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June 27, 2008
SouthAmerica: In the article that I wrote and it was published in September 2002 on Brazzil magazine âCountdown to Armageddonâ I mentioned the following:
âIf the United States attacks Iraq and now there is talk in Washington of the possibility of the U.S. even take over Saudi Arabia's oil fields (according to an article on The New York Times of August 12, 2002), oil prices will skyrocket to between US$ 60 and US$ 80 per barrel. What does the Bush administration think the consequences of that act would be to South America?
We already have a bad economic environment in South America, and that continent will not be able to absorb the economic impact of such an increase in the price of oil.â
At that time when I wrote that article oil was trading around US$ 26 per barrel and I thought that if oil price reached the US$ 80 dollars per barrel that would cause major hardship to most countries around the world, mainly the ones that would have to import a high percentage to meet its internal oil needs.
I donât understand why the price of oil trading around US$ 140 dollars per barrel is not devastating the economy of many countries just like a Hurricane Katrina..
Now I am curious about how high the price of a barrel of oil can go. I wonder what price is the breaking point that would push the global economy over the edge of a cliff.
It is just my gut feeling that as the price of a barrel of oil reaches the $ 150 or $ 170 dollar level during the summer at the same time a chain reaction of events will start to surface and people would start realizing of the extent of the damage done to the global economy and to individual countries.
I am not smart enough to be able to forecast the surprises that might be in store and are coming -in the pipeline as a result of the skyrocketing price of oil. We might have things that are going on right now that it will surprise everybody when people start realizing the extent of the damage to the entire economic system.
I know that part of the problem regarding the price of oil is related to the fact that the US currency (US dollar) is becoming just a big pile of CONFETTI.
Maybe I am overreacting about the price of oil and its impact on the economies of countries around the world â maybe because I am looking at it from a Confetti perspective and in terms of Confetti the price it seems a little high.
I am looking at this problem, as someone who is living here in the US, but maybe the price of oil is not the one that is becoming too high in world markets and instead the US currency the US dollar it is the real culprit in this story because it is slowly becoming worthless.
Now Libya also entered the game and they are playing their part â How high the price of oil can be pushed to?
How much is too high: US$ 150, US$ 170, US$ 200 dollars per barrel or even higher?
In the meantime the oil producing countries are laughing all the way to the bank to the tune of billions of Confetti in extra oil revenues.
What happened to the talk about bombing Iran? We need that kind of rhetoric to continue for the price of oil to be able to reach the US$ 200 dollar per barrel level in the near future.
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âOil Surges Above $140 to Record as Libya Warns of Output Cutâ
By Mark Shenk
Bloomberg News â June 27, 2008
June 26 (Bloomberg) -- Crude oil jumped above $140 a barrel to a record as Libya threatened to cut output, OPEC's president said prices may reach $170 by the summer and the dollar weakened.
Libya may curb output because of a U.S. law that allows terror victims to seize assets of foreign governments as compensation. OPEC President Chakib Khelil said oil may surge on a European interest rate rise, France 24 reported.
Oil, gold and copper climbed today as the dollar dropped because the Federal Reserve gave no signal of higher interest rates yesterday.
``The Libyan comments are helping send us higher,'' said Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``The Libyans are responsible for only about 2 percent of production, but with supplies tight every missing barrel will have an impact.''
Crude oil for August delivery rose $5.09, or 3.8 percent, to $139.64 a barrel at 2:59 p.m. on the New York Mercantile Exchange, a record settlement price. Futures touched $140.39 today, surpassing the previous intraday record of $139.89 reached on June 16.
``I think you're seeing a clear flight from equities into commodities,'' said Kyle Cooper, an analyst at IAF Advisors in Houston.
Record oil prices helped send U.S. stocks tumbling. The Standard & Poor's 500 Index plunged 38.82, or 2.9 percent, to 1,283.15 in New York. The Dow decreased 358.41, or 3 percent, to 11,453.42.
GM Plunges
General Motors Corp., the largest U.S. automaker, plunged the most in three years as Goldman Sachs Group Inc. advised selling the stock because of a worsening sales outlook amid soaring gasoline prices, falling consumer confidence and tight credit. GM fell $1.38, or 11 percent, to $11.43 in New York Stock Exchange composite trading.
Libya's National Oil Corp. Chairman Shokri Ghanem declined to say when a decision would be made on whether to lower Libyan production or give any indication of the size of the cut under consideration. The African country produced an average 1.85 million barrels of crude oil a day last year, or 2.2 percent of global supply, according to a report this month from BP Plc.
Ghanem said the cuts may be made because of a law passed by Congress in January that would let families of American victims of Libyan-linked attacks confiscate Libyan assets and those of companies doing business with the North African nation. At least two lawsuits have already been filed in Washington.
U.S. legislation allowing lawsuits against the Organization of Petroleum Exporting Countries may also lead to reductions, Ghanem said.
NOPEC
President George W. Bush has said he'd veto a so-called NOPEC bill passed in May by the House of Representatives, because it may limit the availability of gasoline and further increase fuel prices.
An oil price of $150 a barrel may be ``around the corner,'' Ghanem said in a Bloomberg Television interview.
A decision by the European Central Bank to increase interest rates in July may cause the dollar to decline and prompt investors to buy more oil, Khelil, who is also the Algerian oil minister, told the Paris-based television channel. Prices would ease toward the end of the year, he said.
Threats against Iran would also support prices during the summer, he said. A political crisis that would stop Iran's oil production would push prices over $200 a barrel, to possibly $400 a barrel, he said.
Saudi Arabia pledged it will pump an extra 200,000 barrels a day next month to calm the oil market at a June 22 meeting. The kingdom hosted the summit of 35 producing and consuming countries in the Red Sea port of Jeddah.
OPEC Matters
``The Saudis go out of their way to have this specific meeting outside the OPEC frameworks, and if you're the OPEC president, you want to be important, so you come out of it and say $150 to $170,'' said Roger Read, an analyst at Natixis Bleichroeder in Houston. ``He's trying to prove he matters and OPEC matters and the Saudis don't make all the decisions.''
The dollar is also lower on a forecast that the ECB will boost interest rates. The currency's drop against the euro made commodities cheaper for buyers outside the U.S. The dollar was at $1.5756 per euro as of 4:38 p.m., from $1.5666 yesterday.
``Now the worry is that the European Central Bank may raise rates, which would be the same as another Fed cut,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut.
The Federal Reserve yesterday left its benchmark interest rate at 2 percent and said ``uncertainty about the inflation outlook remains high'' as energy and commodity prices continue to rise. Leaving the interest rate unchanged ended the most aggressive series of rate cuts in two decades.
Commodity Rally
``Commodities are rallying because there's a lack of confidence that the Fed will raise rates,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``They didn't raise rates yesterday and it doesn't look like they will raise them soon. Their statement yesterday was too wishy-washy.''
The Reuters/Jefferies CRB Index of 19 commodities jumped 11.13, or 2.5 percent, to 463.27, after earlier reaching a record 463.41. The index gained 49 percent in the past year.
Brent crude oil for August settlement rose $5.50, or 4.1 percent, to settle at a record $139.83 a barrel on London's ICE Futures Europe exchange. Prices climbed to $140.56 today, the highest
since trading began in 1988.
Source:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aaRbgtzwZjpg&refer=home
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