Record Oil Prices and Jobs
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We do have plenty of Nimbys and Greens who would oppose nuclear power though.
Throw in Thorium to the debate and watch the more militant Greens squirm... it's safer, more efficient, and produces less toxic waste than Uranium. Best of all, it can't go critical in a reactor where the catalyst is a particle accelerator instead of U-233. Switch off the particle accelerator and the reactor gently dies down... perfect.
Electricity is the future... solar, wind, wave, tidal, hydro... and... nuclear for base power generation. Gas will be king for the next few decades in the transition but with electric motors more powerful than the internal combustion engine and battery technology becoming commercially viable, the future is electric.
...and what a world it will be to live in... quiet (that constant background freeway noise in cities a thing of the past), clean (no air pollution) and fast... very very fast.
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V1650,
Thats why I posted:
"Maybe its time to head off to the middle east to work for these carriers, they are the only airlines that will have the oil rationed to them as it starts to peak? Any thoughts?"
No one really got my thread.
My head is in the sand too.
Thats why I posted:
"Maybe its time to head off to the middle east to work for these carriers, they are the only airlines that will have the oil rationed to them as it starts to peak? Any thoughts?"
No one really got my thread.
My head is in the sand too.
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...and what a world it will be to live in... quiet (that constant background freeway noise in cities a thing of the past), clean (no air pollution) and fast... very very fast.
Nobody has yet ever decommissioned a nuclear power plant and permanently disposed of its radioactive components and waste. Until that occurs there is no way to factor the cost of that into the price of nuclear-generated electricity.
The Economist last week reported that:
... worries over climate change and the end of self-sufficiency in oil and gas mean that atom-splitting is set for a comeback. Ministers want new plants to boost nuclear power's contribution above the 18% of electricity it currently provides but insist that, unlike in the past, there will be no subsidies. With that in mind, the government announced in March that British Energy, which owns most of Britain's nuclear plants (including Sizewell B), was up for sale, and with it the state's 35% stake.
In theory, the firm is an attractive proposition.... So far, though, there has been no scramble for it.
In theory, the firm is an attractive proposition.... So far, though, there has been no scramble for it.
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From : The Australian
Anatole Kaletsky | May 22, 2008
JUST as the credit crunch seemed to be passing, at least in the US, another and much more ominous financial crisis has broken out.
The escalation of oil prices, which this week reached a previously unthinkable $US130 a barrel (with predictions of $US150 and $US200 soon to come), threatens to do far more damage to the world economy than the credit crunch.
Instead of just causing a brief recession, the oil and commodity boom threatens a prolonged period of global “stagflation”, the lethal combination of high inflation and economic stagnation last seen in the world economy in the 1970s and early 1980s. This would be a disaster far more momentous than the repossession of a few million homes or collapse of a couple of banks.
Commodity inflation is far more lethal than a credit crunch for two reasons. It prevents central banks in advanced economies from cutting interest rates to keep their economies growing. Even worse, it encourages the governments of developing countries to turn their backs on global markets, resorting instead to price controls, trade restrictions and currency manipulations to protect their citizens from the rising costs of energy and food. For both these reasons, the boom in oil and commodity prices, if it lasts much longer, could reverse the globalisation process that has delivered 20 years of almost uninterrupted growth to America and Europe and rescued billions of people from extreme poverty in China, India, Brazil and many other countries.
That is the bad news. The good news is that the world is not as impotent as is often suggested in the face of this danger, since soaring commodity prices are not the ineluctable outcome of some fateful conjuncture of global economic forces, but rather the product of a typical financial boom-bust cycle, which could be deflated - especially with some help from sensible political action - as quickly as it built up.
The present commodity and oil boom shows all the classic symptoms of a financial bubble, such as Japan in the 1980s, technology stocks in the 1990s and, most recently, housing and mortgages in the US. But surely, you will say, this commodity boom is different? Surely it is driven by profound and lasting changes in global supply and demand: China's insatiable appetite for food and energy, geopolitical conflicts in the Middle East, the peaking of global oil reserves, droughts caused by global warming and so on. All these fundamental points are perfectly valid, but they tell us nothing about whether the oil price will soon jump to $200, stay at $130 or fall back to $60 next month.
