 | Saudi Arabia Announces They Will Produce More Oil | The Oil Drum | Saudis announce oil production increases...again...and again...and again... |  |
343 comments on DrumBeat: June 23, 2008
Comments can no longer be added to this story.
Show without comments | PDF version
343 comments on DrumBeat: June 23, 2008
Comments can no longer be added to this story.
Show without comments | PDF version
Search The Oil Drum with Google
Support The Oil Drum
Recently on TOD:World
TOD:Campfire
TOD:Europe
- Oilwatch Monthly November 2009
- Some predictions on the forthcoming Russian-Ukrainian gas 'crisis'
- The US stimulus and "green jobs" for wind energy
TOD:Canada
- In this house, we obey the laws of thermodynamics!
- The Round-Up: October 24, 2008
- Compressed Air Energy Storage - How viable is it?
TOD:Australia/NZ
- Australian Senate: Peak Oil motion defeated 31:6
- The Bullroarer - Friday 20th November 2009
- The Bullroarer - Friday 13th November 2009
TOD:Net Energy
Blogroll
Energy Sites
- The Coming Global Oil Crisis
- Die Off
- Dry Dipstick
- Energy Bulletin
- From the Wilderness
- Life After the Oil Crash
- Peak Oil Crisis
- Peak Oil News and Message Boards
- Powerswitch
- Rigzone
- Matthew Simmons
- Wolf at the Door
Environment & Sustainability Sites
- The Daily Green
- EcoGeek
- Eco Street
- Green Car Congress
- Green Options
- green.alltop.com
- Gristmill
- RealClimate
- Sustainablog
- Treehugger
- WorldChanging
Blogs
- The Big Picture
- Casaubon's Book
- Cleantech Blog
- Clusterf
k Nation (Jim Kunstler) - The Cost of Energy
- David Strahan
- The Energy Blog
- Entropy Production
- European Tribune
- GraphOilology
- Health After Oil
- jeffvail.net
- Mobjectivist
- Peak Energy (Australia)
- Peak Energy (USA)
- R-Squared
- Resource Insights
Finance & Economics Blogs
- Calculated Risk
- The Crash Course
- Ecological Economics
- Econbrowser
- Environmental Economics
- Infectious Greed
- The Mess That Greenspan Made
- Mish's Global Economic Trend Analysis
Organizations
Peak Oil Primers
Beware email scams!
Beware email scams claiming to be from this site. We do not have any job openings. If anyone contacts you about a job at The Oil Drum, do not reply to them, and definitely do not give them any personal information or send them money. Read more here.
“What gets us into trouble is not what we don't know, it's what we know for sure that just ain't so.”
—Mark Twain
User login
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
Personnel
- Editors: Nate Hagens, Gail the Actuary, Prof. Goose
- DrumBeat Editor: Leanan
- Contributors: ace, Engineer-Poet, Heading Out, jeffvail, JoulesBurn, Sam Foucher, Robert Rapier
- TOD:Campfire: Glenn, Jason Bradford
- TOD:Europe: Chris Vernon, Euan Mearns, Francois Cellier, Jerome a Paris, Luís de Sousa, Rembrandt, Rune Likvern, Ugo Bardi
- TOD:Canada: benk, Libelle
- TOD:ANZ: Big Gav, Phil Hart, aeldric
- Emeritus: Stuart Staniford
- Technician: Super G
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
GAIA Host Collective
A great video, very early this morning by Melissa Francis on CNBC Ms. Francis was, in my opinion, completely snowed by the Saudis. Ms. Francis said:
I think the Saudis are producing every drop they possibly can and are making great plans to produce more. I, for one, do not believe they will be producing 12.5 million barrels per day by the end of next year, or even have the capacity to produce that. But time will tell.
All that being said however, it looks for all the world to me that the Saudis realize what a damn mess the world is in, concerning the supply of oil on the market. And, they are doing what they can to help. It is just that they can’t do very much. I believe their promises are a lot bigger than what they can actually deliver. However I may be wrong.
Ron Patterson
Some interesting comments on CNBC at about 8:25 Central time--lots of Shocked! Shocked! realizations that the Saudis have very little ability to significantly increase production, especially light/sweet.
