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June 17, 2009

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Ignatz

--Aren't inflated oil prices the result of market speculation?--

Not if the speculators made contributions to the right crowd.

The Obama administration has discovered that the only speculators they are currently aware of are a small group of widows and orphans somewhere in Indiana who had attempted to prey upon the powerless UAW, tiny FIAT and the public servants at Cerberus.
Obama has liquidated them, so to speak.

MayBee

Ha!

narciso

No, Rich, the Arctic Survey is personal, just like cutting the F-15s at Elmendorf, a third of the GBI interceptors at Ft.Greeley,
etc. The Tongass forest cutoff, one or two are incidental.

Ignatz

That's my Fresno guy, clarice!
Chuck Jamgotchian. Funny, crusty old guy. Very good at what he does.

Think he still has my Yosemite ranch listed on there in case anyone is interested. ;)

Rick Ballard

"The Obama Administration likes them anyway, how else to explain his budget proposal with 9 seperate line items targeting the oil and gas industry: pulling leases, closing tax credits, eliminating funding for deep water research and the Arctic Survey (that was probably a favor to the Russians)..."

Add the coming regulation (or prohibition) of horizontal drilling techniques used to exploit this situation. The (D)irty Fascists need to maintain the illusion of scarcity coupled with Gaia "protection" in order to reward the Friends of Fascism who control the "right" kind of gas to power those generators behind the rusting windmills (next to the dilapidated solar array).

clarice

Well, ignatz--you seem to be able to hew trees and ranch--you coulda been our manager. Jefe de Ranchero as it were.

Parking Lot

((The Obama Administration likes them anyway, how else to explain his budget proposal with 9 seperate line items targeting the oil and gas industry: pulling leases, closing tax credits, eliminating funding for deep water research and the Arctic Survey (that was probably a favor to the Russians)...

I'm really not getting something here that I do want to understand. To me it seems that over-regulation of a particular industry would dampen interest in investing in it so don't understand the argument that overregulation inflates prices..

oh wait a minute ... light bulb moment ... regulation make oil more expensive to produce so price has to go up to cover expenses ... am I getting warmer?

That still doesn't explain last summer's high and then nose dive.

Parking Lot

clarice lol

hit and run

MayBee, I haven't gotten your email ... don't tease me.

Rick Ballard

"That still doesn't explain last summer's high and then nose dive."

Toss in China, Indonesia, India, Brazil, Russia and Venezuela's (not to mention the ME) stimulation of demand through subsidy, add the planned closure for maintenance of the Gahwar field, the witholding from production of oil from the Caspian fields, the delay in initial production from the deep water Carribean plays due to the rig damage occasioned by Katrina, stir slowly with ill informed speculation concerning Peak Oil (backed by Soros?) and then serve with ridiculous projections from Goldman Sachs commodity pimps.

Danube of Thought

I want MayBee's e-mail too.

Parking Lot

((The Obama administration has discovered that the only speculators they are currently aware of are a small group of widows and orphans somewhere in Indiana who had attempted to prey upon the powerless UAW))

I count myself as a 'widow and orphan' who got badly burned last year by investing hard earned and saved dollars in the stock market. I have since fired my broker, he was a total ass, and am trying to learn more about all this stuff so as to prevent a similar mistake in future. The previous guy was I guess what Rick would call a 'commodity pimp' and he was a goldbug. The present guy is neither so I think I'm in better hands now and sleeping better as we are working thru the damage done by the other guy.

Ignatz

--Add the coming regulation (or prohibition) of horizontal drilling techniques used to exploit this situation.--

Rick,

Is there really talk of regulating horizontal drilling and if so why, or are you being facetious?

--you seem to be able to hew trees and ranch--

Let's leave the cattle to Po, they give me a pain.
Speaking of hewing trees, time to go see a man about a bulldozer. Toodeloo.

MayBee

I love men.
They are such optimists when it comes to the thought of naked women.

PD

PD, I would submit he already broke his tax pledge when he signed the bill increasing cigarette taxes 62 cents per pack.

Sure, that qualifies as a broken pledge, too. He said "not a dime more" in "taxes," no qualifiers, for sub-$250K families.

Hm ... or was he using the $225 figure for that speech?

Old Lurker

"I demand proof.

OK, Hit check your email."

Hey! Share!

Old Lurker

Ignatz, Rick.

Horizontal drilling for (Barnett Shale) Natural Gas is probably safe because all lib politicians actually think gas is NOT a carbon fuel!

Biggest problem at the moment is all those reserves were discovered when gas was $8 and drilled like crazy when it was $13. Today at $4, there is quite a glut.

