Oil at $147 a barrel?

That’s what Goldman Sachs predicts. When the global economy recovers, oil supplies won’t be able to match demand and prices will soar. Business Insider isn’t concerned though, pointing out that GS has already forgotten that Congress has solved the problem by banning oil speculators. Whew!

I would add that even the usually astute Insider missed the other source of salvation, the free, renewable energy sources that are going to be discovered by Obama once he puts Big Oil and Big Coal out of business. It’s those bastards, along with the auto companies, that have kept solar powered beanies off the market, as well as that secret carburetor that yields 1000 mpg for family cars.

26 Comments

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26 responses to “Oil at $147 a barrel?

  1. ogrcc

    Where do you stand on this issue?

    Summer 2008 oil’s run up had a big impact, don’t you agree?

    I guess there is no reason to resent, HF/IB speculators and the big oil companies when they profit handsomly at the expense of others.

    It’s the uh-merican way!!

    • christopherfountain

      Well OGRCC, Venezuala has the system you’d prefer, and uses its “profits” to reward political flunkies and fund FARC terrorists (excuse me – you’d call the “freedom fighters” in Colombia. The result is that their production dwindles each year, output is dwindling, equipment failing and Chavez is happy. I prefer that the oil companies take their enormous risks and bring me gasoline in convenient locations when I want it at a cheap price. They earn their profits – what do you suppose Connecticut, whic takes in taxes a larger portion than oil companis take as profits, dose to deserve my money? I haven’t figured that one out.
      Here’s a report prepared for Congress that outlines oil companies profits and earnings.

      Click to access RL34437_20080404.pdf

  2. anonymous

    Joe Sixpack can easily choose to invest in oil companies and share in any profits and stock price appreciation (and his mutual/pension funds do anyway)….funny how Capitalism 101 works

    And I suspect the 35yo billionaire energy hedgie, John Arnold who founded Houston’s Centaurus (who testified at CFTC about speculation yesterday), has a few pension fund/college endowment investors sharing in his profits (don’t they net ~70-80% of any upside?)

  3. ogrcc

    what’s up with all the name calling around here. last I checked I am not a communist.

    just because I am for a government option HC choice and some other ‘liberal’ things like right to choose suicide doesn’t make one a commie.

    increased demand for oil only makes folks like the saudis and chavez more powerful.

    still not clear where you stand?
    you are against alternative energy sources?
    better get your tin foil hat ready.

    oh, and maybe you need to get out of your sheltered greenwich enclave. there is a whole big world out there where HF execs don’t exist.

    Greenwich is the abberation, not the norm.

    • christopherfountain

      OGRCC – I’m all for alternative energy – what I oppose is destroying our present energy system before there is, in fact, an alternative. The schemes I’ve seen all depend on first eliminating coal, oil and nuclear power and then through the workings of some kind of deus et machina we have, energy! That could lead to a series of long, cold winters before it works, eh?

      I have never left Greenwich in my life, so I’ll have to try to take your word for it that Greenwich is not the norm. Are you sure about that?

  4. ogrcc

    yeah i am pretty sure

    perhaps you would like the upper east side part of manhattan. they dress far more preppier than in frumpy Greenwich CT

  5. pulled up in OG

    Congress banned oil speculators??? Guess I missed that one.

    “The [FTC] rule, which will go into effect in November, targets anyone dealing with crude oil, gasoline and petroleum distillates. It prohibits market distortions through false or misleading statements about stockpiles, prices or crude and fuel output.”

    “The Commission rule does not target speculators, which also have been blamed for manipulating energy prices. A different federal agency, the U.S. Commodity Futures Trading Commission, is expected to decide whether to place trading limits on speculators later this year.”
    http://www.msnbc.msn.com/id/32314715/ns/business-oil_and_energy/

    “In Congress, the House approved measures last fall aimed at curbing excessive speculation and trading abuses in oil and other commodity markets, despite a threatened veto by President George W. Bush. The bipartisan legislation called for giving the CFTC broader authority and limiting the size of the position that traders can hold in certain markets. It stalled in the Senate, however.”

