216 comments on DrumBeat: August 17, 2006
Comments can no longer be added to this story.
Show without comments | PDF version
216 comments on DrumBeat: August 17, 2006
Comments can no longer be added to this story.
Show without comments | PDF version
Search The Oil Drum with Google
Support The Oil Drum
Recently on TOD:World
TOD:Campfire
TOD:Europe
- Peak Gold, Easier to Model than Peak Oil? - Part I
- Carbon Capture and Storage
- Oilwatch Monthly November 2009
TOD:Canada
- In this house, we obey the laws of thermodynamics!
- The Round-Up: October 24, 2008
- Compressed Air Energy Storage - How viable is it?
TOD:Australia/NZ
- International Energy Agency calls 'Peak' on OECD Oil Demand
- Australian Senate: Peak Oil motion defeated 31:6
- The Bullroarer - Friday 20th November 2009
TOD:Net Energy
Blogroll
Energy Sites
- The Coming Global Oil Crisis
- Die Off
- Dry Dipstick
- Energy Bulletin
- From the Wilderness
- Life After the Oil Crash
- Peak Oil Crisis
- Peak Oil News and Message Boards
- Powerswitch
- Rigzone
- Matthew Simmons
- Wolf at the Door
Environment & Sustainability Sites
- The Daily Green
- EcoGeek
- Eco Street
- Green Car Congress
- Green Options
- green.alltop.com
- Gristmill
- RealClimate
- Sustainablog
- Treehugger
- WorldChanging
Blogs
- Casaubon's Book
- Cleantech Blog
- Clusterf
k Nation (Jim Kunstler) - The Cost of Energy
- David Strahan
- Early Warning
- The Energy Blog
- European Tribune
- GraphOilology
- Health After Oil
- jeffvail.net
- Mobjectivist
- Peak Energy (Australia)
- Peak Energy (USA)
- R-Squared
- Resource Insights
Finance & Economics Blogs
- The Big Picture
- Calculated Risk
- The Crash Course
- Ecological Economics
- Econbrowser
- Environmental Economics
- Infectious Greed
- The Mess That Greenspan Made
- Mish's Global Economic Trend Analysis
Organizations
Peak Oil Primers
Beware email scams!
Beware email scams claiming to be from this site. We do not have any job openings. If anyone contacts you about a job at The Oil Drum, do not reply to them, and definitely do not give them any personal information or send them money. Read more here.
“If kindness and comfort are, as I suspect, the results of an energy surplus, then, as the supply contracts, we could be expected to start fighting once again like cats in a sack.”
—George Monbiot
User login
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
Personnel
- Editors: Nate Hagens, Gail the Actuary, Prof. Goose
- DrumBeat Editor: Leanan
- Contributors: ace, Engineer-Poet, Heading Out, jeffvail, JoulesBurn, Sam Foucher, Robert Rapier
- TOD:Campfire: Glenn, Jason Bradford
- TOD:Europe: Chris Vernon, Euan Mearns, Francois Cellier, Jerome a Paris, Luís de Sousa, Rembrandt, Rune Likvern, Ugo Bardi
- TOD:Canada: benk, Libelle
- TOD:ANZ: Big Gav, Phil Hart, aeldric
- Emeritus: Stuart Staniford
- Technician: Super G
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
GAIA Host Collective
Yesterday, The Economist called for the privatization of the national oil companies (NOCs). Let's think about that for a second. Now, aside from the outrageous arrogance of this and despite the fact that The Economist is a One Trick Pony -- what were they going to do, praise state-ownership? -- the bottom line is that the NOCs are guilty. Of what? Not pumping the oil fast enough, not investing enough money to produce more crude for export.
Their position strikes me as insane, the logic of unsustainable growth stretched to its absolute limit.
I wouldn't be surprised to see it happen, despite (or even because of) the stupidity of it.
The government is always short on cash, so there are plans to sell 49% in an IPO.
The debate is if only the trains should be privatized, or the whole company, including railway stations and tracks.
The CEO lobbies that the whole company should be privatized. However, in the last 20 years, about 50 billion dollars have been invested into high-speed tracks and stations by the tax payers. Compared to that number, revenues and profits are tiny.
The CEO and the union think that the 49% of the company should be sold for 2 billion dollars, so that there is a suitable ROI.
I would call that piratization. Hopefully, the parliament is smart to reject such ideas.
