I think you’ve got a pretty good handle on it, Dave. Oil is going up for a variety of reasons but one of the prime ones is the ‘Enron Loophole’ you described concerning oversight on traders in the commodities markets.

Another piece of the puzzle – specifically concerning these folks came roundabout to me from the following Federal Reserve chart that recently stunned me. http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s[1][id]=BOGNONBR&s[1][transformation]=ch1

This drastically shows the money the Fed pumped out starting in March of 08 to be used to stabilize the credit and sub-prime markets. Yet, as serious as these are, they seem to be low-profile lately – at least any substantial efforts are. My guess is that much of this extremely low interest money is being used speculate on the oil bubble in order to strengthen the stability of those banks/brokerages – kind of like going to bingo to win money you lost at the track.

I guess we’ll find out starting June 15th when all that government debt is due to begin to be paid back. Will oil prices stabilize or go down? Or will the profit be too good and defaulting the government be a better deal?

I’m no brainiac on big money movements but this one struck me as VERY significant.

by Christopher Wright (17 articles, 2 quicklinks, 3 diaries, 31 comments) on Sunday, May 25, 2008 at 11:52:54 AM

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Great graph, thanks!

I wonder if the Fed cares though - it sounds like they are more than willing "to further increase the size of these loans in the future if warranted by financial developments."
 

by Dave Wheeler (2 articles, 3 quicklinks, 0 diaries, 22 comments [2 recommended, 0 rejected]) on Sunday, May 25, 2008 at 9:56:10 PM

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by August Adams (11 articles, 0 quicklinks, 1 diaries, 583 comments [11 recommended, 0 rejected]) on Sunday, May 25, 2008 at 2:01:57 PM

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Why is the price of oil going skyward?

Heaven knows!

Let us just print up some more money by the Fed Reserve and let's have a

party.

Ego-nomics is a very easy course to learn. You maximize ME, and

denigrate YOU. Then fill your pockets with ducats of  lucre!

by Wolfie (9 articles, 0 quicklinks, 33 diaries, 1208 comments) on Sunday, May 25, 2008 at 4:57:34 PM

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Want some insight into the kind of thinking that probably goes thru oilman Cheney's head in times like these?

 click here

by delia (0 articles, 1 quicklinks, 0 diaries, 112 comments) on Sunday, May 25, 2008 at 7:42:54 PM

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Want some insight into the kind of thinking that probably goes thru oilman Cheney's head in times like these?

 click here

by delia (0 articles, 1 quicklinks, 0 diaries, 112 comments) on Sunday, May 25, 2008 at 7:43:06 PM

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Here's a working link to the original blog.  I'm thinking this blogger took the original article out of context, which is sarcastically saying that if we don't raise interest rates (or somehow pay the piper for the all of our profligate spending & borrowing), the invasion option is the only way to keep the economy from collapsing.

Although the way he phrases the invasion option is exactly how I'd expect Cheney ("The natural state of man is war") to see global economics!

by Dave Wheeler (2 articles, 3 quicklinks, 0 diaries, 22 comments [2 recommended, 0 rejected]) on Sunday, May 25, 2008 at 9:50:58 PM

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Many confuse production with the amount of oil available. The world has 1.3 trillion barrels of oil proven reserves, and another 1.7 trillion in probable and estimated to be new discoveries. Only 35 years ago we had 650 billion in proven reserves, and despite our drastic increase in consumption, this has doubled today. World oil consumption is 33 billion barrels per year, we have another 40 years of oil left, even if consumption doubles, based on proven and probable, and expected discoveries.

The production that determines our supply, that of actually removing the oil from the wells, is controlled by cartels of Big Oil and Opec. Limiting production results in higher prices. 

Once oil hit 60 dollars a barrel in 2005, oil from tar sands in Canada, became  economically viable, and they have 175 billion barrels of it. All of it will come to the US as Canada exports 99% of their oil exports to us. FYI, we use 7 billion barrels of oil per year (the Pentagon uses 100 million barrels per year). Canadas oil sands are 20 years of US supply, although it will only provide is with 1 billion barrels per year by 2015 (15% of our current consumption) due to environmental concerns. In global terms, it is a 5 year supply. Information came from a CRS report to Congress last year.  Doesn't seem to affect the markets though.

It is true is that the gap between production capacity and demand is shrinking. But this is not due to a shortage in oil in the ground. The thing is, increasing production and supplies at current levels of reserves requires investment in production capacity, storage capacity and refinery capacity. That investment has been minimal despite forecats of increasing demand. The answer why is clear. Higher prices = more profits. Lower supplies = higher prices and higher profits.

