[Pops]

I've always been sceptical about the predictions of oil prices going to $500-$1000 overnight and staying there. Short term the price is elastic but longer term it can only move so fast. You can only pay so much to drive to the Quik Sac for a water.

If you draw a line extending the increasing consumption in the period up to 2005, you'd see that there are millions of barrels of supply that we were expecting to get that didn't show up. That desire is still there but the ability to pay is what is lacking, the price rises until it eliminates enough buyers that the market balances. It is the wedge; rising cost and scarcity presses price up from the bottom but utility holds a lid on top.

If a buyer, say in the US, is eliminated from the market because the price is too high there are plenty of other willing buyers elsewhere to step in and buy that supply so the price has remained amazingly stable. I thought it would begin to gyrate wildly but just the opposite has happened so far.

Europeans pay 2.5 maybe 3 times what the US pays but their cost is mostly taxes, which of course offset taxes or services they don't have to pay in some other fashion. I think too that the taxes were increased over time which allowed adjustment.


Short answer (barring the Energy Fairy pulling a plumb from her bum):
the supply can't rise,
neither can the price,
so the only elasticity is in demand,
and since demand mirrors the economy
watch the economy, not the price.

[Pops]

Here is a map of what's going on ...

http://www.nytimes.com/interactive/2014 ... l-map.html

[AirlinePilot]

What is going on in Iraq is no surprise to a lot of folks. It may not be directly in the path of the oil geographically, but you can bet it will ultimately affect how much outside help they end up with to extract. All of these middle eastern nations will play out like Libya IMHO. Sectarian unrest and violence will mean oil extraction suffers for the foreseeable future. At some point (not too long from now) realization we are falling off the plateau will set in and things will get even uglier. That will be when to look for signs of hoarding. I disagree with you on price Pops....I believe after we obviously fall off the plateau things will get very volatile.

[Pops]

I know AP, I'm a little out in left field. But consider,

More people have come into the market for oil over the last globalization decade or two, yet the growth of "oilish stuff" has been only half of what actual oil growth had been before. So even though consumption per capita in total has been flat for decades, the supply per oil consumer is already falling.

Effectively there is no plateau in the US, consumption is declining 1-2% per year already. Doesn't matter if it is because we've all become flower children or marathon runners, the effect is the same as if physical supply had declined.

Yet the Brent price has only moved within a few percentage point range over the last 3 years.

[rockdoc123]

this conflict has been happening for at least 5-7 years from my recollection. I was involved with a company at the time looking at a deal in Kurdistan which required understanding a bit about the security situation in the region. At the time Mosul was the absolute worst place for attacks by anti- government terrorists. Kurdistan was a relatively peaceful place due to the Peshmergar (the Kurd armed forces which are pretty impressive) keeping much of the Iranian border and areas near Kirkuk under tight control. Incidents were always happening, they just never seemed to reach the western press. This latest bit is definitely much more intense and seems to be much better organized. With US forces leaving it remains to be seen what the Iraq central government will do. Supposedly they have enough money to pay for the large "security" companies to help lead and train their own forces but I suspect that can be a two-edged sword.

Ironically Iraqs best hope here may be help from Iran who were their main enemy prior to Gulf War I.

[PrestonSturges]

Is Al Qaeda getting it's funding and planning from the Saudis again? Because the Saudis would probably love to see the iraqi oil fields off line.

[Fishman]

Well here is what the idiot Biden had to say "I am very optimistic about -- about Iraq. I mean, this could be one of the great achievements of this administration. You're going to see 90,000 American troops come marching home by the end of the summer. You're going to see a stable government in Iraq that is actually moving toward a representative government,"
Oh wait, that was 4 years ago.
And our UN Rep Powers has sent a scathing hashtag to ISIL.
And then our State Department has stated clearly that ISIL in Syria is very different from ISIL in Iraq.

What it really means is the Sunni/Shia war has another front. And our present administration is the poster boy for clueless.

[Plantagenet]

The WSJ is reporting that Maliki has just secretly asked Obama to start bombing the Islamists in Iraq.

It is not too much of a secret , if you read it in the WSJ?!

This is the Obama Administration remember? The people who sent out a press release identifying their own CIA station chief in Kabul? So the discussions between maliki and obama about the US militarily intervening in Iraq got leaked-----it would have been more surprising if it didn't leak

[BobInget]

President Obama just announced "he is looking into" a response to the Islamic militant march to Baghdad.

Look at a stock market chart to see reaction when this news came out.

Keep in mind we too are in-between a Iraq and a hard nosed Saudi monarchy that has, is, financing this
invasion through Syria.

We have yet to hear from Iran, Russia and Turkey that also have dogs in the fight.

[Keith_McClary]

Great rewriting of history but how does it explain that there was no AQ in Iraq before Dubya invaded???

That's 10 years ago. The fall of Mosul to Al Qaida is happening now. Do--- Try to keep up!

Bush agreed to withdraw from Iraq 6 years ago.

[BobInget]

aQ went to Syria trying to horn in on that uprising. Having succeeding only in extending the conflict aQ moved into Iraq where discontent with raging violence was rife for a coup. Because aQ is hankering for oil revenue, it's doubtful there will be significant disruptions, at this time*. China, for instance, turns blind eyes towards resource politics. Turkey will continue to get oil from Kurds. Russia, as I've insisted for months is going for its own OPEC . This coup may not be taking place were it not for Russia's approval. In fact I smell the 'fine Italian hand' of V. Putin all over this perhaps unintended consequence, Saudi proxy army.
(if you recall, the US made the same mistake arming Iraqis to kill Iranians and Afghans to kill Russians)

President Obama, the US has to choose between a corrupt Iraqi government and doing bidness with so called terrorists.

* this is nothing less then a long game for aQ, Iran and Russia.

[dolanbaker]

The WSJ is reporting that Maliki has just secretly asked Obama to start bombing the Islamists in Iraq.

It is not too much of a secret , if you read it in the WSJ?

Oil is starting to respond, up $2 this morning!

Just jumped another dollar in the last hour.

What are the chances of a "panic" in the city tomorrow morning.

[vtsnowedin]

It depends on which "City" you mean. Baghdad a 1 to 10 certainty. London 1 to 2 Beijing 2 to 1 .

[PrestonSturges]

Well here is what the idiot Biden had to say "I am very optimistic about -- about Iraq. I mean, this could be one of the great achievements of this administration.

Biden suggested a three way split if Iraq and the screech monkeys all howled, but that is very likely to be the outcome.

And he's still a genius compared to all the Republicans that rejected all the predictions of this violence back in 2003 when they were promising a quick free war.

Funny how an "idiot" is still smarter than the whole GOP, or maybe that makes perfect sense.