That's what the Iraq war is trying to achieve, and the message is that the guzzling superpower should do more of that.
IMO, we are in a temporary period of stability, before another drop in available net oil exports--and another round of bidding for declining exports.
I fail to see how we can expect to see rising net export capacity when the EIA is reporting falling production among the top exporters, and we have concurrent reports of rapidly rising consumption in most of the exporting countries.
Total US petroleum imports are up year over year, but three-fourths of the 2006 weekly import numbers (four week running average) are below the 12/30/05 number, while oil prices have been trading in a range of 15% to 30% higher than late 2005. The two uptrend price cycles this year correspond to import declines. IMO, refiners had to bid the price up to keep the petroleum coming.
Right now, the US, China and Europe are primarily bidding against regions like Africa. Soon, the US, China and Europe will primarily be bidding against each other.
How convenient that this has all happened right before we head into the fall elections...but then again...I am a bit of a conspiracy theorist...so this does not surprise me.
Mix a little terrorism in with some good economic news....perfect for re-election.
Look for surpressed prices until Dec/Jan.
You see this in some of the warmongering discussion of Venezuela -- the fact that they are not producing at a rate that certain industry experts think they ought to be is literally almost used a case for war.
Them bastards aint pumpin' our oil fast enough!!
The WSJ basically makes this argument. The Economist hints at it. It runs very deep in certain schools of political thinking: that all resources really are ours (well, "the market's" -- but same diff in the end), and that means they should be under the control of multi-national corporations (because nobody else can exploit them efficiently).
See, for instance, this video game. It's a low culture manifestation but shows how pervasive this thinking is:
http://www.mercs2.com/
And related story:
Venezuela lawmakers blast video game
CARACAS, Venezuela (AP) -- A U.S. company's video game simulating an invasion of Venezuela is supposed to hit the shelves next year, but it's already raising the ire of lawmakers loyal to President Hugo Chavez.
...
Pandemic describes Mercenaries 2: World in Flames as "an explosive open-world action game" in which "a power-hungry tyrant messes with Venezuela's oil supply, sparking an invasion that turns the country into a war zone." The company says players take on the role of well-armed mercenaries.
...
Lawmaker Gabriela Ramirez said "Mercenaries 2" gives a false vision of Chavez as a tyrant and Venezuela as being on the verge of chaos. She said the game could be banned under a proposed law aimed at protecting Venezuelan children from violent video games.
-----
It will be interesting if oil really spikes and we start looking for someone to blame. That someone will quite likely be Chavez.
"If we had those extra 2m barrels a day this oil shock wouldn't be happening! Let's get 'em!!"
If we invaded Venezuela would Catholic and Protestant militias start fighting each other.
Bush! Stop making enemies!
I can't tell if you're joking or not. I kinda hope so.
Hispanic is a term invented by the US Census so we can be more racist. Latino is more proper and more accurate.
<rant>
And maybe I just don't watch enough Fox and CNN..I have a hard time understanding why bombing civilians and shooting drones is legitimate warfare while fighting foreign invaders with an improvised explosive device set off by a cell phone is terrorism. Terrorism is an inflamatory word, and I resent this use of the term. If you would like to use an inflamitory term, then look in a mirror and use the term "racist".
When you are oppressed you use the available tools.
Probably the most important peak tool.
The standard definitions of inflation and deflation simply rule out something like crossflation, because they refer to the "level of prices". So, if some of the prices go up and some down, and the monetary supply is constant, then the level of prices is constant. So, deflation and inflation cannot happen at the same time.
Crossflation should not be defined as inflation and deflation at the same time.
In our context crossflation might be defined as rising commodity or energy prices and sinking equity prices happening at the same time.
People would need to spend more on energy and food, while their houses and shares lose value. Demand for most other goods would decline, prices of these goods sink. Suppliers of these other goods would lay off staff, some go bankrupt.
Some consumers will be unable to pay the energy bills and will go bankrupt. They lose their houses, but the banks will sit on a pile of foul credits.
That, in the end, could result in banks going bankrupt, and we are back in 1929.
Seems to be an interesting concept.
This is what I've been throwing around in my head for a while now. Im wishy washy when it comes to inflation or deflation, but I lean more towards inflation due to our massive debt. I don't think we're going to declare bankrupcy to the other nations for fear of the unknown, although I would like to see what would happen. So next is inflation to destroy the debt. I could see a mild deflation, followed by inflation as we struggle to service debt.
