Goldman Sachs: Oil prices to stay high for years ('super spike' phase)

[Pirate Smile]

Goldman Sachs: Oil prices to stay high for years
Investment bank sees crude entering a 'super spike' phase

LONDON - Oil prices, which hit record levels this summer, have entered a "super spike" phase that could last for four more years as global demand booms and supply growth slows, Goldman Sachs analysts said on Tuesday.

"We disagree with what appears to be a growing consensus that crude oil prices reached their peak levels earlier in 2005," said the firm's Global Investment Research.

The analysts said oil demand remained resilient and supply growth lacklustre, prompting them to keep their average U.S. crude price forecast for next year unchanged at $68 a barrel.

They predicted oil prices could see 1970s-style price surges to as high as $105 a barrel during this period.

"With WTI oil prices on-track to average about $57 a barrel in 2005, we think the past phase will be remembered as the first of what could be a four-to-five-year 'super-spike' phase," their report said.

http://msnbc.msn.com/id/10449918/

[hatrack]

1. Well, well, well

Whaddya know?!?

:eyes:

[dapper]

2. Goldman should sack itself

Yeah, we are in "peak oil" just another way to screw us and Bush will happily watch as his net worth increases. Oil and Gas prices should be based on consumption, not what some broker thinks it will be worth.

I love how people feel the economy is improving, for those of you who think the economy is bad now? It's going to get much worse.

Dap

[dapper]

3. oh and...

The oil supply is fine, it's the refineries that are rumored to not be producing enough, but they won't build another refinery because of the time and expense.

Total BS if you ask me.

Sorry for the rants but Bush=Oil and what a coincidence about the oil prices huh?

Impeach the SOB already!

Dap

[Dogmudgeon]

26. The oil supplies are fine?

I wish it was true.

The Ghawar oil field -- the world's largest -- is just about pumped out. The peak years for oil field discovery happened between the British Invasion and the Summer of Love. Team Bush and the House of Saud are gaming the market, not the supply. They know that they are in the catbird seat when it comes to the end of the era of cheap oil.

You're absolutely correct about Bush=Oil and the greed that motivates these mofos. But I'm convinced that they intend to push us to the edge and then make us pay to keep us from falling. Either way, we're screwed.

And yes, indeed; impeachment would be a good start.

--p!

[tularetom]

4. Why is anybody surprised by this?

My brother is an avid free marketeer. He firmly believes if the world is flooded with oil they will have to give the stuff away. He doesn't seem to understand the concept of elasticity and he is always amazed when he reads a prediction like this.

[phantom power]

11. Being perpetually "surprised" is preferable to admitting...

that your model of how the world works is completely wrong. Conservative economists seem to fall into this category. They're always "shocked" when their supply-side economics fails to work. Their theory isn't wrong! The fact that it has never, ever worked is just a run of bad luck!

[SammyWinstonJack]

40. !

:banghead:

[Yavin4]

5. The Other Side of Globalization

In the mad rush for the $1 an hour laborer, these "geniuses" miscalculated the other costs. Converting China to the factory floor for the entire world requires a huge demand for energy, and I suspect that these factories in China are not being built to be fuel efficient, like their counterparts in West.

We live in a world lead by people who only think in the short term. They are only concerned by their greed, and long term consequences are seen a nuisance. See Enron, the Iraq war, and Republican tax cuts.

[AndyTiedye]

13. Chinese Factories Are Probably more Fuel-Efficient than Ours

Their energy costs are higher, after all, especially when priced in their undervalued currency.

They don't care how much their factories pollute though, or how dangerous they are.
(Well, I'm sure the workers care, but nobody listens to them).

[Yavin4]

17. Not Necessarily True

China is probably making all kinds of sacrifices and shortcuts to get their factories built. Understand the power of greed, people make fast decisions based on the here and now. When most of their factories were built, fuel was cheap. Only now has fuel increased in price. So my guess is that they didn't design them for the spike in energy prices.

[AndyTiedye]

45. That Would Surprise Me

Just the fact that the Chinese industrial plant is many years newer than ours should result in greater energy efficiency.

[Fovea]

41. From what I understand from an aquaintance in labor

China's mfg base is about 4 times less efficient in energy usage than ours. Half of that is not invessting in best practices, half is what they manufacture... I.E. they have a steel industry, and we don't.

At least that is what he says, but he has access to trades and reports.

Also, China has some of the worst air quality going.

[endarkenment]

6. One problem.

What the heck do they think is going to change four years from now?

[dapper]

7. certainly not "renewable energy"

With the technology we have today, where is the push for renewable energy? or other energy sources.

Sorry for the rant guys but this manipulation is something I feel strongly about.

Dap

[Boomer]

8. My thoughts exactly

It's not refining that is the consistent cause of shortages, it's oil field production. And oil field production will only continue to slow as the "easy" oil is reclaimed and the deeper deposits require greater and greater expenditures of time, effort and energy to pump to the surface.

