Oil price soars as US woes mount

[Kilgor]

Oil price soars as US woes mount
Oil rigs in California
Oil prices have jumped amid increasing production worries

The price of oil has made a record jump to nearly $139 a barrel, amid reports it could reach $150 by July because of rising demand and political tension.

Crude oil in New York gained more than $10 to hit $138.54.

The spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years.

Correspondents say oil prices were also pushed up by Israeli threats to strike on Iran over its nuclear programme.

Light crude set a high of $139.12 in after-hours trading on the New York Mercantile Exchange after hitting $138.54 at the regular session.

Crude oil hit a record high of $135 a barrel last month.


If Iran continues its nuclear weapons program, we will attack it

The BBC's North America Editor, Justin Webb, says the gloomy figures are a reminder to all Americans that the nation faces serious economic problems and perhaps even a recession.

Oil prices were given a boost on a report by Morgan Stanley analyst Ole Slorer, who suggested the price of oil could rocket to $150 as early as July.

Some analysts have suggested that prices would reach as high as $200 a barrel during the next 18 months.

The price of the benchmark light, sweet crude oil has already seen rapid gains over the past months and has gained more than 40% over the year.

It is more than twice the price it was a year ago.

The market was also responding to a statement by Israel's transport minister that an attack on Iran was "unavoidable" after sanctions to prevent Tehran from developing its nuclear capability had failed.

Investors hedging oil against the weak dollar has also pushed up the price of oil.

Fears that workers at Chevron Corporation in Nigeria may go on strike and subsequently disrupt production and access to oil are also adding to market jitters.

Sustained demand?

Oil prices had recorded losses earlier this weak after doubts about future demand took hold of the market.

Both the Indian and Malaysian governments have raised fuel prices in order to cut the subsidies they provide.

The International Energy Agency (IEA), an adviser to 27 industrialised countries, had said it could lower its 2008 demand growth projection further, after having already more than halved it to 1.03 million barrels per day.

But several analysts have proven bullish about future prospects.

Harry Tchilinguirian, oil analyst at BNP Paribas in London, said demand would be sustained by expanding Asian nations.

"World oil demand growth is still accounted mostly by China, the Middle East and Latin America - and through the summer, there is no reason to expect a material slowdown in demand growth in these areas," he said.

Nuclear concerns

Despite widespread international concern over Iran's nuclear programme, Tehran insists it is developing its technology only for civilian purposes.

Israeli transport minister Shaul Mofaz told the Yediot Aharonot newspaper an attack on Iran's nuclear facilities seemed inevitable.

"If Iran continues its nuclear weapons program, we will attack it," he told the daily.

http://news.bbc.co.uk/2/hi/business/7440536.stm

[I can't think of a name]

Wait, we face a recession? I thought news outlets like the BBC said we were already in one?

[Flagg]

For those with short attention spans, here's a couple of talking points about oil and oil prices:

*The excess capacity(also known as swing production) we USED TO HAVE, as a tool to allow some manipulation of oil price to prevent recession is almost non-existent.

*Some large producers, like Saudi Arabia, are unwilling, or quietly unable, to increase production. Either they CANNOT increase production due to oil field maturity or the risk/reward of potentially damaging their oil fields by pushing them too hard isn't good enough.

But the biggest reason for oil price rise in recent years is:

*Inflation

The US(and it's trading partners to a lesser extent) have been taking lessons from Robert Mugabe's Zimbabwe.

The printing presses have been running like crazy in the US for several years now.

In a nutshell...the price of oil isn't going up.....it's the value of the US Dollar going down the toilet that is the problem.

Sure there's a conflict risk premium being priced into oil futures.....but it's only a small component compared to US Dollar devaluation.

[CG51]

We have our boots on a 1/4 of the worlds proven oil reserves. After time and lucrative contracts I think we will be fine.

[I can't think of a name]

Flagg,

What do you think about building more refining capacity and drilling in Alaska?

[Flagg]

Flagg,

What do you think about building more refining capacity and drilling in Alaska?

If enough Americans, especially Alaskans, want to drill in Alaska due to rising oil prices......the wheels will begin to turn and it will happen.

