Dec 4, 2008 – Oil may fall below $25, says Merill Lynch
Now, before panicking, review this table of previous oil price forecasts for 2009 (from various sources).
What would we do without experts?
I’m by no means arguing that a further drop in oil prices isn’t possible. I just want you to remember these days of rapid declines when the inevitable occurs, and the price of crude begins to rise again.
For when that happens, politicians and activists alike will resume their anguished wails decrying the problems of economic good times – from “lack of supporting infrastructure” to “lack of affordable housing” while they argue that responsible public policy demands “managing” the boom downwards into something they call “sustainable growth”.
As though such a thing exists.
Forcing “sustainable” growth on the energy industry is the equivalent of forcing a farmer to slow the rate at which he empties his bins during a grain price spike, to prevent him from earning too high a rate of return per bushel.
There’s a name for this in the ag industry – it’s called the “Canadian Wheat Board”.
I’ve lived and worked through a couple of boom and bust cycles, and what I’ve learned doesn’t require a degree in economics. Write it down, and tape it to your fridge door, because it’s something you’ll need to remind yourself of every day.
When a commodities boom comes galloping your way, grab that beast and ride it for all your worth, because slowing it down won’t make the ride last longer.
So remember that forecast of $25 a barrel oil the next time a socialist politician, (or a politician appeasing a socialist) advocates “sustainability” during times of rapid economic growth.
Remember those capped wellheads the next time a agenda-driven activist convinces your elected betters to pile another costly environmental regulation on an industry already drowning in bureaucratic redundancy.
Remember that $25 doesn’t cover the cost of getting a barrel of oil out of the ground, much less provide royalty revenues to fund hospitals or service new subdivisions for all those economic migrants that long ago stopped arriving.
And by “remember”, I mean hunt them down and leave the remnants of their political careers in a garbage bag in the ditch.
“Sustainable growth” is code speak for “slowing things down to government pace so they can figure out how maximize the dollars entering government coffers”.
The too low oil prices reflect the cash shortage created by the global credit crunch. Cash-hungry state-controlled oil companies such as in Russia, Iran, Venezuela, China, etc. are flooding the market with cheap oil to feed their insatiable need for cash cash cash. The world will gobble up that cheap oil as fast as it can, but, in the background, the decline in production and reserves addition will continue its plunge. The resulting crisis, coming more sooner than later, will probably drive the price of oil to new, staggering, highs.
But the socialists need to slow it down so they can figure out how to share the wealth without doing anything. Their dinosaur brains do no operate fast enough to do this quickly, that is why they need to slow it down otherwise the boom is over before they can collect “their fair share”.
abcd,
Are you one of the “experts” like over at Merrill Lynch?
6/10/08 Merrill Lynch $107
10/2/08 Merrill Lynch $90
12/4/08 Merrill Lynch $25?
My favorite bumper sticker from the 80’s oil boom in Calgary:
Please God, give us another oil boom.
This time I promise not to piss it all away.
Unfortunately, hard times are here again. Even the Great One has dropped plans to “windfall tax” the oil companies.
The good news is that I’m seeing Hummers on the road again. Waiting for one to run over a smart car liberal.
Only someone from an oil-exporting country like Canada would be enthusiastic about high oil prices. As an American, I want my country to free itself from dependence on foreigners to the maximum extent possible. That includes dependence on Canada. I’m sure you Canadians feel the same about your country. If you don’t, you should.
You missed this nugget: http://tinyurl.com/6ow988
Jeff Rubin: Missed the housing meltdown and his employer lost $8 billion
Missed the oil meltdown, but still gets to show up for work.
Kate, I must protest!
That’s a horrible waste of a perfectly good garbage bag.
Ya, but aren’t some of those companies like Lehman Brothers, Goldman Sachs, and Meryl Lynch already or almost bankrupt?
This drop in the oil prices is obviously a conspiracy by “Big Oil” (vs “mom & pop” oil) to do something nefarious. How else could one possibly explain the prices dropping at the pump all at the same time? I’m waiting to hear the socialists call for government intervention to artificially raise the price of oil in the name of “sustainability”. Well?
Damn fine post.
Oldest rule in any commodity market – you got to sell the product WHEN PEOPLE WANT IT.
And the more they want it, the higher the price they will pay for it.
Doesn’t that boast last winter of CWB Sask Ritter that he was going to be carrying over 4 mil mt of wheat into the new crop year look great now?
Sask Ritter? Now why did he make a hasty exit, stage right?
Oh abcd, you so miss the point.
Production of oil continues apace while demand has fallen. The economic conditions around the world has lowered demand in china as layoffs, shutdowns and demand for chinese manufactured goods has dropped. With a glut, the prices will continue to drop.
