Oil Prices

Congress Is Clueless On The Oil Issue

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Related video: The Energy Non-Crisis by Lindsay Williams

The U.S. Congress continues to show an incredible amount of ignorance on the oil issue. This week, the U.S. Senate held a hearing on the high price of oil and called out a group of oil company executives to testify. In addition, the U.S. House of Representatives approved a bill to sue OPEC over the high oil price. All of this grandstanding by our so called elected officials is going to do nothing to resolve the high oil price. This is a case of the U.S. Congress misdirecting the blame of the high oil price on OPEC and the major oil companies when they are really only minor players in this game. Threatening to sue OPEC is an incredibly stupid move because that could very well have the reverse effect and cause OPEC to respond to this threat by reducing the amount of oil they decide to pump. The two major reasons for the high oil price involve the Federal Reserve devaluing the U.S. Dollar through their monetary policies as well as the U.S. occupation of Iraq and Afghanistan. On top of this, it is clear that the Bush administration is looking for any excuse possible to bomb Iran. Israeli Prime Minister Ehud Olmert has even stated that a naval blockade of Iran is an option that should be put out on the table. With the devaluation of the U.S. Dollar and a potential expansion of war in an area where a tremendous amount of oil is drilled, it is no wonder why the oil price has skyrocketed as high as $135 a barrel. This makes the actions of the U.S. Congress entirely insane and intellectually bankrupt. Expect oil prices in the long term to move much higher.

Since oil is priced in U.S. Dollar denominated terms and the monetary unit of the U.S. Dollar continues to be devalued by the Federal Reserve’s ability to create as many U.S. Dollars as they like, it isn’t a real mystery as to why the oil price is so high. Instead of suing OPEC, the U.S. House of Representatives should be suing the Federal Reserve for fraud. The Coin Act of 1792 states that U.S. Mint employees who are caught debasing the nation’s coinage would be subject to the penalty of death. The Federal Reserve is engaging in the intentional debasement of the nation’s currency which is fundamentally no different and in fact worse than employees of the U.S. Mint debasing the nation’s coinage. Instead of debasing the physical coinage, bankers can simply type digits into a computer to devalue the nation’s currency. Maybe the death penalty should be explored for some of the central bankers that have engaged in these practices.

The U.S. Congress is also helping to contribute to the high oil price with their ridiculous policies. They have funded the illegal and unconstitutional occupation of Iraq and Afghanistan since 2003. The U.S. Senate just passed another war funding bill which will give the executive branch another $165 Billion to continue military operations in Iraq and Afghanistan. By continuing the military occupation of these countries it makes an attack on Iran all the more likely and contributes to greater uncertainty in the oil producing region.

General David Patreaus the current commander in Iraq is on the path to being confirmed as the new CENTCOM commander which means he will be in charge of all U.S. military operations in the Middle East. Assuming he gets confirmed, the chances of a strike on Iran will be all the more likely. Admiral William Fallon the former CENTCOM commander resigned from the position due to the perception that he was refusing to play ball with the Bush administration’s agenda on Iran.

Read moreCongress Is Clueless On The Oil Issue

IEA inquiry into whether oil supplies will run dry by 2012

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The International Energy Agency has ordered an inquiry into whether the world could run out of oil in four years’ time, it was reported yesterday.

The IEA has concerns about what might happen in 2012, when demand for oil, boosted by the rapid growth of the Chinese and Indian economies, is expected to have reached 95 million barrels a day. Global supply at that point is projected at only 96 million barrels a day. Such a thin margin would be vulnerable to any sudden supply crisis in volatile countries such as Nigeria, Venezuela or Iraq, now estimated to have overtaken Saudi Arabia as the biggest oil nation.

The IEA said its inquiries would form part of short and long-term forecasts to be published in July and again in November. Its energy research chief, Lawrence Eagles, said: “Up to now we have believed that supply can cope with demand. One caveat is that we don’t know for certain whether estimates of reserves in countries such as Saudi Arabia are entirely accurate.”

