Quote :

"Rat: just wait for about 15 liberals to come in here Loneshark and prove all mathematics to be incorrect and vent about how aweful it would be to do such things."

the only thing 'aweful' here is your logic.

but please do continue being LoneSnark and hooksaw's cheerleader.

its about the only thing you manage to do consistently.





[Edited on May 23, 2008 at 8:44 PM. Reason : ]

5/23/2008 8:43:13 PM

bttt by request

10/6/2008 4:18:25 PM

Quote :

"Just adding a million barrels a day to current production is the difference between $150 oil and $50 oil. And at a million barrels a day, 10 billion will last for 27 years. "

I am with you more than I am disputing you, but if price dropped to $50/barrel, consumption would not remain constant, and we'd be looking at less than 27 years.

10/6/2008 4:20:35 PM

So, lafta. thought I would call you out on this. Since you felt that making an argument based on oil pricing was sufficient to prove peak oil theories correct, I'd be interested in how you support that as oil continues to plummet. I am too smart to try to make an argument for or against peak oil based on prices alone, but that doesnt appear to be a problem for you. I didnt see your thread in time to reply, but I wonder how your bull shit theories are holding up right now if you are trying to prop peak oil to current pricing?

My points are holding up really well...

We've seen significant reductions in miles driven and oil used for transportation in a very short period of time (2-3% YOY).

People arent buying gas guzzlers anymore. This will amount to a significant MPG increase within 5 years. Auto manufacturers are obviously scrapping their truck plants to build more efficient cars. Just ask GM and Ford how well their trucks have been selling.

I never said our market wasnt tight. It certainly is. But its not peak oil at work. Our inventories, while being low, are all about the storm, and market imbalances (crack spread on finished products), not peak oil.


[Edited on October 6, 2008 at 4:27 PM. Reason : .]

10/6/2008 4:22:38 PM

^^ OMG DOUBLE POST!!! BAN!!! SUSPEND!!! TERMINATE!!!

[Edited on October 6, 2008 at 6:17 PM. Reason : that's gunzz who has a boner about that. i don't give a shit, at least within reason.]

[Edited on October 6, 2008 at 6:17 PM. Reason : -duke]

10/6/2008 5:33:38 PM

No reply, lafta, or are you graciously bowing out of the peal oil debate?

10/8/2008 11:04:26 AM

haha, price increases were only a symptom of peak oil, and the price decline is a result of economic pressures from price increases and housing crisis
but demand in the long run will continue to rise globally therefore the problem will grow as will prices

the fact is peak production is there based on the analysis of data that is available.
if you want to say you want somone to measure all the oil in the world directly before you're satisfied that we've hit peak then the only proof you'll ever have is when the tap runs dry
if you want a prudent prediction of our current state then look at the obvious and realize we have arrived or are near peak production

10/8/2008 2:02:04 PM

Quote :

"the fact is peak production is there based on the analysis of data that is available."

This is not a fact, and it should be obvious just based on the structure of the sentence.

10/8/2008 3:31:24 PM

Lafta, I laugh at you, not with you...

Quote :

"haha, price increases were only a symptom of peak oil, and the price decline is a result of economic pressures from price increases and housing crisis but demand in the long run will continue to rise globally therefore the problem will grow as will prices"

I'd like you to step back for a second, take your head out of your ass, and try to figure out the garbage that just came out of your month. first of all, production of oil products is at an ALL TIME HIGH (based on the numbers I pulled up from August). We havent declined this year. even if oil production were to have declined this year, then you still couldnt call peak, because it would have to be a trend over several years, and be caused by physical constraints, and not economic constraints (to meet the definition of a physical peak in oil production). In fact, your peak oilers didnt think that OPEC had any real spare capacity, and they were full of it. Well, its pretty obvious they were able to increase production by something like 1.5 mbpd. But, I guess you guys can ignore that, and continue to spout "But they're all liars!" You peak oilers keep getting it wrong, and I'm tired of you.

Prices spiking DO indicate an acceleration of of the increases to global demand consumption of crude outpacing the ability of producers to meet demand, thus creating a tight market, but this current situation has NOTHING to do with peak oil. For you to think otherwise just makes you look foolish.

