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Old 03-11-2008, 10:52 AM  
xbarretx xbarretx is offline
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$200 Oil - Who's Going to Pay For It?

http://seekingalpha.com/article/6801...-to-pay-for-it

In March of 2005, Goldman Sachs kicked off the oil speculation boom by releasing a report that "Oil Could Spike to $105."

At the time oil was around $55 a barrel, already up considerably from $25 a barrel before the Iraq war (the second one) surprisingly caused oil prices to spike.

[Interesting note: The first Iraq war is what made our current President his first millions as he sold his stock the same month his dad invaded Iraq and spiked oil from $18 a barrel in July 1990 to $27 in August. After bankrupting his first company (aptly called Arbusto Energy), in which he was partners with Salem Bin Laden (Osamaís Father) through James Bath (who also worked with BCCI who conducted the largest bank fraud in US history while laundering gun money for George I in the 80s), Junior merged Arbusto with Spectrum 7, became the CEO and bankrupted them. Spectrum 7 was then sold to Harken with the financial help of BCCIís Kalid bin Mahfouz, who took over for Bin Laden on his death and bought 17% of Harken in exchange for the Bush bail-out which ended up giving him 400,000 shares of Harken stock (Bush was investigated by the SEC but was cleared - how would he know his dad was going to invade Iraq?!?)...]

Anyway, so there was no way our President could have foreseen the impact that invading Iraq (again) would have on the American economy (or his familyís extensive oil holdings) but Goldman Sachs was on top of the situation as they were the largest trader of energy derivatives. Goldmanís 2005 report cited " Thin spare capacity in the energy supply chain, and long response times for bringing on supply additions, as well as robust demand in the United States and in developing heavyweights China and India, despite the recent rapid increase in energy costs."

Now that the mission has been accomplished at $105, Goldman (who has made record income on the massive increase in energy prices and energy trading even while losing their shirts on the other bubble, housing) has now upped the anti and is boosting their low-end range to $80 and says: "$200 a barrel could be a reality in the not-too-distant future in the case of a "major disruption"."

This report, released Monday morning by the same guy who was right about $105 (even though he said that would be a super-spike, not the norm), drove oil to $108 a barrel in Mondayís trading and knocked the markets right off their early morning recovery and sent them back towards the 1/22 lows.

What Goldman doesnít explain though, is who is going to pay for this $200 a barrel oil? I pointed out to members of my site Monday afternoon that todayís $2 rise in oil prices will cost US consumers $280M next week. At 20M barrels a day of consumption, $200 a barrel oil would be $4Bn a day spent just on oil! Thatís about $1Bn a day more than weíre paying now, $365Bn a year or double what Bush is dumping into the economy in order to shut us all up while oil goes over $105 a barrel while the dollar "super spikes" below 73.



Thatís right, our own US dollar finished the day today at an all-time low of 72.96, down 40% since Jan 2002 so the joke is on OPEC, who is only getting $60 worth of our 2002 currency for their $100 barrels of oil. Unfortunately, the joke is also on us as that dollar you have in your pocket is worth just 60 cents while the average American is making LESS money than he did in 2002.

Couple stagnant wages with declining home prices, increased property taxes (because local governments actually have to BALANCE their budgets), rising food and other commodity prices and you have to wonder where Goldman, and their investors, think US consumers are going to scare up an extra $1Bn a day to pay for oil. By herding investors into commodities at this level, Goldman is leading sheep to the slaughter as spikes that look like this rarely end well for the latecomers:

Perhaps if oil were the only thing going up in price Goldman could squeeze another $1Bn a day out of US consumers, but letís keep in mind that the rest of the world has to fork over $3Bn a day as well in order to support $200 a barrel oil. Thatís on top of the $4Bn a day we are all paying already - thatís a lot of money. Oil is not, however, the only thing thatís affected as food and other goods rise along with the price of oil.

The CRB index should be at around 308 (220 in 2002 x 140% to adjust for the dollar) but has outpaced the dollar decline by a whopping 33%, a nice toppy little number thatís just begging for a retracement to 370 very soon. While a 40% decline in the dollar may have helped Goldman and Bush achieve their primary goals, itís hard to see how we are going to manage enough of a decline in our currency to push oil and the CRB up another 100% from here.

A 40% decline in the dollar led to a 33% increase in the CRB and the dollar is at 72 against a global basket of currencies so it will take 3 more 40% declines in the dollar to get us to $200 oil, Following the same path weíve been on to get to $100 oil, that would be going from 72 to 43 to 26 to 16, giving us a US inflation rate of roughly 450% overall. This is the dream of starry-eyed energy traders who are too bad at math to realize that if they do successfully drive oil prices up to $200 a barrel and double their money, that the money they have will only be worth 1/4 of what it was when they started.

Really people, think about it - we are talking about $8 per gallon gas. We are talking about $160 to fill up your tank and $1,000 a month to heat a home. Weíd better start giving people monthly raises now as itís going to be really hard to know if our employees will be able to afford to drive the car to work with projected increases of .10 per gallon per month for the next 4 years.

The average US driver has a car that gets 20 miles a gallon and drives 15,000 miles a year. Thatís 750 gallons a year. $4 a gallon is $3,000 more dollars of what used to be disposable income going up in smoke. Even if we conservatively assume that all the other increases in the CRB translate to "just" another $3,000 in forced spending and we cap utility increases at $500 (super conservative numbers) then we still have the average US wage earner needing $6,500 more in net wages to support $200 oil.

