'Squawk Box' Guest Warns of $12-15-a-Gallon Gas

Originally posted by pityocamptes

'Squawk Box' Guest Warns of $12-15-a-Gallon Gas

www.businessandmedia.org

“[T]he prices that we’re paying at the pump today are, I think, going to be ‘the good old days,’ because others who watch this very closely forecast that we’re going to be hitting $12 and $15 per gallon,” Hirsch said. “And then, after that, when oil – world oil production goes into decline, we’re going to talk about rationing. In other words, not only are we going to be paying high prices and have considerable economic problems, but in addition to that, we’re not going to be able to get the fuel when we want it.”

(visit the link for the full news article)

I believe that will happen sadly enough. As there will be riots over food and water pretty soon too. It's only a way for the people to go on their knees and beg to the government.

reply to post by C G Fleischer


The problem is it does not end there. Food, clothing, lights, medicine, agriculture, EVERYTHING is oil dependent - which means a lot of people will die or go without. Its simply not just being able to drive, but live...

The scariest thing of all is they've known about it for years.

I do not believe for a moment this whole fuel crisis is some sudden mistake. Not only that, but the efforts globally to REALLY do something about energy needs for the future has been small at best.

This is the thing I cant work out ....

What is the agenda behind a world fuel shortage? Food will be affected - hell everything in every area of our lives will be affected in ways we could not imagine. But why? and to what gain?

It just keeps rising.. What will be the impact on the economy when people cannot afford to drive to work.

A few things:



As you can see, the price of oil seems to follow the astronomical gains the NASDAQ experienced during the tech bubble. A new bubble?

The price climb in oil is probably due to a mix of speculative fervor and real supply and demand concerns. It surely can't be attributed to all speculation, as someone is taking physical delivery of oil at these prices.

On the other hand, that chart does show an interesting pattern that probably amounts to a bubble in prices. With Goldman Sachs and other investment banks coming out with predictions of $200/barrel prices almost daily, perhaps they are trying to find an exit for their long positions. Only now are we seeing pension funds, average investors, and others starting to pile into the oil trade.

The cheap money being lent to large banks by various FED concoctions such as the expanded TAF (which the FED takes crap credit and mortgage debt as collateral) is seeking returns and the greatest returns in the current market climate are in commodities, thus driving prices up as more and more cash is parked there. Traditional flights to quality (to equities, treasuries and commercial property) have all proven too risky for the large market players to invest heavily in, adding another reason to the appeal of commodities.



This is a reason for increasing demand. The chart shows how heavily gas and diesel prices are subsidized in China. I'm sure some have heard of the explosion of demand in foreign nations, this is part of the reason why. Low prices for them means artificially stimulating worldwide demand, once again driving prices higher. An argument for a pure supply/demand price increase might go like this:

Suppose you are a pig farmer on an island with 10 pigs. There are 10 families on the island, so assuming each family wants 1 pig, the price will remain stable at let's say, 10 dollars apiece. Another family moves onto the island, bringing the total to 11 families. Once again, assuming they want a pig as well, and there being only 10 pigs, they offer 12 dollars for a pig. The most probable outcome is the bidding for each pig will get successively higher until a family is priced out. Note that the increase in price is not 1:1 with the increase in demand. This explains why we have seen a huge increase in oil prices, but not an increase in demand that quite matches the price surge.

I've read numerous sources calling a top on oil, but that is left to be seen. One thing is for sure, demand destruction is sure to follow at least here in the United States in the wake of this credit crunch/housing crisis. Taiwan, Malaysia and Indonesia are all cutting their fuel subsidies down in the wake of rising prices, which should dampen demand a bit further (Source) . Rumors abound whether or not China will, with most thinking if it were to happen; it would be after the Olympics.



As far as making a difference in price right now, it's unlikely as investors are starting to look into future oil supplies (read: peak oil) and pricing both futures and spot prices higher.

[edit on 5/23/08 by aava]

wow...

But a total conversion to ethanol is a bad thing (Maybe if the government would pay all those farmers to GROW corn instead of paying them NOT to grow anything) still???


