Oil hits $100/barrel

Adrian Laguna · Post by **Adrian Laguna** » 2008-01-03 12:20am

Aw, I thought the barrel would drop below $80 before shooting back up and hitting $100. Then again, I wasn't expecting the dollar to lose value, that might have something to do with it. I couldn't possibly be that random guesses are only right on random occassions.

In any case, I think this is a good time to proclaim my undying love for President Chavez and see what he can do about letting me set-up a commune on the Orinoco basin. I'll just need lots of people with, um... "special" knowledge and experience. I could probably convince a bunch of Nigerians to abandon their shitty nation for a slightly less shitty one.

Straha · Post by **Straha** » 2008-01-03 02:14am

Mr Bean wrote: Your father is falling into the classic grand consiparcy theory, that all the oil company's of all the world (Including the one's that hate the US or dislike us like Iran, Venezuela and Russia) have all signed some secret deal to make like oil is going to run out, in order to drive up prices and make everyone richer, cue evil laughter....

In all fairness this has happened before. Look at the oil prices during the Oil Crisis and up to the middle of the Iran-Iraq war. Since the nationalization of a majority of the world's oil supply and the creation of OPEC Oil has ceased to act as a normal trading resource and has long since acted as a political commodity. Traded high when the Middle East wanted money. Traded low when the GCC needed to bankrupt Iran during the Iran-Iraq war and in the aftermath. And traded progressively higher since. The only difference between now and pre-Iran-Iraq is that nowadays the Oil producing companies are keeping their traps shut about Imperialism because they don't want to cause any needless antagonism if they don't have to.

Which isn't to say that peak oil isn't coming, mind you. Just to show you why his father could make a logical connection from what he's seen.

Illuminatus Primus · Post by **Illuminatus Primus** » 2008-01-03 02:28am

Actually, OPEC deserves a lot of credit for keeping oil prices stabilized and affordable as long as they did. You should read Twilight in the Desert by Matt Simmons.

Straha · Post by **Straha** » 2008-01-03 04:05am

Illuminatus Primus wrote:Actually, OPEC deserves a lot of credit for keeping oil prices stabilized and affordable as long as they did. You should read Twilight in the Desert by Matt Simmons.

Oh, no doubt. I'm just making the point that, from a rational outside perspective, it is not hard to see where Tasoth's father is coming from.

Korto · Post by **Korto** » 2008-01-03 08:11am

Tasoth wrote:What is it that makes individuals who aren't complete loonies think that this is all a hoax?
...<snip>...

"None so blind as they who will not see".
My opinion is he believes it's all a hoax, because the alternative is too frightening that he doesn't want to face it. Humans are marvelous for being able to sincerely believe the most unlikely scenarios if the far more likely alternative is unsettling or just plain terrifying.
Which also explains our belief in an afterlife.

Although this current $100/barrel thing looks to me to be just the normal jitters they always get. It's "OMG, it's the driving season!", then "OMG, it might be a cold winter!", then "OMG, it's hurricane season!", and so on, and then next year, they do it all, all over again.
In the overall climate of tight oil supplies, for reasons we all know, giving it a high starting base.
I would say the price will sooner or later drift back down a bit, and then something else will push it back up again, ad infinitum. At least until we do run out of the bloody stuff.

Illuminatus Primus · Post by **Illuminatus Primus** » 2008-01-03 12:35pm

Yeah, but it never goes quite as far down as it once did, and each price peak is higher than the last.

J · Post by J » 2008-01-03 01:33pm

J wrote:Also,
Analysts are expecting the latest government inventory report - set for release Thursday, to show a 1.8 million barrel decline in crude supplies, according to a Dow Jones poll. It would mark the seventh straight week U.S. crude stocks have dropped.
My guess is the number will be a lot closer to 5 million.

Silly analysts, when will they ever learn? Despite more imports flooding in, crude oil inventories dropped by 4 million barrels, so my guess wasn't far off. Analysts are once again wondering about the "unexpectedly large drop".

Admiral Valdemar · Post by **Admiral Valdemar** » 2008-01-03 02:15pm

But gasoline went up a measly couple million! It's all good.

