James Hamilton on oil prices
Thursday May 22, 2008
Categories: Peak oil
I found this essay, with charts, by James Hamilton to be helpful in understanding the current oil supply-and-demand situation. Here's his bottom line: I think we will see some net production gains this year, and expect this to bring some...
Filed Under: James Hamilton, peak oil
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Rod Dreher is an editorial columnist for the Dallas Morning News, and author of "Crunchy Cons" (Crown Forum), a nonfiction book about conservatives, most of them religious, whose faith and political convictions sometimes put them at odds with mainstream conservatives. The views expressed in this blog are his own.
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"But it's a big mistake to conclude that speculation is the most important part of the longer run trend we've been seeing."
Yeah, sure. A few years ago nearly all of these mainstream blowhards were saying "it's a big mistake to conclude that speculation is the most important part of the longer run trend we've been seeing in housing prices".
Well, at least I have George Soros in my camp.
Naw. The real bottom line in the article: Are such projections plausible from the point of view of potential supply? Not remotely.
Not remotely is right. We have no supply or anywhere reasonable left to look. We understand oil discovery too well. And yet people are considering speculation as the cause of today's prices? Blows my mind. It was easy to see production was slipping back in the late 1990s, for goodness sakes. We haven't been replacing what we are using since the 1980s, even though we have been looking harder and with more technology with every passing day.
The final large oilfield left to discover is conservation. But we aren't going to go looking for that elusive oilfield until the price gets north of $300/bbl. And it will be here sooner than later. No supply. More demand.
let's see...
China has 4 times the population of the USA...
so is it reasonable to suggest a future daily consumption rate of only 2 times the current rate of the USA?
uh... yes...
and...
even if this does not pan out...
surely the future demand of BRIC will be enormous...
yup...
supply might edge up slightly in the near future...
demand will surely rise at a higher rate...
coal-to-oil, anyone?
energy faith hope love joy peace to all...
BRIC Rules...
Let's not forget the State-induced collapse of the dollar. Thanks to all that lovely Government spending (way to go on that prescription-drug benefit, guys !), there has been more borrowing than ever before (back at you, Hu Jintao ! Go Red China !) All those dollars, and billy-oh being produced to back them, and we're surprised that it has an effect ?
I know that many, if not most, Americans are utter ignoramuses when it comes to economics, but I didn't know it was THIS bad.
Your servant,
Lord Karth
This just in, from canadaeast.com:
"While the dollar gained slightly against the euro and the Japanese yen from overnight levels, it fell against the British pound and showed a new downward momentum.
The 15-nation euro bought $1.5765 in morning European trading, down from $1.5780 in late New York trading Wednesday.
The British pound bought $1.9786, up from $1.9689 late Wednesday. The dollar declined to 103.25 Japanese yen from 104.17 yen.
Investors see hard commodities such as oil as a hedge against inflation and a weak dollar and pour into the crude futures market when the greenback falls. A weak dollar also makes oil less expensive to buyers dealing in other currencies.
Many investors believe the dollar's protracted decline over the past year has been the most significant factor behind oil's rise from about $66 a barrel a year ago."
Your servant,
Lord Karth
Lord Karth gets it. So does George Soros.
They're wrong about oil, by George
Anatole Kaletsky
The Times of London
tinyurl.com/3m4g65
From the article:
"Now consider the situation today in oil markets: the Gulf, according to Mr Rothman [Mike Rothman, of ISI, a leading New York consulting group], is crammed with supertankers chartered by oil-producing governments to hold the inventories of oil they are pumping but cannot sell. That physical oil is in excess supply at today's prices does not mean that producers are somehow cheating by storing their oil in tankers or keeping it in the ground. All it suggests is that there are few buyers for physical oil cargoes at today's prices, but there are plenty of buyers for pieces of paper linked to the price of oil next month and next year. This situation is exactly analogous to the bubble in credit markets a year ago, where nobody wanted to buy sub-prime mortgage bonds, but there was plenty of demand for 'financial derivatives' that allowed investors to bet on the future value of these bonds."
Even I learned something new. We were told by Paul Krugman that growing physical inventories of oil did not exist so I just assumed the oil producers were keeping the oil in the ground at these prices. He appears to be wrong.
Hey Pyrrho, where do you typically go to get such reasonable commentary on commodities?
About Peak Oil, I spotted this in an interview with F. William Engdahl in the latest Acres USA:
Now, I don't know if he's onto something here, or is competely crackers, but I always thought the dinosaur bones explanation was odd. When plants and animals die, their bodies decompose gradually, returning to the earth from whence they came. Why would there be a huge pile of dead plants and animals in the first place? It's an interesting theory, anyway. Unfortunately, he goes on to claim (essentially) that we aren't pumping all this oil because of a world-wide conspiracy to keep oil prices up, and I have a harder time buying that.
Mhoram: "[W]here do you typically go to get such reasonable commentary on commodities?"
That's precisely the problem! I usually have to piece things together out of scraps taken from various articles and reports. This is what you do when you're ahead of the curve ;-)
Let me make two things clear:
[1] I am convinced adherent of the Peak Oil theory, but
[2] I believe there is a more "parsimonious" explanation for recent events in the oil market: financial speculation.
The peak may well be nigh.
Mhoram, yep, Engdahl is competely crackers.
I personally do not see any relief in the near future for the spike in the price we pay at the pump as long as we have politician's who are premitted to gain in the sale of gas and almost a form of racketeering in its utmost defined status.
Until America wakes up to the truth's of who is making the money and demand's an immediate hault to such practices...the only thing we are going to be able to count on is the price of gas continuing to rise!
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