Oil at $111 a Barrel: We Are Being "Sovereignly Screwed"!

[marmar]

from HuffPost:




Raymond J. Learsy
Oil at $111 a Barrel: We Are Being "Sovereignly Screwed"!
Posted March 17, 2008 | 11:09 AM (EST)


The price of oil has diverged from fundamentals in such a dramatic way that it is placing our economy at grave and immediate risk, not to speak of the consequences of the enormous, unprecedented transfer of wealth that is taking place.

There are no crude oil shortages. Commercial inventories of crude oil, even excluding our Strategic Petroleum Reserve are 9% higher than they were at the end of last year. Crude inventories increased in seven of the last eight weeks. This past week crude oil inventories jumped by 6.2 million barrels far more than the 1.7 million barrels forecast. Yet prices barely budged below their all time highs of $111/bbl. Gasoline inventories are at their highest levels in the past 18 months.

Geopolitical concerns, though always present and forever overplayed are no more problematic presently than they have been in years past. Supply and demand? Largely adequate supply and diminishing demand. Yet, the price for crude oil continues to escalate to ever higher highs.

Turn on the television or read the papers and the reasons are always the same. The falling dollar (rarely a mention that the price of oil has increased by over 120% over the past 15 months, far more than the dollars the 18% fall over the same period (see "A Short Tutorial on the High Price of Oil and the Falling Dollar," 10/19/07). The dollar weakness can be blamed for much, but hardly the massive and disproportionate increase in oil prices. In addition the economy is slowing markedly and gasoline consumption is being impacted appreciably by higher prices as well as the weakening economy -- Economics 101 prescription for lower oil prices which just isn't happening (today's overall turbulence excepted but still to levels that are historically steep highs).

To better understand what is happening we need a time warp moment. With a tongue in cheek heading -- "Oil Baron Longs for Past, Not Futures" -- Newsday reported on November 2, 1990 -- (yes, 1990. Leon Hess, erstwhile owner of the New York Jets, was Chairman and Founder of Hess Oil & Chemical now known as the Hess Corporation -HES-):

"Leon Hess, whose oil company made more than $200 million by trading oil futures during the Persian Gulf crises..."I'm an old man, but I'd bet my life that if the Merc (the NY Mercantile Exchange) was not in operation there would be ample oil and reasonable prices all over the world, without this volatility" Hess said at a hearing the Senate Committee on Government Affairs held on the role of futures markets in oil pricing."

Ah, but, we are told, hedge funds, speculators, individual investors and even conservative institutional investors such as the CalPERS (the California Public Employees Retirement System) given the risks of the stock market and the disastrous bond markdowns are pouring significant funds into commodities as an asset class. As quoted by Reuters, "the financial flows have been overwhelming the fundamentals of the oil market." The inflows are large and the aforementioned groups are forever cited as the source of liquidity flooding the commodity pits. Yes, but oil continues to go up, up, up while other commodities such as grains have occasional and significant retracements. ......(more)

The complete piece is at: http://www.huffingtonpost.com/raymond-j-learsy/oil-at-111-a-barrel-we-_b_91872.html

[Mountainman]

1. Yet wing nut radio still blame eviormentalists and not drilling in ANWAR.

There are no crude oil shortages. Commercial inventories of crude oil, even excluding our Strategic Petroleum Reserve are 9% higher than they were at the end of last year. Crude inventories increased in seven of the last eight weeks. This past week crude oil inventories jumped by 6.2 million barrels far more than the 1.7 million barrels forecast. Yet prices barely budged below their all time highs of $111/bbl. Gasoline inventories are at their highest levels in the past 18 months.

[stellanoir]

3. Record profits, huge tax breaks, total impunity for the Exxon Valdez according to a recent SCOTUS

ruling, and bogus claims about Katrina when they've found more in the

Yeah we are getting royally screwed.

[LiberalEsto]

2. When B*sh campaigned in 2000

he claimed he would bring down gasoline prices.

Yep. Right.

Chalk up another bald-faced lie.

[DesertFlower]

4. when bush took office gas was around $1.50. what happened

to all the cheap oil we were going to get from iraq?

[ThomWV]

5. Has it occured to anyone to see who might be buying that expensive oil and how much of it?

Might be some suprises.

[demosincebirth]

6. Its at $105 last time I read.

http://news.yahoo.com/s/ap/20080317/ap_on_bi_ge/oil_prices;_ylt=ApVUeCAwcnZH39Er0iFzo26s0NUE

[Obamanaut]

7. Some of the blame belongs to us. Waaay back during the

Ford administration auto makers were told to have their car (not truck) fleets average 27 mpg by 1985. They pretty much complied, partly by having tiny little cars that got really good mileage to balance the guzzlers. Precious little progress has been made since. Britain and Japan auto fleets average over 40 mpg, while we (the general public) here continue to purchase the huge SUV type vehicle, large pick up trucks to haul the trash out once a week, and generally don't attempt to help by conserving.

It is possible that the gas prices would still continue to increase, but we could help our individual purses by being more prudent, by leaving the Excursions and Tahoes on the sales floor, and by buying instead the more economical to drive vehicles.