A "Flood" of new oil..........

[Alvaro Spain]

Re: A "Flood" of new oil..........

In the short run the gold price is helping your case. We haven't seen a gold/oil price spread like this since the late 1970s and under entirely different circumstances. One of three events is virtually certain to happen over the next several years: 1) the oil price is going to fall toward the $80 level without a significant demand decline (recession) or 2) gold prices will rise toward the $1,500 level, or 3) a bit of both, with oil falling into the 90s and gold rising into the 1400s.

Sorry if I misunderstand you. Are you saying that you believe that gold is, over the next several years, reach a maximum price of 1.500USD?

[Mega]

Re: A "Flood" of new oil..........

MAD MAX ?
WHEN !
I been promised by:-
SChiff, Farber, Rodgers,JIm Rickards, Max Keiser............still waiting !!!!

[flintlock]

Re: A "Flood" of new oil..........

Money is one aspect of the issue...but...there are other issues.

My cousin was getting great MPG also until that Transit bus ran over him. None for me thanks.

[EJ]

Re: A "Flood" of new oil..........

Sorry if I misunderstand you. Are you saying that you believe that gold is, over the next several years, reach a maximum price of 1.500USD?

My peak gold price estimate since 2001 has been $2500 to $5000 at which point a new international monetary system is in place and gold will have a different role than it does today. I can say 13 years later that I have no reason to change that except perhaps upwards as the price is half way there yet the Peak Cheap Oil process that is driving the price is still in early innings.

Thanks to improved technology and cheap credit the oil industry globally has gracefully responded to PCO since 1998 and similarly consumers have adapted remarkably well and without drama, except for late 2007 and early 2008, a crisis that is a harbinger of things to come.

The oil price has increased on average 13% per year since the start of PCO on Dec. 11, 1998 at a spot price of $10.87. If the long-term PCO price trend continues oil will be $211 by 2020.

Peak Cheap Oil has produced an average 13% annual oil price increase. This will continue but not smoothly.

For nearly 20 years from 1985 to 2002 the oil price remained nominally around $20. The ability of the global economy to accommodate a five-fold increase in oil prices in 12 years since then is astonishing. Conservation has been the main adaptation method -- higher mileage vehicles and fewer miles driven -- and cheap credit has mitigated the oil price tax on both producers and consumers.

Going forward, the path from $101 to $211 will be no smoother than the path from $11 to $101. The U.S. shale oil and gas revolution is currently distorting the trend. I expect the trip to $211 will be more sudden and economically painful as a result.

In the model above, an oil price spike in 2016 causes a recession and an oil price decline to $80.
Reflation subsequently causes the price to revert to its PCO level implied by 13% annual price increases.

The gold price has only risen on average 10% per year since the start of PCO. It has a fair amount of catching up to do as it is to maintain the long-run price of 15 to 20 ounces of gold per barrel from 12.6 today. I expect a gold price in the range of $3,000 and $4,000 by 2020 if oil is by then $210 in line with 13% annual increases since 1998, especially if this occurs in a dramatic way such as a monetary and fiscal reflation following a recession.

Correlation is not causation, as we know; gold and oil prices do not effect each other rather they are both driven by factors of the monetary system that we call Good as Gold for Oil.

[gvanc]

Re: A "Flood" of new oil..........

"In the model above, an oil price spike in 2016 causes a recession and an oil price decline to $80."

Thank you for the update on your PCO/GAGFO model. What do you believe would be the cause of the WTI price spike occurring in 2016 (e.g. demand increase, drop off in US oil production, financial speculation, or some combination of those) and do you believe there is reasonable possibility that the WTI spike could take place in another year within a range of multiple years near 2016?

[santafe2]

Re: A "Flood" of new oil..........

Correlation is not causation, as we know; gold and oil prices do not effect each other rather they are both driven by factors of the monetary system that we call Good as Gold for Oil.

Possibly the gold market is anticipating the next move in the price of oil toward a ~2016 low. That is, the factors of the monetary system that drive both gold and oil in their separate but equal paths are currently having a greater effect on the price of gold. My takeaway from your presentation is that if one has the wherewithal to buy gold between now and that time in the future when demand creates GRG's first barrel of shortage, it could be rewarding when the next blow-off top in oil prices occurs. If the thesis is correct and events materialize with some semblance to the estimation, we should see a reasonable two year accumulation period for gold and several strong years of upward price movement....Black gold indeed.

[Polish_Silver]

nobody learns?

I think my thesis is consistent with PCO. I made a wager that WTI would touch $60 some time during 2014
Then I flew from DFW to Midland. What I saw there and out in Pecos County confirmed what I expected. The big boys, Apache, Anadarko, and others similar are drilling up a storm. They won't stop until they, and industry as a whole, create a price drop...that is the usual scenario in pretty well every drilling boom. If Brent price cracks, WTI will probably be more volatile this time.

..but I will nevertheless be placing an order with my brother for an expensive bottle of Margaux.

It is certainly not in the interest of the drillers (or at least those financing them) to cause a large price drop.

So why does it keep happening?

Because the factors involved are so complex that nobody can time it correctly?

[jpatter666]

Re: nobody learns?

It is certainly not in the interest of the drillers (or at least those financing them) to cause a large price drop.

So why does it keep happening?

Because the factors involved are so complex that nobody can time it correctly?

Because you have to keep dancing until the music stops

[gwynedd1]

Re: nobody learns?

