Pickens’ Busy Week: Predicts New Oil Spike and Promotes Pickens Plan on The View
T. Boone Pickens reiterated on Thursday his belief that oil prices are on the verge of another spike. Speaking at the Wall Street Journal’s ECO:nomics conference, Pickens predicted that U.S. crude oil prices will hit $75 by the end of 2009. Pickens also asserted, “If you don’t think we’ll see $200 to $300 oil in 10 years, you are kidding yourself. You think OPEC is a free market? We have no control over what is going on.”
Pickens had a busy week, also appearing on The View on Monday:
Gasoline Prices Magically Rise as Oil Stagnates
The entire oil production chain stinks. From the cartel of petro-states that drill it to fund their illegitimate regimes, to the traders that hoard it and play market games, to the allegedly independently operated refineries that mysteriously require unexplained maintenance all at the same time, the path to the pump is to corrupt and too easily manipulated. Practically every step along this chain there is the will and the ability to artificially decrease the supply in order to prop up prices.
Despite the fact that a barrel of crude has been sitting around $40, the average price of a gallon of gas is now $1.92, up from $1.79 a month ago.
Gregg Laskoski, managing director of public relations for AAA Auto Club South said that some of the increase in price can be attributed to lower output by U.S. refineries. Laskoski noted the odd situation where “A recession and rising unemployment translates into fewer motorists on the road and diminishing fuel consumption, and yet, retail prices climb higher.”
The sooner we transition off of this corrupt and polluting commodity, the sooner our economy, planet, and way-of-life, can regain some security.
Pickens: Oil to Hit $75 by End of Year
T. Boone Pickens predicted on Monday that oil prices would be back above $60 per barrel within two months and at $75 by the end of the year. Pickens is not alone in his anticipation of a future oil spike, as he is joined by both oil traders who have been buying up oil to be sold in the future, as well as history, which dictates that although oil may go down, it always comes back up.
“We got a break here, a little bit of breather, but within 60 days we’ll be back up to $60 oil and by end of year we’ll be on our way … at $75,” Pickens noted.
Of course, Obama has warned that we need to avoid falling into the regular shock and trance cycle with oil prices, and hopefully Congress will send him an energy package that substantively addresses this classic problem.
Gasoline and Oil Up, Future Price Direction is Murky
The price at the pump is continuing to rise. Numbers released on Wednesday show that the average price per gallon for regular gasoline in the U.S. rose 6.3 cents to $1.85 and the California average rose by 7.6 cents to $2.06.
The price of crude also rose on Wednesday, climbing 6% to $43.55 a barrel for March delivery. The LATimes notes that there is currently a conflict among oil experts regarding the future price direction for oil. READ MORE
Energy Prices to Experience ‘Swift and Violent Rebound’
Bloomberg reports that:
“Goldman Sachs Group Inc. commodity analyst Jeffrey Currie said he expects a ‘swift and violent rebound’ in energy prices in the second half of the year.
“Oil prices may have reached their lowest point already, after falling to $32.40 in mid-December, and are expected to rise to $65 by the end of this year, the analyst said. There is scope for a “new bull market” in oil, Currie said.”
Anticipation of this future spike in prices is what has led many traders to take delivery of oil today, to be stored for future sale once higher prices return.
Global Oil Demand Predicted to Decline Second Consecutive Year
The International Energy Agency (IEA) forecast on Friday that world oil demand will drop again in 2009, which would make it the first time in 26 years that demand has declined for two consecutive years.
The IEA based their estimate on downward revisions made to GDP forecasts by global economic institutions, such as the International Monetary Fund. According to the IEA report, “China’s economy, in particular, appears to have sharply slowed down as its main export markets tumble.”
The forecast calls for a 0.6% decline in demand in 2009. The last time there were two consecutive years of decline was in 1982 and 1983.
With Declining Revenues, Venezuela Looks to Bring Back Foreign Companies
With lower oil prices, petro-states have been finding it harder to project their influence across their borders. Venezuela, which has used its excess oil wealth to support a wide-range of social subsidies, including its heating oil program in the U.S., is facing a massive budget crunch due to decreasing oil revenues.
The NYT reported on Wednesday that this decline is due to a combination of factors, including the failure of Venezuela’s national oil company, Petróleos de Venezuela, to produce enough oil for sale and a decline in other sectors of that nation’s economy, due to capital flight stemming from the nationalization of these industries by President Hugo Chavez. READ MORE
A Critique of the 60 Minutes Oil Speculation Report
Barry Ritholtz at The Big Picture takes issue with the 60 Minutes piece on oil speculation from Sunday night. Ritholtz does not argue that speculation did not play a role in the high prices, but instead he thinks it was only a small component of the overall picture. He argues that 60 Minutes basically missed that picture by focusing solely on the role of speculators.
