Petroleum Economics and the Middle East (1 Viewer)
- Thread starter Bjerknes
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Seriously, the main reason why prices are so high is because of supply concerns. India and China continue to grow, driving up prices. But it really has to do with turmoil in crude rich nations. That's why prices are so high right now.
Who gives a fuck. This country isn't smart enough to realize the problem at hand, so who cares where prices go. $130, $150, $200, who gives a flying fuck. Perhaps then people here will start to pay attention to what the hell we're doing in the world.
I mean, there are a lot of people who support this "gas tax holiday." What a bunch of morons.
Who gives a fuck. This country isn't smart enough to realize the problem at hand, so who cares where prices go. $130, $150, $200, who gives a flying fuck. Perhaps then people here will start to pay attention to what the hell we're doing in the world.
I mean, there are a lot of people who support this "gas tax holiday." What a bunch of morons.
Pennywise and pound foolish, Andy. Sticking your finger in the dike.
Personally, I am actually glad to see oil prices go up. They have been ridiculously subsidized for far too long and gave incentives to people to be insanely wasteful.
I don't just mean the fat SUV set. I mean that the production of 1 calorie of food used to require about 1 calorie of energy. Today it takes about 10 calories of energy to produce 1 calorie of food. Why? Because it was economically feasible to use cheap oil to generate tons of pesticides and other products that could improve the crop yields by about 2-3x. Problem is that it takes 10x energy to do that.
Cheap energy has created so many bad habits and bad social and economic policies. The tide needs to swing the other way and make people face the real cost of things so they can do the right behaviors -- and not try to prop up all their bad and unsustainable behaviors and economic beliefs.
It will level out in the end. But the equilibrium has been in the cheap energy territory for far too long.
Personally, I am actually glad to see oil prices go up. They have been ridiculously subsidized for far too long and gave incentives to people to be insanely wasteful.
I don't just mean the fat SUV set. I mean that the production of 1 calorie of food used to require about 1 calorie of energy. Today it takes about 10 calories of energy to produce 1 calorie of food. Why? Because it was economically feasible to use cheap oil to generate tons of pesticides and other products that could improve the crop yields by about 2-3x. Problem is that it takes 10x energy to do that.
Cheap energy has created so many bad habits and bad social and economic policies. The tide needs to swing the other way and make people face the real cost of things so they can do the right behaviors -- and not try to prop up all their bad and unsustainable behaviors and economic beliefs.
It will level out in the end. But the equilibrium has been in the cheap energy territory for far too long.
It reached 140 dollars today...
Enjoy, Andy... It's your derivatives that make all of this
--------------------------------
Why The Oil Price Is High
By Paul Craig Roberts
12 June, 2008
How to explain the oil price? Why is it so high? Are we running out? Are supplies disrupted, or is the high price a reflection of oil company greed or OPEC greed? Are Hugo Chavez and the Saudis conspiring against us?
In my opinion, the two biggest factors in oil's high price are the weakness in the U.S. dollar's exchange value and the liquidity that the Federal Reserve is pumping out.
The dollar is weak because of large trade and budget deficits, the closing of which is beyond American political will. As abuse wears out the U.S. dollar's reserve currency role, sellers demand more dollars as a hedge against its declining exchange value and ultimate loss of reserve currency status.
In an effort to forestall a serious recession and further crises in derivative instruments, the Federal Reserve is pouring out liquidity that is financing speculation in oil futures contracts. Hedge funds and investment banks are restoring their impaired capital structures with profits made by speculating in highly leveraged oil future contracts, just as real estate speculators flipping contracts pushed up home prices. The oil futures bubble, too, will pop, hopefully before new derivatives are created on the basis of high oil prices.
There are other factors affecting the price of oil. The prospect of an Israeli-U.S. attack on Iran has increased current demand in order to build stocks against disruption. No one knows the consequence of such an ill-conceived act of aggression, and the uncertainty pushes up the price of oil, as the entire Middle East could be engulfed in conflagration. However, storage facilities are limited, and the impact on price of larger inventories has a limit.
Saudi Oil Minister Ali al-Naimi recently stated, "There is no justification for the current rise in prices." What the minister means is that there are no shortages or supply disruptions. He means no real reasons, as distinct from speculative or psychological reasons.
The run-up in oil price coincides with a period of heightened U.S. and Israeli military aggression in the Middle East. However, the biggest jump has been in the last 18 months.
When Bush invaded Iraq in 2003, the average price of oil that year was about $27 per barrel, or about $31 in inflation-adjusted 2007 dollars. The price rose another $10 in 2004 to an average annual price of $42 (in 2007 dollars), another $12 in 2005, $7 in 2006 and $4 in 2007 to $65. But in the last few months, the price has more than doubled to about $135. It is difficult to explain a $70 jump in price in terms other than speculation.
