Exercise Oil Shock

Discussion in 'Current Affairs, News and Analysis' started by tomahawk6, Jun 24, 2005.

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  1. americans have been in the Middle East for the last 80 years because Americans just love the climate.....of course they are there for oil........
  2. Some very very disturbing analysis on BBC24 last night . $60.00 a barrel may just be a pit stop, with oil industry insiders saying $100 coming. China also attempting to buy large US oil exploration concerns in CASH

    The official explaination as to why oil is still going up, in spite of a surplus of crude was 'Uncertainty over America's future intentions in the Middle East'
  3. I doubt the US government will allow UNOCAL to be bought by the Chinese.
  4. The optimistic one is that some of the worldwide savings glut is going into speculation in oil - either through hedge funds or through one or more Asian (or Russian) central banks putting part of their huge foreign reserves buildup in it.

    The pessimistic view is that we're running out!

    Interestingly, Chinese demand for oil actually fell slightly over the last few months. So - either folks are speculating like hell because they think we're running out, or they're speculating full stop and may be caught long of a falling market. Interesting times!
  5. Lets hope they regard UNOCAL as a strategic asset Tom6.

    But suppose they don't?
  6. I don't think Unocal is that significant - most of its assets are in Asia, and most of its production is sold into China anyway. It might even have a calming effect on the markets if the Chinese were less keen to buy oil on the open market to fill strategic reserves, for example if they owned more Asian fields. More broadly, they are investing heavily in coal-fired power stations, coal gasification/hydrogenation (like the Leuna Synthetic Oil plant of glorious memory), nuclear and hydroelectricity. Given that they are a planned economy, maybe they are going to treat Unocal's fields as a super-SPR, that is, draw them down slowly whilst building other sources?
  7. If the government approves the deal then UNOCAL will be owned by the Chinese. This was an unsolicited offer so its possible that another buyer may enter the scene. The Chinese cant win a bidding war with one of the BIG 3.
  8. Brazil is had already had the technology to power cars on Ethanol ,a suger cane by product,

    could be the way to go,

    on another note if we go down this route , the Arabs are not going to be too happy, after all without oil they have nothing, we can leave them to fight amongst themselves for all we care and they know it.
  9. Much of the problem is refining capacity, rather than crude oil supply. Most (all?) of the spare production has a high sulphur content, which requires relatively advanced refineries to deal with. There aren't many of these about, and they're all busy processing exactly this crude AIUI.
    Building new refineries would deal with some of the problem, but this hasn't happened for decades in the US or IIRC UK.
  10. I'm not a petroleum geologist and my meager knowledge consists of what I read, but what I read is:

    1. Earth may have already reached, or soon will reach"Peak Oil," that is to say the maximum attainable rate of annual extraction, because of progressive depletion of the most readily accessible parts of the finite supply.

    They are using seawater extraction to pump the Saudi Ghawar field and I've read alarming reports that the percentage of water coming up from the wells is rising.

    2. A partial explanation is that the US financial system is a big green liquidity machine. The USA, through its exponentially growing current account deficit, is flooding the world with dollars.

    It's a maxim that "Liquidity chases profit." Let the profit margin on petroleum start to rise and there will be an awful lot of speculative dollars chasing after that profit.

    Tech stocks are dead. Treasury bonds could go into a bear market if, as many expect, interest rates at the long end of the yield curve start going up. Certificates of deposit give a negligible yield. So what are you going to do if you're an institutional money manager? Direct your firepower at something the price of which is demonstrably going up fast.

    3. I'd be inclined to accept the view that the prospect of military action in the Persian Gulf is building a "fear premium" into the price of petroleum and distillates. I've posted elsewhere on this board my reasons for believing that it is likely to happen.

    4. A major international recession could make crude prices abruptly plunge. I view that as a significant, but not readily quantifiable, possibility.
  11. And is it just a co-incidence that the current clique at the whitehouse who have control over the armed forces/foreign policy all happen to be or were involved in the oil industry.

    It could be the worlds biggest conspiracy (if you believe what the big green lizards tell you 8O )

    I'll fetch my silver hat
  12. Crude oil is priced in US dollars in New York and London.

    Rising revenues of oil-producing states are "recycled" into the market for US Treasury securities and "agencies" such as Fannie Mae and Freddie Mac, twin giants of the US secondary mortgage market.

    So, every time the price of oil goes up, the beneficiaries include:

    1. Bond "longs." In other words, persons holding US dollar-denominated debt securities, futures contracts, and options to purchase. The additional demand for these securities, by oil-producing states, bids up the price.

    2. The United States Treasury. Anything that heightens the demand for US debt securities lowers the interest rate and the Treasury's borrowing cost.
  13. It's all about King George wanting to build Nuclear power stations. The 'War game' is just that a game Georgei Boy wants ta build Nuc power plants end of story.
    I drink with a civil engineer of world standing and he has been telling us for years that 'Industry' has been saying Nuc is the only way to go.