Why Gas is so Expensive Today

[porter]

http://www.cpeterson.org/2011/03/10/...its-not-libya/


Not sure if this squares with the peak cheap oil theory....what do you think?

[lektrode]

Re: Why Gas is so Expensive Today

http://www.cpeterson.org/2011/03/10/...its-not-libya/

Not sure if this squares with the peak cheap oil theory....what do you think?

methinks the writer of the above ought to get together with the producer of INSIDE JOB and make another movie (and KEEP ON MAKIN EM) until they/we get this story out on front of the masses - and it all ALL OF IT revolves around the criminal operation known as GS:

here's the meat of just exactly why the GREAT KRASH/DEPRESSION OF 2009,10,11,12, ?, ?, ?, ? ? and counting, continues:

Anyway, from 2003 to July 2008, the amount of money invested in commodity indices rose from $13 billion to $317 billion—a factor of twenty-five in a space of a little less than five years.

By an amazing coincidence, the prices of all twenty-five commodities listed on the S&P GSCI and the Dow-AIG indices rose sharply during that time. Not some of them, not all of them on the aggregate, but all of them individually and in total as well.

The average price increase was 200 percent. Not one of these commodities saw a price decrease. What an extraordinarily lucky time for investors!
And the top oil analyst at Goldman Sachs quietly conceded, in May 2008, that “without question the increased fund flow into commodities has boosted prices.”
One thing we know for sure is that the price increases had nothing to do with supply or demand. In fact, oil supply was at an all-time high, and demand was actually falling. In April 2008 the secretary-general of OPEC, a Libyan named Abdalla El-Badri, said flatly that “oil supply to the market is enough and high oil prices are not due to a shortage of crude.” The U.S. Energy Information Administration (EIA) agreed: its data showed that worldwide oil supply rose from 85.3 million barrels a day to 85.6 million from the first quarter to the second that year, and that world oil demand dropped from 86.4 million barrels a day to 85.2 million.
Not only that, but people in the business who understood these things knew that the supply of oil worldwide was about to increase. Two new oil fields in Saudi Arabia and another in Brazil were about to start dumping hundreds of thousands more barrels of oil per day into the market. Fadel Gheit, an analyst for Oppenheimer who has testified before Congress on the issue, says that he spoke personally with the secretary-general of OPEC back in 2005, who insisted that oil prices had to be higher for a very simple reason—increased security costs.
“He said to me, if you think that all these disruptions in Iraq and in the region… look, we haven’t had a single tanker attacked, and there are hundreds of them sailing out every day. That costs money, he said. A lot of money.”
So therefore, Gheit says, OPEC felt justified in raising the price of oil. To 45 dollars a barrell At the height of the commodities boom, oil was trading for three times that amount.
“I mean, oil shouldn’t have been at sixty dollars, let alone a hundred and forty-nine,” Gheit says.
This was why there were no lines at the gas stations, no visible evidence of shortages. Despite what we were being told by both Barack Obama and John McCain, there was no actual lack of gasoline. There was nothing wrong with the oil supply.
All of these factors contributed to what would become a historic spike in gas prices in the summer of 2008. The press, when it bothered to cover the story at all, invariably attributed it to a smorgasbord of normal economic factors. The two most common culprits cited were the shaky dollar (investors nervous about keeping their holdings in U.S. dollars were, according to some, more likely to want to shift their holdings into commodities) and the increased worldwide demand for oil caused by the booming Chinese economy.
Both of these factors were real. But neither was any more significant than the massive inflow of speculative cash into the market.

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but go read the rest of it = quite entertaining, esp if one is a fan of CONSPIRACY & FRAUD STORIES

http://www.cpeterson.org/2011/03/10/...its-not-libya/

[GRG55]

Re: Why Gas is so Expensive Today

http://www.cpeterson.org/2011/03/10/...its-not-libya/


Not sure if this squares with the peak cheap oil theory....what do you think?

Well, in support of the author's point that "It's not Libya", the last time gasoline prices were this high there wasn't this level of unrest in the MENA region.

Interestingly, the times of greatest political instability in the Middle East oil exporting countries always seem to come when the price of oil is high. Whether the assassination of King Faisal and subsequent fears of the overthrow of the House of Saud in 1975, the Iranian Revolution in 1979, or what is happening now - none of this sort of stuff ever seems to pop up when oil is cheap.

As jk has pointed out, it would appear there are some using crude as an inflation hedge. As for blaming it on the paper traders, crude oil has been the subject of traders [including some pretty big trading departments in the multinational oil companies] for decades, so blaming the current price spike solely on that doesn't hold up. As for peak oil, although the curve is in backwardation, long-dated Brent is still trading at pretty high prices. The Dec 2017 contract is still well over $100 per barrel, so it would appear someone is wee bit apprehensive about the supply of the stuff in the future...

[c1ue]

Re: Why Gas is so Expensive Today

As for blaming it on the paper traders, crude oil has been the subject of traders [including some pretty big trading departments in the multinational oil companies] for decades, so blaming the current price spike solely on that doesn't hold up.

While this statement is true, you have to admit that the scale of investments in commodities were far smaller in the past.

Perhaps I am wrong, but I think the amount of money invested in commodities today is at least an order of magnitude greater than in the past.

30 years ago, there simply weren't ETFs or hedge funds pouring hundreds of billions into commodities, though I'm sure there were probably some investment pools somewhere.

