Oil - is it moving towards a bubble

[Rustic23]

Ha
You are right, however, I see the discussion as oil from wells, vs all other forms of energy. So in my world shale oil or tar sands are alternate energy. Now if we were talking global warming, and production of CO2 then I might take a different bent. Here, however, I felt the conversation was more energy independence. Alternate forms such as solar or wind, compete with shale and tar sands. In ref. to WSJ article the alternatives all cost more than what the current producers cost to produce crude. Therefore, investors are hesitant to invest. Making gas and diesel from coal is a technology that has been around for a long time. i.e. Germany used it in WWII. However, it can not compete with crude from the ground in cost. Investors are not going to spend billions for gasification coal plants and then have the Arab nations reducing the price of a barrel of oil to $30.

[ladelfina]

Commodities index up 7-8% over two years for non-dollar holders.. For dollar holders, up 25%. Red line is when Bush took office.

[chinaco]

Quote:

Originally Posted by ladelfina Commodities index up 7-8% over two years for non-dollar holders.. For dollar holders, up 25%. Red line is when Bush took office.

GWB 8 years we all would like to pretend did not happen.

Unfortunately we will have his legacy hanging over us for another 10 years.

[megacorp-firee]

Quote:

Originally Posted by ladelfina Funny how (I just skimmed most of these posts so forgive me but) I think that out of just about everyone here with all their varying opinions no one has remarked on the "high" price of oil being correlated to the super LOW dollar. Where I am in euro terms, gas really hasn't gone up.. it's been a pretty stable (high) price for a good long while; what's gone way up is the number of dollars I need to convert to buy a euro's worth of gas. IF the dollar were to recover (which I am skeptical about anytime soon).. oil would magically "go down" in price!!! All your base are belong to [??]. Oil is priced in dollars? Dollars are priced in oil. chinaco: It's GWB but also many before him that led the supply-siders to run things, so no one trusts the dollar. The dollar = shady credit and unsustainable debt where it didn't before. Cheney: "deficits don't matter". If you are buying petroleum or anything else with dollars.. they do matter, apparently.

Yep, I agree.
Previously I have seen/heard that the price of oil can be separated into 3 major components (at least).
1) supply demand price ? $35 (my numbers)
2) terrorism ? $35
3) weak dollar (because oil is valued in dollars) ? $35

If we get world stablility (not likely soon) then the price would down to $70
If we get world stability and the US stops flooding the market with it's bond, then the dollar would get stronger and the price would start to go back down towards $35 Or at least sub $50
IMHO ... wouldn't that be nice?

[al_bundy]

Quote:

Originally Posted by ladelfina Commodities index up 7-8% over two years for non-dollar holders.. For dollar holders, up 25%. Red line is when Bush took office.

so what did bush do to cause the dollar to slide?

[FinanceDude]

Quote:

Originally Posted by al_bundy so what did bush do to cause the dollar to slide?

Didn't you know? It's Bush's fault for everything, including one of my fillings cracking and the fact it was snowing when the sun was out yesterday...........

[DallasGuy]

Quote:

Originally Posted by al_bundy so what did bush do to cause the dollar to slide?

He got us into a war we shouldn't be in....and by the way, it's already cost the US about $500 billion and counting. That has driven up the US budget deficit and forced the US to sell more bonds...in turn this has driven down the value of the dollar because the US just keeps printing money to cover the huge deficits. I'm sure the war isn't the only reason for the sliding dollar, but it's a big part in my opinion.

[tomintucson]

I appreciate Ha's link to the piece penned by Charles Maxwell. I only skimmed the article, as I have subscribed to his views for a number of years, invested accordingly, and retired a little earlier than I would have had I adhered to some of the views expressed here.

I'm posting only to encourage readers of this thread to scroll up to Ha's link and give a few minutes of their time to a thoughtful summary of our energy quandary by someone much smarter than myself. In positioning my investment portfolio for what I hope will deliver preservation of capital with future growth, I'm playing with the big boys, swimming with the sharks if you will, and I'm thus highly motivated to keep abreast of what they're thinking. A really large percentage of the world's best minds work in the bloated money management business...because, well, that's where the money is...

