Re: How high will oil prices go?

From: ZZBunker (zzbunker_at_netscape.net)
Date: 10/18/04 

Date: 17 Oct 2004 18:17:07 -0700

Roland PJ <roland@rolandpj.com> wrote in message news:<ckmjvb$i2p$1@ctb-nnrp2.saix.net>...
> Fred B. McGalliard wrote:
> > "Dez Akin" <dezakin@usa.net> wrote in message
> > news:dd43b4da.0410131122.1ee0602d@posting.google.com...
> > ...
> >
> >>I'm afraid you're wrong on this. Theres no extra pumping capacity, no
> >>matter what the Saudi's are saying, and global oil demand keeps rising
> >>with the growth of China and India into industrial economies. Now its
> >>plausible that the Saudi's and other OPEC nations could ramp up
> >>pumping infrastructure, but thats quite capital intensive and also
> >>takes many months to years. We haven't seen that sort of movement of
> >>capital to spend on infrastructure.
> >>
> >>The reason they aren't spending money on infrastructure is the same
> >>reason we arent spending more money on avaliable if expensive reserves
> >>here: Everyone remembers 1998, not so long ago, when the asian
> >>financial crisis hit and OPEC pumped the price down below 15 dollars
> >>per barrel. So it will continue to rise until people realize that the
> >>price is going to stay above 30 for a long long time, and start
> >>building infrastructure.
> >
> >
> > I have noted that we have been taking refining capacity off line for a long
> > time now. Are we simply seeing the end of a long and well planned process of
> > getting us by the gonads?
>
>
> Fred, I think we've taken ourselves by the gonads.
>
> Globalisation is a worthy goal, but industrialisation of countries
> requires energy. What's noteworthy about the current oil spike is that
> it's not an artifice of producer politics.
>
> Fact is that oil demand has risen massively, and oil supply hasn't.
>
> OPEC's public position is that they want to maintain the oil price at
> the official $28 level, which is laughable now. Either OPEC are pulling
> a fast one on all of us, and are throttling supplies, which I don't
> believe, or the oil market is changing phase from a supplier controlled
> market to a free market.
>
> That might sound like a good thing, but the only reason it is doing so
> is that supply is currently unable to keep pace with demand.
>
> There is much talk from the local financial side that there is
> $10-$15/barrel political surcharge on the price, and that will evaporate
> after the US elections, but I don't belive that.
>
> You have posited that conservation can reduce demand in a matter of
> weeks. However, the only way such a short-term change could come about,
> in the real world, is through legislation, for example, to criminalise
> air conditioning, or maintain night-time black-outs.
>
> Anyone up for a War on Oil?
>
> Patterns of car usage can change. Those Hummers can be replaced by
> scooters. However, large scale change requires large-scale manufacture.
> Large scale manufacture requires energy. Catch 22.
>
> My view. Oil will not drop to the existing financial models' 2004 year
> average of $27 for a little time still, maybe 10 to 15 years. The IEA
> revised forecast of diminished demand increase in 2005 (1.4b
> barrels/day) compared the the actual 2004 demand increase of 2.5b
> barrels/day will prove slightly conservative.
>
> The US elections will have little result on the oil price. The current
> 1% cushion between supply capacity and demand is not going to change.
> The revised IEA demand increase for 2005 already exceeds current supply
> surplus. Iraq is still a mess and shows no signs of improvement,
> elections or not, US withdrawal or not.
>
> So, oil at >$50/barrel, perhaps $75/barrel next year.
>
> Roland
>
> p.s. So what?
>
> US domestic consumption down cos people are spending more on basic
> heating, cooling and transport. US inflation up becos same basic costs
> are up. US interest rates up to dampen inflation. Dow Jones down cos
> bottom line is affected by same basic costs.
>
> US$ level against foreign currencies is interesting. Increase in oil
> price produces international demand for dollars cos all countries have
> to buy oil in dollars. At the same time, the US budget deficit grows cos
> the US consumes 25% of the world's oil, but Texan supplies are
> dwindling, so US oil imports are growing faster than the US economy's
> growth.
>
> So what are the Arab Sheiks going to do with all of their dollars?

  Doing the same thing they have been doing for the last 60 years.
  Investing the dollars in Korea Rockets, Russian Machines Guns,
  Chinese Camo, F-16 spare parts. Nuclear power plants.
  Nuclear weaponry. American computer technology rippoffs.
  Which because Congress still refuses to do anything
  about due to their the egalitarian human interest concerns,
  the electronic maintence cost on typical us vehicles
  is now 10 times the cost of the oil, for the US corporation.
  Who most are only looking at oil as a hedge investment,
  before pulling out of the US return investment completely in 10 to 20
  years, before the Lawyers and their street walker
  suit-of-the-hour completely take over of the country.
  And give over all decision-making power in US economics
  over to Oprah Winfrey and the Crusaders of The Lost
  Noah's Ark.

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