To see that these “fundamentals” are all irrelevant, we have merely to ask which of them has changed in the past nine months. The answer is none. The oil markets didn't suddenly discover China's oil demand nine months ago so this cannot explain the doubling of prices since last August. In fact, China's “insatiable” demand growth has decelerated. In 2004 it was consuming an extra 0.9 million barrels a day; in 2007 it was consuming just an extra 0.3 mbd. In the same period global demand growth has slowed from 3.6 mbd to 0.7 mbd. As a result, the increase in global demand growth is now well below last year's increase of 0.8 mbd in non-Opec production, according to Mike Rothman, of ISI, a leading New York consulting group.
Why, then, are commodity prices still rising? The first point to note is that many no longer are. Rice, wheat and pork are 20 to 30 per cent cheaper than they were two months ago, when financial pundits identified Asian and African food riots as the first symptoms of a commodity “super-cycle” that would drive prices much higher. And the price of industrial commodities such as lead, zinc and nickel, supposedly in short supply a year ago, has now dropped by 40 to 60 per cent. In fact, most major commodity indices would already be in a downtrend were it not for the dominance of oil.
But oil is the commodity that really matters and surely the latest jump in prices proves that demand really does exceed supply? Not at all. In the late stages of financial bubbles, it is quite normal for prices to become completely detached from economic fundamentals. House prices in Florida and Spain kept rising even after property developers built far more homes than they could possibly sell. The same thing happened in credit markets: mortgage securities kept rising even while banks created “special purpose vehicles” to acquire vast “inventories” of bonds for which there were no genuine buyers - and dozens of similar examples can be cited from the bubbles in internet stocks and Japan. Similarly, the International Gold Council reported this week that gold demand for commercial uses and investment fell 17 per cent in January, just as the gold price surged through $1,000 for the first time.
Now consider the situation today in oil markets: the Gulf, according to Mr Rothman, is crammed with supertankers chartered by oil-producing governments to hold the inventories of oil they are pumping but cannot sell. That physical oil is in excess supply at today's prices does not mean that producers are somehow cheating by storing their oil in tankers or keeping it in the ground. All it suggests is that there are few buyers for physical oil cargoes at today's prices, but there are plenty of buyers for pieces of paper linked to the price of oil next month and next year. This situation is exactly analogous to the bubble in credit markets a year ago, where nobody wanted to buy sub-prime mortgage bonds, but there was plenty of demand for “financial derivatives” that allowed investors to bet on the future value of these bonds.
In short, the standard economic assumption that supply and demand drive prices is only a starting point for understanding financial markets. In boom-bust cycles, the textbook theory is not just slightly inaccurate but totally wrong. This is the main argument made by George Soros in his fascinating book on the credit crunch, The New Paradigm for Financial Markets, launched at an LSE lecture last night. In this book Mr Soros explains how financial bubbles always start with some genuine economic transformation - the invention of the internet, the deregulation of credit or the rise of China as a commodity consumer.
He could have added the Netherlands' emergence as a financial centre triggering Tulipmania or Britain's global dominance as a naval power before the South Sea Bubble of 1720. The trouble is that these initial perceptions of a new paradigm tell us nothing about how far financial prices will adjust in response - will Chinese demand drive oil prices to $50 or $100 or $1,000?
Instead they can create a self-fulfilling momentum of rising prices and an inbuilt bias in the way that investors interpret the world. The resulting misconceptions drive market prices to a “far from equilibrium position” that bears almost no relation to the balance of underlying supply and demand.
The people who tell you that commodity prices today are driven by “economic fundamentals” are the same ones who said that house prices in Britain were rising because of land shortages. The amazing thing is that just months after losing hundreds of billions in the housing and mortgage bubbles, investors and governments around the world have reverted to the discredited fallacy that financial markets always reflect economic reality, instead of the boom-bust cycles and misconceptions that George Soros's book vividly describes.
Anatole Kaletsky | May 22, 2008
JUST as the credit crunch seemed to be passing, at least in the US, another and much more ominous financial crisis has broken out.
