THE Price of Crude pt 4 (merged) Archived

[Doly]

Is it just me, or does it feel like one major political blunder would send this world into WWIII?

You could call it WWIII, but the battles aren't going to happen in the territory of the countries that start them. The battles will happen in the countries with oil.

[linlithgowoil]

no chance. that price of oil would only happen if we had a shortfall in supply of a couple million barrels or more. and even then, the price would not simplty sit that high or keep rising, because people expect disruptions to be temporary - mainly because they usually are.

the world economy could not sustain $100 oil for very long, and thats why i think people saying oil will keep going higher and higher for ever more are wrong.

[Madpaddy]

Unless you are talking about the Jordanian dollar, I think $100 oil this month is impossible bar a war or a major terrorist attack. In fact, I think governments would intervene and introduce rationing before they would allow an increase like this to take place in such a short time frame.

However, the one thing I do know after watching events unfold in the last 4 years is that we cannot predict with any real accuracy what will happen.

[deconstructionist]

Is it just me, or does it feel like one major political blunder would send this world into WWIII?

You could call it WWIII, but the battles aren't going to happen in the territory of the countries that start them. The battles will happen in the countries with oil.

not that we're all Americans here, but for the record, America is still one of the top oil producing nations in the world... which puts the war on our soil in Doly's scenario.

I think it's safe to call it world war III. and i think that PNAC is marching us straight into it. the only thing that might stop it is civil war in the US.

[khebab]

Expect $95 to $100 per barrel of oil to come around within this month and next month. Goldman Sachs predicted it last summer (suggesting $105 per barrel by end of 2005 or start of 2006), just less than a month before the Katrina/New Orleans disaster. The sky-high gas prices we saw and paid for in the first two weeks of September was just a conditioning preview for all of us and see how we reacts to that by various degrees.

I could be wrong and I hope I'm wrong but this sign of a triple-digit price per barrel of oil is just right around the corner soon.

Be prepared for the shock.

Why is that? We don't have any problems on the supply side (yet), just tight spare capacity and strong demand. Many new projects are coming online this year and are on schedule.

Prices should stay around $60 +/- $10 for a while unless major geopolitical event!

[elroy]

Is it just me, or does it feel like one major political blunder would send this world into WWIII?

You could call it WWIII, but the battles aren't going to happen in the territory of the countries that start them. The battles will happen in the countries with oil.

not that we're all Americans here, but for the record, America is still one of the top oil producing nations in the world... which puts the war on our soil in Doly's scenario.

I think it's safe to call it world war III. and i think that PNAC is marching us straight into it. the only thing that might stop it is civil war in the US.

Maybe one of the top producing countries, but also the single largest consumer. Check out these tables: http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.html
http://www.cia.gov/cia/publications/fac ... 4rank.html
Northern america has a very strategic position, between 2 oceans, has the largest (perhaps after China, but quality over quantity I think) most modern army in the world and that's why the wars won't be fought on their soil.

[HonestPessimist]

Less than three years ago, I told (more like warned) few peoples, friends and my family that sometime in late 2004 or 2005 we would be seeing an end to cheap oil, or at least the end of abundance of cheap oil and we would be seeing an average $1.80-$2.00 per gallon in the USA by 2005 in most places. My prediction/warning was made just prior to the start of the Iraqi war. It wasn't just a gloom-n-doom scenario I was making up with, it was something that I observed from various geopolitical affairs and its long-term impact on energy/oil production and distribution between nations.

So far since the beginning of last year, my prediction came true, as a matter of fact. 2005 was the final year of cheap oil and we will not be seeing $1.50 per gallon or less from now on in the USA. From that point, we'll be seeing $2.00 and above per gallon depending on the availability of supplies in the nation (export/import), barring any major energy disruption, geopolitical impact, a major war or a huge terrorist attack on oil facilities in the Persian Gulf.

I'm just expecting a temporary spike of oil price ($95-$100 per barrel) sometime early this year, not a gradual spiking throughout the year, based on the Goldman Sachs analysis last summer. I don't know if it has been since revised but given the recent circumstances regarding Iran, this might be it. The threat of Iran's bourse exchange and the switching of petrodollar to petroeuro by March is a critical issue here, adding the general election in Israel at the end of March may affect the outcome of a possible confrontation against Iran or not.

Now Sharon is in the hospital, under a serious emergency health matter, it could be a sooner-than-you-think circumstance regarding Iran.

