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bluetea
14 Comments
How Have 'Traditional Defensive Stocks' Done in This Downturn?
They are well-positioned globally to grow in all the emerging economies and so far have been able to offset the high commodity prices.
Crude Reality: Big Oil's Purposely Restricting Supply
Whether or not OPEC is greatly overstating their reserve position, I think we all agree the long term focus has to be on reducing our demand for oil.
Coal displaced wood, oil largely displaced coal, and alternate energy sources must displace oil as quickly as possible.
Greenspan thinks OPEC could ramp up and the world could produce 115MM barrels a day by 2025 or so. Pickens says 85 MM is the peak.
They both agree that demand must be destroyed or the ability to produce will fail to meet global consumption at some point.
That Battery technology that Kleiner backs sounds very promising. I've read about some big companies getting close to solar breakthroughs that will be affordable to the mass of people.
For now, I do my small part to conserve, drive less and drive more intelligently and see a fairly quick and painless way to further erode US demand if we can get all 240MM or so US cars on board
Crude Reality: Big Oil's Purposely Restricting Supply
I follow the price of oil throughout the day and have seen no one pushing the idea our gridlocked country may produce more oil in the fairly distant future has impacted the price slide.
The sell-off has been been driven by concerns over demand decreasing and increased above-ground supplies in the developed world. The latter has been caused by a combination of the effects of oil speculating and a marginal increase in production.
US gas consumption was down 2.4% a month, a huge figure in a country with 240MM cars. Our economy is slowing down , facing inflation and strapped with debt - a recipe for further short term demand erosion and longer term destruction.
High prices have slowed down economies and demand growth worldwide. Thankfully for us, it has chilled China's expansion for now.
In June the Saudi's invested 10 billion in what is perhaps their last huge oil field with a goal of bringing 1.2MM barrels a day by late next year. No meaningful impact on global price resulted.
It will interesting to see if we get to the 117/barrel threshold and large programmed selling occurs.
Crude Reality: Big Oil's Purposely Restricting Supply
I read the oil drum presentation. Lot's of good information. The insights into the technical and economic limitations of producing oil are something that far too many American's don't grasp.
The same is true for the fact that oil has to be priced high before oil companies can produce the difficult sites that remain.
I think the real wild card is just how large are OPEC's reserves ??
I understand the idea that they are probably inflating their position. Alan Greenspan was all over the energy issue while Chairman of the federal reserve and had access to all the information on Oil Drum. He also knew a lot of the OPEC oil ministers. He thinks they have enough to ramp up production to at least 115 MM barrels a day by 2030 - but there is great risk to assume they will do so.
Regardless, we are fast approaching the day when demand outstrips supply.
The other wild card is how quickly China and other emerging markets will grow their demand. High prices stunt their demand as well. Chinese leaders are much more astute at economics than most realize and they may steer their country toward more alternative stuff than is presently predicted. The Olympics are show casing their terrible air and could be a positive in this regard.
Regardless, we are at a critical juncture under any scenario and need to make cutting down our consumption of oil the highest priority.
I'll pass that link around.
Crude Reality: Big Oil's Purposely Restricting Supply
NEW YORK (AP) -- Oil prices slipped beneath $118 a barrel Wednesday -- $30 below their record high -- after a jump in U.S. crude and other fuel supplies fed beliefs that high energy prices are eating into demand.
Oil market traders are paying close attention to see if oil falls below $117, a key resistance level expected to trigger a rash of technical selling by computers programmed to dump oil contracts once prices fall below a certain threshold.
Let's keep driving demand down. Slow down, tune up , and ignore McCain and inflate your tires. with 240 million cars on US roads - we can all make a difference.
Note the comments about oil having a threshold price of $117 - if true, we could be near a major drop in price.
If it happens, please keep the SUV parked anyway.
Crude Reality: Big Oil's Purposely Restricting Supply
I do not buy the idea that the mere suggestion that US will drill in restricted areas will move the needle on price for more than a day or 2.
The really big investors know how the global economy works and that any "new" US oil will be marginal in amount and relatively expensive to produce.
I really am curious how many US companies will jump on the new "opportunity"... if the OCS is opened up. THe oil, whatever exists, is below 7,000 feet of water and probably 1 to 3 miles under the ocean floor.
longoil :
I already am on Picken's mailing list. That does not mean I'm 100% behind all aspects of his plan, but I think he has the experience, money and ego to raise the level of political discourse . I really can't seem to get unbiased info. on how clean and domestically available natural gas truly is. Nor how quickly - 10 years as he suggests - we could move a lot of US vehicles to run on natural gas.
His weekly newsletter will come out today as you probably know.
