You might have heard that CLX07 hit $86/bbl today. Oil--in the next month--will...
Posted by Prof. Goose on October 15, 2007 - 6:53pm
Topic: Supply/Production
Here's an open thread and a poll for you to discuss the fact that oil went through $86/bbl today.
The five options in the poll are, "in the next month, oil will..."
1. hit 93 before it hits 79
2. hit 79 before it hits 93
3. stay in a trading range between 79 and 93
4. it's all geopolitics, what does a price signal mean anyway?
5. haven't you heard? it's all about the declining dollar. it has nothing to do with growing demand and a current lack of supply.
Enjoy. :)
[UPDATE by Super G] Poll is here.
I think it's all because of Daniel Yergin--when he said in late June that oil prices should be back down to $60 next year, which based on prior performance suggests a price target $120 within one to two years.
Who knows?
So many factors to consider. Peak diesel?
An attack on Iran?
Well, the chart says:
Source: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID897936
What you will see in this chart (and analysis) is that there are no targets. Only tendencies. And the "picture" can change daily. But remember, the trend is your friend, and that hasn't changed in the past 5 years, right?
Cheers, Dom
------------
Just remember the Golden Years, all you at the top!
When oil was $70+ in 2005 following Katrina the MSM were reporting that it was still below its inflation adjusted price in 1972-1980 of $80. Now oil is $87.60 (Bloomberg: Nymex Crude Future 05:30EST 16 Oct) and the MSM are saying that oil is still cheaper than its inflation adjusted figure in 1980 of $101.
Does the law of receding horizons impact oil so directly as well? In other words, is the $87.60 worked into the inflation figures. And if so will oil ever exceed its inflation adjusted 1980 value?
What you're really asking is if there is anything like infinite petroleum. The answer is no. 101$ will be reached, and the 1980 figure will be topped.
Geez dude, that is not even close to what he was asking.
Mostly, yes. Oil is an input to near everything and, so, inflation tends to go toghether with its price.
today
As I see, two factors can change real oil prices:
1 - A recession, where people stop buying lots of goods and concentrate their spending on oil. That would make oil prices go up.
2 - Food inflation, where people stop buying other goods to concentrate their spending on food. That would make oil prices to go down.
And 2 seems to be dominating 1 by now.
But forget about all that. Current oil prices are due to the weak Dollar (and a weak Dollar is partialy due to peak oil, but that is another topic). Have I said that gasoline prices are falling as a rock at Brazil?
I'm sorry, I couldn't disagree more.
1. IF there's a recession, that'll mean less, not more oil demand, thus leading to lower prices.
2. Food inflation does not impact oil inflation unless there is a recession, in which case, oil goes down.
The dollar has stabilized at 1,42 in euros since last month, when oil hit 82. The current 5$ rise is therefore not because of the descending dollar. And oil is also rising in euros, so this is no "excuse" at all.
The underlying fundamental is shrinking supply (non-OPEC), shrinking stocks (USA) and growing demand (Chindia). Demand has been higher than supply all year long.
"1. IF there's a recession, that'll mean less, not more oil demand, thus leading to lower prices."
Ah, but you discount the effect of panic and hoarding (personal and national) on prices.
People don't 'hoard' during recessions. They bemoan their woes to congress and the Democrats give them $5000 baby bonds.
I am talking about inflation adjusted prices.
On a recession, every price go down (deflation), but oil moves less than average. On a food inflation, every price go up, but oil, again, moves less than average.
And remember that the universe is expanding, which means that a barrel of oil today is actually larger than a barrel of oil from 1980.
true enough. But the cylinders in the engines are expanding at the same rate, and the distance from place to place is growing, so the fuel mileage should be the same. At the same time, the dollar is shrinking, so the US economy must not be tied to the cosmological constant after all.
:)
"You can never solve a problem on the level on which it was created."
Albert Einstein
I was thinking the exact same thing, that a couple of years ago they were saying that in inflation adjusted dollars the all time high was about $80/barrel. What gives?
Look at my post downthread.
The question is when it will pass the inflation adjusted high and be a new record. That'll be uncharted water.
