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Gas Prices Are Insane!!!!!
- Thread starter krunchbubble
- Start date
We laid off excessive driving that last time gas spiked to $4.50. By that time, truckers had been buzzing the capital in protest for a couple of months. Ultimately, speculators laid off oil long enough for the price to wane.
One recent estimate places as much a $57/bbl on speculation alone.
One recent estimate places as much a $57/bbl on speculation alone.
For sure speculation is a big part of it.It's not just the driving though. It's all the petroleum based products we use as well. Plastic, fertillizers, and much more. It's basically just our dependence on petroleum for all sorts of products.
http://www.ranken-energy.com/Products from Petroleum.htm
http://www.ranken-energy.com/Products from Petroleum.htm
Days of yonder. Mark to market accounting was officially abolished in 08. Bookkeeping is for the birds. These days we all just pretend. The banks books are the worse ones mark to market.
but you must be forgetting all the refineries that will be built in Houston some day that will power the horses of the future
you know its just a game for the children to play, and they can think that the people with the hybrids are the good guys, and the big dudes in the trucks are just hogs who don't know ass from buttkiss, and to be honest thats how it probably looked in the 1970s for a while too. The reality is that China must be stopped from developing any more of a diesel and pavement based economy. They must modernize with open media and free access to communication. Then they should start to sit around and draw pictures of rice paddies and protect the panda bear like they are supposed to. Leavin the trucking business to those who built the modern highway and go backwards towards the heyday of their forefathers and let the opium flow again.
luks a bitch
gassed up @ $3.75 tonight, got a 4 cent per/g discount for cash & used a competitors coupon for another 3 cents off, $3.68 per/g final price.
I remember the days when I used to get all excited about scoring some new pussy, now I'm all about pennies off per gallon, strange days indeed.......
Try getting a loan on pretend.
Who's the authority that says SA is blue skying their reserves? Is this authority speculating? If they had proof, global finance would earn more points, they might even reject loan requests.
While some tell us the US makes up 2% of global oil reserves, big oil commercials say we own over 50% of the world's reserves.
We qualify for financing based on 2% of global reserve. Every mark to market trick in the book couldn't get a loan based on the 50% baloney. That's part of what collapsed Enron. Before we knew they were wholesale criminals, we knew their value formulas were suspect.
If SA were running what amounts to national-scale Enron, they'd have to pay cash for everything.
GAAP is dead too
You mistake what we (the little people) can do and what TBTF and sovereigns can do. Just because you can't walk into the bank anymore and get a NINJA loan on 8000 sq ft McMansion doesn't mean that big banks and soveriengs aren't getting free money on pretend.
Just one example.....Greece. It got into the EU on pretend and now we (the little dumb taxpayer) are bailing them out into perpetuity on pretend. In fact, all of Europe's periphery is getting bailed out on pretend.
See, the little people have to mark to market, but if you are big and powerful enough and live beyond the law you can engage in mark to fantasy accounting and not only is legal, but encouraged. The silly taxpayer is only here to pay for the ruling classes pretending and to bail them out into perpetuity when they make bad bets with our money. There is a massive difference between what the tax paying slaves get do and what the ruling class gets to do.
The ex-head geologist and once in line to be CEO of Aramco (Saudi National oil company). It was leaked in a diplomatic cable by Wikileaks and has long been suspected within the industry.
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Nobody calling the shots at Enron wass willing to admit their strategy was corrupt. These guys thought they were smarter than everybody else.
The first signs of collapse (that even these yo-yos couldn't deny) was the failure to secure the bank loans that floated their boat. No bank was willing to become the equivalent of Arthur Anderson by exploiting their own industry for Enron's gain.
The reasons I don't put much faith in zero hedge's prophecy is he oversimplifies the details and overplays the doom. I understand why he has to go places that detailed conventional wisdom doesn't suggest - he has to have an audience.
They are drilling, not off shore as much, but it's picking up! Read about the drilling for oil in North & South Dakota, Colorado, That's why they want to build a pipeline to Texas!!!!!!!!!!
Sounds like Bernanke and the rest of the central planners
What did that statement have to do with zerohedge. Do you dispute the fact Greece got into the EU because they, with the help of GS, were pretending?
Do you dispute the fact that Greece is bankrupt? They just defaulted and triggered CDS. Ratings agencies have declared them in default.
Do you dispute the fact that all they did was write off $100bil in debt so they could get $130bil in more loans? Does that same reasonable or insane to you?