I also am not convinced about peak oil theory of 85MM barrels a day. I think OPEC could move that number up if there were so inclined. Even if true, there is too much risk in hoping they will.
Crude Reality: Big Oil's Purposely Restricting Supply
You are preaching to the choir on conservation and slower driving. I have been among a very small group of people where I live who have taken the bold approach of simply not speeding. In the northeast, everybody does the limit plus at least an additional 10MPH. I would go slower, but people get enraged if I simply don't speed.
Tire inflation is huge even though McCain has mocked Obama - it is low hanging painless fruit.
Look at the downward pressure on price that has been in part driven by a 1 month reduction of just 2.4% in US gas consumption.
It will take political courage to push a 55mph limit. I'm also not sure how it would effect truckers - our big rigs themselves consume more petrol than all of Germany - but time is built into the logistics of supplying goods in our economy. Probably should look at what can be shipped effectively on trains.
Crude Reality: Big Oil's Purposely Restricting Supply
The problem with "all of the above" is all of the above will be very expensive and we have a 9.5 trillion dollar national debt and our deficit will soon hit 500 million.
Our biggest opportunity is to reduce demand by conservation and alternate technologies. Oil is below 118 barrel right now because of lower US demand - real and projected.
The potential off shore oil at issue is below 7,000 feet of water and probably miles below the ocean floor, I don't see oil companies proceeding very far without a lot of government help.
People are dreaming if they think the relatively small amount of oil we might bring to the global market will lower price - it will be very expensive oil to extract.
We will always need foreign oil until we drastically reduce our consumption of gasoline. That is where the smart money should be focused.
Crude Reality: Big Oil's Purposely Restricting Supply
I just listened to the NPR podcast and it is a good summary of the situation as I have come to understand it from searching many different sources. It is worth a 17 minute investment in time to give a listen.
I do think Dr. Kaufman ?? is wrong in saying the drilling ban will fade away as a campaign issue. The Rove proteges in McCain's campaign see this as a thought ending wedge issue they can exploit.
I hope a compromise is reached to open up some new areas. Not because I feel it is a sound part of the solution to our energy problem, but as a way to prevent single issue voters from being duped into placing their votes for the wrong candidate for the wrong reason.
If the ban is lifted, oil companies will not rush in to produce this very hard to get oil unless our Tax dollars heavily subsidize them. That is where the the battle over fiscal responsibility should be fought.
Crude Reality: Big Oil's Purposely Restricting Supply
Early on, our oil barons, mostly John D. Rockefeller, saw benefit in keeping prices fairly stable. Our oil was largely controlled by the Texas Railroad Commission (not a typo) for decades and they would raise limits on output to suppress price hikes and cut output to prevent sharp price declines.
Excess US crude was released in 1951 in response to the aborted nationalization of Iranian Oil, in 1956 in response to the Suez Canal crisis and in 1967 in response to the Six Day War.
Today, I don't think US oil producers limit output solely to impact prices. It is more likely they cannot afford to develop and produce a lot of oil because the cost has been too low. Our oil reserves are largely "hard" to extract by now and OPEC can still bring a lot to the global market with less expensive processes.
OPEC, by comparison, has not invested enough to ramp up production because they do fear it would lower price. Saudi Arabia is the lone exception to that approach. There are also internal political pressures on OPEC members to invest in domestic social programs and even alternate oil instead of new production facilities.
The ugly truth is the US does not the potential to ever produce enough oil to impact global price. We can do far more to lower our consumption curve than we can on the supply side.
There is a global shortage of essentially everything needed to explore, drill, transport and refine oil. Sector production inflation is about 25% per year. Any new US oil will be very expensive to produce.
We will need some amount of oil for a very long time. Until we drastically lower our demand, we will always need foreign oil.
Crude Reality: Big Oil's Purposely Restricting Supply
I agree. In a perverse way, high gas prices are a gift to the GOP. There are few issues they can win on. Creating the overly simplistic myth that drilling in environmentally sensitive areas will lower prices at the pump can easily be communicated in a quick, thought-ending TV ad.
The Congressional ban has been in place for 27 years. Bush's father signed the executive order. Seven and half years into Bushs reign he lifts the executive order and republican's rally to portray the problem as something created by Dems.
Does any republican find McCain's commercial blaming O'Bama for high gas prices intellectually honest ?
The great mass of American's lack the patience and maybe the smarts to understand the complexities of the oil industry and it's place in the global economy. There is now way to explain it in a 60 second commercial.
That's why I want a compromise. Too many single issue voters will be swayed by the simple ideas being advanced . The truth about the probable costs ad benefits are simply too hard to explain to far too many voters.
I just hop someone talks about our 9.5 Trillion debt/half trillion deficit as we continue to bleed money in Iraq, in propping up banks and lending institutions and continue to pay for the housing bubble burst.
