[Arthur75]

To continually get suckered into "this is the big one!" mentality on the crest of every peak of the sin wave is Boy Who Cried Wolf at its worst.

I think it is recognized that with respect to commodities, small variation in demand can greatly influence price, so the demand destruction occuring past July 2008 didn't need to be that big for the price to tank, and don't see how it is boy crying wolf, it is more a verificatin of the current oscillation principles :

1) Price and production increasing with a more or less recovering economy
2) Pricing increase getting into third gear as demand/supply tension gets higher on real geological production constraints
3) Some demand destruction release the current prod constraint vis à vis the market and the price tank

I don't deny the fact that speculation has some effect on the price especially near the spikes, but don't thing it is in any way major.
And on the other hand, the "it is because of the speculators that price is going up" meme, is an easy way out to avoid the real PO constraints.

In fact there is this guy Paul Jorion who adheres a lot to the "speculators fault theory" (and who got quite famous (in France) by accurately forecasting 2008 crash) is promoting a rule forbidding speculation (futures trading) by people not directly involved in the commercial market.
I think this would probably be a good rule (somehow the Chinese also moving this way), but a t the same time I wouldn't expect much from it regarding the resulting price.

[mos6507]

demand destruction occuring past July 2008 didn't need to be that big for the price to tank

How about profit taking rather than just demand destruction?

And on the other hand, the "it is because of the speculators that price is going up" meme, is an easy way out to avoid the real PO constraints.

Well, yes, I don't think it should be used as an excuse not to face peak oil. But you have to strike the middle-ground somewhere between what Matt Simmons was saying in 2008, that we'd hit $300/bbl and stay there, and the Shorty approach of don't worry be happy.

Instead, the tone of the debate during oil runups here tends to continually follow the track of "FASTEN YOUR SEAT BELTS!!! HERE COMES TOECUTTER AND HIS GANG OF MUTANT ZOMBIE BIKERS!!! THIS IS THE BIG ONE BOYS!!!" only for us to look like idiots when there is a correction.

There is a clear upwards trajectory on averaged prices, but it isn't the superspike->TEOTWAWKI phenomenon that people thought it would be pre-2008. Not yet at least.

[mos6507]

I choose to a more conventional economic theory: supply/demand are in balance as they always have been and price reflects the truth.

And you're wrong, like when oil dropped to $30 a barrel in the fall of 2008, it overshot to a low-point. In a post-peak world, no less!! That's not snarkiness. That's a fact. The oscillations of speculators distort what the price would be if it were merely a signal of supply and demand. Only in a place like this can such a supposition be seen as unreasonable.

I could easily draw you a chart to average out all these fluctuations and show how oil has been on a steady (but not apocalyptic) march upwards. THAT is what people should looking at. Not these temporary spikes caused by above-ground factors, fear, and profiteering.

I am the one who has counciled restraint for years at PO.

First off, you haven't posted much recently, and most of your responses of late are ad hom-ish dismissals, not debates.

Look up my old old posts. I am a mature adult educated and well read, studied in all aspects of oil decline. It is here. Sorry. You are pretty bright also. But our essential difference is this: I have the luxuary of clear thinking, ensconsed safely behind the Redwood Curtain. You are trapped with 150 million others in the Eastern Seaboard Megalopolis. If I were you I'd fix that situation (get the f#ck out) and stop trying so desperately to lecture others to allay your own fears.

This whole subtext of you snickering that I'm doomed and you are sitting pretty behind the redwoods is YOUR bias, not mine. I have no problem with the idea of overshoot, die-off, or cities being future death-traps. Anybody who has read my posts will know I'm no corny. So review your reading comprehension skills. The fact that I am not cowering in a bunker or wearing a hair-shirt should not cause people to second guess my intellectualizing of the data. I'm perfectly capable of coming to doomy conclusions even if it makes my survival odds look worse. I'm good at disassociating that way.

I am like the guy in Star Wars who said "stay on target". I am not jumping the gun on "calling" doom on every price-spike the way so many people do, that's all. I can see it fast approaching, but it's not there yet. Even if this thing causes a double-dip, I will blame it in large part to speculators and above-ground, NOT geology. This need to frame things solely in terms of geologic depletion is a much too simplistic way of looking at things. 3 years after the credit crisis, we should know better. There are more moving parts to this.

Some people just can't escape their tunnel vision.

[Pops]

To be perfectly honest, since about '07 and certainly within a couple of years of the '08 spike, I half expected (hoped I guess) the economists were right and higher priced oil would bring on a glut exactly like that of the '80s or the current frackin gas glut. But aside from Cushing that hasn't happened, and when the pipelines from Montana and Alberta connect to the oceans, the Cushing glut will end too.

We aren't at decline of total liquids yet but I think we had better be practicing for that day because the stocks built up post 08 are dwindling. Like I said in another thread and I've never said before: this is peak oil for all intents – it looks and walks just like the duck everyone pictured. If demand slows gently this time, pulls back just a speck without tanking the economy again, we'll be pumping right at max flow - pedal to the metal, baby. Who knows, we might even add a few barrels a day if the price stays around $100.


Don't be fooled though, that isn't stage fog you see, it's the water in your pot starting to boil.

[sjn]

mos, there will always appear to be various proximate causes for the latest crash, but you seem to be unwilling to entertain the concept that surplus available energy is required for productive economic growth. When it isn't available it's quite possible to have financial growth, it would seem to show up initialally as mal-investment bubbles such as Mortgage Backed Securities and equities where speculative mania creates phantom ponzi style investiment opportunities. But eventually and necessarily the financial capital gets redirected to maintaining the economic system itself by bidding up oil in order to maintain the required energy flow rates through the real ecomomy, thus undermining the various ponzi schemes, the resulting deflation drags down productive activities along the way.