It sounds like there's a lot of product under the ground in Alaska.......but here's the problems:

1.) It's expensive to get it out of the ground, due to environment/logistics/engineering challenges

2.) It's not likely to be in one convenient family sized oil field.......it's likely a lot of small fields and a few medium sized ones.

3.) It will likely take 10 years from the day approval is given and capital expenditure funds are available to do so before anything comes out of the ground in volume.....That 10 year clock hasn't started ticking yet.

Ultimately, "the market"(meaning price) will decide, in conjunction with Americans as to the risk/reward of drilling Alaska.

--------

Additional refining capacity could be a good idea.

South Dakota just approved the first new refinery project in the US since 1976.

Refining capacity(or the lack of) is a constraint.

It takes YEARS to get approval and YEARS to build a turnkey refining facility(plus billion of bucks to build it......and lots of cost over-runs in a high inflation environment).

The good news is additional refining capacity will help reducing price shocks in the energy supply chain....but it will be YEARS until this facility is running.

My only suggestion in regards to oil refining is that additional capacity should probably be focused on refining the more sour grades of crude.....as light sweet is becoming more scarce and heavy sour isn't AS scarce in terms of percentage of current and likely future production.

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

Both suggestions could help...but not until 2013-ish to 2018-ish IF the ball started rolling TODAY..which it hasn't.

[Bia]

For those with short attention spans, here's a couple of talking points about oil and oil prices:

*The excess capacity(also known as swing production) we USED TO HAVE, as a tool to allow some manipulation of oil price to prevent recession is almost non-existent.

*Some large producers, like Saudi Arabia, are unwilling, or quietly unable, to increase production. Either they CANNOT increase production due to oil field maturity or the risk/reward of potentially damaging their oil fields by pushing them too hard isn't good enough.

But the biggest reason for oil price rise in recent years is:

*Inflation

The US(and it's trading partners to a lesser extent) have been taking lessons from Robert Mugabe's Zimbabwe.

The printing presses have been running like crazy in the US for several years now.

In a nutshell...the price of oil isn't going up.....it's the value of the US Dollar going down the toilet that is the problem.

Sure there's a conflict risk premium being priced into oil futures.....but it's only a small component compared to US Dollar devaluation.

My local Dairy Queen... the 5.29 combo meal jumped to 7.99 last weekend.

Looks like a bologna/ravioli summer :P

[Flagg]

We have our boots on a 1/4 of the worlds proven oil reserves. After time and lucrative contracts I think we will be fine.

Are you referring to Iraq?

If so......as mentioned in my previous post...it will take approvals from everyone and their pet dog with their hand out; tens of billions, possibly hundreds of billions to build the infrastructure; years; more years; and a benign political and security environment for additional pumping capacity in substantial quantity enough to have a positive impact to kick in.

The "I think we will be fine" I agree with...eventually.

It's the time between NOW and the time that we will be fine which is the awkward fart in the room.

Oil/Energy is like Oxygen......we will die without it......but we can live with a little bit less.....but if we even temporarily have a LOT less or have to pay too much for it too quickly......we either die or have to start cutting off limbs.

[redvand]

Are you referring to Iraq?

If so......as mentioned in my previous post...it will take approvals from everyone and their pet dog with their hand out; tens of billions, possibly hundreds of billions to build the infrastructure; years; more years; and a benign political and security environment for additional pumping capacity in substantial quantity enough to have a positive impact to kick in.

The "I think we will be fine" I agree with...eventually.

It's the time between NOW and the time that we will be fine which is the awkward fart in the room.

Oil/Energy is like Oxygen......we will die without it......but we can live with a little bit less.....but if we even temporarily have a LOT less or have to pay too much for it too quickly......we either die or have to start cutting off limbs.
"While oil shale is found in many places worldwide, by far the largest deposits in the world are found in the United States in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil resource in place within the Green River Formation range from 1.2 to 1.8 trillion barrels. Not all resources in place are recoverable; however, even a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia. " woot

Of course, Obama won't let us get that oil!!!