[phantom power]

9. Bingo. If production is "declining," what's supposed to make...

prices magically go down in four years? Particularly since we all know that nothing is going to reduce demand, either.

[dapper]

10. 4 More Years was a Bush Slogan...wasn't it?

Who knows, maybe the next president will be an oil man too.

I'm still amazed how this manipulation can take place.


How about some recommendations for this thread?

Dap

[Massacure]

36. I think production is still increasing, but demand is increasing faster.

I do not think production will ever catch up with demand again though.

[phantom power]

37. That's what I thought too, yet the article actually said "declining"

At any rate, I'm quite sure that we're never again going to see the kind of glut we did in the 1990s, when oil was going for $10/barrel. From here on out, the world will be sucking it up as fast as anybody can pump it.

[AndyTiedye]

14. A Really Bad Recession, Perhaps

[endarkenment]

22. that would certainly help. eom.

[bahrbearian]

18. The Horse breeding and Buggy Makers will be at full capacity

[PurityOfEssence]

12. Shouldn't that be "forever"?

Just asking...

[400Years]

15. nah, I'm sure demand will fall after the apocalypse

[newswolf56]

16. And the Bush Administration continues its war on public transport.

(Not that today's Democrats are much better.)

[Mojorabbit]

19. We need a manhatten type of project

in renewables and yesterday ..or we will be in a world of hurt.

[Hypatia82]

20. Of course that's what Goldman Sachs says...

they stand to make lots o' money if oil prices stay high. As it is, more than a few analysts have run some numbers and figured oil should be around $40 a barrel right now and eventually will be. Nice bubble in the oil futures market, and like all bubbles, it'll collapse.

[endarkenment]

21. based on inexhaustible supplies that can keep up with demand growth

you are quite correct. Do I really need the sarcasm smiley here?

[jseankil]

23. Bingo! They are giving out $11 billion in bonuses in 2005!! No Joke!

http://www.nymetro.com/nymetro/news...features/15197/

--------------------------------------------------------------------------------

[endarkenment]

24. Yes sure the oil companies will profit gouge over scarcity.

That does not make peak oil either real or unreal. Nor do short term downward price movements indicate that vast new fields of cheap to extract oil have suddenly been discovered. Either you accept the evidence that we are at or near the peak or you don't. The evidence that we are there is pretty solid, the evidence that we aren't is basically lacking.

[jseankil]

25. Forbes a few months ago said oil prices were artificially inflated

Said that the cost should be around $40 per/b. I'll find the article and post it.

[endarkenment]

27. We appear to be talking past each other.

Once more.

Price gouging is real. Peak Oil is real. We really have a long term crisis with fossil fuel energy supply vs energy demand. Specifically the supply of cheap-to-extract oil is not keeping up, and cannot keep up with the demand. The consequence is price instability - aggravated no doubt by all sorts of shenanigans - with a long term upward trend in real dollars. It doesn't matter if Forbes thinks that the 'real' price ought to be $40 or $60 or $24. The actual price is going to fluctuate wildly and climb inexorably.

[Yavin4]

28. Oh Please

Jesus will give us oil.
:sarcasm:

[dapper]

29. Peak Oil

Peak oil is a reality but have we already seen the peak?
is the peak happening now?
10 years from now?

Of course it is a truthful statement but I don't think anyone knows when the peak will actually happen, it seems to be something they have thrown out to increase the price of oil.

I just don't believe it is responsible for an investment firm to state that the price will remain high and higher for the next 4 or 5 years. I liken it to pumping up the price so they can profit on it. The old pump and dump.

Dap

Where are all the recommendations for this topic?!?!

[Strelnikov_]

35. My Gut Tells Me We Are On The Plateau Now

As I recall Gharwar (SA), Cantarell (Mex), Burgan (Kuwait), the Nos. 1 thru 3 fields in the world, are probably at or past peak based on recent reporting. North Slope (AK) and North Seas fields are declining at 10%+, much faster than anyone anticipated, primarily due to EOR being used.

Why are there no recommendations? Because most people are in denial and would rather grab onto the cargo cult of rationalization, generally market manipulation or technofix, rather than take a sobering look at the overwhelming evidence.

Anyone who can read a graph should be able to figure out that the cornucopian view of petroleum supply does not add up.

[dapper]

38. Peak II in 3D (thanks for the chart)

I do not doubt that there is a "peak oil" and I don't doubt the information is used to manipulate the market.

I'm no expert but could it be possible that there are less discoveries because there is less exploration?
There is oil in Alaska which the govt seems to be going back and forth with the environmentalist about. How much oil is there?

Obviously the more you use (oil) the less there will be, it will not last forever. How much oil do we have left? Is it reason to raise oil prices now?

I do know that there was not much Natural Gas exploration at one point because it was cost prohibative with the low price of gas. When they didn't explore, the prices moved up. As with Oil and Gas, when the price goes high enough, the exploration companies will jump back into action because now they can profit from that exploration. In a way, what do you expect? These are companies, they need to make money, they don't want to lose money... but it opens these markets for a good deal of manipulation.

