Oil market oversupplied: Saudis

[Newsjock]

Source: Reuters

Saudi Arabia’s Oil Minister Ali al-Naimi said Sunday the global oil market was oversupplied and that the world’s top oil exporter had already reduced production due to weak demand.

Consumers have urged OPEC to quickly add supply to quell the rally that has taken oil to its highest level in two and a half years amid unrest in North Africa and the Middle East.

“The market is overbalanced ... Our production in February was 9.125 million barrels per day, in March it was 8.292 million barrels per day. In April we don’t know yet, probably a little higher than March. The reason I gave you these numbers is to show you that the market is oversupplied,” he told reporters.

... OPEC officials have strongly rejected responsibility for high oil prices in recent weeks but Mr. Naimi’s words are the clearest indication yet that the group is unconvinced there is a need for more oil and that OPEC may well leave its policies unchanged at its June meeting.

Read more: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/oil-market-oversupplied-saudis/article1988603/

[DCBob]

1. Oversupplied at $100+ / barrel ??

So this will likely cause the price to rise even more. Yuk.

[truedelphi]

8. Speculation driven oil prices brought about a scenario recently

Where the June delivery of a barrel of oil could stand at $ 200 a barrel.

I mean, YIKES!

Food, travel, heating and just about everything would go up in price if this occurs.

[nashville_brook]

20. yep -- speculation.

[Thunderstruck]

27. Which is doing EXACTLY what commodies traders do EVERY DAY with many

other commodities in good times and in bad.

It's what they do, speculate. That's how it works. Based on SUPPLY and DEMAND. Whether it's oil or cotton or copper.

[primavera]

39. Not exactly a ringing endorsement of commodities traders, is it?

I'm certainly no economist, but, to my ears, "speculation" is just an upscale word for gambling. Does it really contribute anything to the economy, or does it simply move wealth from one person to another? If that's all it's doing, is that really a useful function in an economy?

[wellst0nev0ter]

50. Short Answer: Yes, If Regulated

Commodity trading, in simple terms, is when a producer of a commodity (say farmers) make contracts with a buyer (say cereal companies) for them to buy a commodity at a set price per unit, despite the market conditions. It's supposed to be a hedge against fluctuating prices due to droughts, oversupplies, etc.

Sometimes, the producer might not be able to find a buyer for some reason or the buyer isn't able to find a producer to buy from, so that's when speculators come in. They make the same deals with commodity producers and the buyers in hopes of making a profit, like they buy 10 bushels of corn at x dollars and sit on it until corn prices rise to x+5 dollars then sell it to a buyer at a profit. So they function in keeping the commodity trading market moving.

However, that model only works if the speculators are prevented from cornering the markets or if there just a small number of speculators working in the margins. Once the commodity market becomes flooded with speculators, as has happened in the past decade, then the prices get wildly inflated. It's like if there are a bunch of people going around saying they're willing to buy a bunch of cars - any number of cars - for $500,000. Eventually you're going to have cars selling for $500,000 each, and the honest car buyer who is in need of a mode of transportation being screwed over.

[primavera]

59. Point taken

But I suspect that legitimate purpose constitutes a very small fraction of the economic activity associated with trading.

About, oh, must have been about 10 years ago, I took a graduate survey course in international econ and the professor shared a statistic that took my breath away. I'm probably going to get this wrong - it was ten years ago and I can't remember the specific parameters of the figure - but the basic gist was a comparison of the real value of goods traded versus the amount of financial activity associated with speculation and stock market transactions. Again, it's been too long for me to recall the details, but what has stayed with me all of these years was the magnitude by which purely speculative financial transactions outvalued transactions grounded in actual real goods. It was by some ridiculous number, something on the order to 10:1, just staggering. It impressed upon me that the vast, overwhelming majority of economic activity in this country is based not upon real life productivity, but upon this phantasmal, smoke and mirrors world of wealth transfers based upon real or imagined perception of value. It's kind of like our economy lives in an opium den. A part of me can't help but wonder whether we wouldn't be better off kicking the pipe.

Is any of this ringing a bell? I'm sorry I can't recall better what I'm trying to articulate - I know, I really ought to try to figure this out better before opening my big mouth - but maybe you know better than I do what I'm talking about.