Which supports Rich & Rick and their theory of what drives oil prices since a BTU is a BTU so why oil doubles while gas is cut in half...raises suspicions?

Thomas Collins

See LUN for a story on the death of a pilot during a flight and a safe landing.

RichatUF

Where is Windy Pickens? Haven't seen him on GE for a while.

And a bit of brainstorming...

Herschel, and 18th century astronomer of some note, observed an inverse correlation of wheat price and sunspots to confirm his observations. Kondratiev used bond prices and ag commodities prices as the basis for his cycle economics theories (and others have piled in with a debt version, equities version, and boom-bust version of varying misanthropic degrees). It just dawned on me that Kondratiev's work would probably better explain climate and sunspots and its relation to economics than as an "end of history" economics theory given how large agriculture was in the economy of all countries up until the mid-20th century. Don't even think that comment was in english...

some researchers have done additional work on the idea...and my little bit of googling shows that some have made the connection...

RichatUF

Parking Lot-

I'm really not getting something here that I do want to understand.

I was being a bit cheeky in my previous and Rick's above gives a general overview, but I'd like to expand on it. I've got to run for a bit, but I'll be back to explain further.

Parking Lot

((I've got to run for a bit, but I'll be back to explain further.))

k I'll watch for it

Rick Ballard

"Is there really talk of regulating horizontal drilling and if so why, or are you being facetious?"

Facetious? Me?

Not this time. The war on fracking began years ago and continues today. There's a truce at the moment so I tend to agree with OL's assessment concerning "safe right now".

narciso

The Russians are building undersea installations to tap the Gas in the Barent sea, WTH are we doing.

Ignatz

Thanks for the links Rick.
Never knew thay added chemicals to the fracturing water.

Old Lurker

Regarding drilling of oil or gas (same concept)...whether vertical, slanted, or horizontal, the true stupidity of the WH policy on not drilling offshore is this:

That stuff does not respect "property lines". Oil and gas both flow through the sponge to a greater or lesser degree depending on all sorts of variables. I get approached from time to time to lease mineral rights we own in WV and KY, and we always haggle a bit with the wildcatter and then sign the lease provided the terms offered are market because if we don't agree, the driller will get one of my neighbors to agree, then the driller will suck all the gas from under my neighbor's land and then from under my rights too. That happens either because the gas finds its way through the sponge from my land to the straw he placed next door, or even because the driller slanted his straw so that the end of it was under my property and I would never know that.

Either way, my gas is gone and I won't get paid for it.

So now expand that notion to the oil & gas that are known to exist off Florida between Florida and Cuba. We, in our prissiness, decide not to extract what we can. But Castro happily signed a lease with the Chinese to drill into exactly the same pool of oil and gas.

So we get nothing. The stuff goes away anyway. It gets burned and spews whatever it will into the air whether we burn it or they do. And Castro and Chinese get the goodies - the fuel and/or hard cash...some from selling our own fuel back to us!.

Boy we are smart.

Pofarmer

I demand proof.

OK, Hit check your email.

Now I'm jealous, I think.

typepad sucks.

;;;;;;

Ol' King Sol.

Rich, there is a paper by Ruzmaikin, Feynman and Yung showing a correlation between aurorae borealis and ancient Nile River level records. The mechanism is unknown.

Pofarmer

Is there really talk of regulating horizontal drilling and if so why, or are you being facetious?

IIRC, MCcain just voted in the affirmative on a bill that vetoed directional drilling into the ANWAR reserves. Just sit off shore and directional drill, no land presence, and they won't even allow that.

WTF are these politicians thinking?

Pofarmer

There are plenty of smart people in the U.S. Unfortunately, the stupid ones seem to be in charge.

Pofarmer

Rich, there is a paper by Ruzmaikin, Feynman and Yung showing a correlation between aurorae borealis and ancient Nile River level records. The mechanism is unknown.

Correlated which way? Aurora borealis is directly related to solar activity.

Old Lurker

Speaking of correlations, Po, (hey, where's ChaCo lately, he'd like this story?) I remember like it was yesterday back in my first statistics class, circa 68-70. They latest greatest tool was access to a main frame computer via remote terminals and paper tape programs. We were learning how to type in various series of data and letting the computer do all the math to measure the degrees of correlations between and among the streams of data. It was wonderful to discover how we could predict the future of one stream by comparing it to projections of other variables.

We were so smart and saw how we could master the universe.

Until our wise old professor asked us to run our little Fortran program with a stream of S&P stock data against an unknown data stream he provided. The correlation was almost perfect and we thought we would become rich. All we needed to know was what the other data was.

We learned a life-lesson when we found the mystery data was the depth of some river in China.

Interesting. But useless.

