[Rage]

How does the sale of oil figure in calculating the GDP? Is every dollar of oil profit a dollar on the producing countries GDP? Would produces spend a smaller percentage of GDP as the cost goes up?

[eXpat]

Arjun N. Murti an analyst at Goldman Sachs, predicts Superspike link
$this->bbcode_second_pass_quote('', 'A')rjun N. Murti remembers the pain of the oil shocks of the 1970s. But he is bracing for something far worse now: He foresees a “super spike” — a price surge that will soon drive crude oil to $200 a barrel.

Mr. Murti, who has a bit of a green streak, is not bothered much by the prospect of even higher oil prices, figuring it might finally prompt America to become more energy efficient.

An analyst at Goldman Sachs, Mr. Murti has become the talk of the oil market by issuing one sensational forecast after another. A few years ago, rivals scoffed when he predicted oil would breach $100 a barrel. Few are laughing now. Oil shattered yet another record on Tuesday, touching $129.60 on the New York Mercantile Exchange. Gas at $4 a gallon is arriving just in time for those long summer drives.

Mr. Murti, 39, argues that the world’s seemingly unquenchable thirst for oil means prices will keep rising from here and stay above $100 into 2011. Others disagree, arguing that prices could abruptly tumble if speculators in the market rush for the exits. But the grim calculus of Mr. Murti’s prediction, issued in March and reconfirmed two weeks ago, is enough to give anyone pause: in an America of $200 oil, gasoline could cost more than $6 a gallon.

[MrBill]

The nominal price of crude oil is largely irrelevant whether measured in US dollars or any other currency. What matters is petroleum's relative value to other commodites as well as wages and incomes, and, of course, physical shortages.

Commodity Price Inflation



Commodity Price Inflation in Euros


Notice the effect of the weak US dollar pales in comparison to real inflation-adjusted prices. That is actual demand outpacing readily available supply. Note that potential demand is always greater than actual demand. High prices ration demand where as available supply is limited by natural, physical and manmade shortages.



Unfortunately, I do not have an updated version of this graph to reflect commodity price gains in the past one year. However, just looking at a regression to the mean (say around long-term bond yields) that energy and commodity prices still have much further to rise most likely at the expense of property and equity prices.



I apologize for using different time scales for comparison purposes, but it is hard to get the complete data much less prepare and size those graphs.

That fact is that governments are addicted to the revenue from oil whether that is royalties paid to producing nations or taxes levied on retail pump prices. Were we to see a super-spike in crude prices governments can lessen the blow to consumers in a stroke by rolling back taxes. But they won't because they need the money.

BigTex wrote:
$this->bbcode_second_pass_quote('', 'T')he only point I would make about economics in general when discussing peak oil (and I've made this point in various ways before) is that economic analysis simply provides red flags in the form of high prices too late. I have no suggestion regarding a better system for determining prices and how to allocate resources, but this problem of providing dramatic market signals in the form of high prices 10-20 years after the market would have needed a signal in order to actually do anything about the problem is troubling.

I suspect that an economist would say that it is the job of government to correct a market failure like this by imposing the necessary taxes to provide the appropriate price signal (which is sort of what Europse has done, I suppose) if this is in fact a market failure, but I don't think the U.S. government is anywhere near that perceptive.

So we are sort of left with a good tool (economics) when we need a great one (enlightenment?). Or maybe human nature is the real problem, and so long as humans are the ones searching for a solution, one will never be found.

[dohboi]

Given the runup today, it looks like we're already inside your spike. But spike implies a price collapse, and that is not going to happen, or at least not for very long at all.

Post peak, hyperbolic growth of oilprices is now inevitable untill oil is no longer available at any price. How could anyother mathematical model apply at this point?

Most here and at TOD acknowledge that we are past light sweet crude peak. So there is less than half the amount available as there was.

Is that half going have a value less or more than the first half?

When there is only a quarter of all once-available oil left, will it have more or less value than the previous quarter?

How about the last eighth? The last sixteenth.....

At each point, what is left is worth more than what was pumped, and of course you can keep dividing in half mathematically for ever so you can keep increasing price or value forever.

That is the very nature of hyperbolic growth. We're on a one-way trip to infinity, and it's not going to be pretty.

[yesplease]

$this->bbcode_second_pass_quote('dohboi', 'A')t each point, what is left is worth more than what was pumped, and of course you can keep dividing in half mathematically for ever so you can keep increasing price or value forever.