I think the key to much of this may be housing, specifically the next two years as ARMS reset. Fannie Mae could be the weak link, but again I think the gov't would try it's hardest to prop this up. At some point there is only so much life support that remains effective.
Tate,
Where was the original "nugget"? Would be curious to read it.
If commodity and energy prices are going up, that pretty much assures that we'd be in an inflationary environment. My question is whether you can have rising commodity prices against the backdrop of US economic slowdown, given that we consume about 30% of the world's extracted resources.
The counterargument to an staflationary scenario is: ok, we might have inflation if basic materials and energy start to run and housing at least stabilizes; but if housing continues it's slo-mo implosion, that is simply too big a piece of the economic pie not to seriously affect demand for most commodities. If the US is an anchor to world economy, then global demand has to slow and you'll see easing in commodity pricing, slack labor, along with decreasing asset values (maybe) -- hardly an environment conducive to inflation.
Another factor, is a possibly ongoing erosion in the US$. That would certainly be inflationary. It's tough to game. I wish I had a few supercomputers to run a model...
A steep decline in petroleum production--either for geological or political reasons--would seem to be stagflationary for sure. It would guarentee recession or worse and still drive inflation. I been reading this sight quite a while though, and I haven't seen much to convince me we're facing a steep and immediate decline.
I think we will have monetary inflation - meaning that the supply of money will continue to be increased by the Federal Reserve. In terms of price inflation I think asset prices, ie houses, will fall (deflation) whereas the cost of living will increase (inflation). I don't see these two outcomes as mutually exclusive. We have just come out of a period where assets prices have soared and consumer price inflation has been low - primarilly due to low cost manufacturing in China. We will likely to see that trend reverse.
To keep talking about inflation we've got to agree what it is. Let me point a few things out. Inflation described above is not based on MS increases. Unless there is some mathematical proof that price level increases and MS increases are equal, I dont think they are the same thing necessarily.
I was taught that the FED doesn't "set" FF rates per se, they engage in FOMC and they contract the MS to increase the FF rate. Sounds logical, but that's more difficult than it has to be. For 16 straight meetings the FED increased borrowing rates. Yet the corresponding MS measurements were all rising at the same time as interest rates rising. Is that not a complete contradiction of what I've been taught? If the whole point to raising rates is a reduction in the MS, then why would our MS be increasing in the face of increasing FF rates?
The whole lag time of 18-24 mos is bunk, since the FED instantaneously resets these rates as the NY FED trading desk. So if tomorrow they raise the rates, then that MUST mean they are selling bonds to suck up the cash TODAY, right NOW. So wouldn't next months money measurement correspondingly drop? You would think, but that's not what has been happening.
Wouldn't it be far easier for the FED to just "set" the FF rate at 25bp higher each time without doing anything, but announcing it? I only realized this after my class was finished, so I was unable to quiz my proff. If we stick to using this MS inflation increases, then we're talking about 8% inflation as we speak. Doesn't sound near as good as 3-4%.
http://www.theoildrum.com/?op=search&offset=0&old_count=30&type=comment&topic=&s ection=drumbeat&string=ponzi+scheme&search=Search&count=50"
If you didn't feel like engaging with a question it would have been polite to either ignore it or say so. Your half baked attempts to reference the world - as if your knowledge and opinion is naturally the only correct one - is...well, I'll use "amusing," for now.
You mean to tell me you didn't see the part of my post which read, "too many words too little time." I already told you a day ago I didn't feel like engaging this question, so why throw out some smart ass question unless you wanted a smart ass answer? Oh and where in the five sentences above do I attempt to reference the world?
contects=context
I don't really agree with the idea that capitalism is a ponzi scheme. I think statements like that are trite, but otherwise of no usefull value whatsoever. Capitalism is not a perfect system, and in fact it certainly has a lot of issues, but the roots of the problems we face today are not a result of capitalism, it's a result of our own lack of forethought and planning.
It's like when people say capitalism is bad because people borrow and spend their way into debt. Capitalism allowed them to do that, but it didn't cause them to do that. Blaming a system is just a way of passing the blame along.
Instead of equating inflation/deflation with prices do remember that....
