THE Oil : Gold Thread (merged)

by **Graeme** » Wed 19 Mar 2008, 00:50:52

“Oil as the New Gold”: CERA Comments on the New Fundamentals of Oil and Record High Prices

$this->bbcode_second_pass_quote('', '�')��The new fundamentals” — global financial dynamics and new cost structures — are driving the momentum that pushed oil prices to a record high of $111.80 per barrel on March 17, before settling lower, still putting it well ahead of what had been the previous inflation-adjusted record high of $103.59 set in April 1980, according to Cambridge Energy Research Associates (CERA), an IHS company.

“Oil has become the ‘new gold’ — a financial asset in which investors seek refuge as inflation rises and the dollar weakens,” said Daniel Yergin, chairman of CERA and executive vice president of IHS. “The credit crisis has been fueling the flight to oil and other commodities, and that will last until the dollar strengthens or the recession becomes more pronounced.”

“Shortages of equipment and personnel are dramatically raising the cost of developing an oil field,” said James Burkhard, managing director, Global Oil Group at CERA, citing the latest IHS/CERA Capital Cost Index, which shows a doubling of oil field costs over the last three years. “Adding to this pressure is increasingly heavy fiscal terms on oil investments in the form of higher taxes and greater state participation in oil projects. The net result is much higher oil prices are needed to support development of new oil supplies.

“These financial and cost structure dynamics are new in the sense that they were not strong forces in determining the oil price in the 1990s and even earlier this decade,” he continued. “The ‘old fundamentals’ — the balance between demand and supply — still matter, but it is these new factors that are the driving force behind the record high.”

by **Colorado-Valley** » Wed 19 Mar 2008, 03:59:25

Hmmm ... I thought Yergin was predicting that oil was going back to $38.

Changing his tune a bit?

by **JohnDenver** » Wed 19 Mar 2008, 04:51:54

Yergin's right on this one. There aren't any fundamentals to justify a 20% rise in the price of oil in one month. It's a speculative dogpile. Harsh measures may be called for if things get out of hand.

by **centralstump** » Wed 19 Mar 2008, 10:21:56

$this->bbcode_second_pass_quote('JohnDenver', 'Y')ergin's right on this one. There aren't any fundamentals to justify a 20% rise in the price of oil in one month. It's a speculative dogpile. Harsh measures may be called for if things get out of hand.

by **dohboi** » Wed 19 Mar 2008, 11:00:22

JD is just jealous that Yergin has a unit of misjudged oil-price named after him and JD doesn't...yet. :roll:

JD, tell us where you think oil will be in three months, and when you are off by dozens of dollars, we can name a new unit of error after you, too :lol:

by **Johnvancouver** » Wed 02 Apr 2008, 02:46:29

Gold was sold off hard today, falling at one point $50 to $870, below $900 for the first time in about two months. Euro also fell sharply against the US $. Yet the oil price held firm above $100. Given the historically high correlation of the gold and oil prices movements, this is rather remarkable. I think this suggests the oil market is very tight. Does this mean the oil and gold markets will finally decouple? $100 the new floor for oil? I find it a bit scary when sharply falling gold and Euro couldn’t shake the oil traders. :shock:

OT: Check out the one month lease rates for gold and silver. They are presently negative. Central banks are paying the bullion banks to borrow and sell gold! Unbelievable. http://www.kitco.com/market/LFrate.html

by **Sys1** » Wed 02 Apr 2008, 10:44:20

Good find... So we have an inflation situation in term of constant dollar and an economy collapsing under its own weight (debt, subprime and real estate).
Stagflation, the nightmare of capitalism.
I should even say terminal stagflation...

by **Heineken** » Thu 01 May 2008, 18:23:03

Anyone noticing? I keep reading stories about record oil prices, but they are falling fast, for now. And gold has lost all support.

Why has the dollar strengthened? What basis is there for that? Such a silly game.

by **seahorse2** » Thu 01 May 2008, 18:47:44

My reaction is that the "big money" is re-entering the equities, meaning leaving commodities, bc they believe the financial crisis is over, simply bc the Federal Reserve committed itself to saving the big boys like Bear Sterns.

Personally, I don't think the crisis is over. I do believe as Jim Sinclair says that this "belief" that the crisis is over is not based on fact, and as reality of higher energy prices, the continued downturn in housing and the rest of the economy all set in, there will be a move back into commodities.

I think the big run up in gold for sure, was an indication of what a market "panic" looks like. Remember Cramer and everyone screaming the whole system was at risk, everyone moved to gold. Now they think the crisis is over, they move back to equities.