John Waterlow, analyst at oil research consultancy Wood Mackenzie, commented: “Many oil-producing countries are closed, secretive societies where it can be difficult to pinpoint the level of provable reserves.”

The IEA’s inquiry follows last week’s new record high for black gold at $135 a barrel, fuelling inflation and possible world recession.

Read moreIEA inquiry into whether oil supplies will run dry by 2012

George Soros: rocketing oil price is a bubble

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Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned.

The billionaire investor’s comments came only days after the oil price soared to a record high of $135 a barrel amid speculation that crude could soon be catapulted towards the $200 mark.

In an interview with The Daily Telegraph, Mr Soros said that although the weak dollar, ebbing Middle Eastern supply and record Chinese demand could explain some of the increase in energy prices, the crude oil market had been significantly affected by speculation.

Telegraph TV: George Soros on oil prices
Telegraph TV: George Soros on oil prices

“Speculation… is increasingly affecting the price,” he said. “The price has this parabolic shape which is characteristic of bubbles,” he said.

  • ‘We face the most serious recession of our lifetime’

    • The comments are significant, not only because Mr Soros is the world’s most prominent hedge fund investor but also because many experts have claimed speculation is only a minor factor affecting crude prices.

    Oil prices stalled on Friday after their biggest one-day jump since the first Gulf War earlier in the week.

    At just over $130 a barrel, the price has doubled in around a year, causing misery for motorists and businesses.

    However, Mr Soros warned that the oil bubble would not burst until both the US and Britain were in recession, after which prices could fall dramatically.

    Read moreGeorge Soros: rocketing oil price is a bubble

    Oil to hit $200 a barrel, says ace Indian analyst

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    Goldman Sachs analyst Arjun N Murti is no ordinary forecaster. But in March 2005, when crude oil was trading at $55 a barrel in the global market, he was scoffed at for predicting that oil prices would experience a ‘super spike’ and cross $105 a barrel.

    No one is laughing at him anymore. In fact, people are shivering at his latest forecast: crude oil prices may touch $200 in the next two years, says a New York Times report.

    With oil prices smashing past $135 a barrel for the first time on Thursday, continuing the astonishing rise following unexpected drops in US crude and gasoline stocks in a tight market, the 39-year-old Murti’s prediction seems frightening close to turning into reality.

    Although other analysts argue that market speculation may bring down the prices drastically, Murti is of the opinion that that the oil price will definitely stay above $100 till 2011.

    This, says the NYT report, is indeed a matter of concern for the US where with $200 oil, gasoline could cost more than $6 a gallon.

    Read moreOil to hit $200 a barrel, says ace Indian analyst

    Energy Advisor Warns of $12-15-a-Gallon Gas

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    Robert Hirsch, an energy advisor, says CNBC morning show prediction was a citation of the ‘Dean of Oil Analysts.’

    Robert Hirsch, Management Information Services Senior Energy Advisor, gave a dire warning about the potential future of gas prices on CNBC’s May 20 “Squawk Box”. He told host Becky Quick there was no single thing that would solve the problem, due to the enormity of the problem.

    “[T]he prices that we’re paying at the pump today are, I think, going to be ‘the good old days,’ because others who watch this very closely forecast that we’re going to be hitting $12 and $15 per gallon,” Hirsch said. “And then, after that, when oil – world oil production goes into decline, we’re going to talk about rationing. In other words, not only are we going to be paying high prices and have considerable economic problems, but in addition to that, we’re not going to be able to get the fuel when we want it.”

    Hirsch told the Business & Media Institute the $12-$15 a gallon wasn’t his prediction, but that he was citing Charles T. Maxwell, described as the “Dean of Oil Analysts” and the senior energy analyst at Weeden & Co. Still, Hirsch admitted the high price was inevitable in his view.

    “I don’t attempt to predict oil prices because it’s been impossible in the past,” Hirsch said in an e-mail. “We’re into a new era now, and over the next roughly five years the trend will be up significantly. However, there may be dips and bumps that no one can forecast; I wouldn’t be at all surprised. To me the multi-year upswing is inevitable.”