That is the very nature of hyperbolic growth. We're on a one-way trip to infinity, and it's not going to be pretty.

[MrBill]

$this->bbcode_second_pass_quote('', 'U').S. crude oil hit an all-time high of $130.47 a barrel (EDIT: $135.04 today)

Robust demand for crude and a weak dollar have fuelled the rally from a dip below $50 at the start of 2007.

Adjusted for inflation, oil is now above the $101.70 peak hit in April 1980, according to the International Energy Agency, a year after the Iranian revolution.

DOLLAR WEAKNESS

The fall in the value of the dollar against other major currencies has helped drive buying across commodities as investors view dollar assets as relatively cheap.

It has also reduced the purchasing power of OPEC's revenues and increased the purchasing power of some non-dollar consumers.

OPEC oil ministers have noted that although prices are rising to record nominal levels, inflation and the dollar have softened the impact.

Some analysts say investors have been using oil as a hedge against the weaker dollar.

FUNDS

Since the Federal Reserve cut U.S. interest rates in mid-August last year and central banks pumped billions of dollars into financial markets to ease a credit crunch, oil and gold have risen.

Investment flows from pension and hedge funds into commodities including oil have boomed, as has speculative trading. At the same time, the credit crunch has brought some other markets, such as the U.S. asset-backed commercial paper market, to a virtual standstill.

Some of that money has found its way into energy and commodities, analysts say.

DEMAND

While previous price spikes have been triggered by supply disruptions, demand from top consumers the United States and China is a main driver of the current rally.

Global demand growth has slowed after a surge in 2004 but is still rising and higher prices have so far had a limited effect on economic growth.

Analysts say the world is coping with high nominal prices because, adjusted for exchange rates and inflation, they have been until recently lower than during previous price spikes and some economies have become less energy intensive.

OPEC SUPPLY RESTRAINT

The Organization of the Petroleum Exporting Countries, source of more than a third of the world's oil, started to reduce oil output in late 2006 to stem a fall in prices.

Fewer OPEC barrels entering the market helped propel the rally and consumer nations led by the International Energy Agency have urged OPEC to pump more oil.

At its meetings since December, OPEC has agreed to leave output unchanged, saying there is enough crude in the market. It next meets formally on September 9.

Few in the group believe there is much it can do to tame a market it says defies logic.

NIGERIA

Supply of crude from Nigeria, the world's eighth-largest oil exporter, has been cut since February 2006 because of militant attacks on the country's oil industry.

Oil companies and trading sources have detailed 559,000 bpd of shut Nigerian production due to militant attacks and sabotage.

IRAN

Oil consumers are concerned about supply disruption from Iran, the world's fourth-biggest exporter, which is locked in a dispute with the West over its nuclear program.

Western governments suspect Iran is using its civilian nuclear program as a cover to develop nuclear weapons. Iran denies this, saying it wants nuclear power to make electricity.

IRAQ

Iraq is struggling to get its oil industry back on its feet after decades of wars, sanctions and underinvestment.

Exports of Kirkuk crude from the country's north are stabilizing as the system recovers from technical problems that had mostly idled the pipeline since the U.S.-led invasion of Iraq in March 2003.

REFINERY BOTTLENECKS

Refiners in the United States, the world's top gas guzzler, struggled with unexpected outages which have drained inventories.

[dohboi]

YP, yes there is incredible waste, but at this point, as any PO book you want to lay your hands on will explain in great detail, we are hooked into a oil and gas intensive lifestyle in a thousand different ways, from the food we eat, to the ubiquitous plastics all around us to the air travel we have come to take for granted. At the very least. we're in for major adjustments of our lifestyles (lifestyles that, of course, are long overdue for adjustment).

And this is at a time in America when we are indivudually and collectively fantastically overdrawn on credit.

And even at this late date we are not even considering the simple, costfree measures that would immediately save gas (and lives) like lowering speed limits.

No, the US (at least) has just become too idiotically braindead to tie its shoes much less orchestrate the massive resources necessary to deal with the oil depletion cliff we have now jumped off of.

Have a pleasant ride down.

[municipal]

We are approaching the rim of the grand canyon with our ferrari and we are checking the road signs?

[yesplease]

$this->bbcode_second_pass_quote('dohboi', 'Y')P, yes there is incredible waste, but at this point, as any PO book you want to lay your hands on will explain in great detail, we are hooked into a oil and gas intensive lifestyle in a thousand different ways, from the food we eat, to the ubiquitous plastics all around us to the air travel we have come to take for granted. At the very least. we're in for major adjustments of our lifestyles (lifestyles that, of course, are long overdue for adjustment).

