<A Thought for Today: "Losing Faith in Peak Oil's Transformative Power"The Oil DrumDrumBeat: September 18, 2006>

161 comments on Whither Oil Prices?

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step back on September 15, 2006 - 8:49pm Permalink | Subthread | Parent | Comments top
Excellent, excellent point !

"Dollars" are just a noise that we humans make and that Mother Nature pays no heed to. We can crunch the dollar numbers to any unbounded value we choose. It is not absurd to talk about a googleplex of dollars as reported within the depths of some bank's computer whereas one could not rationally do the same thing for barrels of sweet crude. The physical world is bounded. Human hubris is not.

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Sunspot on September 16, 2006 - 9:28am Permalink | Subthread | Parent | Comments top
My favorite point is: Energy is real, money is fictional.

If printing more money really works, then let's just do this:  we'll design a nice, new $1 billion bill.  Then we'll print up 6.5 billion of them and give one to every person on the planet.  Then everyone will be rich!!

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raymond on September 16, 2006 - 11:23am Permalink | Subthread | Parent | Comments top
the real thing

It is meaningless to say that money is fictional. Are numbers not real?

It would be more accurate to say that that money and energy represent different dimensions, one physical (the world of things, processes and 3 dimensional space), one  mental (the world where things and 3d space is represented). These distinct dimensions are not seperate - but they intersect in known and mysterious ways.

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step back on September 16, 2006 - 12:47pm Permalink | Subthread | Parent | Comments top
Money represents a promise.

But then again, humans lie. :-)

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DieOff on September 17, 2006 - 3:13am Permalink | Subthread | Parent | Comments top
Ok... how about a chart of Oil in terms of real value... Gold. It presents an alternative view. Check out a 10 year chart here: Chart of Oil priced in Gold
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Nate Hagens on September 17, 2006 - 2:11pm Permalink | Subthread | Parent | Comments top
One of the points being, since gold has recently sold off more than oil, oil in terms of gold bottomed 10 days ago and is not far from all time highs. Double barreled bad news for those who are long gold and oil. Im still uncertain what peak oil will mean for gold prices - I can see both sides of the argument. Now, chicken prices, that I am sure of.
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Calorie on September 17, 2006 - 9:17pm Permalink | Subthread | Parent | Comments top
Here's one that goes back to 1971:

It's from the Forbes article on Michael Lynch:

http://www.forbes.com/home/forbes/2006/1002/098.html

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Bubba on September 16, 2006 - 9:35am Permalink | Subthread | Parent | Comments top
Although this discussion about near-term pricing is a fun distraction, it has very little to do with Peak Oil.   The fact of the matter is that oil production has ceased increasing for over a year now (which Stuart regularly reminds us of), regardless of a continuous and huge run up in prices over the last five years.  Prices are going down presently, not because there is more supply, but because demand growth has ceased, and demand for the marginal barrel cannot, at the current point in time, stand a $77 price.  

Peak oil is about production capacity, and production capacity is extremely insensitive to short term pricing.  The Gulf of Mexico Lower Tertiary Play will not start producing oil before 2009 if oil is $35/bbl or $135/bbl.  The same is true for almost all of the projects on Chris Skrebowski's Mega-projects list.  Most of those projects were justified on oil forecasts considerably less than $40/bbl and they will go forward in all cases, absent a worldwide economic contraction.

To be honest, most of the major oil companies would be happy for oil to move back to $50/bbl (or even $40/bbl) and stay there.  Such a scenario takes them out of the political spotlight, it puts downward pressure on the cost of services and supplies, and it takes power and money out of the holders of the resources (governments of nation states) and puts it back in the hands of those who have the capability to extract the resource.

Sometimes it seems that we are watching the daily fluctuations of temperature in NYC and trying to make statements about global warming.

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Halfin on September 16, 2006 - 12:39pm Permalink | Subthread | Parent | Comments top
Oil production and oil consumption are inherently equal, to within a couple percent. So when you say oil production has not increased, you can just as easily interpret that as that oil consumption has not increased. And that's not so hard to understand, in view of what you describe, "a continuous and huge run up in prices over the last five years".
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westexas on September 16, 2006 - 12:59pm Permalink | Subthread | Parent | Comments top
An interesting note regarding consumption

http://www.forbes.com/business/feeds/afx/2006/09/15/afx3019146.html

BEIJING (XFN-ASIA) - China imported 95.8 mln tons of crude oil in the first eight months, up 15.3 pct year-on-year, with 11.82 mln tons in August alone, the General Administration of Customs said in a statement.

The imports of oil products rose 25.7 pct year-on-year to 25.75 mln tons from January to August, with 3.78 mln tons in August.

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gtjeffers on September 17, 2006 - 9:49am Permalink | Subthread | Parent | Comments top
Excellant point about the marginal barrel unable to command  $77 at the moment.  In this post, we are discussing current oil trading prices, not Peak Oil.  Prices today reflect the desire of market particpants - not environmentalists, doomsters, politicians...

I have worked on Wall Street for nearly 20 years.  A former boss once said:
"a - fill in the blank with stock, bond, commodity - will keep going up till it stops going up, and it will keep going down until it stops going down".  And "they always go up farther than you thought possible, and down farther than you thought possible".  If do not trade for a living, this statements might seem simplistically obvious.  When you have a great deal of money on the line... they can eat a hole in your stomach.

At the moment the short term trend is down, even though we had a couple of days of pause.  As a trader, I would not reach for the falling knife, so i must believe that prices are headed lower.  Prognosticating a price point of the bottom?  Ha! These are always made by economists who do not a penny of their own money in the game.  

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Don in Colorado on September 18, 2006 - 2:27am Permalink | Subthread | Parent | Comments top
I don't know how you guys do this kind of thing for a living. It's insane.

All these people who put their life saving into speculative houses over the last couple of years. Reading the headlines today must be a nightmare for them.

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gtjeffers on September 18, 2006 - 9:07pm Permalink | Subthread | Parent | Comments top
Can anyone tell me why I keep reading posts that Oil prices are down becasue of
"massive imports"?  I reviewed the import data (for the U.S.) at the EIA website and the "massive imports" are actually down, year oover year for the first 6 months of 2006 from 2005.  If I am missing something please let me know. Any help would be appreciated
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Jack on September 19, 2006 - 5:33am Permalink | Subthread | Parent | Comments top
Where are you reading that? Oil prices can't, even in theory, be down because of massive imports. Gasoline prices could, in theory, be down because of massive imports of oil, but as you noted that is not the case. Oil prices could be down because of massive exports, but that is not the case either.

My feeling is that oil prices are down on a combination of expectations of lower demand (partially because of lower economic growth expectations) and reduction in the role of financial intermediaries/risk premium. Could all change soon, who knows.

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gtjeffers on September 19, 2006 - 6:03am Permalink | Subthread | Parent | Comments top
Thanks for the reply.

Of course world Oil prices should not be down because of US imorts, unless of course, the tanker inventory world wide can't find a home... but that is the line coming from a number of Oil market analysts and advisors... US inventories have only 3 components (when you lump crude, distillate, and gasoline together) domestic production, imports, and consumption.  Production is down, imorts are down, consumption is... down?  Must be if inventories are up year over year

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