Oil At $60, Then $70 Inevitable, Say Analysts - Bloomberg

[hatrack]

June 17 (Bloomberg) -- "Crude oil in New York surged above $58 a barrel for the first time since reaching a record in April on signs that producers will struggle to meet growing fuel demand during the second half of the year. ``There is no question that the market is going to $60,'' said Kyle Cooper, an analyst with Citigroup Inc. in Houston. ``There is a lot of fear and hype about the possibility of us running out of oil, and it has stuck.''

Global oil use will jump to 86.4 million barrels a day in the fourth quarter, 200,000 barrels more than forecast a month earlier, an International Energy Agency report showed this week. The world pumped an average of 83.8 million barrels of oil a day in the first quarter. U.S. crude-oil supplies fell 4.9 million barrels in the last two weeks, Energy Department figures show. Crude oil for July delivery rose $1.12, or 2 percent, to $57.70 a barrel at 1:55 p.m. on the New York Mercantile Exchange. Futures touched $58.15 a barrel, the highest intraday price since a record $58.28 was reached on April 4. A settlement at the current price would be a record. Prices have risen 7.5 percent this week and are up 50 percent from a year ago.

Oil prices may rise next week as producers strive to meet growing demand from refiners, a Bloomberg survey showed. Thirty- five of 68 analysts and strategists surveyed, or 51 percent, said oil prices will increase next week. Eighteen, or 26 percent, said they will fall, and 15 forecast little change. ``Going over $60 will require a catalyst,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte. ``A major event such as a hurricane, massive crude-oil inventory draw, or destabilizing geopolitical event will be needed.'' The increase may accelerate if prices rise above so-called resistance at $58.28 a barrel, according to traders who watch charts to predict price movements.

$70 a Barrel

Crude-oil prices are likely to reach $70 barrel once they breach the record, said John Murphy, chief technical analyst at StockCharts.com. Oil futures in New York have exceeded the 200- day moving average since a dip in May. That suggests a 70 percent to 80 percent chance of oil's reaching $70, said Murphy. ``I don't think there's any doubt we're headed higher,'' Murphy said in an interview today. ``We had a correction and came back to the 200-day moving average,'' he said. ``If we get through $58, $70 will be the next big number.''

EDIT

http://www.bloomberg.com/apps/news?pid=71000001&refer=&sid=aiwRNOjz1HRc

[aquart]

1. Food is going to be unbelievably expensive.

Unless you can grow it in the backyard.

Every mile of shipping will be added to the price of an item. Too bad nothing is made locally anymore.

You know what we could really use? Shoe and textile factories run on hydroelectric power. That would help some.

[phantom power]

2. Heck, just having some shoe and textile factories in the continental US...

would be a big improvement.

[thegreatwildebeest]

6. I'm not sure...

I'm not sure if the population spread as it is now can be sustained. In densely populated places such as New York and the like, there isn't enough arable land in the immediate area to supply enough food for the whole city I would think. A rejiggering, or flattening out of America would probably have to take place.

While I don't think this eventual problem will be a crisis (people will eventually pick up a hoe and get to work)) it may spell doom for economics as we know it. When a system of commodities trading and financial markets can no longer be supported, the greenbacks will be as uselss for your actual needs as they've always been. I don't consider this a necessarily bad thing.

[Coastie for Truth]

7. I have seen this argument in Kunstler and on DU

I haven't seen a real "systems analysis - operation research - industrial engineering" study that quantifies:
1. Transportation costs as a function of fuel costs and need for refrigeration.

2. Food production costs - farming and food processing for the following cases:

a). "Do nothing" base case.
b). Total localization and organic farming with human labor and animal power (but without Wall-Martizing the workers or resorting to peonage or prison labor; and without drawing the ire of PETA.
c). Some "intermediate cases" based on "Luther Burbank" breeding, 100% recycling of farm waste and mulch, various level or organic farming, etc.

Everything is a balance and trade off, and there are economies in "specialization" and "division of labor."

