By on May 20, 2008

2417358198_e6752ae824.jpgWhile some people remain relaxed about the price of gas, few will take comfort in the fact that the price of a barrel of oil reached $129 for the first time this morning. According to the AP [via CNNMoney], even after Saudi Arabia promised to pump an additional 300k barrels of crude oil a day, the price spike continues over  "concern about global supply." Energy trader Nauman Barakat says he's seen "no news that would have caused the jump," but notes that strong demand for distillates used to make diesel (and heating oil), have been pushing up the price for those fuels. As for "Big Oil," Steve Austin at oil-price.net says governments in oil-producing countries "are demanding higher prices from oil conglomerates for tapping into their onshore reserves and sometimes even excluding them in favor of domestic expertise." Despite the large profits reported by Big Oil, Steve figures things look bleak for Big Oil. "In the 1970s, 80% of the world oil reserves were controlled by Big Oil companies, but now those numbers are reversed, with local government-owned oil companies holding 80% to 94% of the block." Steve's bottom line: "Clearly Big Oil's business model is due for a revision." After reaching the record high of $129.31 earlier this morning, the current price of oil (as of this writing) is $128.42… and rising.

Get the latest TTAC e-Newsletter!

32 Comments on “Oil Reaches a New All-Time High. Again....”


  • avatar
    Alex Rodriguez

    Great article from Ed Wallace about the role of speculation. At some point the politicians are going to wake up to the fact that we are swimming in oil, and asking the Sauids to pump more or stopping flows into the Strategic Reserve are going to do nothing.

    The price is being manipulated, bottom line, in a market that is completely un-regulated. Peak Oil is a myth, there is so much oil out there right now that countries are having difficultly figuring out where to store it.

    http://www.star-telegram.com/804/story/651928.html

  • avatar
    ppellico

    Could somebody..ANYBODY do us all a favor and give us the breakdown.

    Would it be so hard for somebody in this group of so called car industry experts to give us the good old PIE chart showing exactly what is responsible for what percentage of fuel cost increase.

    How much of the pie is speculation?
    How much is the shortage of refinery capabilities?
    How much of it is demand from China and India
    Taxes can be left out and done locally.

    But the increases have all been blamed on the above.
    We keep getting all the individual causes, but no real percentage.

    I personally want to know how much China and India are involved.

    I am tired of hearing accusations without knowing who or what is correct.

    This simply can’t be as blurred as global warming!
    There has to be some sort of data that can be used to give a really truthful chart.

    PLEASE…somebody use what skill and information you have with Excel and give us the damn chart.

  • avatar

    ppellico: …exactly what is responsible for what percentage of fuel cost increase.

    Not sure how you’d weight these in a spreadsheet. From Bloomberg News:

    Pure speculation:
    Crude oil rose above $129 a barrel in New York for the first time after billionaire hedge-fund manager Boone Pickens said that oil will reach $150 a barrel this year.

    Supply vs. demand:
    Supplies aren’t keeping up with demand, Pickens said…

    The weak U.S. dollar promts more speculation:
    The dollar weakened against the euro, prompting investors to buy commodities as a hedge against the currency’s decline.

    Yadda, yadda.

  • avatar
    ppellico

    Alex Rodriguez

    Alex…I applaud you.
    I thank you.
    That was a wonderful link.
    Why is this happening?
    Why is it that history simply must repeat itself?
    This is why eventually you wear down and end up sitting in a rocking chair…not giving a f#@k about anything.
    Eventually you realize you cannot fight the fight.
    You cannot sustain the energy required to fight the greed that the so called Lord has placed inside the human soul.
    Without it, we don’t compete and we die.
    With it, we live in this chaos mixture of good against evil.
    Fairness against greed.
    I just want to take a few days off from this and see if I can catch some weeds and leaves in the lake.

  • avatar
    Paul Niedermeyer

    ppellico: PLEASE…somebody use what skill and information you have with Excel and give us the damn chart.

    Impossible. There are many highly-compensated executives and analysts that couldn’t reduce one of the most complex issues facing the world into an Excel spreadsheet.

