Texas Tea

[Guest yobob1]

You might want to take a look at this and rethink that oil "war premium." Gee, I wonder what would happen if oil prices took off like a bat out of hell. Pushing that 4 ton Ford Gargantuan up a position in the gas line should be fun. Anybody remember pushing their cars in gas lines so you didn't waste gas?

 

Total non-OPEC production of crude oil in the last five years has ranged between 37 and 38 mmbd.  A little more than thirty years after the peak in the United States total non-OPEC production of crude oil is clearly nearing its peak and may perhaps already have passed it.  

 

The Secular Case For Higher Oil Prices

[Jorma]

I am not going to stick my head up and make any predictions on this. Surely I'm an oil market dilettante.

 

I do know what the party line is comming from the adminstration. That is that Iraqi oil will be soon available after our attack. Enough so to lower crude prices.

 

Intermediate term Iraqi oil production can be increased significantly and hurt OPEC. There is a simple idea about that the Bush's want nothing more than high oil prices to make their oil friends rich. I think this is dead wrong. The economic advantages of stable prices at a lower level are far better for everyone and they know it. Well, I think I know that. The assertion in the first paragraph is without question. Bill Seedman, GOP bigwig and former RTC chairman came back from a White House breifing last month and told the local paper that exact story. He said that the war was "bullinsh" for the economy because it would lower oil prices.

 

We will soon see. A mistake here short term would be catastrophic. Not only economically but politically for Bush. Any period of say $2 gas and the stool will hit the fan. Intermediate and longer term Auerback is probably closer to right.

 

What nobody is predicting is the Stoolie scenario. Significant economic slowing and a drop in demand. A sudden spike in price would in fact make this outcome far more likely.

[assteroid]

Yobob, Great link. I think the authors of the article pretty much nail it. I can't help but think that we're entering into a "highest bidder" economy. The war in Iraq, based on a model of "plentiful supply" doesn't make much sence. Viewed through this lens, it makes more sense.

[Guest AssMaster]

Since oil is priced in dollars on international markets - when the dollar falls, OPEC has to raise the dollar price of oil to prevent a price *decrease* in terms of their own currencies and, most importantly, to Gold.

 

Their thinking is along these lines - FOR EXAMPLE. Suppose that two years ago (and for the 10 years before), the dollars I got for one barrel of oil bought 1/2 oz of gold. Last year, 1/3 oz.. This year one barrel only gets 1/4 oz. of gold. I'd better raise the US dollar price of a barrel of oil by 100% to correct for this continuing devaluation of the US dollar.

 

(Please note that the above is merely an illustration and that prices and times are not intended to be historically accurate.)

 

If you think of it this way, a lot of other things become more clear. Such as why OPEC wants oil priced relative to the gold dinar and the Euro, rather than the USD. They have been there and done that before during an inflationary period in the US and didn't like the T-Shirt (which kept shrinking). And oil prices have only gone down since then because the dollar has gone up.

 

Now you see why the value of gold had to be capped - to cap the price of oil. Al probably has moved up the upper limit at which gold will be smacked down in order to induce some inflation. But how long until the genie escapes?

 

Once that happens, we are about to revisit the 70's all over again...and everyone else in the world sees it coming except us. Arab terrorists at the Olympics, hijacked planes, sky-high oil prices in the US, stagflation, gold skyrocketing, punitive interest rates. Higher crime, more drugs, turmoil, malaise, chaos. The 70's' times two...or perhaps squared.

 

Once Volcker crushed inflationary expectations by raising interest rates to nosebleed levels, the dollar rose, oil fell, the economy recovered and the stock market took off. When James Baker made an unwise comment about letting the dollar fall, you have the 87 crash when foreign money left the market. Once the administration backed off that comment, the foreign money came back into the market and it recovered very quickly rather than crashing into a depression as Prechter and Batra predicted.

 

And if we are good boys and keep the value of the dollar in the agreed upon range, Saudi Arabia will play ball and keep OPEC prices stable in the agreed upon range. Dollar devalues, they cut production to stabilize the price further up in dollar terms.

 

Once we have Iraq, WE will be able to be our own swing producer in OPEC. Why? To keep BOTH oil AND gold in the range we want. Oil = gold.

 

Otherwise we have to annex Canada. :grin:

[Whadda I Do Whadda I Do]

If the Mideast wants to move to a gold coin for stability in oil profits, how does this effect US oil based contracts (long term) that are based in US dollars. I mean doesn't everyone else in the world search, construct, extract, maintain, protect and R&D anything having to do with oil in the region while locals go to the bank?

[assteroid]

Jorma, Lower stable prices are "far better for everyone". Truer words were never spoken, and if we were dealing with the local chamber of commerce, you'd have a very valid point. Truth is ,we're dealing with pirates who are trying to gain complete control of diminishing resources...water, natural gas, oil. We'll be shiverin' our timbers trying to stay warm if home heating costs spike up too.

