Supply worries send oil near $126

[[R_H]]

BBC

Crude oil prices have hit yet another all-time high in Friday trading, almost touching $126 a barrel.

Driven by surging demand and continuing supply concerns, US light crude reached $125.98 by early afternoon in Europe, up $2.29 from Thursday's close.

Meanwhile, London's Brent crude was also at a fresh high of $125.68.

Earlier this week, a report by Goldman Sachs said the price of crude oil could reach $200 a barrel in as little as six months, as supplies tighten.

Despite the continuing rises in oil prices, producers group Opec reiterated its view on Thursday that supplies were adequate for the time being.

However, it has also said that $200 a barrel was a possibility in the future.

Chinese demand

Soaring global demand for oil is being led by China's continuing economic boom and, to a lesser extent, by India's rapid economic expansion.

Both are now increasingly competing with the US, the European Union and Japan for the lion's share of global oil production.

This additional demand comes at a time of continuing production problems in a number of oil-producing nations.

In the past week, production in Nigeria has been affected by attacks on pipelines by anti-government militants, while Iraqi exports have been hit by renewed cross-border raids by Turkish forces against Kurdish insurgents.

Oil prices are also rising as the key US summer driving season approaches.

Economists warn that continuing high oil prices will have an impact on the global economy, hitting growth and fuelling inflation.

Wonderful. Apparently, the price could go over 200$ a barrel in as little as six months, according an energy strategists with Goldman-Sachs. The price of oil has risen 400% since 2001.

[Shinova]

It's okay to say that OPEC is taking the opportunity to reap massive profits with the rising prices, correct?

[Knife]

And yet I'm still surrounded by hoards of giant SUV's on the freeway on my 20 minute commute to and from work. How the hell these people afford their gas is beyond me. I make a decent living and the crunch at the pump forces me to make decisions with a 4 cylinder car.

[Vaporous]

They were just discussing peak oil on FOX Business. It sounded like they took it seriously for about five minutes before they brought on the Free Marketeers who assured the hosts that high prices mean supply will have to go up and demand will have to go down, no matter what happens in Asia or Europe or anywhere else.

They actually used the example of Oil replacing whale oil to claim that dwindling supplies of whale oil is why oil was discovered.

[Kanastrous]

And yet I'm still surrounded by hoards of giant SUV's on the freeway on my 20 minute commute to and from work. How the hell these people afford their gas is beyond me.

I'm guessing some number of them are doing it with credit cards.

[Shinova]

I do it with my credit card, but pay it all every month.

[Kanastrous]

I do it with my credit card, but pay it all every month.

Accumulating it as debt on their credit cards, to be more precise.

[Chardok]

There has to be a ceiling. These "Supply" issues seems like horseshit to me. I don't see fucking lines at the pump. There's no reason for this shit except that we're stupid enough to keep paying whatever prices they want to charge. Fuck.

[Admiral Valdemar]

There has to be a ceiling. These "Supply" issues seems like horseshit to me. I don't see fucking lines at the pump. There's no reason for this shit except that we're stupid enough to keep paying whatever prices they want to charge. Fuck.

You won't see supply issues. The Third World certainly does. If the world was well stocked, then prices wouldn't be going up so dramatically with total non-stories in the news. The talk of the recession around the globe being shallow or non-existent, premature as it may be, will only make for more bullish markets at a time when the likes of Chindia already increase their oil usage in double figures every year.

If the price is going to collapse, someone is going to feel it. This is not a speculative bubble nor is it the dollar dying (one of the many pre-made excuses the MSM use to explain prices which is false in this instance. Supply never seems to be readily looked at, least not without the caveat that it's all down to something other than physical constraints).

[J]

And yet I'm still surrounded by hoards of giant SUV's on the freeway on my 20 minute commute to and from work. How the hell these people afford their gas is beyond me.

2nd mortgages, HELOCs, and credit cards, in other words, a lot of them can't and they're running on borrowed money.

They were just discussing peak oil on FOX Business. It sounded like they took it seriously for about five minutes before they brought on the Free Marketeers who assured the hosts that high prices mean supply will have to go up and demand will have to go down, no matter what happens in Asia or Europe or anywhere else.

I had several arguments on this board with those who claimed higher prices would lead to an orgy of exploration & production and more or less make everything good again. Well, oil production has been effectively flat since 2005 and I don't see reserves being replaced at anything close to the rate of consumption even though prices have tripled since then.

There has to be a ceiling. These "Supply" issues seems like horseshit to me. I don't see fucking lines at the pump. There's no reason for this shit except that we're stupid enough to keep paying whatever prices they want to charge. Fuck.

Of course there's a ceiling, just like there's a floor on the housing prices right now. Which is to say we're still a long ways away. As for supply shortages, the reason we in the first world aren't seeing one is because the poor people in the 3rd world are. Nepal for instance is on strict fuel rations, as are quite a few other poorer countries.

Think of it this way. Let's say you're a rich person, you shop at upscale malls and chic grocery stores. If the price of food doubles or triples, you'll notice it but it's not going to put a dent in your 7-figure salary, you'll complain about it then move on and debete the merits of Porsche vs. Ferrari. Someone near the bottom of the economic ladder is going to be hit hard. He's already putting every penny into keeping his head above water, and now that food prices have doubled he can either starve or give up his rented apartment.

The US is the rich person, the 3rd world is the poor guy. Unless and until everything goes to hell, the guy at the top can continue living his blissful life. Same idea with the US, and most of the other 1st world countries.

[Admiral Valdemar]

There is a caveat, however. If the likes of Chindia start feeling the pinch and have to cut back on their incredible spending and growth, then that filters through to the US and anyone else who happens to use them for industry (that'll be the rest of the planet). So the irony here is that higher prices for the less well off coming about because of greater demand from the well off wanting more, will lead to a recession or market collapse anyway.