Quote :

"the fact is peak production is there based on the analysis of data that is available. if you want to say you want somone to measure all the oil in the world directly before you're satisfied that we've hit peak then the only proof you'll ever have is when the tap runs dry if you want a prudent prediction of our current state then look at the obvious and realize we have arrived or are near peak production"

I dont even know where to start with this nonsensical statement. I'll see if you can even begin to reply to the other comment before I say anymore.

[Edited on October 8, 2008 at 4:10 PM. Reason : .]

10/8/2008 4:09:30 PM

It is now $2.49 a gallon in missouri
http://www.missourigasprices.com/

The cheapest here in Raleigh, without a car wash, is now $3.38 a gallon as of today
http://www.raleighgasprices.com/

10/11/2008 12:14:23 AM

Bttt

11/17/2008 11:21:12 PM

11/17/2008 11:43:39 PM

1.92 for a gallon of gas yesterday.

11/18/2008 1:05:42 AM

Did India and China and the rest of the developing world stop their demand for gas? Isn't this what they've been saying is responsible for the upward pressure on gas?

And now the price is plummeting.

I wonder if Obama has anything to do with this...

11/18/2008 1:16:37 AM

Much of the developed world has reduced their consumption from year prior levels, while China's growth has slowed. There will be about a 4 million barrel surplus of production by next year. Last time we had that excess surplus was 2000 (I think).

11/18/2008 9:02:13 AM

i guess now i can buy that hummer i've always wanted

11/18/2008 9:23:38 AM

Economic crisis tend to do this. But it is not yet clear how long this lull will last. Economic recoveries tend to have a voracious appetite for oil and if oil produces fail to use this time productively we could be right back where we were a year or so ago. That said, this question is over the possible return to $3 gas, as the highs of last month are very unlikely to return.

11/18/2008 9:24:48 AM

Can anyone post a good clean graph of crude oil price from 2000 to now that is up to date?

I was just having problems finding such a thing.

11/18/2008 11:54:39 AM

got it for 1.65 in SC

11/18/2008 12:09:54 PM

slightly dated....

http://futures.tradingcharts.com/charts/COM.GIF

The market has been too crazy to know for sure where oil prices can go. I think the current situation can be described the following way:
Oil prices were pushed to record heights based on a very tight supply/demand market, lots of speculative funding, a falling U.S. dollar, and fears of peak oil.
Oil prices have dropped because of a very loose supply/demand market, much less speculative funding, a strengthening U.S. dollar, and lessening fears of impending peak oil.

I do not see the oil market becoming 'geologically' tight in the next 2 years. There has been too much demand destruction, and it could get even worse than where it is right now. That is a big downer on the price of oil. I U.S. dollar maintaining it value as the rest of the world's economic reovery will lag the U.S.. There has been a large loss in wealth due to the economic collapse, so less money will be available to fuel the speculative market in the next 2 years. Peak oil influence is unknown.

so I think the next 2 years, the time it will probably take to get through the recession, and on the path to solid recovery, will have much better oil pricing. I do expect oil to go lower from where it is now, but also expect a gain in the summer, although not topping $100.

[Edited on November 18, 2008 at 12:27 PM. Reason : .]

11/18/2008 12:26:58 PM

As illustrative as it's going to get probably...



Notes:
1. The current lull in oil prices is not just a dip as the graph goes up, but a full crash - prices have fell to the level (below actually, and even further if you're not denominating in USD) it was at the beginning of 2007. This is a reversal of the trend, not just a part of a cycle.
2. The actual output of oil was changed very little through these price changes.
3. The storage capacity of the oil infrastructure is about 3 months of usage. You can only have an artificial rally for that long, then supply and demand take over the wheel. Speculation is nothing more than predicting supply and demand.

I would claim that point 2 indicates that it is production that is fairly inelastic. Demand may have more elasticity - when we saw the huge rally this last summer production was basically maxed out and constant. Who knows what demand wanted it to be, but I believe that it was, in fact, demand that was setting the price.

You can not say with any good confidence that oil will not rise above $100 / barrel in the 2009 summer. Simply, no one knows. If you wanted to buy oil futures, now would be a good time, but the price could also go lower. Markets are smarter than many give them credit for.