The escalation of oil prices, which this week reached a previously unthinkable $US130 a barrel (with predictions of $US150 and $US200 soon to come), threatens to do far more damage to the world economy than the credit crunch.
Instead of just causing a brief recession, the oil and commodity boom threatens a prolonged period of global “stagflation”, the lethal combination of high inflation and economic stagnation last seen in the world economy in the 1970s and early 1980s. This would be a disaster far more momentous than the repossession of a few million homes or collapse of a couple of banks.
Commodity inflation is far more lethal than a credit crunch for two reasons. It prevents central banks in advanced economies from cutting interest rates to keep their economies growing. Even worse, it encourages the governments of developing countries to turn their backs on global markets, resorting instead to price controls, trade restrictions and currency manipulations to protect their citizens from the rising costs of energy and food. For both these reasons, the boom in oil and commodity prices, if it lasts much longer, could reverse the globalisation process that has delivered 20 years of almost uninterrupted growth to America and Europe and rescued billions of people from extreme poverty in China, India, Brazil and many other countries.
That is the bad news. The good news is that the world is not as impotent as is often suggested in the face of this danger, since soaring commodity prices are not the ineluctable outcome of some fateful conjuncture of global economic forces, but rather the product of a typical financial boom-bust cycle, which could be deflated - especially with some help from sensible political action - as quickly as it built up.
The present commodity and oil boom shows all the classic symptoms of a financial bubble, such as Japan in the 1980s, technology stocks in the 1990s and, most recently, housing and mortgages in the US. But surely, you will say, this commodity boom is different? Surely it is driven by profound and lasting changes in global supply and demand: China's insatiable appetite for food and energy, geopolitical conflicts in the Middle East, the peaking of global oil reserves, droughts caused by global warming and so on. All these fundamental points are perfectly valid, but they tell us nothing about whether the oil price will soon jump to $200, stay at $130 or fall back to $60 next month.
To see that these “fundamentals” are all irrelevant, we have merely to ask which of them has changed in the past nine months. The answer is none. The oil markets didn't suddenly discover China's oil demand nine months ago so this cannot explain the doubling of prices since last August. In fact, China's “insatiable” demand growth has decelerated. In 2004 it was consuming an extra 0.9 million barrels a day; in 2007 it was consuming just an extra 0.3 mbd. In the same period global demand growth has slowed from 3.6 mbd to 0.7 mbd. As a result, the increase in global demand growth is now well below last year's increase of 0.8 mbd in non-Opec production, according to Mike Rothman, of ISI, a leading New York consulting group.
Why, then, are commodity prices still rising? The first point to note is that many no longer are. Rice, wheat and pork are 20 to 30 per cent cheaper than they were two months ago, when financial pundits identified Asian and African food riots as the first symptoms of a commodity “super-cycle” that would drive prices much higher. And the price of industrial commodities such as lead, zinc and nickel, supposedly in short supply a year ago, has now dropped by 40 to 60 per cent. In fact, most major commodity indices would already be in a downtrend were it not for the dominance of oil.
But oil is the commodity that really matters and surely the latest jump in prices proves that demand really does exceed supply? Not at all. In the late stages of financial bubbles, it is quite normal for prices to become completely detached from economic fundamentals. House prices in Florida and Spain kept rising even after property developers built far more homes than they could possibly sell. The same thing happened in credit markets: mortgage securities kept rising even while banks created “special purpose vehicles” to acquire vast “inventories” of bonds for which there were no genuine buyers - and dozens of similar examples can be cited from the bubbles in internet stocks and Japan. Similarly, the International Gold Council reported this week that gold demand for commercial uses and investment fell 17 per cent in January, just as the gold price surged through $1,000 for the first time.
Now consider the situation today in oil markets: the Gulf, according to Mr Rothman, is crammed with supertankers chartered by oil-producing governments to hold the inventories of oil they are pumping but cannot sell. That physical oil is in excess supply at today's prices does not mean that producers are somehow cheating by storing their oil in tankers or keeping it in the ground. All it suggests is that there are few buyers for physical oil cargoes at today's prices, but there are plenty of buyers for pieces of paper linked to the price of oil next month and next year. This situation is exactly analogous to the bubble in credit markets a year ago, where nobody wanted to buy sub-prime mortgage bonds, but there was plenty of demand for “financial derivatives” that allowed investors to bet on the future value of these bonds.
