PS_RalphW wrote:Once the situation understood is when things will get really irrational. Every major exporter will suddenly find armed insurgents coming out of the woodwork, ideologically inclined to whichever superpower pays them the most. Production will nosedive as in Syria, Libya, Iraq.... Before you know it, it will be rationing and military police at every pump.
Armed insurgents that come out of the wood work will tag themselves as those that should be included in the billions that need to die.
Sad to say, but killing your enemies and their families is not irrational.
We all know how, when countries threatened to trade oil in something other than dollars, those countries were invaded and 'democratised'.
Is there any trading of oil in other than dollars actually going on today? I believe it's only Iran but maybe there's others? What about China?
I experience pleasure and pains, and pursue goals in service of them, so I cannot reasonably deny the right of other sentient agents to do the same - Steven Pinker
There is a lot of ambiguity and confusion about the dollar oil trading issue.
One thing to remember is that, like a lot of financial markets, each barrel of oil is traded many times before it is even pumped out of the ground. Most money is in the oil futures markets, and big buyers are hedge funds. The trades take place electronically, and very often no money (electronic or otherwise ) is ever exchanged. The trades are denominated in dollars, and presumably any exchange of currency could be arranged as a simulateous transaction between dollars and any other two currencies. I did hear that one OPEC country (was it Qatar ? ) was setting up an oil trading exchange that used local currency but I do not know if it ever opened.
Payment for actual delivery (spot price) is a relatively small amount of trading. The US gains a lot of stability by oil being traded in dollars. The US is still the world's third (?) largest producer of oil after SA and Russia, so there is a natural gravity to the currency.
It shows that Brent oil price volatility is at an 8 year low. This is quite surprising given the unpredictability of supply from Iran, Iraq, Sudan, and especially Libya. Some interpret this as a sign that the price is being controlled by demand being choked off. The world economy cannot sustain prices much above $110 and so falls in supply are matched by falls in demand to keep the price at $110. However, if supply rises it is not rising far enough to significantly cut price, as the pent up demand comes back very quickly for a small fall in price.
It also suggests that cost of production is approaching the price that the market will bear. This can only lead to falling 'demand' if cost exceeds $110 - in other words peak oil.
PS_RalphW wrote:
It shows that Brent oil price volatility is at an 8 year low. This is quite surprising given the unpredictability of supply from Iran, Iraq, Sudan, and especially Libya. Some interpret this as a sign that the price is being controlled by demand being choked off. The world economy cannot sustain prices much above $110 and so falls in supply are matched by falls in demand to keep the price at $110.
I just heard that Brazil's economy had only grown by 2%. We're on the long bumpy plateau.
Strange how oil at $100+ has become the new norm, does not merit a mention in MSM. A deathly hush from those who dismissed it as an aberation, wild speculation etc etc.
I'm lazy, anyone know how long it has averaged $100+ must be over a year by now. Equally on the peak oil side $100+ has not perhaps had the catastrophic impacts predicted. This is probably due to a lot of the fat still in the system eg the "average' man can drop a meal out or football match making up for addition fuel costs. Down grade his shopping basket and similar, I note retail prices down last month a couple of % due to increased competition. Could be we just dont have it to spend anymore.
westcoast wrote:Strange how oil at $100+ has become the new norm, does not merit a mention in MSM. A deathly hush from those who dismissed it as an aberation, wild speculation etc etc.
I'm lazy, anyone know how long it has averaged $100+ must be over a year by now. Equally on the peak oil side $100+ has not perhaps had the catastrophic impacts predicted. This is probably due to a lot of the fat still in the system eg the "average' man can drop a meal out or football match making up for addition fuel costs. Down grade his shopping basket and similar, I note retail prices down last month a couple of % due to increased competition. Could be we just dont have it to spend anymore.
If you look at this chart you can see that it was above $100 from last July 1 to mid October but a lot of the year was spent in the low 90's. I haven't done the math but I think the average for the year was just about $100 even. This years run up is well before July and is something different , Perhaps fears the Ukraine situation will go from bad to worse or just a tightening of supply. http://ycharts.com/indicators/crude_oil_spot_price
Vt, you are confusing the wti headline price with the price of oil. Wti price has been artificially low for a few years, because of a local gluyt and inadequate pipeline infrastructure. Oil , including most oil used in the USA has been 100 to 120 dollars for the last three years. Only tar sands and a small amount of mid west production is linked to the wti price. Belated infrastructure upgrades have removed the discount, that is all.
PS_RalphW wrote:Vt, you are confusing the wti headline price with the price of oil. Wti price has been artificially low for a few years, because of a local gluyt and inadequate pipeline infrastructure. Oil , including most oil used in the USA has been 100 to 120 dollars for the last three years. Only tar sands and a small amount of mid west production is linked to the wti price. Belated infrastructure upgrades have removed the discount, that is all.
No I'm not confused about the price of oil either WTI ,Brent ,the wellhead price in ND ,or the price in Singapore. I'm just watching the day to day price of WTI because that is the price on the ticker at the bottom of the page.
Obama must be in two minds over the new pipeline. If he approves it he will be the darling of the oil companies as it will increase the price of tar sands oil in the US to world prices and maybe have an upward effect on oil price in general in the US which could have a deleterious effect on the economy, but only after he has left office. If he doesn't approve it there will be no change in the oil price and no adverse effect on the US economy but no kudos for this.
On that basis he will probably approve it just before he leaves office so that he can collect his "pension"!!
You know the Wall Street Journal recently pointed out that oil and gas production by a couple of those majors, Chevron, Exon and Royal Dutch Shell, their production has fallen over the past five years despite their spending more than half a trillion dollars, $500 billion on new projects. Chevron’s costs have jumped 56% since 2010 and their production is actually falling with all that spending. And so it’s denting the profits of these big oil companies and their investors are starting to get very nervous.
I experience pleasure and pains, and pursue goals in service of them, so I cannot reasonably deny the right of other sentient agents to do the same - Steven Pinker