That would be roughly $10,000 pre-tax or roughly a 40% increase in the average personís salary JUST TO STAY EVEN WITH WHAT THEY ARE SPENDING NOW. So I ask Goldman Sachs, I ask the commodity bulls and I ask our President - who is going to pay for this?

We are talking about the destruction of the very fabric of our society here, not a "rally." The rise of oil is a crisis and needs to be treated as such as it will do more to destroy your way of life than a hundred terrorist attacks could possibly hope to do and it wonít change unless you demand that it change. Our "leaders" set their agendas based on the polls, maybe itís time we start setting the agendaÖ

Itís time to get mad!
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Old 03-11-2008, 10:56 AM   #2
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Interesting read, and scary.


What pisses me off about all of this is that oil reserves are the highest they've been in 15 years.
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Old 03-11-2008, 10:59 AM   #3
BucEyedPea BucEyedPea is offline
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I think it's time I look into that oil well my mum left me, but which I thought was dry.
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Old 03-11-2008, 11:02 AM   #4
BucEyedPea BucEyedPea is offline
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'Er scrap that! I think the greenies and libbys are getting the exact thing needed to spur alternative renewable energy. Look at it as the glass being half-full.
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Old 03-11-2008, 11:07 AM   #5
HonestChieffan HonestChieffan is offline
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Diesel was $7 in Italy 2 years ago. The world did not come to an end.
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Old 03-11-2008, 11:14 AM   #6
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Do your part. Use synthetic (i.e. Mobil one) for engine lubrication. drive less. Recycle plastic (made from oil)
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Old 03-11-2008, 11:14 AM   #7
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Goldman Sachs is pretty much right on with their predictions. when corn was at 3.00/ bushel they came out saying it was to go to $5.40. That's exactly where it went.
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Old 03-11-2008, 11:15 AM   #8
BucEyedPea BucEyedPea is offline
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Quote:
Originally Posted by HonestChieffan View Post
Diesel was $7 in Italy 2 years ago. The world did not come to an end.
Then again, everything Europe is much smaller with places much closer together there. Not as much is needed as it is here with our more expansive geography. Unless you live in NE, Delaware or Maryland.
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Old 03-11-2008, 11:21 AM   #9
HonestChieffan HonestChieffan is offline
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well actually a mile is a mile...in Europe or the US. The big difference is we have a wastefull lifestyle that the Eropeans do not. When gas is high enough, Americans will finally adapt and we will be fine.
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Old 03-11-2008, 11:28 AM   #10
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Originally Posted by HonestChieffan View Post
well actually a mile is a mile...in Europe or the US. The big difference is we have a wastefull lifestyle that the Eropeans do not. When gas is high enough, Americans will finally adapt and we will be fine.
????

You realize we have states bigger than Italy right?

We'd need a population of 1.8 billion (with a "b") to equal the pop density.

That has more than a little bearing on how bad fuel prices hurt here vs Italy.
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Old 03-11-2008, 11:29 AM   #11
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Originally Posted by HonestChieffan View Post
well actually a mile is a mile...in Europe or the US. The big difference is we have a wastefull lifestyle that the Eropeans do not. When gas is high enough, Americans will finally adapt and we will be fine.
What she is saying is true. In Europe everything is so compressed you can go from city to city alot cheaper than you can in the US except in the NE. Also in Europe they have alot of trains that can take you from place to place unlike here where we only have Amtrack.
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Old 03-11-2008, 11:34 AM   #12
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????

You realize we have states bigger than Italy right?

We'd need a population of 1.8 billion (with a "b") to equal the pop density.

That has more than a little bearing on how bad fuel prices hurt here vs Italy.
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Old 03-11-2008, 11:34 AM   #13
BucEyedPea BucEyedPea is offline
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Quote:
Originally Posted by HonestChieffan View Post
well actually a mile is a mile...in Europe or the US. The big difference is we have a wastefull lifestyle that the Eropeans do not. When gas is high enough, Americans will finally adapt and we will be fine.
Actually, they use kilometers. Apples and oranges.

Even with a mile being a mile if everything you need is either in: walking distance, bicycle riding distance, short public transit distance or closer driving distance. Then those miles ( or kilometers) take on a different importance not to mention lump sum total of fuel needed or used.

Just another way of saying, it's all relative.
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Old 03-11-2008, 11:35 AM   #14
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What she is saying is true. In Europe everything is so compressed you can go from city to city alot cheaper than you can in the US except in the NE. Also in Europe they have alot of trains that can take you from place to place unlike here where we only have Amtrack.
Yup! And that Amtrack needs to cover more rail miles too than a train in Europe.
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Old 03-11-2008, 11:36 AM   #15
xbarretx xbarretx is offline
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Interesting read, and scary.


What pisses me off about all of this is that oil reserves are the highest they've been in 15 years.
i agree 100% if you go to the link you can view the interesting graphs/visuals. i was going to post htem on here but figured id get flamed to death for doing so.

the best point of the article talks about how the rising cost of oil is hurting them (speculators and OPEC) as they are only making 60% of the full amount. if the price were lower, demand would be higher, thus youd be WAY closer to equilibrium.
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