Big Oil would like you to think they are dependent on the nations having the largest reserves, and most people blame the Saudis, since they control OPEC and OPEC has 40% of the oil production. In fact, these nations are  dependent on Big Oil, Saudi perhaps less so than most. But even if they have the equipment and refineries, and their own tankers, much of the equipment for replacement and new capacity and the parts required for oil production and refineries are controlled by companies controlled by Big Oil.

So lets look at proven reserves, production capacity and refinery capacity. Increasing reserves, and increasing production capacity to remove these reserves and increasing refinery capacity to refine it, and increasing storage capacity to hold increased production costs money.

Demand we know is relatively inelastic. The world is dependent on oil. It's essentially a monopoly. There are not a lot of options. Natural gas is also controlled by Big Oil, and the environmental scare mongers have eliminated the nuclear option, and Big Oil now controls uranium supplies now anyways.

So you have a rather inelastic demand and a monopoly or cartel increasing prices by controlling the reported amount of proven reserves, and the supply of oil relative to demand is reduced by limiting the growth of production and refinery capacity. The nations and consumers will pay what it needs and can afford. If they can't afford it, they have to borrow it (international bankers, and also the World bank/IMF are happy). They may use less of it, say 10% less in a recession, but if the price increases 50%, so what, Big Oil still make more money selling less. Oil is essential to grow food, No oil, no food. They have us over a barrel, no pun intended.

Spending money to increase proven reserves and production/refinery/storage capacity would increase supplies relative to demand. Prices would go down, and not up. Who wants to invest in something which will devalue your main product? Monopolies and cartels do not do that. That only happens in competitive markets when you want to eliminate your competitors by driving prices down.

Thats how Big Oil became Big Oil. Little Oil has been crushed, extinct as the dinosaur, since Big Oil kept the price of Oil low for many years to eliminate competition from nuclear power and the smaller Oil companies.

Who profits from not investing in finding new proven reserves, or proving probable reserves as proven, and in not investing in the added capacity to extract and refine the oil? This is clear. Big Oil, and the nations having Oil are willing to go along for the ride.

The Big Oil Prophet Hubbert warned us of the dangers of Peak Oil 50 years ago. We are running out of oil he says.   Then we had the Oil Shocks in the 70's, orchestrated by the Big Bad Oil Sheiks running OPEC, while Big Oil pumped, shipped and refined their Oil.  At that time, as the dollar was taking a beating since scrapping Bretton Woods. OPEC Sheiks came to the rescue, and insisted on USD for their oil.   Then we had TMI followed by Chernobyl, and our last great hope, nuclear power was taken off the table as too dangerous. 

But Oil suddenly became cheap again after Volcker killed inflation, and killed the economy, and people were happy at the pump despite the fact their jobs were being moved to China while immigration fueled population growth. If people were to become poorer, business needed more of them to grow and consume, so we needed immigration to add more consumers and more debtors to charge excess usury.

And yet, in this world of ours, where the neoliberal economics of the Chicago Boys say what's good business is good for the people, Big Business has no Plan B. Nobody seems to have any ideas what to do as a solution except use the oil that's running out to grow corn and convert the corn to ethanol. That must be good for business (Big Agri-business), and the people, not so much.

We all know the Pentagon runs their military machine on oil, and is in fact the single biggest consumer in the US, and consumes more oil than a number of countries. And in this day of War and National Security hysteria, we will leave the solution to business and the markets despite the obvious national security ramifications of being without oil.

In WW II, confronted with the possibilty that Hitler would develope the bomb before we did, we undertook a Manhattan Project, and threw all of our available resources into beating them to the punch. Yet today, we are told we are in a long War with Terrorists and the oil is running out, yet we have no Plan B or Manhattan Project.   No Capitalists taking advantage of the great opportunity a new fuel source would bring (spare me the solar and wind options, both need backups dependent on Oil). No Governments getting together and pooling resources and working together with the energy giants and scientists to find an alternative to a resource that not only gets you to work but which every company relies on and which is essential to feed our world, including our military machine, despite it's imminent depletion?

The Dubai Mercantile Exchange (DMEX) was set up by NYMEX on June 1, 2007, when oil was 60 dollars a barrel. Today it is at 135 dollars a barrel, as the world heads into a recession which projects to decrease demand.    The US Government energy futures regulator, CFTC opened the way to the present unregulated and highly opaque oil futures speculation. It may just be coincidence that the present CEO of NYMEX, James Newsome, who also sits on the Dubai Exchange, is a former chairman of the US CFTC."

