Oil at $100?

[harry123]

Yup. Thank God. I think $100 oil is coming and it can't happen soon enough.

http://www.creditwritedowns.com/2008/07/oil-to-sink-to-100.html

[rurallib]

1. can $30 be far behind?

joking

[Turbineguy]

3. $30

is probably close to the real price after the US gets and puts a new foreign policy into practice.

From the time Bush was nominated to when he was inaugurated the price of oil went from $10 to $30. When he seemed slow to attack somebody oil went back down to $20. Bush is the posterboy for "geo-political uncertainty"

It was the Bush Doctrine that initially raised the price. Supply destruction in Iraq followed by demand by emerging economies (emerging to fill offshored production) followed by treats to Iran that led to speculation that did the rest.

Get rid of Bush and you will go back to normal market forces.

If you figure an average Bush Tax of $50 per barrel over 8 years (figuring 75 million average barrels per day) you get about $11 trillion world wide. Wealth transferred.

[Common Sense Party]

9. A new U.S. foreign policy won't do a thing to dampen China's demand

China and India are guzzling oil at a rate that would make your head spin, and that's not going to change, I'm afraid.

And if Israel and Iran get pissy with each other, all bets are off.

[Hannah Bell]

13. india is 3.3% of total world demand. even if their consumption increasesn 100% per year,

it's not enough to make anyone's head spin.

the drop in US consumption this year is as big as the increase in total world demand 2006-07.

China is ~9% of world demand & they produce half of their own oil.

[Andy823]

2. Good article.

I think it was right. My opinion about the rise in oil prices has always been that Bush's "oil buddies", both here and in the Middle East, were going to make a "killing" before he got out of office. Speculation was their big "tool" to do so, and we have seen that it worked rather well. I can remember just last year hearing about $100 a barrel oil, and seeing so many people, myself included, thinking "no way", it just can't happen, but it did. Now we are more than "happy" to see the price come down to $100 a barrel. Big oil will have it's best year since Bush took office this year, and they will have the American people "happy" with $100 a barrel oil, and over $3.00 a gallon gas. The only thing I see helping the people out is that renewable energy sources are coming into play, and will expand greatly in the years to come. I think the energy people know that, and this was a last big rally for oil. Now people like Pikens are jumping into the wind, solar, and other renewable energy sources, and the big oil companies will follow. They will do everything the can to tap into the market to get their share. I

[DJ13]

4. Yay! Back to only a quadrupiling of price since Bush became President!

(Ever feel like Pavlov's dog?)

[MadrasT]

5. Love this, though...

Now, on July 22nd, oil has even dipped below $127. I think it's on its way to crashing below $100 as demand collapses, with a global recession on the horizon.

Can you really call that a "crash" if it was $75 a year ago?

[harry123]

7. $100 is a minimum to the downside

I see oil much lower than $100, how much lower depends on how things progress over the next few months. But, $60 is not out of the question. Given everyone is talking about $200 right now, $100 is plenty low, 30% down from its high. That's a crash.

[MadrasT]

8. Not that I was complaining or anything

B-)

[NickB79]

11. Hooray $100/barrel oil and global recession!

Oh, wait, what?

[On the Road]

6. Fibonacci Numbers

suggest that when a rally has topped, it will usually retrace 38%, 50%, or 62% of the way back to the former base. Depending on when you think the rally started, $100 should be very reachable.

[Robert Oak]

10. countdown to $100 dollar

http://www.economicpopulist.org/?q=content/countdown-100-oil-2-asian-subsidies-crumbling

above has some good details on Asian Subsidies on oil. What is really amazing are these posts were written when oil was going up up up and predicted to go to $200 a barrel.

[NickB79]

12. This all seems very familiar

Last year, oil was $80/barrel, then crashed to $55/barrel by mid-winter.

This year, oil was almost $150/barrel, and we're cheering it to drop to $100/barrel.

Has anyone thought what prices we may see next summer?

[sendero]

14. Oil is high..

... because of increasing demand, speculation and last but certainly not least, the cratering dollar.

The countries that have oil have already pumped out the easy stuff, and production is waning. Many of them are watching their only income stream slowly dwindle away.

They are not going to give away what's left of their birthright for a dodgy currency like the dollar, that is going to KEEP FALLING because of all of the money printing that will have to be done to bail out the banks and GSEs.

Oil can and will fall, but not much below 100 a barrel, ever. In fact, the only thing that will make it fall substantially is a global recession that reduces demand. A pyrric victory at best.

[happyslug]

15. Summer, the months oil prices traditional have DROPPED.

People forget that twice a year, Spring and Fall, refineries have to switch production. In the Spring the switch is from Home Heating oil to Gasoline, in the fall from Gasoline to Home Heating oil. Now the refining process produces both Home Heating Oil and Gasoline, but the refiners can emphasis one of the other. In the winter the emphasis in on Home Heating oil and gasoline is a byproduct. Thus in the Winter of 2005-2006 due to a very cold winter in Europe, Home heating oil production went up in Europe, and the gasoline that was produced was shipped to the US at relatively low prices compared to Home Heating oil.

In the Summer Gasoline is emphasized and Home Heating oil/Diesel is the by product (it is believed the high price for Diesel this year is the product of Europe buying more Diesel cars and trucks then any other single factor, while gasoline prices in the US is following a more traditional track).

