Anyone Got a Clue on Oil?

[JPatrick]

I've been playing oil and oil service full tilt since about the middle of May.
Lots of profit and I've taken some along the way. At $60 a barrel I bailed out quickly only to find I was early.  I reentered yesterday morning with the thought of exiting before this weekend.
Some are calling oil a bubble,  yet we are not talking dot coms here. This stuff is real.  I have a difficult time imagining  any senario that would cause the sudden drop some predict.  I can think of plenty of reasons why oil could spike further, but not lower to any great extent.
The charts I use are screaming sell, but again, this is oil and the charts don't factor in hurricanes and such.  Supply and demand, and  China's economy all can have longer range effects, but those factors will provide an early warning of an impending drop.
So the question is:::What could happen overnight or over the weekend that could cause a major, more than one day drop in the price of oil

 

[wabmester]

So the question is:::What could happen overnight or over the weekend that could cause a major, more than one day drop in the price of oil

This weekend, we might defeat terrorism and start the flow of oil from Iraq.

Or declare Alaska a free-for-all drilling site.

Or Cold Fusion might turn out to be useful after all.

But your bet on supply and demand is probably pretty safe.

 

[brewer12345]

Overnight? I have no idea. However, if worldwide demand softens significantly, the price of oil could drop a lot. With prices as high as they are, a LOT of effort is being devoted to producing and supplying more oil. All of that extra supply is currently getting hoovered up because the US economy and many others (China, for example) are expanding strongly. There are some signs that the Chinese economy is slowing a bit. That's about the only real driver I can think of that will reduce crude prices significantly.

 

[haha]

Oil at $60 is obviously high, relative to the recent past. It may have been higher in real terms during the Iranian Revolution and OPEC shutdown, but these were brief emergencies.

The only reason for being heavily overweighted in oil would be if you believe in the "Peak Oil Idea".

I kind of do, but it is hard to be confident when everything you need to know is hidden. I know one thing-loading up on energy now, vs. 2 or 3 years ago, you either get kicked in the butt, or you make a fortune.

If you look at the out months on crude, you can see that the market is forecasting continued high prices. Of course, not long ago the same market was forecasting a large drop.

To stay high, short term China is the key. If they mess up, the price drops regardless of peak oil or schmeak oil.

If China keeps sucking it in- and they want to- and if Saudi Arabia is blowing smoke about increasing production to 12 mmbpd, then the price goes through the roof.

I think those who know most have incentives to lie, so take your pick.

I have gained over $250,000 in the last few years on O &G investments, but this is nervous territory now.

Ha

 

[laurence]

I have gained over $250,000 in the last few years on O &G investments, but this is nervous territory now.

Ha

Wow-ow-ow! The numbers on this site never cease to amaze me. Being a newbie can be daunting sometimes.

All I know is I just filled up and it cost me nearly $50!!! I carpool, and my DW's car gets over 30/gal, but gas prices are even starting to affect our bottom line. How are other's surviving? At some point consumer spending has got to nosedive, what money are they spending?

 

[justin]

How are other's surviving? At some point consumer spending has got to nosedive, what money are they spending?

I don't drive a lot. If gas goes up $1/gal, I pay a total of $10 more per month. I live near my workplace and near stores. I run errands on foot occasionally. When gas "skyrockets" (goes up $.10-$.20/gal) I laugh, because it really doesn't affect my car operating costs that much. The larger effect of higher petroleum fuel costs are passed on through goods and services. That is where I will start feeling the squeeze.

Jpatrick,
I think one thing that could cause a decrease in oil prices are the huge profits being made right now. These profits will induce non-oligopoly/non-monopoly market participants to extract more oil and explore for more oil. More and more oil can be "economically" extracted when the prices are this high.

 

[laurence]

It is certainly interesting to see what kind of innovations suddenly appear when costs rise.

http://www.msnbc.msn.com/id/8129979/

 

[Patrick]

It is certainly interesting to see what kind of innovations suddenly appear when costs rise.

http://www.msnbc.msn.com/id/8129979/

I heard on the news this morning that Brazil(?) is going to start making ethanol from sugar to replace part of its oil requirement. Why aren't we making methanol with all that corn that we're paying our farmers not to grow?

 

[brewer12345]

I heard on the news this morning that Brazil(?) is going to start making ethanol from sugar to replace part of its oil requirement.  Why aren't we making methanol with all that corn that we're paying our farmers not to grow? 

Beecause most of these cockamamie schemes use more energy than the resulting fuel contains. Brazil is almost certainly doing this more for political than economic reasons.

 

[tozz]

I believe the energy equation for sugar cane in Brazil is quite different than for corn from the midwest, i.e. the resulting net energy is (considerably) positive.  The major gripe last time I was down there was the poor quality/immature technology of the alcohol burning cars.

Beecause most of these cockamamie schemes use more energy than the resulting fuel contains.  Brazil is almost certainly doing this more for political than economic reasons.