Waitasecondhere:
In 2005 the "Inflation adjusted" [edit]peak[/edit] price of crude was $80/barrel, and in 2007 it's $101/barrel? Does this mean the MSM is claiming a 12% annual inflation rate for the past 2 years?!
Funny, I heard on Jim Lehrer yesterday that the inflation-adjusted number was $90.
The Energy Outlook blog has an interesting post about this:
How come gasoline isn't following suit?
Earlier this month gasoline forced oil down a couple bucks.!!??!
Shouldn't gas be around $3.50?
If the crack spreads ever get back to where they were, gas will be at $3.50/gal pretty easily.
However, I gotta say, I am really starting to think that $100/bbl oil isn't going to "flip the light switch" like many thought it would.
Just another day of slow secular bleed-out and destruction of ye olde middle class.
The price of oil has tripled under the current administration and our economy hasn't collapsed. Not until there are actual shortages...
I'm also thinking like that.
If there is plenty of juice and the price is high, it will cause the regular Joe to modify his habits regarding his/her use.
But if there are ongoing and worsening shortages, that is a different kettle of fish.
First instincts will be to buy as much as possible when its available and hoard, which will of course exacerbate the situation.
It hasnt been as bad for us in the developed world where we can simply pay up and go about our daily business. THe third world is taking it on the chin as oil just gets too expensive to afford anymore and more do without.
Thanks guys for freeing up the black stuff for us up here. My big honkin' H2 thanks you sincerely!
Seriously, at this point demand destruction is working. Not equitable but effective. Look for it to start occuring in greater amounts in our own under class and more fossil fuel aware contingents. Me personally, I've only purchased 36 gallons of gas this year, mostly by getting myself situated where biking and walking makes a bunch of sense.
I have purchased zero gallons of gas this year, although I do ride public transit to work for five minutes every work day.
If you say so...
Well I know our economy is in big trouble (deficits and falling dollar, subprime meltdown, etc.) and you know this too, but the average Joe doesn't. Yet.
If Average Joe doesn't know it yet, then at least for the purpose at hand - guessing consumption's effect on oil price - it hasn't happened yet.
But the market is very good at preventing shortages. It prevents them by increasing the price.
Fuel shortages come as a result of dramatic events like acts of terrorism, natural disasters, wars or boycotts. Depletion will not by itself cause shortages.
Just because the first tripling of the price of oil didn't cripple our economy does not mean the next tripling won't do it.
I agree. Deffeyes kind of predicted this. He said there would be a lot of volatility (typical when a resource is scarce), and that this would disguise the peak and keep people from making the changes needed for the post-carbon age.
The runup has been so gradual compared to the oil crises 30 years ago. And prices have gone up and down, so people are hoping that they'll go down again. Especially since the talking heads keep saying that there's no shortage, nothing to worry about, refinery issues, weak dollar, etc. While in the '70s, everyone knew that we'd been cut off.
There actually have been shortages in part of the country this year. In the middle of the country, at the end of the pipelines, just as you would expect. Oil companies are pulling out of the area. There were gas shortages over the summer, and now there's a diesel shortage that is hurting farmers trying to harvest their crops.
But it doesn't even make the news, except locally.
Local stories ... that's true for sure. North Dakota has a diesel issue and in the Northern Marianas they are having problems with keeping the power on because of the high price of oil. The reason for that,I guess, is that the Commonwealth wants to do some sort of price control thing and it's causing the utility some concern.
Elsewhere, I don't know. Most places in the developing world really subsidize their fuel so the citizenry are somewhat insulated (until the the price controls come off and the riots start).
Some countries have to buy at spot prices too, since they have no capacity to store fuel, so that's got to hurt their budgets.
I'm actually quite surprised at how little disruption this is causing ... load shedding seems to grab the headlines though.
Well, not the US or Western Europe perhaps... But $80/bbl oil is already flipping switches in the developing world.
Yes, we should be measuring this in Yergins. You know, like a 3-dog night. We are likely to have a 3-Yergin day (but will we singing Daniel was a bullfrog?).