[al_bundy]

Quote:

Originally Posted by DallasGuy He got us into a war we shouldn't be in....and by the way, it's already cost the US about $500 billion and counting. That has driven up the US budget deficit and forced the US to sell more bonds...in turn this has driven down the value of the dollar because the US just keeps printing money to cover the huge deficits. I'm sure the war isn't the only reason for the sliding dollar, but it's a big part in my opinion.

so why aren't treasuries yielding 1970's era yields? budget deficit as a percentage of pretty much every metric is about the level when clinton left office.

reason for the dollar being low is probably the fact that the Euro is a real currency now and trusted

[eridanus]

Quote:

Originally Posted by al_bundy budget deficit as a percentage of pretty much every metric is about the level when clinton left office.

Eh? We're looking at different graphs. As a % of GDP, it decreased under Clinton. It has done nothing but gone up under Bush II.

This data comes from the Heritage Foundation, which pulled its numbers from the CBO.

http://www.ombwatch.org/budget/pdf/D...centageGDP.pdf

Here's the CBO graph itself.

Monthly Budget Review

[al_bundy]

back when clinton came in the deficit was around 4% or so and if you look at the numbers, the national debt rose every year of the clinton presidency. even the supposed surplus years

[ladelfina]

FD, sure, I guess it could be just "casual"... Other people mentioned the invasion of Iraq (which was being planned in 2000), which is part of it.. but then there're also the Bush tax cuts.

Would you buy a stock with declining revenue and increasing expenses? Better, would you buy a stock where the CEO's STATED POLICY was establishing the declining revenue and the increasing expenses? The dollar is the stock of the US. Sadly, I was almost as much in denial as you are now.. just too afraid to jump ship and put my egg in euros. (Al, you're right.. I think the increased faith in the euro is part of it, too.)

In the 70s we had more mfg.; now the rest of the world makes more of their own stuff, and more of ours. We went from wealth in mfg. to wealth in technology to wealth in houses to wealth in "financial services". Where is future growth going to come from, is the question..

[eridanus]

Ladelfina, the CBO agrees with you. The deficit = the tax cuts.

"Based on Joint Committee on Taxation estimates, the tax cuts enacted since January 2001 are costing a total of $258 billion in 2006 (including the increased interest costs of the debt that result from the borrowing that is required to cover the lost revenues)."

The deficit that year? $260B.


edit: read too quickly and didn't notice the shift in argument

[Patrick]

I just saw a blurb on CNBC saying Goldman Sachs is predicting $200 oil.

[al_bundy]

go look at the total debt every year, not the deficit. Total debt increased every year of the clinton presidency and so did government revenue after the evil tax cuts

from what i remember it takes a 2/3 majority of the senate to pass anything so the democrats are just as much to blame

[ladelfina]

eridanus: right.. and then we pay INTEREST on that. The bigger the deficit, the more we have to pay in interest to maintain the deficit. (But "deficits don't matter"!!). Which makes all the talk of lowering interest rates to 'stimulate' the economy a little suspect. Lowering rates gets some of our debt off the hook, as apparently some foreigners will buy treasuries no matter how low the rates get (although we may soon find out that no longer holds true).

[al_bundy]

Quote:

Originally Posted by Patrick I just saw a blurb on CNBC saying Goldman Sachs is predicting $200 oil.

that probably means sell

i was looking at the charts this weekend of a bunch of commodities and most look like the peak of a head and shoulders patterns. just like Toll Brothers right before it peaked in 2005

[al_bundy]

Quote:

Originally Posted by ladelfina eridanus: right.. and then we pay INTEREST on that. The bigger the deficit, the more we have to pay in interest to maintain the deficit. (But "deficits don't matter"!!). Which makes all the talk of lowering interest rates to 'stimulate' the economy a little suspect. Lowering rates gets some of our debt off the hook, as apparently some foreigners will buy treasuries no matter how low the rates get (although we may soon find out that no longer holds true).

do you have any idea who owns most of the debt and collects the interest? there is a reason the deficit doesn't go away no matter which party is in power. it would cause too much social disruption if it did

[ladelfina]

true.

[Patrick]

Quote:

Originally Posted by al_bundy that probably means sell i was looking at the charts this weekend of a bunch of commodities and most look like the peak of a head and shoulders patterns. just like Toll Brothers right before it peaked in 2005

It just hit $107.50