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Oil falls, Japan's economy shrinks

Posted by m0t0r1zed on Sunday, September 14, 2008 4:06:11 PM
no point in talking about it since i pretty much said everything in my earlier posts. meh, just hope there's a quick turnaround and oil keeps dropping fast.
 
 
 
 
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merrily over the cliff we go, tra la la

Posted by m0t0r1zed on Wednesday, July 02, 2008 9:09:01 AM
 
CNN story - counterargument that it is supply and demand and not speculation based on IEA report
Speculation not to blame for oil - report
 
just some questions about the CNN article - some excerpts from it.
 
Since 2003, the volume of investment funds in commodity markets - especially oil - rose from about $15 billion to $260 billion, according to the International Energy Agency (IEA), which issued the report.
 
not important? huh?
 
this is the counterargument.

The IEA argues that if speculation drives prices too high, the market would be unbalanced. Either demand would fall off, or stockpiles would rise. Neither has happened. In fact, global demand for oil products has surpassed supply in every quarter since the fourth quarter of 2006, according to the U.S. Energy Information Administration. Fast-growing economies like China and India are consuming more and more oil. Meanwhile, it's difficult for oil-producing countries to quickly ramp up output. The IEA also made the argument that many commodities - such as coal and rice - are showing similar price increases, even those without the possibility of speculation.

just thinking it through. dunno, maybe my reasoning is flawed. whatever.
1 - it's hard to adjust oil/energy usage quickly - lag time. also there have been signs of demand drop off in unnecessary things.
2 - oil isn't a final product. it's often the starting point for manufacturing other products. instead of demand drop off, you will just get cost added to the product or reductions elsewhere (no peanuts from airlines :p).
3 - evidence for this should be increased prices and inflation across the board (since energy costs affect almost everything) - which is what seems to be happening.
4 - oil isn't a free market system. nationalization, price supports, cartels, flying monkeys, etc. skew supply and demand.
5 - oh, also coal is going up because of high oil prices.
 
i could be wrong. seems to me people can be divided up into 1) people that know (or think they know) what is going on, 2) people that really don't know so flutter about (like me, i'm a pretty butterfly!), 3) people that know, but lie because they have self-interest at stake, 4) people that don't know, so by default support the side in alignment with their interests / ideology.
 
my hunch has been that it's speculators (even tho i like the whole free market thing). but i'm not an economist, and i don't have the time to teach myself about the oil industry, speculation, commodities markets, neat ways to game the system, russian energy mafia, blah blah blah.  to give an opinion that i was fairly secure about, i'd have to invest a lot more time.
 
so whatever. dun care no more. just following the story to see what happens and if my guesses were wrong, where my thinking went astray. and why i am idjiot. i suggested some simple ideas to implement for a quick drop in oil prices. but dun matter.
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hmm so i'm sure china is happy

Posted by m0t0r1zed on Friday, June 27, 2008 10:39:02 PM
LOL, financial speculation is funny.  I'm obviously not an expert at it.  No formal training in econ aside from basic macro micro nonsense.  Best I can guess at is looking at big overall patterns. Then again, I'm not an expert in housing or the tech sector, and it was pretty obvious to an untrained layman, like myself, that those were bubbles.  Same thing with oil.  Lots of games being played under the surface ... ah well.  Thousands of leprechauns spending lifetimes all running after giant pots of gold.
 
Anyhoo, just wondering how China is enjoying this little ride.  The dollar's weak, but China lives and dies by exports so it artificially has to keep its currency low to match the dollar.  Oil is bad enough in the US, so you wonder how China is dealing with it. Hmm, but they subsidize oil, so the braking effect on demand isn't as strong in China.  Kind of a double whammy.
 
Also, you wonder how overall demand for their exports will fare with high energy costs eating up disposable income and when inflation starts to go on the march .... A global slowdown isn't going to help.
 
