency shifts to the euro, either fully or in part, then the EU could sell more bonds and help lower the tax burden without cutting costs or services.
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. Today’s events are just further evidence of the tightness of the oil market. Any little occurrence can trigger a major spike. Imagine what would happen if OPEC announced in a formal way that global oil production had peaked. Imagine the effect of a Saudi Revolution…on second thought, don’t think about it.
Now, given that growth cannot go on forever, we might as well roll up our sleeves and get started on the depletion side of the energy graph.
