In a forthright television interview on June 2nd between President Medvedev of Russia and Maria Bartiromo of CNBC, the subject of oil prices was discussed -- an issue of particular concern to Russia as the world's largest energy exporter. The gist of the conversation was enlightening. Simply put, Medevedev confided that today's prices of $60-70 were a throwback to the prices of 2006, which was then perceived by Russia as generously high, and that he was puzzled why prices reached this level today.
President Medvedev clearly doesn't read the Financial Times. In a braying editorial on the same day, the Financial Times swept aside all doubt, instructing us in schoolmarm manner that "Oil [Is] Back To Normal" and that we should all put on our Alfred E. Neuman persona, and understand that the 100%-plus price rally in oil prices since hitting bottom earlier this year is no cause for worry. Well, if prices continue to go up, that could, according to the Financial Times, trigger inflation, being "a final straw for many sectors battered by recession." But again, hey, don't worry, because further immoderate price rises can be hedged against. Did you catch that Mr. and Mrs. Juarez? If gasoline and home heating continues to escalate as oil prices go up, taking a big chunk of your day to day living budget, don't worry. All you need to do is call your local broker and start trading oil contracts on the Commodity Futures Exchange. Simple as that!
The Financial Times, forever the apologist for any upward aberration in oil prices, goes on to compare the price movement in oil to other products such as agricultural commodities that "have all gone up." The fundamental differences are not touched upon. Soybeans and wheat deal with real problems such as dry growing conditions and limited stockpiles. Oil on the other hand functions under fabricated conditions with Saudi Arabia shutting in 4.5 million barrels a day of its oil production, while the rest of OPEC probably shutting in an additional 3 million barrels. All this while oil storage throughout most of the world is filled to capacity and scores of supertankers are at sea, loaded with oil, serving as auxiliary storage with nowhere to go to discharge their cargo. And not for the Financial Times to overlook the dollar's weakening as a further reason for a renewed spike in oil prices, without pointing out that the dollar has lost some 11% of its value since the outset of the year, while oil has escalated over 100%.
Far be it for the Financial Times to mention the machinations of OPEC, or the trading aberrations on the commodity exchanges. They all seem to be club members and therefore above reproach. But that breath of fresh and candid air coming from Russia, now that's a most pleasant change.
Of course, for the 50 percent of Americans who don't pay any income taxes this is difficult to digest. Better to just complain.
:-)
The alternative is endless variations on the government-imposed ethanol debacle.
The supply and demand laws that existed between Tropicana and orange growers, refineries and crude oil exporters, cocoa farmers with Hersheys has been smashed when the rules were changed to allow "investors" into the buying and selling. Oil and OJ are inputs of production, not "investments" to hedge and gamble and manipulate!!!!!!!
Our government allowed the rules to change. They are complicit in this massive destruction of our wealth and the ruin of real capitalism.
We were burning more than ever, and they, 1000s for each of us, were also burning more than ever before. Add it all up, it was record demand. And it did not start backing off until the recession latched on.
Yes, it is that simple.
http://www.huffingtonpost.com/michael-martin/are-speculators-to-blame_b_208773.html
I stay out of that particular debate as it is well debated by others without my ignorant two cents worth.
"They all seem to be club members and therefore above reproach. But that breath of fresh and candid air coming from Russia, now that's a most pleasant change."
Now, when it comes to practical and geologic limitations on growth generally, and oil specifically, your views may be more akin to the MSM than to my own.
That is ok, but what will you have to say when the chickens come home to roost after this fall-off in exploration and development the last 8 months. Will you attribute the stated (and inevitable) production declines to a "breath of fresh and candid air" or a rascally ploy to justify gouging?
KTM said it best: "So unless we see much higher and sustained prices soon, the delay in new drilling will automatically program the next supply shock into the system. It might already be unavoidable at this point."
As the world is using less oil worldwide than last year (Maybe 5 to 10 million bbl/d less?) then the world is still blowing through 70-80 mbbl/d of this valuable stuff - an amazing rate considering this world-recession.
And what has changed? Our driving habits? Development of alternatives? Our President making nice and hoping for the best?
I mean it- good luck to all of us.
Future cars will need no fuel and can become power plants when parked.
Revolutionary breakthroughs will make possible a Self Powered Internal Combustion Engine - SPICE™.
A SPICE can be used to power a hybrid. It needs no fuel and will end the need to plug-in, as the engine can run when parked and wirelessly transmit and sell power to the local utility.
The SPICE is powered by hydrinos. One barrel of water can equal several hundred barrels of oil. To learn more about SPICE and hydrinos see: www.chavaenergy.com Look under the heading HOW?
A second breakthrough is the MagGen™. These magnetic generators, without moving parts, will replace batteries in electric cars, trucks and buses.
Scientists and engineers will doubt these technologies are possible until they have been validated by Independent Laboratories. That is an important step on the agenda.
Until now, car ownership has been an expense. Payments to car owners driving a hybrid with a SPICE, or powered by MagGen, are likely to be substantial.
When vehicles selling power to the grid fill a parking garage, it will have become a multi-megawatt power plant.
The cost of many vehicles might be paid for by utilities, as they purchase power whenever needed. The parked cars each become decentralized power plants - a rapid, cost-effective path to a rebirth of the automobile industry.
And as worldwide production begins to ramp up, a permanent end to high oil prices!
:-)
Any constitutional lawyer here who wants to take that?
Now, absent this guarantee and given that higher oil prices are a fact, wouldn't it be more important to ask how we can reduce our dependence on oil in the fastest and most efficient manner rather than to get upset about what is being written in this or that article in this or that newspaper?
Supply will fall off pretty steeply over the next few years because marginal cost for drilling is above the market price right now and most producers are past peak, anyway. So unless we see much higher and sustained prices soon, the delay in new drilling will automatically program the next supply shock into the system. It might already be unavoidable at this point.
If I remember correctly, last year I had no other choice to keep myself from getting bent over, other than to the convert my 4 cylinder truck and grow and distill my own alcohol.
The price of oil is the commodity that Hedge Funds think will make them money in the short term. They are gambling, yes gambling, that they can go back to their forced price increase at the pump.
They learned that the price point at which the public would complain was $4/gallon...so they are gambling that as summer rolls around, we will use all the gasoline which they have at inflated prices...again. Don't you just love it that Hedge Funds are back to their old ways: Putting their own wealth on the back of the American economy/public.
Just watch the profits in the Oil Sector for the second quarter (not available until July). They are laughing all the way to the bank!
Yes, it's really that simple.