RichatUF

Ol' Sol-

First I thought that it was a joke, then maybe a Post hoc ergo propter hoc criticism. I thought my observation between Herschel's wheat observations and Krodrateiv's bond and ag commodities prices (I think it was wheat and wool, but not exactly sure) was something new-a bit of "self-reliance" on my part, but a bit of searching has disabused me of the notion. Deflating really.

RichatUF

LUN Pofarmer for a presentation of Ol' Sol's comment.

fdcol63

Po,

I think your question is answered by the abstract of the paper at the following link:

http://journals.cambridge.org/action/displayAbstract;jsessionid=7E12A9A7A39CAFDF00138D6FF9D3E388.tomcat1?fromPage=online&aid=534492

clarice

USELESS,OL? Never say USELESS. I am positive that with a bit of fudging as to the source of the other data stream, Mr. PUK and I coulda made a poile of money with our new investment book . HRight now we'd be flying for hours and hours over Rancho SCAMOSO in Boliva, surveying our domain for a proposal to conservation groups and offset kings.

MayBee

I'm dying to know who the fake me was.

fdcol63

Rich's link is better ... it has pictures! LOL

Surely you are joking, Mr. Gore.

Ah, yes, of course OL, correlation does not prove causation, but in this matter there is much to suggest a causal relationship. Mechanism, ah, that is the Prize question. Thanks, Rich and fdcol, for the links. I believe Joan Feynman is Richard's brother.

Richard started out fixing radios in the early days.  Lots of different things went wrong with them..

er, sister to Richard. Hmmmph!

pagar

" WTH are we doing."

As I understand the Obama plan, it is designed to cut oil production and raise prices for Americans so it is easier for us to gain that fourth world country status that the American leftists seem to crave so much.

RichatUF

Parking Lot-

To explain further on the oil superspike. We talked about it quite a bit on the threads last year. A brief sketch of the substance of those discussions:

1. Modernization and expansion of the Ghawar Field (to expand the saltwater injection) in KSA. This work had been planned for a number of years (since 1998 or so) and began in 2003 and the deepest production cuts in KSA were 07 and 08. The work was completed in July August 2008, and KSA went from a 10 million bbl/ day capacity to a headline 12 million bbl/day capacity, though that capacity has never been tested. For the period of time the work was ongoing however, they lost there position as OPEC's swing producer and other countries exploited the opportunity.

2. Iran and Russia. They have exploited their positions of strength around the Caspian Sea and Central Asia to delay and prevent production from coming on line. Iran though exploiting terrorist groups to make work dangerous and Russia through the clever exploition of environmentalist regulations have been able to close off Central Asian countries oil production. Russia was able to manipulate Khazistan to force Eni to do environmental rework of some fields which closed off 1 million bbl a day. They have also worked to destabilize the BTC pipeline-through invasion (Georgia) and terrorist attacks (Turkey). Russia has also been able to use Gazprom and state police power to bully foreign countries out of their markets (which in the end creates a domestic monopoly and a decline in production as money is moved away from the oil industry and goes to subsidize political support). Iran's oil industry suffers similiar defects as a result of international sanctions and a high level of corruption. Venezuela should be included here as well as Chavez has used his state oil industry as his personal piggy bank as he has bought allies and support while he has driven his oil industry into bankruptcy and decline because they can't pay for the talent or equipment to keep their fields maintained.

3. Exaggerated demand. Countries around the world heavily subsidize oil and oil products, with it being a particuliar problem in Asia (including India). The AOGC in 2008 addressed the problem in part as countries in concert began to reduce subsidies and tariffs as the price of crude blew through $100/bbl. Also the backdrop of the subsidy story was the additional excess demand from China as they were hoarding stocks for the Bejing Games (and as an aside they were also hoarding rice-since they shut down Bejing (and factories in about a 40 mile radius) for the Games they were giving away fuel and rice to keep the population happy). Analysts were using this excess demand as a base for wildly optimist continuing demand forecasts.

4. Active measures and hot money flows. The active measures is the interplay between global warming politics which restrict energy development and pushing it into the weaker regions of the planet and the "theory" of peak oil which states that oil is running out and that the peak is either happening now or just around the corner. The hot money, which was abandoning US real estate and financials, needed to find a "safe", but high rate of return, and it flowed into the hottest markets-overseas areas that were either big exporters to the US (India and China), big energy producers (Russia), or both (Brazil). Part of the problem here is that the weak housing and banking was going to weaken the dollar and hugh moves of investment overseas would strengthen currencies abroad. This showed up, in part, as an increase in the oil price. The problem is that oil isn't bought in purchasing power parity, it is bought in dollars. And when dollar investments around the world were declining (Agency paper) and dollars were outflowing from the significant price increase in oil (impairing capital accounts of Asian exporters), the hot money flows had to stop.