[Kilgor]

"While oil shale is found in many places worldwide, by far the largest deposits in the world are found in the United States in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil resource in place within the Green River Formation range from 1.2 to 1.8 trillion barrels. Not all resources in place are recoverable; however, even a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia. " woot

Of course, Obama won't let us get that oil!!!

There is certainly no shortage of oil shales – it is estimated that the world has over 1600 Gb of oil available, 1200 Gb of which lies in the USA. Other countries with oil shale include Canada, Australia, Estonia, Germany and Israel. With conventional oil reserves estimated at 900 Gb, it would seem to be the answer to our prayers.

Unfortunately oil shale carries serious disadvantages. First, most of it needs to be dug out in strip mining rather that drilled, a process that has high environmental problems. Once dug out, it then needs to be heated to 450-500°C, enriched with hydrogen via steam before the resulting oil is separated. We are then left with a sludge which has increased in volume by 30% through the process and needs to be disposed of.

The downsides of all this are that oil shale production creates more than four times as much greenhouse gases as conventional oil production, it uses vast quantities of water (which are not always available where the shale is), and wastes something like 40% of its initial energy in production.

Oil shale production is expensive, wasteful and environmentally hazardous. It is only now, when conventional oil prices are high, that oil shale production has become feasible. It will no doubt make a contribution to the oil shortfall in the future but it is no panacea.

[redvand]

There is certainly no shortage of oil shales – it is estimated that the world has over 1600 Gb of oil available, 1200 Gb of which lies in the USA. Other countries with oil shale include Canada, Australia, Estonia, Germany and Israel. With conventional oil reserves estimated at 900 Gb, it would seem to be the answer to our prayers.

Unfortunately oil shale carries serious disadvantages. First, most of it needs to be dug out in strip mining rather that drilled, a process that has high environmental problems. Once dug out, it then needs to be heated to 450-500°C, enriched with hydrogen via steam before the resulting oil is separated. We are then left with a sludge which has increased in volume by 30% through the process and needs to be disposed of.

The downsides of all this are that oil shale production creates more than four times as much greenhouse gases as conventional oil production, it uses vast quantities of water (which are not always available where the shale is), and wastes something like 40% of its initial energy in production.

Oil shale production is expensive, wasteful and environmentally hazardous. It is only now, when conventional oil prices are high, that oil shale production has become feasible. It will no doubt make a contribution to the oil shortfall in the future but it is no panacea.

And I have heard that it can be gotten now without strip mining and that it would cost half the current price we are paying.

[deagle]

why hasn't our govt done anything ?? or do they oblivious b/c our taxpayer money buys anything ?? do they pay anything out of their pockets, or just "bill it to the ppl" ??

[Flagg]

There is certainly no shortage of oil shales – it is estimated that the world has over 1600 Gb of oil available, 1200 Gb of which lies in the USA. Other countries with oil shale include Canada, Australia, Estonia, Germany and Israel. With conventional oil reserves estimated at 900 Gb, it would seem to be the answer to our prayers.

Unfortunately oil shale carries serious disadvantages. First, most of it needs to be dug out in strip mining rather that drilled, a process that has high environmental problems. Once dug out, it then needs to be heated to 450-500°C, enriched with hydrogen via steam before the resulting oil is separated. We are then left with a sludge which has increased in volume by 30% through the process and needs to be disposed of.

The downsides of all this are that oil shale production creates more than four times as much greenhouse gases as conventional oil production, it uses vast quantities of water (which are not always available where the shale is), and wastes something like 40% of its initial energy in production.

Oil shale production is expensive, wasteful and environmentally hazardous. It is only now, when conventional oil prices are high, that oil shale production has become feasible. It will no doubt make a contribution to the oil shortfall in the future but it is no panacea.

Yeah, the water and natural gas requirements to produce oil sounds like a poor return on investment in exchanging two finite strategic resources(water and Natural Gas) for one other(oil).....what to do when water and NG run short?

Sounds like ti might have potential......but I'm highly skeptical at this point.

The shale oil production ramp up has been sloooooooooooooooooooooooooooooooow to be polite.

[redvand]

Yeah, the water and natural gas requirements to produce oil sounds like a poor return on investment in exchanging two finite strategic resources(water and Natural Gas) for one other(oil).....what to do when water and NG run short?