Consider this.

http://uk.reuters.com/article/oilRpt/idUKL2232289720080522

"Oil prices at a record high above $135 a barrel are rising due to market sentiment rather than a shortage of supply, Royal Dutch Shell's chief executive said on Thursday.

"What we say and what we see is there are no physical shortages," Shell's Jeroen van der Veer told Reuters television. He runs the world's second-largest fully publicly traded oil firm by market value.

"There are no tankers waiting in the Middle East, there are no cars waiting at gasoline stations because they are out of stock. This has to do with psychology in the markets and you cannot forecast psychology".

Thats a Big Oil insider talking, and this implies financial speculators are manipulating the prices, and creating an Oil price bubble, perhaps to make up for their losses in the sub-primes.  My bet is it gets popped before 200 dollars, a comes down to earth, which might be 60-100 dollars now.

I don't know about you, but I think this shows Government and International Finance behind the conspiracy with Big Oil.  Perhaps motivated by the use of Oil as a weapon against countries dependent on imported oil who are resisting their demands, perhaps it is more sinister. 

FYI, Thomas Gold had a theory on oil developed in 1977, which Russia also had believed this to their benefit. Thomas Gold was a respected scientist that even NASA listened to, and he wrote a book in 1998 called the Deep Hot Biosphere outlining his theory that oil are not fossil fuels in limited supply as Big Oil would have you believe, but upwellings from the deep hot biosphere where organisms that dwell below and feed on methane, using oxygen and sulfur bound in porous rocks to metabolize the carbon in the methane. They are brought to the surface with the oil. Their presence in oil led us to believe oil must have come from life that has decayed on the surface and then subsided.

From Professor Vladilen A. Krayushkin, Chairman of the Department of Petroleum Exploration, Institute of Geological Sciences, Ukrainian Academy of Sciences

"The eleven major and one giant oil and gas fields here described have been discovered in a region which had, forty years ago, been condemned as possessing no potential for petroleum production. The exploration for these fie lds was conducted entirely according to the perspective of the modern Russian-Ukrainian theory of abyssal, abiotic petroleum origins. The drilling which resulted in these discoveries was extended purposely deep into the crystalline basement rock, and it is in that basement where the greatest part of the reserves exist. These reserves amount to at least 8,200M metric tons of recoverable oil and 100B cubic meters of recoverable gas, and are thereby comparable to those of the North Slope of Alaska. It is conservatively estimated that, when developed, these fields will provide approximately thirty percent of the energy needs of the industrial nation of Ukraine."

Natural oil seepage estimates into oceans runs from 3 million barrels per year. Consider that if this number has been constant for just the past 1 million years, let alone tens of million of years, this means that in only 1 million years, 3 trillion barrels of oil have seeped into the ocean. More oil than consumed by man, and equal to the oil said to remain for our consumption. So much for man being the oil hog and polluter, nature pollutes itself, perhaps for a good reason.  But seems like Mother Earth it has so much oil it just leaks out between the seams.

Consider the Bakken Formation

http://www.nd.gov/ndic/ic-press/bakken-form-06.pdf

Dr. Leigh Price who worked for the USGS had sent out a paper for peer review in 1999, estimating the oil in Bakken, which runs from ND to Montana into SE Saskatchewan , had as much as 200-400 billion barrels of oil, based on a 50% recovery rate. He died in 2000 while exercising before the peer review was completed, so his paper went unpublished, but was seen by some of his peers who were reviewing it. Requests from USGS to release it are denied, since they argue it did not complete the peer review process, and this is againat policy to release such studies. They have just last month estimated the Bakken Formation as having only 3.5 billion of recoverable oil. This is 1/2 year consumption, as opposed to 40 years if Leigh Price was correct. I don't really want to believe in conspiracies, but unlike Thomas Gold, he was in his 50's, and from all accounts, in great shape, and the price of oil has increased from 20 to 140 dollars a barrel since his death. Maybe coincidence.

Little Oil would be all over Bakken.  But Little Oil is dead as a dinosaur  

You can poke holes in the weakest links of my argument for a conspiracy.  But taken together, I have no choice by to believe that the price of oil is part of a conspiracy. To what ends is more speculation than theory, but it likely relates to the NWO and the Malthusian views of our elite.

by pft (0 articles, 0 quicklinks, 0 diaries, 601 comments [7 recommended, 0 rejected]) on Monday, May 26, 2008 at 4:03:09 AM

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