The Oil Drum

It should have read 119 thousand barrels per day below 2005 production.

Sorry for the brain lapse.

Ron Patterson

All this wild optimism leaves me puzzled. It seems to be like a meme, a contagious idea that has infected the mind of almost everyone in the investment world. And I keep wondering; how long before this meme leads them to disaster.

You really hit the nail on the head there Ron. This is irrational exuberance at its most extreme and it certainly is contagious. The level of complacency out there now is absolutely staggering, as that level of manic optimism makes people fearless - it makes them discount, or ignore entirely, the obvious risks they are facing. However, a consensus that extreme is ususally indicative of a trend reaching exhaustion. If everyone is bullish and has acted (ie placed their bets) accordingly, who is there left to buy into the upward trend in order to sustain it?

When the greatest speculative fool has already committed himself, then the trend will reverse, and will probably do so sharply. As the reversal picks up speed (as it will because fear is a much sharper emotion than hope or greed and therefore spreads much more quickly), the downturn will begin to feed on itself just as the upswing has done. IMO we are very close to the point of reversal, although the prevailing optimism makes such a forecast seem incredible at this point.

This plateau continues to impact those at the very lowest economic levels in ways not apparent. Who can blame Darfur or Iraq on declining discoveries? Who can blame global warming on this same pre-peak irrational exhuberance?

As the old firesign Theater used to say,

Don't panic,  Don't take off your shoes !

At the end of each of these feeds they have a little "lighter side" type story that's supposed to get you all feelin' good before you encounter the rush hour hell...

Well today's funny story was about (paraphrasing) - Motor Trend's SUV of the year goes to Mercedes Benz GL450 - it may be a gas guzzler V-8 but it'll get you around in style blah blah blah with 335 horsies etc etc...

All that got out of me was nervous laughter - not quite the gee whiz chuckle and Neanderthal drooling of their target audience I suppose...

Oh by the way - if you're looking for one they're only about $55k

"Japan is the world's largest LNG importer, purchasing 58 million tons of LNG from abroad in 2005, of which 25% was from Indonesia...Indonesia is poised to cut in half its Japan-bound exports of gas when long-term contracts expire in 2010 to boost the availability of natural gas for domestic industries amid decreasing natural-gas production at home."

"..After days of hectic haggling, Japan's Inpex Corp, a core firm of Inpex Holdings Inc, and National Iranian Oil Co reached a basic agreement early this month on a major cut in the largest Japanese oil and gas developer's stake in the oilfield, in southwestern Iran, to 10% from 75%."

"..In yet another blow to Japan's energy security, exports of natural gas from Sakhalin-1 could all go to China. ExxonMobil, which holds the right to decide which parties receive natural-gas exports, reportedly concluded this month a provisional contract with China's state-run China National Petroleum Corp (CNPC) on the import via a pipeline of about 6 million tons (in liquefied conversion) of natural gas to be produced at Sakhalin-1."

"..Not so long ago, it was thought that Japan's trump card in the ongoing negotiations was its ability to develop the rich resources of the Russian Far East. However, what the Japanese government officials have long taken for granted as a negotiating chip - Japan's economic power - seems to have lost much of its luster, at least in the eyes of Russian leaders. For Russia, the strategic significance of Japan has declined. "