Inflation = expansion of money and credit
Deflation = contraction of money and credit
Here are some sites that make an interesting case for deflation:
http://www.mises.org/fullstory.aspx?control=1583
(a little old but still good)
http://globaleconomicanalysis.blogspot.com/
(he often writes on inflation/deflation and includes peak oil in his analysis, see his Aug 11 article)
Also all his deflation articles are linked here:
http://tinyurl.com/g8od6
http://news.goldseek.com/RickAckerman/1093824441.php
(does the inflation/deflation debate)
http://www.jasmts.com/reports.php?page=econwinter
(ties it to historical Kondratieff periods)
http://www.safehaven.com/
(lots of guest articles, sometimes on inflation/deflation)
I think we are likely to see a sudden sharp correction in asset values, most notably housing. You could call this deflation, but in my mind the gains in recent years were never real and this is simply a correction to more realistic values.
Once that is out of the way then the underlying inflation would start to cut in big time in net energy importing countries. Demand for energy would no doubt fall for a while, but not as far as some might expect, housing and other assets would be cheaper thus allowing a proportion of the public MORE discretionary income... Those sat on negative equity as in the eighties would mostly be allowed to carry on servicing their debts if they could and those that could not would likely become bankrupt for a time later to return [ could be as little as one year now in the UK ] as reborn consumers...
If we really are at peak this will most likely not dampen the demand growth in India, China etc.. to a great degree either and at the same time we might start into decline proper, we will certainly find a decline in net export capacity...
Ironically the rise of inflation will help those caught in negative equity as their debts will shrink in real terms and they too would most likely gain MORE income due to wage inflation...
I could be well off beam here.....??????
The editorial board over at The Economist are smoking some weird shit. I wish I could get my hands on some of it--must be a pretty potent retardation inducer, whatever it is. Seven years ago they had the same lame ass fa-la-la-free-market, supply-side economic fantasy about crude oil--just another commodity! They wrote then that prices would fall to $5 ( http://www.economist.com/displaystory.cfm?story_id=E1_TRRTPT )... They are so on the money! snicker
Yesterday I was going to ask if there had been a discussion of this idiocy here at TOD--I guess it's happeneing now...
What to make of such floating-on-clouds statements like this:
"These companies are certainly sitting on a reassuring amount of oil. Saudi Aramco's proved reserves alone could keep the world supplied for several decades. But it is only exploiting ten of its 80 or so fields, so will be able to pump at the present rate for about 70 years even if it never discovers another drop of oil. In fact, Aramco and other NOCs are likely to find plenty more if they look, since their territory has not been very thoroughly explored. Only 2,000 wildcat wells have ever been dug in the countries around the Gulf, according to Leonardo Maugeri, an Italian oilman, compared with more than 1m wells in the United States." ?
Either they are really right, or really wrong--and from reading this excellent website, one of those choices stands out at as being to obvious to comment.
I suppose it's because not only on every subject, but in every article, they write exactly the same kind of stuff.
We call them "leaders".
Then there are "true believers", fanatics, zealots, devotees of the echo chamber, they hear only the sound of their own voice and can see only what they choose to, their minds are closed. When presented with evidence to the contrary, they shut down, a mental or emotional defensive strategy, or simply chant the same mantra louder. They are either brainwashed, ideologs, or just plain ignorant.
Then there are those who are paid to act as soothesayers (in the traditional meaning of the term, that is to say things that soothe), these run the gamut from fawning sycophants and hired henchmen to think tanks, focus groups, and paid 'experts'.
Which do you think applies to editorial board of "The Economist" and their ilk?
It is just as you perceive it, despite their ever-shriller claims to the contrary.
No, it's not a first. Commodities flucutate wildly and the fluctuations have very little, if anything at all, to do with, "news." The fluctuations also have very little, if anything at all, to do with, "supply and demand." The only impact, "supply and demand" might have on the price of oil (although it's almost painful for me to admit that it has any impact at all) is a kind of "supply and demand fear premium," which represents the fear some traders have that, at some point in the future, demand might actually reach supply (supply being, "supply capacity," as reported by CERA, which is true supply, not the supply charted by Stuart Staniford, which is actually just demand) at which point supply and demand WOULD determine prices, sending them through the roof.
