The Problem Is Not about Oil, It's about Greed
Wednesday, 18. June 2008, 16:36:18
THE ENERGY NON-CRISIS
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Lindsey Williams talks about his first hand knowledge of Alaskan oil reserves larger than any on earth. And he talks about how the oil companies and U.S. government won't send it through the pipeline for U.S. citizens to use. ...all »
These are 2 original paintings by (me) Kulanga
Name: "GREED" 1 and 2
Medium: Acrylic on paper.
(Both are excerpts from my book "The Book of Joy")
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HERE ARE MY THOUGHTS ON THE OIL CRISES
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Some will say that today's rising oil price is necessary and fully justified.
Many would argue that “... most of the world's major oil deposits have already been discovered, that global warming in a major concern in today’s consciousness, or that the remaining oil supplies are tough to get at - and expensive to recover.
But is this true?
This argument is essentially correct. But it is just a story - and a thoroughly well-known one at that.
Yes, the world's demand for oil keeps rising as more people around the globe - especially since emerging giants like India and China are scrambling and pounding the table for "more and more supplies."
But in all appearances the low-hanging fruit has been picked, the deep and shallow wells have been tapped and we are at the brink of a major energy shortage, getting worse drop by drop as we speak.
Meanwhile speculative fever has gripped the oil market, the price is up 51% since January 1 - and more than 700% since trading at $17.45 a barrel in November 2001.
But, it is rationale to rush out to buy and hoard oil out of fear and anxiety .
According to Stephen Schork, President of Schork Group, a firm that advises the Organization of Petroleum Exporting Countries, "There's nothing different between this mania, the dot-com mania, the real estate mania, the Dow Jones mania of the 1920s, the South Sea bubble and the Dutch tulip-bulb mania. The parallels are uncanny. Consumers start to conserve. Producers search for oil that was once too costly to extract. Supply and demand come back into balance.
History repeats itself over and over and over again."
Despite these decidedly bearish developments for oil, this bull is likely to end up just like those in the ring in Mexico City. Current oil prices are simply unsustainable.
The truth is, according to the federal Energy Information Administration, high prices and a weak economy will knock down U.S. oil consumption by 90,000 barrels a day, and Oil demand in the United States is actually down 2% so far this year. Other economists point out that the situation is similar in other parts of the world.
The International Energy Agency (IEA), the Paris-based energy watchdog of the world's richest nations, recently lowered its forecast for world oil demand growth by 460,000 barrels a day. The IEA also sees supply from outside OPEC growing by 815,000 barrels a day, the strongest growth since 2004. (And this was before Saudi Arabia's recent promise to boost production by a million barrels a day).
That doesn't mean that oil is going to plunge today or tomorrow. Indeed, it could keep rising for quite some time. After all, you cannot make a rational judgment about when irrational behavior will end. So if you have big profits in your energy stocks, consider paring back. Or at least running your trailing stops closer to better protect your profits. Oil prices will come back down. And that will be positive for both the economy and the stock market.
If you're skeptical, remember high prices always sow the seeds of their own collapse.
---------------------
Lindsey Williams talks about his first hand knowledge of Alaskan oil reserves larger than any on earth. And he talks about how the oil companies and U.S. government won't send it through the pipeline for U.S. citizens to use. ...all »
These are 2 original paintings by (me) Kulanga
Name: "GREED" 1 and 2
Medium: Acrylic on paper.
(Both are excerpts from my book "The Book of Joy")
------------------------------
---------------------------------
HERE ARE MY THOUGHTS ON THE OIL CRISES
---------------------------------------
Some will say that today's rising oil price is necessary and fully justified.
Many would argue that “... most of the world's major oil deposits have already been discovered, that global warming in a major concern in today’s consciousness, or that the remaining oil supplies are tough to get at - and expensive to recover.
But is this true?
This argument is essentially correct. But it is just a story - and a thoroughly well-known one at that.
Yes, the world's demand for oil keeps rising as more people around the globe - especially since emerging giants like India and China are scrambling and pounding the table for "more and more supplies."
But in all appearances the low-hanging fruit has been picked, the deep and shallow wells have been tapped and we are at the brink of a major energy shortage, getting worse drop by drop as we speak.
Meanwhile speculative fever has gripped the oil market, the price is up 51% since January 1 - and more than 700% since trading at $17.45 a barrel in November 2001.
But, it is rationale to rush out to buy and hoard oil out of fear and anxiety .
According to Stephen Schork, President of Schork Group, a firm that advises the Organization of Petroleum Exporting Countries, "There's nothing different between this mania, the dot-com mania, the real estate mania, the Dow Jones mania of the 1920s, the South Sea bubble and the Dutch tulip-bulb mania. The parallels are uncanny. Consumers start to conserve. Producers search for oil that was once too costly to extract. Supply and demand come back into balance.
History repeats itself over and over and over again."
Despite these decidedly bearish developments for oil, this bull is likely to end up just like those in the ring in Mexico City. Current oil prices are simply unsustainable.
The truth is, according to the federal Energy Information Administration, high prices and a weak economy will knock down U.S. oil consumption by 90,000 barrels a day, and Oil demand in the United States is actually down 2% so far this year. Other economists point out that the situation is similar in other parts of the world.
The International Energy Agency (IEA), the Paris-based energy watchdog of the world's richest nations, recently lowered its forecast for world oil demand growth by 460,000 barrels a day. The IEA also sees supply from outside OPEC growing by 815,000 barrels a day, the strongest growth since 2004. (And this was before Saudi Arabia's recent promise to boost production by a million barrels a day).
That doesn't mean that oil is going to plunge today or tomorrow. Indeed, it could keep rising for quite some time. After all, you cannot make a rational judgment about when irrational behavior will end. So if you have big profits in your energy stocks, consider paring back. Or at least running your trailing stops closer to better protect your profits. Oil prices will come back down. And that will be positive for both the economy and the stock market.
If you're skeptical, remember high prices always sow the seeds of their own collapse.
WIDGETIZE