Do you dispute the fact that as soon as these "new Greek Bonds" hit the market they collapsed and are trading as junk bond status already? Do you dispute the fact that the Greece PM has already said they are going to need another bailout (in effect admitting that they are in a state of rolling default)?
Do you dispute the fact that Italy's and Spain's CDS and bond spread are blowing out again? Do you dispute the fact they are rioting in Spain? Do you dispute the fact that Portugal's bond spread is starting to look like Greece? Do you dispute the fact that the $1tril LTRO1 and LTRO2 from the ECB is already wearing off and the stigma for the banks that took the money up is spreading.
Do you dispute the fact that the EU is in the mist of a credit crisis?
This has nothing to do with zerohedge. You can read bloomberg, CNBC, Der Spiegel, etc and draw the same conclusions.
Are you going to blame every piece of bad news out there on Zero Hedge?
Why isn't big oil using the leases they already hold? Too much supply makes the price drop. Don't forget, these folks want the price to stay high. These bastards love all the world tensions and OPEC machinations that make western oil companies as rich as some of the nations they exploit.
So how do rich oil barons get half the country to side with their interests?
Hate your gub, by gawd. Shout freedom from the rooftops. Just resist the impulse that suggests rich capitalists want as much as they can possibly get, even to the point of ripping off Joe public.
Those who want lower prices AND less government control need to recognize these two aspects are diametrically opposed.
So how do rich oil barons get half the country to side with their interests?
Hate your gub, by gawd. Shout freedom from the rooftops. Just resist the impulse that suggests rich capitalists want as much as they can possibly get, even to the point of ripping off Joe public.
It's on: The Fed vs. gas prices
After years of cheap money, we need Fed chief Ben Bernanke to stop the stimulus and take on rising inflationary pressures and energy prices. But is he up for the fight?
Anthony Mirhaydari.
It's time for the Fed to fight inflation.
After all, that's supposed to be Job No. 1, now that the specter of financial crisis has passed. Inflation is already running above the Fed's 2% target, and one-year consumer inflation expectations have jumped to 4%.
Inflation is nowhere as visible as at the fuel pump, where gasoline prices have returned to their 2011 highs and are a mere 20 cents from their 2008 all-time peak. (See the chart below.)
Worse, the stench of stagflation is in the air as manufacturing activity stalls and global policymakers -- from the International Energy Agency to the International Monetary Fund -- warn of an economic slowdown driven by dangerously high energy prices...
Officially, of course, inflation is running at just 3.1% a year. But it feels worse, and for good reason. The American Institute for Economic Research recently unveiled a new inflation gauge that better measures the actual day-to-day experiences of most people. We rarely buy a new house or a car, yet we are very sensitive to prices of ordinary purchases like food, fuel, phone services and personal care products. This new measure, dubbed the "Everyday Price Index," is running at 7.2%.
How the Fed can fight inflation
.
The problem with inflation-fighting, though, is that the market has become addicted to the Fed's ultralow interest rates (near 0% since 2008) and numerous bond purchase programs (which have totaled nearly $2.4 trillion). The craving was on full display this week. Wall Street responded with all the grace of a drug-addled groupie when Fed chief Ben Bernanke hinted he would dole out another hit of stimulus.
Yet the danger of pumping yet more cheap cash into a financial system already flush with trillions of it is easy to see.
Bernanke on gas prices and growth
So it's decision time. Does Bernanke keep up his efforts to juice the economy? Or does he refocus on inflation and the price of gas -- and allow a good old-fashioned recession?
I fear Bernanke will go the wrong way and ignore the threat of rising prices. Here's why.
Everything hangs on this decision
It's hard to imagine a more critical decision, because right now, so much is riding on pain at the pump. The economy. The recovery. The stock market. The presidential race.
But Bernanke has long been committed to overpowering the business cycle through massive stimulus, pushed by a combination of personal ambition and a determination to prove right the theories he developed over a lifetime in academia. (Those theories got him dubbed "Helicopter Ben," after all.)
The problem is, the free market will eventually win. It's like trying to fight gravity. Recessions are supposed to happen. When they don't, speculative excesses accumulate until the weight of bad loans and overvalued assets collapses into a credit crisis. Frequent downturns keep the free market honest and recessions short and shallow. After all, as Fed historian Allan Meltzer loves to say, "Capitalism without failure is like religion without sin; it doesn't work."