[IrateCitizen]

14. Matthew Simmons has spoken of one possible solution to this...

RAIL

By the figures that Simmons has cited, we could reduce transport energy use to 10-15% of its current rate by revitalizing our national rail systems. And although we have torn up a lot of track over the past 30 years or so, we have maintained the rights-of-way, so it wouldn't be as difficult as starting from scratch.

Furthermore, removing trucks from the roads would then reduce congestion, which would increase overall fuel efficiency in the short-term, thus saving more petroleum.

Of course, my optimism that the political system will somehow be able to address distracting issues like peak oil instead of focusing on real issues like gay marriage and the like is somewhat bridled right now.

I tend to think that Kunstler is right in the shorter term -- in the sense that we're vastly unprepared for this and we won't do a damned thing about it until it's upon us, which will result in a lot of socioeconomic and political turmoil. I also think that there will be a general agricultural "crash" in the short term that will lead to some rampant starvation -- especially in the SW. But I don't share his dark vision for what will happen in the longer term. I still think that there will be enough innovative spirit to overcome these challenges, at least regionally-speaking, to enable us to avoid returning to a 17th-century existence.

[Dogmudgeon]

20. Makes ya wonder, dunnit?

Team Bush has lately turned it's hungry eyes toward what remains of the rail infrastructure. Conrail is now up for destruction via privatization, and Amtrak will probably follow quickly.

I share your take on Kunstler's view, except that I don't think the starvation will be long-term, and it will probably be what incites the population to political activity. Two or three prolonged episodes of emptied grocery stores and the pressure will be on. (The effects of other problems -- epidemics, severe climate changes, and political breakdown -- are just about impossible to predict except to say that they are "bad".)

Unlike the probable situation in North America, there may well be major die-offs in Africa and Asia unless the political leadership there can get their populations into more intensive local agriculture -- the traditional approach combined with modern scientific insight (and ideally democratic participation). But exactly the opposite is happening. The demand is for industrialized food production and Green Revolution/patented/engineered crops.

So we have our work cut out for us. And now, Bush (et al.) is trying to give us more. WTF?

--p!

[Coastie for Truth]

21. Very good idea

Back in the 1950's a measure of transport productivity was "ton miles/gallon" - which favored a few big trains over many smaller trucks. Makes even more sense today.

[dcfirefighter]

22. big fan of rail

of course BushCo wants to divy up the 'unearned' monopoly in location for the rights of ways, while socializing the rolling stock. Makes absolutely no sense as far as fairness and economic efficiency, but a lot of sense as far as giving gifts to corporate interest - gifts that pay and pay regardless of maintenance or effort. Such is the nature of land titles - especially ones as lucrative as rail rights of way.

A much better solution would be to socialize the rights of way, or even the tracks, and auction slots to privately owned trains. Much like the interstate highway system, but with congestion charges.

Another option, slightly beyond the near future, but entirely probable on downslope of peak oil, is to lay track on the fast lane of the interstate highway system. The ballast might not be as heavy as required, but it's pretty beefy, and if lighter trains were developed, and loads were managed, it'd only be the cost of laying the rail (and electric power?).

Truck freight has closed the gap in efficiency over the last couple decades, as train cars are generally 100 year old technology, while trucks have pared every last bit of excess weight. There is also an element of network efficiency for trucks: they can drive directly from shipping dock to receiving dock, or even to private residences. Trains lose out in transhippment costs: few industries build on the rail line anymore, but rather in suburban industrial parks, where freight would have to be transferred from truck to rail and back to truck to get from point A to point B.

[Coastie for Truth]

23. The company that "invented" container sips (SeaLand Corp)

always had plans for "containers" that could be off loaded from ships - right to truck beds or rail car beds (present business) - or from rail cars to trucks (not as widely done)..

We are just beigning to see mini-containers (half a trailer, quarter of a trailer) rooled onto and off of trailers. Mostly for furniture moving - it's a "load the 'trailer' yourself" thing.

But the intermodal connection to rail is obvious.

[Boomer]

12. We've been preparing for this

My partner has established a thriving vegetable garden in our relatively small backyard. We started a few years ago specifically to prepare for the inevitable rise in food prices.