    Maxwell’s original $12-15-a-gallon prediction came in a February 5 interview with Energytechstocks.com, a Web site run by two former Wall Street Journal staffers.

    “[Maxwell] expects an oil-induced financial crisis to start somewhere in the 2010 to 2015 timeframe,” Energytechstocks.com reported. “He said that, unlike the recession the U.S. appears to be in today, ‘This will not be six months of hell and then we come out of it.’ Rather, Maxwell expects this financial crisis to last at least 10 or 12 years, as the world goes through a prolonged period of price-induced rationing (eg, oil up to $300 a barrel and U.S. pump prices up to $15 a gallon).”

    According to associate of Maxwell at Weeden & Co., Maxwell is out of the country and currently unavailable for comment.

    Maxwell’s biography on the Weeden & Co. Web site said he “has been ranked by the U.S. financial institutions as the No. 1 oil analyst for the years 1972, 1974, 1977 and 1981-1986,” according to polls taken by Institutional Investor magazine.

    “In addition, for the last 17 years he has been an active member of an Oxford-based organization comprised of OPEC and other industry executives from 30 countries who meet twice a year to discuss trends within the energy industry.”

    Although Maxwell’s prediction is for the long-term, not everyone supports high-end predictions, even in the short-term. CNBC contributor and the vice president of risk management for MF Global (NYSE:MF) John Kilduff said on “The Call” May 7that he expected gas prices to drop following the Chinese Olympics, as China’s economic boom slows down.

    By Jeff Poor
    Business & Media Institute
    5/21/2008 3:38:13 PM

    Source: Business and Media

    Soaring oil price could drive ‘weaker airlines’ out of business

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    The soaring oil price will drive “weaker” rivals out of business, easyJet claimed this morning, despite seeing its own losses treble over the last six months.

    With oil hitting a new record of $122 a barrel yesterday, and Goldman Sachs forecasting it could hit $200 a barrel this year, easyJet predicted carnage in the airline industry.

    “If the oil price stays high we will see a number of weaker airlines disappear over the next 12 to 24 months,” chief executive Andrew Harrison predicted.

    The budget airline reported a 15% jump in passenger numbers for the six months to March 31, with revenue growing 24% to £892.2m. But its pre-tax losses spiralled to £57.5m, triple the loss it made a year ago. The loss, which was expected following the firm’s profit warning in March, was primarily caused by dearer jet fuel, which costs 80% more than a year ago.

    Every $10 increase in the cost of a barrel of oil cuts around £2.5m off easyJet’s profits. Harrison claims the company’s relatively young fleet – its 157 planes are three years old on average – give it an edge.

    “A quarter of Europe’s short-haul aircraft are at least 15 years old, so they burn 20% more fuel than our planes,” he said.

    Rival airline Aer Lingus yesterday blamed fuel costs for an increase in its baggage charges. From tomorrow, it will cost £12 to check in a bag at the airport.

    Read moreSoaring oil price could drive ‘weaker airlines’ out of business

    Oil nears $123 on $200 oil prediction, supply concerns

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    Oil prices rise to record near $123 a barrel on prediction of $200 oil, supply concerns

    NEW YORK (AP) — Oil futures blasted to a new record near $123 a barrel Tuesday, gaining momentum as investors bought on a forecast of much higher prices and on any news hinting at supply shortages. Retail gas prices edged lower, but appear poised to rise to new records of their own in coming weeks.

    A new Goldman Sachs prediction that oil prices could rise to $150 to $200 within two years seemed to motivate much of Tuesday’s buying, although a falling dollar and increasing concerns about declining crude production in Mexico and Russia contributed, analysts say.

    Read moreOil nears $123 on $200 oil prediction, supply concerns

    OPEC president sees $200 oil possible

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    ALGIERS (Reuters) – OPEC President Chakib Khelil does not rule out oil prices reaching $200 a barrel, even though supply is adequate, because the market is driven by the dollar’s slide, Algerian government newspaper El Moudjahid reported on Monday.