[Pops]

Obviously the incline of the line is dependent on the proportions of the chart but it looks pretty steep to me...



Those are just eyeballed trend lines btw...

[Plantagenet]

Bank of America just advised their clients to buy oil and other commodities with a chance at an upside target on Brent crude of $160/barrel later on this year.

B of A sees oil up to $160/barrel oil in 2011

Haven't we seen this all before? LIke in 2008? And it didn't end well either.................

[americandream]

Bank of America just advised their clients to buy oil and other commodities with a chance at an upside target on Brent crude of $160/barrel later on this year.

B of A sees oil up to $160/barrel oil in 2011

Haven't we seen this all before? LIke in 2008? And it didn't end well either.................

2008 was exceptional given that the market was overrun with hedge funds holding positions in oil, many of whom had to cash in those holdings in a bid to stem the collapse in their property portfolios. That in turn set off an avalanche of stops. We are essentially returning back to the fundamentals that drove the earlier rise.

Prepare yourselves for a future of very expensive energy. Those who of course still believe that this is all down to speculators will be the wiser in a year or two.

[kmann]

hey mos, you can lead a peakoiler to facts, but you can't make him think.

[americandream]

Apart from Skinner and others who appear to be unsure as to whether we need to cycle or buy a Hummer, it looks to me like Mos and others like him and pstarr and his particular band, are agreed that the trend is upwards. The disagreement is largely whether oscillations within that upward climb will include opportunistic speculators who will both ride the ups and downs (and engineer volatilities within that upward trend to some degree by covertly storing product). Hardly worth falling out over I reckon as we all agree that oil price is on the up and up. The disagreement is a timing one, which I think we can all agree, is always likely to be subjective rather than objective until there is clear evidence that inventories are failing and contrived shortages cannot be the cause.

[sjn]

The disagreement is a timing one, which I think we can all agree, is always likely to be subjective rather than objective until there is clear evidence that inventories are failing and contrived shortages cannot be the cause.

Contrived shortages can always be the proximate cause, afterall if the market is allowed to set prices according to supply/demand there can not be shortages! What there will be is lower levels of economic activity outside the energy complex. IMHO this is the root of the disagreement, whether a market mechanism can transparently price in decline (resulting in systemic stress) or whether it will conviniently show up as gas lines and acute shortages which then nobody could deny.

[americandream]

The disagreement is a timing one, which I think we can all agree, is always likely to be subjective rather than objective until there is clear evidence that inventories are failing and contrived shortages cannot be the cause.

Contrived shortages can always be the proximate cause, afterall if the market is allowed to set prices according to supply/demand there can not be shortages! What there will be is lower levels of economic activity outside the energy complex. IMHO this is the root of the disagreement, whether a market mechanism can transparently price in decline (resulting in systemic stress) or whether it will conviniently show up as gas lines and acute shortages which then nobody could deny.

Thats not quite right. Bearing in mind that capitalism's ideal state is risk sustaining annual growth, any energy function which causes it to abandon risk in preference for security can be reasonably be characterised as a shortfall of optimum energy essential for that necessary annual growth percentage (whatever it is) and so to that extent, the market's energy status must determine its efficiency. Of course, the fact that this shows up as declining demand does not alter the fact that the market is in less than optimum state, in other words, is in shortage, and must ultimately defeat the sole object for its existence, the accumulation of surplus, thereby placing it at an increasing risk of liquidity seepage, the onset of greater regulatory and fiscal intervention, nationalisation and finally, the rise of socialised exchange (communism).

As regards oscillations (proximate shorter term sub-trends) within the larger trend, whether these fall to be contrived for whatever reason, to the extent that they do not impact on the larger trend, they remain oscillations and in effect, market noise.

[mos6507]

James Hamilton (by way of Dave Cohen at Theoildrum Link) explains how prices react when scarcity of a resource occurs:

So you have a pretty graph. I can draw graphs too. It doesn't prove anything. I like TOD, but they don't have it all figured out.

-How can short/long future contracts, settled at delivery

You're starting to sound like a global warming denier. Follow some of the links I've sent your way over the last 3 years. I'm not going to serve this to you on a silver platter. If you don't get it, and you don't, then you never will.

You attack me. I respond in kind. Plus I have given you free counseling. You should be thankful.

I've been a doomer long enough that I don't need counseling, thank you very much.

I am me, pstarr. respond to my points or STFU.

Now you're just being a belligerent jerk who is looking for drama. That's an observation, btw, not an ad hom.

[Pops]

Speculators run up the price of futures
Producers see profit in postponing sales
They postpone sales
Supply is less than it would have been
Spot price rises.

Cattle producers (people I talk to in the real world) are doing exactly that so it's hard to deny it doesn't happen. Feeder prices today are at a record (nominal) level.

Of course the reason the market in in the condition it's in is ethanol ran up feed costs '05-'08 so breeders simply sold out and now the calf crop is too small. That makes calves a good analogy for speculation on top of shortage.

Barchart 25 year feeder chart

[Pops]

Petroleum sales can not be postponed. Petroleum does not enter different markets. It moves from well-pipeline-refinery.

What are you talking about, of course oil productioon can be postponed - that's silly, you simply shut off the pump or close the valve or divert to storage or put it on a slow boat. Just like a cow calf guy can keep his calves till he thinks the market is right, no difference.

You're joking, right?