The countries which produce oil Russia, saudi arabia, the gulf states etc that built up these huge soveriegn wealth funds are now spending what is left of the funds after the stock market losses. Countries like Venezuela and Iran which have spent as much as they made are now up the creek.
welcome to capitalism 101.
It’s a conspiracy by Big Oil to cut the alternative energy industry off at the knees. They’re selling oil below cost so that wind farms, hybrids, and electric cars won’t make economical sense.
Oh, and the conspiracy includes GM, the Gettys, the Rothschilds, the Queen, the Vatican, and the Colonel.
Wow Kate. This comment reminds me why SDA is my homepage.
You forgot the Masons grok.
But I was informed that it was PEAK OIL time in which WE ARE OUT OF OIL. Well, I guess not.
The low oil, as others have already pointed out, is a result of the economic slowdown. It’s an indicator, and if the forecast of 25 bucks is close, we are screwed for a real long time.
Buh, buh, but the future always resembles the past, right?
When oil prices are high, the left complains that we are too dependent on oil, particularly foreign oil. When oil prices are low, the left complains that we are consuming too much. It’s the same game they play with Global Warming: hot or cold, wet or dry, windy or calm.
Understand that there is a difference between a boom and a bubble, and few people can recognize the difference while it’s happening. You’re right that you cannot stop a bubble by yourself, so riding the bubble is certainly the right thing to do if:
1. You are able to grab the beast near the beginning
2. You don’t need anyone else’s help to climb on
3. You know when it’s time to jump off
The problem is that 1, 2, and 3 are hard things to do for most people. Riding the bubble is what caused this housing crisis. Hedging against future prices is why food prices are sky-high even though oil prices have dropped dramatically.
So the Russian gubmint is better at predicting economic trends than all the banks in the free world.
Greeeat!
Ask my wife why I often go to the dentist early.
To read magazines. The oldest ones – for the “expert”* forecasts !
Easier done today – Internet.
* Expert, def: Some fool far away from home.
Awwww. CTV reporting that Stephane is to step down early 🙁 Stay, Stephane, stay!
Come Bob come !!
As he would bring mega tonnes of Uncle Mo’s baggage !
Seems the Russians forcasted the best at $78 a barrel. Production of oil will slow, demand will climb, price will go up.
The best thing about $25 bbl is it cuts the Opeckers off at the knees. How many barrels they gotta sell now to fund the London mosque?
“Only someone from an oil-exporting country like Canada would be enthusiastic about high oil prices. As an American, I want my country to free itself from dependence on foreigners to the maximum extent possible. That includes dependence on Canada. I’m sure you Canadians feel the same about your country. If you don’t, you should.”
Uh there is quite a difference between what Canadians do with oil money and what the Saudis use it for. If you transfer most of that Saudi money to Ottawa we might be able to save a skyscraper or two.
As someone who owns a small trucking co. in Calgary, I’m willing to bite the financial bullet to prevent financing Opeckerheads.
The prediction for $25 per barrel oil could be the inverse of previous predictions that it would soar to $200, so it may indicate a bottom.
Whether it does or not, I’m concerned that with oil prices this low, exploration and development of new reserves are grinding to a halt, which may set us up for serious future shortfalls, as bringing new sources on line is not something that can be done in a matter of months.
I’m not a supporter of the peak oil theory, but I do know that many of the world’s cheapest sources of oil are declining rapidly, and that $25 oil does not encourage the development of new sources.
Hysteria is par for the course for the left — consider Layton’s ridiculous assertion that Harper locked the doors of the parliament…sure, until Jan 26 when he can deliver a budget that you can then vote on, moron.
Don’t forget their similar hysterical rantings, “Families are starving!! They can’t put food on the table!!” “Waa waa.”
I know some friends who have recently lost their jobs — they saved some money for hard times to prepare for such a time as this. Honestly, we should help people, but what about personal responsibility? Is that ever a factor for you folks on the left?
COMPAS: CPC 51, LPC 20, NDP 10, BQ 8, GPC 6
48% have confidence in Stephen Harper as Prime Minister in the current economic climate compared to 14% for Michael Ignatieff in second place, 11% for NDP leader Jack Layton, 8% for Stephane Dion, 4% for Bob Rae, and 3% for Gilles Duceppe;
Bob Rae polls below Dion! Stay dion, Stay!
JustAnotherWesterer:
True. Depending on Canada worries me somewhat less than depending on Saudi Arabia, Venezuela, or Russia. Still, dependence is dependence, and when you consider my country’s persistent trade deficit, there is no escaping the conclusion that we Americans are living at the sufferance of others.