[fasttense]

100. It's a bubble.

Ravi Batra predicted this bubble when the recession 1st hit. Since we have rescued the uber rich, they have to find a place to park all their unnecessary money. (They don't need to spend it, they have everything they need or want.) Since the CDOs and other mortgage backed crap is known to be worthless, they need something solid and real. So, speculators are buying up gold, oil and other commodities. Simply put, with the help of the bailout, they are re-inflating the bubble.

This was a good post on DU:

"“That’s how we have developed a massive glut of 677 million barrels worth of contracts in the front four months on the NYMEX and, come rollover day – that will be the amount of barrels ‘on order’ for the front 3 months, unless a lot barrels get dumped at market prices fast.

“Keep in mind that the entire United States uses ‘just’ 18M barrels of oil a day, so 677M barrels is a 37-day supply of oil. But, we also make 9M barrels of our own oil and import ‘just’ 9M barrels per day, and 5M barrels of that is from Canada and Mexico who, last I heard, aren’t even having revolutions.

“So, ignoring North Sea oil, Brazil and Venezuela, and lumping Africa in with OPEC, we are importing 3Mbd from unreliable sources and there is a 225-day supply under contract for delivery at the current price, or cheaper, plus we have a Strategic Petroleum Reserve that holds another 727 million barrels (full) plus 370M barrels of commercial storage in the U.S. (also full) which is another 365.6 days of marginal oil already here in storage in addition to the 225 days under contract for delivery.“

These contracts for oil outnumber their actual delivery, a sign of speculation and market manipulation, as oil companies win government authorizations for wells but then don’t open them for exploration or exploitation.

It’s all a game of manipulating oil supply to keep prices up. And no one seems to be regulating it."

There is so much oil out there, they can no longer store it in the US.

But Obama says he can't do anything about it except to drill baby, drill.

The complete piece is at: http://www.consortiumnews.com/2011/041911a.html

[NashVegas]

56. And It IS Speculators Causing $3.90 at the Pumps

Makes me about ready for a street bike.

[defendandprotect]

60. Exactly -- and these markets used to be REGULATED to prevent speculation -- !!

[Thunderstruck]

75. Where were you when gas was $1.90? Were you hysterical about

speculators causing that price level too?

[NashVegas]

82. Let Me Google That For You

http://tinyurl.com/3cvh5jr

http://tinyurl.com/3hqntc4

[Devil_Fish]

83. I'm a step ahead of you, (two steps actually)

1. Here in CA our gas is up to $4.25~$4.50 a gallon.
2. I ride a 1985 Honda Shadow 500cc V Twin. 50 M.P.G. (It used to get 60 M.P.G. before they put 10% ethanol in the gas)

[Fool Count]

23. Well, obviously the world is oversupplied with dollars more.

[girl gone mad]

103. No, a small percentage of people are oversupplied with dollars.

Instead of using those dollars to engage in capitalistic creation, innovation and production, they're gambling with those dollars and leveraging to create more dollars to gamble with, all of which will result in yet another massive collapse.

[GKirk]

2. I'm sure Opec and Saudi Arabia are very upset

about the high prices...

"Consumers have urged OPEC to quickly add supply to quell the rally that has taken oil to its highest level in two and a half years amid unrest in North Africa and the Middle East"




vvv my made up quote VVV
"We'll get right on that" one official was quoted as saying

[sharesunited]

3. Dept. of Energy should be selling short like crazy against the SPR

to break the back of this speculative bubble.

Cover their shorts at lower prices and never need to release a single drop of actual oil.

We're not doing that as deliberate policy to force green competitiveness.

But, as happened in 2008, the fossil fuel price spike will crash us.

[defendandprotect]

62. kr

[TygrBright]

4. Gee, you sure couldn't tell at the filling station. n/t

[Odin2005]

5. They are trying to cover up that their oil production is dropping.

[BobbyBoring]

6. The only thing covered up is

Speculators on Wall St. placing orders of millions of bbls thus taking them out of the inventory. They never take delivery though. It's all paper oil.

[Odin2005]

11. It is thought by some that the Saudis intentionally exagerated their oil reserves.

They just keep on lying about how much oil they REALLY have.

