[DantesPeak]

Has it begun? Did it start yesterday when well known oil tanker tracking firm, Oil Movements, said most OPEC oil exports in June were expected to go to Asian locations - and not to the US or Europe? Was it today when Israel implied that the bombing of Iran's new nuclear plant was under active consideration?

Or is this just a speculative bubble or the work of greedy traders?

Here are some recent threads on what the 'Superspike' is about:

New 'Superspike' Report Update: $200 Oil Possible

Goldman: Oil to hit $150-200 in 6-24 months

Goldman Sachs 2005 "super-spike" prediction just h...

[joeltrout]

I voted no. Call me crazy.

A superspike gives the impression of a temporary peak in prices and then prices will afterwards fall. I am seeing a dramatic upward trend that will not drop back down to previous levels of $40-$50 oil.

I think what we are seeing is markets realizing supply/demand issues are real and have no solution as of now. Speculation plays a healthy role in that.

joeltrout

[yull]

Historically, looking over the past decades, the whole last few years could be classed as a super spike. Recent price movements though certainly seem to show an acceleration of things and perhaps we are now reaching a tipping point where the price explodes as the peak, declining exports, and declining net oil energy break the buffer systems that have been adsorbing things over recent years. Now they are broke, if they have, who knows what will happen.

Maybe time to head for the hills!

[TireFire]

Major cities are already seeing people adjust to high oil prices. just look at the public transportation sector.

Demand will drop in the near future, prior to the end of the year. I believe prices will remain very high (150$ per barrel) and remain there, but world demand and consumption will drop eventually and signs of this happening are already starting to emerge.

[joeltrout]

Historically, looking over the past decades, the whole last few years could be classed as a super spike.

But doesn't a spike imply that prices will come back down in the future? The prices might soften but I don't see them dropping down to previous levels.

joeltrout

[yull]

Depends on your definition I suppose. I agree though that this is something that is permanent, minus some unforeseen event, and that will be temporary itself.

[GoghGoner]

But doesn't a spike imply that prices will come back down in the future? The prices might soften but I don't see them dropping down to previous levels.

joeltrout

Yeah, I think your picture of a spike it correct. However, I don't think it has to come down as far as it went up to be a spike. I believe that if the price goes up to $200 quickly then we will see a fall in demand caused by economic collapse and then the price will come down quickly until it starts to go back up. Heck, I think if prices hold around $120 we will suffer enough economically to cause a major adjustment in demand.

[errorist]

Now everybody in the bussiness has read trough Peak Oil issue and is familar of things to come. Bye-bye keeping old models alive.

Must buy a roll of high quality tinfoil and some popcorn.

[Twilight]

I voted yes. At the end of last year, I thought the price action would settle down somewhat. In hindsight the oil price had already blasted off vertically and has now set record after record ahead of the difficult time of year. There was room for differences of interpretation then. There is only one direction it is going in Q3. After that, I still think a sharp pullback is possible.

[emersonbiggins]

Superspike started- maybe not, but hoarding - hell yes!

[dohboi]

As I've said elsewhere, we've already been on an exponential curve the last few years, doubling every two years or so. Now we're on track to double in six months (having gone up ~50% in ~three). If unabated this is either a great acceleration of the exponential curve or the beginning of kind of hyperbolic curve, where the period of doubling keeps shrinking.

Either one is pretty damn scary.

I ask the esteemed economists on the thread to please inform us where their vaunted "demand destruction" is? Why hasn't it kicked in to greatly lower prices so far? When do they think it will finally show up?

This is getting to feel like the Samuel Becket absurdist play "Waiting for Godot" where the hapless characters aimlessly wait around for a mysterious character to appear, but he never does.

[mmasters]

No.

[Duende]

dohboi wrote:

I ask the esteemed economists on the thread to please inform us where their vaunted "demand destruction" is? Why hasn't it kicked in to greatly lower prices so far? When do they think it will finally show up?

This is getting to feel like the Samuel Becket absurdist play "Waiting for Godot" where the hapless characters aimlessly wait around for a mysterious character to appear, but he never does.

I was wondering the same thing. If I were to ask anybody last year at this time if the economy could handle $139 oil for any amount of time at all, they would have all said hell no. Yet here we are. Yes demand has been 'destroyed' by 4% in the US, but that's hardly making a dent in business as usual.

How much more demand can be destroyed before economic destruction begins?