Current oil prices are determined by speculation, along with a range of, "premiums," the, "Iraq premium," the, "Iran premium," the, "hurricane premium," etc., etc. There might also even be a, "Mathew Simmons premium," or, "peak oil premium," although minimal, which represents traders' fears of future geology-induced falls in oil production. There is also the, "booming global economy premium," having to do with increased global demand. The thing about all these premiums, though, is that they are just guesswork. Oil futures are priced based on what these premiums should be worth at some point in the future. No one knows this for sure, which leads to the premiums constantly being readjusted up and down, which creates up and down movements in commodities prices. Supply and demand, since supply always outstrips demand, given the spare capacity in places like Saudi Arabia, plays no direct role, other than the, "supply and demand fear premium," mentioned above. There has yet to be a person/entity who went out looking to buy a barrel of oil and couldn't find anyone to sell him one. As, "peak oilers," I would presume that you would expect the, "supply and demand fear premium," to get larger and larger until, at some point in the future, it is the main driver of oil prices. Personally, I don't think this has happened yet, since oil prices have basically mirrored the price rises in other commodities over the past few years, none of which are, "peaking," leading me to conclude that oil is still behaving as, "just another commodity." In other words, I believe that the , "supply and demand fear premium," is still minimal, and we can expect oil prices to flucutate both up and DOWN, sometimes significantly so, just as they have always done in the past.
As I have stated before, I believe we are seeing the beginning of a major, DOWN flucuation right now. A high level of complacency has created a very dangerous situation in commodities markets. Most market participants are still clinging to the belief that the recent, almost 10% pullback in oil prices, from the high of over $78 a barrel, is a very temporary phenomenon which will soon reverse itself. People aren't scared at all. No one is panicking. In fact, the opposite is true, since people are so convinced that this is all temporary and overdone, and that, very soon, we will see $80, $90, or even $100 a barrel oil. This type of complacency in the face of declining prices is typical of downward corrections. Expect to see a series of lower lows in commodities prices over the course of the next few months. At each of the lower lows, partipants will be more than eager to jump back in, claiming that, "the decline is over now," and that we will soon be witnessing new record highs. A small bounce will follow, seemingly proving them right, but then, soon enough, a new lower low will be made. The pattern will repeat itself several times. At each new lower low, there will be very little fear in the markets. This lack of fear will be the proof that the correction isn't done yet. Finally, we will experience a collapse, at which point fear will suddenly rise. At the bottom, expect most people to be claiming that, "commodities still have a long way to fall." This will be the buy signal.
As I said before, I fully realize that some of the most dangerous words in the English language are "It's different this time," but the world has never been at the 50% of Qt mark before, based on HL work, although regions, such as the Lower 48 have.
I am not a perma-bull. In late 1990 and early 1991, I argued vociferously that we should hedge against a fall in oil prices. My point was that there was plenty of capacity and that as soon as the US launched the air campaign, it would become apparent that Iraq was not a threat to world oil supplies, and prices would fall. Oil prices in late 1990 were a clear example of oil prices not being supported by fundamentals--but again, I recognized that. My partner at the time and I were in the process of trying to secure some hedge positions when the air campaign started, and oil prices, as I predicted, fell.
I seen nothing remotely like the 1990/1991 situation in world oil markets. Instead, what I see is falling world oil production and falling production in the oil exporting countries. Let's see, falling oil production against rising oil prices. Where have we seen that before? Oh yes. The Lower 48, when it crossed the 50% of Qt mark.
You said, "There has yet to be a person/entity who went out looking to buy a barrel of oil and couldn't find anyone to sell him one." However, in poorer regions, we have seen multiple examples of countries having to reduce consumption, because of high oil prices.
Soon, it will be the US, China and Europe bidding against each other for exports, and not just against regions like Africa.
Finally, as I said before, it it weren't for the HL analysis, I would agree with you and I would be selling oil contracts and virtually all energy assets, based on some of the crazy things that have been reported. But the world has never been at the 50% mark before.
Oil is not "just another commodity" and in general commodities are not some abstractions that people just bid on. They have intrisinic(sp?) value and people pay for them because they need them. I agree that your scenario may very well happen for the short term, driven by the well known market herd mentality, but the medium to long term trend is just one - up. There are several undeniable facts to make sure this is the case:
- World spare capacity is almost gone. No significant growth is expected in the medium term, quite the opposite actually
- People need (or want to) consume more.
Combine 1) and 2) and you get higher prices in future, irrespective of what the short term fluctuations may be. Personally I have a small investment in gold&silver mostly as an inflation hedge. It wouldn't bother me a lot if gold goes to $500 in the next 6 months, as long as I have placed my bets on a long-term rise.I agree with you, although, eventually, even that trend will run its course.
