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DrumBeat: January 11, 2007
Posted by threadbot on January 11, 2007 - 10:05am
Topic: Miscellaneous
Saudis Adjust Long-Term Oil Strategy
Saudi Arabia's growing fear of Iranian hegemony in the Middle East may be driving the world's largest crude oil exporter to prepare a more aggressive long-term political oil strategy that could subvert an Iranian ascendancy, insiders and analysts say.Under a new, accelerated production program, the kingdom could increase its spare oil drilling capacity to at least 3 million barrels a day
Nathan Lewis: The Ultimate "Contrarian" Investment for 2007 - Be Prepared
What I am talking about could be summed up as: the lights go out and don't come back on again. Foreign oil shipments stop, or are blocked. Maybe freight shipments of goods from China and elsewhere become impossible. Maybe food is no longer delivered to the supermarket. In short, an economic breakdown something like what happened to the Soviet Union, but possibly on a worldwide scale. In such case, there will be no rescue because there will be nobody to do the rescuing.(Original source: The Daily Reckoning.) Lewis is a supply-side economist who writes investing articles for FT, WSJ, etc. At least, he used to be.
Swiss Re Global Risks 2007 Report Highlights Increasing Threats
Swiss Re's newly issued "Global Risks 2007" report highlights "a growing disconnect between the power of global risks to cause major systemic disruption, and our ability to mitigate them."Among the risks: an oil shock, and climate change. Full report can be read here (PDF)
Tom Whipple - The Peak Oil Crisis: A Memorandum for the Board
Estimate of the World's Oil Reserves
Mr. Zysk appears to have done a fair amount of research, and if true, give the most frightening scenario yet on the amount of time we have to use fossil fuels. He also makes some very pointed observations on the fundamental Christian concept of Jesus saving the earth and the coming rapture which he believes that our present government pins it's final hopes on after we have exhausted the worlds last fossil fuels that we "steal" from the rest of the world. Believe me when I say that his conclusions actually make sense when you look at the world from his standpoint. I am going to reprint his chapter on the estimates on the world's oil reserves. I would also recommend that you check out his web site where I'm sure you will find some very interesting concepts and correspondence.
Zimbabwean inflation hits 1,281%
Domestic energy, gas and other fuel costs were behind the rise, the Central Statistics Office said.
Analysis: India deregulates coal sector
NEW DELHI -- India has decided to deregulate its coal industry to encourage private investment and solve the coal production problem, which is not keeping pace with country's rising energy demands.
Experiment With Biofuel Production in Senegal Raises Concerns
A Senegalese experiment with biofuel production will start within the coming weeks, as part of President Wade's plan to reduce oil imports and to revive the rural economy. Where biofuel supporters see a green solution to their growing energy crisis, critics worry about the problematic - and possibly dangerous - tradeoffs in the rush to exploit environmental cash crops.
Albania: Mjaft! Protests the Energy Crisis
Yesterday Mjaft! Movement protested against the nation’s ongoing energy crisis in front of the Prime Minister’s Office. Mjaft! proposed the inauguration of a new Prime Minister for Albania – Pinocchio - as well as the introduction of a new emblem for the Council of Ministers - a picture of a generator, torch and candle to replace the eagle.
Stratfor - The Belarusian Crisis: An Opportunity for Germany
European Commission tackles energy crisis
Brussels plans to wean itself off oil imports and slash the carbon emissions blamed for global warming. Europe has to look at alternatives, using more renewable energy (wind power and biofuels), the Commission says.
Germany Wary About EU Energy Policy
Germany reacted cautiously Wednesday to an EU plan to diversify energy sources, raising concerns about the new EU president's ability to tackle the issue in the 27-member bloc.
Russia to diversify oil export routes
Russia will diversify its oil supply routes in order to avoid incidents similar to that with Belarus, Deputy Economic Development and Trade Minister Andrei Sharonov said.
OPEC's President Urges Group to Comply With Oil Cuts
OPEC's president, describing crude oil's plunge to $53 a barrel as "unacceptable," urged members to comply with pledged production cuts.