In short, the standard economic assumption that supply and demand drive prices is only a starting point for understanding financial markets. In boom-bust cycles, the textbook theory is not just slightly inaccurate but totally wrong. This is the main argument made by George Soros in his fascinating book on the credit crunch, The New Paradigm for Financial Markets, launched at an LSE lecture last night. In this book Mr Soros explains how financial bubbles always start with some genuine economic transformation - the invention of the internet, the deregulation of credit or the rise of China as a commodity consumer.
He could have added the Netherlands' emergence as a financial centre triggering Tulipmania or Britain's global dominance as a naval power before the South Sea Bubble of 1720. The trouble is that these initial perceptions of a new paradigm tell us nothing about how far financial prices will adjust in response - will Chinese demand drive oil prices to $50 or $100 or $1,000?
Instead they can create a self-fulfilling momentum of rising prices and an inbuilt bias in the way that investors interpret the world. The resulting misconceptions drive market prices to a “far from equilibrium position” that bears almost no relation to the balance of underlying supply and demand.
The people who tell you that commodity prices today are driven by “economic fundamentals” are the same ones who said that house prices in Britain were rising because of land shortages. The amazing thing is that just months after losing hundreds of billions in the housing and mortgage bubbles, investors and governments around the world have reverted to the discredited fallacy that financial markets always reflect economic reality, instead of the boom-bust cycles and misconceptions that George Soros's book vividly describes.
When will the bubble burst and who could this effect?
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Yes in the longer term I agree. There will be solutions. Of that there is no doubt.
But what about here and now? When oil hit $100 people talked of the "natural, underlying" price of being around $50. Now its almost at $150 some say the natural price is $80. Blah Blah Blan. Depends on who you listen to.
Regardless of the causes of high oil prices - speculation, etc, you pay what you pay. And the current price is starting to bite.
GD's latest spiel on the QF intranet talks of parking planes. They are already doing this in the States.
Naturally this has an effect on jobs.
Any newbie with a positive outlook for the next decade or so definitely views the glass as half full. Admirable, but to my mind the justification is dubious.
As for those about to head to our shores armed with a s457 visa, you are headed into dangerous territory. What rights will you have if airlines begin to "downsize"?
OI
But what about here and now? When oil hit $100 people talked of the "natural, underlying" price of being around $50. Now its almost at $150 some say the natural price is $80. Blah Blah Blan. Depends on who you listen to.
Regardless of the causes of high oil prices - speculation, etc, you pay what you pay. And the current price is starting to bite.
GD's latest spiel on the QF intranet talks of parking planes. They are already doing this in the States.
Naturally this has an effect on jobs.
Any newbie with a positive outlook for the next decade or so definitely views the glass as half full. Admirable, but to my mind the justification is dubious.
As for those about to head to our shores armed with a s457 visa, you are headed into dangerous territory. What rights will you have if airlines begin to "downsize"?
OI
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To the sceptics out there, pull your thumb out of your bum and understand where airlines money is going at the moment.
Read the reports, airlines are in trouble globally.
Merge or go broke.
See here: http://www.smartmoney.com/one-day-wo...nd-oil-prices&
MP.
Read the reports, airlines are in trouble globally.
Merge or go broke.
See here: http://www.smartmoney.com/one-day-wo...nd-oil-prices&
MP.
Grandpa Aerotart
I watched an Australian analyst on Bloomberg this evening saying over and over again that this is 70% demand driven. His eyelids were blinking at an incredible rate...a sign he didn't believe what he was saying.
What has changed world wide in the last 9 months or so that would cause oil doubling?
Iraq is quiet and it seems things are improving there and the troop surge is working.
Nigeria is just same old same old...as is Venezuela etc.
Some huge oil finds off Brazil (Tupi) and in the continental US (Bakken and Gulf)
Demand is not rising...in fact indications are it is falling as people tighten their belts and economies contract if not actually edge closer to recession.
