Hooray - Oil's back down to $110 !!

[NickW]

Pensions? - I'd go for "tangibles" rather than anything on paper -  pay off the mortgage, buy pvs, solar hot water schemes, woodburners, land, livestock, woodland, anything but "paper"...........

Good point Martin When the  sh*tfan:all the electronic fiat money will vanish into thin air.

In the meantime have £100000000000000000000000000000000000 on me

[dan_aka_jack]

There's a short and interesting article over on The Economist's website about the recent sky-high oil prices:

http://www.economist.com/daily/news/displaystory.cfm?story_id=11413334&fsrc=nwl

The bottom line, as usual these days, is that the primary driver of the high prices is supply and demand.

[KenB]

List,

I know the title of this thread is a bit out of date - perhaps it should now read

Hooray - Oil's back down to $135 !!

Once again the price of oil is on the rise, having risen $6.6 or 5% today in the first few hours of trading - funny how it goes mad on a Friday.

Here's why

http://news.bbc.co.uk/1/hi/business/7440536.stm

Will it exceed its $135 record by the time the yanks stop trading this evening?



Ken

[dan_aka_jack]

Indeed.

I forgot to mention (it's a little late now)... last week's edition of The Economist had oil on the front cover (The title was Recoil) and had a number of interesting articles.  All of the content is available for free online:

http://www.economist.com/research/articlesBySubject/display.cfm?id=381586

[dan_aka_jack]

Will it exceed its $135 record by the time the yanks stop trading this evening?

You've got your answer, Ken.

I've just checked and it's $136.94.  There's still over an hour of trading left today. $138.46 with 30 mins of trading still to go...

The markets closed at $138.76 although they peaked at $138.94 (this is for July crude delivery on NYMEX; I'm not sure exactly which benchmark though)...

http://finance.yahoo.com/q?s=CLN08.NYM

The 9pm news on BBC Radio4 led with the news that crude oil prices have set two new records today: one is for the price; the other is for the magnitude of the change in price over the course of the day.

[martin]

http://news.bbc.co.uk/1/hi/business/7440536.stm - George Dubya is exceedingly lucky he's not within swiping distance, or I'd fetch him a hefty one!.................
"The market was also responding to a statement by Israel's transport minister that an attack on Iran was "unavoidable" after sanctions to prevent Tehran from developing its nuclear capability had failed." - in other words George Dubya is thinking of having a go at Iran, and getting his Zionist buddies to do it!
I've made my views about nuclear power known, but if I were Iran, and had that lot on my doorstep, I'd want a nuclear weapon or three..................just to even things up a little!
About time we expelled the US ambassador, and broke off diplomatic relations.............

[Paulh_Boats]

($150 is the prediction for Sept July 2008)

Enjoy it while you can folks!

Paraphrasing from National Geographic magazine June 2008.

"In 2000 a Saudi oil geologist named Sadad I. Al Husseini head of the state-owned oil company, Saudi Aramaco, made a startling discovery. He had long been skeptical of the oil industry's up-beat forecasts for future production. He looked at how much crude remained in the world's major oil fields and how rapidly it was being depleted, then added all the new fields that oil companies hoped to bring on line in coming decades.
When he tallied the numbers, Husseini says he realised that many oil experts "were either misreading the global reserves and oil-production data or obfuscating it."

Where mainstream forecasts showed output rising steadily each year that kept up with demand, Husseini's calculations shower output levelling off, starting as early as 2004. Just as alarming, this production plateau would last 15 years at best, after which the output of conventional oil would begin "a gradual but irreversible decline".

If he is right, a dramatic shift lies just ahead for a world whose critical systems all run on cheap, abundant oil.

Forecasts of peak oil are highly controversial - Optimists, by contrast, insist the turning point is decades away, because the world has so much oil yet to be tapped or even discovered, as well as huge reserves of "unconventional" oil, such as the massive tar-sand deposits in western Canada.


One prediction seems secure: The era of cheap oil is behind us. If the past is any guide, the world may be in for a rough ride. In the early 1970's, during the Arab oil embargo, U.S. policymakers considered desperate measures to keep oil supplies flowing, even drawing up contingency plans to seize Middle Eastern oil fields. 


Any meaningful discussion about changes in our energy-intensive lifestyles, says Husseini, "is still off the table". With the inexorable arithmetic of oil depletion (and rising prices), it may not stay off the table much longer."



cheers
Paul

[Ivan]

In the geological 'ages' notation, we are coming to the end of the relatively short 'oil age'

[ajstoneservices]

I'm certain if it were not for the American's then Israeli's would have already destroyed Iran's NF as they have done in Syria twice in recent times.


Tony

[dan_aka_jack]

I believe the International Energy Agency are currently doing a huge review of the world's petroleum reserves - the review is due out sometime in the Autumn.  So far, the IEA have been making slightly pessimistic noises.  And the BP Petroleum Review is due out some time soon.  All these reports will probably make interesting reading.

