ColossalContrarian wrote:The timing of the SPR release is mind boggling, there isn't a shortage but instead a glut and now when the SPR is really needed it will already be used up. Goldman Sachs can still keep the price high too, so this entire charade is impotent!
The unintended consequences are even worse because there's no need for everyone to ramp up supply since demand is so low!
wrote:Drill Baby Drill.
LL: Is the opening of the SPR ill-timed?
KB: The timing is a bit surprising. If the Libyan disruption was a proper supply crisis, why wait until refiners have been running for five months without high-quality crude before responding to it?
There may also be more going on than meets the eye.
In a deleveraging world where bailout dollars are running out, selling petroleum to lower prices may have been viewed as a back-door, consumer-side stimulus that could also capitalize further government spending. And, if current economic conditions have made price interventions acceptable, political factors, including the run-up the 2012 national election could them increasingly so.
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For decisions like this one, late-breaking data can tip the balance.
Inputs that could have tipped the balance might have been (1) the June 8 OPEC impasse; and (2) a high (>80%) share of rising speculative calendar spreads in crude.
Total oil stocks in IEA member countries amount to over 4.1 billion barrels, and nearly 1.6 billion barrels of this are public stocks held exclusively for emergency purposes.
Refining capacity across Europe & Eurasia declined by 1.0% in 2010, which might lead one to conclude that there is more involved here than greedy U.S. oil companies. In fact, global refining capacity increased by 0.8% as refining operations shifted to areas with lower labor costs and more direct access to crude oil. Refining capacity in Africa, China, Iraq, and India respectively grew by 8.9%, 12.%, 6.8%, and 3.6%. I expect the loss of U.S. refining jobs to continue such that crude oil imports are slowly replaced by finished product imports.
Bill Hicks wrote:ColossalContrarian wrote:The timing of the SPR release is mind boggling, there isn't a shortage but instead a glut and now when the SPR is really needed it will already be used up. Goldman Sachs can still keep the price high too, so this entire charade is impotent!
The unintended consequences are even worse because there's no need for everyone to ramp up supply since demand is so low!
There's hardly a "glut" with Brent currently in triple digits.
Seahorse is right, this move is to try to save Europe from the debacle of the Libyan campaign. What they plan to do when the 60 days are up and Libyan production is still shut down is anyone's guess.
evilgenius wrote:Sounds like a bridge to an extra ten or fifteen cents a gallon off at the pump to me. You righties can call that a bribe if you want to. I call it putting stimulus into the economy in a much more direct fashion than the crippled banking system can at the present time.
This is doing the exact OPPOSITE of what should be happening, in terms of the markets sending the correct price signals to energy consumers.
I'm going to pick on the U.S. here, since we have a terrible gas tax policy compared to the first world overall.
If Obama is going to inject 30 million barrels of liquidity into the U.S. when things (oil prices and/or the economy) get a little inconvenient, it just hastens the day oil gets even more expensive due to people making brilliant decisions like buying high mileage vehicles because they are "more convenient".
Government Controlled Oil Stocks
Early Warning / June 24, 2011IEA wrote:the IEA warmly welcomes the announced intentions to increase production by major oil producing countries. As these production increases will inevitably take time and world economies are still recovering, the threat of a serious market tightening, particularly for some grades of oil, poses an immediate requirement for additional oil or products to be made available to the market. The IEA collective action is intended to complement expected increases in output by these producing countries, to help bridge the gap until sufficient additional oil from them reaches global markets.
I don't know - maybe Saudi production will indeed increase, and this release from the SPR is a bridge to somewhere. It's going to be very interesting to watch the next few months of statistics. But there are sure a lot of strange loose ends here that don't seem easy to unravel. If it turns out to be a bridge to nowhere, then there are going to be hard choices between stopping the flow of oil (thus sharply raising prices again), or continuing to drain the strategic reserves for an indefinite length of time.
rangerone314 wrote:Pops wrote:No president since WWII has been re-elected with greater than 7.2% unemployment.
It is HIGHLY unlikely that we will get below official 7.2% unemployment by election time.
Pops wrote:I kinda think O has pulled all the levers he's got and nothing has worked.
I think I heard some head say no president has been reelected with unemployment this high. Whether this is a transparent election ploy or legitimate plan to stimulate the economy, the country is hurting for jobs and he'll get the blame.
Unfortunately for whoever came up with this lever, the banker will again get the benefit. A contango has already set up after the futures market had been flat (near month at the same price as the 11 month) so traders are in effect buying the government subsidized cheap oil and storing it to sell after the release is complete.
http://www.businessinsider.com/contango ... ase-2011-6
basil_hayden wrote:Road Trip!
rangerone314 wrote:No president since WWII has been re-elected with greater than 7.2% unemployment.
Sixstrings wrote:basil_hayden wrote:Road Trip!
Yup, fire up the gas-guzzling RV and party like it's 1999.
peripato wrote:Sixstrings wrote:basil_hayden wrote:Road Trip!
Yup, fire up the gas-guzzling RV and party like it's 1999.
This release of less than one day's worth of global consumption was done in an environment of record inventories and falling demand (hmm, I wonder if the two might be linked in some way?). Prices were already on the way down, this action is just a stunt to cover the fact that the US and by extension, world economy, is slowly but surely sinking back under the mire and that the Great Recession Part Deux would have caused the oil price to drop anyway.
There is no "road trip" for the US and global economy going forward. Instead of a party, there will be a wake, as the black hole that was the old FIRE economy sucks more and more people, businesses and ultimately countries into its bottomless pit of deflation. In fact this process will only accelerate as it builds momentum.
peripato wrote:This release of less than one day's worth of global consumption was done in an environment of record inventories and falling demand (hmm, I wonder if the two might be linked in some way?). Prices were already on the way down, this action is just a stunt to cover the fact that the US and by extension, world economy, is slowly but surely sinking back under the mire and that the Great Recession Part Deux would have caused the oil price to drop anyway.
There is no "road trip" for the US and global economy going forward. Instead of a party, there will be a wake, as the black hole that was the old FIRE economy sucks more and more people, businesses and ultimately countries into its bottomless pit of deflation. In fact this process will only accelerate as it builds momentum.
Certainly you are correct, Peripato; but just like November 2009 there is a small window to load the Honda and do some family camping. The low prices should be fully kicked in by the end of July so it'll be perfect timing once again. I find it odd that the President is acting on his own without Congress quite a bit lately, in apparent fits of desperation. So it's likely that the light at the end of the tunnel is a train coming the other way.
GoIllini wrote:My target oil price for the end of the year is $100-$110. Oil prices will remain high and remain the limiting factor on the economy, but it doesn't mean we're going into a crash. Just more stagflation, doom and gloom, etc until we move on to a better energy technology.
John_A wrote:GoIllini wrote:$100-$110 sounds fair for both producers and consumers. I don't know if any new energy technology is required, rearranging job/home locations in a more bicycle friendly configuration alone would allow Americans at least to use way less crude in their commuting.
Saudi Arabia was recently trash-talking Iran, talking about how the Saudi's would raise output to decrease prices to hurt Iran. though how hurt would Iran be, with 100 billion barrels ?
The country is already experiencing a lot of social unrest due to high food prices. At the same time, it's also funding Hezbollah and a government crackdown in Syria. Perhaps Iran is overextended.
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