I could easily see this being an over correction, meaning that it must again rally higher than ever before. I could see $300 / barrel oil in the next year. btw, if you think the economic situation now is bad, it won't even compare to that scenario.

11/18/2008 6:11:58 PM

One concept that I have been thinking about is that if both supply and demand are relatively inelastic in the short run the speculative bubbles in futures become much more possible.

In short this is because the need shortage or surplus to produce rapidly rising or falling price is fairly small. There is some degree of speculation that occurs throughout the storage process. Fear of higher oil prices should lead to a small degree of hoarding along the supply chain.

If that is enough to capture the shortage implicit in the fundamentals then rising prices could form their own support, for a time. As inventories became maxed out the spot price would begin to fall, leading to a decline in prices and a decrease inventory demand leading to even faster falling prices.

11/18/2008 6:30:39 PM

"I could easily see this being an over correction, meaning that it must again rally higher than ever before. I could see $300 / barrel oil in the next year. btw, if you think the economic situation now is bad, it won't even compare to that scenario."

Sorry, but short of ABOVE GROUND problems, there is no way oil gets anywhere near $300 next year, and I'm not even sure it will get very far over $100. Its probably more likely that oil remains, on average, well below $100 for the next year. There is nothing, short of a nuclear attack on Saudi facilities, or OPEC deciding to reduce their production by 5+ million BDP that would get that price.

Even in a constrained market, $150 was the catalyst to kill the world economy. Demand destruction would accelerate in unimagineable ways past $150 so that we'd likely not even see $200 before spare capacity brought prices in check.

And the way I have seen oil for the longest time is the following:
Oil consumption is elastic, but there is a time component to the elasticity... We cant get off oil today even if we wanted to, but we can reduce consumption to essentials immediately, and buy alternatives in our next cycle, but that next cycle takes time.

11/19/2008 9:29:24 AM

Quote :

"Sorry, but short of ABOVE GROUND problems, there is no way oil gets anywhere near $300 next year, and I'm not even sure it will get very far over $100. Its probably more likely that oil remains, on average, well below $100 for the next year. There is nothing, short of a nuclear attack on Saudi facilities, or OPEC deciding to reduce their production by 5+ million BDP that would get that price."

Exactly, so WHY would you discount those above ground factors? Why did it get up to near $150 in the first place? IT DOESN'T TAKE A NUCLEAR STRIKE! Believe it or not, we have a continuing supply/demand mismatch into the coming years, and the current recession is making that worse as investment into new infrastructure is drying up.

Quote :

"Even in a constrained market, $150 was the catalyst to kill the world economy. Demand destruction would accelerate in unimagineable ways past $150 so that we'd likely not even see $200 before spare capacity brought prices in check."

Sheah, and at $55 we'll see plenty of supply destruction too. If I owned an oil rig right now and didn't need the income, I would be sitting on my butt not producing regardless of my production costs. There's only so much oil in there, and it will most likely be more expensive later versus now.

If you want to talk about demand destruction over time, you are completely right... here is a good summary post of such things:

http://www.theoildrum.com/node/4411



I think this is a very appropriate illustration to what you're talking about, where the demand decreases over time for a certain price increase. But the argument continues from there...

to say that things become more 'brittle' after that. People adapt to more expensive oil after a few months, but the next time prices spike, there is less than they can cut out than before. This makes it more likely than before that those pesky above ground factors could rally oil up to previously unseen levels.

Do I think it will shoot up to crazy levels and beyond? No, but the rally usually happens in the summer and 2009 will be an interesting test. There is certainly a credible possibility that we will soon see $300 / barrel oil. It's unlikely, that's all. If it did happen, it would be devastating. That is certain.

[Edited on November 19, 2008 at 11:46 AM. Reason : ]

11/19/2008 11:31:39 AM

Quote :

"Exactly, so WHY would you discount those above ground factors? Why did it get up to near $150 in the first place? IT DOESN'T TAKE A NUCLEAR STRIKE! Believe it or not, we have a continuing supply/demand mismatch into the coming years, and the current recession is making that worse as investment into new infrastructure is drying up."

Below ground issues were the cataylst for the surge. it was not above ground. The sypply side was constrained (below ground). You could make an argument that underinvestment was an above ground issue that caused the below ground issue, but oil had been very very cheap for too long, and we were living off of crude gains in Russia that were cheap.