We won't be able to feed ourselves entirely from the garden, but it will provide something of a buffer. We even have some dwarf apple trees and some grape vines.

I STRONGLY urge anyone who can do so to begin a vegetable garden NOW. It takes years to condition the soil and learn how to grow plants effectively. You'll want to go the organic route as much as possible because fertilizers are based on petroleum, and their prices are going to sky rocket too.

[phantom power]

3. One thing I've been wondering about.

Oil has been hovering around $50/barrel for a couple years now. I was expecting more inflation from that than we've seen so far. Kunstler predicts some kind of economic phase change at around $60/barrel, but intuitively, it seems as though if we're already within 15% of that threshold, we'd be seeing more economic strain as it is.

I just wonder if the true threshold is at some higher price.

[brokensymmetry]

4. On the contrary!

$50 oil is a major increase!

Here, take a look at 4 years worth of charts:

http://futures.tradingcharts.com/histcharts.php?cbase=CO&year=2001&cpp=4&action=Display+Charts

We have not BEGUN to see the ripple-through effects.

[aquart]

5. They'll let the next pres. be Democratic.

So the full weight of the horror can fall on him and not them.

[IrateCitizen]

15. Democrats are as much to blame for this as Republicans

Remember, the biggest champion of "globalization" -- one of the dead-end policies that assumed we would always have cheap oil -- was none other than Bill Clinton.

Furthermore, the only US Congressperson who has talked about Peak Oil at length is Roscoe Bartlett of MD -- one of the most conservative members of Congress.

Both parties share the blame for this due to their inability to face up to reality out of a desire for re-election. I mean, how many people would get re-elected if they told their constituents that they'd better get used to a life that is lacking in many, if not most, of the creature comforts and luxuries they have come to take for granted?

[Dogmudgeon]

19. Which means ... what?

Are we supposed to trust the Republicans to respond? Or should we, instead, radicalize our own Democrats?

I fail to see the point in continuing to remind people of all of Clinton's faults. Nearly every major topic in modern political discourse has attracted considerable "Clinton was just as bad" rhetoric. However, Clinton left office about five years ago. George Bush has been hailed as the Avenger of 9-11 and the Conquering Hero, 6am prayer breakfasts have replaced late-evening political and philosophical discussions, and Clinton's optimism about the future has been replaced by a strategically stoked paranoia.

Meanwhile, no practicable solutions have been proposed by the Left; and certainly not by the hard(er) Right, either. The need for radicalization extends across the entire political landscape because it implies major social and cultural changes that will challenge the political beliefs of everyone.

As I've said before, we can either do it "easy" and maintain a sense of optimism, or ignore the problems and deal with the crushing loss of our society. At that point, voting won't be on anyone's mind -- eating will. And nobody will spend much time blaming Bill Clinton.

--p!

[ramapo]

25. Politicians are empty suits

They have no guts. Democrat, Republican, doesn't matter. They cannot level with the American people. It's not really the fault of the politicians but our fellow citizens. Americans don't especially like reality (unless it's a tv show). When they hear it, they tend to dismiss and not vote for the speaker so politicians just can't go there.

Clinton/Gore did worse than nothing to address the problems of transportation and energy utilization. They sold out to Detroit and paved the way for lower CAFE standards and the explosion of SUV guzzlers. In 2000, Gore certainly did not run as an environmentalist. In 2004, John Kerry did not run as an environmentalist. Democrats do provide more lip service to the environmental movement but little else. Yes they're against drilling in Alaska. But the only true answer is a radical turn away from the limitless sprawling growth to a more efficient and conservative society.

I expect a continuation of what we've had for the past 25 years, delusional thinking that there are no limits for Americans. That is why there will be no soft landing, we blew the chance for that. We'll get to where we need to be but it won't be pretty.

[Coastie for Truth]

8. Kunstler's assumptions

Implicit in Kunstler's analysis is a "hard landing." Equally implicit are Deffeyes' and Hawken and Lovins' assumptions of a "soft landing."

A soft landing would give us some time to get by on Fischer-Tropsch synthetic fuels and tar sands - albeit it at a cost of massive strip mining (10-20 years).