[sofa king]

87. I think you're correct.

My understanding is that oil production has failed to outstrip demand by more than about 1 percent in any of the past ten years. SA is one of the few nations left with the option to fiddle with its production rather than running full tilt, and clearly it's not adjusting those figures by more than a couple percent in either direction. Obviously, that's a cap on demand that's not going to change for the better.

I don't think any oil producer has the ability to influence the market through overproduction, because no one nation or group of nations has the ability to overproduce in a volume that has a real influence on the market.

[Thunderstruck]

25. I'm just about sick and tired of this thing where people blame speculators...

for doing what commodities traders do. The fact is that economic growth and budding middle classes in China and India are placing serious pressure on supplies. And as everyone knows, when there is high demand for a product, the price goes up. That's the nature of commodities.

The market is doing EXACTLY what it is designed to do.

[SkyDaddy7]

34. Although I agree with the basic fundamentals of trading you discribed...

but when people can buy X amount of oil on paper & wait a day & sell it for profit then the price will get inflated as there is a "demand" for "paper oil". It would be much different if every transaction was actually buying the oil & selling it to someone who would be using it but that is not the case on every BUY & SELL order. So, traders do play a role in inflating the price...To say they don't is not being honest. The question is how much of a role are they playing in driving up the price. I honestly have no idea & I don't think many people do but it is a good question to be asked.

[Javaman]

42. This is what cracks me up about people such as yourself that get angry

over this is: Were you just as angry at the speculators when oil was at $70 per barrel?

Did you get yourself all bent out of shape then?

Or are you now only mad at them because it only now effects you and your wallet?

People who get angry at the speculators come off as people who think we, the US citizens, own that other nations oil. LOL We act like drug addicts who get pissed that our dealer raised the price of crack.

There are two gigantic other nations in the world that are ramping up their economies 5% year on year: China and India.

The Saudi's have yet to ever release and accounting or inventory of their reserves. They play with the market all they want, yet people such as yourself get angry at the speculators.

You want to get rid of speculators? Have the UN establish a body to investigate oil reserves then have that same committee set the rate and be done with it.

But railing at the speculators who deal with a finite resource which is traded on an open market, honestly, is a fools errand.

[wellst0nev0ter]

53. You're Goddamn Right I Was Angry

Back during the last oil bubble when prices were over $100 a barrel, there wasn't actually a supply and demand problem. Gasoline reserves were the highest it's been at the time, and at the time worldwide demand has grown 2 percent but oil production increased 2.5 percent, so it isn't a question of supply and demand.

There were rules in place that put the limit to a number of speculators, and for a long time it has prevented the fake bubbles we have seen these past few years, but industry pressure lead to the relaxation of those rules and now we are paying the consequences.

[Javaman]

65. I asked about $70 dollar oil...

not $100 dollar oil.

Also, last run up, the middle east and northern africa also weren't revolting.

Scream as much as you want, stamp your feet if you like, but this time, the reasons for the run up are vastly different.

[SkyDaddy7]

54. LOL! This is what cracks me up with folks who "think"

They know it all when they don't! First, GO BACK & READ MY COMMENT I was not angry at all I was simply pointing out the FACT that YES when market forces begin to move any stock or commodity up speculators/TRADERS jump on & actually cause the price to go up even faster...The same can apply if said stock or commodity is going down! And YES sometimes it can be coordinated effort...Although I am not saying it is with this current rise in oil.

If you are not aware of this then that shows just how ignorant you are!

Do I blame the TRADERS for making money, NO! I have done the same myself! But to see you so arrogantly argue something that is 100% false is quite hilarious!!

PLEASE tell me there are not TRADERS buying & selling oil that have nothing to do with OIL! PLEASE TELL ME YOU THINK THIS!! I need another laugh!!

[Javaman]

66. One day you will understand how commodity trading works.

cheers. :)

[SkyDaddy7]

93. No, I want to know if you are telling me...

that there are no "speculators" like perhaps Goldman Sachs & others that have NOTHING to do with using or selling oil & simply buy & sell oil to make a profit? And if you agree there are entities that do this then how can you say they do not play a role in running the price up? Especially when there is a hint of trouble in the middle east!

I never said there was a conspiracy or some plot to run up oil prices I simply pointed out a FACT of commodities trading or speculating.

Would love to hear how you think I am wrong...If I am please tell me how?