From May, 2007 to May, 2008, oil prices increased at about 6% per month. In June, we are on track for a 6% range increase:
$125 + 6% ($8) = $133
For the time being at least, a price increase of 6% per month appears necessary to balance demand against declining net oil exports. What is happening now is a continuation of what started in 2005 in poorer countries: a smaller number of consumers paying a higher unit price for a smaller volume. It's just that forced energy conservation has moved up the food chain, and it is now having widespread effects in wealthier countries.
I expect to continue to see a parallel 6%(+) per month rate of increase in delusional thinking.
Regarding post-peak delusional thinking by former swing producers, the following comment was in response to a question from me, in 2005:
Texas has enough oil supplies for 'many decades': Tinker
Baghdad Bob has taken up residence in Saudi Arabia. Or is he dressed in drag and working for CNBC?
The markets, apparently, see this as so much noise. But wasn't most of the world, excluding the U.S., taking action on global warming? And how does increased supply and consumption fit into that overall scheme? Only if the intent is to avoid substituting coal for oil.
How predictable that the world's "leaders" would panic at the reality of higher prices and lower supply. As usual, they are subsituting the magic of wishful thinking for a real energy policy.
It is past time to set a floor on oil; the longer reality is avoided, the worse things are going to be.
Obama is coming to the rescue, however, with his support of ethanol. We'll worry about food later, maybe sometime next week.
The big story this year (with some important exceptions, still largely ignored in the MSM) is the ongoing export decline from Russia, Norway, Mexico and Venezuela--key nearby sources of imported oil for Europe and the US respectively.
I estimate that Mexico's net oil exports fell from about 1.4 mbpd in 9/07 to about 1.1 mbpd in 5/08. At this rate, they would be at zero in about three years (from 9/07), the Fall of 2010. At half this rate, they might make it to the Fall of 2013.
BTW, Mexico might be an interesting model for another top 10 net oil exporter that is highly dependent on one field, Saudi Arabia. It appears that the big decline in Mexican production kicked in four years after their final peak, which would mean 2009 for Saudi Arabia.
The real kicker is that after they reach zero exports, they quickly become a net importer, which then increases the competition for the globally shrinking supply of available exports.
ej
Like the UK & Indonesia
I used the ELM's 28% per year and Matt Simmon's 8% per year to current world exports. Does this seem reasonable?
Also estimated is the oil deficit from export decline since 2005 compared to the deficit from the 1973 Oil Embargo. Losses from the Embargo likely over stated, are based on 4 mbpd for the entire period of the Embargo. Even if 73 Embargo is over stated, deficit for the last 3 years are 3 times greater than those of the Embargo.
Our middle case is that the top five net oil exporters (about half of world net oil exports) collectively approach zero net oil exports around 2031. My guess is that total world net oil exports in 2031 will be down by at least 75% from their 2005 peak.
Any predictions for when we hit peak delusion?
Evidence suggests the more delusion is consumed internally, the more is exported, clearly physical supplies remain abundant.
"I look at it this way... For centuries now, man has done everything he can to destroy, defile, and interfere with nature: clear-cutting forests, strip-mining mountains, poisoning the atmosphere, over-fishing the oceans, polluting the rivers and lakes, destroying wetlands and aquifers... so when nature strikes back, and smacks him on the head and kicks him in the nuts, I enjoy that. I have absolutely no sympathy for human beings whatsoever. None. And no matter what kind of problem humans are facing, whether it's natural or man-made, I always hope it gets worse." George Carlin (May 12, 1937 – June 22, 2008)
If only the ones doing the defiling and those receiving retribution from nature were the same, I would agree with this statement. Unfortunately, that's not how it works.
Those who have gotten rich raping the planet will be the most able to afford to protect themselves from it's counter-attack.
Peak delusion? I think it has peaked. What was it Dylan Ratigan said on CNBC last Fri. when the markets were plunging? Something like "Oh ... about the Saudi oil meeting and Bernanke meeting at the Fed? It doesn't matter who's meeting with who. Nothing changes the (bear market mentality)."
Dylan is looking a big depressed these days. He's a quick study I think. He and a number of the other CNBC staff are no longer as deluded as they once were.
Peak Delusion has a direct relationship with Peak I Told Ya So's. About the time we are tired of the told ya so's, the delusionists are tired of hearing it.
Hi WT,
That would be a hard act to follow...here's hoping you are wrong :P
July would be avg 141 (+8)
Aug would be avg 149.50 (+8.50).
