WP: Oil Prices Rise to High As Demand Continue ($47 a barrel)

[DaveSZ]

http://www.washingtonpost.com/wp-dyn/articles/A13840-2004Aug18.html

Oil Prices Rise to High As Demand Continues
Concern About Supply Bumps Up Cost

By Justin Blum
Washington Post Staff Writer
Thursday, August 19, 2004; Page E03

The price of oil hit another high yesterday, closing above $47 a barrel as traders reacted to continuing concerns about supply disruptions from terrorism and instability in oil-producing countries.

Analysts said they expect prices to continue creeping up because of the combination of uncertainty and enormous demand.

"World growth is so strong and demand is so strong that we are using all the oil capacity we've got," said Bill O'Grady, director of futures research for A.G. Edwards & Sons Inc.

The closing price of benchmark U.S. crude oil for September delivery was $47.27, up 52 cents from the closing price on Tuesday. Adjusted for inflation, the price of crude oil remains well below its peak in 1982.

-more

[Justice]

1. Two Things

If you use oil for heat, lock in your price now (with someone reputable who will be around all winter).

Two - how is it that gas prices are falling? I don't get it.

[alittlelark]

3. Because the BIG OIL companies

are takin' a loss for the next few months (after RECORD PROFITS) to make sure their TEAT - GW B*sh remains in office.

They LUV their Mommy, and will do anything for him.

[hadrons]

7. no, there's plenty of gasoline right now ....

the $47 a barrel are futures, so there rise doesn't affect us now, but later on in the winter watch out

[jmcgowanjm]

14. Sep Unleaded vSep Crude-Notice bifurcation May31/June30

http://charts3.barchart.com/chart.asp?sym=HUU4&data=A&jav=adv&vol=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=

http://charts3.barchart.com/chart.asp?sym=CLU4&data=A&jav=adv&vol=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=

Unleaded from $1.10 to $1.30 as Crude moves from
$35 to $48.

What happened to oils pass on costs immediately
but fade decreases?

Someone's eating alot of losses.

[boot@9]

22. You are

exactly right. Up until the last month any spike in futures resulted in an immediate hike at the pumps. Now,even though futures are escalting at a record rate, the pump price is very slow to respond.

[ProfessorGAC]

25. That's Not Universally True

The recent bump caused our gas prices to rise almost 8% overnight this week.

I think the survey of gas prices is lagging this week. Not the price, but the survey itself. Oil went up 7.4%, gas went up 7.7% between Monday night and Tuesday morning this week. ($1.82 to $1.96)

So, the lag you're describing does not exist in northern Illinois.
The Professor

[Massacure]

11. This is september crude

So prices won't show up until september when they start refining the stuff.

[jmcgowanjm]

15. See post #14 n/t

[DenverDem]

2. We'll be looking at $80 per barrell and $4 a gallon pretty soon.

And that's only the beginning. It's too late to avoid catastrophe now. Jimmy Carter is looking pretty smart right now. If only we had listened to him in '77, we wouldn't be facing this.

<http://www.peakoil.net/>
<http://www.lifeaftertheoilcrash.net/>

[The_Casual_Observer]

4. The unintended and unforeseen consequences of globalization

Everything was cozy when the US was the only real customer for foreign oil. Now that the Walmart and Nike Asian junk factories need energy to light up what used to be rural agrarian wastelands we are getting to peak oil sooner than later.

[sventvkg]

5. Our economy will sink with $4 a gallon gas...

My living will be affected for sure as I will have to charge more $$ to make up for the extra traveling cost...It will be bad bad bad...

[radfringe]

6. I'm waiting to hear

that high oil prices are good for america

[recidivist]

8. Some of us have for many years wanted a hefty gasoline tax.

We can live with higher oil and gasoline prices. As someone who dislikes suburban sprawl, favors intensive urban redevelopment, is serious about conservation and alternative energy sources, and thinks our dependence on foreign oil is a problem, I see a silver lining in this.

There are ample alternative sources of energy, but they are more expensive than the historical price of oil. This has meant that expensive investments in alternative energy could be blown out of the water any time the Saudis wanted to flick the production switch and bring global oil prices down. That is the primary reason large scale development of alternative energy sources has lagged.

If rising global demand and declining production are finally going to drive global oil prices to a new and much higher plateau, there will be an adjustment to be made but the results will not be all bad. Of course, I hope for a relatively smooth transition. We'll see.