Anyway, during the winter and summer prices of oil tend to stay steady, if they do not drop. Remember I am talking about Traditional Economic ups and downs that occurs during a year. In addition to this you have a steady increase in the price of oil over the last several years. The problem has been that over the last few years during those time periods when the price of oil has traditionally gone up, it has gone up substantially, while during those period oil went down it held its own or dropped slightly.

A third factor is the recent drop in the usage of oil in the United States and elsewhere do to oils high price. This drop in usage and subsequent increase in oil stockpiles is the reason given for the recent price decrease, but during a time period when oil prices traditionally drop in price. Just like Peak Oil has forces the increases to go higher then the price would have gone up, and not let it go down during the periods oil traditionally has gone down, the drop in usage and increase in inventory has built up downward pressure as to the price of oil. The real issue is how long will this drop in price last? Most Americans can NOT drop their usage of oil EXCEPT when it comes to vacation and other trips NOT tied in with their jobs or day to day living needs. Thus the downward pressure will drop as soon as supply equals the demands from such americans when it comes to the need for oil and their day to day living needs. For this reason I do NOT see the price of oil hitting $100, it might get close for the price being quoted is for oil delivery in September (After the end of the Summer driving season) NOT in August when that driving season is still in full swing.

Remember come September the Refiners will switch from Gasoline to Home Heating oil as their main product. A lot of people did NOT buy any oil for hot water during the summer, making do with what ever oil their had left over from last winter. Come September these people will have to start to buy for Winter. Most are hoping for a drop in the price of oil, so I see a delay in buying but come November I see a rush to get oil, any oil, so the buyers can have some heat this winter. Thus I do NOT see an increase in the Price of Oil till November and then I suspect it will go through the roof (Defiantly back up to $150 a barrel). Some people can switch to Natural Gas from oil (The Borough of Windber, Pennsylvania a Suburb of Johnstown Pennsylvania did so a few years ago) but most can NOT. We are thus in a stable period of oil pricing and will remain so for a few months, but then the upward pressure will reappear. Thus I can see the price hitting $100 but not below that price, but as we get near Winter in the Northern Hemisphere that will change.

For the above reasons I would recommend you wait to buy your home heating oil for this winter till September or October, and then buy it after the price has dropped. I do NOT expect home heating oil to go down after October. If the US or Europe has a bad winter the price will exceed $150 a Barrel, but if Winter is normal $150 will be the price.

As Peak Oil becomes more and more clear, prices swings like the above will become the norm. Pricing will vary more then it has since the Texas Railroad Commission (Which controls and regulates Texas Oil) first started to set the world wide price of oil in the 1920s by telling Texans how much oil they could pump. In 1970 the Texas Railroad Commission lost its ability to regulate world wide oil prices when it left every Texan that had an oil well to produce full out. It took a few years but by the mid 1970s Saudi Arabia had assumed that same role by simply setting its own oil production, increasing it when the world wide price of oil was to high, decreasing it when the price was to low. In the mid-1980s Saudi Arabia showed its strength when, after Thacher had repeatedly reduced the price of North Sea Oil to increase market share of North Sea Oil world wide, the house of Saud reduced its production so that the world wide price dropped below the cost of producing North Sea oil. Thacher received the message and when Saudi Arabia cuts its production to set price, Thacher followed suit i.e. made sure North Sea Production stayed above the price being set by Saudi Arabia.

The problem is North Sea production peaked in 1999 and has been in rapid decline. The North Sea, The North Slope of Alaska and the Huge Siberia field that came into production as the same time as the North Sea and North Slope of Alaska all went into terminal decline about the same time (Through the Siberian Super Giant officially peak out and started to drop in production last year). With these production drop, more and more of the world became dependent on Persian Gulf Oil. The problem seems to be the Saudi Arabia no longer has the ability to produce more oil then the world demands, thus the House of Saud is like the Texas Railroad Commission in 1970, facing a growth in world wide oil prices having lost the ability to regulate the price of oil.

Any commonality, like coal and oil, have a history of extreme ups and downs when no one controls the price. When someone controls the price (As Standard oil did before 1912, The Texas Railroad Commission did from the 1920s till 1970 and the House of Saud did from 1975-2005) you have a stable price for the product. When that control is lost you see rapid increases (As in the Early 1970s, till Saudi Arabia grabbed control) and rapid drops (As you did in the 1980s till the House of Saud reined in Thacher and regained control over the price of oil).

We are in another period of no control over the price of oil. It will thus go up and down on a scale not seen since US Civil War when J.D Rockefeller and his Standard Oil took over the Industry. The Coal industry was harder to control and this open to more radical ups and down then the oil industry, but such ups and downs are what we have to expect over the next decades.

I bring the above up for the price of Oil will drop, and sometimes radically, but it will go back up almost as fast. When people want to use the oil will be a factor as to the ups and downs, but more to when the ups and downs will occur then how far or how radical the ups and downs will be.

This it is possible for oil to drop below $100 a barrel, but I doubt it, the drop in Summer demand is NOT great and will end in September. On the other hand I foresee no increase will November when the Demand for oil will go up with the first cold wave of Winter. Lets see if I am right, but we will not know till Spring 2009, when the price of gasoline will go up again in anticipation of the Summer 2009 driving Season.

[Xenotime]

16. Once Obama takes office oil will really come down..

See how much good it helped the economy for him to go over there.