 

[laurence]

Let's just buy all the oil the middle east has right now, with immediate shipment, so there's nothing left to fight for.

Seriously, ethonol, solar, wind, pebble bed nuclear reactors, anything to reduce our dependence.

 

[unclemick]

I vote for soybean diesel - caught that on the ag channel a few weeks back.

 

[greg]

I vote for soybean diesel - caught that on the ag channel a few weeks back.

I read an article a few months ago that you can buy a machine ($200?) that turns used cooking grease into diesel fuel, just add a little chemical and heat it up. Fast food restaurants give the stuff away if you ask. The only difficulty is you better like the smell of french fries. And you should send in the road tax to your state authorities if you plan to use it in your vehicle. See, they even tax you when you're not spending or making any money. Dang government. Oh yeah, you have to strain the crispy parts out too, before you begin the process, otherwise the fuel injectors clog up.

 

[sgeeeee]

I heard on the news this morning that Brazil(?) is going to start making ethanol from sugar to replace part of its oil requirement.  Why aren't we making methanol with all that corn that we're paying our farmers not to grow? 

When I lived in Iowa, all of the gas stations offered gasahol. You could get 2 extra octane points for the same price as regular if you bought the corn-gas. But I think the state had to subsidize the program to make it work.

 

[VoyT]

I read an article a few months ago that you can buy a machine ($200?) that turns used cooking grease into diesel fuel, just add a little chemical and heat it up. 

Don't know if he uses the same machine you speak of, but there's a fellow in California who's been running is suburban on biodiesel ...

http://pathtofreedom.com/pathproject/offthegrid/biodiesel.shtml

 

[MJ]

I vote for soybean diesel - caught that on the ag channel a few weeks back.

If cars started using soybean diesel would the cars have gas exhaust problems like people do.

 

[greg]

Last year I bought an agriculture stock called Bunge (BG) with a big footprint in Brazil. While researching it, I read a brief article about how when the price of sugar was very low the gov't subsidized production and started the ethanol production to use the product so the farmers didn't go down. Nowdays, they sort of wiggle the percentage of ethanol in the gas as needed to balance things out: When sugar prices are high, they reduce the amount of ethanol in their gas. And when oil prices are low, they decrease the ethanol content. It seems to work, although I'm not quite sure what they do when all commodity prices are high.

10% ethanol tends to rot gaskets and rubber parts on older engines. I believe that's why they limit ethanol to 5% in Iowa and Minnesota.

 

[greg]

I've got my little Jetta Diesel and think it's great. I never get less than 50mpg on the highway. And my city mpg is about 45--even in the winter. I get 60mpg at 60mph. I figure if I went 45-50mph, I cound cross the entire country on two or three fillups. It's also nice only getting gas once or twice a month. They've significantly improved the deisels over the years.

In high school I had a Mercedes 190D I paid $150 for. It rarely started in the winter and topped out at 50mph. I raced a city bus on the freeway once and lost--badly. Good thing was, he didn't know he was racing me.

--Greg

 

[brewer12345]

How well do the modern diesels do starting up n the cold weather (say 10F or so)? I've not got a garage, so keeping it warm before start-up isn't a possibility.

 

[Martha]

How well do the modern diesels do starting up n the cold weather (say 10F or so)? I've not got a garage, so keeping it warm before start-up isn't a possibility.

No problem with starting the Jetta in the cold. Above zero never an issue. It strained a bit last winter at -30 but started.

 

[brewer12345]

Interesting. If Subaru ever comes through on their hints to bring cleean diesels to the US market, that might be my next car. Gotta wonder why they don't do hybrid diesels...

 

[Martha]

Greg is anxiously awaiting hybrid diesel vehicles. Apparently it has to wait until the US moves to lower sulfer diesel fuel. http://www.worldchanging.com/archives/000791.html

 

[MJ]

After I get international travel out of my system, I probably would like to do full time RV travelling or even living. It would be wonderful if in 5 to 10 years you could purchase an hybrid diesel RV to cut the cost of fuel dramatically.

 

[greg]

For diesels, you can always get a one of those little plug in heaters to warm the anti-freeze or oil. We haven't installed one yet because we don't need it. The installation will depend on whether we keep this thing another ten years or so. As Martha said I'm waiting for the diesel-electric hybrid from Toyota. I absolutely love these things. It's an obsession.

BTW, my old Mercedes 190D had a little knob on the dash that you pulled until a light came on, then you could start it after the cylinders were pre-warmed. It was called the glow plug. If I was giving a girl a ride and as I was pulling out my keys to get in the car, I would usually say "Would you like to see my glow plug?" Then I would jump in the car and show them how it worked. If all went well, I would say "Do you want to try pulling it next time?" Depending on the response, I knew whether I had a keeper. I had a whole line of patter about it. Whether they were amused by it determined our future relationship and my interest.

So that was how my little obsessions-compulsions with off-beat objects got started. I bought the dang car because it had a glow plug.

--Greg

 

[TromboneAl]

I had a whole line of patter about it.

'zat how you hooked Martha?