And I apologise for my tone in my last message I was not feeling well...I thought I was going to get an intelligent reply not be accused of being angry when my first message did not have a hint of anger in it.

Talk to you later.

[Javaman]

94. oh lord.

:eyes:

[SkyDaddy7]

95. Nope, calling out to nothing won't help...

I think it is safe to say I have my answer. Take Care.

[Javaman]

97. what ever gets you through the night.

lying to ones self sometimes does what the truth can't.

[SkyDaddy7]

96. Nope, calling out to nothing won't help...

I think it is safe to say I have my answer. Take Care.

[primavera]

61. Actually, I rather like the UN idea

:)

[Javaman]

67. I brought that up a while ago...

but that won't happen until Saudi Arabia erupts in revolution and the UN has to step in.

Until that time, trying to do something like that will only get you dirty looks or dead.

[Devil_Fish]

84. They shoud be forced to take delivery. NT

[Nihil]

86. ... and then drink it ... (n/t)

:evilgrin:

[lumberjack_jeff]

99. Exactly. nt

[liberal N proud]

7. If it were over supplied, wouldn't the price go down?

Or is it just over supplied by their terms.

[truedelphi]

9. The price is going sky high due to speculation.

Just as the housing market speculative bubble brought about huge increases in housing prices, such that a shack in the woods in California could set you back $ 200 K, even though you couldn't live in the mess, so too is speculation driving the price of oil. (Same item now worth $ 23 K, in my County.)

[freshwest]

19. Yup. Hyped by the MSM who are spokepersons for the MIC and fossil fuel monsters.

Probably none of the dramas being played out in Africa, the Middle East or South America have stopped one drop of oil from making it here on time to be refined.

If supplies from abroad made the prices go up, why do we ship American supplies to other countries?

The MSM is just giving them cover to screw us. It's a monopoly, they'll screw us at will. We've got no other place to go except homemade biodiesel or riding a bike.

[Thunderstruck]

29. You are completely discounting growth in China and India.

China's economy has grown nearly 10% in the past year, and that is a decrease from previous years. And India is struggling to control their growth.

And together China and India have contributed the lion's share of http://www.dailyindia.com/show/435102.php">poverty reduction, leading to many more people moving toward more material lifestyles and all of this puts pressure on oil supplies because production cannot keep up. And when supply is challenged by demand, commodities traders do what they always do, they speculate. Just as they did when there was a corn shortage and just as they did when there was a wheat shortage, etc.

[zogofzorkon]

37. You forgot tulips. A classic supply vs demand speculation.

[Javaman]

43. Tulips aren't a finite resource. nt

[zogofzorkon]

52. they are as finite as wheat and soybeans

[Javaman]

64. You can't "grow" oil.

nice try.

[girl gone mad]

104. Tell that to Brazil.

[truedelphi]

68. However all your points here are moot, because right now there is

Still a glut of oil on the market.

[Thunderstruck]

71. Prove it or stand down.

[bananas]

105. Read the ConsortiumNews article mentioned in post #100

Read the excerpt from http://www.consortiumnews.com/2011/041911a.html
in post #100: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4817465&mesg_id=4821237
and read the rest of the article too.

[NashVegas]

57. And I Guess We Weren't To Be Angry With Speculators, Then, Either

Oh, wait. Yes, we were. And we faced these same kinds of posts from home-flippers in the forum, too.

[zeemike]

10. Well that is what the supply side economist say

But then there is Wall Street who can manipulate all of that at will...and become rich doing it.

[freshwest]

18. Supply side and trickle down theories don't take monopoly into account, do they?

[bhikkhu]

31. "If" is the key word there. The Saudis aren't the most trustworthy

Keep in mind that they spent the summer of 2008 talking about how supply was fine and there was no reason for them to ramp up their production, even as prices went through the roof...


After the fact, no one is questioning that the $147 a barrel was the result of speculation, but it was speculation on a very well-founded base of information; oil production was going full-bore, but demand was rising faster. An example of speculation was Southwest Airlines locking in a good price for jet fuel for 2009 delivery, and then the other majors looking at supply projections and scrambling to get in on the futures market, because it was possible that if they didn't lock in future delivery, they might get shut out of the market at any price. As it happened, recession intervened and supply was fine for a few months.