Running out of room
To use another metaphor, Bernanke is running out of runway. He's been trying to get the economy moving with cheap cash before the nasty inflationary side effects kick in. Time's up.
He could ignore the warnings and do QE3, a third round of bond buying to pump cash into the economy. Alternately, he might merely keep interest rates near 0% through 2014 as previously pledged. The titans on Wall Street haven't been interested in the details. As long as what Bernanke does fits with the meme that central banks will support the economy (and therefore the financial markets) at any cost, they're happy.
This might keep stocks rallying for a while. But price pressures would soon have consumers and businesses cutting back. That would leave us in a stagflationary quagmire, with growth slowing and prices rising.
Or he could react by tightening the money supply or simply acknowledging the inflation risks and standing pat. The still-vulnerable recovery would stall. But the cheap-money junkies on Wall Street would be forced into rehab, the natural business cycle would be allowed to work, and gas prices would fall as recession started to bite.
Why stimulus can't do much more
The problem is that Bernanke's stimulus efforts have been thwarted by the nature of this downturn, which is driven by too much debt on private and public balance sheets. That's hard to fix with low interest rates, because the focus is on reducing the West's $8 trillion debt hole, not on borrowing more.
How the Fed can fight inflation
.
The rise of China hasn't helped the picture. China gobbled up the globe's spare commodity production capacity and raised demand for raw materials. You can see this in crude oil now as a drop in demand in the West due to higher prices has thus far been offset by rising numbers of Chinese motorists. Nor have the structural, demographic shifts under way in the labor market, which have resulted in lower labor productivity and a higher "natural" unemployment rate. (For details on this, see last week's column, "Are American workers getting lazy.")
All of this has acted against Bernanke's unprecedented, headlong dive into extreme central banking by decreasing the economy's potential growth rate and slashing the benefits of pumping money into the economy. And it has increased the risks of inflation from the Fed's actions.
Bernanke hasn't been alone in this real-time experiment in macroeconomic planning. Worldwide, major central banks have opened the floodgates, unleashing a torrent of cheap money -- bringing the total monetary injections since 2007 to nearly $7 trillion, enough to give every man, woman and child on Earth more than $1,000. But now, even these bankers have doubts.
Several central bankers -- including Bank of Japan governor Masaaki Shirakawa, former European Central Bank President Jean-Claude Trichet and Jaime Caruana, who runs the Bank for International Settlements -- warned at a conference organized by the Federal Reserve in Washington last weekend that policymakers needed to be on alert for the negative consequences of their actions and recognize their limits.
Bernanke, though, seems happy to ignore the risks, given his hint earlier this week of more stimulus.
How cheap money can backfire
The bankers' warning was this: While lower interest rates ease the pain of high debt, they reduce the incentive for businesses and governments to fix their debt problems. You can see this in the way Washington keeps avoiding the hard choices on the national debt and deficit. You can see this in the way Americans aren't really shedding their debt, aside from those defaulting on mortgages, and are instead using low interest rates to roll over lofty credit balances.
Low rates and a dramatic expansion in the monetary base have also failed to encourage any meaningful new borrowing businesses would use to increase production or hire more workers, thus stimulating economic growth.
In other words, with the banking crisis behind us, we no longer have a problem the Fed can fix. We need the White House and Congress to address our structural problems -- including inefficient health care, a broken education system, dilapidated infrastructure and foreign trading partners not playing by the rules -- to get the economy we want. This will create the jobs and the income needed to cut our overall debt levels and return the economy to a more normal footing with less volatility and drama.
At this point, all the Fed and its unchecked cheap money can do is cause inflation, push up commodity prices and damage growth, Shirakawa warned. In fact, this has already begun to happen. Led by the impact on gas prices, all the extra money is beginning to act as a negative factor. And growth is slowing as prices rise.
Using data from this week's report on manufacturing activity from the Federal Reserve Bank of Dallas, the chart below illustrates this. New orders are down. Yet prices paid for raw materials are up. Worse than inflation, this smells like stagflation, the most dangerous of the modern economic ailments. It's like a drug-resistant staph infection -- easy to catch but hard to kill. (Anyone who lived through the early 1980s and 20%+ interest rates can tell you how hard.)
.
More cheap money from the Fed, in whatever form, will only increase inflation, push gas prices toward $7 a gallon and further damage the economy via lower consumer confidence and lower real wages. But tightening the money supply isn't easy, either; it would send stocks lower, raising the risk of a new recession.
