Prices & supplies – June 27

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Many more articles are available through the Energy Bulletin homepage

Oil Surges Above $140 to Record as Libya Warns of Output Cut
Mark Shenk, Bloomberg
Crude oil jumped above $140 a barrel to a record as Libya threatened to cut output, OPEC’s president said prices may reach $170 by the summer and the dollar weakened.

Libya may curb output because of a U.S. law that allows terror victims to seize assets of foreign governments as compensation. OPEC President Chakib Khelil said oil may surge on a European interest rate rise, France 24 reported. Oil, gold and copper climbed today as the dollar dropped because the Federal Reserve gave no signal of higher interest rates yesterday.
(26 June 2008)

$7-a-gallon gas, 10-million fewer cars: Rubin
Matthew Trevisan, Globe and Mail
A new forecast calls for gasoline prices to hit $7 (U.S.) a gallon in the next two years and oil to soar to $200 a barrel by 2010.

The report by CIBC World Markets also predicts there will be 10 million fewer cars on the road in the United States by 2012.

“Over the next four years, we are likely to witness the greatest mass exodus of vehicles off America’s highways in history,” Jeffrey Rubin, the lead author, wrote in Thursday’s report.

… By 2012, the report predicts, the average miles driven in the United States will decrease by 15 per cent, and sports utility vehicles, which accounted for almost 60 per cent of U.S. market share in 2006, will drop to less than half that level. Overall vehicle sales will drop from 14 million to 11 million by 2012 – the lowest level since the early 1980s.

… Basic laws of supply and demand are “no longer operative” in the crude oil market, the report says, compelling CIBC economists to raise their target for West Texas Intermediate by $20 a barrel, to $150 next year, and by $50 a barrel by 2010, for $200.

“Higher oil prices spell stagflation for the U.S. economy next year, and we have marked down our GDP growth to barely over 1 per cent for 2009,” Mr. Rubin wrote.

The report also predicts that by late next year, gasoline sales in the United States, growing at a rate five times that of the rest of retail sales, will overtake grocery store spending as the largest item in households’ non-vehicle retail spending.
(26 June 2008)
Commentary and summary of two CIBC reports by Joseph Romm at Gristmill: Must read CIBC report: $7 per gallon gas by 2010.

It would be interesting to see the original report and find out what they mean by “basic laws of supply and demand are no longer operative”, or if that is a misinterpretation by the reporter. It seems to me that is exactly what is in play right now. The more interesting question is whether that level of demand destruction will make a difference, which will depend on whether exported output remains somewhat stable or declines (that is not looking so good right now).

700 militants arrested this year, Saudis say
Ian Black, Guardian
Saudi Arabia has arrested 700 militants in the past six months on suspicion of planning attacks on the country’s oil industry and other targets, the interior ministry said yesterday.

The figure suggests the Saudi security forces still face a significant threat from al-Qaida despite the perception, at least in the west, that the organisation has been effectively beaten, or has at least peaked, in the country of Osama bin Laden’s birth. General Michael Hayden, the director of the CIA, said in an interview last month that al-Qaida had suffered “near strategic defeat” in Saudi Arabia and Iraq.

Saudi security forces carried out several operations and arrested 701 people of various nationalities, said the ministry spokesman, General Mansour al-Turki.
(25 June 2008)
Contributor driller writes:
I think one should be very wary about any news about planned terrorist attacks, especially if it is impossible to verify them. Anyway, this has a striking analogy to Stephane Menier’s science fiction movie “2013: Oil No More”.