I'm wondering how far this will go before they really start worrying and urging action. OPEC have said they will consider another hike in production (LOLZ) in March and Saudi said they have a million barrels of light sweet Arab crude to give out if need be. Yeah, I expect their SPR won't last long if that's what they use.

J · Post by J » 2008-01-03 02:33pm

Admiral Valdemar wrote:But gasoline went up a measly couple million! It's all good.

Well...except for this...

Total commercial petroleum inventories decreased by 7.3 million barrels last week, and are in the bottom half of the average range for this time of year.

Admiral Valdemar wrote:I'm wondering how far this will go before they really start worrying and urging action. OPEC have said they will consider another hike in production (LOLZ) in March and Saudi said they have a million barrels of light sweet Arab crude to give out if need be. Yeah, I expect their SPR won't last long if that's what they use.

That should be pretty interesting, I imagine there will be much talk of speculation driving prices, and thus no need for OPEC to increase production. It's worked for the last half year or so, it should continue to work for a while longer.

Androsphinx · Post by **Androsphinx** » 2008-01-03 03:12pm

Single trader behind oil record
Floor traders at the New York Mercantile Exchange
Open outcry trading is being replaced by electronic methods
The man behind the record rise in oil prices to $100 a barrel was a lone trader, seeking bragging rights and a minute of fame, market watchers say.

A single trader bid up the price by buying a modest lot and then sold it immediately at a loss, they claim.

The New York Mercantile Exchange said that US crude oil futures traded just once in triple figures on Wednesday.

Some analysts questioned the validity of the trade, though their concerns faded as oil set a record on Thursday.

New York light sweet crude climbed to a new high of $100.05 a barrel on Thursday.

Vanity trade

On Wednesday, one floor trader bought 1,000 barrels, the smallest amount permitted, and sold it immediately for $99.40 at a $600 loss, said Stephen Schork, a former floor trader on the New York Mercantile Exchange and the editor of an oil market newsletter.

"They absolutely overpaid," he told Radio Four's Today Programme.

"He paid $600 for the right to tell his grandchildren that he was the first in the world to buy $100 oil."

Beeb

Cute. Also, he sold it straight away? I will never understand people.

Adrian Laguna · Post by **Adrian Laguna** » 2008-01-04 12:42am

Admiral Valdemar wrote:I'm wondering how far this will go before they really start worrying and urging action. OPEC have said they will consider another hike in production (LOLZ) in March and Saudi said they have a million barrels of light sweet Arab crude to give out if need be.
Wouldn't this be a bad thing? Ideally all increases in production should stop immediately, so that the ammount of production we have right now will last longer.

Androsphinx wrote:Cute. Also, he sold it straight away? I will never understand people.

Yeah, it was pretty awesome until the part where he sold it. Then again, I posted an article several weeks ago where some dumbass was predicting $60 oil in the future.

Admiral Valdemar · Post by **Admiral Valdemar** » 2008-01-04 01:37pm

It should be gently cut back now as it is. New projects coming on-stream only makes the overshoot that much worse.

Post by **K. A. Pital** » 2008-01-04 03:53pm

In other news on TV, Nigeria rebels promised to cut the oil supplies via terrorism against oil lines and transport convoys.

Admiral Valdemar · Post by **Admiral Valdemar** » 2008-01-04 04:07pm

Peak oil explained easily for doubters by a pro.

Korto · Post by **Korto** » 2008-01-05 04:27am

I feel PO is going to happen later than many believe, and certainly later than Hubbert's estimate. What I'm getting at is we can compensate for falling production per oil well by drilling more wells, and improving technology.
For example, if we imagine a well whose production has fallen from 100% to 80% over the years, it would be possible to dig two more wells. Production may then fall to (making a number up) 65% per well, but that still means almost double the original! Demand can then increase, and the increased difficulty in oil recovery will be neatly disguised. The steady loss in recovery per well will now of course accelerate, but then more wells can be dug.
Increasing the quantity and quality of recovery equipement would have the effect of putting off PO, and putting it off and putting it off, until finally the point is arrived at where it becomes impossible to maintain and production falls, and likely falls precipitously.
I'm not believing that any more oil magically comes into existence, but that modern methods will act to 'prop up' production past calculated PO points, by shortening the total length of life of the oil field. This will lull concerns, allow oil use to continue to increase and PO believers be laughed at, but when technology finally fails us, it will fail us hard.

