Business must be slow and circulation down at Barron's. What better way to stimulate newsprint distribution than a blazoned scaremonger front page headline as in this past weekend's edition, "Get Ready For $150 Oil". And then, not to shatter our faith in the free market system, it goes on to provide us with a dissertation on oil prices, parading a market oriented argumentation basing its projections on a lexicon of pure market driven presumptions, thereby anointing the oil market universe as being fully responsive to supply and demand.
Conveniently overlooked are such comments by ExxonMobil Chairman Rex Tillerson that the current price of oil should be no higher than $60 to $70 a barrel, attributing the difference to speculation and trading on the commodity exchanges (please see "Are our leaders Hearing ExxonMobil CEO Ttllerson?"). The words 'speculation' or 'manipulation' play no role in Barron's exercise of beneficent 'innocence', beneficent to the oil interests who want this to be exactly what they want us to hear and believe. Thereby they prepare us to accept unquestioningly the coming of $150/bbl oil as being a normal evolution of the oil market so that they, the oiligopoly, can enrich themselves unchallenged on the backs of the world's masses, rich and poor alike. Preparing us to accept the mantra that if prices do reach $150/bbl, well you see its all about rising demand and limited supply -- so relax and don't pick on the speculators, nor a casino system that encourages speculators. As to manipulation, well not to worry, the CFTC continues to be asleep at the switch.
Embedded in the article is the canard that world oil has or is reaching its maximum oil production capability. Praising Saudi Arabia for claiming it raised their production to 10 million barrels a day with oil prices ranging around $100/bbl. No mention is made that Saudi production capacity is now some 12.5 million barrels/day and overlooking the constant inconsistencies between what they say and do.
The article goes on to belittle the impact of releasing oil from the Strategic Petroleum Reserve without any cognizance of the immediate impact it has had on speculators and the casino betting strategies of the Bank Holding Companies such as Morgan Stanly, JP Morgan, Goldman Sachs -- by loading up 200,000 ton oil tankers with millions of barrels of oil with monies of their depositors insured by government agencies such as the F.D.I.C., and funds accessed virtually without cost at the Fed Discount window; then keeping these fully loaded tankers at sea for months at a time in confident knowledge that the price would only go higher... yet now, giving them at least a moment of hesitation before putting their next bets on the roulette wheel.
Most depressing is that the article could not have been crafted better by the best flaks in the oil industry to make us impervious to the willful distortion of oil prices orchestrated by oil interests, including of course OPEC, the speculators and those with the volition to manipulate the oil market, all in collusion to rape the consuming public.
We hope Barron's has sold a few extra papers.
Follow Raymond J. Learsy on Twitter: www.twitter.com/raymondLearsy
As you surely know, the US imports much of its oil from Canada.
How much of that oil comes from the Tar Sands? Does production of Tar Sands
cost the same as light crude in Saudi Arabia or Texas. Is there a separate listing for bitumen derivitaive oil on the COMMEX?
So unfortunately, I am really NOT going to listen to the CEO of EXXON. Because the first question I would ask him is WHy isn't he increasing refining capacity in the US? Because according to you and the theory of market forces, these high prices should be bringing on new sources of oil and therefore the need for more refining capacity.
But maybe thats just another way to keep prices high?
I dutifully read on looking for the evidence clearly laid out as to why this reality is a canard... but, alas, no evidence presented- not even a link to photos of a fleet of tankers anchored off-shore hoarding the black gold.
Raymond, they did what you've been demanding for years in releasing oil from the SPR, and now that this oil has been figured into the futures price- you are understandably disappointed.
Don't worry- it will get worse- nothing will ever get us an energy policy or prepared for an energy scarce world.
And to the original author of this piece..didn't we learn from the Wikileaks state department dump that Saudi Arabia has been consistently overstating their reserves/production capacity?
Even if crude price should rise above $124, a certain historical definitive oil cost/GDP ratio will halt the spike @ $136/barrel ($4.28/gal pump) ... just as this Demand Destruciton Barrier reversed the July 2008 spike @ $131. McDoomers predictions since mid 2008 of $200 to $750/barrel oil litter the ditches of the information highway.
As the name (DDB) implies, there is no opportunity for sustained prices at this level. Conservation and replacement measures will prevail. The 2008 spike was founded on fundamentals. On the contrary, this multi-month price run has been a classic commodity bubble. Prices will fall precipitously once upward momentum subsides.
Barrel Meter chart: http://trendlines.ca/free/peakoil/BarrelMeter/BarrelMeter.htm
You are arguing against a straw man when you imply that Peak Oil folks say we are running out of oil. No scientist or informed energy analyst who studies Peak Oil would ever say that, because Peak Oil does not affect reserves - what declines is the ability to increase production or maintian the flow rate to meet demand at reasonable prices. So you are fundamentally misrepresenting the Peak Oil crowd and giving an incorrect definition of what it is.
Peak production occurs when HALF the reserve has been produced - because at this point all the low hanging fruit of easily accessible pressurized light sweet crude has been used up. What remains after the Peak has been reached - because of entropy - is harder and more expensive to produce, and is going to take more energy to produce and have higher marginal costs to produce (deep water, tar sands, arctic).
Prices moved down for a few days after the release from the Strategic Reserve.
At that time, I watched the various "oil analysts" and they all basically said that oil was headed much lower in coming days, and it would be at $85/barrel or lower by the 4th of July. However, none of that came to pass. The lower level of price/barrel lasted only a couple of days. During the past week, the price/barrel has risen quickly back upward, and today, it closed at $97, after a $2 increase. This, of course, means that the slightly lower prices we have seen for gasoline during recent days is about to turn around. I sincerely hope the Barron's estimation of the future is wrong. But, presently, their record of accuracy is as good as anyone else, so we would be foolish to discount it entirely. I am a Democrat who is concerned that continuing high gas prices is threatening to unravel our unsteady economy, and I know who will be held accountable for those prices in 2012, if they do not come down. It concerns me that the administration is not doing more to impact this situation.
Its like throwing a rock in the Mississippi River and telling people you are building a dam.