Crude Oil a Bubble?!??!!?

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WallStGolfer31

Guest
Demand from China not meeting what some thought it would be. All time record investment in drilling and other extraction equipment for oil. Alternative energy investment also at all time record high. Oil Shale extraction becoming easier and profitable when oil is above $30/barrel. The majority of FL's Power plants switching from crude oil to natural gas for their supply, and other states following that lead. Old oil wells are starting up again since $70/barrel oil make pumping profitable again, brining more supply to market. People are reducing demand for oil bc of the high prices and other keep demand constant in the US (largest oil consumer in the world). Nuke power plants coming back into favor (vs oil powered plants) with a license granted for one only a few weeks ago for the first time in over 20 years, congress looking at min mpg mandates for all new cars driven in the US.


<img src ="http://img67.imageshack.us/img67/6329/bubblecomparison24rh.png"></img>
 
Oh, we will see 50's again. All it takes is a US recession, which will thump the China bubble hard. We will see massive supply and average demand.

When? Dunno. I would guess as early as '07, and prolly by '08.

Jay
 
Quote from Jayford:

Oh, we will see 50's again. All it takes is a US recession, which will thump the China bubble hard. We will see massive supply and average demand.

When? Dunno. I would guess as early as '07, and prolly by '08.

Jay
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That makes alot of sense. A recession based on housing appears iminent which will hurt consumers and China definitely.
 
Quote from WallStGolfer31:

Demand from China not meeting what some thought it would be. All time record investment in drilling and other extraction equipment for oil. Alternative energy investment also at all time record high..



Sorry but posting pictures of tulip and nasdaq price ascents and comparing that with the oil price curve just isn't what I'd call a convincing argument.

Oil isn't that historically expensive when indexed to inflation - and believe it or not, our oil consumption efficiency is much higher than before, so high oil prices pose less of an overall economic impact than they did in the 1970s oil embargo times. We've seen $35 oil plenty in the last decade or two, and we're only double that right now. Thats not a bubble - its a sign of the times.

We'll need to be deep into -global- recession before the price of oil comes down. Oil demand is inelastic. We still need to drive to work every day.

And OPEC and every other state run oil company who is tired of being strongarmed by US interests probably wouldn't mind screwing with us even more (ie reducing output even in the face of a recession, Iran possibly eventually cutting off production temporarily, and worst for US dollar: selling oil in non US currency).

I'm very worried.
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Quote from scriabinop23:

Sorry but posting pictures of tulip and nasdaq price ascents and comparing that with the oil price curve just isn't what I'd call a convincing argument.

Oil isn't that historically expensive when indexed to inflation - and believe it or not, our oil consumption efficiency is much higher than before, so high oil prices pose less of an overall economic impact than they did in the 1970s oil embargo times. We've seen $35 oil plenty in the last decade or two, and we're only double that right now. Thats not a bubble - its a sign of the times.

We'll need to be deep into -global- recession before the price of oil comes down. Oil demand is inelastic. We still need to drive to work every day.

And OPEC and every other state run oil company who is tired of being strongarmed by US interests probably wouldn't mind screwing with us even more (ie reducing output even in the face of a recession, Iran possibly eventually cutting off production temporarily, and worst for US dollar: selling oil in non US currency).

I'm very worried. [/B]
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My thoughts exactly. But I'm just too lazy to say it.


Brian
 
scriabinop23, oil demand is indeed inelastic, but not completely.

The problem is not with demand though.

The difference between consumption and production. It's a simple issue of the difference between supply and demand returning to historical means. This has been furthered by various other conditions which have been overstated.

<img src ="http://img201.imageshack.us/img201/4687/consumpproddiff5pf.png"></img>
 
Oil is a financial bubble, it has been documented to death, everyone knows it and for some reason TPTB pretend it's not there.

This happens due to broken price discovery mechanism.

Even oil producers are saying it LOUD AND CLEAR for AGES everyday:

Yesterday from Reuters:

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http://today.reuters.com/news/newsA...=&cap=&sz=13&WTModLoc=NewsArt-C1-ArticlePage4

Saudi cut shows record oil defies market logic
Wed Jun 28, 2006 11:58am ET167

By Peg Mackey and Janet McBride

LONDON (Reuters) - Oil power Saudi Arabia has offered the most compelling proof yet that record high prices are divorced from the realities of supply and demand.

The world's biggest crude exporter dared to make a huge cut in its production through the second quarter but growing demand for oil was still satisfied.

From July 2004 to March 2006 the kingdom had been pumping well in excess of 9 million barrels per day, in part to keep the world's top two consumers the United States and China supplied.

In that time global oil stocks have risen to their highest in 20 years and U.S. stocks are at an 8-year high -- persuasive evidence that inventories have become a more reliable indicator of whether producers are pumping too much or too little.

According to the International Energy Agency, adviser to the West on energy, OECD countries had enough crude oil in reserve in March to keep their refineries running for 25.9 days -- well above the norm. Crude oil stocks have risen further since then.

"There is absolutely no relationship between price and supply and demand," Saudi Oil Minister Ali Al-Naimi noted. He told pan-Arab newspaper Al Hayat in early June that crude oil was worth no more than $50 a barrel based on fundamentals.

He has repeatedly said the oil price is determined by the multi-billion dollar market that brings together oil companies, traders, investment and hedge funds.
 
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