The Oil Drum

89 comments on HO v. Econbrowser: Title Fight...Round 20! (and another open thread)

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Dave Cohen on April 29, 2006 - 10:20am

Today's NY Times has an interesting piece on the front page Trading Frenzy Adding to Rise in Price of Oil. I was particularly struck by the huge influx of money, much of it from hedge funds, pouring into the market. But this happy juxtaposition made me laugh.

According to Cambridge Energy Research Associates, an energy consulting firm owned by IHS, Iraq is 900,000 barrels a day below its prewar output; Nigeria has shut 530,000 barrels a day; Venezuela is still 400,000 barrels below its prestrike production; and the Gulf of Mexico remains down by 330,000 barrels a day. In all, this amounts to more than two million barrels of disrupted oil, Cambridge Energy estimates....
"It is the case," complained BP's chief executive, Lord Browne, "that the price of oil has gone up while nothing has changed physically."

When somebody blows up a pipeline in Iraq or Nigeria, or a hurricane blows through the GOM, I (perhaps naively from Browne's point of view) consider that to be a physical change...

But of course when the world is pumping between 84 and 85/mbpd of liquids (boe), then I think that's a physical change too. That much oil has just disappeared from the ground, never to be seen ever again...

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Charles Mackay on April 29, 2006 - 1:57pm

The title of this article may be somewhat misleading. After a careful read of this article, you may come to the conclusion that the 'trading frenzy' may also have to do with hedge funds expecting oil prices to drop. Recent business news articles, and even various opinions voiced on business news shows, indicates traders may be expecting prices to decline - and, if anything - are pushing prices lower.

Sure there are some like Pickens and Simmons who see a steady and relentlessly higher market price for oil. However I suspect most traders actually expect oil prices to fall, if only because they are at the highest by historical experience. This goes against the myth of the evil trader who is only working to raise oil prices for his/her own benefit.

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tochigi on April 30, 2006 - 10:13am

Lordy (oh lordy!) Browne has an extensive track record as a pathalogical liar.
Google some of his bare-faced public pronouncements over the last couple of years to get a taste.