Even in China and India.
The only thing that has happened in the last 9 months is the US sub prime meltdown.
100s of Billions of $ has flowed out of sub prime effected investments and into commodities as big investment banks/brokerages/investment funds etc try and recoup their losses.
Oil is the biggest commodity of them all....interesting that others, like rice, corn etc have seen 40-60% falls just lately...despite the recent food war rhetoric.
Certainly US airlines are in DEEP ****. Many operate with extremely old aircraft because they are fully depreciated or cheap to buy/lease...DC9s/727s/737-100/200s etc abound in the US. Even the larger airlines still have fleets of old, fully depreciated aircraft...I wonder how many were owned outright but refinanced as airlines travelled through CH 11 in the last year or three?
This is one of the big holes in modern management/accounting practices...in times past when airline owners believed in owning aircraft and expanding within cashflow an economic downturn meant mothballing aircraft owned outright so cash flow 'out' could better equal cash flow 'in' until things picked up again. In the era of big beancounter bonuses everything is refinanced then/or leased back...so when the hard times come the outgoing cash keeps going out at the same rate as when the times are good.
Interesting too that the enormous US fleets of regional jets have suddenly become uneconomical.
Many of the big US airlines have only recently emerged from extended periods in Chapter 11 protection...bankrupt airlines can't hedge fuel because they don't have the cashflow/credit facility to do so.
Mates at EK tell me that Emirates pays for its fuel 5 years in advance. EK have been inundated with applications from US pilots so the pilot shortage in the ME just ended.
My feeling is that we are approaching the top of the oil price bubble...how far further I couldn't guess...the market is being talked up by Goldman Sachs et al...when they have made as much money as they can they will start selling off and oil will crash.
As an aside it is interesting to juxtapose the political rhetoric within the US. On the one hand they talk about how essential it is to be independent of Saudi oil while at the same time (the Lefty Democrats) block off great slabs of real estate and say you can't drill for oil...not in ANWR, not offshore on the continental shelf, and forget the oil shale in Colorado etc too. Forget also building refineries. They haven't built one in the US since 1975.
100s of billions of barrels if not trillions and they, the Democrats, sit trapped by their ideology while their economy tanks.
Extraction cost range from about $2/bbl in Saudi Arabia to about $30/bbl for Tar sands in Alberta.
Demand has peaked and is falling, supply is a non issue with more coming online (they have been drilling like mad the last years-and finding) all the time.
So tell me where $135/bbl comes from if not speculation?
What has changed world wide in the last 9 months or so that would cause oil doubling?
Iraq is quiet and it seems things are improving there and the troop surge is working.
Nigeria is just same old same old...as is Venezuela etc.
Some huge oil finds off Brazil (Tupi) and in the continental US (Bakken and Gulf)
Demand is not rising...in fact indications are it is falling as people tighten their belts and economies contract if not actually edge closer to recession.
Even in China and India.
The only thing that has happened in the last 9 months is the US sub prime meltdown.
100s of Billions of $ has flowed out of sub prime effected investments and into commodities as big investment banks/brokerages/investment funds etc try and recoup their losses.
Oil is the biggest commodity of them all....interesting that others, like rice, corn etc have seen 40-60% falls just lately...despite the recent food war rhetoric.
Certainly US airlines are in DEEP ****. Many operate with extremely old aircraft because they are fully depreciated or cheap to buy/lease...DC9s/727s/737-100/200s etc abound in the US. Even the larger airlines still have fleets of old, fully depreciated aircraft...I wonder how many were owned outright but refinanced as airlines travelled through CH 11 in the last year or three?
This is one of the big holes in modern management/accounting practices...in times past when airline owners believed in owning aircraft and expanding within cashflow an economic downturn meant mothballing aircraft owned outright so cash flow 'out' could better equal cash flow 'in' until things picked up again. In the era of big beancounter bonuses everything is refinanced then/or leased back...so when the hard times come the outgoing cash keeps going out at the same rate as when the times are good.
Interesting too that the enormous US fleets of regional jets have suddenly become uneconomical.