You can't permanently grow, but neither can you contract without such hardship either. No matter which route you go down, even the First World will be affected to such an extent that any signs of economic recovery will be swiftly dealt with.

That is, of course, unless the mega-projects list comes up good for us, which is something I'm hoping on, even if the tardiness of such projects is quite well known. Plus, with or without those new fields coming on-stream and on-time, they only secure new supply up till 2012. It gets awfully bare from there on as far as oil discoveries go.

[Rogue 9]

Gas prices are killing me. It's getting to the point where I might have to quit my job and find one here in town. Trouble is, there's not much. I suppose I could go manage the Subway restaurant...

[CmdrWilkens]

And yet I'm still surrounded by hoards of giant SUV's on the freeway on my 20 minute commute to and from work. How the hell these people afford their gas is beyond me. I make a decent living and the crunch at the pump forces me to make decisions with a 4 cylinder car.

Part of it, though, is that you have to have a car to survive in most of the US and right now re-sale prices for SUVs are plummeting. You then have the option to either continue to pour money in your existing vehilce in the fomr of huge gas bills OR you can curb it and pay a second car loan to get something fuel efficient. Even right now its certainly cheaper to keep pumping fuel than to get another car if you can't sell the first one at enough of a price to pay off the existing loan on it.

[Col. Crackpot]

Part of it, though, is that you have to have a car to survive in most of the US and right now re-sale prices for SUVs are plummeting. You then have the option to either continue to pour money in your existing vehilce in the fomr of huge gas bills OR you can curb it and pay a second car loan to get something fuel efficient. Even right now its certainly cheaper to keep pumping fuel than to get another car if you can't sell the first one at enough of a price to pay off the existing loan on it.

another reason why it makes no sense to finance a depreciating asset. You buy cash or lease. period.

[GrandMasterTerwynn]

It's okay to say that OPEC is taking the opportunity to reap massive profits with the rising prices, correct?

It's just as likely that they simply do not have the reserve capacity required to boost production any higher. Especially as, if I remember correctly, there is evidence to suggest that their big money-making fields are fast approaching the point where their productivity begins to plummet.

[GrandMasterTerwynn]

And yet I'm still surrounded by hoards of giant SUV's on the freeway on my 20 minute commute to and from work. How the hell these people afford their gas is beyond me. I make a decent living and the crunch at the pump forces me to make decisions with a 4 cylinder car.

Part of it, though, is that you have to have a car to survive in most of the US and right now re-sale prices for SUVs are plummeting. You then have the option to either continue to pour money in your existing vehilce in the fomr of huge gas bills OR you can curb it and pay a second car loan to get something fuel efficient. Even right now its certainly cheaper to keep pumping fuel than to get another car if you can't sell the first one at enough of a price to pay off the existing loan on it.

It's gotten so bad that some dealerships simply will not accept SUVs and trucks as trade-ins. Nobody wants to buy them, and those who have them have been trying to get rid of them. Which, of course, they can't.

[Kanastrous]

We're picking up a Mini Cooper for my wife, tomorrow.

Hooray for go-cart clown-car mileage.

[Knife]

And yet I'm still surrounded by hoards of giant SUV's on the freeway on my 20 minute commute to and from work. How the hell these people afford their gas is beyond me. I make a decent living and the crunch at the pump forces me to make decisions with a 4 cylinder car.

Part of it, though, is that you have to have a car to survive in most of the US and right now re-sale prices for SUVs are plummeting. You then have the option to either continue to pour money in your existing vehilce in the fomr of huge gas bills OR you can curb it and pay a second car loan to get something fuel efficient. Even right now its certainly cheaper to keep pumping fuel than to get another car if you can't sell the first one at enough of a price to pay off the existing loan on it.

I don't know. A lot of them are pretty fucking new models.

[Vympel]

What irrational waste of oil do you guys see that pisses you off the most? For me, it's bottled water. Stuff should be fucking banned.

[weemadando]

What irrational waste of oil do you guys see that pisses you off the most? For me, it's bottled water. Stuff should be fucking banned.

For me, the biggest issue with that is that it costs more per litre to buy bottled water than it does to buy coke. Despite the fact that the water is sourced from the same fucking spigot as the water for the coke.

Hooray for marketing dollars!

[Admiral Valdemar]

What's funny is seeing people complain about petrol, them in and say four times that for a cup of gourmet coffee. Everyone has been used to oil being so cheap without taking onboard how fundamental it is. Everything needs energy.

[Havok]

What irrational waste of oil do you guys see that pisses you off the most? For me, it's bottled water. Stuff should be fucking banned.

Agreed. At least regulated in places that have water of a certain quality, not to mention that bottled water is WAY more expensive than gas. $4+ a gallon(gas) Vs $1+ for 20oz. That is a vending machine price, but still...

Math question: I get about 150 miles a tank, with a 4.9 gallon tank. How does that compare %-wise to a standard car, that gets 30mpg? Shit... I don't even know what a average car tank size is anymore.... 20 gallons?

[Havok]

GE: Scratch that math question. It's fucking late and i am fucking tired. I am bad at math, but NOT that bad.

[tim31]

You ride a crotch rocket Hav??

As for bottled water, I hate it because it's a waste of plastic->oil, because it is overpriced, and because it tastes shit. I'd rather tapwater.

[weemadando]

You ride a crotch rocket Hav??

As for bottled water, I hate it because it's a waste of plastic->oil, because it is overpriced, and because it tastes shit. I'd rather tapwater.

That's because Hobart has the best fucking tapwater I've ever had (drawing from my experiences around Australia, Canada and Japan).