The point there is that the Saudi's lied about market conditions and their own capacity then, and they have similar reasons to do the same now. I believe it was in February or so that demand began to exceed supply most recently, if you follow the industry news, and that was before the "Arab Spring".

[pasto76]

12. oil prices are not driven by supply and demand. They tell us everyday that "speculators" are

[sulphurdunn]

13. Gee! reduced demand triggers higher prices.

That must be how a free market works. Imagine that! :smoke:

[Thunderstruck]

26. Where is demand reduced?

[sulphurdunn]

38. Everywhere.

Consider that consumption is expected increase this summer and throughout the rest of the year, but not by much. Therefore, $4 a gallon gasoline at this date is obviously a consequence of speculation that has been decoupled from traditional notions of supply and demand economics. That implies serious market manipulation by someone with lots of money.

Global oil consumption declined by 1.2 million b/d or 1.7%, the largest decline since 1982. (2010).

http://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622

http://seekingalpha.com/article/210551-u-s-per-capita-oil-consumption-plummets

[Javaman]

44. First site is from BP...

that is the last corporation I would ever believe anything from.

the second site only deals with US consumption. And it's no mystery that US consumption has gone down due to the recession.

Here are the facts...

That link gives a chart showing the currnet consumption of each of the fossil fuel nations in the world.

http://www.indexmundi.com/energy.aspx

This chart is for how much fossil fuel usage has increased in China...

http://www.indexmundi.com/energy.aspx?country=cn&product=oil&graph=consumption

This chart is for how much fossil fuel usage has increased in India...

http://www.indexmundi.com/energy.aspx?country=in&product=oil&graph=consumption

You can see a very dramatic rise in fossil fuel usage for both nations.

while over all usage may be down, due to the recession (since the US is the largest user of fossil fuels in the world), the slack is certainly being picked up by india and china.

Brazil, an emerging power on the political landscape, has had a steady increase also in fossil fuel usage.

http://www.indexmundi.com/energy.aspx?country=br&product=oil&graph=consumption

But why listen to me? Check on the links provided.

[sulphurdunn]

70. I think we're comparing

apples and oranges. Chinese and Indian oil consumption are indeed up, but global consumption is down. My point was that with global consumption down (regardless of India and China) rising fuel prices in the US cannot be explained by traditional supply and demand economics. Furthermore, in such a climate it is hard to explain why US oil inventories are down, except as a means of holding petroleum off the market and thus driving up prices. Reduction of OPEC production in response to this situation will most likely drive prices even higher. The worse case scenario is that Chinese and Indian demand will serve to further reduce demand in the US and serve as a brake on any economic recovery. Just because BP is the devil incarnate that fact does not determine the accuracy of its data. The message never bears a logical relationship to the messenger, even if the messenger is the Devil.

[ensemble]

14. Saudi Arabia did not make up for Libyan oil

The punchline:

"So my take is that the failure to increase production to compensate for Libya is deliberate. We can only speculate, but my guess is that, having watched how the west has helped to ease Mubarak and Ben-Ali out of power and is intervening in Libya to the same end, the Saudi regime is in no mood to care about our desire for more oil. Instead, they are very much in the mood to build as large a war chest as possible with which to appease their own population, strengthen their defense measures, etc."

http://www.energybulletin.net/stories/2011-04-15/saudi-arabia-did-not-make-libyan-oil

[Johnny Morales]

15. Libya is a minor producer in terms of total production

It's oil is certainly NOT used to make gasoline, as their crude is worth far more because of its high purity.

HEDGE FUNDS are making KILLINGS buying oil cheap and selling it a few weeks or days later with each jump.

It does NOT matter how expensive it gets, because they are driving the price not demand.

As long as they can sell it to each other at a little bit higher price every few weeks, what we pay will go higher and higher.

[Javaman]

45. Libya supples the EU with roughly 8% of their total oil usage...

that is a a player in ever definition of the word.

