maximax

Oil in Decline: The Tax That Proves a Point

I stopped reading this article after the 'credit crisis=exogenous event' statement. Of all events affecting the US economy, the credit crisis is the least exogenous. To rebrand the oil price as a tax is just wrong - as if Americans owned Middle Eastern/Venezuelan etc oil and the costs of finding it, getting it out of the ground, shipping and refining it wouldn' exist. And only a tiny marginal fraction of oil revenues finances terrorism. And terrorism also flourished in years of low oil prices. And spending whatever that oil tax is supposed to be on infrastructure and education is not necessarily more beneficial than investing the dosh abroad, especially as US growth has lagged other regions during the recent years. But reducing US oil consumption would certainly be applauded by the rest of the world, so feel free to go ahead on that point, for whatever reason. This author clearly has an agenda which he tries to wrap in a fake analysis. What I would like to read her are genuinely analytic&unbiased articles.

Is the Oil and Energy Bubble About to Burst?

Not so sure what difference that miniscule increase in the gasoline retail price really makes. In Beijing a litre of gasoline is RMB5.34. Small Chinese refiners would still make a loss so they probably won't resume production. The large state owned ones have to produce anyway but they will still prefer to export their output to the world markets instead of selling at huge losses in the domestic market while begging the government to send in a massive check to restore their balance sheets. The government would have to prevent Sinopec et al to export refined products and set refining targets, but Sinopec et al are increasingly independent. At the same time the government is heavily concerned about inflation as China has a history of civil unrest sparked by inflation, and the Olympics are near... Myanmar's unrests were triggered by fuel price hikes, so hell would freeze over and Bush would go green before the Chinese government ever allowed refined products retail prices that could yield profits to domestic refiners. Was the latest price increase really to curb consumption? The government's main priority is economic growth (unsurprisingly, since much of the non-state owned economy is owned by commies and their families). It was a timid attempt to alleviate fuel shortages caused by the refinery game outlined above. Looking at other commodities driven into price bonanzas by Chinese growth (eg iron ore) it seems that they will push hard to lower the price through negotiations and alliances with key suppliers, but I am not aware of serious efforts to curb consumption. Ok there are these cuts in export rebates, but they have not changed much. Also, these unrests at Chinese petrol stations seen recently are not entirely uncommon as with or without shortages there are always long queues at petrol stations at the last day before the a price increase.

The Oil Price Denomination Fallacy

It appears to me that Baker is going against blaming the falling USD for the rise in oil prices while ignoring the S-D fundamentals. He also said that if the USD was stronger, then oil prices in the US would not be that high. Is this a variant of money illusion? Anyway, you (Salmon) go on to conclude that the relative value of the USD is completely irrelevant for the oil price, right? I disagree, but your quoted "fallacy argument" is misleading as well. The Middle East earns USD for its oil, but a large chunk of its expenditures (especially refering to the ongoing construction projects) are in Euro et al. So the dominant OPEC producers have an incentive to increase the oil price, and they can hope to achieve this by producing less, at least on paper. Since the incentive exists, they will at least try. And recent history appears like they have just been doing exactly this. So there is a link between the oil price and the value of the Dollar, although it is indirect. Middle Eastern producers have recently increasingly gone into non-USD denominated oil contracts. Why would they do so if the currency denomination was really completely irrelevant?

The Oil Scam Driving Crude Over $80

Enter your comment hereMr Davis, welcome to the world of oil. May I wish you the very best of luck analysing oil data, as it is frought with inconsistencies. Here is an absolutely shocking example: OPEC consecutively announced cuts totalling 1.7 Mn b/d but never really complied with it (reductions were made, but not to the full extent). Not that anyone exactly knows how much the OPEC countries are exporting, but the common estimates (based on tanker watchers) point to consistent non-compliance. Some OPEC members more so, some less. But maybe you do not really want to base your analysis on evidence, but on a desired outcome. Wrong pitch dude, wrong pitch. People here make their living in the markets, how can you expect to find willing henchmen on this site for your political purposes?

The Oil Scam Driving Crude Over $80

Enter your comment hereMr Davis, welcome to the world of oil. May I wish you the very best of luck analysing oil data, as it is frought with inconsistencies. Here is an absolutely shocking example: OPEC consecutively announced cuts totalling 1.7 Mn b/d but never really complied with it (reductions were made, but not to the full extent). Not that anyone exactly knows how much the OPEC countries are exporting, but the common estimates (based on tanker watchers) point to consistent non-compliance. Some OPEC members more so, some less. But maybe you do not really want to base your analysis on evidence, but on a desired outcome. Wrong pitch dude, wrong pitch. People here make their living in the markets, how can you expect to find willing henchmen on this site for your political purposes?