Thursday, December 2, 2010

My 1030th post.

I like to celebrate odd (or in this case, even) numbers. This is my 1,030th post!  What's so special about 1,000, anyway? (This site averages 7,500 to 9,000 unique visits per month, and unlike many of the other peak oil sites most of the commenter here actually make sense.)  And what is so special about $100 Oil?  I think the important number for Oil in American $$ is 88.  Yep, $88 per barrel on the front end is my magic number. And we hit it again today ($87.99 for you sticklers), for the second time in a couple of weeks.

At $88 per barrel, Oil crosses the imaginary line where it begins to grind on the American economy... not a hard, decisive grind the way $120 does it... just the withering, torturing kind of grind. Can Oil make it to $120 in 2011? I think so, though I doubt it will average that high... to do so would mean that imports really, really imploded.

I think Nat Gas is the more interesting of the 2... there is this common wisdom that the U.S. has entered into a permanent glut.  I doubt this very, very much.  I also doubt that prices will remain at $4.2 or so for 2011, given the Fed's propensity for stimulus and the BTU comparison with Oil.  Nat Gas at $6 - $8 and Oil over $100 are very possible... and while Nat Gas is almost entirely produced domestically, all of the money the Fed stimulated in this round will leave our shores within 18 months via paying for imported $100 Oil... and $8 Nat Gas would be a nice near double from here... (disclosure: I am long Nat Gas futures contracts... and no, this is NOT a recommendation... Nat Gas isn't known as the "widow maker" and the "career killer" without good reason).

This could get really, really interesting politically. What if Peak Oil Imports does not wait until the 2012 elections to make its presence known?  Goldman Sachs says OPEC exhausts spare capacity by 2013... Greg Jeffers says they exhausted spare capacity in 2010... that's why the price is $88.  Waiting for $147-Oil to confirm this is kind of defeating the purpose, me thinks.

Oil has been in a "melt-up" for the past coupe of days... if this is the real thing, Oil will break $90 almost immediately, in a matter of days (if not, Oil will correct almost immediately, too)... if so, look for triple digits... Simple. Like. That.  If you don't know how to sell if it goes against you, don't go long.

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My hat goes off to the Federal Reserve Bank.  While we cannot know the propriety of their actions, there is NO DOUBT that they succeeded in driving up the price of assets, particularly the U.S. stock market.  Whether they can hold it is irrelevant... they have bailed out the establishment, kept society's classes static, and all is right with the world... I only wish I had participated more in the market's gains... unfortunately, on balance energy has lagged badly... may the worm turn.

8 comments:

bureaucrat said...

Congrats on all your
1000thwhatever posting and the information you convey to the "viewership of the willing." Keep it up.

The wonderful bounty that is natural gas is heavily questioned by Art Berman, who has gone to great pains to show that these new "vertical fracking" gas wells are being grossly overstated in terms of their profitability. It is the wild, wild west in the natural gas industry right now, and it may come to a quick end very soon.

Greg T. Jeffers said...

I think it is beyond the profitability issue... the projected production has not come out as promised... the vast majority of our gas comes from conventional sources... the change in price will be rather stark when it comes... I hope...

westexas said...

The year over year increase in annual oil prices, from 2009 to 2010, is going to be in the same range as the average rate of increase from 1998 to 2008 (about 20%/year). And the average annual oil price in 2010 is going to be the second highest in history.

Over the 1998 to 2008 time frame, we saw an interesting progression in three separate year over year price declines--from $14 in 1998, to $26 in 2001, to $62 in 2009 (each successive decline was about twice the level of the prior decline). If these patterns hold going forward, I suspect that we are back to an average rate of increase in annual oil prices of about 20% per year, with the next year over year price decline bringing us down to the $120 range.

PioneerPreppy said...

I am sure there are 100's of reasons to explain something I have observed recently but your theory also kinda fits the facts.

I watch three small energy companies who have usually less than 40% or so stakes in mostly South American fields with a few Southern US fields thrown in.

All three of them started climbing this Summer and all three had a major decrease in corporate officers insider selling at the same time.

Not much as an observation goes I know but all three doing the exact same thing like that was unusual from my 10 or so years of watching them daily. There were even a few down turns where I was convinced at least a few officers would lock in some profits and they didn't... Made me think they KNOW something we don't.

I know it's weak but my gut was telling me something was int he works.

DaShui said...

Maybe high oil prices are a result of currency debasement. When priced in gold, not so high. (But this begs the question;Why is everyone debasing their currency to get out of stagflation? Could it be that our oil slaves are now being emancipated, and our astute economists believe that the printing of money will magically bring them back to work for us?

bureaucrat said...

(Every country is printing cause every country made promises to benefit beneficiaries that it cannot provide, expect by printing money. Everyone wants benefits and no one wants to pay for them.)

Donal Lang said...

Does anyone have an analysis/graph of the oil price based on gold?

Greg T. Jeffers said...

Donal:

You are reading my mind... the Oil/Gold ratio is 16, towards the high for the past decade, but only high average for the past century... I don't read much into it as a trading indicator as it has always been very, very volatile.