    My recommendation if you want to understand it better: read; a lot. There’s a very good article in this month’s National geographic. The Economist has done some excellent coverage. Just avoid the extremes, if you want to get a balanced picture.

    Anyone who tells you that “Peak Oil has already happened”, or “Peak Oil is a myth” is best avoided. The truth, like in most issues, is somewhere in between.

    There may be a bit of a bubble right now, but longer term, there isn’t a mainstream analyst out there who doesn’t think that oil supplies will get tighter and more expensive. By when? Try 2015, as the mean date of a number of experts.

  • avatar
    ppellico

    Glenn…Alex and I previously have submitted links from very educated professionals showing you exactly the opposite!
    Why did you again give the Bloombshit speculative crap?
    It is again madness.

  • avatar
    ppellico

    Paul,
    I agree that the truth usually ends up somewhere near the middle.
    But not always.
    There isn’t always a grey.
    There is a black and white truth.
    Crimes are committed and people go to jail.
    This should not be that difficult.
    IF the demand is dropping in the US.
    IF the refineries are backing off production…
    IF speculation has been panicking us into a group self hypnosis…
    Then there must be a general picture to show.
    2015 is a long way off to explain this mess.
    The truth that I see is not just 3 or 4 months ago, this was not the situation.
    Something has made oil jump from 89 to 125 per gallon!
    Nothing in the world has so drastically happened that oil should be where it is.
    Nothing.
    Winter is over.
    The world is not at war.
    So, there is speculation running amuck and the show.

  • avatar
    hltguy

    If Bush and company decide to attack Iran before his term is finished, the price of oil will absolutely skyrocket. I would not bet against military action against Iran in the not too distant future.

  • avatar

    ppellico: Glenn…Alex and I previously have submitted links from very educated professionals showing you exactly the opposite! Why did you again give the Bloombshit speculative crap?

    ppellico, I’d be the last person to profess to know what’s going on regarding oil prices. My blogging the news does not make me an authority.

    However, given that the article you provided the link to begins with “In My Opinion,” I’m hard pressed to see how that makes it the only possible “truth.”

    Just as William C Montgomery’s editorial on the subject is one man’s opinion.

    There’s a lot of emotion wrapped up in all of this; I’ve no idea who’s right, who’s wrong, or even if there are any black and white answers. And that’s the truth.

  • avatar
    Stingray

    You better get used to it… this is not going to be “news” anymore in the future. But it will be big news when it gets to 150$ and 200$.

    However, there must be an equilibrium point somewhere… or not.

    I don’t see the reasons for such a spike either. Think however that China’s demand has a lot to do.

    World is very complicated, politics and in some cases at war in many oil producing zones, so that also forces the prices up.

    And as commented before, to barely understand this, a big homework has to be made.

  • avatar
    Paul Niedermeyer

    ppellico: So, there is speculation running amuck and the show.

    It appears you already have formulated the answer to your question, then.

  • avatar
    ppellico

    Paul.
    Not sure what you mean.
    What question in particular?
    Yes, I think I have made my opinion clear as to what is causing the major panic.
    I am not really sure the percent.
    My gut is speculation could be responsible for most of the increase in the last 3 months.
    I know of no event and nobody has shown any.
    Without somebody actually giving me real numbers otherwise, how else could we believe?
    To simply tell me its the Chinese or the Indians…without any numbers, is hog-wash.
    Without numbers, its speculation, right?
    But I was hoping somebody had the skill to chart it.
    I do not at all accept the present cost of fuel as real.
    Well, its real in that it is…but mostly based upon speculation and fear.

  • avatar

    “We are swimming in oil” is an absurd statement. We should all wish that were so, then we could blithely go on burning the stuff ineffectively, instead of stashing it away for applications where it’s really useful.

    The world is not experiencing an oil glut – it’s going through a contraction in supply, and demand is still rising, though abating somewhat as economies are cooling off. (The high cost of transportation being one factor in that.)

    Even with a price correction due to a slackening in demand, there’s no point in hoping for a significant reduction. There’s just not enough new production happening, and existing sources are all (seriously – ALL) delivering below expectations, due to overoptimistic prognostication of available reserves.