"For nearly 20 years from 1985 to 2002 the oil price remained nominally around $20. The ability of the global economy to accommodate a five-fold increase in oil prices in 12 years since then is astonishing. Conservation has been the main adaptation method -- higher mileage vehicles and fewer miles driven -- and cheap credit has mitigated the oil price tax on both producers and consumers."


I think the OPEC oil shock has given us a false idea. Oil rising in price does not kill the economy. I believe this can be explained by a credit starved world. Should not be so surprising considering the staggering amount of human resources now economically activated in Asia. However the higher the price of oil the higher go US trade deficits which inject more credit into the world economy. What would be interesting to me is what happens if the US is oil independent. What happens when the US runs a surplus? That would be US debt deflation on a global scale. I suppose we can find another way to run trade deficits , but as of now oil imports print money.

That is so long as the $USD remains intact....

[vt]

Re: A "Flood" of new oil..........

Old math casts doubts on U.S. oil reserve figures

http://money.msn.com/business-news/article.aspx?feed=BLOOM&date=20140403&id=17493948

[Slimprofits]

Re: A "Flood" of new oil..........

Old math casts doubts on U.S. oil reserve figures http://money.msn.com/business-news/a...03&id=17493948

From the Junk Economics Dept.: http://www.bloomberg.com/news/2014-0...7-by-u-s-.html

The Energy Information Administration, the branch of the Energy Department that collects and analyzes energy data, said the once-chimerical goal of U.S. energy independence could be within reach in 23 years under a “high-production” estimate contained in an update of its periodic energy forecast.

“This is the first time that a case in the Annual Energy Outlook has projected that net imports’ share of liquid fuels consumption could reach zero,” said John Krohn, a spokesman for the EIA, in an e-mail.

“Forecasts going out 20 years make astrology look like respectable science,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “Ten years ago we were importing natural gas, and now we’re looking at exports. The changes have over the last few years have been dramatic and there’s really no way to predict things more than a couple years in advance.”

“A lot of things have to go right” for the high-end case to come to fruition, Caruso said in a phone interview. “It’s so early in the game, but it’s not unreasonable to see something like this. We could be pretty low on the learning curve.”

[coolhand]

Re: A "Flood" of new oil..........

I think my thesis is consistent with PCO. I made a wager that WTI would touch $60 some time during 2014 (and in behind the paywall posted a similar outlook some months ago). I have no idea if I will be proven correct, as I have also posted many, many times that forecasting oil prices over short time intervals is a mugs game.

However, here's my thinking...and why I do not think it inconsistent with PCO.

First I was specific about WTI. The differential between WTI and the most popular global index, Brent, is being influenced by factors that have nothing to do with global supply, demand or GDP, and everything to do with USA domestic pipeline, truck, rail, barge and refining capacity...all of which are presently overtaxed while the upstream industry does what it always does...drill baby, drill. I just got back from a short trip to Dallas and Midland, TX. I made a 2 hour drive northwest of Dallas to meet a biz associate. I had the rental car on cruise control at 75 mph in the right lane. Once I got out of Fort Worth I was being passed by an almost continuous line of trucks hauling drill pipe...I gave up counting them.

Then I flew from DFW to Midland. What I saw there and out in Pecos County confirmed what I expected. The big boys, Apache, Anadarko, and others similar are drilling up a storm. They won't stop until they, and industry as a whole, create a price drop...that is the usual scenario in pretty well every drilling boom. If Brent price cracks, WTI will probably be more volatile this time.

Second, I wagered "touch $60". If the oil price declines, but does it by way of a gentle drift down to perhaps $80ish, I'll lose the bet with my brother. Possible, but not a typical commodity (oil) price decline. Usually once the oil price cracks the speculators exit their long dated futures en masse creating a selling avalanche and oil overshoots to the downside. All that is needed is a single intraday trade settled at $60. If that happens I would expect a pretty healthy bounce in the oil price immediately after...but I will nevertheless be placing an order with my brother for an expensive bottle of Margaux.

My question is that if the shale producers are bleeding massive quantities of cash at an accelerating rate, despite $100 WTI and 0% rates, and that the cash bleed has accelerated since they moved from dry gas to liquids, then how is oil going to drop to $80, much less $60? E&Y's London office in conjunction with Oxford University released a new paper last week questioning the sustainability of the shales at $100...it suggests EJ is dead on - if oil is at $60, the world economy will be in tatters...

http://www.ogj.com/articles/2014/03/...oil-plays.html

[GRG55]

Re: A "Flood" of new oil..........

I would like to understand why you think oil has any chance of moving below $90 this year. I don't see how over production will do more than keep oil from moving back up to or above $140 and causing a recession. Over production is just keeping oil in a reasonable price range. It's not possible to produce enough to drive the price down, only a severe recession can do that. I don't know 1% as much as you do about the oil business but I'm just observing the world economy and I don't see a break soon enough to save you from some serious brother shame.

Too early to tell if I am going to collect that Margaux, but looking somewhat more promising

[shiny!]

Re: A "Flood" of new oil..........

Gold is taking it on the chin as well, closing at $1190.79.

Waiting for the inevitable GETTING KILLED!!!!!!!!!!!!!!!! thread.

[GRG55]

Re: A "Flood" of new oil..........

Gold is taking it on the chin as well, closing at $1190.79.

Waiting for the inevitable GETTING KILLED!!!!!!!!!!!!!!!! thread.

If this commodity price slide continues it's Bye Bye BRICS...