There are only two options ahead for the Fed and the economy, and gas prices are key to both. So before we get to them, we need to look at why oil prices have gone from $76 a barrel in October to near $110 now.
Why gas prices are up
Geopolitical tensions with Iran certainly play a role, but are worth only around $10 a barrel, according to Société Générale analysts. Rising demand isn't a factor, with global oil usage dropping in the fourth quarter.
The main reasons are constrained supply and all the cheap cash floating around.
How the Fed can fight inflation
.
The problem with supply is lower output, mainly because of the emptying reserves in the North Sea but also because of disruptions in places like Colombia, Syria and South Sudan. The world is depending on excess capacity in Saudi Arabia to fill the gap. This is despite the fact that U.S. resources are running high, with the number of development drilling rigs in operation going from 200 back in 2009 to nearly 1,000 now.
According to estimates by Barclays Capital, and assuming the Saudis can increase production to nearly 12 million barrels per day (from 10 million now), global spare capacity will drop to just 600,000 to 1 million barrels per day this summer, down from nearly 5 million barrels in 2009. That increase won't be easy. Measures include reviving the Dammam, the kingdom's first production facility, tapped in 1938 and mothballed in 1980.
But as sanctions against Iran kick in, SocGen estimates we will lose upward of 800,000 million barrels of supply. When Riyadh heats up this summer, and the Saudis burn more oil to power the air conditioners cooling their mega-malls and opulent homes, spare capacity could drop to zero. Any release from the U.S. Strategic Petroleum Reserve is likely to have a limited impact, according to Barclays, and rich-world oil reserves are at five-year lows anyway.
The Fed's aggressive stimulus efforts aggravate the situation. Not only does a weaker dollar tend to increase the price of real assets, but ultralow interest rates also encourage oil producers to keep their oil in the ground, say Bank of America Merrill Lynch analysts. Why pump now when the cash that oil generates will go into accounts and investments earning almost no return?
A good old-fashioned recession
The Fed doesn't control oil prices, of course. But what the Fed does next -- how it reacts to oil prices -- will have a broad impact what we pay for everything, including oil. There are many variations but they all boil down two basic choices:
Option 1: Gas prices stay high, inflation increases, the economy slows, and the Fed stops the stimulus, allowing the $400 billion "Operation Twist" initiative to end in June with no follow-up.
Stocks are likely to drop in this environment, according to Barclays Capital strategist Barry Knapp, with an order of magnitude similar to what was seen following the end of QE1 in 2010 and QE2 in 2011, as well as the 8% to 10% corrections seen when Fed started to normalize its policy stance in 1983, 1994 and 2003.
This is a road to recession, just before the November elections. It's a painful path. But from a long-term perspective, it's the more desirable one because it forces the Fed to back off -- and fight inflation, as it should.
Option 2: Thanks to Saudi production increases and Chinese purchases of Iranian oil, gas prices drop enough for the Fed to justify additional stimulus with a straight face. Inflation will remain high, but the Fed will dismiss it as "transitory" or "temporary." Bernanke unveils QE3 -- likely worth $600 billion, focused on mortgage securities and shaped to minimize any impact on oil prices -- by the end of June.
Stocks will scream higher in a liquidity-fueled rally heading into Election Day. But we'll face another round of inflation, a rancorous political climate and lost economic momentum in early 2013.
In other words, we're back to Option 1. We can take our medicine now or later. But eventually, we must treat the stagflation infection. The bottom line is that we need Bernanke to stop the stimulus. Unfortunately, I don't think he will...
So in the weeks to come, as you cringe in agony during your fill-ups, keep this painful template in mind. If the Fed keeps stimulating, gas prices will keep rising; the two go hand in hand. If the Fed stops stimulating, prices might fall -- but we'll head into a recession, and you'll have less money.
For the average American, more affected by 7.2% inflation than by the liquidity junkies on Wall Street and their boosters at the Fed, this is a Sisyphean nightmare in two octane levels: regular unleaded and premium.
http://money.msn.com/investing/it-is-on-the-fed-vs-gas-prices-mirhaydari.aspx?page=0
sorry for the gaps...the graphs didn't load. see them at the site linked.
After years of cheap money, we need Fed chief Ben Bernanke to stop the stimulus and take on rising inflationary pressures and energy prices. But is he up for the fight?
Anthony Mirhaydari.
It's time for the Fed to fight inflation.