    Not one – not a single one – not one major oil company has reported greater finds during 2007 than what was produced. This is a first. But expect it to become a constant.

    I can only smile at the polyanna statement from AR in the first post. It’s that kind of irreality that is turning this into a “why the hell did we build a village under that promontory” situation. We better face up to the fact that our strategies no longer fit the landscape.

  • avatar
    ppellico

    Stien.
    You simply cannot say things like this.
    Not with me.
    You cannot call a statement absurd unless you are willing to back it up with data.
    The article did.
    You have not.
    A contraction in supply and a growth in demand is nothing.
    Please.
    If you had more than enough before the growth, then the contraction has nothing to do with the price.
    It just another generalized and meaningless statement.
    If you have any facts, I beg to please us help out and present them.
    In fact, you last email has an absolute false statement.
    The truth is, many oil deposits have been discovered.
    Are you so unaware of the recent Brazilian discoveries?
    Please…facts, just the facts.
    Otherwise this continues into one of those PC nightmares like global warming blame it on America and cars discussions.

  • avatar
    Alex Rodriguez

    By “Swimming in Oil” I mean that stocks are above their averages and climbing, that there is so much pumped supply that countries are having to look for places to store it, no one is buying. Demand is falling year over year.

    The fundamentals of supply and demand CANNOT POSSIBLY account for a 400% increase in the price of Oil over the past 3 years. CANNOT. 400% inflation becuause of a supply that is very high and a demand which is falling?

    Please explain how rising supply, falling demand = 400% inflation. It does not. What is going on here is Katrina opened the eyes of investors and hedge funds to the profit in the oil commodities market. They are playing the market like a fiddle and have driven the price using fear, tiny margins and futures contracts manipulation.

  • avatar
    bunkie

    Crude oil rose above $129 a barrel in New York for the first time after billionaire hedge-fund manager Boone Pickens said that oil will reach $150 a barrel this year.

    This is the poster child of self-serving statements.

    ANd if there’s anyone out there who doesn’t think that Mr. Pickens is betting on a rapid fall from that lofty number at some point in the not-too-distant future knows very little about how the world works.

  • avatar

    Actually, Pickens was long on oil for a considerable amount of time, and only recently came around to the viewpoint that we’re running out. (Google away.)

  • avatar
    ppellico

    Don’t get me wrong.
    Again, I must state that I enjoy the cost rising as it has once again blasted open the R&D doors for many companies.
    Once again there is a flourishing of technical advances and earlier tried but never allowed ideas to find an ear.
    Events like this force the human spirit to shine.
    Its just a shame that we needed this to force down the congressional roadblocks for diesels.
    Soon, we might one day see nuclear power again.
    One day we will see refineries being expanded and built.
    But all I want is to have people acknowledge the truth.
    I have always admired this TTAC crowd because of its ability to talk straight.
    This is not because of a shortage.
    Not in this time period.

  • avatar
    ppellico

    I am done.
    This is going to have to rest with me.
    I think I have an easier time discussing the existence of god with my trashy friends in MO than the true cost of fuel with many.
    So, OK.
    The sky really is falling.

  • avatar
    d996

    Capitalism has always been marked by excesses of optimism or pessimism. The best line about the market is “prices can stay irrational longer than you can behave rational”. IMO oil markets are taking the path of least resistance up-until they don’t :)

  • avatar
    volvo

    Just my musings but I think that the oil producers decided to get smarter and harder edged.

    Lets say I sell widgets. I produce 100/day and my cost is $1/widget. I sell them for $2 and my profit is $100/day. I am not greedy and only need $100/day to be satisfied.

    Now I raise the price to $4/widget and still sell 100/day. Now my profit is $300/day.

    Now I raise the price to $6/widget and now sell 90/day. My profits is $450/day.

    But I see this is the point of elasticity in demand and since i am not greedy lower the price to $5/widget. Now I only need to produce 25 widgets/day to maintain my desired profit of $100/day. I produce those widgets before noon, close shop, have some wine and life is good.

    Sorry for the pedantic rant but I think what we are seeing is smart producers learning the price at which decrease in demand means the price has peaked. If I were that producer I would then cut production to maintain that price.