"Libya normally exports oil about 1.6 million barrels a day, 85 percent is shipped to Europe, according to the International Energy Agency."

http://www.worldnewsco.com/3665/libya-starts-oil-exports/

"LIBYA produces 1.7m of the world’s 88m barrels a day (b/d) of oil. OECD countries import 1.2m b/d, and China another 150,000. Our chart shows which of Libya’s main export markets are most dependent on it for their oil. At the top of the list, Ireland only accounts for a tiny fraction of Libya’s oil exports. Italy is by far the biggest importer: in 2010 it took 376,000 b/d from its former colony." (or about 20% and change for Italy alone)

http://dawnwires.com/investment-news/libya-oil-who-buys-how-much-from-libya-italy-leads-the-way/


A list of OECD nations...

http://www.oecd.org/document/58/0,3746,en_2649_201185_1889402_1_1_1_1,00.html

[bhikkhu]

16. So the Sauds will pump less to lower the prices, to make less money?

Its surprising now many otherwise intelligent people have bought into that over the past five years or so.

The Saudi's have been producing everything they can as long as the price stays high. You can still have your "speculators drive up the oil prices" argument if you like, but there hasn't been any spare capacity available to moderate prices for years, except for a brief period in the recession of 2008/09.

[Javaman]

46. Crazy, isn't it?

I try, such as yourself, to use fact based reasoning and arguments to refute the, "speculators are the problem!", meme, but alas, it appears as if a villain needs to be had.

While I'm no fan of Wall Street and how they have basically raped the US, I'm also of the reasoned mind that, that, in this case, speculators aren't the cause.

I read a lot of history and I'm about to start a book on the reign of terror in France. I know a little bit about it. One of the things that stands out and I want to learn more about, regarding that time, is: who were the innocents that were killed because of mass hysteria?

I look at our energy and political landscape and all I see is ignorance. People are frustrated and want that pound of flesh. And rarely if ever does reason play a roll in that. Hence the, "off with the heads" of the speculator viral chant.

Makes me wonder.

[freshwest]

17. Great. Now tell the middle men so the price of gas will go down.

[tridim]

21. Nice scam boys.

Unfortunately there's pretty much nothing we can do about it since supply and demand apparently doesn't apply to oil.

[Canuckistanian]

22. The Saudis are playing a shell game

Pretty soon they'll have to pony up and actually PROVIDE all that "excess capacity" they claim they have.

[MilesColtrane]

24. They must be pushing for a President Romney.

[L0oniX]

28. Bull shit

[indimuse]

30. shouldn't there be a CAP on speculations?

People are BROKE! never endzzzz..

[Name removed]

32. Deleted message

Message removed by moderator. Click here to review the message board rules.

[NashVegas]

58. I'd Like to See It Confined to Those Who Can Take Delivery

That would get most of the cool kids out.

[RedCloud]

98. A cap and an electric chair!

[cliss]

33. Some thoughts about the Saudis ~

1. Yes I agree the Saudis must be furious at the US 'meddling' in the ME / N. Africa. I personally believe the US didn't interfere, but they could only stand on the sidelines and watch as things deeteriorated, caught between a rock & a hard place. They finally came out in favor of the demonstrators. Message to other countries: you corrupt leaders don't count on us. We'll dump you faster than you can say 'Mubarak'.

2. Not enough oil. I believe Saudi Arabia with its gigantic oil field the Ghawar, is starting to slow down. They've been pumping in salt water underground to force more oil up. This has probably damaged the well plus SA probably hit its peak back in 2006?


3. A little hard up for cash. Saudi Arabia just gave $93 billion to their disgruntled citizens. It was done in order to prevent a revolution. So now they need some dough.

4. Incredible paper inflation, covering the world with dollars. Stupid FED started its QE-4 Quantitative easing - another word for unbelievable paper printing, making inflation inevitable. Saudi Arabia and other Petro countries get pissed because their Petrodollar holdings are going down. They have to raise prices now because their dollar holdings are going down in value.
The US

5. A worldwide thirst for oil. Why be nice? Why not just tell the US to go jump off a bridge. Sell to whoever can pay the most. Oil prices have always been dictacted by a number of things, among them sensitivity to price hikes (elasticity of demand). If they raise the prices too much, people start to cut back, reduce usage, start to look at oil alternatives and so on. Producers have always know they can't just double or triple the price, because there will be some unintended consequences. But in this economy, who cares?

[Thunderstruck]

74. Not only that, they are investing HEAVILY in solar research and tech. A country

secure in their oil resources would not even bother and this is a relatively new development. They had said that they want to be the world leader in solar tech just as they have been with oil.