China's economy is gonna grow, but less due to high oil prices
Interesting - high oil leading to rise in coal prices and coal shortages in China and plants idling turbines
 
However they are still exporting coal - though decreasing ... less by 4.1%
 
And gearing up for coal-to-oil conversion plants - which makes environmentalists none too happy (Environmental News Network)
 
article on China's determined efforts on acquiring oil - back in the good 'ol days of $3 gas
 
Interesting quote from Tech Review
Since China has very little in the way of oil and gas reserves, its future depends on coal. With 13 percent of the world's proven reserves, China has enough coal to sustain its economic growth for a century or more.
And first paragraph from BBC News article
Coal built China - and fuels its relentless growth today. Eighty per cent of China's electricity comes from coal, and there are plans for 544 new coal-fired power stations to meet an insatiable demand for energy
 
Last two articles focus more on clean coal and greenhouse emissions, but let's face it, the Chinese gov't place environment second after economic growth.  Oil speculators keep talking up China, but it seems that their economy is geared around coal. 
 
Ah well, it's not like I know anything in depth about this, but it's interesting to look at just out of curiosity and see how things eventually turn out.
 
Edit: I'm looking around for cost per barrel for coal liquefaction. The sauce that wiki uses is a 2002 article from Diesel Fuel News. Have no clue if they're reliable or not.  They say break even for China is oil above $20 per barrel, and $33-$35 for the US.  LMAO.  This can't be right!!!

Another key factor driving the project is China's interest in development strategic yet fairly cost-competitive alternatives to crude oil imports. While Shenhua officials believe the new project will provide a decent return on investment (close to 15%), this depends upon crude oil prices staying above $20/barrel.

In contrast, a similar project in the U.S. -- if ever attempted strictly on commercial terms -- would require long-term world crude prices to hover around $33 to $35/barrel, HTI's Lee explains. Such levels haven't been sustained for any lengthy period in world history.

 
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Short-term solution to oil prices

Posted by m0t0r1zed on Sunday, June 08, 2008 10:59:25 PM
Question: why should we idly watch as the speculators play a game of economic chicken with each other and try to jump out at the last minute? Seriously, isn't it in the best interest of the nation to curtail their little joyride?
 
When Bush took office, the SPR was at around 545 million barrels of oil. Now it is at 700 million barrels. Set aside 500 million barrels as the strategic reserve to be used only during times of national emergency.  Allocate around 200 million as a permanent, non-strategic petroleum reserve (NSPR) to be used to fight inflation and price spikes and to adjust for short-term shortages due to natural disasters. 
 
The Fed controls interest rates to manage the economy and fight inflation.  Why shouldn't the NSPR be used to alleviate the current economic crisis created by inflated oil prices?  It would be prudent to pop this oil bubble before it gets any worse.  We just went through the credit and housing fiascos, so there is no point in going through another mess - especially one that is dragging down the world economy, transportation, and petrochemical-based manufacturing.
 
Bush should announce that we are effectively putting 200 million barrels of oil on the market and will begin releasing 1 million barrels a day (or something to that effect).  Hopefully, just the shock of the announcement will do the job and not much will actually have to be released.  Also, in the future, the reserves should be expanded to 1 billion barrels, and 750 million set aside as SPR and 250 million as NSPR.  Refilling should resume when the prices are at lower levels.
 
The counterargument to this idea, that this is the strategic reserve and should only be used in a national emergency, is a bit arbitrary.  Exactly how much oil is necessary for the strategic reserve?  750 million barrels? 1 billion? 10 billion? All of the oil in the world?  During a serious emergency, there would be severe restrictions on usage and rationing implemented, so current consumption levels would not be likely.  It is also wise to create two distinct reserves due to the uncertainties of future political happenstance.
 
The only valid reason I see for not tapping into the reserves right now would be a military operation against Iran in the near term.  Although I still think you could open the reserves ... unless you are planning for a full-scale invasion or are expecting severe Iranian counterattacks against oil and shipping.

Naturally, this is only a short-term solution.  It would be wise to also have long-term solutions implemented as well.  Haha ... yeah, right.

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