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Peak Oil/Peak Exports


davo22

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According to one report on CNN this morning most analysts/experts do not believe that "the rising oil price is supported by fundamentals" I suppose they are the same people suggesting avoid oil stocks. Maybe they are right ,but what if they are wrong? Will they at some point admit that oil/gas companies with proven producing reserves are worth looking at? Many on SS including myself are of the option that many Australian junior oil stocks that fall into this class have been way oversold, so it will be interesting to see who is right the oil/gas posters on SS or the expert/analysts.
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Hi Avenger

 

With something as critical as fuel we would already be in the endgame if there were widespread and chronic physical shortages. However from time to time there are already short-term shortages occuring in Chinese cities as the authorities try to balance growth and inflation.

 

From another angle, assuming some level of demand elasticity for petrol, if US consumers paid a similar price for petrol as consumers do in many other countries (i) there would be less pressure on current supplies and (ii) there would be greater incentive for the big US oilers to explore more vigorously and to develop what they have found.

 

http://www.economist.com/finance/displayst...ory_id=10733112

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In reply to: Monteverdi on Wednesday 12/03/08 07:48am

M,reckon you have hit the nail on the head there,history tells us that a small inflationary fire --with dry grass and a gust of wind ,will multiply into an unstoppable inferno in seconds. Have noticed most of Asia and ME countrys have heavily subsidised fuel,govts. trying to wean their populations off this distortion are confronted with violent protest and riots,and even the strongest dictatorship is in serious risk of being overturned if they try it---the dry grass is already there---this might provide the gust of wind that unleashes the inflation genie---Ben didnt help last night Tom

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In reply to: davo22 on Wednesday 12/03/08 10:41am

Hi Davo22

 

Since our in house expert disdains from answering my question, I'll ask you, and you may shed some light on the subject from me.

 

Please explain to me how the price of oil is set. Simple question. Is it demand and supply of the physical oil or is it supply and demand of a theoretical physical oil on the stock or futures exchange. Is it an orderly market, where oil producing companies forward sell their oil and buyers do the same? Or is it purely a gambling house? Or is it a combination of the two?

If its not purely trades for actual deliveries, what proportion of trades are for actual deliveries? ie they are closed with actual delivery of oil.

eg That French trader who lost his bank billions, was trading futures purely for speculation.

What ever he was trading, was never going to be delivered, but sure as hell affected the price.

If you don't know the proportion of trades of actual deliveries against the gambling trades, how can you equate that to actual supply and demand of the physical oil?

 

Thanks Davo, your assistance would be greatly appreciated.

 

Regards

 

 

Avenger

 

 

 

 

 

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In reply to: Avenger on Wednesday 12/03/08 10:08pm

Ultimately it is supply verses demand.........trading can alter prices in the short term but without the ability to store vast quantities of oil hedge funds and the like need to sell the oil back into the market........obviously the more money that piles in the more volatitlity you will see.........of course, thanks to OPEC, supply can alter significantly as well.....

 

So rather than short term price fluctuations I would rather look at the longer term trend as that is linked to demand and what is sustainable..........and assume that OPEC will support the price by cutting production should demand fall below supply....

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According to Venezuela's energy minister ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“it is not a market of shortage, the market has plenty of oil" but that OPEC couldn't pump out more oil even if it wanted to.

 

http://www.resourceinvestor.com/pebble.asp?relid=41146

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In reply to: davo22 on Thursday 13/03/08 05:49am

Thanks Davo

 

You have just reinforced to me what an idiotic answer "its the market" is. Its just used by people who have no understanding of what a true market is. And i am not talking about you Davo, I am referring to so called experts who have no idea and just mock any body who dares question them.

 

But if I read your answer correctly, you are not quite sure what sets the price, but rather in the long term true supply and demand will win out. Or the fundamentals will win out. Am i correct? eg You would have to be a dill to believe that supply or demand for the physical oil has shifted by such a huge amount to push the price from $90 to $110 in the space of two weeks.

 

So my question to you is what is the length of short periods which can affect the the price which has nothing to do with actual current levels of prduction and demand? 1 week? 1 month? 1 year? or like a bull (or bear market) it goes on feeding on itself until exausted?

Remember, if you open a position, you don't have to deliver or buy the oil. You just need to close it.

And I repeat the Arabs have consistantly stated in the last few years that they are not responsible for the price of oil. They have no wish to see the world into depression if oil stays at current levels.

 

Regards

 

 

Avenger

 

 

 

 

 

 

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