Yikes!
However it still would be only 21 cents a cup then, for possibly the most precious substance in the history of mankind. Not smarter than yeast definitely.
So if we continue what PeakTO and WT have written :-
Jul = $141.00
Aug = $149.46
Sep = $158.42
Oct = $167.93
Nov = $178.00
Dec = $188.68
Jan = $200.00
Feb = $212.01
Mar = $224.73
Apr = $238.21
May = $252.50
Jun = $267.66
Jul = $283.71
Yikes x 2 !!!
If you use the 70 rule then 6% means oil will double in price every year (assuming %6 holds true)
Those figures are averages for each month - if you watch the daily data it fluctuates up and down in a range - so, which month do we see $150 oil. $150 Tapis in June?
If the price goes up by 6% every month, you will see $150 oil by August (Sep contract).
Hello Suyog,
I would expect I-NPK pricing to rise just as fast, or even faster, too. It depends on how much total [and depleting] FFs are dedicated to this very long and complex global supply chain.
Remember: the depleting P & K ores [just like oil-- first guano, then on to the next lowest fruit!], the depleting sour natgas & sour crude [cheapest sulfur source], and the Haber-Bosch nitrogen are essentially free--it is just the huge energy requirements and total global infrastructure that determine the supply, and obviously the demand for food won't shrink as long as the population is still increasing at 70 million per year.
Has anybody found that Ghawar-sized batcave full of guano yet? Oh wait, ..I forgot.. they are experiencing dieoff from white-nose fungus. I suggest the big ramping of O-NPK recycling instead, because I don't see people everywhere racing to build bat shelters, and making bat biologists the highest paid people on the planet.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Any idea what carrying capacity/crop yields in the U.S. would be without I-NPK? How much food could we make using manure/rotation etc.?
What would be the U.S. carrying capacity using only organic methods?
Hello Consumer,
Thxs for responding. I am pressed for time, so no supporting links.
No expertise here, but what I have read seems to indicate that commercial harvest yields would drop by more than 50% instantly [if no O-NPK is recycled back to the field], and the subsequent additional crop rotation to nitrogen-fixing plants [to be totally plowed under] would reduce the grains available by an additional significant percentage [20% more?]. Good luck trying to stay above a Liebig Minimum.
If O-NPK is used abundantly & immediately: the commercial yield is still expected to initially decline, but then as the topsoil becomes organic over time, healthy with micro-organisms, and full of mulch--the yields are equal or better than using I-NPK. I recall that the conversion process takes about 5 years or more [Rhodale Institute?].
Lots of people can starve during that 5 year conversion process. :(
Bob,
You might want to check out rice. Seems I read that it gives back almost every nutrient taken. One of the reasons that the Asians can plant and grow it so well with little commercial NPK inputs.
As I drove back from Oklahoma today I noticed a huge increase in rice plantings in the bootheel of Missouri. I thought that NE Arkansas was the big guys on rice but now it must have qualities to make it able to compete favorably with the normal corn-wheat-soybean mantra.
Also once you plane and setup your ground for rice I think you are pretty much locked into it and will then go with just that crop on that prepared acreage.
Myself I love rice and even eat it for breakfast with milk,butter and sugar. With soysauce the rest of the time or with Beans(ala 'hopping john')
Best,
airdale
The problem with rice is water. It requires huge amounts of water to grow, and water shortages are actually causing many Asian farmers to switch away from it.
Most of the water used in commercial rice growing is to control weeds. Methods are being developed to do away with the flooding stage http://www.sciencedaily.com/releases/2007/10/071014202450.htm. I discovered this when I looked into the possibility of growing a small rice field on my property. The instructions from the seed company in which I located rice seeds: http://www.organicaseed.com/rice.html
Have you tried growing any rice? I, too, have been thinking about growing some. I recently read an article in the NY Times about SRI (System of Rice Intensification)promoted by Dr. Uphoff of Cornell. Have you heard much about this? I would love to be able to grow some basmati rice in my backyard.
I think it depends on what kind of rice you are growing. Lowland rice needs flooded paddies while upland rice can be grown on dry ground.
Apparently with lowland rice the water isn't just for weed control. The rice plant needs it to grow.