This doesn't mean that it is all the fault of the speculators, but it does weaken the argument that it cannot be any fault of speculation.

I would note also that Peterson's article only focuses on 6 month periods.

Oil prices have been high many months now - over $80. In 2008, there was a 6 month spike up but then it was followed by an overcorrection to $40 - resulting in a full year 2008 average of $83 (if I recall the iTulip graph correctly).

Unless we see a fall very soon, and this is unlikely given the 'recovery', 2011 will have a much higher average oil price - again iTulip has predicted so although $123 average seems quite high.

[GRG55]

Re: Why Gas is so Expensive Today

...One thing we know for sure is that the price increases had nothing to do with supply or demand. In fact, oil supply was at an all-time high, and demand was actually falling. In April 2008 the secretary-general of OPEC, a Libyan named Abdalla El-Badri, said flatly that “oil supply to the market is enough and high oil prices are not due to a shortage of crude.” The U.S. Energy Information Administration (EIA) agreed: its data showed that worldwide oil supply rose from 85.3 million barrels a day to 85.6 million from the first quarter to the second that year, and that world oil demand dropped from 86.4 million barrels a day to 85.2 million.

Not only that, but people in the business who understood these things knew that the supply of oil worldwide was about to increase. Two new oil fields in Saudi Arabia and another in Brazil were about to start dumping hundreds of thousands more barrels of oil per day into the market...

One dimensional analysis and conspiracy theories aren't going to provide many answers to a multi-dimensional situation.

In fact the global production of crude oil was pretty flat in the 3 years ahead of the 2008 oil price spike. Below a chart from The Oil Drum compiled from EIA data. What I like about this form of presentation is that it shows the contributions from each of global crude oil production, natural gas liquids and other liquids. While much of the world talks about 80+ million barrels of daily "oil" production, the actual contribution from crude oil is well below that. I don't see much evidence of that increase in oil supply, do you?




Here's a few things that "people in the business who understand these things" were saying about that time. Since the author above mentions Brazil, let's start with Jose Gabrielli de Azevedo, the President and CEO of Brazil's state-owned oil company Petrobras - from a January 2009 Bloomberg Businessweek interview:

"...According to the company's projections, production from existing fields will fall from a little over 80 million barrels a day to maybe half of that even if new techniques are used to slow their rate of decline. So just keeping global production flat is going to require lots of new fields. Says Gabrielli: "We [the world] need to replace one Saudi Arabia per three years."..."

Someone else "in the business"...Christophe de Margerie, CEO of France's Total Petroleum [operates in 130 countries around the world, for those that may not have heard of Total]

Total says oil output near peak

By Carola Hoyos in London
Published: February 15 2009 23:37 | Last updated: February 15 2009 23:37

The world will never be able to produce more than 89m barrels a day of oil, the head of Europe’s third largest energy group has warned, citing high costs in areas such as Canada and political restrictions in countries like Iran and Iraq.

Christophe de Margerie, chief executive of Total, the French oil and gas company, said he had revised his forecast for 2015 oil production downward by at least 4m barrels a day because of the current economic crisis and the collapse in oil prices...

[GRG55]

Re: Why Gas is so Expensive Today

...This doesn't mean that it is all the fault of the speculators, but it does weaken the argument that it cannot be any fault of speculation.

...

It would seem you and I are in agreement on this point:

"As for blaming it on the paper traders, crude oil has been the subject of traders [including some pretty big trading departments in the multinational oil companies] for decades, so blaming the current price spike solely on that doesn't hold up."

[c1ue]

Re: Why Gas is so Expensive Today

It would seem you and I are in agreement on this point:

"As for blaming it on the paper traders, crude oil has been the subject of traders [including some pretty big trading departments in the multinational oil companies] for decades, so blaming the current price spike solely on that doesn't hold up."

Quite true, though my view is that it is unproven either way, whereas your view seems to imply that it isn't a significant factor.

Perhaps I am misunderstanding.

[housingcrashsurvivor]

Re: Why Gas is so Expensive Today

Is there any other product sold in the world at the retail level that has, pretty much from its inception until current date or at all, a mechanical (now digital) price changing display? Or have we been conditioned to accept this construct of how society need be organized as natural and good for the highest welfare of the public?



Who would buy into that?

[c1ue]

Re: Why Gas is so Expensive Today

Is there any other product sold in the world at the retail level that has, pretty much from its inception until current date or at all, a mechanical (now digital) price changing display? Or have we been conditioned to accept this construct of how society need be organized as natural and good for the highest welfare of the public?

How do you know it isn't coming?

But seriously, the reason gasoline has a digital display is because it is the one single item purchased on a unit basis which we all use the most of.

Seriously, think about it.

[housingcrashsurvivor]

Re: Why Gas is so Expensive Today

Of course, once a system of thought has been established, variations on the theme can seem more reasonable.

Here's an old tomato juice dispenser I found online from years before so many people drove cars...

[GRG55]

Re: Why Gas is so Expensive Today

Is there any other product sold in the world at the retail level that has, pretty much from its inception until current date or at all, a mechanical (now digital) price changing display? Or have we been conditioned to accept this construct of how society need be organized as natural and good for the highest welfare of the public?



Who would buy into that?

Don't lose faith; when someone figures out how to barcode gasoline I'm sure it'll change...

[housingcrashsurvivor]

Re: Why Gas is so Expensive Today

very funny!