Your comment was that we could see $300 per barrel oil next summer. That was the context of my rebuttle, and there is next to nothing in the current situation other than an VERY LARGE ABOVE GROUND CATALYST that would bring $300 a barrel oil this summer. Since we will be pushing over 4 million barrels a day in excess capacity, where do you think this price surge will come from?

Quote :

"Sheah, and at $55 we'll see plenty of supply destruction too. If I owned an oil rig right now and didn't need the income, I would be sitting on my butt not producing regardless of my production costs. There's only so much oil in there, and it will most likely be more expensive later versus now."

You need to understand the cycle. It starts like this:
1) Initial demand exceeds capacity
2) Prices are high
3) investors enter the market and build excess capacity
4) available capacity exceeds demand
5) prices fall
6) available capacity meets or falls short of demand
7) prices rise
8) Repeat starting at #3

The problem with this last market rise was that it happened too quickly and went too far. Investors thought that everyone would continue to use the same amount of oil as always, and did not think oil could fall. It can and did. So, instead of a nice climb, that would encourage growth, people got greedy and created a boom/crash. The investments that were out there and sustainable at $80+ a barrel will still be there when we really need them.

Quote :

"to say that things become more 'brittle' after that. People adapt to more expensive oil after a few months, but the next time prices spike, there is less than they can cut out than before. This makes it more likely than before that those pesky above ground factors could rally oil up to previously unseen levels."

I couldnt disagree more. Demand destruction will accerlerate the longer oil prices stay high. The demand destruction we have witnessed in the last year is short term demand destruction. Coming most with our travel behaviors, but not the underlying technology. The real demand destruction occurs when people begin to make their next automobile choice, or factories overseas decide to use coal instead of oil to power their factories. Those type of capital investments do not occur at the drop of a hat, or for an immediate impact, but happen during a 3-6 year period. We will not truly understand the demand destruction of the past peak for another 3-5 years in the U.S. as people drive smaller more efficient vehicles. Now that the bigs have shuttered the SUV plants, small cars are locked in for another cycle or two.

Quote :

"Do I think it will shoot up to crazy levels and beyond? No, but the rally usually happens in the summer and 2009 will be an interesting test. There is certainly a credible possibility that we will soon see $300 / barrel oil. It's unlikely, that's all. If it did happen, it would be devastating. That is certain."

The Summer spike we have seen for the past few years has been within context of a bull oil rally. We are now in a bear cycle, and although I expect oil to go up this summer, I dont expect anything overly dramatic compared to the last 2 summers in particular. $300 oil is nearly impossible for this summer.

I like to throw this graph in to show you what can happen to demand destruction when prices go to where they did this past summer...



[Edited on November 19, 2008 at 1:35 PM. Reason : .]

11/19/2008 1:20:56 PM

i dont have time to type now, i just wanted to say that once again i've been proven right, good day

11/19/2008 1:46:11 PM

No you havent. You have, however, been proven lame.

[Edited on November 19, 2008 at 2:00 PM. Reason : .]

11/19/2008 1:59:55 PM

Quote :

"I couldnt disagree more. Demand destruction will accerlerate the longer oil prices stay high. The demand destruction we have witnessed in the last year is short term demand destruction. Coming most with our travel behaviors, but not the underlying technology. The real demand destruction occurs when people begin to make their next automobile choice, or factories overseas decide to use coal instead of oil to power their factories. Those type of capital investments do not occur at the drop of a hat, or for an immediate impact, but happen during a 3-6 year period. We will not truly understand the demand destruction of the past peak for another 3-5 years in the U.S. as people drive smaller more efficient vehicles. Now that the bigs have shuttered the SUV plants, small cars are locked in for another cycle or two."

Likewise, I couldn't disagree with you more. I'll post a quote from the link I just posted...