    “Questioned about a possible rise which would go to $200, the minister did not rule out this eventuality, explaining that this rise is indexed from now on to the fall in the dollar or to the rise in the dollar,” El Moudjahid reported.

    “In terms of fundamentals, stocks are high, demand is easing, supply is satisfactory. Therefore normally, without geo-political problems and the fall of the dollar, the prices of oil would not be at this level,” he was quoted as saying.

    Khelil, a former World Bank official, is also Algeria’s Minister of Energy and Mines.

    He added: “The prices are high due to the fact of the recession in the United States and the economic crisis which has touched several countries, a situation which has an effect on the devaluation of the dollar, and therefore each time the dollar falls one percent, the price of the barrel rises by $4, and of course vice versa,” he was quoted as saying in brief remarks to journalists on Sunday.

    He added that: “If this (the dollar) strengthens by 10 percent, it is probable that (oil) prices will fall by 40 percent.”

    If the U.S. economic situation improved from now to the end of the year “that would help the market to stabilize.”

    “But I don’t think that an increase in production would help lower prices, because there is a balance between supply and demand and the stocks of gasoline in the United States have recorded a surplus and are at their highest level for five years.”

    The independent El Watan newspaper reported Khelil as saying that if the dollar’s value on currency markets stayed as it was at present, then oil prices would be expected to remain at between $80 and $110 a barrel.

    (Reporting by William Maclean; editing by James Jukwey)

    Mon Apr 28, 2008 5:59am EDT

    Source: Reuters

    Americans fear harder times

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    Public’s feelings about economy are bleakest since ’73, survey indicates Americans are bracing for rising unemployment and shrinking salaries, a gloomy outlook that could translate into a serious cutback in consumer spending, the primary engine of the economy.

    A survey of about 2,500 households found that Americans feel worse about the economy’s prospects than at any time since 1973, when Americans struggled with soaring oil prices and runaway inflation.

    Read moreAmericans fear harder times

    2008: The year of global food crisis

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    carrot.jpg

    IT IS the new face of hunger. A perfect storm of food scarcity, global warming, rocketing oil prices and the world population explosion is plunging humanity into the biggest crisis of the 21st century by pushing up food prices and spreading hunger and poverty from rural areas into cities.

    Millions more of the world’s most vulnerable people are facing starvation as food shortages loom and crop prices spiral ever upwards.

    And for the first time in history, say experts, the impact is spreading from the developing to the developed world.

    More than 73 million people in 78 countries that depend on food handouts from the United Nations World Food Programme (WFP) are facing reduced rations this year. The increasing scarcity of food is the biggest crisis looming for the world”, according to WFP officials.

    At the same time, the UN Food and Agriculture Organisation has warned that rising prices have triggered a food crisis in 36 countries, all of which will need extra help. The threat of malnutrition is the world’s forgotten problem”, says the World Bank as it demands urgent action.

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    The bank points out that global food prices have risen by 75% since 2000, while wheat prices have increased by 200%. The cost of other staples such as rice and soya bean have also hit record highs, while corn is at its most expensive in 12 years.

    Read more2008: The year of global food crisis

    Rising Inflation Creates Unease in Middle East

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    AMMAN, Jordan – Even as it enriches Arab rulers, the recent oil-price boom is helping to fuel an extraordinary rise in the cost of food and other basic goods that is squeezing this region’s middle class and setting off strikes, demonstrations and occasional riots from Morocco to the Persian Gulf.

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    The cost of many basic foods, like at this market in Amman, has doubled. Some in the middle class are tilting toward poverty

    Read moreRising Inflation Creates Unease in Middle East

    Global “Oil Shock” Rattles World Stock markets

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    Cleaning up the mess that Mr Greenspan left behind was never going to be easy. Banks and brokers around the world face more than half-trillion dollars in write-offs as a consequence of the US sub-prime mortgage crisis, which is spreading from the US property market and roiling global stock markets. It’s toppled the US economy into a recession and the tremors are also rattling Asian stock markets.