For innovative techniques for rice growing, check this out:
http://ciifad.cornell.edu/sri/
This is strange. I replied to bruce's post when there was no replies. But Now it looks like my reply is attached to sandiego's post.
This must be a bug.
Also, I was wrong in my post, rice doesn't need the water to grow, but that type of cultivation has the highest yields so is the most common. Sorry bout that.
Well, looks like its formated correctly when I look at the whole db. But if I just look at the subthread its formatted incorrectly.
http://www.theoildrum.com/node/4204/367051
My girlfriend is from Issan (Northeast Thailand) and has been growing rice since before she could walk. She tells me that people do grow some varieties of rice with little water - like sticky rice, red rice and black rice. She says that often they don't grow that rice due to insects and birds which are much more of a problem than when the water is deep. Also there is a real problem with seed. Over the years planters have stopped collecting seed and just planted the cheaper hybrids. The old seed varieties are only maintained by a few people and for most growers it is difficult to get nowadays.
Hi Bob,
An idea/realization hit me last week, and I've been waiting to run it by you. It appears to me that we already have a system that centrally collects human waste streams--Sewage Treatment Plants, and that with some modification they could collect the nutrients they try so hard to wash out of the water they're suspended in. Are there any Waste Management engineers reading TOD?
Whatayathink Bob?
They are already doing this. Last week I watched the Fertilizer episode of "Modern Marvels" and there are sewage plants that do this. They separate the solids, add some bacteria, let it mulch, and sell it as fertilizer.
Disclosure: I am not Bob.
But there is a problem with your idea. The stuff that goes down our drains is not just bodily excreta. There are all kinds of household chemicals, heavy metals, pharmeceuticals, soaps/shampoos/cosmetics. All kinds of lovely bioactive estrogenic crap. Etc.
I would never put anything from a sewage treatment plant on my land, period. We're just not set up for it.
never put anything from a sewage treatment plant on my land
That used to be Milwaukee's Milorginate recommendation - do not use on food crop.
Now they say its OK. Your mileage will vary.
In addition, you are adding energy to the process in the form of:
1) Processed drinkable water moved to your home
2) moving water+waste to processing
3) handling the water+waste - where eventually you have to allow the material to settle out
4) de-watering the settled out matter
Now, it used to be that man handled their own waste via an outhouse. Today it could be done with say 2 machines like the naturesmill. Or other methods documented in the book on humanure.
Yeah, I thought about all that other crap as I was writing, and afterwards remembered the book Toxic Sludge is Good For You. Oh well, I was trying to come up with a use for a system already in place. I was thinking about the mandating of composting toilets, and how it would be easier to use the system already in place. Sigh....
"Sigh" is right, karlof1. That's my take on a lot of things :-)
We are just not set up for real recycling, either of human waste or industrial waste or consumer waste. The fact that I'm even calling it waste is revealing.
I'm thinking that real recycling has to be designed in right at the start, right from the, um, manufacturing stage.
The notion of closing that circle is the right idea, but we're just not set up for it...
Yep. This should be another Manhattan Project sized push, but Alas! Pooh and sewerage isn't as exciting to think and talk about as cars :)
Hello Bob,
I'm sure you saw this article about phosphorus consumption and the potential troubles ahead. Although the topic is out of most peoples vision, it seems certain to have large influence on our global survivability for the future. I suggest you continue your efforts to bring better understanding of this topic to the masses.
It looks like the average WTI spot price for the first three weeks of June was around $134.
It looks like retail gasoline prices are currently about one dollar per gallon more than the spot price of crude per gallon. So, at $284 per barrel, we would presumably see gasoline prices of about $7.80 per gallon, which is less than the current price in Europe. But consider what an oil price increase like this would do to food prices.
Have I mentioned ELP in the last 30 seconds?
ELP Plan (April, 2007)
http://graphoilogy.blogspot.com/2007/04/elp-plan-economize-localize-prod...
Expect to see more stories like the one from Circuit City last year. From the ELP article:
Agreed. Here in the West we are moving from a world of cheap resources and expensive labor to one of expensive resources and cheap labor.
In the East they are moving from cheap resources and cheap labor to expensive resources and even cheaper labor.
Either way, we need to reconstruct our economy to minimize the capital required for projects and maximize the people required. Right now we are willing to spend millions more to purchase highly advanced machinery that takes people out of the equation. This will no longer work going forward because capital will become scarce and it will be in our collective interest to employ as many people as possible.