Many of the big US airlines have only recently emerged from extended periods in Chapter 11 protection...bankrupt airlines can't hedge fuel because they don't have the cashflow/credit facility to do so.
Mates at EK tell me that Emirates pays for its fuel 5 years in advance. EK have been inundated with applications from US pilots so the pilot shortage in the ME just ended.
My feeling is that we are approaching the top of the oil price bubble...how far further I couldn't guess...the market is being talked up by Goldman Sachs et al...when they have made as much money as they can they will start selling off and oil will crash.
As an aside it is interesting to juxtapose the political rhetoric within the US. On the one hand they talk about how essential it is to be independent of Saudi oil while at the same time (the Lefty Democrats) block off great slabs of real estate and say you can't drill for oil...not in ANWR, not offshore on the continental shelf, and forget the oil shale in Colorado etc too. Forget also building refineries. They haven't built one in the US since 1975.
100s of billions of barrels if not trillions and they, the Democrats, sit trapped by their ideology while their economy tanks.
Extraction cost range from about $2/bbl in Saudi Arabia to about $30/bbl for Tar sands in Alberta.
Demand has peaked and is falling, supply is a non issue with more coming online (they have been drilling like mad the last years-and finding) all the time.
So tell me where $135/bbl comes from if not speculation?
Last edited by Chimbu chuckles; 26th May 2008 at 12:49.
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Chimbu,
Great post. I've said it before and I say it again - OPEC has the world by the testicles and every now and then it has a bit of fun by giving them a good hard squeeze . The rest of the world crosses it's eyes in pain while they sit back laughing all the way to the bank.
When a viable non oil basd fuel alternative is developed the boot will be on the other foot. I hope it happens in my lifetime.
Great post. I've said it before and I say it again - OPEC has the world by the testicles and every now and then it has a bit of fun by giving them a good hard squeeze . The rest of the world crosses it's eyes in pain while they sit back laughing all the way to the bank.
When a viable non oil basd fuel alternative is developed the boot will be on the other foot. I hope it happens in my lifetime.
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CNG
Maybe our massive natual gas reserves could be utilised by some smarty inventing a motor that can run on both petrol and CNG , and leave the expensive fuel for the airlines.
But I think Johnny sold it all to the chinese for about $2.65.
MC
But I think Johnny sold it all to the chinese for about $2.65.
MC
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Chimbu,are you sure about no demand from China?
I'm sure thats why steel and oil are so high at the moment and continue to rise.
I was talking to a guy who brings in ag equipment to Oz and he reckons that anything that is made from steel will be at least 40% or more by the end of the year.fertilizer prices are also going through the roof and China with it's massive expansion is the only reason I can see at the moment.
I'm sure thats why steel and oil are so high at the moment and continue to rise.
I was talking to a guy who brings in ag equipment to Oz and he reckons that anything that is made from steel will be at least 40% or more by the end of the year.fertilizer prices are also going through the roof and China with it's massive expansion is the only reason I can see at the moment.
Quote:
"This is one of the big holes in modern management/accounting practices...in times past when airline owners believed in owning aircraft and expanding within cashflow an economic downturn meant mothballing aircraft owned outright so cash flow 'out' could better equal cash flow 'in' until things picked up again. In the era of big beancounter bonuses everything is refinanced then/or leased back...so when the hard times come the outgoing cash keeps going out at the same rate as when the times are good."
Great post Chimbu, and very informative. With reference to the above however, here's an interesting one. With respect to airlines being heavily geared In Australia, you have REX at one end of the scale (having virtually no net debt, and owning almost all of their aircraft) to DJ being a product of the short sighted accounting practices that have come to be so commonplace in the industry. With such high debt levels some industry insiders are starting to predict rocky times ahead for Virgin Blue.
Remember Ansett and ANA back in the 50's!
"This is one of the big holes in modern management/accounting practices...in times past when airline owners believed in owning aircraft and expanding within cashflow an economic downturn meant mothballing aircraft owned outright so cash flow 'out' could better equal cash flow 'in' until things picked up again. In the era of big beancounter bonuses everything is refinanced then/or leased back...so when the hard times come the outgoing cash keeps going out at the same rate as when the times are good."
