The oil is running low. Many countries are fighting for it now. Having oil is a foolproof way to have an ‘interesting’ life, with long-lasting scrutiny from very powerful people.

mnky mnd

Sure enough on Asian refining and heavies, a fact that’s not captured much attention no matter the earlier announcements. Guess the story didn’t play well as it contradicted too many others.

Anon 12;43,

Enron may have gone under but the financial deregs which it helped bring about did not while other trading platforms acquired global reach.
Not all so fundamental that run from 30s to 140s.

It is interesting, for example, that Ecuador, which tends to be very close to Venezuela politically, stating yesterday that they are against production quota cuts. Given their share of net exports, that doesn’t make a lot of sense, economically-speaking, given rational actors.

I suspect that Iran and Venezuela are not especially interested in $100+/b oil either:

Iran is a net importer of food (about 75%) … this hurts. They are also an importer of gasoline, though this is set to change as new refining capacity comes online in the next few years. Venezuela’s international political strategy is based on creating allies of the “dispossessed” countries, where slightly higher food prices actually cause people to starve.

However, both countries fear foreign intervention (reasonably in Iran’s case, not so rationally in Venezuela’s) … thus rhetoric railing against the colonizing powers is politically effective at home and rattles the industrial world by helping make for a volatile price environment in oil.

Though I share Cash’s distaste for the fascistic elements of the GOP convention, I’d point out that he must make much more money than most of those people he looks down upon to be so sanguine about the price of oil. I guess if he doesn’t hurt, he doesn’t understand if someone else does. Even ironically-speaking, yearning for the enlightened despotism of the Chinese is fairly spineless.

Well said.

I fully expect oil to move higher long-term. PBR, PBD and PWND are my long positions at present.
I agree that, barring something like cheap and easy fusion, ‘demand destruction’ is really postponement and reallocation from the US to the emerging powers.

Regarding petrochemicals: if I was World Dictator, I would keep as much oil in reserve for that purpose as possible, imposing draconian taxes on fossil fuel for combustion and very generous subsidies for conservation and alternative energy. This would incidentally be the right policy vis-a-vis global warming. Being the only sensible policy, it is politically impossible, failing an enlightened World Despot to implement it.

I am informed that the Republicans (frightful, awful people with few notable exceptions) had some sort of prayer service or mating ritual at their current Bacchanalia involving the frenzied chanting of some sort of “Drill Now” mantra, no doubt followed by the ritual sacrifice of a vegetarian and a Prius. In fact, a search for “drill now” reveals some sort of Republican “Drill Now. Pay Less” advertising campaign.

Let’s hope that as China emerges as the next major power, they have a greater strategic depth of ideas to offer than “Drill Now. Pay Less”.

Toyota and Honda can’t make battery assisted cars fast enough but the US might gear up in two or three years with new plants if the taxpayer fronts the funds. If I didn’t know any better I’d say the oil and auto producers are in cahoots.

Carbon tax…..really? Get your mind out of the gutter.

In July world production of total liquids increased by 890,000 barrels per day from June according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 87.84 million b/d. Average global production in 2007 was 85.41 million b/d according to the IEA. In 2008 an average of 87.08 million b/d has been produced from January to July. The US Energy Information Administration (EIA) in their International Petroleum Monthly puts average global 2007 production at 84.44 million b/d and average production in the first five months of 2008 at 85.49 million b/d.
(Oilwatch Monthly, August 2008)

and premiums have been disappearing:

Ekofisk, a typical, nicely fungible North Sea grade was assessed at Dated Brent minus $0.10/b in Platts assessments for August 27, the lowest level since May last year. Five weeks ago the grade hit Dated Brent plus $3.65/b, an all-time high.

Some players have found themselves very long indeed. StatoilHydro, the owner of Mongstad and many cargoes of Norwegian crude that feed it, have been offering their cargoes more and more aggressively in recent days, as Statfjord crude has fallen from its record high of Dated Brent plus $4.50/b on July 1 to plus $1.15 in the most recent assessment.
(Platts, 28 August 2008)

MXQ,

Right, OPEC, as a weak cartel, has a history of quota enforcement difficulties.

These guys are the worst.

If Venezuela isn’t busy kleptocratically confiscating any and all western fdi, then they’re running a deficit that requires oil to be ~$95bbl (CR has a chart that showed the overall OPEC deficit to oil-price threshold…but i cant recall the location of the chart that broke it out, country by country).

And here’s Iran situation (via Phil Flynn):

“So even if Iran complains about wanting OPEC back to quota they have no problem trying to exceed their own. What they are really saying is that they want Saudi Arabia to cut back on production. Iran is jealous of the Saudi’s spare capacity and their power within the cartel and they would love to have them cut output while they produce more! I guess they had no idea how expensive a nuclear weapons program is. The Reuters survey indicates the Organization of the Petroleum Exporting Countries is pumping almost 800,000 barrels per day more than its target. Iran accounted for much of the increase.”

It would be interesting to see when, if oil starts falling below these deficit thresholds, the pro-cutters actually have to revert to pumping more in order to fund their profligate spending (futher reducing prices and reinforcing a negative cycle)– any hidden/potential spare capacity be darned.

Either way, even if OPEC cuts, doesn’t that put a huge damper (at least in the near-term) on the peak-oil, panic trader, as spare capacity (pent up supply) is the by-product of the cut?

So what replaces petrochemicals?