-André
www.PostPeakLiving.com
For the time being anyway, here in Western Canada we can't get enough workers. Of course, we don't need many senior Circuit City people, but there are continuous job fairs and recruitment events. (And that action by the company sucks for many reasons. So tell me folks, how is the American Dream comin' along these days?)
Will the vastly unemployed, fiat currency deprived (or over inflated) Americans become our Mexicans? Ohhh, this doesn't go over too well in the land of the free and the home of the brave (on credit mind you). But think about it, think your reaction to the insinuation and the possibilities?
That's the part that hurts. Now Peak Oil is starting to get a visceral feel.
Circuit City may not be the best example. When they did that they discovered that some of those highly paid people had earned their raises. Those were the ones who didn't have to take the pay cut. CC took a big profit hit, followed by a big stock price hit.
From Drudge:
http://www.jsonline.com/watch/?watch=1&date=6/23/2008&id=42044
An oil well is a hole in the ground owned by a liar...and, it doesn't matter what nationality the hole is.
Sir, I am personally offended by what you have posted. I will expect an apology.
I would be interested to hear your opinion of this article, Ron. I especially like the part where the Fed passed regulation to 'allow CITI to take possession of crude aboard tankers...for the benefit of the public good'...and, would it not be interesting to find out why those tankers loaded with Iranian crude are sitting around in the Persian Gulf when oil is in such short supply world wide? Link at bottom. This is a long read and not for those with short attention spans...nitwits can simply click the DOWN ARROW.
...snip...'Let’s say the CFTC was not a compromised regulator, was not an audition stage and revolving door for million dollar jobs in the (commodities) industry it regulates. Let’s say it genuinely wanted to report back to Congress on just how big a player Citigroup is in the oil markets. According to a February 22, 2008 filing with the Securities and Exchange Commission (SEC), Citigroup has over 2,000 principal subsidiaries (meaning it really has more but it’s not naming them). Of these, a significant number are secret offshore entities where records are unavailable to regulators. (For a mind boggling look at this sprawling octopus click here: http://www.sec.gov/ )
So the CFTC can’t get its hands on all records and even in jurisdictions where it can, it first has to know under what names, out of a possible 2,000, Citigroup is trading oil and then aggregate the positions.'...snip...
'Next comes what can only be described as an act of insanity on the part of the Federal Reserve. After allowing for the repeal in 1999 of the depression era investor protection legislation known as the Glass-Steagall Act in order to let Citigroup house retail bank deposits, investment banking, insurance, stock brokerage and speculative proprietary trading under one roof (the perfect storm that intensified the Great Depression) the Federal Reserve decided on October 2, 2003 that Citi wasn’t scary enough. It needed to allow this company that had already been named in hundreds of lawsuits for securities frauds and manipulations and could not remotely manage itself as a financial firm to ramp up its oil trading business by allowing it to take possession of crude oil on tankers because it would “reasonably be expected to produce benefits to the public.” Here are excerpts from the Fed’s release suggesting the expansive plans Citi had in the oil storage and transport business'...snip...
http://www.counterpunch.org/martens06212008.html
I guess the question is quantitative -- how many spare tankers are there, and how much oil could CITI take possession of? Enough to corner the market? Or is this just conspiracy delusion again?
Sure, this is just 'conspiracy delusion again.' Just like the Enron manipulation of energy prices in California was a conspiracy theory. Did you bother to read the link?
...snip...'Combing through government archives, the first noteworthy appearance of Phibro occurs on April 6, 2001, when the Wall Street law firm of Sullivan & Cromwell sent a letter to the Commodity Futures Trading Commission (CFTC), the Federal regulator of oil and other commodity trading, acknowledging that it was representing “the Energy Group.” The letter was noteworthy because it delineated just who had teamed up to grease the oil rigging in Washington: namely, two investment banks (Goldman Sachs and Morgan Stanley); a house of cards that would later collapse (Enron); a proprietary trading firm inside a Frankenbank (Phibro inside Citigroup); and two real energy firms (BP Amoco and Koch Industries).
What the Energy Group had long lobbied for and finally received from its Federal regulator was the breathtaking ability to trade oil contracts and oil derivatives secretly in the over- the-counter (OTC) market, thus avoiding the scrutiny of regulated commodity exchanges, their CFTC regulator, and Congress. The April 6, 2001 letter was essentially to say thanks and interpret the new rules as favorably as possible for the Energy Group.