It is not about whether there are still plenty of supplies around to keep the oil price at $60 per barrel or less, it is a question of whether all the world's oil supplies and its production/distribution would be seriously affected by a burgeoning geopolitical meltdown by certain sovereign parties over certain controversial issues.

Nevertheless, in my conclusion, the triple-digit oil price per barrel is just right around the corner, at least for a short-term outcome. How soon we get there remains to be seen.

ADDENDUM: When I predicted the end of the abundance of cheap oil in 2003, I did not know anything about Peak Oil discussions or this website until I joined here last year. Most of my observations were based on reading newspapers, periodicals (Time, Newsweek, US/World News, etc), and Internet forum discussions but definitely not Peak Oil stuff I was getting into at the time.

[pogoliamo]

The fact there are people who fear 110$/barrel means they will try to secure against it. This already means something! And it is not "doom and gloom", IMHO is exactly the opposite of irrational and overblown. It may be a bit early but it is logical and we should be better prepared in advance.

Few month ago I spoke to a trader and person who worked in oil company in Canada. They were both convinced the price will go 30$ again and that the current price is "exaggerated". Sometimes we need to take few steps back and try to see the forest, not the trees.

Thanks HonnesPessimist!

[pogoliamo]

sorry clicked twice on submit, please delete

[evilgenius]

It is convenient for the sale of US debt that oil and other commodities are denominated in US dollars. Anybody outside of the US has to have dollars to purchase those commodities. The safest way to hold dollars is to hold bonds. Now would be a good time to think about what euro-petro means. For the first time the dollar will have to bid for its purchases. If the dollar is weak more dollars can be thrown at a thing and in effect the same price is paid as if fewer strong dollars had gone that way. Of course, business in the US would have to accept higher wage costs to fulfill a truly inflationary strategy. So far they haven't seemed willing.

Why is it that Bernanke was nominated to the Fed post? Is inflation the administrations answer to competing with the euro? More probably inflation is the Administrations answer to the overall level of debt and they aren't sure about what to do about euro-petro. Lots of people argue that Iraq was done because Saddam wanted to institute euro-petro and the US simply wouldn't stand for that. I think Saddam is where he is because he got in the Neo-Con's way vis a vis their strategy to maintain cheap oil for as long as possible past 2010.

On the other hand, maybe the Fed is going to talk about stopping its rate rises but won't really stop until the rate reaches 5%? If their inflationary strategy means that bonds won't really sell because of low interest rates relative to the rest of the world then why not sell off a shocked and deflated real estate position in order to keep the dollar conveyor going? That would still keep foreigners in bonds so that they could hold dollars in order to purchase discount real estate. It is like anorexia, isn't it?

[HonestPessimist]

More illogical doom and gloom.

Oil may move up 10% or even 20% in January. But a 60% price hike in one month without a massive disruption in supply? Give me a break.

Either provide some evidence of a soon-to-be revolution in Saudi Arabia or moderate your prediction.

...Or do whatever the heck you want, it's a free internet.

Tyler, I stated:

I could be wrong and I hope I'm wrong but this sign of a triple-digit price per barrel of oil is just right around the corner soon.

Which mean I'm giving anybody the benefit of doubt about my perspective on this potential $100 PBO soon ...for free, of course.

I understand that you and the rest of us get "doom-n-gloom" predictions and so-so from time to time and that make all of us jaded, right? But don't ignore the potentiality of a triple-digit oil price spike coming in the very near future, okay?

This early morning, I went to a gas station for gas and the price was $2.29 per gallon- regular fuel (in central Ohio). When I left work for home, I spotted the same gas station with the latest price: $2.49 per gallon! A 20 cents jump in over 8 hours.

[HonestPessimist]

It is convenient for the sale of US debt that oil and other commodities are denominated in US dollars. Anybody outside of the US has to have dollars to purchase those commodities. The safest way to hold dollars is to hold bonds. Now would be a good time to think about what euro-petro means. For the first time the dollar will have to bid for its purchases. If the dollar is weak more dollars can be thrown at a thing and in effect the same price is paid as if fewer strong dollars had gone that way. Of course, business in the US would have to accept higher wage costs to fulfill a truly inflationary strategy. So far they haven't seemed willing.

Why is it that Bernanke was nominated to the Fed post? Is inflation the administrations answer to competing with the euro? More probably inflation is the Administrations answer to the overall level of debt and they aren't sure about what to do about euro-petro. Lots of people argue that Iraq was done because Saddam wanted to institute euro-petro and the US simply wouldn't stand for that. I think Saddam is where he is because he got in the Neo-Con's way vis a vis their strategy to maintain cheap oil for as long as possible past 2010.