[unkachuck]

35. so, the $4.50 a gallon....

....price I paid last week for gasoline is fake, a ruse, fraudulent highway robbery?....capitalism will never work for me....I'm too easily enroned....

....I guess we'll have to slow down our economic activities even further....good luck, Prez....

[DeSwiss]

36. Gotta pay for all.....

...that military hardware they're buying from us to protect themselves from their own people.

- Now don't they?

K&R

[Javaman]

40. AKA they can't ramp up production enough to meet demand...

this should be the "uh oh" moment for us all.

[JoeyT]

47. +1

Time to start investing in research for a time machine so we can go back a few decades and invest in technologies to get us past oil while we had plenty of time to do it without causing an economic meltdown during the transition.

[antigone382]

76. Yep...we've entered the period of continuing, worsening recessions.

I don't like it, I don't want it, but I accept that it is what it is. We've always known oil was a finite resource...coal, too. Yet we danced around and wasted our time on mountains of plastic crap. I continue to invest in the possibility for a just, peaceful, humane transition, because I can't just shrug off mass global suffering, even if it is apparently inevitable...our incredible wastefulness leaves so much room for improvement, that it is almost my only avenue for hope.

[Thunderstruck]

79. You may as well forget it. Because if you think there's a chance it will change,

you're going to be sorely disappointed.

[melm00se]

41. oil prices

(and by extension gasoline pump prices) are being driven by a lot of what has been discussed above:

- speculation by oil traders
- demand coming out of China and India
- supply by OPEC

but the one thing that has been overlooked:

The weakening of the US dollar.

a nifty thing happens when a currency becomes less "valuable": imports into the country with the weak currency cost more and exports from that same country cost less in the countries where the exports land.

this is one of the ways that China has become such an exporting powerhouse: their currency is being artificially low thus making their exports cheaper than domestically produced goods. If China lets the yuan to freely float you would see a dramatic shift their economic mix - I have seen some speculation that the US/China trade (im)balance would be dramatically less almost overnight (that is, of course, assuming that the Chinese economy is as healthy as the Chinese are portraying (something I personally doubt but cannot prove).

[Thunderstruck]

49. People here DO NOT WANT TO KNOW the truth about oil. It's that simple.

And all your points on what drives the price of oil are correct, including a weak dollar. But all anyone wants to ever THINK about with regard to oil (and gas by extension) is that when the price is down, there's no complaining. But when it's up, it's "speculation" that gets the blame, as if speculation doesn't take place at $20, $30, etc.

Get fucking real people. OIL PRODUCTION IS IN DECLINE!

Either accept it and adjust your lifestyle accordingly, or have peak oil DEVESTATE YOU. It's your choice.

[GliderGuider]

63. +1

For the truth.

[JVS]

77. Speculators have been using peak oil as cover for their fucking people over. That's the only...

reason they ever allowed peak oil to exit the realm of conspiracy theories.

[Thunderstruck]

78. Lulz! What makes your paticular theory any more credible?

If you want to believe there's enough oil to last forever, knock yourself out.

[JVS]

80. It's fun playing handmaiden to the oligarchs. You make a prediction, they use it as cover, and..

you get the satisfaction of interpreting the event through confirmation bias as supporting your hypothesis.

[Thunderstruck]

81. Like I said, knock yourself out. Pump until the cows come home. And, FGS,

don't do anything to prepare or plan, just in case. There's going to need to be a large reduction in population and, well, someone has to go.

Oil expert Gail Tverberg came out with this article just today, which is relevant to the topic: http://www.theoildrum.com/node/7786

[Dark]

85. The Problem is not lack of oil, it's lack of cheap oil.

There's plenty of oil, it's just really expensive to get out, if not impossible... Along with other factors (speculation, etc)

[truedelphi]

69. Very good contribution to the discussion.

I have heard some real oil experts speak at a symposium some years back, and one thought that has remained with me is this one: the price we in the USA pay for oil pretty much stays tied to the value of gold.

And just as the price of gold has escalated over the past eighteen months, so too has the value of the dollar fallen, and those of us still pumping gas are seeing a direct result on our pocket books.

I am glad I don't care to be hot in the winter. If it is fifty five in the house a lot of the time, so be it.But I do wish I could afford an electric car.

