[Barbara]

I thought of this last night (this peak oil is killing me! lol), maybe is just a stupid idea, I'm not an economist.
What is scaring us about Peak Oil? The end of oil? No: the end of cheap oil and all the following implications. We know that when a resource is on depleting curve, the price MUST grew... it's a market law.
What if someone is trying to "fake" the market? I mean, look at what's happening in Iraq and Saudi Arabia, in the OPEC etc. What if someone put his hands on the major oil fields, by military or whatever? He can choose the price he wants, that's all. There's no market law... expecially if, doing this, he's able to keep secret the truth about peak oil.
What I mean (very hard to me explaining in english) is that there can be a very big project in action.
1) We hide the truth.
2) We get the fields
3) We decide the prices until fields are REALLY depleted
4) After this, we leave the prices go wherever they want and keep the remaining oil for ourselves.

How many years of recovering oil do we have left? 20? 25? Then they'll simply sell it at a cheap price, balancing it between the growing costs of extraction and their own gains, without paying any attention to market. Is this possible? I think so.
A project like this would explain very well what's happening at the moment. The secrets, the wars, the "no worry about that" our govts are showing.
Any thoughts?

[OilBurner]

Despite the economics of supply and demand, if one could corner the supply (usually with a cartel), then you get set any price you like. Drug companies conspired with each other to hike the price of vitamins.

See:
http://www.eye.net/eye/issue/issue_10.0 ... amins.html

So, theoretically, if you could get co-operation of all or most suppliers then you could set the price anyway you like. Setting it high is no different to setting it low IMHO.
The DeBeers diamond cartel sets their market price by restricting supply. Obviously the days of dropping the oil price by increasing supply seem to be coming to an end, so they would have to drop the price by arbitraily setting a low price - I'm not actually convinced this is possible in the oil market though.

[Barbara]

Thank you oilburner... but to tell it straight, I was not talking of cartels: I was talking of war strategies!

[OilBurner]

LOL! I know Barbara - you can substitute whatever euphemism you like: cartel/NATO, business strategy/war strategy etc etc.

The crucial point is, to actually control the price, you need one country or group of countries to be allied together or co-operating at a high level.

You seem to be inferring that the US is either working with OPEC or has threatend them enough to force co-operation? Or at least, has the potential to do so.
And in that sense, would be able to fix prices?

[Aaron]

Morning All,

Man I hope coffee isn't made of oil...

I see this differently.

Invade Iraq not to steal their oil, or manipulate the price, but to ensure we can still buy the oil at all. Probably motivated by the threats of social unrest in Iraq & the region and not peak.

[Barbara]

Exactly that, oilburner: thank you for the translating help!

Let's think this way: a group of allied countries (I've already heard this... ), a strong military force, powerful oil companies, and some Arab greedy leaders. They all agree to hide the truth and take oil fields by force, or menace, or corruption. From then on, faking price is a child game. Of course, some other countries/leaders are not going to let them do it: Russia maybe, or Venezuela (which, remember, is signing an agreement with major South American countries...). But anyway, all of them know that Oil peak is coming and there's nothing else to do... they just try to avoid America and allies put their hands on the what oil is left.
If you look at things in this perspective, everything goes in place. What do you think?

Matt, what's your thought?

[dmtu]

$this->bbcode_second_pass_quote('Aaron', 'I')nvade Iraq not to steal their oil, or manipulate the price, but to ensure we can still buy the oil at all. Probably motivated by the threats of social unrest in Iraq & the region and not peak.

[Barbara]

dmtu,
I wasn't saying that they drive the prices up: but quite the opposite! The'll keep (not now yet) the prices down during/after the Peak. If the market is not aware of Peak (officially faking reserves) and oil companies are part of the agreement, it will be easy. They'll balance the price so it will be enough cheap to let the economy running, and enough expensive to worth the extraction and to give companies their share.
When the depletion will reach the cross point, they'll simply drop the business: but with 1000 gigabarrels left, it could take years.

It's not that absurd: think that drug traffic is worth 8% of the world market... and it's totally hidden. How can you believe in the correctness of a market like this?

[notacornucopian]

Barbara,

I certainly agree that those in positions of power have possibly conspired to suppress the truth about oil reserves / production. Controlling the oilfields of the Middle East would go a long way towards controlling of the price of a barrel of oil. Controlling the price of a barrel of oil also provides more control over the pace and direction of the economy. Control of the economy means you can curb demand ( as production declines ) by manipulating the price of oil. So the net result is exactly what you said earlier, keep everything going as if it is business as usual until it is too late. Then the decline is very steep, and we do have a massive dieoff.

Pops, you will be happy to hear that I recently purchased a gross of Reynolds Wrap. I am not about to get caught without an ample supply of tin hats !

[Chichis]

Maybe the Council on Foreign Relations has something to do with it. =D

[Ender]

$this->bbcode_second_pass_quote('OilBurner', 'D')espite the economics of supply and demand, if one could corner the supply (usually with a cartel), then you get set any price you like.

[AdvocatusDiaboli]

A cartel or the US controlling the whole of the Middle East could NOT hold prices down. Prices go up if you can't supply enough and that is exactly the situation we are in. Holding military control over Iraq has not helped the situation.
As Deffeyes says, OPEC has lost control of the oil price.