Quote :

"I've seen a number of comments, both at TheOilDrum and elsewhere, suggesting that the US is now less susceptible to supply disruptions because we have reduced our demand for oil by several hundred thousand barrels per day over the past year. In general, I get the sense that people think we can insulate ourselves from supply disruptions, from our dependence on potentially unreliable foreign sources of oil, by improving our efficiency and eliminating "unnecessary" oil consumption. In my opinion, this is backward. In this post, I will argue that, because the demand that is destroyed first in a free market is the demand that is easiest to eliminate, the resulting consumptive system is more inelastic, more brittle, and more susceptible to systemic shock from supply disruption. I will approach this argument by outlining what makes a system either resilient or brittle and why market-driven demand destruction creates a more brittle system. I will conclude with a few thoughts on how we can increase the resiliency of our energy-driven economy in a future environment of declining energy supplies."

Think about what you're saying:
"Demand destruction will accerlerate the longer oil prices stay high."

This does not make sense. You have some half-life of consumer reaction to a price change, and then on the large scale, some more complicated demand function over time. Following a price increase...

Demand has a negative slope over time.
Demand has a positive 2nd derivative over time.

Your statement sounds like it's claiming that said demand curve would curve down - have a negative 2nd derivative. It will most certainly not. People are making decisions about what cars to buy now just as they will be in a few years. We are still a country powered (transportation-wise) by oil. That being the case, demand destruction does not come from nowhere, there MUST be economic pain accompanying it.

Quote :

"Below ground issues were the cataylst for the surge. it was not above ground. The sypply side was constrained (below ground). You could make an argument that underinvestment was an above ground issue that caused the below ground issue, but oil had been very very cheap for too long, and we were living off of crude gains in Russia that were cheap."

No economist knows precisely what caused the last oil rally, and you certainly don't either. You can't just pass off above-ground factors and speculation as not playing a role.

11/19/2008 2:20:01 PM

Let me clarify my statement above and see if it makes more sense.

I believe that the demand for oil is elastic, and that ultimately consumption will some-what follow a traditional supply/demand graph, but that all of those changes will not be seen immediately. There is a third dimension to the supply/demand graph for oil, and that is time.

Demand destruction CAN accelerate with constant high prices if consumers feels as though it is going to get worse or stay at those levels. There is a psycological component to demand that you dont see on a chart. Trading out of vehicles is not a small issue. Many people hold on to their SUV's hoping prices will come down and will ultimately dodge efficiency gains in the initial shock, but will give up those vehicles if the prices stay high for too long, or if they fear that long term pricing will make them vulnerable.

another way to look at it: If the price of gas goes to $5 tomorrow because a pipeline is down, but we know it will come back to $2 within a month, its unlikely we'll be making any drastic changes to our demand. However, if we know that the $5 isnt going away any time soon, then we'll probably start making long term adjustments immediately. That isnt explained with a simple demand supply curve or elasticity chart.

Quote :

"No economist knows precisely what caused the last oil rally, and you certainly don't either. You can't just pass off above-ground factors and speculation as not playing a role."

They dont know because there is never one thing, but one of the main components, if not THE component, was an undersupplied market with reductions in world wide inventory levels, and the realization that the world was going to be in a supply crunch with China's continued growth. Its not rocket science. And once you get traders thinking there are going to be shortages in a commodity, then its off to the races, and fundamentals are out the window.

Quote :

""I've seen a number of comments, both at TheOilDrum and elsewhere, suggesting that the US is now less susceptible to supply disruptions because we have reduced our demand for oil by several hundred thousand barrels per day over the past year. In general, I get the sense that people think we can insulate ourselves from supply disruptions, from our dependence on potentially unreliable foreign sources of oil, by improving our efficiency and eliminating "unnecessary" oil consumption. In my opinion, this is backward. In this post, I will argue that, because the demand that is destroyed first in a free market is the demand that is easiest to eliminate, the resulting consumptive system is more inelastic, more brittle, and more susceptible to systemic shock from supply disruption. I will approach this argument by outlining what makes a system either resilient or brittle and why market-driven demand destruction creates a more brittle system. I will conclude with a few thoughts on how we can increase the resiliency of our energy-driven economy in a future environment of declining energy supplies.""

First of all, I hate theoildrum, and most who post there. Of course, there is only so much blood you can get from an onion. With all the conservation efforts that have gone on, there is no doubt that a lot of the reduction in our short term use has already happened, and our ability to reduce IN THE SHORT TERM a lot more from where we are gets more painful. However, the threats we dealt with in the past year that DID dictate price increases into the market place have been mitigated by consumption reduction. For example, If Nigeria goes off-line, there is plenty of spare capacity in the market to supply users. Now, if the intent of the suppliers is to screw the U.S., they could do that with or without consumption reduction. We are no more or no less exposed now than we were before to that type of manipulation. its a bogus argument.