Others here can probably better fill in the details and give some links, but this gets about 70% of the answer.

Rick Ballard

Rich,

I've copied that comment to a doc for future plagiarism study. It's really excellent.

A small addendum on the Soros/Peaker crap and a tie in to the GS 'anything for a buck' commodity pimping would bring it to around 90%. Some consideration must be given to the majors having participated in the Peaker scam. They certainly filled their piggy banks to the brim at the right time. It's almost as if they had economists on the payroll who were actually capable of rational thought. Selfish bastards - what about all the Credentialed Morons who have been fired since the collapse of their ABS castles in the air? Don't they deserve a shot at doing for oil what they did for housing?

Parking Lot

thanks very much Rich, I do appreciate it. (sorry I'm bringing up stuff you've already dealt with on JOM)


((The hot money, which was abandoning US real estate and financials, needed to find a "safe", but high rate of return, and it flowed into the hottest markets-overseas areas that were either big exporters to the US (India and China), big energy producers (Russia), or both (Brazil). Part of the problem here is that the weak housing and banking was going to weaken the dollar and hugh moves of investment overseas would strengthen currencies abroad. This showed up, in part, as an increase in the oil price. The problem is that oil isn't bought in purchasing power parity, it is bought in dollars. And when dollar investments around the world were declining (Agency paper) and dollars were outflowing from the significant price increase in oil (impairing capital accounts of Asian exporters), the hot money flows had to stop.))


isn't the above 'speculation'? or am I misusing the word?

the 'commodity pimps' that were handling my account at the time were livid at Bernanke and Paulson whom they believed had orchestrated the tumble.

RichatUF

Parking Lot-

As I remember the debate when "speculation" was being thrown about people were using it to mean "manipulation". The closest example in commodities was the Hunt Brothers corner of silver-an illegal act for which they were bankrupted (and one or two of the were jailed?). I'm pretty sure there was some criminal manipulation of the oil market during the run up, but since the US Congress would much rather have a 17th Century energy policy of wind and sunlight, we're going to be under constant assault from the much more significant manipulative influences of international politics and firm-states in the oil market. And since the media has fully bought into the peaker/warmer active measures (hell GE profits from it) the population will blame the "evil speculator" trading oil at NYMEX when their gas prices go up, and not where it really belongs, the "evil politicians" in Washington DC and Congress.

Parking Lot

(( the population will blame the "evil speculator" trading oil at NYMEX when their gas prices go up, and not where it really belongs, the "evil politicians" in Washington DC and Congress.
))

ok gotcha ... I didn't mean it in that sense but more like, for example, investing in a home as above all an investment, instead of as a 'home.'

For quite some time I've been very sympathetic toward the oil companies due to the unfair beating they get. By 'speculators' I meant investors who couldn't care less about oil for its own sake, but who buy oil shares today and dump them tomorrow to turn a quick profit. Maybe that is the smartest thing to do but ideally I'd like to feel some connection to companies and products I invest in.

Rick Ballard

"but ideally I'd like to feel some connection to companies and products I invest in."

I believe "traders" fits your definition better than "speculators", although that may be cutting things a bit fine. I suppose "connection" might work out if the basis was honest and clear reporting of financial results over a reasonably long (more than five years) period. If by "connection" you mean empathy for the facade generated by a companies PR staff, then I would suggest that the PR staff must be doing a good job. There's heartbreak ahead if you put up money on that basis.

I will admit that a clean, concise 10K with numerous repetitions of "exceeded expectations" can give me a warm glow regarding a company. And I'm absolutely repelled by "given the current uncertainties" or "unexpected" used in conjunction with "unforeseen".

Rick Ballard

A Primer For Our Future In Ogabonia

That one is a great example of capital seeking and finding the exit.

Parking Lot

((I suppose "connection" might work out if the basis was honest and clear reporting of financial results over a reasonably long (more than five years) period. If by "connection" you mean empathy for the facade generated by a companies PR staff, then I would suggest that the PR staff must be doing a good job. There's heartbreak ahead if you put up money on that basis.))

how about clear and honest reporting AND producing something I like or respect. for example, as a former heavy smoker, I don't wanna put money into tobacco companies no matter how much they might exceed expectations.

Parking Lot

((These controls have backfired with a vengeance -- businessmen, companies and private citizens transferred some $72.7 billion out of Venezuela over the last six years -- nearly double the outflow of the previous six years, according to the Central Bank -- distorting the economy, fueling inflation and discouraging private investment.))

I'm amazed he let them transfer their money out

Parking Lot

(( Primer For Our Future In Ogabonia))

what a freaking mess

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