KSA: Work Progresses at Khursaniyah oil and gas facilities
CEOs and delegates from more than 20 contractor companies has met with Saudi Aramco executives in Khursaniyah for the Second CEO Meeting to discuss the progress on one of the largest oil and gas facilities being built in Saudi Arabia.
EU proposes break-up of energy giants
The grip of Europe's energy giants on the Continent's oil and gas markets will come under threat today when the European Commission unveils plans which could mean formal separation of supply and generation companies.
Democrats May Resurrect Ousted GOP Rep's Energy Plan
The November elections left former House Resources Committee Chairman Richard Pombo, R-Calif., without a seat in the U.S. Congress. But one of his important bills - a plan to fix flawed 1998 and 1999 oil drilling leases - might live on.
Montreal woman seeks to sue gas companies over price hike
The lawsuit argues that four companies — Petro-Canada, Shell Canada, Ultramar and Imperial Oil — colluded illegally to raise gas prices as a means of offsetting the future cost of a "green tax" on gas that will come into effect later in 2007.
You know that old joke, I'm sure. The one with the husband talking about his marriage, and explaining how he makes all the big decisions - whether they approve of the government's foreign policy, that sort of thing - while his wife deals with the trivial stuff like what the children should have for dinner. Perfectly amusing in an old-hat, patriarchal "let's give the little woman some credit" sort of way. It's just that I'm finding, increasingly, that the two types of decision have merged into one. Shopping has become a socio-political process, and neither I nor my husband is equipped to make the decisions.
Weird winter leaves Europeans, North Americans warm but puzzled
"In the coming years, this exceptional mildness will no longer be exceptional."
NASA scientist urges action on warming
The effects of global warming are being felt around the world and unless international efforts are launched within the next 10 years species will disappear and the earth will be a vastly less habitable planet by the end of the century, according to NASA scientist James E. Hansen.
Is ethanol the heart of Schwarzenegger's idea?
Activists and experts offer mixed reactions to the gas alternative after the call for a low-carbon fuel initiative features a key backer of ethanol.
Warming climate may prove costly for state, study warns
A warming climate could cost Washington governments and businesses tens of millions of dollars every year in drought-stricken crops, forest fires and tightened water supplies, according to a new state study.
Agency Affirms Human Influence on Climate
Until yesterday, no news release on annual climate trends out of the National Oceanic and Atmospheric Administration under the Bush White House had said unequivocally that a buildup of greenhouse gases was helping warm the climate.
Do carbon offsets live up to their promise?
"On the one hand, there is the potential benefit of educating people through offsets," says Dan Becker, director of Sierra Club's global warming program. "On the other hand, if people view offsets like papal indulgences that allow you to continue to pollute, then it's probably not a good idea."
Soil Association’s annual conference in Wales
At the conference, leading experts on peak oil and climate changes will be included.
A radical new source of jet fuel that's comparable to jet-A and military JP-8 may become a marketplace reality.
Study casts doubt on nuclear waste storage safety
Materials that scientists had hoped would contain nuclear waste for thousands of years may not be as safe and durable as previously thought, researchers said on Wednesday.
Review: Mark Jaccard’s Sustainable Fossil Fuels
Oil keeps U.S. vulnerable, lawmakers told
WASHINGTON (Reuters) - The United States' role as dominant global military and economic power hinges on secure access to crude oil, but U.S. politicians who call for "energy independence" are shouting into the void, experts told a U.S. Senate panel on Wednesday.The U.S. economy will continue to rely on crude oil imports -- which currently account for more than half the nation's oil consumption -- panelists said at a hearing before the Senate Energy Committee on global oil supplies.
Price of oil hits 19-month low
Oil prices tumbled to settle at a 19-month low Wednesday after the government reported rising inventories of gasoline, heating oil and diesel fuel.
Fuel dealers' earnings melting in mild winter
...To those in the energy trade, this winter already looks like a slow-motion train wreck.