How are we any more brittle if we consume 85 MBpd now, and the market place decides to cut supply to 80 MBpd than if we reduced from 85 to 83 MBpd and then the market place decides to cut to 80 MBpd? Its the same out come. We have to reduce 5 MBpd of consumption regardless.

[Edited on November 19, 2008 at 3:20 PM. Reason : .]

11/19/2008 2:57:58 PM

Quote :

"I could see $300 / barrel oil in the next year. btw, if you think the economic situation now is bad, it won't even compare to that scenario."

HAHAHAHAHAHAHAHAHAHAHHAHAHAHAHAHAHA

11/19/2008 7:28:06 PM

Yeah, I can't take that comment seriously. The only event that could cause that to happen would be an embargo by OPEC.

11/19/2008 7:29:27 PM

For the love of God, do people not learn from history?

Remind me again, how credible was $150 / barrel oil a few years ago?

11/20/2008 2:19:32 PM

http://www.nytimes.com/2008/11/21/us/politics/21dingell.html?_r=1&hp

11/20/2008 2:26:34 PM

I love log in screens...

11/20/2008 2:33:44 PM

Quote :

"Remind me again, how credible was $150 / barrel oil a few years ago?"

But there is an element of scale here. You are not saying oil will hit $300 eventually, or even in the next ten years, but this friggin' summer!

In late 2007 oil was already at $100, so $150 should have been considered within reach. Well, here we are in late 2008 and oil is below $60 and falling. A perfect storm at $100 only made it as far as $150, so try to imagine what will be required to reach $300?

I'm not saying it is impossible, just so improbable I would never mention it. Yet, you seem to think it is so likely it is worth mentioning and then defending; so, what don't the rest of us know that in a worldwide recession would drive oil to $300?

11/20/2008 2:50:22 PM

Quote :

"I could see $300 / barrel oil in the next year. btw, if you think the economic situation now is bad, it won't even compare to that scenario."

Just to highlight how absurd this statement is, lets hear from an expert:

Quote :

"Just as a booming global economy had steadily driven up commodity prices for six years, the current meltdown means the world needs less oil, and is sharply driving down prices. It is a stunning — and sudden — reversal that has taken aback many experts. Oil futures on the New York Mercantile Exchange settled at $49.62 a barrel, down 7 percent, a level last seen in May 2005. Oil futures have lost more than two-thirds of their value after settling at a peak of about $145 a barrel in July. Some analysts predict oil could fall to $30 to 40 a barrel as the world economy worsens. The pillars that had pushed up the price of oil and other commodities seem to be crumbling all at once: the American consumer is in full retreat; the Chinese economy is sputtering; financial markets are collapsing; developing countries are trimming their energy subsidies; and the dollar is strengthening. The speed of the falloff is a testimony to the world’s dire economic straits. As growth in the United States, Japan and Europe contracts, global oil demand is headed for its first annual decline in 25 years. The drop in prices could not have come soon enough for consumers. Gasoline prices are down about half since July, easing some inflationary pressures. Falling energy costs are also providing some breathing room for the economy, although they have also ignited fears of deflation — a board drop in prices across the economy. ... In the short term, exporters are feeling the sting, and some producers are becoming desperate to stop prices from falling further. The OPEC cartel, whose members draw most of their income from oil exports, has called for an emergency meeting in Cairo next week, less than a month after its members agreed to trim production. But there is not much that OPEC can do. Some analysts are betting that oil prices will fall further. Adam Sieminski, a Deutsche Bank analyst, said prices could fall as low as $30 to $35 a barrel next year. The last time oil was at that level was in December 2003. "

NYTimes.com

So just to recap: You could envision $300 a barrel next year, while many experts predict oil to drop to $30 a barrel.

Sorry, but there is just no plausible scenario where price spikes like that within a 12 month period, short of an OPEC embargo or WWIII.

You are right that many new development projects are being cancelled right now due to the price collapse and economic downturn, which will pave the way for the next price spike. But that price spike is more likely 10 years away, not 1 year.