I mean hell... $3.50 a gallon of ethanol would be a lot more affordable that $12 a gallon petrol.


Alternatives actually sound viable at these unbelievable prices.

On a second thought... Why is the price rising so steadily? Profits are rising steadily. This goes against all previous comprehensions of supply and demand that I can understand. Plenty of Supply with plenty of demand should yield affordable costs; yet in the oil industry the exact opposite is the case. Ever increasing supply and demand along with ever increasing costs. Sounds to me like some oil execs know somebody with enough power to think they can get away with it.

we'll see how powerful they are when congress is done with the oil execs!

Coven

reply to post by coven


In a purely supply and demand situation, if there was plenty of supply and an equal amount of demand (to simplify things, lets assume no reserves, futures, speculators), then the price would remain steady. If it leans ever so much in either direction, then the price point is changed.

People often forget the usefulness of speculators in things such as commodities. They are great for price discovery, only when abused (as arguably is happening now) do we get these bubbles. Full margin requirements and forcing investors to take delivery are some "fixes" being thrown around right now. Problem is, these sort of regulations would only apply to US markets, the big players would simply trade elsewhere. The problem would still be there and our markets would be less competitive as a result.

reply to post by benevolent tyrant


Straight up.

You know, my uncle-in-law works in the oil business and is a good, honest, and hard
working guy. He is in charge of crews that maintain refineries.
In talking with him about the whole petrolium thing, he said that there was no shortage
of crude at all that he can tell for the near or far future, it's just THE comodity that
makes the world go around and the guys at the top can do whatever they want. Literally.
The other thing he mentioned was that the U.S. is sitting on one of the biggest oil
reserves on the planet and all the wells have been tapped & capped. The U.S. is playing
their cards close in a sense, that they will not draw from the large U.S. reserve until
the rest of the reserves around the world have been depleted. Literally, keeping some
fuel in the tank.

MS

I wonder how much of that $12-$15 dollar a gallon gas is due to "squawk boxes" that are themselves buying into oil futures?

reply to post by mybigunit


I dont mean to sound defeatist here....... but do you realize this will really solve nothing at all?? Do you realize tptb WANT the little guy to riot?? THey want to pick off the world like a row of turkeys... Start with the one at the back of the line first... because turkeys are not smart enough to realize they are slowly but surely being picked off...... IMHO ;-)

And why am I typing "irancontra" to verify that I am not a bot??? Guys, you should never use words to filter out bots.... Random letters and numbers....

$12-$15? You kidding me, or what? I don't believe in any of this crap because if that were to happen, the United States is finished. How would truckers cope with those prices? Every single one of them will quit, which means there won't be any goods reaching supermarket shelves. And if that happens, it'll only be a matter of time before people start rioting, robbing, and even killing neighbors for food. In just months, this country will begin to resemble a post-apocalyptic world that is so often portrayed in Hollywood films.

Originally posted by pityocamptes


Wow, things do not look good!!!

www.businessandmedia.org
(visit the link for the full news article)

I am on the side which thinks we can adapt. I am conflicted, however, on what we should do in regards to drilling.

Originally posted by coven
wow...

But a total conversion to ethanol is a bad thing (Maybe if the government would pay all those farmers to GROW corn instead of paying them NOT to grow anything) still???


I mean hell... $3.50 a gallon of ethanol would be a lot more affordable that $12 a gallon petrol.

Only if you don't count the cost born by the world food markets, as the price of corn goes the direction of all energy, higher and higher. And you still have to count the subsequent cost on human lives.


In the last several weeks the the plight of the ethiopian people has become increasingly dire, and is a harbinger of many other crisis like this one around the world.

Ethiopian children pay for food prices, drought

Xan Rice
NAIROBI: Up to 6 million children under the age of five are at risk of malnutrition in Ethiopia because of rising cereal prices and the failure of rains, UNICEF has warned. Dry spells across much of the country since September 2007 have led to big food shortages, said humanitarian agencies.

I don't think ethanol is very *affordable* if you ask me


[edit on 24-5-2008 by Quazga]