The Plan for Economic Strangulation of Iran
Iran currently produces about 4 million barrels of oil per day, of which only 2.5 million barrels are exported with the remaining 1.5 million barrel being consumed internally. According to the latest report (26 Dec 2007) by the National Academy of Sciences of the United States (NAS), if the current increase in local Iranian oil consumption continues and the current decline in oil production is not stopped, then by 2015 Iran’s oil export will decline to zero.[3] According to this and other reports Iran needs to invest about $2.5 billion a year just to stand still. Iran is not running out of oil, but needs money to maintain old fields and bring in the new fields online.The existing major oil fields in Iran are: Ahwaz (1958), Aghajari (1936), Gacchsaran (1937) and Marun (1963). These four fields together, during their highest output, produced almost 4.5 million barrel of oil per day. All four reached their peak in late 60s to mid 70s. According to Mathew R. Simmons by 2003, these 4 oilfields’ combined production were reduced to 1.7 million barrel per day.
Uganda: Power Cuts Increase City Infernos
A new report has revealed that power shortages and lit candles remain the major causes of infernos in the city.The report suggests that there is a link between the prevailing power shortage and the ravaging fire outbreaks.
Canada's Changing Political Winds and the CANROYs
Even if half of what Matt Simmons (of Twilight in the Desert fame) says is true, we won’t see $40 oil again.
How Oil Gets to Central Europe
Russia resumes pumping oil to Europe
MOSCOW - Russia resumed pumping oil to Europe via Belarus on Thursday, ending a three-day suspension of supplies caused by a dispute between the former Soviet neighbors that has left lasting doubts in European capitals about Russia's dependability as an energy supplier.
Russia's Pipeline Czar is Putin's 'Soldier'
Semyon Vainshtok, the clever and self-confident head of the pipeline group Transneft, manages Russia's giant oil distribution network. By shutting off oil supplies to the West, he has provoked a serious foreign policy crisis.
Europeans are deeply unhappy about Russia's decision to close off a major crude oil pipeline. But there are some important lessons to be learned. First, the European Union needs energy alternatives. The second, say German commentators, is that Russia doesn't mind going it alone.
To the world, Russia seems to be throwing its weight around again. Why, we might ask, was there no advance notice for those European consumers further down the line before the pipeline was shut? Why does the Russian President, Vladimir Putin, refuse to sign the Energy Charter proposed by the European Union, which would guarantee security of supply? Confidence in the Kremlin is wearing thin. The feeling is growing in the West that Moscow is using energy as a "weapon" rather than merely a tradeable commodity.
'Beware the Russian bear' is the motto Europe must adopt as it reviews its energy future
Today sees the publication of the European Commission's review of energy - a subject which has climbed remorselessly up the political agenda in recent years to the point where it has now assumed the same kind of importance to world well-being and security as international terrorism or global warming
Well, that was quick. Today US forces raided the Iranian consulate in Arbil, in the Kurdish region. Six staff members were arrested and computers and documents were seized.
For those that don't mind visiting the Al Jazeera website.
If this keeps up we may see an increase in the price of oil sooner rather than later.
Here's a Bloomberg link to the same story, it's good to have multiple sources on stories like these...
http://www.bloomberg.com/apps/news?pid=20601103&sid=a90DLQrWr.YY&refer=u...
Gee, in light of this raid news, I wonder if adding 92,000 troops is related to this strategy of engaging the Iranians?
Gates looks to add 92,000 troops to military:
Defense secretary sets 5-year goal, unclear how long Iraq surge will last
http://www.msnbc.msn.com/id/16576547/
If it takes 5-10 years to add a few troops, we'd better hope the Iranians are patient people.
"Not now, we're not ready yet"
One word:
Draft
two words:
Draft...soon.
5 words:
soon ... draft Jenna ... draft Barbara
Bill Murray in "Stripes". 4 words. Hah! I beat'ya.
Yes, it is getting a bit drafty.
And then there is this ====>
Did the President Declare "Secret War" Against Syria and Iran?
http://www.thewashingtonnote.com/archives/001869.php
Damn...I just love a good conspiracy theory!!!
My conjecture.