P.S. There is another possibility that has not been raised here, and that is that the Saudis may be gaming the U.S. elections. Rising oil prices are probably the primary reason the economic recovery has been as uncertain as it has been. If we are in fact moving into a new era of significantly higher energy prices, we will look back on this period and say we were reasonably fortunate in the transition. But if oil prices plummet soon after the election due to higher OPEC production, it will be clear the Saudis have tried to undermine Bush and elect Kerry. Their hope would be that Kerry would retreat from the Bush policy of regime change and sweeping reform in the Middle East and revert to the traditional American policy of propping up the status quo.

This is a speculation but not an unreasonable one. We know the Saudi royal family is deeply divided on many issues, but one thing that surely unites them is a fear of democratization in the Middle East. Bush hasn't achieved that yet, but he's talking about it and the Saudis don't like it one bit. They are accustomed to getting not only a free ride but actual deference from American and European political leaders. For the first time in my memory, we are actually starting to speak honestly about the political and cultural cesspool in Saudi Arabia. I don't think there is any doubt the Saudis would prefer Kerry, whose basic principle on foreign affairs seems to be consensus, which in practice means American passivity (always popular with the Europeans) and a reluctance to challenge status quo arrangements.

[DenverDem]

13. Surely you jest!!

The Sauds are full partners in busholini inc. They know that junior would never mess with them. To say the Saudis would prefer Kerry is disingenuous at best.

[recidivist]

17. We will have the answer sometime after the election.

For decades, Saudi Arabia has controlled the price of oil. The question is, are the current high prices the result of a fundamental shift in the oil economy (leveling off of production, growth in demand from China and India), or are they the result of predatory OPEC pricing policy?

If OPEC boosts production and cuts prices after the election, it will suggest that the current price runup is political gamesmanship on their part. We'll see.

[DenverDem]

18. The point is your inference that the Sauds want Kerry elected

which is petropublican propaganda.

[radfringe]

20. Bandar of S.A.

said (this spring when prices were first spiking) that he would do whatever it takes to support bush* in the election

[recidivist]

24. And you believe him?

Look, I'm an agnostic on the question of whether the Saudis are playing oil politics, but the idea is floating around and is not impossible. All I'm saying here is that we should get an answer sometime shortly after the election.

As I also pointed out, there is also the possibility that we may be moving into an era of permanently higher oil prices. That, in fact, was the original point I made. I added the Saudi twist in the P.S. as a possible alternative theory.

Now, how do you suppose the Saudis view their interests in this election? They are virulently anti-Israel. They opposed us on Iraq. They want us to defend them but don't want American boots on their sacred soil. As an autocracy they are much threatened by any liberalization and democratization in the region. Bush's nation-building agenda in Iraq, whatever its other pros and cons, is something that frightens the Saudi plutocracy. Last but not least, Bush has leaned hard on them with regard to their payoffs to terrorists and funding of Islamic extremist groups worldwide. I don't know how effective this effort has been, but certainly the Saudis have felt an unaccustomed degree of pressure from the U.S.

Against all that, there is the fact that Bush is from the oil patch and that his father's administration, like all previous American administrations, played footsie with the Saudi royals.

I don't know what lurks in the back of their minds, but I can see lots of reasons why the Saudis would think Bush is threatening. As I suggested before, Kerry's basic foreign policy pitch -- to put the most favorable construction on it -- is multilaterism, consensus building, and reliance on international institutions, particularly the UN. Which approach do you think the Saudis would prefer?

[They_LIHOP]

21. WTF?

WHAT the HECK are you talking about? If anything, the Faud's are tryin' to prop bushco up in any way they possibly can. their two dynasties are just one big oily 'family'. these two groups need one another!

I think that there is an better probability than any you suggest Recid: that the world has actually reached 'peak oil', and the only thing keeping this news from destroying the world economy (particularly the US economy) by it's disclosure is that the Saudi's are still telling everyone that they can boost production whenever they want to cover the surging world demand. Once they quit playing games and bombing their own facilities (it's supposedly 'terra-ists', but I ain't buying THAT story!) to provide cover for the fact that they CANNOT boost production any more, peak oil will become official. On that day, civilization as we know it will begin an inexorable march towards it's demise...

i think that bushco's friends the saudi's are just trying to buy their buddy bushy 'til november. if they succeed in keeping bushco in power, they'll then all be free to let out the cat and proceed to hold the world hostage by controlling a huge chunk of the known reserves as a team.

Ostensibly, the occupation of Iraq was done to make sure that the oily texas fatcats (privatizing the profits is no doubt in bushco's gameplan) will be in on the gravy train with their 'own' supply to sell at the soon-to-come staggering oil prices. prices that will do nothin but go up for the rest of our lives, utterly destroying the 'conspicuous consumption' way of life we've become so accustomed to.