I look forward to the mid-November day when I can join other TODers in being bullish on oil prices, my only fear, and sometimes I wake up at night in a cold sweat, thinking about this, is that, by that point, everyone else will have turned bearish.
Just think about the October/November headlines that we will be reading:
"China Demand Waning"
"Is Recession Inevitable?"
"Did the Fed go too far?"
"Iran Reaches Deal with Russia and China on Uranium Enrichment"
"Treasuries Continue to Rise"
"Nasdaq Breaks Below 1700"
"Flight to Safety Lifts Dollar"
"Oil Production at Record Highs"
"Oil Demand Seen Lower on Warm Winter"
Normally, by the time a market bottoms, sentiment has become so bleak that most people are predicting a further collapse, and they miss out.
Funny you should say that...
Lower 48 peaked at about 50% of Qt.
Russia peaked at a broad plateau, centered on 50% of Qt.
The North Sea peaked at about 50% of Qt.
The world is at about 50% of Qt, and production, as predicted, is down.
We now have credible reports that all four of the world's largest producing oil fields are declining, and the EIA is showing that eight of the top 10 net oil exporters are showing production declines since late 2005--while oil prices are up by 15% to 30% since late 2005. Falling oil production and rising oil prices--see the Lower 48/Texas case history.
What part of this is difficult to understand? Find me a case history where a region has shown rising oil production when its four largest producing fields were all declining.
If Mexico's oil production keeps on its downward spiral, the market will discount it against new supplies arriving. I looked at OPEC's oil production figures, and it is amazing how many downward corrections have occurred in previous years figures, in this and previous issues. Current OPEC forecasts are predicting increased oil production for Norway and Mexico in 4Q 2006 and 2007 rather than falls, as experience should be telling them, just to keep yearly figures from being so pessimistic.
It surprises me that the oil market believes OPEC production forecasts (in that it moves the market to a certain extent). So long as more oil comes onto the market this year than last year, the oil futures will discount peak oil. It is just that OPEC figures obscure how little is actually arriving each year. They predict 1.3 Mbpd at the begining of each year of non OPEC oil but are now getting 0.2 Mbpd when the final figures are totted up the following year. OPEC seem to be using every trick in the book to hide the very small yearly increases from non OPEC sources and the oil market seems to believe OPEC. OPEC oil production and spare capacity are deliberately opaque, so I believe they are pumping at near capacity to maximise profits at $70+ per barrel. As their production is hovering around the 30 Mbpd figure, I take it that must be about their maximum figure. So increased oil production each year is very small and more strain is going to have to be taken by OPEC.
... yeah right. In fact, Nigeria would just whizz back up to full production, except they just can't find any clients for their oil. This must be true, because Yergin includes it in his supply capacity numbers. Likewise, insurgents will stop blowing up pipelines in Iraq, if only the clients were there.
mmmm right! This requires nothing less than a religious faith that SA has this spare capacity they claim to have. However, they are scrambling for drilling rigs in order to offset production decline, and they haven't got the number of rigs they claimed to need to meet their targets... yet you and Yergin still take their original numbers...
... on faith.
Luckily, their bluff doesn't get called, since some buyers have been priced out of the market.
You may be familiar with a gentlemen named Richard Rainwater. He turned every dollar that the Bass Brothers inherited into $100. He has a certain reputation for accurate predictions. Enclosed is an excerpt from a December, 2005 Fortune Magazine article on him. BTW, I hadn't made the connection before, but world oil producton has been falling since this article came out.
http://www.energybulletin.net/11695.html
Excerpt from "The Rainwate Prophecy"
"This (Peak Oil) is a nonrecurring event," he (Rainwater) says. "The 100-year flood in Houston real estate was one, the ability to buy oil and gas really cheap was another, and now there's the opportunity to do something based on a shortage of natural resources. Can you make money? Well, yeah. One way is to just stay long domestic oil. But there may be something more important than making money. This is the first scenario I've seen where I question the survivability of mankind. I don't want the world to wake up one day and say, 'How come some doofus billionaire in Texas made all this money by being aware of this, and why didn't someone tell us?'"
I feel oil is bound to eventually perform a new trick, as you recognize. Nobody ever ran out of tulips!
Here is a question- do you think if the market knew the true state of our oil reserves - say that they would peak in 2010 - that the price would rapidly adjust?
I'm working on a theory that the oil markets are underinformed and therefore aren't accurately pricing oil.
Thanks
Ben