Slight Majority Of U.S. Energy CFOs Disagree That World Has Reached Peak Oil
Stephen Payne, Oil and Gas Investor
Approximately 48% of U.S. E&P chief financial officers believe that the world has reached its peak petroleum production rate or will reach it within the next few years, while another 52% disagree with that statement, according to a new survey by Chicago-based national professional services firm BDO Seidman LLP.
… The survey finds there are similarly differing opinions in predictions regarding when the world’s demand for petroleum will peak—31% believe it will be in less than 10 years, 43% believe it will be in 10 to 20 years, 14% believe it will be 20 to 30 years and 8% think it will reach peak more than 30 years from now.
(13 January 2009)
60 Minutes on Oil: Did Anyone Verify Anything?
Todd Sullivan, Seeking Alpha
So, 60 minutes did a piece on oil last night and, well, oops…
For those who do not want to watch it, here are the crib notes. A Wall St. cabal controls oil markets that Enron set up to manipulate prices. There is a little more but not much…
Let’s look at some of the claims…
… Was oil priced correctly at $147 a barrel in July 2008? No. There was some speculative excess but to suggest that what happen in 2007-2008 was “speculators” lacks in any basis of fact. Is oil priced correctly at $40 a barrel today? No. Far too low. Good, I’m buying…
For 60 Minutes to imply that supply / demand had very little to do with the oil price increases in 2007 and early 2008 is counter to what the EIA was saying. It does make a nice little story to blame it all on the villain of the day, Wall St. and to bring back the ghost of Enron, but it is still shoddy work on their part.
(12 January 2009)
What 60 Minutes Missed on Oil Speculation
Barry Ritholtz, The Big Picture
Last night’s 60 Minutes had a story on Oil Speculation. Its not that they said anything that was factually wrong per se, its more that they told 10% of the story of the rise and fall of energy prices. The entire report was surprisingly thin, and avoided discussing all of the many other factors that had been impacting energy prices during the 7 year rise and subsequent collapse (60 Minutes video here).
Very often, major bull market moves begin on fundamentals, but shift towards the end of its life into a speculative frenzy. These always end in a price surge (i.e., a blowoff top), which is followed by a collapse. But note that it is in the end game where speculation dominates, not the first 7 or 8 innings. That was true as much for Housing in 2005-06 as it was for dot com stocks in 1999-2000.
Hot markets always attract hot money.
But merely claiming that the run up in Oil prices was due to unprecedented speculation misses the big picture of what actually occurred. And, it reflects a lack of understanding of how markets work, and the psychology of booms, bubbles and busts.
Here are a few factors that I believe the folks at 60 Minutes either misunderstood or overlooked completely during the run up from $20 to $100:
1. Oil is priced in US Dollars. Since 2001, the Dollar fell 40% (from 120 to 72); Oil rise nearly 5 fold over the same period. And Oil’s collapse occurred over a period when the dollar formed a short term bottom; it has certainly had its most significant rally in years (72 to 88).
2. Over the same period that Oil prices were rising, the US was fighting two major wars in the Middle East, Iraq and Afghanistan. These impact prices via psychology and risk of supply disruption — especially at a time when producers were running flat out.
3. Energy prices rose during a global economic expansion (fueled by low rates and cheap money); Oil fell during a period that marked the beginning of the US recession and the start of a global slowdown.
… There’s a lot more, but the bottom line is this: Higher energy prices were caused many many factors over the past 8 years. Certainly, speculation played a part at the end of the run — but it always does. Oil fell more precipitously than it rose, but don’t all markets do that? Didn’t the S&P just plummet nearly 50% in a year, after a 5 year run?
Speculation is merely one aspect of what happened. 60 Minutes missed the other 59 elements . . .
(12 January 2009)
Related: A sloppy 60 Minutes segment on oil prices.
Jim Rogers sees oil at US$200 as world is running out of reserves
Business Intelligence – Middle East
Investor Jim Rogers is bullish on oil as crude prices collapsed to four-year lows and the world is running out of known oil reserves.
Rogers said he is the world’s worst market timer and a horrible short-term trader, but a sharp sell-off in oil prices suggested a bottom.
Rogers, who remains bullish on commodities, estimated known world oil reserves at today’s consumption rate are about 16 years, which indicates crude prices will again trend higher.
“Oil Reserves are dropping 7% a year and these drop in reserves will cause serious supply problems in the near future.”
“We’re going to see US$200 oil at some point, it may be by 2013. It’s a sad fact but the world is running out of known oil. Oil will make a big comeback,” he said”
Peak oil has been the subject of debate for many years and has largely been ignored by industry optimists but has continually worried many industry experts.
(13 January 2009)