The change in the law occurred via the Commodity Futures Modernization Act of 2000 (CFMA) and is called the Enron Loophole. (Since Enron’s trading room went belly up along with the company, and Phibro is still trading oil secretly all over the world, it should perhaps now be called the Phibro Loophole.)
What the CFTC also granted the big Wall Street trading firms was a license to sneak under the radar by using computer terminals located in the U.S. while trading oil on foreign exchanges like the Intercontinental Exchange (ICE) located in London but owned by an Atlanta, Georgia outfit that was funded and launched by Wall Street firms and big oil.'...snip...
http://www.counterpunch.org/martens06212008.html
Yes, I read the link. When it first appeared, even, since I read CounterPunch regularly. My question was mainly rhetorical -- I know nothing about commodity trading except at a very theoretical level. And I am inclined to believe the CP line.
BTW, I gave you a greenie for your post.
Thanks for reading the post NLNG. I am not using the greenies but it was a nice gesture. Thanks.
I indeed read the story (twice), and it sure looks like conspiracy delusion to me. There are ZERO facts in the story that have anything to do with energy manipulation. The author goes to great lengths to make Phibro sound scary, but never associates them or CITI with much of anything, or than trading energy (though she archly points out that they refer to themselves as an "energy trading corporation", just like Enron did .... wink, wink, nudge, nudge).
The author seems to believe that energy trading is the same as energy manipulation, and that OTC trading (the "Enron loophole") is somehow proof. Other than that, we learn that Phibro was part of a failed oil venture years ago, and that they now trade oil (oh, and that they pay their CEO a lot). That makes them a "juggernaut", despite only providing 2 billion to CITI. How much was Enron making trading only in California, compared to what Phibro is making manipulating the entire world? 2 billion? Sheesh. Hedge funds are making more than that with exchange-traded oil futures.
If you're going to manipulate the oil market, you have take production off the market. Enron did that in CA. However, the world is not CA. To move oil prices as much as they have moved, you'd have to take whole percentage points off production. 1% of production is about 750,000 barrels of oil per DAY. To move prices and keep them there, you'd have to take at least that much offline every day for the past 6-8 months. That works out to be 130-150 million barrels of oil CITI would have to be sequestering somewhere. That's several times the oil at Cushing, OK.
Where's the evidence of this? Not surprisingly, the author gives none. According to standard conspiracy theory format, the author recites a bunch of mundane facts about the company, points out that the company is doing a lot in secret, and then invokes Enron repeatedly.
Hey, I'm all for closing the "Enron loophole". Just don't expect it to have any effect on oil prices.
From my post up the thread:
BTW, oil prices went up about 1,000% from 1972 to 1980, without the benefit of the "Enron Loophole."
I think that conventional wisdom is wrong. I think that the physical market for crude oil is driving the paper market higher. This is basically a "Shoot the messenger" effort.
Problem:
The markets are not paying for storage.
Farmers encounter this all the time.
Mac, better go read the link. If CITI is taking possession of oil aboard tankers....
'Citigroup also has represented that it will have in place specific policies and procedures for the storage of oil… '
and...
'In addition to the secretive Phibro oil trading unit, Citi has formed Citigroup Energy and moved it to Houston. In a help wanted ad placed in Canada it described itself as follows: “Citigroup Energy is a global energy trading, marketing and risk management company based in Houston with offices in Calgary, New York, London, and Singapore. OUR GOAL IS TO BECOME THE PREMIER GLOBAL ENERGY COMMODITIES MARKETING AND TRADING ORGANIZATION. cURRENTLY OUR CAPABILITIES INCLUDE TRADING AND MARKETING DERIVATIVES/STRUCTURED PRODUCTS IN POWER, NATURAL GAS, CRUDE AND CRUDE AND CRUDE PRODUCTS" (caps mine)
Enron also called itself the “premier” energy trading organization. Apparently impressed with that model, Citigroup Energy has hired a significant number of former Enron traders.'
http://www.counterpunch.org/martens06212008.html
If Citibank starts storing huge amounts of oil anywhere, the market will know about it, just as the market knows about the Iranian tankers, and the price will take a dive. Nothing scares an oil trader more than large amounts of inventory--it doesn't matter who owns it.