Oil prices have been high in the past. Until 2008, the record monthly oil price was $104 in December 1979 (measured in December 2007 dollars). As recently as 1998, the real price of oil was lower than in 1946, when the nominal price of oil was $1.63 per barrel. During the Bush regime, the price of oil in 2007 dollars has risen from $27 to approximately $135.
Possibly, the rise in the oil price was held down, prior to the recent jump, by expectations that Democrats would eventually end the conflict and restrain Israel in the interest of Middle East peace and justice for the Palestinians. Now that Barack Obama has pledged allegiance to AIPAC and adopted Bush's position toward Iran, the high oil price could be a forecast that U.S.-Israeli policy is likely to result in substantial supply disruptions. Still, the recent Israeli statements that an attack on Iran is "inevitable" only jumped the oil price about $8.
Perhaps more difficult to understand than the high price of oil is the low U.S. long-term interest rates. U.S. interest rates are actually below the rate of inflation, to say nothing of the imperiled exchange value of the dollar. Economists who assume rational participants in rational markets cannot explain why lenders would indefinitely accept interest rates below the rate of inflation.
Of course, Americans don't get real inflation numbers from their government and have not since the Consumer Price Index was rigged during the Clinton administration to hold down Social Security payments by denying retirees their full cost of living adjustments. According to statistician John Williams, using the pre-Clinton era measure of the CPI produces a current CPI of about 7.5 percent.
Understating inflation makes real GDP growth appear higher. If inflation were properly measured, the United States has probably experienced no real GDP growth in the 21st century.
Williams reports that for decades political administrations have fiddled with the inflation and employment numbers to make themselves look slightly better. The cumulative effect has been to deprive these measurements of veracity. If I understand Williams, today both inflation and unemployment rates, as originally measured, are around 12 percent.
By pumping out money in an effort to forestall recession and paper over balance-sheet problems, the Federal Reserve is driving up commodity and food prices in general. Yet American real incomes are not growing. Even without jobs offshoring, U.S. economic policy has put the bulk of the population on a path to lower living standards.
The crisis that looms for the United States is the loss of its world currency role. Once the dollar loses that role, the U.S. government will not be able to finance its operations by borrowing abroad, and foreigners will cease to finance the massive U.S. trade deficit.
This crisis will eliminate the United States as a world power.
*Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal.
http://www.countercurrents.org/roberts120608.htm
Enjoy, Andy... It's your derivatives that make all of this
--------------------------------
Why The Oil Price Is High
By Paul Craig Roberts
12 June, 2008
How to explain the oil price? Why is it so high? Are we running out? Are supplies disrupted, or is the high price a reflection of oil company greed or OPEC greed? Are Hugo Chavez and the Saudis conspiring against us?
In my opinion, the two biggest factors in oil's high price are the weakness in the U.S. dollar's exchange value and the liquidity that the Federal Reserve is pumping out.
The dollar is weak because of large trade and budget deficits, the closing of which is beyond American political will. As abuse wears out the U.S. dollar's reserve currency role, sellers demand more dollars as a hedge against its declining exchange value and ultimate loss of reserve currency status.
In an effort to forestall a serious recession and further crises in derivative instruments, the Federal Reserve is pouring out liquidity that is financing speculation in oil futures contracts. Hedge funds and investment banks are restoring their impaired capital structures with profits made by speculating in highly leveraged oil future contracts, just as real estate speculators flipping contracts pushed up home prices. The oil futures bubble, too, will pop, hopefully before new derivatives are created on the basis of high oil prices.
There are other factors affecting the price of oil. The prospect of an Israeli-U.S. attack on Iran has increased current demand in order to build stocks against disruption. No one knows the consequence of such an ill-conceived act of aggression, and the uncertainty pushes up the price of oil, as the entire Middle East could be engulfed in conflagration. However, storage facilities are limited, and the impact on price of larger inventories has a limit.
Saudi Oil Minister Ali al-Naimi recently stated, "There is no justification for the current rise in prices." What the minister means is that there are no shortages or supply disruptions. He means no real reasons, as distinct from speculative or psychological reasons.
The run-up in oil price coincides with a period of heightened U.S. and Israeli military aggression in the Middle East. However, the biggest jump has been in the last 18 months.
When Bush invaded Iraq in 2003, the average price of oil that year was about $27 per barrel, or about $31 in inflation-adjusted 2007 dollars. The price rose another $10 in 2004 to an average annual price of $42 (in 2007 dollars), another $12 in 2005, $7 in 2006 and $4 in 2007 to $65. But in the last few months, the price has more than doubled to about $135. It is difficult to explain a $70 jump in price in terms other than speculation.
