Up, up and away

Oil's 'super-spike' hits new high

The world oil price is a little like movie character Indiana Jones, oil conference delegates heard Monday morning -- no matter how many fundamental body blows it absorbs, it keeps climbing relentlessly higher. As oil prices rose to yet another record on the New York Mercantile Exchange on Monday, Giovanni Serio, London-based vp and senior energy economist for Goldman Sachs International, said oil and other commodity prices should be levelling off because of what is likely already a recession in the US. "Still, there is no sign of moderation in commodity prices, no sign of moderation of oil prices," he said in Calgary. "This really looks like the plot to one of those action movies, in which the protagonist, no matter what you throw at him, no matter how badly injured he is, defies all laws of physics and won't die." As he spoke, crude oil was rising 1.5% to a record US$111.76 a barrel at the close of floor trading on the NYMEX. Prices are up 76% from a year ago. Oil gained as the US dollar weakened against the euro and some production was halted in Nigeria. Serio, in the opening keynote address to the Canadian Energy Research Institute 2008 World Oil Conference at the Fairmont Palliser hotel, said oil prices are also being boosted by political protectionism that is causing a shortfall in investment, preventing producers from matching demand growth.

Julian Lee, senior energy analyst at the Centre for Global Energy Studies in London, told conference delegates that only a sharp recession in the US, one that might spread to Europe, will coax the Organization of the Petroleum Exporting Countries into increasing oil capacity and result in an end to sky-high energy prices. A recession would kick off a chain reaction that could eventually force OPEC members to produce more oil to maintain the level of revenue they now enjoy as a result of current oil prices. "What [OPEC members] are interested in is not how much oil they are producing. What they are interested in is their revenues to the government," Lee said. Recessions put the brakes on consumer spending, which is particularly bad news for China because it manufactures many of the goods consumed in the West. Much of China's growth is based on its export industries, and if these businesses stagnate, or even decline, investment in that sector could stall and "the growth in Chinese oil demand ends," Lee said. A drop in demand would translate into less money in OPEC government coffers. To make up the shortfall, OPEC would produce and sell even more oil to keep up demand and at reduced prices to ensure it pocketed the same amount of money as when prices were high, Lee said. "I don't believe that [OPEC's production] is driven by high prices," he said. "I believe that is driven by low prices, particularly if that low price starts to effect an increase in demand again."
(National Post, Calgary Herald 080415)

Hmm....so against all 'fundamentals' the price is still staying atmospheric? Maybe it's not a 'super spike' after all, dear delegates. The truth is too horrifying for even the experts to contemplate. What does that indicate for the policies and programs that needed to be implemented a decade ago to stave off this potentially disastrous problem?

OPEC has no more oil to pump...they are maxed out. Even the heads at Aramco have said to raise production any more is going to be a dubious, extremely expensive task.
Everything that is being produced is being consumed immediately...and there's still wont for more, now.

I love the Indiana Jones metaphor. The gravity and interpretation of the situation is about as reality-based as the fictional character.

Americans are working to drive, and decidedly skipping meals to keep the wheels on the road. McCain wants to eliminate the federal gas tax for the summer driving season. How fucked up is all of this? Start using less, now, you idiots. It's not rocket science.