Yeah Moe, you small time traders are privy to all the rumors that the talking heads and blogs can dish out. You are really well informed.
...and Enron was doing fine till it wasn't...
Speculators can store oil by hiring tankers. One supertanker can hold 2 million barrels. They fill the tankers and park them by refineries. When they think prices have peaked they steer them in to the refinery for unloading.
I think that you may well have hit upon a fantastic scheme for turning a large fortune into a very small one.
Supertankers aren't exactly cheap to hire and there are a whole host of other fees and costs involved in parking a supertanker next door to a refinery that might, just might, say, "no ta 'guv, we've got another delivery scheduled for 3 days time for $10 million less, but we know a bloke, for a small fee of course, in Rotterdam who might do you a deal."
Wow, what a super dumb plan. I have a much better plan. They buy futures contracts on 2 million barrels of crude. When they think prices have peaked they sell the contracts. So simple and they save all that hassle of renting tankers and paying to park them.
Of course they must be correct in guessing that the price is going up. Otherwise they lose money. But they do not lose nearly as much as if they had rented those damn tankers to store the oil.
Ron Patterson
The clever thing is that by taking millions of barrels of oil off the market it forces prices up. In he last crisis of 1981 there were several tankers parked outside a refinery in New York watching each other like hawks.
The price of oil trebled in three months - it made sense to leave the tankers at sea while prices were increasing that rapidly. The thing was the rate-of-increase, not the high value of the oil on board.
It is not enough to take 2 million barrels of oil off the market, because those extra two million barrels will be replaced the very next day. The effect of the loss of supply diminishes each day and becomes negligible after a short period. 2 million barrels is a vanishingly small percentage of annual oil production.
If you want to manipulate prices, you need to take the 2 million barrels (or some significant amount) off the market every day, and keep them off the market. Otherwise, the effect dissipates like ripples in a pond.
Oil prices have been going up for almost 2 years. If that was a result of manipulation, then someone has been stashing hundreds of thousands of barrels of oil a day for two years.
That's a staggering amount of oil to store. To take 1% of the world's oil production offline and store it would mean someone is sequestering about 275 million barrels of oil a year. That works out to about 137 VLCCs. And 1% probably isn't enough to account for the past year's rise in oil.
No one is cornering the market on oil. Oil is too bulky, and the scale of oil trading makes it pretty much impossible.
Moe - in your opinion what is a "large amount of inventory" that might "scare traders"?
And is large inventory a sign of huge surplus or pending shortage?
I think inventory needs to be analysed along with / in context of price and the available storage facilities.
River, you asked for my opinion and I will give it to you. The article is total absolute nonsense! The Fed does not have legislative powers. They are not an arm of the law.
Can't you just see a group of bankers boarding a tanker and saying: By the powers vested in us by the Federal Reserve Bank we commandeer all the oil on this tanker! Yeah Right! Read it again River.
Methinks Ms. Martens needs a course in reading comprehension. The oil, in this case, is already under contract to CITIgroup. They do not need to take possession of it, they already possess it or are under contract to buy it. They have every right to say that tankers that carry oil on their behalf to have proper insurance against pollution take necessary steps to prevent spills or pollution.
Ron Patterson
Ron, that is exactly what I expected you to say. It is you that need a course in reading comprehension. But, some people take longer than others to 'get it'. Perhaps if you re-read it? Or, you can simply push the 'down greenie'...Yeah, that is probably the ticket for you.
After all, gotta stay on topic.
Gee Ron, since oil has increased 697% one would not think that spare capacity would be sitting around in tankers in the Persian Gulf.
Well, after being wrong about the 'no 1979 gas lines' and the 'there is no discrimenation in the South' and 'there are no conspiracy theories'...What was I to expect from you? The unseen hand must be working hard to acheive an almost 700% rise in crude while spare capacity sits around in tankers. Meanwhile the head of OPEC states flatly that 'refineries are not calling for more crude'...Whats up with that? BTW, you should know that the SEC, FED, Treasury, OCC, CFTC, etc are joined at the hip with Wall St bankers. Paulson at Treasury was head of GS. These guys rotate in and out of fed regulatory agencies and Wall St firms. They are the same thing!
