BrucePile

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  • Barron's Banks on $100 Oil
    On one of Cramer's shows, he presented a table that listed all the times and dates that Saudi Arabia promised to increase production by a certain time and the result. All of these proclamations proved to be false. Cramer called them "serial liars". Even if they would put 500,000 bpd on the market, it likely would be heavy sour crude and would have limited bidding on it from the importers, most of whom have limited refining ability for it. The Saudis are planning to build some new refineries to handle their heavy crude, then sell refined product, which would help with oil prices. But those are not on line yet.

    As for what the dollar does, the price of oil has been charted in the other major currencies, and the big climb happens there too (just a little more moderate).

    What is really behind the price climb is not total oil production versus demand. It's total exported conventional crude - and this is severely lagging total production and has been falling since '05. As global peak production is approached, a much higher portion of total liquids is unconventional and consumed by the enriched producing nation (see the Export Land Model ELM). This presents two big problems few consider. The unconventional oil (oil sand, shale, deep water) all must be ground up, heated up, or manufactured with massive amounts of fossil fuel as opposed to conventional oil, which traditionally comes spewing out of the ground already made up for us and ready to put into a pipeline! This produces a net energy math problem such that you net only about 1 out of every 3 barrels added from all these sources that have EROI around 3-5. This means it takes 3 barrels of deep water or tar sands oil to replace each barrel of declining conventional crude production! Compound this with the math of ELM, and you have a much sharper decline in net energy supplied than just the total "oil" production numbers indicate. And net exported net energy is what is setting oil prices. This is becoming more and more detached from what has always been considered "oil production", but nobody seems to understand this.
    Jun 22 17:19 pm |Rating: 0 0 |Link to Comment |View article
  • The Iranian 'War Premium' Vanishes from Crude Oil
    I think the war premium is coming back into oil as of early April. You can see a technical change in behavior in the oil chart coinciding with Admiral Fallon's leaving and a banking war on Iran declared by the U.S. on March 20 effectively blacklisting any global bank doing business with Iran.
    May 09 17:47 pm |Rating: 0 0 |Link to Comment |View article

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