Oil is no longer considered a commodity by our government, but a "National Security Interest". Therefore, it no longer is part of the open and free market place, but whatever rules the Fed and Central Banks care to impose upon it to make sure it does not collapse the major economic players of the world.
"National Security Interest"
See The Carter Doctrine
http://en.wikipedia.org/wiki/Carter_Doctrine
23 January 1980, which stated that the United States would use military force if necessary to defend its national interests in the Persian Gulf region.
I keep charging at this windmill...
There are smart people out there that mathematically analyze the markets for evidence of manipulation. One of them is Michael Bolser. He busies himself with "The examination of government interaction with strategic commodities and financial indexes"
For example, Michael shows how the front month Brent contract, when you look at the 100 day moving average adjusted for currency variations, has been moving in straight, linear segments. THe current segment started on Nov 22nd, and has kept a straight line (regression index > 99.6) ever since.
In other words, it is as if some algorithm or emergent market property somewhere ensures that the closing price of the Brent front contract and the FEDs daily dollar currency index are correlated such that the 100 day moving average changes by a consistent amount every day.
It is easy to dismiss this as "that is what 100 day moving averages do". And I am sure you can pick any commodity and find straight sections like this in it's 100 day moving average. But if you consider how long this has been going on (years), and how it holds up even as oil has dropped from the high $60s to low $50s, it becomes very puzzling.
You can find his site here and a summary of his terms here (read this first)
All markets trend - the 100 day moving average makes it look like the trends are smooth. Oil markets trend more than most. People underestimate 3,4 and 5 standard deviation events in markets which is why using trend following beats fundamental analysis in commodities (for example, how many people are bullish on oil right now and might ultimately be correct but are getting margin calls due to price plunge?)
In any case, if the correlation is 99.6%, either its tradable, in which case it will disappear soon after the publishing of that report, or its not tradable, which means its just a meaningless stat.
If the 100 day moving average changes 'by a consistent amount every day', all that tells you is the daily magnitude of change is about the same as the average daily change over past 100 days. It therefore is more of a predictor of stable volatility than price direction.
But (in my own lengthy experience of designing trading algorthims), stable volatility periods beget super volatility periods which beget stable volatility periods (after institutions get whipsawed and stay away). We are due for a some volatility in oil prices as we have nicely gradually declined from 80 to 55 with barey a hiccup. The calm before the storm. Dec 2007 $100 call options are 35 cents. and Dec 2007 $35 puts are 35 cents. I bet 2 months from now they will collectively be worth more than 70cents, even with time decay.
I think this is not the 100 day MA your mother taught you, and that we are all familiar with. Take a look at the links I provided if you have a moment
Francois
You seem to be asking 2 questions:
1)Is there government intervention in the markets?
and more importantly
2)can it be predicted based on some formula (presumably that you or someone can profit from it)
1)Unequivocally the governments use coordinated intervention. When I was at Lehman Brothers there was a red light labeled 'fed' on the currency desk that would rarely flash, but when it did, the government would be buying or selling huge amounts of dollars in the forex market. I am less certain of whether this exists in oil or SP500 markets, but see no reason why it wouldnt.
2)Looking backward at data anyone can datamine and find some 'pattern'. For it to be profitable it has to work 'out of sample'. Most people are tricked into thinking some historical pattern has causality when it was in fact random (there is an evolutionary origin for this) Talebs book "Fooled by Randomness" is a very readable explanation of this (and thanks to Kurt Cobb for gifting it to me).
Im not saying youre wrong - just saying what good is the information? I highly highly doubt its tradable, and if youre ultimate question is 'are the governments intervening in the markets' the answer is 'probably, and there is no way for the average person to game what, how much and when'
but send me the data - Ill take a look. (when Im done chopping wood)
Agreed on the intervention thing. Take that as a given (like you say).
The question is more about trying to see behind it - i.e. is it being managed to a preset plan, or is it an ad-hoc thing that gets decided in the morning when they wake up.
This Brent oil MA could possibly be evidence of it being managed to a plan.
