German newsweekly Der Spiegel is known for its exemplary investigative journalism, but doesn't have a rep for incisive economic analysis. With this caveat, we find it notable that its English-language online edition says today's sky-high oil prices are not based on "real" factors like supply and demand. Apparently, speculators are behind the recent price spike; the "bubble" will pop just like the "new economy," Internet and housing bubbles. Fadel Gheit of Oppenheimer & Co. says oil is presently the victim of "excessive speculation." Trading on the New York Mercantile Exchange (NYMEX) would seem to support his contention,. World consumption totals around 86m barrels a day, yet trading volume based on price speculation is 15 times that amount. So when will it end? Gheit doesn't know but he's confident it will. "This is a bubble, and it will burst."
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Yay. The Hemi Ram is a thirsty girl so this would be welcome news.
Gearheads may want to read this article, too.
http://afp.google.com/article/ALeqM5iYXm1UNEI-ViI-p5S6TAaogyDv8Q
It’s about creating microbes that eat CO2 and make octane.
Like all bubbles, it will burst when the speculators can’t find a bigger idiot to sell to.
The last bubble: Tech companies – you can only sell something for a loss (and make it up in volume) for so long, investors will finally want their money
The current bubble: Housing prices – there’s only so many times you can flip a house until no one wants to buy it at your inflated price
The next bubble: Energy prices? Don’t know if it’s a bubble or not, but it could be – it looks suspicious to me.
There have deifnitely been some pretty pathetic reasons provided for some of the hikes…
“Frog squished by tanker truck…oil prices to rise..news at 11.”
Thanks, NeonCat93. That one will be useful for something I’m writing. I hope it works. I love internal combustion.
This is not the only research of this sort. Nonetheless, I can remember all to well writing about the glamorous Genex Corp growing trees for fuel back in ’81, and similar stuff that never went anywhere. Still, Venter, and someone else I know of doing similar stuff are true giants, whereas the Genex boys weren’t.
IronEagle,
I heard the Tundra/Land Cruiser/Sequoia/Titan/Armada/Infinti whatever-the -hell-they-call-it are thirsty too.
Fadel Gheit is pretty hilarious. There is always some bubble going on, relax, the oil price is about to return to “normal” levels.
Here he is, blaming the Russians back in 2004: “If it weren’t for Yukos, we wouldn’t have crossed the $45 mark,” said Fadel Gheit, oil analyst at Oppenheimer & Company.
$45! LOL!
I predict that next year this time he will still be talking about a bubble, blaming [your favorite scapegoat here] while oil prices cross the $(100 + [your prediction here])/bbl…
It’s the war, stupid. If there was peace in the Middle East, or what passes for it over there, prices would drop by twenty bucks or more a barrell overnight. Speculators see oil plants being suicide bombed and jack up the price, fearing shortages. When there aren’t any actual shortages, the only thing that happens is oversized profits for people like ExxonMobil and Hugo Chavez.
Pease in the Middle EAst might help but few oil producing nations are very stable, there will always be some risk of significant disruption.
But the growing appetite of the Chinese and Indians for cars and consumer gooss; that’s a major market force. It’s hard to see oil production keeping up with that and that spells higher prices.
Hey guys, it’s Peak Oil. It’s for real and no bubble. China, Russia, India not to mention the oil rich Middle Eastern countries are buying cars like crazy and they all use oil. The U.S. is not the center of the oil world or even the car world any more. Japan with the Prius and Europe with it’s small diesels have taken the lead. As countries like Russia and Saudi Arabia get more cars they use more of their own oil and have less for export. This puts the squeeze on importing countries like the U.S.
Better get use to high prices and ethanol. That’s what’s ahead.
As far as I’ve been able to figure, for every use of oil, there is a non-petroleum alternative. For the given application, society uses the most economically productive alternative. That often is oil — and will be until it isn’t.
I’m not sure if whale blubber costs more or less today than it did 150 year ago. But it doesn’t really matter.
