Posted on 03/08/2008 3:59:54 AM PST by Man50D
The recent rise in oil prices to over $100 a barrell has been fueled largely by speculators, anaylsts say, hoping to hedge against the falling dollar and an unstable world situation - especially in the Middle East and South America.
But that might change in the next few weeks:
The stunning price rise has been driven almost exclusively by investors who were bailing out of the dollar and other financial assets and pouring into commodities, Judith Dwarkin, chief economist at Calgary-based Ross Smith Energy Group, said yesterday.
“The fundamentals don't support prices at $80, let alone $100,” Ms. Dwarkin said. She said global demand growth has slowed in recent years, while spare capacity among members of the Organization of Petroleum Exporting Countries has expanded somewhat, even as inventories of gasoline are at robust levels.
“The greater prices diverge from what is fundamentally supportable, and the longer they stay at a distance from what is fundamentally supportable, the greater the risk of a correction, and a large one.” She has forecast an average price of $75 a barrel for this year.
Oil consumption in the developed world is dropping more sharply than anticipated just a few months ago because the subprime crisis has contributed to increasing economic weakness, Mr. Lynch said. Even emerging economies have slowed their demand growth in the face of record high prices, he added. This speculative bubble, analysts say, may pop before summer due to increased gasoline stocks and a slowing economy.
At this point, any drop would be a welcome relief.
I would expect the bubble to pop, too. When it does, be prepared for a flood of media stories bemoaning all the money that’s been lost. You just can’t imagine how many poor, minority females (single) who are dabbling in the commodities markets.
If the price starts coming down Russia is going to poke the tiger again and it will be kept high or at least higher than it should be.
Iran is playing the same game.
Just start some crap in a HOT oil area and bump it right back up.
It may stop working so well.
There are also the guys in the markets. I’m just wondering if Russia hasn’t got some of their bent nose guys in there doing a little work.
I'm no economist but I think lowering interest rates actually encourages inflation.
Most rational report I’ve seen recently, but the Dems are working to keep the crisis until the election. Nothing in a presidential election year is based on reality. Its a bit like the recession that isn’t. Talk down the housing market and the economy until the housing market froth causes a collapse, then turn the ripple into a full blown tidal wave. We have yet to see a negative quarter, let alone two consecutive negative quarters, the definition of a recession.
Warren Buffett says that we are in a recession in the same sentence in which he says he will vote democrat. No connection there... /s/
The day may come when we long for President Jorge.
We need to rid ourselves of Democrats who are standing in the way of drilling for, and refining our own oil. There's plenty of evidence that there's plenty of oil in the ground--just for our taking it but Democrats would rather destroy our economy.
Could well be an unintended consequence.
I've heard from friends in the wholesale fuel business that our limited refining capacity is now dedicated almost totally to gasoline production, and that we are importing refined diesel--at a higher price, of course.
While I'm not an expert, I don't play one on TV, and have never stayed at a Holiday Inn Express, I seem to recall reading that a year or two ago new federal regulations went into effect requiring very low sulphur levels in diesel, which requires a bunch of extra refining. I used to do some occassional work for a freight company, and remember the owner saying that the switch was going to force him to raise his rates quite a bit, because the cost of fuel was going to skyrocket.
And I guess it did... I was seriously thinking about going from a Toyota Corolla to a VW Jetta TDI diesel a few years ago (for the additional milage), but with the rise in diesel prices, it's no longer really a viable option for me.
Mark
Yeah, I will never forget the picture of Germany with the pile of money in the street equal to one US Dollar.
While I very much want to believe this, I heard the same argument at $90. “unsustainable”
Well guess what, there is no incentive to lower price. Everyone from producers to refiners to distribution (and the government) are all taking in MUCH more money on somewhat lower volume.
The slackening of demand will only serve to delay the development of new energy sources. Why drill for oil or build a new refinery if you already can meet demand with a nice fat margin?
The problem relates to oil being treated like the fungible commodity that it is. Competition is illusory.
I'm no economist but I think lowering interest rates actually encourages inflation.
Actually, something that I've been wondering about is just what might happen because I think that we're coming into a situation that I don't know has ever really existed before...
Interest rates keep going down, however many lenders have been hurt badly by making a lot of bad loans. Normally it seems that high interest rates can sort of limit the number of loans processed, but now I think that the limiting factor will be the fact that many lenders are more "gun-shy," especially after Bernake suggested that something lenders should do is reduce the principal of loans made, to give the borrowers some equity in their property, making the borrowers less likely to walk away from the property. I really think that we're coming into unknown territory here. Of course, I'm no economist either.
Mark
The high diesel prices are the product of a booming economy. Almost every tangible good that is marketed in this country makes it to market on trucks. The rest travels by diesel powered locomotives. Take a look at any interstate highway in the country. You'll see that about 50% of the vehicles on the road are truckers and those trucks aren't empty. They're full of goods headed for the market. This is up sharply from just a few years ago. Look at how the trucking companies are advertising for drivers. I make this comparison because I spent the better part of 18 years traveling for a living and I tend to notice such things. I also recently did a cross country trip from Tennessee to Colorado and back. There were a LOT of truckers on the road. That's where all the diesel is going......and why the price is so high.....btw, I drive an F-250 turbo diesel.....
I agree, Bush could increase his popularity rating by 15% by aggressively campaigning for ANWAR drilling now.
Actually, if you look at the Carter years and compare it to now, it looks to me like we're headed for stagflation and that is a very well known territory to some of us that lived through those times.....
This issue should be one of the top issues of Republicans. This would be easy to tag onto the RATS. It’s so darned easy and yet it’s not being used. I don’t get it.
“The day may come when we long for President Jorge.”
I sincerely doubt that, CGG; well not unless one is a Mohammedan, like perhaps a Saudi or a KLA killer of Orthodox Christians or a Pali killer of Jews or an employer looking for serf wage illegal alien workers, or maybe an employer looking for legal American workers who’ll work for serf wages under the table because their job got sent to Mexico or China.
In order to beat the Dims about the head with their objections to domestic oil production requires a spine. The 'Pubbies haven't haven't been able to muster a spine since Ronaldus Magnus.....
“I agree, Bush could increase his popularity rating by 15% by aggressively campaigning for ANWAR drilling now.”
Yes he could...but he won’t because his buddies and business partners don’t want that. They want what we’ve got righht now except maybe more of it.
What they mean is that inventories are at a fourteen year high. It’s not the same thing as “supply.” Supply tells you how much sellers are willing to sell at any given price. Inventories are just the amount you’ve got in the storage tank.
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