The Oil Drum | POLL: CLU08 went through $127/bbl today..so, in the next 60 days, the front month price of CL will...

112 comments on POLL: CLU08 went through $127/bbl today..so, in the next 60 days, the front month price of CL will...

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waterpump on July 22, 2008 - 5:20pm

Of course it isnt possible. Demand is on the march like never before seen in world history. 10.5m vehicles will be sold in China this year, double the amount from only 4 years ago! Annual vehicle sales in China is on the way of reaching a whooping 20m in 5 years, surpassing America by a wide margin. Vehicle sales in Brazil: up 30% from last year, sales in Russia: up 40%, on the way of becoming the biggest market in Europe this year. Demand destruction? I see massive demand boom.

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cooma down under on July 22, 2008 - 6:14pm

I agree with you and when Hurricane Dolly hits it will be the excuse again by TV's talking heads when the bounce occurs. In Australia they are now saying the bubble is bursting and lower fuel prices are on the slide!! And most will believe them !!

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Sololeum on July 22, 2008 - 7:40pm

G'Day Cooma,
Commenators should be licensed - there was a raving idiot who got air time on Radio Aunty this morning saying words to the effect of..
"Oil prices will fall further as the US$ STRENGTHENS".. Surely a recovering US economy would stimulate demand???

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Dryki on July 23, 2008 - 7:39pm

The paradigms people use to understand events are so broken people cannot make sense of the data. In some books, if the US economy and dollar strengthened, then yes, prices of imports would fall.

In a world without limits, that is. But we're past peak everything - because energy underlies everything. Peak economy - in the biggest sense of economy. The attempts to force facts into old paradigms will get increasingly absurd - like all those epicycles pre-Galileo. This commentator, the politicians, the media, the public.

A square peg doesn't fit into a round bump. But if all you have is a hammer, you will cause immense destruction trying to make it work Until you change paradigms, all you can do is cause damage - and the harder you hammer, the worse it gets.

cfm in Gray, ME

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waterpump on July 22, 2008 - 10:06pm

It is truly totally irresponsible of these people to even suggest such a thing. The demand boom is just getting started. The average Chinese uses only 2 barrels, while the American uses 25. The average Mexican uses 7 barrels, while the average Indian uses 0,8 barrels. The room for further demand is just incredibly huge and we're seeing it in the vehicle sales and energy demand across the world. And now the Tata Nano car is about to be launched as well, the "people's car". India has 40% more people than all the western countries combined...

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BillyTheRenter on July 22, 2008 - 9:21pm

Waterpump,

I also agree with you. Not only millions of Chinese, but also millions of Indians will be buying cars for the first time thie year.

Matthew Simmons has me convinced. Oil-based products, such as the case for my notebook PC that I'm using to type this, fertilizers, pesticides, asphalt, and many more necessities are produced from oil. People are fools if they think that if everyone used electric light rail powered by nuclear energy, demand for oil will fall so dramatically that prices will be $10 per barrel. I cannot see oil ever going back down below $100 per barrel again.

I'm buying my oil stock on the dips. My oil trust stock has a yield of 14.75% rignt now. I haven't bought any stock for several months and I'm happy to see that it dropped 15% lately.

In the long haul, I hope we build nuclear power plants like crazy. We are running out of cheap oil. I think investors are seeing that Bush wants to drill, but the reality is that it will take ten years for the first drop of oil to come from the new digs. This drop in crude oil prices is wishful thinking. The alcohol will wear off and the hangover will take over. oil will certainly go up above $140 again this year. Bye bye $114!

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waterpump on July 23, 2008 - 12:12am

Indeed, and its not just these countries either. There's huge growth in a lot of countries, from latin america, eastern europe, middle east, southeast asia, combined they add alot of weight as well. There's less than 50m vehicles on the roads in China today, but that number is set to triple by 2015...Add in the rest of the world and the new "people's car" by Tata, we're looking at adding another America to the global vehicle fleet in the next few years.

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noutram on July 23, 2008 - 4:09am

In retrospect the US hit the 'sweet spot' in the decades after the 2nd world war as there was very little global demand for a product that was in massive potential supply. The leverage cheap oil/energy has given enabled the country to keep its #1 status.

It remains to be seen whether the intellectual base built in the latter half of the 20th Century can help the US maintain its hegomony going forward or whether the inneficiencies its reliance on cheap oil has bred will be its undoing.

Nick.

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GreyZone on July 23, 2008 - 2:08pm

In the short term, I can see only one way for oil prices to fall drastically, and that would be severe global recession (or even depression), which remains a distinct possibility. But that's the only way I can see demand slackening. And as soon as any recession ends globally, the Chinese and Indian people will be off to the demand races again. China says that 300 million Chinese have entered the Chinese "middle class" and there are 35 million of them that own cars so far. China has another billion people wanting into that same middle class. Even if car per capita ratios do not expand, that's another 105 million cars minimum.

As Prof. G. notes, markets can be short term volatile. But the longer term trend line has not been seriously broken yet, anymore than the quiet period in 2007 when many thought oil had "stabilized" in the $60 range was a break in that same trend line.

Note: I should say I see only one peaceful way for prices to collapse, that is via a global recession. If we decide to throw a global nuclear bomb party, all bets are off.

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neal on July 23, 2008 - 9:35am

If China is at 10.4 million (and rising fast) and the US down to 12 million from 16 million- then maybe the poll should be on which of the following months has China with a bigger monthly sales figure than the US.

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tstreet on July 23, 2008 - 9:42am

Don't confuse us with the facts. Be like CNBC this morning and use no facts, just that the market says the bubble is bursting. I guess all those people buying new vehicles in China and Russia plan not to drive them. Also ignore the fact that we are adding 70 million people each year to the planet's population.

The problem is that $110 oil seems cheap from $140 but seems like a scary breakthrough coming from $90. My fear is that people are psychologically adjusting to these new prices, especially if they go down.

We need a permanent price floor for oil.

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