[melm00se]

88. finite commodities

tend to retain their value relative to each other.

[GliderGuider]

48. "As Saudi Arabia goes, so goes the world."

Anybody who wants to find out what this fuss is really about needs to pick up a copy of Matt Simmons' Peak Oil book "Twilight in the Desert". Yes, there's some geopolitical gaming going on, but the big story is that Saudi production is maxed out, and may be about to fall off a cliff in the next couple of years.

Here's a selection of large oil producers that are past peak production:

Country	        Peak            2008     % Off     Peak
                Prod.	        Prod.     Peak	   Year
------------------------------------------------------------------
United States	11297	        7337	   -35%	1970
Venezuela	3754	        2566	   -32%	1970
Libya	        3357	        1846       -45%	1970
Kuwait    	3339    	2784	   -17%	1972
Iran	        6060	        4325	   -29%	1974
Indonesia	1685	        1004	   -41%	1977
Iraq     	3489     	2423  	   -31%	1979
Other Europe
& Eurasia	762	         427	   -44%	1986
Russia          11484	        9886	   -14%	1987
Egypt	        941	         722	   -23%	1993
Syria    	596	         398	   -33%	1995
Argentina	890	         682	   -23%	1998
Colombia	838	         618	   -26%	1999
United Kingdom	2909	        1544	   -47%	1999
Australia	809	         556	   -31%	2000
Norway	        3418	        2455	   -28%	2001
Oman	        961	         728	   -24%	2001
Yemen	        457	         305	   -33%	2002
Mexico	        3824	        3157	   -17%	2004
Malaysia	793	         754	    -5%	2004
Nigeria	        2580	        2170	   -16%	2005

There is more than speculation driving oil prices. About half of the world's oil comes from countries whose production is on the back side of the curve.

[Vinee]

51. $5 per gallon, here we come. eom

[Thunderstruck]

73. When oil production is down 33% from the current in a few years, you'll

be wishing for $5/gallon gas. HARD.

[Strelnikov_]

55. Peak Oil = Peak Profits

The Pusher Man isn't going to tell the addicts the supply is drying up.

Can't have the addicts kicking before the price run-ups due to a dwindling supply of a critical inelastic commodity.

"Everything is fine, we're getting a load in from KSA next week, just hang in there. By the way, the price for a tar ball has gone up $50."

http://www.youtube.com/watch?v=rpoEmlxUPeQ

[Thunderstruck]

72. Yea, and it doesn't help when you have Trump sitting there with Crowley

saying stupid bullshit like "There's plenty of oil. The oil is everywhere" in one breath and saying "I'd just take their oil," referring to Libya, with the next.

[shanti]

89. it was shocking

to see such a rise in gas prices over the past two months. i am retired and don't drive very often. last time i filled up was february, and it was about $45-50 to fill up my van (4cyl). i filled up today, and it was almost $70. screw 'em, i'll walk or ride my bike!

[GliderGuider]

90. Three graphs that should make us worry.

1. We hit Peak Oil six years ago:



2. Net oil exports (the volume of oil available on the world market) are declining as the plateau of production meets rising consumption in oil producing nations:



3. The cost of food is very (I mean VERY) closely tied to the price of oil:

[antigone382]

91. You should post this as its own OP in GD. I would recommend it. n/t

[GliderGuider]

92. Done

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x923535

Thanks for the suggestion.

[fasttense]

101. It's a bubble.

Notice at the end of your 1st graph both production and price are going up. This should NOT be happening if we are reaching the end of our supply of oil.

Every since bush was selected by the US Supreme Court to be our president, prices have gone up and stayed up. What you might be seeing is the lack of demand for gas because of high prices and a corresponding decline in production in order to force the price up.

[GliderGuider]

102. Is production really going up?

Production is identical to what it was in mid 2005 - over 5 years ago. The price has gone from $60 to $140 to $40 to $80 in that time - a swing of +/- 55% around the average of $90/bbl, with a production change of +/- 2%. That's a price elasticity of supply of 0.03 or so - and that is extremely inelastic. Some determinants of PES are the availability of raw materials, the presence of excess capacity and supply inventories. None of them are in evidence. Don't be fooled by short term wiggles - supply is not changing no matter what happens to the price.

If there is a speculation bubble, it's only possible because we're at Peak Oil.