It's worth noting that a report stating that "oil will be $150 by July" can quickly turn into a self-full fulling prophecy.  If speculators think that the oil price will continue to go up then they'll by more oil futures, hence pushing the price up!

[rob26440]

Ken,

Your 1st May subject title is just about spot on today:

http://news.bbc.co.uk/1/hi/business/7595293.stm

But how quickly will the fall be passed on at the pumps and in the energy prices that are tied into the price of oil, such as gas (now that the latest hefty gas & electricity price rises have been implemented by the utilities)?

I note that the doom mongers (Wall St Analysts) in the next to the last para of the BBC item had already thrown in a possibility of $250/barrel.  Perhaps they knew the "eastern bloc" was going to get more uppity.

Who knows where it will go?

Looks like more panels on the roof and the neighbour's trees are looking ripe for a bit of heavy pruning!    Might go for a wood burner too!

Rob.

[KenB]

Rob,

Despite the aftermath of Gustav leaving up to 30% of the Gulf of Mexico production platforms and refineries shut down AND the deterioration of the political situation with Russia regarding Georgia, the markets still seem to think everything is OK in the petroleum supply world, and thus oil drops in price.

IMHO we are in an even more precarious situation to what we were in July when it reached $147. I cannot understand what drives the markets thought processes.

Prices passed on to the pumps? - you gotta be kidding, the oil companies will continue to rook us for every penny they can - for as long as they can.



Ken

[dan_aka_jack]

But how quickly will the fall be passed on at the pumps and in the energy prices that are tied into the price of oil, such as gas (now that the latest hefty gas & electricity price rises have been implemented by the utilities)?

I'm just an "interested lay person" but I'll take a shot in the dark at answering your questions:

In terms of pump prices: I doubt we'll see the pump prices drop all the way back to what they where when crude was at $110 for the first time (back in March).  Refineries are enjoying the largest profit margins (or "crack" in oil industry parlance) they've seen for some time and they're unlikely to let go of those profits without a fight, not least because many refineries were making next-to-no profit when oil was up in the high $130s and $140s.

In terms of natural gas prices: I'd say it's very unlikely that we'll see a price drop any time soon.  I think the contracts which tie natural gas pricing to crude pricing are usually at least 6-month contacts.

I would take a real stab in the dark and predict that oil prices will remain low for the next few months and then start to climb again when three things happen:

1) India and China's economies continue to grow strongly in the face of a slow-down in the west
2) when the IEA release their review of remaining oil supplies and
3) when it becomes apparent that demand for oil is elastic only up to a certain point (it's relatively easy for city commuters to switch to public transport but it's very hard for supermarkets to remain stocked without lots of diesel trucks... i.e. it's relatively easy for some demand to evaporate in the face of high prices but there's a very large "baseload" demand which is damn difficult to decrease quickly)

I think this Summer's price-hike was a sneak peak at what's in store when oil supply truly does peak (which may be as early as 2012).  Let's just hope that people get the message and don't think "ah, good - the oil price is dropping - let's start buying up SUVs again".

Platts.com is a good source for oil-markets information (and info on other commodity markets).  Their free podcasts help to shed some light on the crazy world of the oil markets:

http://platts.com/podcasts/news/index.xml

[dan_aka_jack]

So, my post above has been proved completely wrong!

Just for completeness, it's worth noting that oil dipped below $70 yesterday and that all commodity prices are cooling since their peaks during the Summer.

What a roller-coaster ride.

There was an article in the FT a few days ago saying that commodity prices will probably start to increase again in the not too distant future because the main drivers of commodity price increases (increasing demand, plateauing supply) are still at work.  I guess it largely (entirely?) depends on just how slow the global economy becomes; recent news that China's economy is slowing faster than anyone expected may mean that commodity prices stay low for some time.

Quick, Gordon: it's time invest public money in building that new energy infrastructure we've all been talking about (creating jobs in the process).

[KenB]

Quick, Gordon: it's time invest public money in building that new energy infrastructure we've all been talking about (creating jobs in the process).

Jack, I quite agree.

Countless billions have been dissipated propping up the banks, which will no doubt lead to shortages of funds in the next few years for health, welfare and other well meaning public spending.

The Global Recession may well delay the arrival of peak oil by a few years, and we should look at this as an opportunity to get our house in order and get on with the renewable infrastructure.

This might include large renewable projects, such as offshore wind and a HVDC super grid. On a lesser scale it could involve a nationwide project to improve the insulation of the existing housing stock and widescale introduction of solar water heating.

Our car manufacturers could convert to building hybrid vehicles and CHP systems.  Aviation manufacturers could build wind turbine blades and components.  The North Sea oil platform industry could provide the heavy engineering expertise necessary for off-shore wind generation.

Many such schemes are possible, but unlikely that the government has the will to put them into action.  In the next ten years, we are more likely to get involved in resource wars than renewables.



Ken