So in summary, you are probably off by an order of magnitude in both your predictions for the price of oil next year, and the timing of the next price spike. Thats pretty impressive.

11/20/2008 3:59:34 PM

Quote :

"I'm not saying it is impossible, just so improbable"

right with you, exactly what I said.

Quote :

"I would never mention it."

huh? Really, wtf? explain this to me. Explain why this is not in the cards.

Seriously, it does not make any sense to not entertain this. absolutely none. Again, I've said it was a low probability, but you seen to indicate that you would give some kind of 0.001% probability that it would do so. That is a gross underestimation by simply the history of prices.

Ignore every known factor that moves the price of oil. Pretend that you don't understand anything about the pricing mechanisms (in truth, not far from the truth for all of us). Look at the graph of the price of oil. It just dropped 3 fold in price. How crazy is it to think that it could increase 6 fold in price in the near future?

That shit's not crazy talk.

11/20/2008 4:02:41 PM

Quote :

"How crazy is it to think that it could increase 6 fold in price in the near future?"

Extremely crazy in light of the global economic downturn that will likely last throughout 2009.

11/20/2008 4:07:34 PM

^

11/20/2008 4:27:23 PM

^^so I'm guessing that you're putting all your investments into oil? I mean, you could get rich pretty quick with your line of thinking.

11/20/2008 4:28:46 PM

^ Only if you do your carrots right and completely ignore what I just said.

There are multiple possibilities for the future, all of them having certain likelihoods as assessed by the observer. I know this might be a hard concept for your small mind, but this is one way of modeling decision making. If I believe there is a 1 or 2% chance that oil will go to $300 / barrel in the near future, this does not translate into profitable knowledge.

I'll stop here because it's apparent that you're going to have trouble with this concept.

11/20/2008 8:35:44 PM

Please, just stop kidding yourself. Its not going up to $300/barrel anytime soon. What is wrong inside your head? Oh and my bad on the "investment" line, since you're only giving it a 1-2%, excuse me for not paying attention to your dripping with lunacy comments.

11/20/2008 11:45:30 PM

Quote :

"Its not going up to $300/barrel anytime soon."

This does not even form a coherent response to what I was saying. It would make sense for you to say "There is not any credible possibility of it going to $300/barrel anytime soon," in which case I would disagree with you.

You don't know the future. I've done nothing more than assign less certainty to where we think the price of oil is going. Step back a little bit and consider that this might just make sense to do - after we've just entered some of the most volatile economic conditions in history.

11/21/2008 7:31:25 AM

11/23/2008 12:17:36 PM

Quote :

"You are right that many new development projects are being cancelled right now due to the price collapse and economic downturn, which will pave the way for the next price spike. But that price spike is more likely 10 years away, not 1 year. "

How do you figure?

The price (of gas) quadrupled from 2000 to 2008, and in the past year, it has dropped by half (or 1/3rd the price in barrels of oil). It is more than feasible that the price can spike again within 2-5 years.

11/23/2008 8:46:39 PM

^^ not sure if you think that graph says something by itself, but it certainly doesnt help make any of your points.

I definitely think prices will spike again, and they'll spike before 10 years, but they wont spike this summer. That was my contention. I still think $300 oil this summer is Matt Simmon's best wet dream, and it simply wont happen. I'll wager 10/1 on it up to a $50 bet (because I'd have to pay out $500).

[Edited on November 24, 2008 at 8:58 AM. Reason : .]

11/24/2008 8:56:04 AM

Quote :

"I'll wager 10/1 on it up to a $50 bet (because I'd have to pay out $500)."

So, you're giving it a higher likelihood in your mind than what I did. I can't believe people are trying to call the concept anything close to 'crazy'.

And if you don't mind me pointing more stuff that isn't 100% related...

http://online.barrons.com/article/SB122731156668449361.html



We are officially experiencing THE most volatility in the history of the market, as we pass what the great depression's record.

If you actually wanted to make the bet you're talking about, then you can go write a call for Exxon, Jan 2010 at a strike price of say, 140 going for $1.00 right now

http://community.investopedia.com/stocks/XOM/options?month=1&year=2010&view=1

I would say that Exxon would be worth about that much in a world where oil is $300 per barrel. This is still apples-and-oranges comparing to my assertion of 1-2% probability, but really... it looks like the market sees similar probabilities of this happening as I do.