Even if it were safe for my country to depend on foreign oil, I am skeptical of our (your) ability to drill deeper and deeper for ever more elusive supplies. I favor a large Manhattan-style project to develop alternative energy sources coupled with simultaneous deployment of existing technologies (especially nuclear). I know that reliance on “gubmint” programs is anathama here at SDA, but much of that distain has been provoked by programs that redistribute wealth rather than facilitate its creation. I think even most conservatives would support government funding of basic infrastructure such as roads and ports. Well, I believe funding for basic research in something as critical as enery-supply falls into the same category. Yes, there will be instances when programs are funded in reponse to political pressure rather than scientific or commercial merit. But I think the potential benefits outweigh the inevitable abuses.
The reason Bob Rae polls below Dion is because Bob is the Ghost of Deficits past, while Dion is…well…just a ghost.
RSP….you want oil independance….stop using the computer to start with.Next…ask your Messiah when he is going to allow offshore/ANWR drilling.Until then,tough titties.Freeze in the dark with the Eastern bastards!You made your bed,sleep in it.
Oh.And don’t forget LNG etc for your barbie,furnace etc.
Justthinkin:
He’s not my Messiah and I have no problem with ANWR/offshore drilling. As for having “made my bed”, I have no idea what you’re talking about. I deplore the trends my country has pursued since the 1960’s. Can I be any clearer?
RSP: don’t worry about adequacy of supply from Canada. The tar sands contain more oil than the middle east, and that’s just the Athabaska tar sands. It doesn’t include tar sands further to the east and to the west. The issue around it is that it’s expensive to extract. But as long as you or someone is willing to pay the price, the oil is there.
Justthinking: Man that was harsh.
RSP: You are a valued customer and we welcome you. You depend on oil from us, we depend on other things from you, it’s win win. I hear where you are coming from, but our arrengements are benificial to both sides at least.
Yes, I agree. RSP and Americans are valued customers. Canadians, especially the Left, have not treated them all that well the last decade.
IMO, America’s energy problems are a direct result of Al Gore and his band of eco-extremests.
Th USA has huge undeveloped oil reserves. Brazil, Venezuela, China, ect are developing theirs.
Yes
IMO, America’s energy problems are a direct result of Al Gore and his band of eco-extremests.
Also started the ball rolling that put all the auto makers (well, North Am ones anyway) in the dire straits they are in now. Hey Big 3 see if uncle Al will lend you money, hell he fleeced enough people with his lies I think he owes it to you.
I work at a mining Co. in northern Ontario where the nickel price is the focal point. As with oil and all commodities, there has been a steep and unwavering decline in price with no end in sight. By next week the nickel price should be into the $3 and change zone at which we are near the break even point. Two summers ago nickel was fetching $24 per pound and we couldn’t pack enough of it up and ship it fast enough. Now no one (ie. China) is buying it and we’re renting warehouses to store it in.
Even more baffling is the oil price since I never saw a decrease in traffic when the price was higher, and consumption is up like crazy with folks going to the malls for Christmas shopping. And still the price keeps dropping. Something is fishy about all of this.
And He raised His glowing Hand, and said to all gathered, “let it be remembered that this is when we stopped the rise of the oceans”… and He finished with “and let there be cheap oil”.
I now concede, the lefties were correct all along… it’s all about the oil.
I used to complain about the Alberta government not being able to properly manage the growth and, as such, how were they ever going to manage the inevitable bust. Since becoming a little more economically and financially literate I now tell myself every morning “what the hell was I thinking”. Contrary to popular belief there is a cure for stupid. Chalk it up, in part, to “SDA-U”. Now thats an idea for a tee shirt.
http://seekingalpha.com/article/109210-the-manipulation-of-gold-prices
(applies to all commodities)
What is really going on . A little technical for some but the current deflation scare is just setting up the reflation to come.
By the way I was one of the people who told you the US was in financial trouble before it happened.
PMSH said it some time ago… Now is a good time to buy…
Start thinking about it.. I am not an economist BUT, I think you will find that a couple of months ago all of the personal investors have already liquidated (at great loss) or have held on…
The Hedge fund guys have sold and made there monies or gone kaput…
NOW, is the time for the pension funds to sell great shares, at low prices to gain the liquidity to pay annuitants. Should be good buying there, if you don’t need the cash start thinking of buying.
The CWB. A rats nest of Lieberal appointees. It has to go.
Roadtrips here we come…wwwweeeeeeeeeeee!
“Chalk it up, in part, to “SDA-U”. Now thats an idea for a tee shirt.”
Get a Real Education. Attend SDA U. “You don’t speak for me” smalldeadanimals.com
There ya go, Kate. In polo, T, and sweat. Guaranteed seller.