Here are the 10 factors that Ritholtz believes the 60 Minutes analysis missed: READ MORE
60 Minutes Attributes Much of Recent Oil Spike to Speculators
Part 1:
Part 2:
60 Minutes has an interesting look at the recent oil boom. In its analysis, 60 Minutes attributes the massive price run-up to oil speculators at big financial firms like Morgan Stanley and Goldman Sachs, among others. One of the most intriguing facts was that during the over 100% increase in price last year, global demand for oil actually decreased.
60 Minutes analogizes these recent market conditions to those that were manipulated by Enron during the California energy crisis of 2000-2001.
Not a Drop to Drink… But Plenty to Use For Drilling and Mining
Foreshadowing the impending conflicts of the 21st century, a battle is heating up in the American West between water and oil interests. On the one side are those in favor of exploiting the massive oil shale reserves under the Rocky Mountains. These reserves are one of the biggest remaining oil resources in the world– containing three times as much oil as that remaining in Saudi Arabia.
Although oil shale extraction is extremely costly, energy intensive, and polluting, it is the massive amount of water that it consumes that is really bringing out the political opposition. Opponents worry that the Colorado River, which is already being taxed to its limits, can not support the enormous draw that would be required for wide scale shale mining in the region. READ MORE
Oil Falls and Gas Shoots up
Despite the precipitous drop in oil on Wednesday, the average nationwide price of regular gasoline at the pump increased 3.9 cents to $1.727 per gallon. According to AAA, this was the biggest single day price increase since September.
This comes on the heels of recent price spikes in California.
According to the Energy Department, fuel consumption in the U.S. is down nearly 3% from this time last year.
Re Price of Oil: ‘You’d be an idiot not to take advantage of that’
A massive drop in oil today intensified the current situation where the short-term price of oil is dramatically lower than the long-term. Crude oil for February delivery fell 12% today to around $43 a barrel. This is in contrast to the futures price for February of next year, which is 41% higher. This price phenomenon is known as “contango.”
As we mentioned this morning, this has created a situation where traders are buying up oil today to store on rented supertankers, in order to re-sell it in the future. Although massive amounts of oil is being hoarded, there is still global storage capacity remaining. READ MORE
T. Boone is Back!
Our friend Boone Pickens (“the man with the plan”) has released a new commercial and message. His message echoes many of our recently expressed concerns about rising gas prices and the lessons to be taken from the current Russia-Ukraine natural gas dispute. The entirety of his message is printed below:
Supertankers Being Used to Store Crude at Sea for Delivery When High Prices Return
Anyone who thinks the days of high oil prices are in the past should think about this:
Both oil traders and oil producers have recently begun using supertankers to store extra reserves of oil for delivery later this year. Although prices are still relatively low right now (around $48 per barrel) oil futures for delivery later in the year are almost 30% higher. As a result, investors see money to be made by purchasing oil today at a relatively low price, paying to store it at sea, with the plan of reselling it back into the market later in the year when the prices are substantially higher.
Frontline Ltd., which is the world’s biggest owner of supertankers, said oil traders have already chartered 25 vessels and may take as many as 10 more in order to store crude for future sales. Traders are seeking to lease the supertankers for three to nine months. Each barrel stored would cost approximately 90 cents a barrel per month for storage. READ MORE
Venezuela Ends Heating Oil Program to U.S. Poor Due to Budget
For the past three years, Venezuela’s state oil company has provided heating oil to low-income households in the U.S. through it’s subsidiary, Citgo Petroleum. Venezuelan leader, Hugo Chavez, began this program after meeting with the Reverend Jesse Jackson a few years ago. For Chavez, the program was a chance to tweak the U.S. government, with which he is constantly at odds.
However, with the dramatically lower price of oil, Venezuela is no longer able to afford these subsidies and has announced it will be ending the program. And while Chavez relies heavily on payments to the poor in order to maintain his legitimacy, once oil fell below $90 per barrel, Venezuela’s budget became unsustainable. Naturally, foreign subsidies like this program are the first to be cut. Whether he has the money, or not, Chavez cannot afford to allow his massive domestic subsidies to wither– which is a fundamental reason why he has so strongly supported OPEC’s efforts to increase the price of oil.