Sounds like ti might have potential......but I'm highly skeptical at this point.

The shale oil production ramp up has been sloooooooooooooooooooooooooooooooow to be polite.
You get the water from the melting ice cps. rofl

[Power_serj]

There's a new plan for a new oil refinery in North Dakota, but it won't start until a few years, then take a few years to complete.

[the dutch egg]

Another option is to scale up production in the tar sand in Cananda, something Shell is working on. The problem however is the same as with shale oil the energy you have to invest is allmost as much as you get out of it and the environmental burden is very high as well especially on water that has to be used to "wash" the sand of the oil.
One methode is to build a nuclear powerplant right smack in the middle of the tar sands to produce steam, which you inject in to the deeper layers of the tar sand via a drilling rig, this will "meld" the oil or free it from it's sandy trap and enables you to pump it out using proven technologie.

Still with the higher demand from Asia we have to look for other sources of energy and especialy conserve as much as we can by driving in less feul gusseling cars. Most analyst agree on the faced that we have reached what they call the peak oil periode, this means that we find less oil than we use which means that we gradually will have a shortage. Oil field which can produce ad 1$ per barrel like in Libya are long gone, the latest field that has be brought online pumps a barrel costing 60/70 bucks so the oil companies don't expect that the price will come close to that level any time soon.

[CG51]

Are you referring to Iraq?

If so......as mentioned in my previous post...it will take approvals from everyone and their pet dog with their hand out; tens of billions, possibly hundreds of billions to build the infrastructure; years; more years; and a benign political and security environment for additional pumping capacity in substantial quantity enough to have a positive impact to kick in.

The "I think we will be fine" I agree with...eventually.

It's the time between NOW and the time that we will be fine which is the awkward fart in the room.

Oil/Energy is like Oxygen......we will die without it......but we can live with a little bit less.....but if we even temporarily have a LOT less or have to pay too much for it too quickly......we either die or have to start cutting off limbs.

True, but if you look at it, at the onset of the war, capturing the oil fields, oil ministry and ports were a priority. Now that the country is being stabalized, more oil can flow through the Gulf. I agree with you, much oil can flow, it's the refining process that is the problem at the moment. Much investment is needed I agree.

[Ordie]

Creativity thrives during times of scarcity.

[Parx400]

For those with short attention spans, here's a couple of talking points about oil and oil prices:

*The excess capacity(also known as swing production) we USED TO HAVE, as a tool to allow some manipulation of oil price to prevent recession is almost non-existent.

*Some large producers, like Saudi Arabia, are unwilling, or quietly unable, to increase production. Either they CANNOT increase production due to oil field maturity or the risk/reward of potentially damaging their oil fields by pushing them too hard isn't good enough.

But the biggest reason for oil price rise in recent years is:

*Inflation

The US(and it's trading partners to a lesser extent) have been taking lessons from Robert Mugabe's Zimbabwe.

The printing presses have been running like crazy in the US for several years now.

In a nutshell...the price of oil isn't going up.....it's the value of the US Dollar going down the toilet that is the problem.

Sure there's a conflict risk premium being priced into oil futures.....but it's only a small component compared to US Dollar devaluation.


The US dollar is not going down because of printing money, its going down because we keep lowering the interst rate. The return on the dollar keeps going down dragging the price down as well.

[Ordie]

The US dollar is not going down because of printing money, its going down because we keep lowering the interst rate. The return on the dollar keeps going down dragging the price down as well.

X2

The idea of a lower dollar is to allow for increase of US exports, and attract international investments.

[NavyTimes]

X2

The idea of a lower dollar is to allow for increase of US exports, and attract international investments.

And that will certainly happen. I see a lot of people here start buying more from Yankee Webshops Inc instead of local alternatives. (Hell, Im doing it myself this week) But you are taking a hit on your import expenses in return.

[dava]

X2

The idea of a lower dollar is to allow for increase of US exports, and attract international investments.