    Roughly $7 trillion has been wiped from world stock markets since the beginning of the year amid fears of a severe US economic recession and financial institutions reporting more mega losses. “The market crisis will preoccupy us well into 2008,” he said German Finance Minister Peer Steinbrueck on Feb 15th. “The financial risks securitized by banks contained packaged explosives,” and he accused rating agencies of having a conflict of interest in the role they played in the process.

    So far, the Bernanke Federal Reserve has pumped more than half-a-trillion dollars into the markets with open market operations and special emergency lending schemes, to help cushion the blow to the US economy and stock markets. However, there’s evidence that the Fed’s prescription for dealing with the sub-prime debt crisis, is actually making matters much worse, and leading to “Stagflation.”

    Read moreGlobal “Oil Shock” Rattles World Stock markets

    Rove: Iraq Redeployment Would Cause Oil Prices To Skyrocket To $200 A Barrel

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    This morning on Fox News Sunday, former White House adviser Karl Rove claimed that redeployment from Iraq would cause oil prices to shoot to $200 a barrel:

    If we were to give up Iraq with the third largest oil reserves in the world to the control of an Al Qaida regime or to the control of Iran, don’t you think $200 a barrel oil would have a cost to the American economy?

     

    Occupying Iraq has hardly helped oil prices stay low. Last week, oil prices reached a record high of over $102 a barrel. On March 19, 2003 — the day the Iraq war commenced — oil was trading at $36 a barrel. A look at the rise in oil prices:

    oilprices65.gif

    None of this should have come as a surprise to the Bush administration; before the war, economists were widely predicting a prolonged presence in Iraq would lead to a rise in oil prices. As Nobel laureate Joseph Stiglitz recently noted in Vanity Fair, “The soaring price of oil is clearly related to the Iraq war. The issue is not whether to blame the war for this but simply how much to blame it.”

    Rove is also out of step with the American people, a majority of whom believes that the Iraq war is tied to the current economic downturn. A recent AP poll found that 68 percent of Americans say that redeploying from Iraq would help the economy.

    Digg It!

    Transcript:

    WALLACE: All right. But Obama has found a clever way to link the war in Iraq to our domestic problems with the economy here at home. Let’s watch.

    (BEGIN VIDEO CLIP)

    OBAMA: We are spending $12 billion per month. That is money that we could be spending here in the United States, rebuilding our infrastructure, building schools, sending kids to university.

    (END VIDEO CLIP)

    WALLACE: If he’s able to define Iraq in terms of where do you spend that $12 billion, on the battlefield over there or on infrastructure and social programs here, doesn’t Obama win?

    ROVE: Well, Obama — it’s a good argument for Obama, but I’m wondering where it goes, because it really is a very neo-isolationist argument. It basically says, you know, We should not be involved in the world because of the consequences to the budget here at home.

    Well, we were not involved in the world before 9/11, and look what happened. Look at the cost to the American economy after a terrorist attack on the homeland. We lost a million jobs in 90 days after 9/11.

    If we were to give up Iraq with the third largest oil reserves in the world to the control of an Al Qaida regime or to the control of Iran, don’t you think $200 a barrel oil would have a cost to the American economy?

    So you know, it’s a cute thing in a primary. I’m not certain over an 8-month general election that you can make the argument that we ought to take a look at every foreign policy commitment in the United States and measure it on the basis of the number of dollars that we’ve got there.

    I happened to be in Los Angeles on Monday, and somebody had heard Obama say this to me, and they were Democrat, and at dinner they said,

    I’m worried about that, because does that mean he’s going to be looking at our support, for example, for the state of Israel and looking at it in terms of what could we be doing at home with those dollars?

    And it was a nice line, but I’m not certain how durable a line it necessarily is.

    Source: thinkprogress.org