[DantesPeak]

dohboi wrote:

I ask the esteemed economists on the thread to please inform us where their vaunted "demand destruction" is? Why hasn't it kicked in to greatly lower prices so far? When do they think it will finally show up?

This is getting to feel like the Samuel Becket absurdist play "Waiting for Godot" where the hapless characters aimlessly wait around for a mysterious character to appear, but he never does.

I was wondering the same thing. If I were to ask anybody last year at this time if the economy could handle $139 oil for any amount of time at all, they would have all said hell no. Yet here we are. Yes demand has been 'destroyed' by 4% in the US, but that's hardly making a dent in business as usual.

How much more demand can be destroyed before economic destruction begins?

The average price in 2007 for imported oil through August 2007 was $60. While the price of diesel/gasoline goes up almost immeadiately due to higher oil prices many other things do not rise in price right away.

Shipping companies hope that oil prices won't stay high and resist raising prices. Service companies can't raise prices frequently. In China, it takes some time to refine oil into plastic, send it to a plant, and ship it across the world to the US.

The intrastate highway system was built with $20 oil.

So I'm saying it takes a long time for oil prices to be fully reflected
in consumer prices. But yes, demand is being destoyed right now, and will be at an accelerating pace through the rest of 2008. Perhaps more importantly, demand is not being destroyed fast enough and discretionary non-energy spending will take a big hit.

The answer to your question then is, no the economy can't handle $139 oil, but right now it thinks oil is about $60 to $70 based upon the current average price of goods and services.

[PenultimateManStanding]

From a consideration of the trends of the past three years and the rate at which the doubling time is decreasing we get the following ( vastly more severe than an exponential function):

Sept 1 $250
Oct 15 $500
Nov 7 $1,000
Nov 17 $2,000
Nov 22 $4,000
Nov 24 $8,000
Nov 25 $16,000
etc.

In other words, it goes hyperinflationary this Fall.

[Jack]

I voted no.

This run appears to be a result of U.S. economic data which caused some to believe (me, among them) that the Fed will not actually work for a strong dollar, but rather will opt for more stimulus.

When the real superspike hits, there won't be any involvement with the value of the dollar.

Not to worry. The superspike will be here soon.

[PenultimateManStanding]

When the real superspike hits, there won't be any involvement with the value of the dollar.

Right, it would seem, based on the inflation data coming in from around the world to be history's first Global Hyperinflationary event. The End Of Money Everywhere At The Same Time.

[DantesPeak]

When the real superspike hits, there won't be any involvement with the value of the dollar.

Right, it would seem, based on the inflation data coming in from around the world to be history's first Global Hyperinflationary event. The End Of Money Everywhere At The Same Time.

Well I'm going off topic on my own thread (somebody stop me!) but the world is going to have a heck of a time adjusting to $140 oil (if that's were it ends up). As I said above, basically we are only now adjusting to $70 oil, and we had two years to gradually do that. Now we are going to double the price in one year. The adjustment this time won't be pretty.

I expect rampant government intervention around the world to smooth the effects - mostly by subsidies and price controls. Even then, many won't be happy as the price of food and energy soars out of sight.

New government subsidies will porbably be paid by fiat money, so yes a vicious inflationary cycle is about to kick off - unless this latest price spike can somehow be deflated.


On another topic, Forbes votes 'yes' - and is calling this a superspike.

Markets Brief
How Crude! Oil Jolts Wall Street
Steve Schaefer, 06.06.08, 4:30 PM ET


Crude had the largest single-day gain on record, spiking $10.15, to settle at a new record $138.54 a barrel.

After closing above $131 for the first time May 28 oil began to dip, going into a holding pattern around $127 before dropping to a $122.30 close Wednesday. Then came an impressive jump to $127.79 Thursday, following hints from the European Central Bank that a rate hike could be on its way, which sent the dollar reeling and foreshadowed Friday's super-spike.

Morgan Stanley (nyse: MS - news - people ) came out with a bullish forecast early Friday, predicting oil will hit $150 a barrel by July 4, and from that point it was off to the races.

Forbes

[PenultimateManStanding]

Well I'm going off topic on my own thread (somebody stop me!)

My contention is that the trends are clear and the superspike is at hand within months. Of course if Deffeyes is right it'll all come crashing down before the trend gets much further. Of course I get your drift (somebody stop me!) but this is all quite on topic.