The lower interest rates certainly explain a big chunk of it, but so does the lax monetary policy of the united states.
Altho a cheap dollar might be attractive for the american economy, it ofcourse depends on HOW cheap it really is.
Bernanke stressed that this low dollar is nothing good and fuels inflation in the US, Bush is expected to talk about the need for a strong dollar on his upcomiong european trip.
Furthermore, the United States is a fairly closed economy. Fuelling exports isnt as good as fuelling domestic growth. The 'its good for the economy' has been overdue long ago.
And how is a country supposed to attract investment when you have a plunging currency?
Investors will have to face a serious exchange rate risk.

[Flagg]

The US dollar is not going down because of printing money, its going down because we keep lowering the interst rate.

Please elaborate...as I get the distinct feeling you don't have a clear understanding of the relationship between "printing money" and interest rates. There are LOTS of things that impact on currency values, not the least of which are monetary and fiscal policy.



The return on the dollar keeps going down dragging the price down as well.

price? eh?

[Laworkerbee]

California's average gasoline price took a 19.1-cent leap in the last week

The price of crude fell today to $4.19, or 3%, to $134.35 a barrel on the New York Mercantile Exchange. Traders said the decline was a reaction to comments by Treasury Secretary Henry M. Paulson Jr. that he wouldn't rule out intervening in currency markets to stabilize the dollar and to a call by Saudi Arabia for a meeting of oil producing and -consuming nations to discuss crude prices.

The experts were hedging their bets on whether peak prices had been reached.

"I think we could go to $4.12-a-gallon gasoline to $4.15 a gallon nationally before it is all over," said MF Global energy analyst John Kilduff in New York. "But these days you make that forecast that this run is over at your extrem
peril."

Fadel Gheit, senior energy analyst for Oppenheimer & Co., said that the market was behaving like an elevator with only one button -- up -- even when there are positive resolutions to the negative incidents that had driven oil prices higher.

"Oil workers are kidnapped in Nigeria and the market climbs," Gheit said. "The workers are released and the market climbs or doesn't go down."

The Energy Department was expected to release a forecast Tuesday on how high gasoline prices might go this year. Senior petroleum analyst Doug MacIntyre declined to say how much higher the target would move, only that "every month we've had to raise our forecast, and this month will not be an exception."
:|

http://www.latimes.com/business/la-fi-gas10-2008jun10,0,5035682.story

[Mastermind]

The market will bear the price...it always has. If there is a glut of petro product on the market, the price will go down. The reason the price of gasoiline is so hig is becasue there is a huge demand and the oil companies and Saudies and iranians and Argentinians have become masterful in the art of limiting supply to impose false shortages. Thus, the huge profits they make.

As demand falls, so will supply...just the opposite of natural market forces.

Our governments, in cooperation with convenient social forces, namely eco-maniacs, have fallen in step with the oil barrons....and are leading our march into energy oblivion. A new dark age may be upon us.

[jasonblaster]

Browns Gas Baby!

Oh, and I just ordered my 80 mpg scooter for the 24 mile trip to work.

[eskachig]

why hasn't our govt done anything ?? or do they oblivious b/c our taxpayer money buys anything ?? do they pay anything out of their pockets, or just "bill it to the ppl" ??You're not entitled to dirt cheap fuel just because you want it. Oil demand around the world is at all time high, and production has trouble keeping up. Sure there are other issues, but this here is the big one. You're finally paying what oil's worth, there's a reason why they call it black gold.

And it sucks a lot to be like me and have a long commute right now :(

[Mastermind]

Some of the guys working here commute 120 miles a day. They drive huge pickups and SUV's Their gas bill is outrageous and yet they refuse to do anything different...hell, they don't even complain about it. I can't imagine what will happen when gas goes to $9.00 a gallon.

I commute only 16 miles a day...I could ride a bicycle...I built a 110 mmpg motorized bike...but can't ride it here...it's against the law to have an uninsured motor vehicle on the street...and I can't get insurance for it! It's an unclassified vehicle according to my insurance guy.

