Exploring Hydrocarbon Depletion
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Plantagenet wrote:The Congress is going to enact a new $9 per barrel tax on domestic oil, so even if it did fall to $5 per barrel you'd have to add in the tax and would wind up at $14 per barrel.
WASHINGTON - House Democrats next week will push to impose a new conservation fee on oil and natural gas taken from the Gulf of Mexico....
The bill calls for a $9 a barrel "resource conservation" fee on domestic oil, and a $1.25 per million Btu fee on natural gas .....
Goldman Oil Bull Speaks: Yes, Oil Still Going to $150-$200 A Barrel, Gas to $4-$6 (XOM) Henry Blodget | Jun 7, 08 8:38 AM :
The man who predicted the current oil "super-spike," Goldman's Arjun Murti, is smart enough not to let himself get photographed (in some idiot circles, Arjun is blamed for today's $138 a barrel), but he did consent to a long interview with Barron's this week. Bottom line, Murti's thesis that oil will spike to $150-$200 a barrel is perfectly reasonable. As is his belief that prices will thereafter crash.
Unlike the 1970's oil spike, which was the result of a supply crunch (oil taken off the market), this move is demand driven: demand is increasing, supply isn't. Economics 101.
This is a spike, not a permanent move to $150-$200. At some point, probably soon, oil will reach a level that will severely crimp demand (translation: economies will collapse). At that point, prices will fall.
US demand is falling, but, so far, emerging market and other international demand has remained strong.
Oil will keep going up until demand shrinks. Increased supply won't save us.
$150-$200 oil means $4-$6 gas.
As long as $150-$200 oil permanently shrinks demand, oil prices will then drop to $75 a barrel.
MONDAY, JUNE 9, 2008 INTERVIEW What Mr. Crude Oil Sees Ahead
Arjun N. Murti, Energy Analyst, Goldman Sachs By LAWRENCE C. STRAUSS:
AN INTERVIEW WITH ARJUN MURTI: Gas may have to hit $5.75 a gallon before consumption cools enough to take the heat off fuel prices.
IN 2004, ARJUN N. MURTI, A TOP ENERGY ANALYST AT GOLDMAN SACHS, published a report predicting "a potentially large upward spike in crude oil, natural gas and refining margins at some point this decade." It was a controversial call, with crude around $40 a barrel at the time. But it was right on the money.
Four years later, crude is trading around 139. Murti sees energy in the later stages of a "super spike," in which prices rise to a point where demand drops off. In a note last month, he wrote that "the possibility of $150-to-$200-per-barrel oil seems increasingly likely over the next six to 24 months."
With supply growth constrained and global demand staying strong, prices must rise further, in Murti's view. Barron's caught up with him last week in his New York office. The 39-year-old analyst doesn't give many interviews and keeps a low profile, preferring not to be photographed. But his strong views on energy have resonated across the financial markets.
Barron's: What do you make of Friday's big surge in oil prices?
Murti: There have been a number of bullish fundamental data points recently that contributed to the rally. These include further declines in U.S oil inventories announced June 4, the announcement of a decline in Russian oil production in May, and recent comments that Mexico expects further meaningful declines in oil production over the rest of this year.
high energy prices will cause demand to fall and the price of oil will drop back.
yull wrote:Yes, even here in the UK with petrol/diesel price well over $10 a gallon you see huge traffic jams full of SUVs and Land Rovers with their engines going. Demand isn't going to go down fast soon. And if they magically all got small cars then someone in China will make that conserved energy up in no time.
Drifter wrote:AirlinePilot wrote:I believe the breaking point comes when decline out paces demand destruction. That could come very soon I think. That is the point where even at higher prices we begin to see shortages I believe, even in first world countries.
That is when the real chaos and panic set in.
The above concept is very difficult if not impossible to explain to someone who has not been looking at this issue for a long time. We only get it here because of the wealth of information and explanation from all of our more knowledgeable members.
This phase is just the appetizer.
Very well put, AirlinePilot. When the oil decline out paces demand destruction, then things get scary. Like a domino effect, quickly crashing the whole system. Total chaos to be sure. At least a lot of us around here have had a few years to mentally and financially prepare for this as best we could.
When we reach zero oil elasticity, we can kiss our asses goodbye.
How's that for doomerosity?
GeoJAP wrote:yull wrote:Yes, even here in the UK with petrol/diesel price well over $10 a gallon you see huge traffic jams full of SUVs and Land Rovers with their engines going. Demand isn't going to go down fast soon. And if they magically all got small cars then someone in China will make that conserved energy up in no time.
Britons also live in a country the size of Kansas with excellent public transportation. Higher prices will affect the suburbs of America, soccer moms, and the delivery industry more profoundly here than in Europe.
mystiek wrote:I really worry about the folks dependent on heating oil. At least during the summer-if you can at all possible sit by a window fan or under a tree with a nice cold beverage, but winter is coming.....