Tuesday, December 22, 2009

Oil Dropping to $30 a Barrel? Stranger Things . . . .

Fossil fuel prices are just about to nose dive. Massive new supplies of energy are coming on stream worldwide. Shale gas has flipped the United States from gas importer to gas surplus. Liquid natural gas (LNG) supplies from Qatar, Algeria and Russia are flooding European and Asian markets. Ethanol production in the US is outstripping demands.

Huge new oil fields in Iraq, Saudi Arabia, Brazil and Ghana will cause an intermediate-term surge in crude oil production. Iraq alone will be producing 5 million more barrels of oil per day within just five years; Brazil will become an oil exporting nation. _ Report_via_BiofuelsDigest
The price of oil can rise or fall for many reasons. The above report discusses falling oil prices based upon rising supplies. The discussion below also highlights the value of the US dollar as an important mover of oil prices.
First, we are seeing signs all over the world of a tightening in monetary policy. From Chinese real estate loan restrictions to actual rate rises in Norway and Australia, and even in the US there is now talk of reining in the stimulus as the economy recovers.
Faking growth?

Secondly, there are increasing question marks over the real strength of emerging market economies. Have they just been faking it for 2009? Stagnant petrol sales in China, for example, hardly square with the reported rip-roaring growth rates.

And certainly much of the government money pumped into China, India and Brazil has gone into inflating stock market and property bubbles of dangerous proportions. Take away the new liquidity and this will implode taking the real economy with it, ask Dubai.

Third, the US dollar appears to have bottomed out and now seems to be on an uptrend (see this article). All commodities are priced in dollars, so when the dollar strengthens then commodity prices fall.

And perhaps a fourth reason to think oil prices might be lower in 2010 is that global demand is still very weak as a result of the impact of the recession on GDP which will now take several years to recover to former levels, even assuming the recession does not turn out to be a double-dipper. _SeekingAlpha
The situation is extremely fluid, and vulnerable to any number of unanticipated events that may occur in an unstable geopolitical environment.

A lot of people stand to profit from "political peak oil" -- the artificial scarcity of fossil fuels due to the actions of political entities such as the Obama - Pelosi reich of the US. Every action the US reich has taken regarding energy has resulted in the decreased availability of fossil fuels -- particularly domestic fuels. Carbon hysteria is one of the main arms of political peak oil. The reich's EPA has acted to impose extortionate penalties on the use and development of fossil fuel resources. Obama's desperate lunge for legacy at Copenhagen reveals his grim intent to hamstring US energy resources and industrial power.

Deflation can turn to inflation of a killing kind, with just the right turns of the screw. Artificial resources scarcity -- as in political peak oil -- can play a pivotal role in a long term economic depression. That can only lead to greater global instability and bloodshed.

Only a change of government -- a return to constitutional safeguards and checks on government power -- can bring the US and the rest of the world up out of this deepening quagmire.



Anonymous Anonymous said...

The other reason for high oil prices would be to prop up anti-American dictators overseas, and therefor to support the leftist revolution around the world.

And we thought we won the Cold War.

3:58 PM  

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