Jeremiah was a bullfrog. Daniel is a toad.
| The problem will solve itself.
| But not in a nice way.
"Daniel Yergin was a bullfrog!"
With such a perfect ring to it, I believe we will indeed be singing this. Now to get this little jingle out of my head...
LOL
Daniel Yergin was a bullfrog.
Such a good friend of mine.
NEVER UNDERSTOOD A SINGLE WORd HE SAID
But he always had some mighty fine.
yes he always had some mighty fine wine
Sing joy to the world (wow)
all the boys and girls now
Joy to the fishies in the deep blue sea
Joy to you and me...
makes me want to drive my car with the radio on
3,4,5 (with a possibility of 1).
Which will happen first - down 7, or up 6? i think that depends on the weather - certainly there is a moderate risk premium atm, but i don't see that going away.
i guess i'm sort of in the 4 or 5 category, as that can explain some of the current increases, although the current price signal (especially the longer term futures curve) can be an indicator on which way prices are likely to move in the future. Medium term i would guess up, but not by much, unless something "unusual" happens. (unusual = a cyclone, random invasions, civil unrest in Venezuela or somewhere else, or almost any other trivial supply disruption).
Longer term it all depends on weather economic demand "destruction" happens faster than decline - one will cause a large slump, the other will cause a large spike, with little middle ground left.
best of luck with a more decisive future than me,
Andrew
--
A farmer in India says he now has to pump water from 300 feet below the surface, compared with 70 feet 10 years ago. (Wall Street Journal, July 28-29, 2007, p. A10)
you're funny.
made me think of Lem's Futurological Congress, which y'all should read if you haven't yet..
Given the $1,000 bet, I'm wondering: Is Robert Rapier sweating bullets yet? Or, does the first $100/bl WTI still seem like a thing for, perhaps, 2008 or 2009?
-best,
graywulffe in CVO, OR
A $14 rise when oil is already in record territory in three-and-a-half months would still be a noteworthy event. So I'm guessing he's not sweating bullets yet, but is probably paying attention.
Then again, I wouldn't sweat one $1000 bet and I'm sure that Robert does better than me. Of course, there are better places that I could put $1000 to work (like on a wood-stove for the cabin I'm building).
OK here is a question for oil drum readers.
If everyone reading this site drove and electric car or bike fueled by solar power, how much would the price of oil go DOWN by?
www.zevutah.com to see my EV
It doesn't even take that much of a sacrifice. Just everyone walk to the corner quikkee mart.
RobertInTucson
I haven't escaped from reality. I have a daypass.
The problem with that is that it's just not feasible yet. Solar car/bike sounds great and I'm all for it, but it comes down to economics. An electric bike and the solar infrastructure to go along with it is EXPEN$IVE. You can't carry much on it, can only take one other person with you (at best) and isn't whole lot of fun in the rain, and in the winter.
There are many other options people will go for before they opt for that. The last time I checked, you can buy a Honda Fit for ~$12K. That will halve fuel consumption for a whole lot of people. Then, there are hybrids, which do better on fuel consumption, but are more expensive.
There are scooters and motorcycles, as well. (I've been motorcycling for 26 years now :-) But, that won't be for everyone, either. I'm betting that people will slowly start opting for either public transportation or carpooling.
My wife drove an Explorer for a few years. Last year, she got a Scion xB - double the mileage of the Explorer. Now, she's into walking for exercise. She's been making noises about taking the bus into work one day a week and then walking home. (~7 miles) Around my town, I starting to see more bicycles being used. My veterinarian now rides a scooter.
Changes will happen. Right now solar sounds good, but doesn't offer the return on the investment - yet.
I just ordered me a scooter. At 60+ MPG...5 fold increase over my F-150. I'm in Florida...until the ice melts ;-)...so I should be able to ride most anytime of the year and hope to make my investment back on the scooter with-in a year or two.
Hurricanes teach the hard lession of lack fuel and I had thought about a scooter since Ivan. You can go 5 times the distance versus my truck on a gallon of gas and pass all the closed gas stations because of lack of power and/or fuel.
Mit