OK...what this Bolser fellow seems to be saying is that manipulation is occurring in such a way as to hide the fact that it is happening. That is, it happens at regular intervals to create the appearance of volatility whilst maintaining a linear 100 day MA trend. For example, if there was a big spike up in price 50 days ago, there will be a big spike down some 50 days later, etc.
Am I understanding this correctly Francois?
BTW, the whole "divide/multiply by the dollar index" business etc, etc is essentially fluff because it arbitrages out. Oil futures are fungible and priced identically in all freely tradeable currencies; if minute discrepancies occur there are thousands of professional arbitrageurs that pounce on them to make a few cents of "free" money. It looks as if this Mr. Bolser is including this to create unnecessary complexity for fee-paying customers.
Regards
oh nooooo no more bold please :)
I could not find evidence of such big spike anomalies - but they may be there in the data.
As far as the multiply/divide thing - I have a different interpretation of it. Let's take a trading day where the dollar falls against the Euro/Yen, and oil prices (in dollars) go up. Someone that has to trade his euros for dollars to buy oil, see little or no impact from the higher dollar price. Someone buying in dollars sees oil more expensive. So - did the real world value of oil go up or down on that day? To answer that question, you will need to know the size of the currency move, and the relative volume of each currency that was used to buy the oil. You can then calculate a value of oil that is currency neutral. Just to say it went up (in dollars) when the dollar actually was down against other currencies, does not reflect what non-dollar buyers see. You want to get to where you can say "the average oil buyer" saw a higher/lower oil price today.
So by multiplying the dollar price of oil with the trade-weighted currency index (MCDI) published by the FED, we arrive at a number for oil that moves day to day (very) roughly normalised to currency fluctuations.
I have looked at the moving averages both with and without the MCDI factor. Adding the MCDI improves the regression index, and it makes sense to me that it does.
Francois
CONNECTING THE DOTS?
From the news story up the thread:
From my comments yesterday:
From the EIA's This Week in Petroleum (1/10/07):
Bremerton-based carrier Stennis to deploy in Persian Gulf:
Doesn’t it seem like more than a coincidence that just as we see increasing evidence of declining oil exports that Bush implements a significant across the board increase in military activity in the Persian Gulf area?
Also, if your doctor called you and said that some lab results are not “as alarming” as they initially appear, would you be unconcerned?
I thought the EIA’s description of declining US crude oil imports as being not “as alarming” as it initially appears was interesting. In other words, the EIA believes that the crude oil import numbers are alarming, but not “as alarming” as they initially appear.
I noted yesterday that, based on the HL method, Saudi Arabia is about 60% depleted, Norway is about 70% depleted and Russia is about 90% depleted (Alan corrected my mistake of using the 85% number).
IMO, the 90% Russian number is more or less correct, at least for mature producing basins. Through 2006, the US Lower 48 and Russia have basically produced 100% of what the HL model predicted they would produce, after crossing the 50% of Qt marks, using only production data through the 50% of Qt mark to generate the predicted post 50% of Qt cumulative production. Based on the HL method, both regions are about 90% depleted.
The Lower 48 is producing about 4.3 mbpd (C+C), while Russia is producing about 9.2 mbpd (C+C). The difference is that Russia had to make up for the huge drop in production after the collapse of the Soviet Union, which implies that very sharp production declines are ahead for Russia.
And let’s not forget the fact that the Cantarell Field, the second largest producing field in the world, is crashing. And let’s not forget the fact that Pemex has tried to hide their true assessment of the predicted decline.
So, if the world is on the edge of a potentially massive decline in net export capacity, and if your country is addicted about a 5% per year increase in Total Petroleum Imports, and if you are a president who believes that the American way of life is "non-negotiable," what do you do with your military?
this war--
I don't think we're getting it.
I suggested that what we're seeing is not "failure" but anticipated outcomes.
This is not to suggest it is not a catastrophe, a disaster, or anything I personally desire to see.
But "failure/success" depends on what this administration's goals were in the first place.
We KNOW he lies:
WMD, Saddam/alQaeada, aluminum tubes/yellowcake, "bringing democracy to the MiddleEast."