[solarpoweredlasers]

$this->bbcode_second_pass_quote('solarpoweredlasers', '
')Going to try EGO for a small pre results profit at 1.7c.. try and sell as soon as it hits 2.4 or somthing... about it really..

[Schadenfreude]

I was explaining peak oil to a friend of mine and said that solar stocks will have volatility but can't lose long term. So he asked me what to buy and I didn't know 'cause I haven't been watching the individual stocks closely.

But now I think I'm probably going to start dollar cost averaging in the solar sector myself along with him and we'll probably exchange ideas here and there and it will be an article of conversation between us.

So I'm looking around for stock stories. Seeking sensible thrills, not safety. What dya know?

Is the sector still overbought?

[smallpoxgirl]

First Solar (FSLR) and Claymore/MAC Global Solar Energy Index (TAN) both seem to be pretty popular. I haven't been impressed that either of them is trending up though. Both of them are pretty volatile so there's probably some money to be made swing trading them, but I don't think that I'd be into buy-and-hold'ing either of them.

[Revi]

I have some ESLR, which is Evergreen Solar. It went way up and then came way down. Now it hovers around $10 a share and doesn't seem to want to go higher.

If it ever gets to $18 again, I'm selling.

It was a fun thing to do, but I'm not buying any more.

[BigTex]

Just take a look at the P/E and ask yourself if gravity is still in effect.

[ivanillich]

I've been in stp and csiq off and on for a couple of years and currently hold both. Got in csiq at 15.67 and it is currently around 40. Most recently bought stp at around 44, but it is down around 42. Both are silicon-based manufacturers. FSLR's run-up far exceeds stp or csiq, but they build cadmium telluride cells, which, if I understand the process, requires tellurium, which is in increasingly short supply. On the other hand, my understanding is that after a period of relative shortage, more silicon supply is coming on-line. Here's a peak oil aware guy who suggests investing in mining stocks or silicon solar and shorting fslr:

Seeking Alpha

There are several other articles on solar from authors that are peak oil aware on that site.

And (to steal pup's disclaimer), remember, I'm some crazy guy on the internet, so do your own research and don't take what I say as investment advice.

[Carlhole]

[web]http://alt-energystocks.com/emot.php[/web]

Link

[Cashmere]

Option A -

Search for oil reserves that, if they exist, will boost stock value tremendously upon your announcement of the find.

or

Don't waste money searching for oil that IS Not THERE, but instead buy back stock, thereby driving stock price up.


Very simple calculus.

[SoylentGreen]

silly boy, big oil already found it all by 1980.

[Tyler_JC]

Oil companies aren't allowed to explore...ANYWHERE.

ANWR is off limits. Outer continental shelf? Nope.

Venezuela, Mexico, Saudi Arabia, Iran, Egypt, Kuwait, Nigeria, Russia, etc, etc, etc.

The overwhelming majority of the world's oil lies in countries or places that are off limits to multinational oil companies.

It's not that we're out of oil, it's that we're out of free oil.

The major oil companies have been kicked out of many of the most promising regions in the world. They have no option other than buying back stock.

When oil production peaks in the next year or two (if it hasn't already) it will be because the private oil companies weren't allowed to work in places controlled by the government state-run oil companies.

Does anyone think Mexico's oil production would be falling at its current rate if Mexico had allowed Exxon and Friends to drill freely?

Would Iraqi oil production be such a mess if that oil was sitting under Oklahoma instead?

Peak Oil was bound to happen at some point but geopolitical bullsh*t got in the way and now we are seeing a peak well before and at a lower level than the free market would have decided.

Just something to keep in mind.

[ROCKMAN]

The Big Oils suffer from their sheer size. I work with a large independent oil and we are spending money drilling just as fast as we can in certain plays. But the majors can't chase the same plays we do. It's too labor intensive for them. That may be difficult to appreciate for those who haven't worked for mega corporations. ExxonMobil et al need very large and expensive projects to invest in. They literally have neinther the time nor personnel to chase smaller projects (mu groups budget is almost $1 billion this year...and we're just one division). And therein rest the problems. The big and expensive plays are controlled by the NOC's. EM would love to plow $10 billion into the new big offshore Brazil play. But Brz has withdrawn all leasing opportunities away in this basin from all companies even their own Petrobras.