11/24/2008 9:50:43 AM

Quote :

"So, you're giving it a higher likelihood in your mind than what I did. I can't believe people are trying to call the concept anything close to 'crazy'."

The only reason I wont go much higher is for something unforseen, such as an oil embargo, or strike against the Saudi nation. At least I'll put some money where my mouth is. And my comments, once again, for the hard of hearing (and apparently learning), were pertaining to the next year (2009).

First of all, you need to define what you are trying to say with the VIX. Are you saying that were are probably near a bottom? because thats what the VIX is good for. I would agree we are near a bottom. According to my data, the VIX reached 150 in Oct of 87. So what exactly are you trying to say with the posting of this graph?

Keep posting graphs and not connecting them to the current discussion.... Makes your argument so much better. Then again, the people at theoildrum love their graphs. My favorite thing about oildrummers is their ability to post a graph that models the current situation, then showing a huge drop-off. When the drop-off fails to happen, and the production curve doesnt fit the model, they redefine their paramters so the model fits what actually happened (ie not what they predicted), generate a new graph, then they all orgasm to the new graph that shows peak oil doom.

[Edited on November 24, 2008 at 12:33 PM. Reason : .]

11/24/2008 12:17:33 PM

Quote :

"First of all, you need to define what you are trying to say with the VIX. Are you saying that were are probably near a bottom? because thats what the VIX is good for. I would agree we are near a bottom. According to my data, the VIX reached 150 in Oct of 87. So what exactly are you trying to say with the posting of this graph?"

Returning to my previous link...

Quote :

"Goldman Sachs derivatives strategists told clients on Friday that Standard & Poor's 500 three-month realized volatility is now 66%, surpassing levels of the 1987 crash and the economic malaise of the 1930s. Volatility now rests within striking distance of a moment in stock-market history that has defined financial crisis for almost 100 years."

There have been blips where the VIX went higher, currently we have sustained volatility (arguably the greatest in history) - more relevant to the discussion of where oil will go in the next year or so. No one's claiming it'll hit those extremes in the next week.

The volatility of the world's markets impart a severe uncertainty on the price of oil. This means that the extremes are more likely than ever.

A 1 to 100 odds bet that the oil will rise above $ 300 / barrel in the time frame of 2009 is, as a very rough appraisal, in line with what the market thinks is reasonable at the present moment. Not 1 to 10.

The fact that you use the word oildrummers shows that you can't look at this objectively. It's winners and losers to you. The attitude there is not to precisely predict the future, and if you though so, you're blind to what they're saying. They do some service to the general knowledge base, and I'm a particular fan of their oil megaprojects information gathering, which is neither doomist or comforting. If someone points out that oil well depletion rates make a big difference in the future of our world, and leaves the idea of what that value is open, then while discomforting, it's not arguing a preconceived conclusion. In truth, we don't know how screwed we are. That's what I got from reading their stuff.

11/24/2008 7:16:48 PM

Quote :

" "A 1 to 100 odds bet that the oil will rise above $ 300 / barrel in the time frame of 2009 is, as a very rough appraisal, in line with what the market thinks is reasonable at the present moment. Not 1 to 10. The fact that you use the word oildrummers shows that you can't look at this objectively. It's winners and losers to you. The attitude there is not to precisely predict the future, and if you though so, you're blind to what they're saying. They do some service to the general knowledge base, and I'm a particular fan of their oil megaprojects information gathering, which is neither doomist or comforting. If someone points out that oil well depletion rates make a big difference in the future of our world, and leaves the idea of what that value is open, then while discomforting, it's not arguing a preconceived conclusion. In truth, we don't know how screwed we are. That's what I got from reading their stuff." "

I look at it pretty objectively. I have listened to the argument, in person, with Matt Simmons. I have heard his counterparts also argue. And I have seen the flagrant abuse of statistical data, the absolute refusal to see anything other than the worst of all possible outcomes from the peakers, and I find it disgusting. I do give the peakers credit for helping people realize the resource is finite, but I also give them part credit for this run up in oil prices which has helped to screw the world economy and delay legitimate production projects.

11/25/2008 8:48:28 AM