If one believes in PO and the economic ramnifications of it, then, the markets will panic again, its only a question of time.

by **emersonbiggins** » Thu 01 May 2008, 18:48:29

A hint at no more rate cuts ("I'll never cheat on you again, darling...")

+

A global currency devaluation, or "race to the bottom" - lots of soft, dead bodies to cushion the blow

by **joeltrout** » Thu 01 May 2008, 18:48:43

I actually think the dollar will regain its strength throughout 2008 therefore pushing gold prices quite a bit lower. Gold has lost more than 15% of its value recently even though people think we are going into a recession or already in a recession.

joeltrout

by **mark** » Thu 01 May 2008, 18:49:18

Can't beat something forever. Temporary break for oil, gold and the dollar. Can't say how long, but am prepared to hit 'em again when the bloom fades.

by **Twilight** » Thu 01 May 2008, 19:00:04

The dollar has its ups and downs. Maybe at 200bp the limit to further cuts seems closer?

Oil prices will not go anywhere in a straight line either. They should fall as the recession bites, but this time they could find themselves in a tug of war with export volumes. This will be a new factor for the market to wake up to. Who knows when?

Gold is just a metal. A useful tool for traders but not a great store for personal wealth. The people who think gold is money are little people who are probably going to get trampled.

What I would like to know is what the hell happened to the price of lead. OK, so China and the ME Gulf are buying a lot of industrial battery systems, but hitting $4000 per tonne last October and this latest bounce to $3500? I assume there is a bubble, but what is the story?

I expect Tin will absolutely crash though.

by **americandream** » Thu 01 May 2008, 19:25:29

The demise of advanced capitalism will not be swift as some seem to anticipate here, but rather will be characterised by plateaus, within which the threshold for what is acceptable, in terms of expectations, will have trended downwards in effect.

Declines will be followed by bursts of euphoria, then negative consolidation, then more declines etc, until resource exhaustion enters an unpunctuated phase.

These are early days yet, and theres money still to be made.....money aplenty.

by **dorlomin** » Thu 01 May 2008, 19:37:46

edited

by **jbrovont** » Thu 01 May 2008, 19:54:59

Kinda makes the Fed look like an innocent pawn in a commodity pump & dump scheme. Wait ... there's no way our pillars of society would make insider trades based on governmental action...would they?

Right - and a wet bird doesn't fly in the dark.

Makes the US look like Enron. If only I owned stock in America, I'd be selling it right now. Hmm, isn't that what the dollar is?

I guess this is as good a time as ever to sell!

And so wealth completes yet another round of consolidation.
</end bitterness>

$this->bbcode_second_pass_quote('seahorse2', 'M')y reaction is that the "big money" is re-entering the equities, meaning leaving commodities, bc they believe the financial crisis is over, simply bc the Federal Reserve committed itself to saving the big boys like Bear Sterns.

Personally, I don't think the crisis is over. I do believe as Jim Sinclair says that this "belief" that the crisis is over is not based on fact, and as reality of higher energy prices, the continued downturn in housing and the rest of the economy all set in, there will be a move back into commodities.

I think the big run up in gold for sure, was an indication of what a market "panic" looks like. Remember Cramer and everyone screaming the whole system was at risk, everyone moved to gold. Now they think the crisis is over, they move back to equities.

If one believes in PO and the economic ramnifications of it, then, the markets will panic again, its only a question of time.

by **Tyler_JC** » Thu 01 May 2008, 20:18:51

This is a great time to expand one's gold stash.

I'm considering buying another ounce or two at these bargain prices.

by **smallpoxgirl** » Thu 01 May 2008, 20:42:35

Oil was down $0.94 today to close at $112.52. Not exactly what I would call a plunge. PM's OTOH, are definitely taking a beating over the last six weeks.

$this->bbcode_second_pass_quote('Twilight', 'G')old is just a metal. A useful tool for traders but not a great store for personal wealth. The people who think gold is money are little people who are probably going to get trampled.

by **Revi** » Thu 01 May 2008, 21:12:45

The price of oil seems to be slipping a bit. Good. Maybe it's time to pre-buy my heating oil for next winter. I hope it goes back below $100 a barrel, because once the "summer driving season" starts up it will probably go back up, and stay there.

by **alokin** » Thu 01 May 2008, 21:15:47

joeltrout why do you think that?$this->bbcode_second_pass_quote('', 'I') actually think the dollar will regain its strength throughout 2008