ship shape and bristol fashion

Is Oil a Bubble? Part One

Here's what's going on:

1. Emerging markets have huge economic growth. Right or wrong?
Right.

2. Anyone think, that growth of that magnitude can be achieved without
substantial growth in demand for oil and other commodities?
Not really.

3. Is it true, that when there is one pie, and suddenly twice as many
people want a piece of that pie, that the price for a piece is going to
double? Yes!

4. Is it true, that every 'super giant field' (which made cheap oil possible)
on the planet is in decline?
Yes.

5. Do oil companies around the world scramble to bring new production
online? Yes, otherwise oil service companies wouldn't make as much
money as the do.

6. Is it true, that this new production is mostly absorbed by the decline
of existing production? Yes, obviously.

7. Now the important question: Is new production coming online ONLY
because of the seemingly high price of oil? Yes, definitely!

8. Is any oil company going to develop projects with per barrel costs
north of 65$, when the price of oil is 65$ or less? Hardly.

To sum up:

NEW OIL FIELDS ARE BEING DEVELOPED, BECAUSE OIL IS UP,
OIL IS NOT UP IN SPITE OF NEW PRODUCTION!

Is Oil a Bubble? Part One

one fella wrote, he does not understand why oil is going up, but it's gonna come down.

Well, how can you know that oil is gonna come down, when you don't know why it is going up?

9 out of 10 oil bears refer to wishful thinking. Nothing more.

Buy a more efficient car. Why does the average Joe here drive a V8, while average Joes in other countries drive a 1.6l 4 cylinder.

And write your Congressmen and tell them to give the enviros the finger and open up every area available for drilling.

85% of our coastline are unexplored. There could be 5 Tupis or Cariocas out there and we don't even know it!

Is Oil a Bubble? Part One

Ramrod and CLH

Since I am not a doomsday leftwinger, may be I can answer you.

The only thing You guys ever say is: 'It's a bubble' and 'This time it's different'.

You don't give any solid reasons or facts. You simply are convinced, that oil is in a bubble. You may be right or you may be wrong.

Ramrod, it is not a question of whether or not we run out of oil tomorrow. I don't think this is going to happen in my lifetime. The Question is: How much daily production can you have? And that is obviously a problem. While it is true, that new production is coming online - all that E&P money must be going somewhere, bubble proponents always, always, always forget the depletion rate of existing fields. The best example is the Cantarel field in Mexico, which is so crucial for the US, because it produced such a vast amount of light sweet crude, the stuff our refiners want so badly. PEMEXs output imploded and suddenly the Mexicans get, how hard it is to replace a million barrels.

Again, yes oil has gotten ahead of itself. Yes, if the entire world not just the US goes into a recession, the price will be cut in half. But nothing changes the fact, that the world has to get used to elevated levels, when it comes to the price of oil. Or do you seriously believe, that someone, who pays five and six hundred thousand dollars a day for an offshore rig, will sell that stuff for 15 dollars? Or that Shell will sell that oil from their oilsands project for a handout, when they have to invest 15 billion dollars for 500.000 barrels a day output.

To sum up: You guys basically pray the same thing over and over again: Oil must be in a bubble, because it is inconvenient, and anyhow, oil is a bubble.

Why don't you take a look at the inventories at Cushing, which are the bellwether for NYMEX Light sweet crude? They are down by almost a third compared to last year. Considering that the dollar doesn't buy a spring 2007 dollar, the rise in the price of NYMEX crude is justified.

There may not be a lot of demand for the sour Iranian stuff, but they are not getting 135$ dollars per barrel. But there is a lot of demand for sweet grades.

This has nothing to do with doomsday stuff. The simple fact is, that cheap oil is history. The economy will adapt, and even you guys will get used to it.

In the short run You guys may be right, but in the long run I am.

Long: RIG, SLB, HAL, OXY, APA, APC, PBR

Is Oil a Bubble? Part One

gzlatin

Congratulations! That is the best answer I heard in a ling time.

Sure, you can produce food without oil, but there will be 3 billion people less to eat it.

Is Oil a Bubble? Part One

ZMaNFaRLee

Why is that, Sir?

Is Oil a Bubble? Part One

fxtrader07

Do you even realize, that without oil, there is no grain production. And if there was grain production, you couldn't transport it to consumers.

10 calories of oil equivalent are spent to bring 1 calorie of food from the field to your table.

Oil makes the price of everything.

And if there is anyone badly capitalized, than it is us.

Is Oil a Bubble? Part One

By the way, the 'oil is bubble' - discussion is in a bubble itself. I have never in my life, seen and heard so many people call a bubble, than in this particular instance.

Being a contrarian, I will wait for a pullback to take out my stop-loss limits and get back in, when oil bottoms between 95$ and 105$.

Is Oil a Bubble? Part One

Yes, oil has got ahead of itself. This weeks capitulation of the oil bears shows it and it will correct. But to call a similar crash like the tech bubble is ridiculous.

It is complete nonsense, to compare wheat to oil. The supply picture for wheat changes every year, oil's doesn't.

And please: To say that AMRs move will cause the oil crash is a bit daring, wouldn't you say? Airlines have been managed incompetently and restrained by unions when oil was 10 bucks and they went broke at 10 bucks a barrel.

The same goes for Ford. A bureaucratic union restraint organization which will hopefully go bankrupt soon along with GM. Why does every carmaker in the world from Mercedes over BMW and Volkswagen to Toyota and so on want to produce cars in the United Sates? Because it pays! Ford and GM simply suck!

Established demand destruction doesn't apply today, because unlike in previous decades the world is out of capacity and the 400.000 barrels we use less are getting sucked up easily from others. May be when the emerging markets stop emerging and go as developed we can calculate as we used to.

As I recall, in January a lot of people called an end to the commodities boom when the Baltic Dry came down rather swiftly. Hoopla, it is at a new high, economies around the world report high growth rates, most of the times against expectations.

May be it is because there are folks out there, who unlike us, don't have to beg for credit so they can buy stuff. They have the money we shipped overseas in exchange for goods, because we are to inefficient to produce these goods ourselves.

So what are we doing: We complain and look for witches we can burn at the stake. Great that always helped - for centuries.

Instead we should buy more efficient cars, trucks and aircraft and we should kick some serious Washington butt until they open up every area for drilling, so may be we get some more oil of our own in 10 or 15 years.

May be our leadership should stop begging the Saudis for more oil. What a humiliation. We saved their butt more than once and know we beg on our knees: Please, please great king. Give us a little bit of oil! Because they worry about what the sight of an oil rig would do to the coastlines at home.

That is why we are loosing. We complain and drown ourselves in selfpity, while others do stuff.

Brazil can do it, we can do it. I think we have more coastal waters than Brazil.