This would give us some breathing room for the structural and political changes that Peak Oil's post-peak conditions will demand.

Worse then the massive layoffs in the 1970's and 1980's in autos and steel - but not the Malthusian catastrophe some predict.

"Necessity is the mother of invention" -> and it will take several (many) parallel "Manhattan Project" - "Man on the Moon" efforts - in fuels, propulsion systems, electric generation and transmission systems, transit systems, architecture and architectural engineering and city planning, agriculture and agricultural engineering.

It's called "Crisis to Crisis Planning" and "Ad Hocracy." Ain't that the way ot always is??

[brokensymmetry]

9. Perhaps...or not...

You said: "Necessity is the mother of invention"

Sometimes it works out. Sometimes it doesn't.

Because of the wonderous advances in computers, we tend to think that if we but wish hard enough, something will happen. But...that may not be the case. We may not be able to solve the fusion problem, no matter how hard we try.

I, not unlike Mr. Kunstler, subscribe to the hard landing theory; I suspect it's too late for anything else, even if by some miracle we started this afternoon.

[Coastie for Truth]

10. I don't think it will be as hard as Kunstler predicts

unfortunately I am not a journalist. "I are a injunear - and had to study all of that thermo stuff."

Seriously - as an example, if the American auto industry had spent less time effort fighting CAFE and Kyoto - and dedicated that same money solving problems (or implementing the solutions they had already "licensed in" from their foreign competitors we would have had real "made in the USA" hybrids and "fly by wire" power trains (which is part of the "magic" of getting a clean tail pipe and high mileage with an internal combustion engine).

A lot of the problem is "implementation."

We still turn out bright techies - just dumb executives.

[IrateCitizen]

16. I think it's somewhere in the middle...

A lot of the problem is "implementation."

The other major part of the problem is that we are a culture that has come to expect endless economic growth based on bottomless resources. And this is the area in which I think that Kunstler is correct -- that the landing will be harder because our national infrastructure based on the suburbanization of the landscape is just about the WORST possible one to deal with such an emergency.

However, I tend toward Deffeyes' views in the longer term, that we will find ways to compensate and carry on some sense of a technologically-based society -- if not an industrialized one -- into the future. I just think that those 10-20 years in between will be quite rough, and there will be a lot of discomfort and even death as our population comes down more in line with our ecological carrying capacity.

It's important to remember that peak oil is happening at the same time as we have diminished much of our ecological "principle" -- some 60% of it based on the recent UN millenial working group report compiled by some 1300+ scientists over 4 years. In a sense, what we are facing is a "perfect storm" of epic proportions, and I'd say it's an unfortunate given that not all of us will survive it.

[Boomer]

13. Invention doesn't always kick in

The world is littered with the ruins of civilizations that rose to impressive height, then crashed when they used up their resources or faced changed climate conditions.

We're facing both conditions.

Hang on tight, 'cause it's going to be a very bumpy ride.

[aquart]

17. Bush could be setting up a Manhattan Project for energy right now.

Except he isn't.

Clinton could have tried, but I don't know that he was really allowed to do anything.

[Coastie for Truth]

18. Bush won't --

unless he can do it in a CRADA (Co-operative Research and Development Agreement) - which gives the technology to the big players - and exempts them from the Anti-Trust laws for hoarding the technology.

That way the tax payers would "donate" any new technology to ExxonMobil and TexacoChevron - who could then extract blood from the "smaller players" for their (the "Big Players'") "Background" "Paper Patents" (vapor ware).

[ramapo]

24. We used up our breathing room

It has been 25+ years since the initial gasoline shortages and warnings from President Carter. Carter was denigrated. Shortages were written off as a tactic to increase corporate profits. Soon nobody cared about saving energy.

There was talk of "Manhattan Projects" to break our dependance on oil.
Not much but talk.

[Truth__Seeker]

11. $100 BARREL BY CHRISTMAS

at this rate, wouldn't surprise me at all. But would it wake the sleeping masses up?

[kestrel91316]

26. Doubt it...............

but I can easily see $3 at the pump here in So Cal by Labor Day. Cheapest I can get right now is $2.33.