“speculations” about what? This is all “BS” Take this senerio, a small oil-pipe somewhere in south america breaks. Now tell me how in the hell would that pipe had an affect on worldwide oil production. As soon a oil company hears such a story gas prices rise. Stupid things like this, or how about terrorist threaten oil-pipelines in iraq, then prices rise. What the f**k is going on. So as I understand, you’re telling me that when gas prices were .99 cents a gallon there were no pipe breaks or threat or anything like that going on. This is nothing more then a shame for OPEC and oil companies to get rich.
Commodities is the new bubble, with prices hiking across the board as someone has sat down and figured out that all the accelerated consumption taking place in growing economies will be price drivers. China, India and former Eastern Europe are thirsty for more.
Speculators are driving the price of oil significantly beyond its rational supply/demand level, but then what’s rational about today’s markets? Analysts have stated that with a cooling of the world economy, oil should slide to 55USD, but then the dollar has lost so much value that producers are seeking compensation for that (and you wouldn’t believe how much the dollar will slide if they should decide they want euros instead.)
Peak Oil? There hasn’t been a single oil company that has reported greater reserves found than oil recovered this year .
Get used to reports such as this one –
Chevron Oil Reserves Drop to 10-year Low:
http://www.mercurynews.com/breakingnews/ci_8393535
Note that Chevron had boosted exploration spending by 21% to a record 15.5 billion USD.
When the greed and gluttony of oil companies go down, the oil prices will shrink. Meaning never. We have here already 2 sins from the Bible. Reading about oil companies provokes in you another one. So, 3 out of 7 ones.
“This year” above relates to oil reserves found in 2007. I see it might be misleading, and get you thinking I mean 2008. The reports are coming in now, though.
Should be:
There hasn’t been a single oil company that has reported greater reserves found than oil recovered in 2007.
Get used to reports such as this one –
Chevron Oil Reserves Drop to 10-year Low:
http://www.mercurynews.com/breakingnews/ci_8393535
Note that Chevron had boosted exploration spending by 21% to a record 15.5 billion USD.
Citgo is owned by Venezuela, not Chevron.
In 1972 Nixon took the dollar off the gold standard to be able to print money to goose the economy prior to the 1972 elections. What could go wrong? Well, gold shot from $35 to about $140 per ounce. Oil quickly followed from about $3 to $12 a barrel.
Today, Ben Bernanke and the federal reserve is printing money again. The dollar’s real value is plummeting. Gold closed yesterday at $972 per ounce! In other words, that 1972 $3 barrel of oil should cost about $83 dollars.
I expect these price increases to spread to cars in the next five to ten year too. Imagine an entry level Hyundai or Kia in 2018 with an MSRP over $24,000.
“It’s a floor wax *and* a dessert topping.” Oil production is leveling into a bumpy plateau and fulfilling the demand drives up prices. Energy investors and geopolitical instability drive prices up even more.
A very few years ago, the Bushes could ask their dear friend Prince Bandar to have the Saudis produce a bit more crude and calm the market. But Bandar’s gone home now, and the Saudis say they are producing more than they can sell. To some extent that’s true because the Saudis are producing lots of heavy, sour crude that can’t be refined in refineries built for light, sweet crude.
But Peak Oilers suspect the Saudis are already producing flat out and simply can’t increase production.
I just read a story that said that gasoline inventories are at a 14 year high. Gas and oil prices are high because no anti-trust regulators have the cojones to look into the price-fixing going on by the oil companies….
And then there’s the facts, as reported by the San Francisco Chronicle: The Federal Trade Commission also determined in a longer-range finding that during the past 20 years refiners didn’t seek to manipulate prices by cutting the number of operating refineries or limiting increases in capacity.
and
The commission said that even though the number of big companies involved in refining has fallen, the market is so fractured that no single company could unilaterally influence prices. It specifically said this is true in California, where the state’s biggest refiner, Chevron, controls 25.1 percent of capacity, with the remainder split among six competitors.
Ah well, why let the facts get in the way of a good story?