"Rising oil prices are probably the primary reason the economic recovery has been as uncertain as it has been. "

REALLY? I think it's more because we've shipped WAY too many jobs overseas, we've launched an EXTREMELY expensive military escapade, gone WAY WAY WAY into deficit spending, and given HUGE tax cuts to the mega-rich which haven't helped the middle class at all economically. It's all this AT LEAST as much rising energy costs (for now, anyway - in the future, as I said, the world economy will be utterly destroyed by the phenomenon of peak oil)

"There are ample alternative sources of energy, but they are more expensive than the historical price of oil."
I agree with that last part, but not the first. Unfortunately, there are absolutely NO SUBSTITUTES for fossil fuels available in REMOTELY NEAR the quantities we will soon require them in to magically (not having planned for diddly-shit) appear.

We face an absolutely intractable problem in the world in the sense that even if we could harness every single Kcal of energy that strikes the planet surface (adding in ALL the nuclear and the geothermal power we could possibly harness) and convert it with 100% effiency into WORK (impossible of course, but just say we could) the amount of ALL those KCals would not even APPROACH the number of KCals our society requires to function at the level it functions at today, let alone with the all population growth we are always experiencing. Plus, there are many fossil-fuel products which simply CANNOT BE CREATED w/o them, like, oh, plastics, for example.

The fossil fuel we burn each day represents probably 100's of years of the energy of the trapped sunlight that struck the planet surface that was absolutely TEEMING w/photosynthesis-able life at the time.

The thermodynamic equations simply don't add up when talking about alternative energy sources and the current world population. We simply cannot replace fossil fuels without allowing BILLIONS AND BILLIONS of people to DIE OFF, my friends. I'm afraid it's time for everyone her to wake up. The attack on Iraq was the beginnings of the death throes of a doomed global civilization. As you watch oil prices continue to creep up, better start getting to ready to kiss the old way of life goodbye, cause I'm afraid it's all about to change - for the WAY WORSE...

God help us all...

[DenverDem]

23. Thanks for the reality check.

Unfortunately, you are completely correct.

Welcome to Hell.

[Wright Patman]

9. They're good for Texas

and America made the mistake of allowing another Texan into the White House, even though he wasn't elected to it. He more or less seized it with the help of the "low" court.

I really thought after the debacles of LBJ and Bush 41 that it could never happen again, but it did and you are paying the price--literally.

[Ghetto_Boy]

10. Gee... Supply & Demand... I'm shocked, shocked!

[Strelnikov_]

12. How About $182/bbl

When demand collides with supply for a price inelastic commodity, the price will skyrocket. Elasticity will be regained somewhat as demand adjusts to price (supply) through efficiency measures, only to have demand and supply collide again starting the entire price shock cycle over.

Is The World's Oil Running Out Fast?
http://news.bbc.co.uk/1/hi/business/3777413.stm

"Oil is far too cheap at the moment," says Mr Simmons.

"The figure I'd use is around $182 a barrel. We need to price oil realistically to control its demand. That is because global production is peaking."
. . .

The adherents of the peak oil theory warn the decline of world oil output will force oil prices higher for good, and that the knock on effects could be catastrophic.

"In my opinion, unfortunately, there will be no linear change," says Iran's Ali Bakhtiari. "There will only be sudden explosive change."

"The people who will be least affected will be the super poor, who already have no access to energy, and the super rich who do not care if oil is $100 a barrel."

"It is everyone who is in the middle who will be hurt the most," says Mr Bakhtiari. "When the crisis comes there will be enormous changes."

. . .

[jmcgowanjm]

16. Until you hear the words "Peak Oil" on CNBC

this current rally will continue.

$48/bbl September Crude

and the Saudis are pumping at capacity.

Ghawar, Cantarell, Dai Qing, and Burgun. When these
4 giants go into decline (they have definitely peaked),
expect an immediate irrevocable era change.

[hatrack]

19. And while Talk of the Nation may breathe its name softly . .

I've yet to see a single scintilla that any of this has surfaced anywhere on the placid pond that is happy, happy optimistic "mainstream" business broadcasting.

[krkaufman]

26. Ummm.... you appear to be misinformed

> When demand collides with supply for a price inelastic commodity,
> the price will skyrocket. Elasticity will be regained somewhat as
> demand adjusts to price (supply) through efficiency measures,

"Efficiency measures"? That sounds like conservation -- and conservation has no place in a sound energy policy.