    I realize that the price of oil is not that simplistic and that speculation and pricing in a devalued currency plays a significant role but I do believe that for the first time since WW2 the true price of what developed economies are willing to pay for oil is being tested.

    Reduction in demand will occur but it will trail current price rises significantly (probably by several years) and in the meantime real economic pain (in the form of inflation and changing lifestyle) will be felt by societies highly dependant on oil.

  • avatar

    @ppellico

    It’s possible to link to just about any viewpoint on the net. Case in point, William Montgomery here, in an editorial, and Paul Krugman over at the NYTimes, are diametrically opposed on the topic of whether oil prices are the result of speculation or not. William states he “doesn’t agree with Krugman.” Which is a perfectly honorable position. Both are stating their chosen facts to support their arguments.

    Your linking to an article proves nothing. Oil is a finite resource. M King Hubbert’s predictions are on track. The price is rising – that’s my set of base beliefs. :-)

  • avatar
    ppellico

    Stein..
    Ok.
    Ok.
    I am breaking my own rule here, just to help out in clarification.
    Here is a link from TTAC itself…over under latest editorials.
    I will read whatever link you ewant.
    I simply need the real statistics, not opinions.
    Now…back to my religious discussions going on over in the next blog!!
    Thanks, Stien for your bantering…its always fun.
    https://www.thetruthaboutcars.com/the-truth-about-high-gas-prices-or-how-i-learned-to-relax-and-pay-67-to-fill-up-my-suv/

  • avatar

    Americans have less than 3% of the world’s oil and 0 of the top 15 oil companies(which are all state-run) yet still believe that they control the global price of crude?

    Why does this God-complex persist?

  • avatar
    M1EK

    Those who think this is all speculation must be really credulous towards the Saudis. How long now have they been promising they could pump more at any time, without even reaching their peak from a couple years ago, even as the price has skyrocketed?

  • avatar
    NickR

    Speaking of which…

  • avatar

    @ppellico

    You link to the article I referred to, from William Montgomery? Proving what?
    In the comments for that article I have linked to Krugman stating something quite different.

    Go to theoildrum.com if you want statistics, you can swim in them. But I would seriously recommend that you read The Hirsch Report, for the official, government authorized and approved version of what’s happening to the US energy supply. There’s a reason why The Pentagon is paying think-tanks to ponder the make-up of Post Petroleum USA.

    http://en.wikipedia.org/wiki/Hirsch_report
    You’ll find the link to the report itself at the bottom.

    And for Pentagon’s view on this, and the actual military writings, check this out. Then let’s talk:
    http://www.energybulletin.net/18056.html
    The literature listing at the bottom of the link is comprehensive, and once you’re through reading that, your hair should have a slightly greyer shade.
    Excerpt, from a study by the US Army Corps of Engineers, famous for their “the sky is falling” attitude to reality:
    “The doubling of oil prices from 2003-2005 is not an anomaly, but a picture of the future. Oil production is approaching its peak; low growth in availability can be expected for the next 5 to 10 years.”

    The report depicts the likely shape of future geopolitics: “In conclusion, we are clearly entering a very different period for global energy markets and relations. We shall continue to face geopolitical risks and uncertainties and concerns around energy security will continue to rise. Petroleum will remain the most strategic and political energy commodity with natural gas running a close second. .…The roles of leading actors in the global energy system will also change as the center of gravity for oil production shifts back towards the Middle East and Central Asia….Oil wars are certainly not out of the question.”

    You should also try to get a back-issue of this copy of Defense Technology International: The Military and the End of Oil, May/June, 2006 issue.
    http://photos1.blogger.com/blogger/1705/1331/400/Slide1.2.jpg

  • avatar
    esldude

    http://www.iags.org/china.htm

    http://news.xinhuanet.com/english/2008-04/29/content_8075648.htm

    You can read some about Chinese oil consumption. Recent years going up at 7.5% per year. More than that so far in 2008. Far more.