Admiral Valdemar · Post by **Admiral Valdemar** » 2008-01-05 05:08am

That assumes:

1. That drilling such wells is economically viable. Costs have gone up 16% in the last year for ExxonMobil and hampered production efforts.

2. That there will be the manpower for such projects. The world is currently in a dire need of new graduates and apprentices in the oil industry given the older generation are nearing retirement and the lull in recruitment years ago means no back-up to replace them.

3. That NOCs don't simply keep you off their turf and develop the wells themselves. Poorly.

4. Exports maintain pace with demand. We are already witnessing export-land with many nations whose more modern wells (Norway, the UK and Mexico) have been sapped of productivity thanks to more powerful secondary and tertiary extraction techniques compromising lifetimes. This is coupled with growing prosperity and demand in oil exporting nations themselves.

Korto · Post by **Korto** » 2008-01-05 06:49am

Admiral Valdemar wrote:That assumes:

1. That drilling such wells is economically viable. Costs have gone up 16% in the last year for ExxonMobil and hampered production efforts.

I believe large goverment subsidies and tax concessions will be given. It'll be "Vote for me for cheap gas!". This will eventually fail, of course, but it will keep the party going a while longer. Fuel is too important to the economy and the voting public for politicians to not do this.

2. That there will be the manpower for such projects. The world is currently in a dire need of new graduates and apprentices in the oil industry given the older generation are nearing retirement and the lull in recruitment years ago means no back-up to replace them.

I have no answer for this. Lack of manpower is a killer, as many mining companies in Western Australia could tell you. Economists will say demand will create supply. Many mining companies in WA would like to say something to those economists.

3. That NOCs don't simply keep you off their turf and develop the wells themselves. Poorly.

I'm confident that greed will win out. Particularly with the brown paper bags full of money that China and the US would be offering.

4. Exports maintain pace with demand. We are already witnessing export-land with many nations whose more modern wells (Norway, the UK and Mexico) have been sapped of productivity thanks to more powerful secondary and tertiary extraction techniques compromising lifetimes. This is coupled with growing prosperity and demand in oil exporting nations themselves.[/list]

These methods are I believe what I'm talking about, and future improvements to them. As these methods get used on still viable wells, production will be maintained or even increased for longer than otherwise expected, but will shorten the life of the wells.

Post by **K. A. Pital** » 2008-01-05 07:28am

I believe large goverment subsidies and tax concessions will be given.

They already are, it's not helping. In fact, a reduction of government taxation from oil will lead to breakdown of government services which are extensive, turning the economy into opressive no-guarantees Third World standard again... which will lead people to protest, and the more you cut down, the more violent the protests will get. An oligarchy can succeed in putting those down, but only so far.

I'm confident that greed will win out.

The greed of foreign capitalists opposed to domestic ones? Why? Domestic ones are greedy enough, no less greedy than the foreign ones. Loss of natural resources to foreign ownership will also massively damage the economy of oil producers.

Korto · Post by **Korto** » 2008-01-05 08:31am

Stas Bush wrote:
I believe large goverment subsidies and tax concessions will be given.
They already are, it's not helping. In fact, a reduction of government taxation from oil will lead to breakdown of government services...<snip>

At present, there's a lot of government money out there. We (Aus) can spend billions on tax cuts. The US can spend I don't know how much on an invasion of Iraq. I'm not saying this wouldn't eventually screw the economy, but if they believe there's votes in it, the politicians will do it.

I do admit that the sheer amount of oil we use may make effective subsidies impossible a lot faster than I'm thinking. I still say the politicians will try.

I'm confident that greed will win out.
The greed of foreign capitalists opposed to domestic ones? Why? Domestic ones are greedy enough, no less greedy than the foreign ones. Loss of natural resources to foreign ownership will also massively damage the economy of oil producers.

No, I meant the domestic ones. The particularly bad will just sell out (eg Nigeria), but others don't have to lose their oil to foreign owners, they can accept "advice" and "assistance" in order to "properly utilize their nation's resources".