Energy Expert: Oil Will Fall to $20 a Barrel
Respected energy economist Philip Verleger makes case that oil will fall to levels not seen in over a decade.
HT: Craig Newmark
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Saturday, July 11, 2009
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- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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12 Comments:
$20 per barrel, eh?
Are those real dollars or Obama dollars?
Monday, June 22, 2009
Jim Rogers on Agricultural Commodities
Jim Rogers...Ethanol is not going to solve our problems. If everybody plants corn, the price of cotton will shoot to the roof. There were no major oil discoveries. So logically, the price of oil has to go to $100 and $150 says Jim Rogers, ex oil exporters are now pure importers, like Malaysia, UK, Indonesia, etc. Jim Rogers pointed out that there are billions of Asians willing to conduct the same life style as in the west. This will drive commodities prices to the sky as there will be more demand for food, oil, cotton, sugar, coffee, etc.
Economist Jeff Rubin's argument for higher oil is:
Oil fell to a low of roughly $35 a barrel in the depths of the worst global downtrend in over 50 years, and its now $60. Which way will the price of oil go when the global economy expands?
Also, Rubin explains higher oil prices will help the U.S. Rust Belt, and economies will rely less on globalization and become more local. Transportation costs will be too high to import heavy goods, e.g. steel. So, high oil prices will increase U.S. steel production.
Moreover, the article states oil fell to $31. However, on stockcharts.com it shows the low was $35.13 (symbol $WTIC for light crude, change to three-year chart, and click on price labels).
The free application of the law of substitution is the one and only answer to the energy "crisis". The supply of energy on planet earth is enormous and growing. Americans will continue to lose manufacturing jobs to China, partly because China is building coal and nuclear power plants at break neck speed. The cost of energy in America because we are wasting our efforts on corn ethanol, wind and such. The next major substitution will be the end of paper newspaper and mail delivery.
> The next major substitution will be the end of paper newspaper and mail delivery.
I also figure they'll also save by substituting canned phrases for most of the so-called news:
The REPUBLICANS in the legislature today were obstructing the passage of the new (insert liberal excess leegislation here) bill..."
And
In today's news, the GOP was busy pushing its rejection of (insert liberal cause of the day here)..."
And
Today, President-for-Life Obama handed out candy to starving children in the red states, after food aid was withheld as a result of anti-tax protests in five of those states...
Y'know, things like that.
Actually I think $10 oil is possible..except that oil exporters can, and probably are, gaming the NYMEX.
Meanwhile, see this:L
US Senators Introduce Bill to Expand Incentives for Natural Gas Vehicles
12 July 2009
US Senator Robert Menendez (D-NJ) last week introduced new legislation, co-sponsored by Senate Majority Leader Harry Reid (D-NV) and Senator Orrin Hatch (R-UT) that extends and increases tax credits for natural gas vehicle purchasing, refueling and manufacturing.
Under the NAT GAS (New Alternative Transportation to Give Americans Solutions) bill (S. 1408), the purchase tax credit cap for a light-duty natural gas vehicle would be increased to $12,500, up from the current $5,000. For the three other covered vehicle weight classes, the purchase tax credit cap would double; the maximum credit would be $80,000 (up from $40,000).
So we have a "liberal" in Reid, and a "conservative" in Hatch, both agreeing to more nanny-state tax subsidies, instead of letting the free market do tis thing.
This discussion is ridiculous. Last summer, the talk was about oil going to upside extremes of $200 or even $500. Today, many of you at least half-way believe predictions of extremely low prices. Reality is in the middle range.
Like the red flag waved by the matador, it is easy for "news sellers" to wave red flags in front of viewers. We fall for the trick daily. Buzz is created and products are sold while the price of oil, like all other goods and services draws nearer the equilibrium price that satisfies both supply and demand. The shortage of last summer created waves like the dropping of a stone in a lake, it creates waves with peaks and valleys but eventually the water returns to normal.
It has taken awhile for the majority of folk to appreciate that corn ethanol is a waste of resources. Many still cannot accept that it takes more concrete and steel to build unreliable wind mills than to build reliable nuclear plants.
Every person, it seems, has his own pet "solution to a phony problem". One hundred years ago, it was feared that horse manure was going to choke off growth of the big cities, 60 years ago it was feared that all the trees were going to be cut for fire wood. Today, many are ready to declare Carbon Dioxide, also known as plant food, as a pollutant. In regard to energy, the current situation is mindful of the amateurs who love to tell exactly what is wrong with Tiger Wood's golf swing.
As technologies, such as refining tar sands in situ and hydraulic fracturing to extract natural gas, mature, and as 100's of giga-watts of nuclear power gradually come on line around the word, the hype about energy will gradually fade. Strong demand will keep the price up while substitutions are made to less expensive but not $20 cheap alternatives.
By this fall, there will be great buzz about new and powerful services such as Google Voice and Google Wave. The ability, aided by machine translation, to "speak foreign languages" will be another great leap in lower cost importation of goods and top price for US exporters of goods. By next spring it will be obvious to most that a huge savings of resources is in the works, as a result of electronic reader newspapers, books and mail.
Finally, the implication of $10 oil is that this recession is actually the beginning of a great depression and reality is that the third quarter will be a strong economic quarter in most nations around the world. The recession is over. There are scores of indicators showing the recession is over, perhaps the most powerful one is that prognosticators are going way out on a limb to suggest that oil is headed to $10.
Are these 2 statements equivalent?
1. Oil will hit $20 per barrel
2. The strength of the dollar will triple.
Is oil a finite resource?
Is the dollar?
U B Judge
Believe it or not, oil may not be a finite resource. Scientist only recently discovered nonillions of methanogens that are converting carbon dioxide into methane. Oil is a complex form of methane. The heat at the core of the earth may be refining more oil as we speak.
heard of the price of oil reaching a level of $500 a barrel. These were Mat Simmons' words in interview for a brazilian financial magazine.
According to him, only this price matches the real oil supply and incentives for further research and development in technologies for new discoveries.
Like I said before, people enjoy making outlandish predictions. They care more for attention than for offering useful information. For thousands of years, the real price of commodities has come down. There is no reason to believe this long term trend has been broken.
Salt was once so valuable that it was used as currency, spices were worth so much that Columbus received venture capital funding. Arrowhead shaped rocks were once prized. Aluminum has replaced much steel and now carbon is replacing aluminum. Commodity supply shortages are always relatively temporary. Wood heat was replaced by coal heat and coal heat was replaced by oil heat and oil heat is being replaced by nuclear electricity. There is enough nuclear fuel to last thousands of years.
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