[lowem]

Me, I'm holding out for at least $75. Hopefully not too much to ask for considering the looming 50/200-dma crossover.

Let the Fed continue to pump, at least until something breaks.

[vision-master]

Oil/ gas prices always increase during the summer driving Months.

[AirlinePilot]

Its probably a combination of many things.

First, the "green shoots" mantra IS having an effect on the futures. it's being sold well that moving forward the global economy Is getting better. I dont believe it for a minute though, too many fundamental issues need to get worked through for that to actually happen. File this under HOPE. It is affecting oil price though.

Second, the dollar is not doing well. Monetary policy by the Fed is having a negative effect on the Greenback and its resultant effect on crude prices. I expect more of this and to a greater extent over the coming months.

Third, Producers have cut back due to the collapse in price and demand signals. I think though that this is more of a knee jerk that is beginning to have a backlash effect. We WILL work through the inventories in the coming months and cause higher prices due to that.

Fourth. Its becoming common knowledge that the oil (and NG) industry has cut back forward investment significantly and there is no other way for this data to affect price other than for it to go up. Historic rig and drilling lay downs will have an effect on production going forward. Also, the time line for a recovery of production will likely lag any economic recovery demand signals.

Fifth, China and to some smaller extent, other nations are converting dollars into tangible assets and commodities. This due to the monetary policies of the Untied States pointing to danger for the dollar and the "Full faith and Credit of the US Government" down the road.

Sixth, Oil is probably priced somewhere currently near or slightly below where it needs to be for a healthy industry to exist. Healthy in the regard that Rust is kept at bay, and the higher costs of more difficult oil can be met by investment of revenues moving forward.

Seventh, and this is the really important one, and probably the hardest to get a hold of, it seems that there is some chicanery going on with inventory, demand, and production numbers. Maybe enough to support the premise that the drop in demand is not as robust as a lot of us here thought a short while ago.

All these factors combined point to higher prices moving forward, and I didn't even MENTION DECLINE OR PEAK OIL!

I also did not say a word about the global political scene I.E. Iran or North Korea.

The only way i see prices coming back down again is from two possibilities.

1. Global demand collapse of 20-30% due to a rapid collapse of the US economy and resulting chaos/ripple effects from that. I consider this plausible.

2. China is hit by a cosmic body big enough to wipe out a large portion of their population and hence their demand for oil. I do not consider this plausible(at least in the near term).

[liammcglynn]

There is a reasonable probability that the US will suffer severe inflation within the next few years. Should this occur, foreign suppliers may balk at delivering oil to US refineries in exchange for dollars. Depending on the level of inflation, the gasoline supply chain could collapse, at least temporarily.

Another impact of inflation is cash aversion. Corporations will convert any capital into assets. One beneficial outcome of such cash aversion is the increase in machinery orders which flow into an increase in employment. With the increase of machinery and employment, we can also anticipate an increase in energy demand.

We can therefore speculate on effects of these two dynamics - one temporary and the other less so. I do not believe that current models account for this possibility. Further, the UK, Japan, and EU may face similar prospects with emerging countries on the other side of the current account equation (Brazil, Russia, India, China, etc.). The net impact could be an acceleration in energy demand from a large portion of the global economy. Given the poor condition of oil infrastructure, these factors could create a sudden and somewhat prolonged supply shortfall that serves as a prelude to a later and more permanent crisis.

In summary, severe inflation could overwhelm current predictive models. To some extent, the ensuing emergency could instigate the kind of preparations that have long been neglected.

[DantesPeak]

Welcome liammcglynn. Good post.

The US is very much unprepared for the post peak oil world. Our solution appears to be inflation, quite likely to give way later to some kind of hyperinflation and depression.

Actually it was pretty clear since oil started rising around the year 2000 that monetary policy was the main tool that would be used in the hopeless attempt to mitigate the affects of peak oil. Luckily the US did manage to accumulate a bit of a strategic oil reserve with prices still reasonable.

Please step into our other similar discussions.

[liammcglynn]

[quote="DantesPeak"]Welcome liammcglynn. Good post.

The US is very much unprepared for the post peak oil world. Our solution appears to be inflation, quite likely to give way later to some kind of hyperinflation and depression.

When you and I accumulate debt, we must either repay it or declare bankruptcy. I would love to go into my basement and print money but the government has reserved that privilege for itself. With federal debt, the government has three options: pay responsibly as obligated; default; or print money. At this point, the first option is not really on the table and the default option is severe.

I would like to think that our leaders have a plan for oil depletion but inflation would not be part of that plan. A weak dollar will make oil more expensive for the US. Actually, when the dollar weakens sufficiently, OPEC seems likely to start trading in other currencies. Currently, all oil (with the exception of Iran) is traded in dollars. Once OPEC agrees to trade in euros, renminbi, yen, and reals, our inflationary crisis will quicken because the world's central banks will not need to keep as many dollars in reserve. These excess dollars will increase the "velocity" of our currency and wreak havoc on prices.

The US will suffer its most severe energy crisis when OPEC refuses to accept dollars for oil. At that point, dollars become hot potatoes. Intermediaries will use electronic trading to offload dollars as quickly as possible. Still, they have to land somewhere and those doors will start closing when exchange rates become wildly unstable. The net effect is that US refineries will have difficulty securing foreign oil. The ensuing shortages will bring transportation to its knees and I expect disruptions in the supply of common goods (e.g. groceries). It would be wise to have an EV by that time.

The disruption will probably last between 3 and 6 months as terms of trade are adjusted to compensate for dollar volatility.

In short, the US seems oblivious to the impending crisis in oil supply. If our foray into Iraq was intended to offset our future shortage, our leaders botched it. Our toehold is tenuous at best. We are at odds with Iran, Iraq, Russia, and Venezuela. If there is a plan, it is well hidden. Inflation will hasten the crisis and further alienate us from our trading partners.

As for timing, I would be a fool to predict anything but I am frequently foolish. I had thought that the dollar would collapse in Q3 2013 but the recent imposition of tariffs on Chinese tires has rattled me. China is key to the dollar's continued international support and that support exists because a dollar collapse will vaporize reserve assets in central banks across the globe. I anticipated that our trading partners would require several years to quietly put in place an alternative global reserve currency while also shifting their assets away from dollars. That process is complex and highly political so I figured that it would buy us some time. I am not so sure now. Watch how this tariff situation evolves. China has already chosen its targets for retaliation and they hold all the cards. I anticipate that they will decide to assert themselves as heir apparent. If the administration chooses to counter, our inflationary timeline becomes much shorter. China's ultimate weapon is about $700 billion in dollar reserves and its presence at Treasury auctions. Their exit may trigger a stampede by other nations. The last nation out the door pays the bill.