Crude Reality: Big Oil's Purposely Restricting Supply
"NEW YORK (AP) -- Oil prices are tumbling, hovering around $120 barrel Monday after a weak U.S. consumer spending report triggered another big sell-off.
Another dose of disappointing data fed investors' beliefs that a U.S. economic slowdown is forcing Americans to cut back on energy use. The Commerce Department says consumer spending fell in June as shoppers dealt with higher prices for gasoline, food and other items."
Lower demand, both real and projected, is largely driving the current sell off in oil. We can much more quickly lower our demand permanently than we can marginally increase supply by opening up new areas to drilling.
I welcome a compromise on off-shore drilling , not because it is a necessary part of a sound long term solution, but it is the only way to diffuse the wedge issue Bush and McCain created by promising lower prices at the pump.
1 out of 7 barrels of oil consumed worldwide are burnt on US roadways. Our biggest area of focus must be on reducing demand in transportation.
OPEC has in fact produced mush less than they are capable of for many years, but they are not all in favor of higher prices on oil. The Saudi Oil Minister warned his brethren against pushing for high prices . High prices will force consumer behavior to change and a flood of investment into alternate technologies. He told them "the stone age did not end because the world ran out of stones".
In the short term, OPEC will likely increase production because they do not want to see further demand destruction in the US and the rest of the developed world.
Aramco is paying investing 10 billion and using an army of underpaid South Asian workers to develop what is probably their last huge oil field. It could produce 1.2MM barrels a day in about a year.
American companies need high and stable prices to proceed on their oil leases. If they get new ones, the battle will become how heavily must we subsidize them so it makes economic sense for them to take the huge risks inherent in modern drilling. They cannot compete on the global market with producers who have much more oil and can produce it more cheaply.
If you want more drilling, be prepared to either pay at the pump or through taxes to subsidize US oil.
All of our options will need a big boost from Uncle Sam. With a 9.5 TRILLION dollar debt and a half TRILLION dollar deficit, I want the bulk of my money spent developing solutions that are permanent and do not worsen global warming.
Wind, Solar, Nuclear, bio-fuel, battery development trump mindlessly throwing money into oil.
Is the Global Economy Drowning in a Sea of Black Gold?
People are understandably afraid of the economy and feel the pain every time they they fill up. Most American's are in a "do everything" we can frame of mind. Drilling more oil, at first blush, appears to be a common-sense idea.
The main thing people want is lower gas prices quickly. The US is such a bit player in world-oil production that we cannot impact the price of oil if we drill everything we might find. I did not think McCain would take the lower road, but now that Rove proteges are running his campaign, the lie that we can lower price by more drilling is supported by the majority of voters.
You might make a better argument that we could marginally improve our supply potential at some point 10 -15 years in the future - but that is not as sexy as low gas prices.
Prices are coming down for a variety of reasons driven by oil - investors : The biggest being the probability that the US demand for oil will continue it's downward trend as our economy slows down. Speculator's actually cause more oil to be held above ground in developed countries, and that also is driving the recent price decline.
US consumption for gas declined 2.4% the last month measured - a huge number caused by many being forced to drive less.
The quickest and most effective thing we can do to lower the price of oil is to change our consumption on US roadways - where 1 out of every 7 barrels of oil consumed in the world take place.
If you listen to the CEO's of big oil, they will tell you that they sit on many oil leases and do nothing because the the cost of oil has been too low to justify the costly risks of trying to produce. They need stable, high prices to take on projects in the global economy. With the exception of Saudi Arabia, OPEC has done nothing to increase production because they could simply sit back and watch prices rise.
If US companies are granted new leases, and we subsidize them enough so they actually move forward, OPEC may just cut their production to maintain price stability.
In the short term, OPEC may finally increase their production to prevent further erosion of demand and development of alternate sources. LIke in the 70's, a lot of the demand decline today represents "demand destruction" - it is not sure term and will not come back as people abandon SUV's, drive less , hopefully drive more intelligently, and new better technology rolls out very soon.
If our huge demand slows down more quickly than anticipated emerging market growth, OPEC may increase their production and hope the US stays the world's biggest waster of global oil.
Crude Reality: Big Oil's Purposely Restricting Supply
His view: US was king of oil until 1971. US used it's excess crude capacity to maintain stable price and that ended when world demand absorbed our excess capacity in 1971. At that time, US ability to influence global price ended.
Pricing power shifted to Middle East/OPEC shortly thereafter and is now subject to market powers outside of anyone's control.
US is now and forever will be a minor player in global oil production. World demand will eventually outstrip world ability to supply oil.
Reducing demand/consumption on gas on US roadways is biggest opportunity to reduce our demand.