As a previous poster noted, the price of oil at any moment is not the story. Supply, demand, and *production cost* are the stories.

We’ll never run out of oil.. it will just take more energy and expense to extract than it is worth.

From TOD:
9/17 OIL FIRMS PRODUCING AT A LOSS DUE TO LOW CRUDE PRICES
“For the first time in the history of the Russian oil industry, a remarkable threshold has been achieved — Russian oil producers are transferring everything they get from customers for crude oil exports to the budget,“ (Moscow Times –UBS Analyst)

Combine that with the other commodities that have risen and fallen in sync.

Now pity commodity producers, including American farmers, auto companies and airlines who made investment decisions on the assurance of a new and higher base price.

Which is not to say that a low oil price is the planet’s friend. Just that the commodities bubble appears on charts. I suppose if it were in the shape of a mushroom cloud it could be more obvious, but I’m not certain even then that the obvious would be admitted.

The fact is this this was a bubble caused by chasing a rising asset price, not by some new and unforeseen explosion of demand or constriction of supply. Likely the inflation and the collapse were also aided by speculators. (One wishes he could visit the trading floor at Goldman Sachs and interview a couple of the ex-Enron traders there.) I still recommend shorting oil companies.

I don’t think it matters what spot price is from day to day. It could be $50 or $100 or $200. Much more important is light sweet production (not sour, not nat gas, not condensate, not heavy) and delivery to US ports. Price means nothing. Inventory is everything.

And hey, while you’re here, could you please set straight those above who seem to believe production has not been on a rise.

My name is Nate Hagens. I’m a phd student at University of Vermonts Gund Institute for Ecological Economics – after working at Salomon Brothers, Lehman Brothers and running my own fixed income hedge fund since MBA school.

I am hardly a ‘hard-core blogger’. This was my first comment on this website, which I have just started to read.

The 2 posts I referenced, (now with hyperlinks) are:
Presidential Energy Debate Fact Check

and

The Marginal BTU – Return of the Red Queen

Of relevance to Yves’ current post are:
Hedge Funds, Hurricanes, and Energy Markets
and
At $100 Oil What the Scientist Can Say to the Investor
and
Peak Oil and Reflexivity and Peak Oil

For those with a spare hour or two, here are two bigger picture essays:
I’m Human, I’m American, and I’m Addicted to Oil (on evolutionary origins of habituation to stimuli and competition for resources)

and
Peak Oil – Believe it Or Not (on cognitive biases underpinning our belief systems)

You’re a hard-core blogger posting under “anonymous?” Do you mind identifying yourself?

Not to mention you provided a hack-job of an http web address instead of a nice, neat html hyperlink to your (supposed) own website?

I’ve seen stranger things, but I call BS. You’ve jumped the shark as well.

That’s categorically incorrect according to the EIA. The ME can pump the stuff for $5.26…average production costs for non-us countries is less than $30.

Molecool…if you’re gonna throw numbers out there, please cite something, because, as of now, you’ve jumped the shark.

And btw, Gheit is far from a “trend follower,” he’s testified, on multiple occasions, for over a year now (see here, here, and here), about the vagaries of excessive speculation and how fundamentals only justify $60.

I think everyone agrees (including Gheit) that specs are absolutely necessary, but only when used in moderation (just like credit). And for anybody wondering, the past year has not been a portrait speculation in moderation.

http://www.chrismartenson.com/peak_oil

Tonight we have a Presidential Energy Debate Fact Check:
http://www.theoildrum.com/node/4621

on the veracity of the claims on offshore drillings impact on oil prices and energy independence. (The sources are all the bat-poop crazy people at the Energy Information Administration.)

I have oft written about the magnitude of financial assets dwarfing the energy markets. The hedge funds leaving the industry now, both from lack of returns, liquidations and fear of further rule changes are causing mother of all forced sells.

Two comments directed at the Oppenheimer report:

1)From a trading perspective, markets usually don’t reverse until sentiment of Wall St firms economists has shifted 180 degrees. The more reports we hear about $60 oil, the sooner oil is going back up (and the sooner we get a better long term price signal for renewable infrastructure)

2)Oppenheimer report focused on demand. Not only is global depletion rate 4.5%. Not only is net energy declining (i.e. energy companies using more oil, natural gas and electricity to procure the same amount of energy as before). Not only are the commodity prices well below the cost of the marginal unit (and approaching that of the average unit),:
http://www.theoildrum.com/node/4562
which is resulting in delays and cancellations of projects. But we now have a credit crisis that is causing firms to reduce capex, postpone new capacity, delay substitution of renewables, and pose serious business risk for any company that can’t fund their business through operations.

So, when economy was strong, we were in a race between technology and depletion. Now we are in a race between depletion and credit contraction. We’re currently in the liminal space where demand IS lower than supply – but many factors suggest that won’t last for long.

But I ramble – I need to go take my medications before I lose sanity again..