'And while the Wall Street firms of Goldman Sachs and Morgan Stanley have been fingered by Congressman Bart Stupak (D-Mich) for gaming the system, Phibro has completely escaped scrutiny during a seven year period when crude oil has risen an astonishing 697%.'
'On May 6 of this year, Tyson Slocum, Director of the Energy Program at the nonprofit watchdog, Public Citizen, testified before Congress on yet another roadblock preventing a meaningful investigation of oil price manipulation:
“Thanks to the Commodity Futures Modernization Act, participants in these newly-deregulated energy trading markets are not required to file so-called Large Trader Reports…These Large Trader Reports, together with the price and volume data, are the primary tools of the CFTC’s regulatory regime…So the deregulation of OTC markets, by allowing traders to escape such basic information reporting, leave federal regulators with no tools to routinely determine whether market manipulation is occurring in energy trading markets…The ability of federal regulators to investigate market manipulation allegations even on the lightly-regulated exchanges like NYMEX [New York Mercantile Exchange] is difficult, let alone the unregulated OTC market.”...snip...
http://www.counterpunch.org/martens06212008.html
+1
For the discussion in general.
I don't consider it a worthy discussion. I think this River guy is trolling this group and wasting everyones time.
Great handle!
Sorry Charlie! And sorry for the corny commercial reference, but I think River gets it exactly right. However, the data and the facts tend to overwhelm us, (me included), and the scheme - whether intentional or not - seems too grand to be real.
And there lies the crux of the problem. We are exhausted by information and by current events. This creates a cognitive dissonance. Had one today, thank you. It takes a sublime mind to look through and summarize the various data points. I believe we call this "connecting the dots" these days.
Things are f*#%ed up these days - more than we care to contemplate.
"We choose to listen to the fool on the hill after the catastrophe has ruined our homes and lives." - quote, "Me"
I keep asking this question and I wonder if you can answer it:
I understand that a manipulator with deep pockets or control of the source can game the price of a commodity by keeping it off the market so if CITI had significant storage capacity they could do this. What I don't understand is how someone without the storage capacity could game the market since they will need to close out each contract before it expires.
Is it your understanding that the speculators are storing the oil and if so where? There are a few tankers in Iranian hands and CITI may have bought some existing tank farms but I have not heard of significant new storage and if there is any it is being hidden from the various agencies like IEA since they are reporting decreasing stores.
I expect the numbers are too big for that to work very well. Let's say you wanted to offset an added 200K/day increase by SA. So if SA produces 200K more then you want to keep the prices from falling, which is at least what someone would have to do to get prices up to where we are anyway. To do that you would buy up and store 200K/day. At 2 MB per tanker you'd fill a tanker every 10 days. So in the last year you would have stockpiled about 36 tankers. Where would you put them and people are going to notice that, whether in a tanker or a tank farm or somewhere. I just can't imagine it won't be noticed. And I think that's at the low end. We're not talking diamonds here - not so easy to hide the flow rates we're missing.
All that being said however, it looks for all the world to me that the Saudis realize what a damn mess the world is in, concerning the supply of oil on the market. And, they are doing what they can to help.
Yeeaah, right. Either: 1) the Saudis had a gun put to their head by you know who -OR- 2) a deal was cooked involving Iraqi oil coming thru SA -OR- 3) the Saudis are simply buying time, hoping Jan brings someone to the WH who's less inclined to bare knuckles -OR- some combo of the above.
http://www.business24-7.ae/Articles/2008/6/Pages/06242008_4d3a76cdcbf345...
UAE Business Magazine: Oil set to surge past $150 after divided Jeddah meeting
By Peter Cooper on Tuesday, June 24, 2008
One of my character flaws out of many is I love to be right and I get the Cupie Doll prize on this one! I'm sure like many of the other TODers that the Jeddah Bong Party wouldn't help in conventional peak oil conditions or global market price.
The lack of simple arithmetic skill across all avenues of society is alarmingly disquieting. 200K of oil = 0.24% increase. Whoopee!! We're saved! Armageddon averted, thank friggin' Christ! Move along folks, nothing to see here. I believe Dr. Bartlett got it right on so many different levels.
It seems the MSM has taken its math lessons from Bingo Hall 101. Keep placing those dots and everyone gets to win folks!
I despair for the species...
I thought she was damn near hysterical touting the fact that we can continue to suck from the oil teats of the Saudis for the next few years.