I am for seeking out new energies and renewable energies but it looks like our govt is not too keep on the idea as it will bring more competition to the markets they love to manipulate.

Any place I can get more of those charts?

Thanks,
Dap

[Strelnikov_]

43. Link To ASPO

http://www.peakoil.net/

The two major charts:

http://www.peakoil.net/uhdsg/Default.htm

Link to an article regarding ANWR. The majors are no longer interested. Thawing of the permafrost has increased pipeline maintenance and development costs to the point where the enterprise will probably not be that profitable.

The general impression I get from the reading is that the majors are talking exploration, but the rubber is not hitting the road. Why? Similar to the reason they are not building more refineries. They know the score, that most of the good finds have been found, and most of the 2nd half of the age of oil will just be mopping up what has already been found/developed.


Big Oil Steps Aside in Battle Over Arctic
February 21, 2005

http://www.nytimes.com/2005/02/21/politics/21refuge.html?ei=5088&en=011827559528ad9f&ex=1266728400%22%02ner=rssnyt&pagewanted=print&position=

[dapper]

44. Appreciate the links

and my favorite part of the article...
"Big oil," Senator John Kerry said in last year's presidential campaign, now calls "the White House their home."

Dap

[endarkenment]

46. cheap oil vs not-cheap oil.

The oil coming out of the great fields of the middle east has the unique property that its extraction costs are amazingly low. There are a few other smaller fields around the planet with similar low extraction costs. Together the production from these fields - which constitute what is referred to as 'cheap oil' keeps the price of oil as low as it currently is. The problem is that new cheap oil fields are not being discovered. The new discoveries are all expense to extract from. So as the cheap oil fields run out, they are replaced with expensive oil fields. Even then, as the charts indicate, replacement regardless of extraction cost is not keeping up with growth in demand. So the inexorable price increase is driven by two factors: demand and extraction cost.

As the price of oil increases, fields that were prohibitively expensive to extract from will become profitable, and there will be some new exploration efforts. That will not do much of anything to lower prices, although it might reduce the rate of increase. From what I've read nobody much expects there to be a replacement for the mideast cheap oil. They have scoured the planet looking for just such a find, and there really isn't one.

We are at the end of an era, and it is a painful end replete with economic dislocation and oil wars. Ironically, just as fossil fuels are starting to run out, the effects of their chronic misuse in the form of catastrophic climate change are starting to be obvious and impossible to deny. Too bad our leaders just won't level with us: they collectively did nothing for 30 years other than line the pockets of their benefactors and get ready for war.

[Hypatia82]

32. Well currently...

it still costs $12-15 a barrel to produce oil. That hasn't changed, adjusted for inflation, in ages. One exception is Iraq where it costs $5 a barrel. Also no one really knows how much oil is around. There's good guesses, but places thought for ages to be dry have turned out to have oil. Not huge quantities but still there. As for production costs, they're related to the equipment used and the cost of drilling. To drill over 10,000 ft of ocean costs more than drilling on land. But unless the actual means of getting the oil out of the ground change the costs don't have cause to change.

[drgoodword]

48. Good post about gouging and peak oil coexisting

As for the Goldman report predicting a finite superspike in the face of peak oil, either they're holding back the full extent of their pessimism, or they, like so many other blue-skyers, think science and market forces will work their magic to create an EROEI-equivalent oil replacement, or they're quietly forecasting massive demand destruction (as another poster noted, the "apocalypse" factor).

[Hypatia82]

33. Current oil prices...

have to do with insane bidding up of prices way beyond what can be justified with supply and demand. It's a market bubble. And like all market bubble it'll come down to what it should be. The price will go back to being regulated by supply and demand and not wild speculation. Which is what has been going out for the last several months.

[Strelnikov_]

34. Peak Oil = Peak Profits

Why do you think they kept us hooked all these years?

The panic is setting in, and the pusher is jacking up the prices.

[dapper]

39. Peak Oil+Peak Profits= everything going higher.

Gas prices in the midwest went up 50% from last year. a cord of wood is almost double the price of last year. My electric company boosted rates due to the price of oil/gas even my day care added a $25 fuel surcharge! (Just a one time offset).


>Why do you think they kept us hooked all these years?
>The panic is setting in, and the pusher is jacking up the prices.

now I know how a crack addict feels :-)

Dave

[Miss Chybil]

30. And the Saudis are experiencing record budget surpluses.

Imagine that.

[dapper]

31. I had the thought in the back of my head...

Maybe we are rebuilding Iraq so some American Oil Business men (Bush Et Al) can run their oil business before they "retire" in Iraq... Crazy thought...

Dap

[Orsino]

42. ...followed by the super-duper spike phase, etc.

Why would anyone believe that the price of a dwindling and vital resource will ever come down?

[Demeter]

47. NO, I Don't Think So

Reason being, there will be no one with the wherewithall to buy it.