Great post Chimbu, and very informative. With reference to the above however, here's an interesting one. With respect to airlines being heavily geared In Australia, you have REX at one end of the scale (having virtually no net debt, and owning almost all of their aircraft) to DJ being a product of the short sighted accounting practices that have come to be so commonplace in the industry. With such high debt levels some industry insiders are starting to predict rocky times ahead for Virgin Blue.
Remember Ansett and ANA back in the 50's!
Grandpa Aerotart
roamingwolf I didn't say 'no' demand from China I said Chinese demand has not increased enormously in the last 9 months, in fact world wide, demand seems to have peaked and be falling...as you would expect at an oil price point that, if sustained, WILL make the sub prime meltdown seem like a picnic.
The US is still the predominate world market by orders of magnitude. Probably 15 times bigger than the Chinese market. I have seen figures that show that even if China continued to grow at double digits the way it has been it would take many decades to be as big as the US is now and by then the US will be many times bigger than it is now.
OPEC is not the problem in my opinion. They have been saying for a long time that the market is awash with oil and just lately they have started to say that demand is dropping. Their biggest worry is the collapse of the oil price not $200/bbl. They keep sending out subtly worded signals that indicate they are as frustrated with the Nymex/ICE etc as we should be outraged.
The last time oil was this high (nearly) they increased supply just as the world went into recession and the result was $12/bbl all through the late 80s and into the 90s. If you correct that $12/bbl for headline (real) general inflation and a falling US$ it probably comes close to $60/bbl.
About where it was a year ago.
You may find this interesting...written in 2005. Note the comments about easy money driving bubbles and think about the easy money the fed has been pouring into the US market of late to prop up failing banks.
http://www.moneyweek.com/file/3075/b...-but-when.html
This too makes an interesting read.
http://www.moneyweek.com/file/47370/...mon-sense.html
As does this.
http://oil-gasoline.typepad.com/geor...n_oilgasoline/
The fact remains that supply is not an issue and demand is falling globally despite a few areas (parts of Asia) where demand is still strong but not as strong as 12 months ago. Interestingly one commentator remarks that the greater part of China's oil demand is driven by transportation needs...to move all the stuff they make for the world market around...and construction.
A US recession will soon fix that.
The US is still the predominate world market by orders of magnitude. Probably 15 times bigger than the Chinese market. I have seen figures that show that even if China continued to grow at double digits the way it has been it would take many decades to be as big as the US is now and by then the US will be many times bigger than it is now.
OPEC is not the problem in my opinion. They have been saying for a long time that the market is awash with oil and just lately they have started to say that demand is dropping. Their biggest worry is the collapse of the oil price not $200/bbl. They keep sending out subtly worded signals that indicate they are as frustrated with the Nymex/ICE etc as we should be outraged.
The last time oil was this high (nearly) they increased supply just as the world went into recession and the result was $12/bbl all through the late 80s and into the 90s. If you correct that $12/bbl for headline (real) general inflation and a falling US$ it probably comes close to $60/bbl.
About where it was a year ago.
You may find this interesting...written in 2005. Note the comments about easy money driving bubbles and think about the easy money the fed has been pouring into the US market of late to prop up failing banks.
http://www.moneyweek.com/file/3075/b...-but-when.html
This too makes an interesting read.
http://www.moneyweek.com/file/47370/...mon-sense.html
As does this.
http://oil-gasoline.typepad.com/geor...n_oilgasoline/
The fact remains that supply is not an issue and demand is falling globally despite a few areas (parts of Asia) where demand is still strong but not as strong as 12 months ago. Interestingly one commentator remarks that the greater part of China's oil demand is driven by transportation needs...to move all the stuff they make for the world market around...and construction.
A US recession will soon fix that.
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OPEC needs to cut production as oil sales are in USD, a currency on the slide.
There is an argument to be made that the US is lobbying its OPEC client states such as KSR and Kuwait to limit the use of their emergency reserves in order to keep oil prices high. High oil prices are actually assisting the US current account deficit at the moment. Washington doesn’t give a toss how many airlines (UAL and Mesa next) fall off the table as a result; there is a much bigger picture to focus on.