 

Look to the examples of Enron, and what happened to the electricity market, in California, for a model of the future. Granted, there may be some differences and many other factors to be weighed and considered. But natural resource pirates, won't necessarily act as part of a greater system, in a symbiosis that rewards seller and consumer. I don't expect "reasonable" business sense from resource thugs, anymore than I'd expect a pirate to do a cost benefit analysis of having an adversary keel hauled. They're in it for the short term. Make a killing, drain the resource, redirect and invest the money elsewhere.

 

Arguments about the symbiotic nature of business are based on the underlying assumption of an ongoing relationship. If oil is running out, those that control the product need not pursue this kind of relationship. They're in the catbird seat.

 

It's more a study for criminologists than economists is my take on it. But then, maybe I'm too cynical, and you're right, Jorma.

[Goldilocks]

"Their thinking is along these lines. Two years ago (and for the 10 years before), the dollars I got for one barrel of oil bought 1/2 oz of gold. Last year, 1/3 oz.. This year one barrel only gets 1/4 oz. of gold. I'd better raise the US dollar price of a barrel of oil by 100% to correct for this continuing devaluation of the US dollar."

 

- Thanks for that. An excellent way to view it.

[Guest yobob1]

The entire industrial revolution and the rise of Western Economies has been possible only because of easy access to cheap energy on a large scale. Clearly a decade from now energy is going to become increasingly dear and availability becomes questionable. Emerging economies won't have the same advantage that the established economies have enjoyed in terms of cheap energy fueling gowth. On the other hand major adjustments will have to occur in the established economies.

 

It seems that the global oil picture will become more front page in people's minds. Tensions will increase over a dwindling resource. I sincerely doubt that China and Russia will be willing to sit idly by as the US tries to corner the OPEC supplies. Right now there is plenty of oil running around and short term prices could go either way. Sadly long term they only have one direction to go. Same with natural gas. Barring a miracle we are destined to enter Dark Ages II perhaps with coincidence of WWIII. The lucky ones will expire before we run out of oil. The only other option is a major reduction of population.

[Hypertiger]

"major reduction of population" that's part of the plan, 6 billion need to die...

[DogBoy]

"Once we have Iraq, WE will be able to be our own swing producer in OPEC. Why? To keep BOTH oil AND gold in the range we want. "

 

Take a look at the charts of the S&P and Nazdaq and then tell me with straight face (no smirking please !) that this is a likely scenario.

 

I said it before and I'll say again and again that if the Neocon scenario happend in the middle east the Bear market will be over instantly.

 

It will be a still-born Bearz.

 

Since I know the Bear market has just started that tells me that some real fornicating bad shit is going to go down over there.

 

The charts and world trends tell me that there is not a snowballs chance in hell that the US just walks in and takes over the ME and all is well.

 

Peace on Earth and Low Oil Prices To all Men.

 

Not chance.

[Guest AssMaster]

Funny, you would think I had read this article before I made the post above. Is this guy reading my mind?

 

Check This Out

 

War For "Big Oil"? We'll Soon Find Out.

 

It is said that the price of oil depends largely on the existence of, or non-existence of, a couple of million barrels per day. Without the extra couple of million barrels per day, oil can be at $20, or even at $30 per barrel as it is today, or even higher. But with that extra million or two barrels per day, which is within Iraq's production capacity, the price of oil could fall to $15 per barrel or even $10. With the US in control of Iraq's vast oil resources, the US could effectively control the price of oil worldwide. $10 oil, by the way, is devastating to the Saudis, but it would be a boon to the world economy.

 

Every time I write anything about the war on Iraq, I get e-mails from people who assure me that the war is about nothing but handing Iraqi oil over to big US oil companies. I would expect that the Bush administration would allow US oil companies to assist in operating Iraq's oil fields, production facilities and exploration, in addition to the French and the Russians. But to assume the US is simply going to "give" Iraq's vast reserves to Big Oil is a bit much I think.

 

It looks like we will find out one way or the other pretty soon. Most of the military strategists I listen to believe the Bush administration wants to invade Iraq in January or February. Who knows if that is the timetable? But whenever it happens, and assuming the US is successful in defeating Saddam Hussein, the price of oil should begin to drop shortly after the Iraqi production comes back online. If it doesn't, then I will give more credence to the argument that this war is more about Big Oil than the War On Terror.

[DogBoy]

"assuming the US is successful in defeating Saddam Hussein"

 

This is a major ASSumption. Note the word "ASS" in Assumption.

 

Any number of things could go seriously wrong and probably will.

 

I see the vast majority of people making this VERY assumption which tells me that something is AMISS here.

 

My "market nose" tells the DogBoy to take the other side of this bet since it's sooo heavily weighted on one side. I overhear in the office all the time tlking about how the Bull will be back WHEN we win in Iraq.

 

It all sounds sooo much like another war in a little place in SE Asia about 35 years ago. 50,000 body bags later and we were forced out in a humiliating defeat.

 

I don't recall such a hugely important event as the start of a war in the Middle East with so much assurredness and assumptions that all would go well.

 

Well see but for now Da DogBoy as he always does plays the role of the CONTRARIAN and takes the OTHER side of this bet GLADLY. And the more CONfident the majority become over a sure and quick victory the more the DogBoy sticks by his bet.

