Wednesday, May 07, 2008

Putting it crudely

When up through the ground came a-bubblin' crude
Oil that is
Black gold
Texas Tea
Trouble in River City

Oops - Guambat is getting his theme music mixed up.

The Fed has saved the day, the stock markets have risen over 10% in the last few weeks, and all is again right with the world.

So let's party like it's 2001!

From MarketBeat:
Crude’s 12/31 Yearly Close

2001 .... $19.84
2002 .... $31.20
2003 .... $32.52
2004 .... $43.45
2005 .... $61.04
2006 .... $61.05
2007 .... $95.98

Goldman’s group, led by analyst Arjun Murti, says the energy crisis “may be coming to a head.” They cite the lack of supply growth outside of the Oil Production and Exploration Countries, and the struggle for OPEC nations to produce more, as part of what will continue to drive prices higher.

In April of 2005, Mr. Murti’s team said the super-spike in oil could lift prices as high as $105 a barrel, which one analyst then compared to a “Dow 20,000″ call.

This time, the target is $150 to $200 a barrel for crude oil, within the next six to 24 months.

Perhaps it's time to have another peak at Big Gav. In this post, he notes the following:
The Independent has a column from Hamish McRae, declaring "We will never have cheap oil again".

Jeff Vail has an updated post at TOD, asking "Thoughts on Demand Destruction: Where Is It?".

Net Oil Exports is a blog tracking global net oil exports - an indicator of the real world manifestation of the export land model.

The rising food prices and food vs fuel stories are still coming thick and fast, with The Australian warning of the "First signs of the coming famine".

Grist says "There isn't a food shortage, at least not yet. There is a food price crisis, which is a very different beast".

The US DOE is investing $60 million in solar thermal technology over the next 5 years. Just imagine what they could do with the $3 trillion spent on the Iraq war !


Wall Street's crude ways By David Weidner May 15, 2008
A boom in speculation and trading by investment banks and hedge funds has put our energy markets on steroids.

Contract volume in the futures markets has risen by a third in just the last year. Oil closed at a record high of $125.96 a barrel on the New York Mercantile Exchange on Friday. That's double the price two years ago, a difference clearly caused by market manipulation.

This isn't complicated finance. The way traders push up prices is surprisingly simple. They buy in European futures markets, which don't have the limits that U.S. markets do. That drives up U.S. prices where they may already have positions. It's a move to think about next time one of these exchange chiefs talks about all of the benefits of "market globalization."

None of it would matter except that these markets are supposed to be driven by supply and demand. China and other rapidly growing countries may be using more, or will use more resources, but the reality is that demand and supply haven't changed enough to warrant the price of oil doubling in less than three years.

Here's what has changed: the proliferation of energy trading desks on Wall Street and at hedge funds. There are more than 9,000 hedge funds with $1.5 trillion under management, according to the Federal Reserve. Hedge funds, which almost exclusively use short-term strategies, do nearly 55% of derivatives trading, the kind used in energy futures, according to a study last year by Greenwich Associates.

During a three-year span ending in 2006, between $100 billion and $120 billion in new speculative money entered the energy markets, according to a congressional report. Investment in commodity index funds surged more than 500% to $80 billion during the same period.


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