    “In the next two months the CFTC will hold a series of hearings to figure out the best way to use its authority to stop manipulation of the commodity markets.”

    “Oil traders and brokers have griped that funds traded on exchanges, such as the United States Oil Fund, have pumped billions of dollars into energy commodities — enough to artificially prop up energy prices.

    For example, benchmark crude oil prices have roughly doubled since March even though government reports show U.S. supplies brimming with surplus oil. Investors have been buying oil barrels not because of traditional supply and demand, but on the expectation that the economy will eventually improve. Some are also buying crude oil as a hedge against inflation, betting that the dollar will get weaker and push the price of energy commodities even higher.”
    http://www.businessinsider.com/cftc-is-going-after-the-speculators-2009-7

  6. xyzzy

    If the level of stocks in the US was the only factor that went into the price of oil then you wouldn’t see the price move very much.

    Speculators didn’t drive the price of oil higher, but it makes people feel better to believe that, rather than face the fact we are running out of oil.

  7. pulled up in OG

    I’m well aware of Peak Oil, xyzzy. There is still no reason to allow anyone not in the oil business to mess with that market.

    If “Speculators didn’t drive the price of oil higher”, what did they have in mind?

    • christopherfountain

      And if they drove up the price of oil last summer, OG, why were they so nice to let it come down the following months? Yes, Christmas was in the air, but nine months of low prices, courtesy of the oil speculators? What a great bunch of guys.

  8. Cos Cobber

    I argue that the price of oil today is too low…not too high. People keep applying the wrong formula as to what the appropriate price is for oil. Its not a cost + fair profit = price. Instead you need to take what the cost of the chief replacement commodity as your 2nd choice to oil and work backwards from there. The only reason oil is as cheap as it is today is because oil rich nations need to eat today. If they had patience (to turn the spigot down), the price would rise so that the cost of solar/wind/nuclear/etc = oil.

    Try all you want, its a fools errand to attempt to keep oil prices artificially low through government intervention (ie regulating speculators; what it absolute joke) or other means. If we are serious about making the transition to the next form of energy smooth, then we need to accept the fact that oil is actually worth much more than todays prices. Once solar/nuclear/wind can produce energy on a per watt cost basis as $70 or $120 or $200 per barrel oil, then we working in realty. Until then, oil is cheap. Thats why we use it, even at $5 per gallon.

    • christopherfountain

      I’m with you, Cos Cobber. Alternative energy will only make sense when it’s as cheap as oil. It would be great if that were achieved by Alt energy’s cost dropping but the best way to see it developed and reach commercial quantities (which will eventually bring down its cost) is if conventional fuel costs rise. I don’t want to see that increase brought about by taxes because it just gives the crooks more funds to buy new Gulfstream 550s, but if Exxon wants it, they can have it.

  9. Sanjay Bigglesworth

    If you don’t believe that the oil markets were manipulated, then I have some off-line power plants in California that I would like to sell you.

    • christopherfountain

      Life is just one big conspiracy, Sanjay – it’s just hell out there. Fortunately, I have discovered the merits of wearing tinfoil ….

  10. Cos Cobber

    who cares if they were manipulated. it doesn’t matter because the cost of an alternative form of energy to replace oil is so much higher than $150 per barrel. the manipulators will get burned when other forms of energy are less expensive than oil. thats what matters, everything is momentary nonsense.

    the reason you can’t charge $100 for a big mac is not because burger king will under cut you. its because there are an unlimited number of other ways you can get your calories. there arent that many ways to get energy that is less expensive than so called expensive oil.

  11. Sanjay Bigglesworth

    When the size of commodity markets jump from $13 billion at the end of 2003 to $260 billion as of 2008, thems a whole lot of specumalating going on there.