[deagle]

Energy Department Says $4 Gas Here To Stay Through Next Year (http://consumerist.com/tag/%244-Gas-Is-Here-To-Stay/?i=5015439&t=energy-department-says-4-gas-here-to-stay-through-next-year)



http://consumerist.com/tag/yikes/?i=...-gallon-coming (http://consumerist.com/tag/yikes/?i=366458&t=retail-gas-prices-hit-record-4-a-gallon-coming)

http://consumerist.com/tag/%244-Gas-...ough-next-year (http://consumerist.com/tag/%244-Gas-Is-Here-To-Stay/?i=5015439&t=energy-department-says-4-gas-here-to-stay-through-next-year)

http://consumerist.com/consumer/driv...gas-258565.php (http://consumerist.com/consumer/driving/is-everybody-ready-for-4-gas-258565.php)

[Ordie]

Tax breaks does not work on the premise that it gives little compensation to the consumer. About $20.00 over the summer.

New drilling does not work in the short term because it would be an estimated 8 years before the oil flows.

New technology is still out of reach for many consumers.

The only means to fight the high fuel prices is to reduce your daily consumption and demand. That means less trips, carpool, telecommute, bikes, walk and public transit.

[Mastermind]

Tax breaks does not work on the premise that it gives little compensation to the consumer. About $20.00 over the summer.

New drilling does not work in the short term because it would be an estimated 8 years before the oil flows.

New technology is still out of reach for many consumers.

The only means to fight the high fuel prices is to reduce your daily consumption and demand. That means less trips, carpool, telecommute, bikes, walk and public transit.

Tax breaks are idiotic...they are redistribution of the wealth...socialist ideas...and so paltry as to be of no help at all. Why so paltry? The tax structure is what it is all about...ALL...

New drilling does work...you have got to start sometime and someplace...better as early as possible. If we had been drilling five years ago we would be in much better shape today. drill now, in five years, we will be in better shape than if we do nothing. But, oil is plentiful and there really is no need to drill...no economic need. Already there are millions of leases just sitting idle that could be drilled right now. The problem is market manipulation and lack of refining capacity (in a nutshell), not new drilling leases.

Reducing daily consumption will work on a limited basis. But, the market manipulation is so well refined (pardon the pun) that any reduction in demand will be instantly met with a rapid reduction in product and the price will remain where it is. Enough governments have assimilated the oil industry to manage the supply and demand. Ask this: If there really was a supply problem, do you think the national security would allow us to continue buying as we have been? I have yet to see any lines for fuel. We could reduce consumption, as the chinese have begun...I predict there will be no significant reduction in price at the pump. The way to achive price reduction is for new production resources to come on line. New independent, competing refineries will make a huge difference...where are they? If the market is so great right now..with price high and supply low...where are the new intreprenuers to take advantage? This is a monopoly market, in collusion with big government and nothing will ever change until new production resources come on line.

New technology is great...but, it already exists. And it is not exotic. Electric vehicles have been around for a century...California scrapped thousands of brand new electrics right off the show room floors..why? Because it suddenly dawned on the Calif government that electric vehicles presented an immediate and dire threat to the fule tax infrastructure. They threatened state supported law suits in event any electric vehicle injured a rescue person in event of a crash...due to dangerous electricity at a wreck scene and battery chemicals from ruptured battery arrays....it was absurd and obvisou and went right over the heads of most people the facts of what was going on. Also, ultra lightt vehicles that get up to 60 and even 90 miles per gallon have been demonstrated...states and feds refuse to license them for "safety" reasons...even though they are much safer than any motorcycle now on the road.

"Commuters" that use charge from the house electric, get 40 and 50 miles per charge and do 40 mph can be bought right now...several manufacturers out there will ship direct, and the vehicles are cheap...down around ten grand and some even have air conditioning! Cities refuse to allow them on the road leaglly...say they will block traffice (also say they put extra demand on limited electric utility systems), although average city surface street rate is les than 25 mph! They are here now. But, government is the impediment. Why? Fuel Taxes are threatened.

New technology is great....and some more clever individuals have developed alternative transport right now and actually use them... But, nothing will be licensed or permitted unless it uses the existing tax structure....get used to it.

Our problem is not a shortage of fuel supply...our problem is an over abundance of self serving government.

[Ordie]

Our problem is not a shortage of fuel supply...our problem is an over abundance of self serving government.

X2 Politicians are falling over each other and have no idea but are just as satisfied with photo-ops.

There is a lack of leadership.

Where's the Energy Secretary and who is he?