    US oil consumption is something like 20 million barrels/day. Chinese is maybe 8 million barrels/day. But even at the 7.5% increase per year they will use nearly as much as the USA in 10 years. The USA uses maybe 25% of the worlds oil. As you can see world consumption is going up quite a bit with likely little or no increase in supply.

    I don’t know the full cause of a bubble on current oil prices. I suspect some of it is increasingly widespread consideration of what the above facts will mean. So maybe the speculative bubble is pre-mature and some are using it to their advantage for profit. Even so, I don’t see how the above facts mean anything other than increased oil prices in the next couple of decades.

    One of the links above mentions that China has 90 times more cars than in 1990. This has been coming for a decade or more now. It just has reached beyond the knee of the curve to become obvious what is happening. Oil prices have gone up more than simple supply/demand would warrant right yet. But it likely isn’t off for near future conditions.

  • avatar
    menno

    Everyone is forgetting one additional little factoid.

    Oil is priced in US Dollars (for the most part) worldwide (the exception being Iraq just before it was invaded, and recently Iran – possibly just before being blasted out of existance).

    US dollars have lost 70% of their value between 1979 and 2007.

    Other currencies have retained more of their value compared to the US dollar, especially recently, and therefore it is AMERICANS who are feeling the highest price increases for oil, worldwide (except for countries which have currencies directly pegged to the US Dollar such as Panama, Belize, etc.)

    For example, the Euro started out at a value of about 85 US cents when it was created (if memory serves me right) and is now at $1.56 (approximately). Therefore, due to the Euro buying nearly twice as many dollars as it did a few years ago, the tripled price of oil is not felt as acutely by the Euro zone, but the full force of the 300% price increase in oil is felt by Americans.

    Look at this chart. And the comments below it.

    http://bespokeinvest.typepad.com/bespoke/2008/03/golddollar-rati.html

    Now, mentally turn the chart “upside down” and you’ll see that the value of the dollar vs. gold is plummeting.

    So – let’s recap briefly (because I’ve got to get to bed and get up and go to work).

    Historically, for decades, when talking in US Dollars (the recent worldwide currency of choice),

    -Canadians paid 150% to 200% of what Americans did for gasoline

    -Britons and Europeans paid 300% to 400% of what Americans did for gasoline

    Much of the difference in price was taxation, still is.

    Now,

    -Canadians pay about 20% more than Americans

    -Britons and Europeans pay about 100%-120% more than Americans

    See? Much of the price increase is actually aimed at Americans (possibly to try to reduce the amount of energy we use, in order for the rest of the world to have a better chance of getting in on the action/improving their standard of living).

    OPEC just said that oil “will be” $200 a barrel.

    So I guess, it will be-soon.

  • avatar
    Areitu

    At this point, OPEC could sneeze and the price of oil would go up again.

  • avatar

    Yesterday’s high is now a new low, as oil just went past 130/barrel.

    What about the “long crude estimates” – those stating what the price will be years from now?
    Peak Oil is beginning to make an impact there, as well. The price has surged in the past few days, and we’re looking at USD140/barrel in 2016. As these long prices are always very conservative compared to the trading prices (well, almost always) they’re taking some time to catch up to the reality on the ground.

    Check out Bloomberg for the details:
    http://www.bloomberg.com/apps/news?pid=20601087&sid=a_jM0ghSxR.s&refer=home

  • avatar
    Lumbergh21

    IMO none of the experts knows why this is happening. Quite frankly I don’t pretend to understand it either now. “Concern about global supply” sounds more like a conclusion based on the rise in oil prices with no visible reason behind it not a reason. Energy trader Nauman Barakat says he’s seen “no news that would have caused the jump,” seems to be a very telling quote; telling me that the experts are all just guessing as to why the price of oil continues to rise.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • Inside Looking Out: Where all the respected commentariat gone?
  • Inside Looking Out: I buckle up since day I was born. But in Russia or Soviet Union buckling up considered too...
  • Urlik: So true. Today it would be white, sparkly grey, light grey, medium grey, dark grey, and grey that is so dark...
  • Inside Looking Out: Why EV van cannot cover 300 miles on one charge per day?
  • Inside Looking Out: The question is: Will Amerika survive until 2040? Or even 2035? Or 2025?

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber