Crude tumbled $3-$5 on world markets Monday before recovering most of the losses. Rumors of a coordinated release from SPRs (Strategic Petroleum Reserves) among the U.S. and European nations was the likely cause. My own take is that U.S. & other nations will first attempt to "jawbone" prices lower with controlled "leaks" (rumors). If this doesn't work, there will be a release prior to our November elections - and it will bring prices down 10-20% - at least temporarily.
Interview with oil analyst John Kilduff, NBR, Sept. 17, 2012
http://www.nbr.com/videos/video/1846067751001#.UFijUaN5mK0
Comments
Crude is still below 2008 peak.
However, crude is at $95.
I would love to see what $150 a barrel crude (which is more or less what we got to in 2008) would equate to at the pump, given that we're really not far from 2008 gas prices (or, apparently, higher during some recent weeks) with crude at $95.
Um, and I think oil going from $99ish to $94ish in the span of a few minutes yesterday was not a mere "fluctuation", but a rumor of SPR release (which was broadcast on Marketwatch and elsewhere.)
Additionally, if inflation is so tame (I was waiting for you to say that "any higher prices anyone is seeing anywhere for anything are transitory" - I'm surprised the government hasn't said that "smaller packages at the grocery store are an optical illusion"), why all the discussion of SPR releases? Why all the upset - if you think oil prices are less than they were in 2008, then there isn't a problem, right?
Finally, given that "median net worth of the middle class has plunged 28% since 2000 back to early 90s levels (while the upper tier class is up around 1%) and the lower tier down around 45%", (http://bloom.bg/S5daZ4, and the lower 50% owned 0.5% of the stocks and bonds in the US, but that was 2007 and it's probably a fraction of that now) I tend to think a fairly large portion of the population MAY be a tiny bit upset about prices rising yet further.
That's all.
It was suggested that the required SPR level is now much lower, and that releases from the reserve would be justified. However it didn't address the timing of such releases, particularly with respect to any possible political advantages that might be involved.
The US remains the world’s largest oil importer by far and is still exposed to the impact of rising oil prices, but the decline in imports has made it less vulnerable."
http://www.ft.com/cms/s/0/4611795a-63bb-11e1-9686-00144feabdc0.html#axzz26rDPd0Zr
I certainly think there is a rise (and some rails, such as Canadian Pacific, are doing well thanks to things like delivering "fracking sand" - http://www.bizjournals.com/pittsburgh/blog/morning-edition/2012/07/cp-smart-sand-partner-for-transport.html) in new forms of oil production, but the infrastructure of it - not to mention other aspects - becomes so politicized (see Transcanada's Keystone, which became politicized again over the Summer when China's CNOOC bought Nexen in Canada, and Republicans went, "See!? If we don't work with Canada on oil, China will be happy to buy." http://in.reuters.com/article/2012/07/26/usa-congress-cnooc-idINL2E8IQAXQ20120726 .)
The Canadians were not entirely thrilled when the whole thing was blocked in the first place, saying that it highlights their need to be less reliant on the US and seek out other customers for their resources.
Whether you believe that that's right or wrong, in a system where Congress can't agree on anything, any progress on energy will be lucky to go at a snail's pace.) When we have a congress that cannot agree on naming a street sign, I don't think they're going to do well trying to decide a possible move in the direction of something actually important, like energy independence, or even some more substantial degree of it.
It's not even entirely a matter of whether or not the SPR release is done - although the intent was to be used during times of crisis, but oh well - it's a matter of using it as another "rumor" tool - oil is too high, float a rumor. Stocks not happy, float a rumor. Currency not behaving, float a rumor. Etc etc. There have always been rumors in the past, but their frequent use as an element of the toolbox lately to the point where they seem near-weekly, if not daily at times, is going to cause more investors to leave the market - if they can't get a read on fundamentals because central planners continually attempt to intervene when something is not to their liking (bond yields too high, currency too high, stocks not high enough, commodities too high), people pulling back further should be no surprise.
Lastly, prices at the pump remain not that far off (more or less, depending where) vs 2008, despite oil being about $50 less a barrel.
http://www.washingtonpost.com/business/oil-declines-to-two-week-low-on-saudi-action-and-fedex-outlook/2012/09/18/72a49f20-01cb-11e2-bbf0-e33b4ee2f0e8_story.html
* Saudi's decided to pump more oil to lower prices.
* At the same time, European demand is declining
I bought gas around $3.50 last week. In 2008, the gas hit $4.00. This is 4 years after. In fact, the US production has increased since then.
Will prices go up? Absolutely. When economy grows demand will come back more fiercely and prices will hit above $4 again some time. But I do not see $4/gal (local) when demand is limited, Europe is slowing down and even falling into recession and China possibly hard landing. But speculators will be pushing the prices up and down.
Part of your statement about politicians reminded me of this 2012 Michigan ballot proposal:
MICHIGAN ENERGY, MICHIGAN JOBS: Initiative petition approved as to form January 20, 2012.
Purpose: Proposed constitutional amendment to require utilities to obtain at least 25% of their electricity from clean renewable energy sources.
'Course the real problem with this, is that such a proposal has no place as part of any legal constitution.
Michigan's surrounding area generally has enough wind sources to run wind chargers (old time name); but some of the folks involved with this all point to solar for electricity. NOPE, not in MI. We generally do not have enough "degree days/sunlight hours" to be of much value for the cost involved. Yuma, AZ.........well, yup; that will work there.
I note this proposal; as it mostly has roots, in my opinion; in that these projects will create permanent jobs. Indeed, there would be folks who would need to be in place for repairs and maintenance......... My take is that this is mostly a political joy ride; although I am sure there are some who feel this is really viable.
I have background is this area; as I was involved in the early 1980's with a solar heat project and also a wind charger for electricity. The solar heater really pumped out the hot air.....went the sun was out during the 6 months of the year; when the heat is really needed in MI. The fall through spring in most areas of MI find too many overcast days, due to the weather fronts and the massive amounts of water that does not freeze upon the Great Lakes. This combination lends to a lot of clouds.
So, solar electric has the same problems as solar heat. The small wind charger did product some electricity; but of course; needed a decent amount of wind.
Tecnology and pricing will find its place in this area as other costs move forward, and some projects in some places, will be valid.
Jacobs Wind Chargers, 60 to 100 years ago
Although the trip to Wyoming had other purposes too, several wind chargers were removed (with permission) from old towers at long abandoned farms and returned to MI.
Regards,
Catch