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Rhinocrisy
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08 August, 2005
The Big One?
This could be it.
Light, sweet crude is trading at $64 today, on speculation that a terrorist attack might happen in Saudi Arabia (based on "credible reports" by UK intelligence agencies). If one actually takes place, one can imagine that the price of oil will easily cross $70. If it resulted in a moderate disruption of the supply chain... we'll get to see how the U.S. economy reacts to a hard punch to the gut.
Light, sweet crude is trading at $64 today, on speculation that a terrorist attack might happen in Saudi Arabia (based on "credible reports" by UK intelligence agencies). If one actually takes place, one can imagine that the price of oil will easily cross $70. If it resulted in a moderate disruption of the supply chain... we'll get to see how the U.S. economy reacts to a hard punch to the gut.
Comments
The reason we import light sweet crude is because that's the only type of oil our refineries can process. Heavy crude trades for $16 less a barrell but the enviornmental wackos don't allow the building of any new refineries. Heavy crude has a high sulfur content but our technology allows to reduce it.
Posted by Chuck Sepers
Posted by Chuck Sepers
Heavy crude trades for less per barrel because it's worth less. It costs money to process it to the same level of purity as light, sweet crude; even then it's not really ever as good quality. If it were possible to refine it cheaper than light crude, then light crude would sell for less, obviously. Heavy crude is far more abundant than light (with a long tail ranging into tar sands).
Posted by saurabh
Posted by saurabh
Saurabh, why do you know so much about oil? You're not secretly a Republican pro-business type are you? :)
Chuck, I'm an "environmental wacko" and let me tell you, I seriously doubt we could stop anything crude that the Bush Administration wants to do right now if they really wanted to do it. Did you hear about the energy bill that just passed?
Posted by Saurav
Chuck, I'm an "environmental wacko" and let me tell you, I seriously doubt we could stop anything crude that the Bush Administration wants to do right now if they really wanted to do it. Did you hear about the energy bill that just passed?
Posted by Saurav
The (1980) historic monthly peak was $95 in 2005 dollars, so we still have a ways to go yet to match that.
I don't think we're going to see any Kaboom!s. More struggling airlines, more fitful growth and recession cycles. It's still a negative feedback loop, right? Speculation is the only reason I can think that the price of oil rising would lead to the price of oil rising.
Posted by Dan
I don't think we're going to see any Kaboom!s. More struggling airlines, more fitful growth and recession cycles. It's still a negative feedback loop, right? Speculation is the only reason I can think that the price of oil rising would lead to the price of oil rising.
Posted by Dan
>The reason we import light sweet crude is because that's the only type of oil our refineries can process.
This is simply not true. Many companies process heavy crude. A quick web search turns up Chevron and Exxon/Mobil. Coking technology has been around for decades, FWIW.
>Heavy crude trades for $16 less a barrell but the enviornmental wackos don't allow the building of any new refineries.
Again not true. Refineries are most cost effective to build closest to where oil is delivered. Shoreline property is incredibly valuable. Plain old NIMBYism from every demographic ensures they won't get built.
>Heavy crude has a high sulfur content but our technology allows to reduce it.
This is true, as is what saurabh wrote.
Posted by Harry
This is simply not true. Many companies process heavy crude. A quick web search turns up Chevron and Exxon/Mobil. Coking technology has been around for decades, FWIW.
>Heavy crude trades for $16 less a barrell but the enviornmental wackos don't allow the building of any new refineries.
Again not true. Refineries are most cost effective to build closest to where oil is delivered. Shoreline property is incredibly valuable. Plain old NIMBYism from every demographic ensures they won't get built.
>Heavy crude has a high sulfur content but our technology allows to reduce it.
This is true, as is what saurabh wrote.
Posted by Harry
Just to be contrarian: yes, the 1980 peak was $95, but economic conditions are not the same as they were back then, so it's not necessarily the case that we need to hit the same high-water mark for the sewers to overflow and flood us with shit. Also, the markets seem to be cottoning on to the idea that the price of oil is important, which might be enough. This IS an irrational enterprise, remember.
Posted by saurabh
Posted by saurabh
What does that mean? "...the sewers to overflow and flood us with shit...". How will we know when "The Big One" has come?
Posted by Dan
Posted by Dan
From what I gather (corrections welcome), your first clue will be that Asian central banks will start selling off US treasuries.
Your last clue will be a huge anti-incumbent vote, if not a fundamental overturning of the dominant paradigms of contemporary economic thought (neoliberalism and whatnot) and what constitute matters of import.
In between, expect a lot of bad commentary :)
Posted by Saurav
Your last clue will be a huge anti-incumbent vote, if not a fundamental overturning of the dominant paradigms of contemporary economic thought (neoliberalism and whatnot) and what constitute matters of import.
In between, expect a lot of bad commentary :)
Posted by Saurav
Yeah, I think a huge depreciation in the value of the dollar would be a good indication.
Posted by saurabh
Posted by saurabh
The Economist has a piece on this topic in the current issue; a lot more sunny than our pessimism.
Posted by Saurav
Posted by Saurav
Power outages in regions dependant on oil for power generation, similar to the rolling outages Cali dealt with in 2001 for no real reason. More expensive food, since that's a more flexible price directly tied to transport costs.
I don't think it will happen for a while b/c the non-invisible hand of the government will slap away the invisible hand of the market for a while, but it will happen eventually (like in the next 10-15 years) if we don't hurry up and think of some other way to get by.
Posted by Saheli
I don't think it will happen for a while b/c the non-invisible hand of the government will slap away the invisible hand of the market for a while, but it will happen eventually (like in the next 10-15 years) if we don't hurry up and think of some other way to get by.
Posted by Saheli
Oh, but what I really wanted to say is that the phrase "light, sweed crude," and pictures thereof alway makes me crave maple syrup.
Posted by Saheli
Posted by Saheli