    I should know. Tinfoil doubled in price.

  12. '73Refugee

    I guess the manipulators aren’t all that smart. Surely they could have figured out a way to keep oil at $140 a barrel and higher.

    Fluctuations are so inconvenient.

    I know… let’s have the government set a steady and artificially high price for oil! Problem solved!

    Where did those underpants gnomes go?

  13. fred

    as long as the fed allows an “extra “2.1 trillion dollars to float around, bubbles are gonna form

  14. cos cobber

    Underpants gnomes…what a classic!

  15. xyzzy

    Half the speculators were short and lost money, you don’t talk about them when people talk about “speculators”.

    Oil is a physically delivered futures contract, if the price went too high everyone would deliver oil to the speculators and they would be stuck with it.

    Is oil manipulated? Yes. The people doing it go by the name OPEC.

  16. cos cobber

    The word I have been looking for is substitutes (duh).

    Until there are cost effecient ( that’s fancy talk for cheap or of like price) ways to make energy the way oil can, oil will be subject to so called exhorbinant pricing. Go ahead, open your wallet and find a lower cost way to do what oil does. You can’t. Unless you use coal.

  17. '73Refugee

    Nukes, too.

  18. pulled up in OG

    Cos Cobber – Ok, so we’re all stocked up on Vaseline for a few decades until “the cost of an alternative form of energy to replace oil” is cheaper than oil.

    Then we just switch over to “alternate” Vaseline, right?

    (I also think gas is too cheap, but I don’t think the Goldman Sachs of the world should have anything to do with it.)

  19. pulled up in OG

    CFTC Chairman Gary G. Gensler: “I think the American people would have a hard time understanding why large financial firms are being treated the same way as large trucking companies and other bona fide users of oil products. We have reached a point where the overwhelming majority of trades are conducted by speculators.”

    US Rep. Bart Stupak (D-Mich.), chairman of the House Energy and Commerce Committee’s Oversight and Investigations Committee, concurred with Sanders [I-VT], stating, “A number of reports, market experts, and regulators agree that reform of the derivates market is necessary. Physical hedging, long used to provide liquidity, transparency, and set market prices, is no longer possible due to the manipulation action of financial traders.”

    Stupak noted that since 1991, when the CFTC authorized the first bona fide hedging exemption to a swap dealer (J. Aron & Co., which is owned by Goldman Sachs), “15 different investment banks have taken advantage of this exemption, even though they do not have a legitimate anticipated business need.” NYMEX has granted 117 hedging exemptions for West Texas Intermediate crude contracts since 2006, many of which are for swap dealers without physical hedging positions, Stupak continued. “Swaps are currently excluded from requirements for position limits designed to prevent excessive speculation. An estimated 85% of futures purchases tied to commodity index speculation come through swap dealers,” he said.
    http://www.ogj.com/index/article-display/6463496987/s-articles/s-oil-gas-journal/s-volume-107/s-Issue_29/s-General_Interest/s-Congress_members_urge_CFTC_to_set_energy_position_limits.html

    Now, you guys can call it whatever you want, but to my eyes, it’s walkin’ and squawkin’.

  20. cos cobber

    Pulled up, what don’t you get? Banned speculative trading and watch the commodities markets move overseas. Hello?
    Do you really think that a global commodity such as oil will bear lower prices in the future just because we banned/curbed speculation
    Here in the US? The country that has only 3% of the proven global oil reserves?

    Close the us down to spec trading and 10 seconds later hong kong will be the place that sets global oil prices.

    Absolutely nothing meaningful will be accomplished by curbing us commodities trades. Your neighbor’s hedge fund will still beat you over the
    Head with high oil prices if that is what the world will support when trading oil contracts in london, vienna, dubai or hong konk.

    Again, tell me real reason why oil is truly expensive? Until we go nuclear in a big way, oil is king…and we will suffer