[buster]

Actually, we went into Iraq with plans of increasing Iraqi output:

$this->bbcode_second_pass_quote('', '2')/29/2000
Fadhil Chalabi, a one-time OPEC under-secretary general and former Iraqi oil official, says Iraq could soon produce more than ten-percent of the world's daily oil demand.

This huge amount of oil would not take long to be expanded. In five or six years it can reach six million or seven million (barrels per day). In a matter of eight years Iraq can reach eight million.

Mr. Chalabi told a private Washington conference on Iraq's oil industry (Tuesday) that demands for hard cash and investment following nearly eleven years of international sanctions could convince Baghdad to sell oil outside of OPEC - possibly leading to a drastic increase in supply, and a consequent fall in oil prices.

Mr. Chalabi also says current industrial growth around the world will not demand as much oil as forecasters believe - making the impact of any increase in Iraqi oil output even greater.

But Ed Porter, of the American Petroleum Institute, believes the oil forecasts are on the mark, and that growing demand will absorb an increase from Iraq if it is phased in slowly - say over ten years or so.

But, he also says Iraq has affected world markets in the past by over-producing.

source

[Permanently_Baffled]

I don't know about this Barbara, this would obviously mean the cliff like decline in production after peak would be catastrophic and actually would be economic and political sucide in the medium term. I would like to think that even our governments are not this stupid.

Nice idea though , if not a little scary!!!

Of course you could theorise that OPEC producers underdeclare reserves and production capability to ensure a higher price. Maybe they are pushing the boundaries to see if the world economy can withstand a higher price. I doubt it , and this is pure speculation, but one thing i have notcied you cannot seem to get an accurate picture from the mouth of a oil producing arab!!

This is the problem with the entire issue, no concrete information. There could be more oil out there than we think , on ther other hand there maybe less!

PB

[Synergist]

I agree with most of the posters here that individuals and companies cannot effectively "stockpile" oil in such a way that it affects the markets without anyone knowing.

Here's a good overview of China's efforts to implement a strategic reserve. Korea and Japan have something similar, the poorer, ASEAN countries like Thailand and the Phillipines have much more modest efforts.

It's worth noting though that increased stockpiling by *all* countries is a prudent step given the possibility of supply disruption and rising prices. Yet this stockpiling can only increase demand even above the unusual and apparently unexpected growth in demand.

It wouldn't surprise me if the U.S. (and others) were secretly increasing stockpiles and keeping it entirely classified.

[Soft_Landing]

http://members.optusnet.com.au/emieluk/CrudeStocks.jpg
http://members.optusnet.com.au/emieluk/ ... Stocks.jpg

I'll try to keep these updated as we traverse the heating season. All the info contained within comes directly from EIA. The effect of the hurricanes is really quite striking.

[Soft_Landing]

For competeness, I thought I'd add Natural Gas too.



With stocks above mean levels for this time of year, it's certainly instructive to see Natural Gas futures have risen so high so early...($7.60 for Nov delivery, whilst Jan and Feb delivery prices breached $9!!)

[EnviroEngr]

The all time, recent high appears to have been in the Dec. 2000 - Jan. 2001 timeframe. The NGF01 contract shows the ramp up and peak. NGG01 shows the peak declining and confirms the $10.100 per thousand (1,000 cubic feet or 1 decatherm) high point.

Go to the NYMEX site and play around with the months and years:
http://www.nymex.com/jsp/markets/ng_fut_histor.jsp?

I haven't played with the Options at all yet.

[smiley]

Lately I was getting the impression that the markets, and especially the DOW were getting ahead of themselves. The DOW has returned to the pre 2000 levels, as if the dotcom crash had never occurred. In contrast every other major index is at 50-60% of its pre-2000 value. A more correct valuation of the DOW would be around 7000 instead of 10.500.

For the Nasdaq the value to profit ratios are at 25-30, exactly the same as before the crash. Google is valued at 413(!) times the profit. I think this kind of exuberance cannot last.

Added to that is the fact that like in the pre-2000 era nobody is able to point out why the stocks are rising. People buy stocks because the markets rise and the markets rise because people buy stocks. Meanwhile the fundamentals are looking bad: the dollar, the deficits, oil and other commodities, interest rates, employment etc.

I was reading trough the financial news this morning and one article immediately grabbed my attention and sent shivers down my spine.

Google founders to sell 7.2M shares
http://money.cnn.com/2004/11/19/technol ... /index.htm

Insider trades are always important to view the direction of the stock markets. When insiders sell you better listen. Insiders have been selling for a long time, but this is the first time I've seen it so openly. These three people are selling all the stocks which they can afford to sell, at the first opportunity that they can sell them. In other words they are running to the first exit they can find.

Add to that the growth warning they issued last week and the picture is ominously clear. The people who know think the market is overvalued and see a correction in the making. This is especially true for the techs but could well spill over to the other sectors.

With that I think that all the signals have turned bright red. With the overvaluation of the DOW the downward potential of such a correction is outright scary and could turn in a full blown crash. For those who are in the market right now it would be a good time to rethink your positions.

[Jack]

I agree. Also, in Bullseye Investing, the author points out that markets always revert to the mean in terms of PE ratios and so forth.

This market could decline 20% tomorrow and still be overvalued according to all historical measures.

Add in Peak Oil, and things could get interesting fast.