Oil prices have been high in the past. Until 2008, the record monthly oil price was $104 in December 1979 (measured in December 2007 dollars). As recently as 1998, the real price of oil was lower than in 1946, when the nominal price of oil was $1.63 per barrel. During the Bush regime, the price of oil in 2007 dollars has risen from $27 to approximately $135.
Possibly, the rise in the oil price was held down, prior to the recent jump, by expectations that Democrats would eventually end the conflict and restrain Israel in the interest of Middle East peace and justice for the Palestinians. Now that Barack Obama has pledged allegiance to AIPAC and adopted Bush's position toward Iran, the high oil price could be a forecast that U.S.-Israeli policy is likely to result in substantial supply disruptions. Still, the recent Israeli statements that an attack on Iran is "inevitable" only jumped the oil price about $8.
Perhaps more difficult to understand than the high price of oil is the low U.S. long-term interest rates. U.S. interest rates are actually below the rate of inflation, to say nothing of the imperiled exchange value of the dollar. Economists who assume rational participants in rational markets cannot explain why lenders would indefinitely accept interest rates below the rate of inflation.
Of course, Americans don't get real inflation numbers from their government and have not since the Consumer Price Index was rigged during the Clinton administration to hold down Social Security payments by denying retirees their full cost of living adjustments. According to statistician John Williams, using the pre-Clinton era measure of the CPI produces a current CPI of about 7.5 percent.
Understating inflation makes real GDP growth appear higher. If inflation were properly measured, the United States has probably experienced no real GDP growth in the 21st century.
Williams reports that for decades political administrations have fiddled with the inflation and employment numbers to make themselves look slightly better. The cumulative effect has been to deprive these measurements of veracity. If I understand Williams, today both inflation and unemployment rates, as originally measured, are around 12 percent.
By pumping out money in an effort to forestall recession and paper over balance-sheet problems, the Federal Reserve is driving up commodity and food prices in general. Yet American real incomes are not growing. Even without jobs offshoring, U.S. economic policy has put the bulk of the population on a path to lower living standards.
The crisis that looms for the United States is the loss of its world currency role. Once the dollar loses that role, the U.S. government will not be able to finance its operations by borrowing abroad, and foreigners will cease to finance the massive U.S. trade deficit.
This crisis will eliminate the United States as a world power.
*Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal.
http://www.countercurrents.org/roberts120608.htm
It reached 140 dollars today...
Enjoy, Andy... It's your derivatives that make all of this
Enjoy, Andy... It's your derivatives that make all of this
Thanks a lot to China, India and the moronic Bush administration for causing the speculators to go crazy on futures trading.
http://www.engadget.com/2008/06/16/scientists-create-mutant-bugs-that-produce-crude-oil-unleash-sw/
Whether it's feasible on a large enough scale is another matter. Still, I found it pretty interesting.
However, if this idea has any promise, I'm sure Exxon Mobile, BP, Shell, etc will purchase the idea and bury it in a file cabinet somewhere.
Whether it's feasible on a large enough scale is another matter. Still, I found it pretty interesting.
However, if this idea has any promise, I'm sure Exxon Mobile, BP, Shell, etc will purchase the idea and bury it in a file cabinet somewhere.
You'd have to create billions and billions of those bugs for this to be feasible. And then what happens when someone sabotages these huge containers of bugs? What if there's an accident and billions of these things escape?
I hate to sounds so completely insensitive to middle class concerns, but the price of oil has been subsidized to a ridiculous level in this country for far too long. We've made horrendous decisions as a result -- how it takes 9 calories of petroleum products in pesticides and fertilizers to grow 1 calorie of food, people buying mega-mansions out in the distant suburbs, nobody paying any attention to stagnating gas mileage standards, a mass rush to buy 3-ton all-terrain vehicles for driving little Jimmy to the mall, etc. It's been ridiculously wasteful.
Yes, there's a lot of short term pain. But for once, people are finally seeing the drawbacks of their spendthrift ways with energy. The long term effect should be good overall, because consumers should be a lot less stupid and reckless with how they consume energy. Because right now it's unsustainable, and people live like it's tap water.
Yes, there's a lot of short term pain. But for once, people are finally seeing the drawbacks of their spendthrift ways with energy. The long term effect should be good overall, because consumers should be a lot less stupid and reckless with how they consume energy. Because right now it's unsustainable, and people live like it's tap water.
People talk about speculators. Well, we had speculators who kept upping the prices of Las Vegas homes nobody wanted with interest-only loans, and the bubble burst and they lost their shirts.
Likewise, a lot of consumers were complicit speculators in putting their head in the sand, thinking that cheap fuel and energy had no limits and thus they banked their lifestyles around it. They've come home to roost, folks. Speculation works both ways.
Likewise, a lot of consumers were complicit speculators in putting their head in the sand, thinking that cheap fuel and energy had no limits and thus they banked their lifestyles around it. They've come home to roost, folks. Speculation works both ways.