On the other hand, maybe the Fed is going to talk about stopping its rate rises but won't really stop until the rate reaches 5%? If their inflationary strategy means that bonds won't really sell because of low interest rates relative to the rest of the world then why not sell off a shocked and deflated real estate position in order to keep the dollar conveyor going? That would still keep foreigners in bonds so that they could hold dollars in order to purchase discount real estate. It is like anorexia, isn't it?

All the rhetoric and threat-of-war propagation by the general media, activists, policymakers, and useful idiots are what stroking and compelling fears and concerns among the various investors, shareholders, market forces, industry/financial analysts, traders, etc., etc., causing a great deal of financial panic and anxiety across the world's markets and trades, impacting the bottom line.

So stop scaring the peons everywhere with all that rhetoric.

[0mar]

I think the price will increase ~35-40% overall in the year, but there probably won't be any spikes in prices. The trend is up overall, but unless something major happens, I doubt we will see prices more than a few bucks a month.

[hoplite]

Regular gasoline today at the Anacortes, WA Costco: $1.99/gallon. Doesn't look like a superspike to me doomers!

[aahala]

Expectations are only bound by one's imagination. Space aliens will land
in the next month, or oil will be $105 or $5 within the same time period.

Reasonable expectations are much narrower in scope. They are bound by
knowledge of the facts on the ground and evidence which can be brought
to bear on the subject matter.

[Euric]

Expect $95 to $100 per barrel of oil to come around within this month and next month. Goldman Sachs predicted it last summer (suggesting $105 per barrel by end of 2005 or start of 2006), just less than a month before the Katrina/New Orleans disaster. The sky-high gas prices we saw and paid for in the first two weeks of September was just a conditioning preview for all of us and see how we reacts to that by various degrees.

I could be wrong and I hope I'm wrong but this sign of a triple-digit price per barrel of oil is just right around the corner soon.

Be prepared for the shock.

Your prediction is actually a few months premature. If there is going to be a dollar spike in oil prices, it won't happen until the spring. The Iranian Oil Bourse will begin its sale of oil in euros after 2006-03-20. This move could cause a panic in the dollar, forcing it to lose enough value, that the dollar price could rise significantly while the euro price remains constant.

China, this week, raised the value of the yuan relative to the dollar and indicated it was going to heavily diversify its foreign reserves. They are preparing to buy their oil in euros. The dollar is starting to lose value again against all major currencies, not just the euro.

There is no other reason for the price of oil to rise. But a relative price rise in dollars due to its declining value is the only thing that would make this prediciton a possibility.

[Marklar]

I predict a fall in oil prices ($40 to $50) and I base that on absolutely nothing.

But I also wouldn't be surprised to see $80 this summer.

I'm a bit confused..... The whole hurricane thing really confused me. After hurricane Katrina hit I made a bet with someone that oil would be atleast $62 at the end of the year. I lost that bet only to see it jump over $62 on Jan 2... Why lord? Why?

[thuja]

Does anyone know how the price of a barrel of crude oil is related to the price of gas/petrol at the fill-up station? Here in the states when a barrel was nearly 70 dollars- the price of gas was about 3 $/gal. on average. Oil has dipped to the 50's and is back again to mid-60's but the price of gas went down to nearly 2 $/gal. and is now averaging only about 2.30$. If there was a direct correlation, the price of gas would be moving towards 3 $ again.

How come there is no direct correlation? What are the factors I am missing?

[Osurac]

I think the price of a barrel of oil that we see today is not the same barrel of oil you are pumping into your vehicle. Im not sure of the amount of time between a purchase of oil and when it hits your local pump but there is a lag time. That would not really explain the fact that prices rose to above 3 dollars during the week of Katrina though so I could be wrong, because I think it takes much longer than a week for a barrel of oil to be pumped out of the ground, shipped, refined, shipped and pumped into a vehicle.

[thuja]

Yeah its a conundrum- I'm sure there are many factors including refinery, shipping/transportation costs, market forces, etc. that go into determining the cost of gasoline versus cost of crude oil. What I need is a really good flow chart...

I believe I read that there are 42 gallons of oil in a barrel.

At 64 $/barrel, that would mean a gallon costs 1.52$. This is of course before refinery/transportation, taxes, etc.

At 70 $/ barrel, a gallon costs 1.67$. That's only a 15 cent difference from the post Katrina prices and yet we have a differential of around 70 cents between now and then.

This is what is confusing me. And yes I know gas prices are rising, but there still seems to be something else going on...