 

If folks started to act like nervous nellies the Dog would worry and not sleep well at all. But I don't see that at all.

 

The neat thing about it is that if DogBoy loses then the world will be at peace and the Bear market will be over.

 

In that case DogBoy just putz his nose back on the grind stone and works and saves. The Dog loses a little but no big deal.

 

If the DogBoy wins the bet then he does a "clean sweep" on Misto Market and never has to trade again.

 

And no mo grind stone for the Dog.

 

Just relaxing massages from island babes and margaritas by the score as far as the eye can see.

 

Doc, is there a retirement home for old stoolies whove made their fortune ?

 

Tell me, what is it like ?

[Takachi]

AssMaster, I think you have it right on. In fact there are some who believe we have been paying a gold premium to the Middle East for some years. Price suppression of gold was a bargain made to reduce the price of oil to deprive the Russians of export earnings in the 80's. Today, the end around is targeted at the Saudis, the Iranians,, the Russians, and, for bonus points, the Chinese. This exercise is not to ensure cheap oil, its to ensure profitable oil.

 

There are lots of reasons to take out Saddam, but he has made himself the convenient target that justifies conquest, and to the victor belong the spoils.

[bubbadropping]

Listened to an article researching Iraqi oil on Pacifica radio the other day. Its not only the oil. Its also most importantly that Iraqi Oil is considered 'easy access' or 'easy flow' oil. It border the ocean. Stick a pipe in the ground and hoover it up and right down to the waiting Exxon ships. Not so with Afghan oil, Russian oil and many other fields. For $1.25 a barrel you can harvest the stuff, then sell it for 25 dollars a barrel. This is double the profits of all the U.S. oil biggies in the first year. This is 40 billion the first year alone and literally trillions of dollars of profits thereafter. Why? It is now beleived that Iraqi oil fields may have as much as 400 billion barrels under the surface. The largest in the world. This whole thing is about seizing the reserves for the long run, meaning the control of the price of energy thru much of the 21st century. But make no mistake, the people that manuvered bush into office will make a killing off easy access. Also once Iraq is under U.S. military control, the next oil grab comes for Saudi Oil. These towel headed facists are going to have to deal soon with major political instability and to that end have been paying off Muslim fundamentalists in an effort to buy time. But when the edifice starts to crack, the U.S. military will step in, partition off the Eastern oil rich section of that Kitty Litter box to be ruled by a U.S. puppet and they will surrender Mecca and the rest of the sand to the fanatics. Score another victory for Yankee hegemony and ultimate control of energy supply and pricing.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

[Hypertiger]

China and Russia are in a better position to wait out the collapse of the US... Unfortunately.

 

As soon as the Americans get close to the oil fields they will blow up along with the pipelines which will take 1-3 years to ?fix?. The US had their chance in 1990 and blew it plain and simple.

 

It?s the end of the line, the oil fields are already set to blow right now and Saddam has his finger hovering over the button.

 

That is just the most likely scenario to fuk things up, there are others. There is no way any western soldiers will be allowed to pull their puds in the Arab world. Saddam is even passing out weapons to the Citizens of Iraq and I assure you Saddam is not going to walk out into the open (The last time the ?real? Saddam was seen was 1998) so the only targets of opportunity will be US soldiers?

 

Iraq is one of the oldest civilizations on Earth and will not lay down and die, sheesh?

 

Eve of Destruction

The Eastern world, it is explodin',

Violence flarin', bullets loadin'.

You're old enough to kill, but not for votin',

You don't believe in war -- but what's that gun you're totin'?

An' even the Jordan river has bodies floatin'.

But you tell me, over and over and over again, my friend,

Ah, you don't believe we're on the eve of destruction.

 

Don't you understand what I'm tryin' to say,

An' can't you feel the fears I'm feelin' today?

If the button is pushed, there's no runnin' away,

There'll be no one to save, will the world in a grave.

Take a look around you, boy, it's bound to scare you, boy.

An' you tell me, over and over and over again, my friend,

Ah, you don't believe we're on the eve of destruction.

 

Yeak, my blood's so mad feels like coagulatin',

I'm sittin' here just contemplatin'.

I can't twist the truth, it knows no regulation,

Handful of senators don't pass legislation,

An' marches alone can't bring integration

When human respect is disintegratin',

This whole crazy world is just too frustratin'.

An' you tell me, over and over and over again, my friend,

Ah, you don't believe we're on the eve of destruction.

 

Think of all the hate there is in Red China,

Then take a look around to Selma, Alabama.

Ah, you may leave here for four days in space,

But when you return it's the same ol' place,

The poundin' of the drums, the pride an' disgrace.

You can bury your dead, but don't leave a trace.

Hate your next-door neighbor, but don't forget to say grace,

An' tell me, over and over and over again, my friend,

You don't believe we're on the eve of destruction,

No, no, you don't believe we're on the eve of destruction.

 

Barry McGuire

 

Selma, Alabama is probably not that bad anymore, so I guess there has been a little progress but too little too late?