We know the MSM is a cracked and fogged-up lens through which to view things.
IF the original and unarticulated goal was: "plant fat ass on oilfields, build military bases; damn all else," then we have exactly what Chimpy said we had: "catastropic success."
IF peak oil is real
IF it is imminent
IF Iraq's oil is the only (short-term) source for upcoming shortages to the US (see "tar sands," "Cantarell," "East Texas"/"Prudhoe Bay"), then we have two choices:
Perpetual war and a future oil supply
Or chronic shortages and chaos.
It's pain all the way around.
This administration has just made our choices for us.
Re: War; I agree
IMO, if current events don't scare the crap out of you, you are not paying close enough attention.
NPR had a caller a little while ago who claimed that a guy, with Special Services training, in her husband's office was called up for active duty, after not being on active duty for 20 years. The implication was that if you receive Special Force training, you are indefinitely in the Individual Ready Reserves (inactive reserves). Anyone have any knowledge in this area? In any case, the Pentagon has been calling up people in the IRR off and on for quite a while.
BTW, George Ure, over at Urban Survival, noted that Bush said "at least" 20,000 extra troops. I wonder if we are the start of a full scale military mobilization, with the long term plan of seizing permanent control of the key oil fields?
George Bush gave a background briefing to some key media people yesterday. According to Tim Russert, Bush said that Iran would be the key focus in 2008, and he said that candidates for the presidency must have a credible plan to keep Iran from going nuclear.
As I said, if this is not scaring the crap out of you, you aren't paying close enough attention.
Another explanation is that if the crap was already scared out of you for a different reason, said crap cant be scared out of you for this reason.
Yep, WT. I think this build up of military in Iraq, raid on the Iranian embassy, more warships in the region and steady drop in crude is preparation for Bush's next adventure in Iran.
But, I've been wrong before, and as Hothgor likes to point out, I'm all doom and gloom (I prefer realist), so what do I know.
Material for a new Ludlum spy thriller.
Hey I can imagine an exchange in the Oral Orifice as follows:
*******************************************************************
W: What? TOD? What kind of shit is that? They knew about all this?
Rice: Our NSA computers figured that they knew all along. This West Texas guy has been tracking this and got there before us. We might want to scan your office Sir for bugs.
W: Rice I want your ass on that website night and day. Like white on Rice...ha ha ha. Get on it! Those loonies are blowing my plans out the window. Where do they get this SHIT?
*******************************************************************
"Let loose the dogs of war."
If "westexas" suddenly starts debunking Peak Oil, you will know that I am sharing a cell with Jose Padilla.
maybe hothgor would be your "roomate"
Sorry but the 8th amendment prohibits cruel and unusual punishments.
From Drudge:
http://www.breitbart.com/news/2007/01/11/070111142703.6qdsdjv9.html
Rice warns Iran against aggression after US arrests Iranian consular staff
Jan 11 9:27 AM US/Eastern
WT, this is definitely scary stuff. We can't whup up on 20 million Iraquis so we're attacking 70 million Iranians?
If Bush has a tiny bit of brain then this escalation is just posturing. He'll never get it through congress, so he can blame the Democrats for losing Iraq because he was ready with a plan to win. Its like Nixon and Kissinger shifted the blame for losing Viet Nam to the Democrats.
Buts what's truly scary is the drunk SOB may not be bluffing-he's ready for the final battle on the plain of Armageddon. He may not be a successful president, but none of us have to live through it to tell the tale. History is written by the victors, not the dead civilians.
Well...really...all he is looking for is a valid cover story for PO.
And there you have it.
This whole situation does have a certain "Dr. Strangelove" feel to it. The Great Question: Is Bush mistaken or crazy?
Another interesting article:
http://in.today.reuters.com/News/newsArticle.aspx?type=businessNews&stor...
Gulf Arabs reviewing currency pegs to dollar
By Will Rasmussen
"Is Bush mistaken or is he crazy?"
Fallacy of the false dichotomy.
hey, don't use big words on us Texins