The price of oil will probably undergo a (short term) super spike of upwards of 200/b. One thing is for sure, we are going to witness a dramatic change in the way oil hits the market with the Kish bourse making headway (reason for nuclear concerns in Iran) and countries such as Venezuela signing “off USD” oil deals (the reason why Colombia is being armed to the teeth by the US).
The price of oil will come back down. Worldwide recession will ensure a huge drop in demand in the coming years and OPEC will eventually move toward marking oil against a basket of currencies with more future than the USD.
The current mess we are seeing: oil prices, conflict, finance bubbles, the decline of USD hegemony and subprime (the next big drama will be personal credit) are all linked to a single decision made in Washington many years ago.
Anybody know what the decision was?
There is an argument to be made that the US is lobbying its OPEC client states such as KSR and Kuwait to limit the use of their emergency reserves in order to keep oil prices high. High oil prices are actually assisting the US current account deficit at the moment. Washington doesn’t give a toss how many airlines (UAL and Mesa next) fall off the table as a result; there is a much bigger picture to focus on.
The price of oil will probably undergo a (short term) super spike of upwards of 200/b. One thing is for sure, we are going to witness a dramatic change in the way oil hits the market with the Kish bourse making headway (reason for nuclear concerns in Iran) and countries such as Venezuela signing “off USD” oil deals (the reason why Colombia is being armed to the teeth by the US).
The price of oil will come back down. Worldwide recession will ensure a huge drop in demand in the coming years and OPEC will eventually move toward marking oil against a basket of currencies with more future than the USD.
The current mess we are seeing: oil prices, conflict, finance bubbles, the decline of USD hegemony and subprime (the next big drama will be personal credit) are all linked to a single decision made in Washington many years ago.
Anybody know what the decision was?
Grandpa Aerotart
De linking from the Gold standard.
Apart from your comments re a short term super spike which is entirely likely as the big banks 'go for gold' I think the rest is unlikely.
A little to much conspiracy theory in there for my liking.
Apart from your comments re a short term super spike which is entirely likely as the big banks 'go for gold' I think the rest is unlikely.
A little to much conspiracy theory in there for my liking.
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Yep.
Washington had no choice but the result has been a system of unchecked borrowing at all levels ever since. Hence the "institutionalised" current account deficit that was only manageable under a system of USD hegemony. That system is coming to an end and we are seeing the results unfold every day in many obvious ways (Subprime, Greenback sliding into oblivion, oil prices) and some not so obvious (the war on terror).
Second question. What finacial data did the US Fed stop publishing and why?
Washington had no choice but the result has been a system of unchecked borrowing at all levels ever since. Hence the "institutionalised" current account deficit that was only manageable under a system of USD hegemony. That system is coming to an end and we are seeing the results unfold every day in many obvious ways (Subprime, Greenback sliding into oblivion, oil prices) and some not so obvious (the war on terror).
Second question. What finacial data did the US Fed stop publishing and why?
Grandpa Aerotart
How much cash is in the system (M3).
There excuse was cash had become such a small part of total liquidity that it was no longer that important to report and they could save money by not reporting it.
The conspiracy theory is it was done purely to hide the fact that the printing presses are running 24/7 and that, of itself, is fueling inflation.
Probably the truth is somewhere in the middle...it certainly doesn't make for transparency in a democracy.
There excuse was cash had become such a small part of total liquidity that it was no longer that important to report and they could save money by not reporting it.
The conspiracy theory is it was done purely to hide the fact that the printing presses are running 24/7 and that, of itself, is fueling inflation.
Probably the truth is somewhere in the middle...it certainly doesn't make for transparency in a democracy.
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Insider,
Yep. A Ponzi scheme is how the western economic system has evolved.
M3. Chimbu, the Fed is pumping out cash like no industrialized nation on earth. Why wont they publish the data? We will never know.
Yep. A Ponzi scheme is how the western economic system has evolved.
M3. Chimbu, the Fed is pumping out cash like no industrialized nation on earth. Why wont they publish the data? We will never know.