isn't the price of oil nearly as pervasive as the price of money?
i am coming around to the opinion that "oil is money", much as goldbugs like to say gold is money. except oil is much more important than gold. and yes, just about anything you look at in the modern world has oil in it, either literally in the physical sense, or as an intermediate step in delivery or production.
in fact, you could say petroleum is "in" us, since without it (and other hydrocarbons for fertilizer), we wouldn't have mechanized agriculture, so the world population would be 80-90% smaller.
oh, one other thing: my guess is they are going to be "making" a lot more paper money (or its electronic equivalent) in the coming years, but they aren't making any more oil, and we have used up about half of it. this means we have used up the half which was cheap to extract.
Faber sort of hinted in one of his free pieces recently that there is a potential for the oil price to get really out of hand. this is worrisome, since the ubiquity of oil in our world means a high price could lead to some very hot conflicts.
from Elmer...
"The recent shift ... has been substantial enough and persistent enough to influence business investment decisions, especially for facilities that require large quantities of natural gas,"
i guess he's talking about demand destruction from fertilizer plants and the like which have been and will be moved overseas. unfortunately, over the past five years American power plants have completed $100 billion worth of new power generators, representing something like 200,000 MW, which are almost all gas-fired. so that is a huge demand source which is not about to be destroyed before it goes live.
one hot summer with low injections, followed by a bad winter with some frozen grannies, might lead to some legislation, who knows.
NG was everybody's favorite basically for environmental and political reasons, but the timing of these generators is unfortunate.
Greenspan said the U.S. must expand global trade in natural gas so further price spikes don't harm the world's largest economy
i think that's a great idea. why don't let's put a big honkin' LNG terminal in the San Francisco Bay, and another in San Pedro. maybe another on Long Gisland. i'm sure they won't mind, given the importance of NG to our national welfare. what's this? nobody wants one? LNG terminals seem to be about as popular as nuclear waste dumps.
adding that high oil prices "presumably" reflected concerns over the potential for long-term supply disruption in the Middle East
if the concerns are over long-term supply, why is oil so backwardated? it seems the consensus long-term outlook is still rather sanguine.
He noted that market forces were as important a determinant of prices as the oil-producing OPEC cartel.
if a supplier has enough supply, he can basically determine the price. as Matt Simmons put it, 1% undersupply is a crisis and 1% oversupply is a glut. supply adjustments were how the Texas Railroad Commission operated, and OPEC was modeled after the TRC.
the TRC stopped being relevant once Lower 48 production peaked, and OPEC will meet the same fate.
it must be rather disturbing, for a believer in the Saudi Aramco story about 50 years of 15 million bpd nirvana, that spot crude has strayed for so long from their target range. at some point, people might wonder why and decide there might be supply issues. |
