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It's not just policymakers that should be thinking of preparing for the unthinkable.


What are you going to do when the - if you are a company driver - your employers en masse calls for all the trucks to be returned to terminals and emptied out?

Don't think it won't happen?

I agree, and that is a VERY good possibility at this point! I sure hope people wake up and SOON. MOST American's, and companies, are FAR in debt and the dropping dollar will exacerbate this whole situation as well.

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The company I drive for hauls product(s) that people litterally cannot live without. I won't worry too much about that.

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Unthinkable probably means that they will have to do without.

If the unthinkable happens - as this IMF official says, there will be a lot of necessities not getting shipped and delivered.

unless its by military convoy

I guess I should stock up my bomb shelter.

You need to stop watching so much "Jericho"

They should of already been thinking about the "unthinkable"...

All of us should be thinking about the "unthinkable"- unaffordable fuel costs; whether folks care to accept the reality and gravity of that fact or not, this is still going to occur in the very near future even if we drill for oil in every county of this country.

I cannot believe that some people cling to the notion that this run-up of crude prices of late has been caused by speculators (those bad guys!).
Isn't that akin to claiming that the vultures eating the carcass of a dead animal somehow caused that animal to die?
rx

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Rex, I would suggest you Google "Commitment of Traders+Crude Oil"

[IMG]file:///C:/DOCUME%7E1/Admin/LOCALS%7E1/Temp/moz-screenshot-2.jpg[/IMG]After having waded through a few pages, I am inclined to stick with my original position- speculators are following the market rather than creating it.

I believe smart money senses that since oil (at least Texas light sweet) is going to be in increasingly short supply, it's better to realize as much profit now as is possible; tomorrow there is a very real possibility that extraction could become so expensive as to greatly diminish returns.

This country, including you needs to face the reality that the cheap petroleum party is over.
rx

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Oil Price Bubble?

Supply is up, demand is down, yet the price is soaring. Here's why.



Oil prices climbed to their highest level ever, reaching over $108 per barrel this week. And Americans are feeling this price spike at the pump, with gasoline averaging $3.22 per gallon. An analysis released by the investment firm Goldman Sachs suggested that oil prices might soar to [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. . Does this make sense?

Not really. Although U.S. crude oil inventories have fallen, gasoline inventories are at their highest since March, 1993, notes Tim Evans, an energy futures analyst at Citigroup's Futures Perspective. World oil production was up 2.5 percent in the first quarter of 2008 over the same period in 2007 while world oil consumption rose by just 2 percent. In fact, world production is projected to be 3.3 percent higher in the second quarter and 4.1 percent higher in the third quarter than the same periods a year ago. On the other hand, world demand is projected to rise by just 1.6 percent over the next six months.
In fact, demand is falling in some countries. According to economist John Kemp at the commodities firm Sempra Metals, the U.S. consumed [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. in January 2008 than it did the year before. Evans agrees, noting that the U.S. demand for petroleum products began falling off last July. Interestingly, this drop in U.S. oil consumption began before crude prices turned vertical and before we began to see weakness in the broader economy. Even China's thirst for oil is abating somewhat. Its demand for oil, which once rose at 10 percent per year, has now dropped to 6 percent per year. In addition, world surplus oil production capacity has gone from a very tight 1.5 million barrels per day a couple of years ago to more than 3 million barrels today, says petroleum economist [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. .
So supply is up; relative demand is down and yet, the price of oil is soaring. What's going on? Last week, Exxon Mobil CEO Rex Tillerson [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. a third of the recent run up in oil prices on the weak dollar, another third on geopolitical uncertainty, and the rest on market speculation.
Let's start with geopolitical uncertainties. Last year, oil consumers watched warily as [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. in Nigeria's oil fields, the possibility of war between the U.S. and Iran, and the antics of Venezuela's [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. threatened to disrupt oil supplies. That analysis may have once made sense, but most of those tensions have [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. in recent months. Nevertheless, it remains true that most of the world's oil is produced in volatile regions and by erratic governments, so the price of crude must still include some kind of [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. .

What effect does the falling dollar have on the price of crude? Most oil price contracts are denominated in dollars. The dollar has fallen in value by more than [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. against a Federal Reserve index of major currencies since 2002. This means that the price of imports, including oil, have gone up. To some extent, the chief of the Organization of Petroleum Exporting Countries (OPEC) Chakib Khelil was correct when he [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. earlier this week, "What's happening in the oil market is due to the mismanagement of the U.S. economy." Continuing U.S. trade and fiscal deficits along with lower interest rates are stoking inflationary fears.
That brings us to speculation. Evans observes that since September 2003, the total number of open crude oil futures and options contracts rose by 364 percent. Meanwhile the global demand for petroleum rose by just 8.2 percent. "So the futures and options market has become more important than the physical supplies in driving the price," concludes Evans. "We are seeing investment flows into the oil market that don't have anything to do with the demand and supply of oil."
Investors are treating oil as a hedge against inflation and a falling dollar. Oil markets are part of a negative positive feedback loop in which higher oil prices contribute to higher inflation, which in turn lowers the value of the dollar, which boosts oil prices, and so forth. In other words, the oil market is coming to resemble the gold market (which has also been soaring). Evans notes that most gold traders don't even ask the question of how much gold was mined last year or how much spare gold mining capacity there is.

In the short run, oil prices are very [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. : A large change in price produces only a small change in demand. If the price of gas goes up a dollar per gallon overnight, you still have to fill your tank to get to work. However, over the long run, consumers and producers respond to higher oil prices. For example, Americans are [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. and have switched to buying [LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. cars.
Higher prices also encourage innovation. Economist Richard Rahn from the Institute for Global Economic Growth believes battery technologies are improving so rapidly that the majority of cars sold in 10 years will be all-electric. This would certainly help drive down the price of oil. Supply is also inelastic—it takes a long time to do the exploration, drilling, and refining necessary to boost production in response to higher prices. This inelasticity of demand and supply means that petroleum prices are very sensitive to relatively small changes in either. This means that prices can fall as steeply has they rose.

Whenever you begin to hear market gurus decree that "this time it's different," as we did during the dot-com bubble and the housing bubble, that's a sure sign of danger in the market. Naturally, proponents of the peak oil theory claim that the recent run up in prices is evidence that the end is nigh. Evans responds, "[LINK POSTED BY MEMBER] Only Members Can View This Truck Forum Link. of peak oil are what this market has in common with the 1980s, not what is different." Recall that during the "oil crisis" of the 1970s when oil prices were as high as they are today, U.S. oil consumption declined by 13 percent between 1973 and 1983. The higher prices of the 1970s led eventually to an oil glut and prices fell to about $10 a barrel by 1986.
So what will happen to oil prices over the next few years? No one is predicting $10 per barrel oil. However, once the current bubble bursts, both Evans and Lynch believe that the price of crude will settle at around $60 to $70 per barrel in the next couple of years. "It's very hard to pinpoint just how long a bubble can expand before it breaks. Getting the timing right is not an easy matter," says Evans. But he adds, "I think that this is the riskiest time to be long in crude oil since 1980."



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