After all, that's supposed to be Job No. 1, now that the specter of financial crisis has passed. Inflation is already running above the Fed's 2% target, and one-year consumer inflation expectations have jumped to 4%.
Inflation is nowhere as visible as at the fuel pump, where gasoline prices have returned to their 2011 highs and are a mere 20 cents from their 2008 all-time peak. (See the chart below.)
Worse, the stench of stagflation is in the air as manufacturing activity stalls and global policymakers -- from the International Energy Agency to the International Monetary Fund -- warn of an economic slowdown driven by dangerously high energy prices...
Officially, of course, inflation is running at just 3.1% a year. But it feels worse, and for good reason. The American Institute for Economic Research recently unveiled a new inflation gauge that better measures the actual day-to-day experiences of most people. We rarely buy a new house or a car, yet we are very sensitive to prices of ordinary purchases like food, fuel, phone services and personal care products. This new measure, dubbed the "Everyday Price Index," is running at 7.2%.
How the Fed can fight inflation
.
The problem with inflation-fighting, though, is that the market has become addicted to the Fed's ultralow interest rates (near 0% since 2008) and numerous bond purchase programs (which have totaled nearly $2.4 trillion). The craving was on full display this week. Wall Street responded with all the grace of a drug-addled groupie when Fed chief Ben Bernanke hinted he would dole out another hit of stimulus.
Yet the danger of pumping yet more cheap cash into a financial system already flush with trillions of it is easy to see.
Bernanke on gas prices and growth
So it's decision time. Does Bernanke keep up his efforts to juice the economy? Or does he refocus on inflation and the price of gas -- and allow a good old-fashioned recession?
I fear Bernanke will go the wrong way and ignore the threat of rising prices. Here's why.
Everything hangs on this decision
It's hard to imagine a more critical decision, because right now, so much is riding on pain at the pump. The economy. The recovery. The stock market. The presidential race.
But Bernanke has long been committed to overpowering the business cycle through massive stimulus, pushed by a combination of personal ambition and a determination to prove right the theories he developed over a lifetime in academia. (Those theories got him dubbed "Helicopter Ben," after all.)
The problem is, the free market will eventually win. It's like trying to fight gravity. Recessions are supposed to happen. When they don't, speculative excesses accumulate until the weight of bad loans and overvalued assets collapses into a credit crisis. Frequent downturns keep the free market honest and recessions short and shallow. After all, as Fed historian Allan Meltzer loves to say, "Capitalism without failure is like religion without sin; it doesn't work."
Running out of room
To use another metaphor, Bernanke is running out of runway. He's been trying to get the economy moving with cheap cash before the nasty inflationary side effects kick in. Time's up.
He could ignore the warnings and do QE3, a third round of bond buying to pump cash into the economy. Alternately, he might merely keep interest rates near 0% through 2014 as previously pledged. The titans on Wall Street haven't been interested in the details. As long as what Bernanke does fits with the meme that central banks will support the economy (and therefore the financial markets) at any cost, they're happy.
This might keep stocks rallying for a while. But price pressures would soon have consumers and businesses cutting back. That would leave us in a stagflationary quagmire, with growth slowing and prices rising.
Or he could react by tightening the money supply or simply acknowledging the inflation risks and standing pat. The still-vulnerable recovery would stall. But the cheap-money junkies on Wall Street would be forced into rehab, the natural business cycle would be allowed to work, and gas prices would fall as recession started to bite.
Why stimulus can't do much more
The problem is that Bernanke's stimulus efforts have been thwarted by the nature of this downturn, which is driven by too much debt on private and public balance sheets. That's hard to fix with low interest rates, because the focus is on reducing the West's $8 trillion debt hole, not on borrowing more.
How the Fed can fight inflation
.
The rise of China hasn't helped the picture. China gobbled up the globe's spare commodity production capacity and raised demand for raw materials. You can see this in crude oil now as a drop in demand in the West due to higher prices has thus far been offset by rising numbers of Chinese motorists. Nor have the structural, demographic shifts under way in the labor market, which have resulted in lower labor productivity and a higher "natural" unemployment rate. (For details on this, see last week's column, "Are American workers getting lazy.")
All of this has acted against Bernanke's unprecedented, headlong dive into extreme central banking by decreasing the economy's potential growth rate and slashing the benefits of pumping money into the economy. And it has increased the risks of inflation from the Fed's actions.
Bernanke hasn't been alone in this real-time experiment in macroeconomic planning. Worldwide, major central banks have opened the floodgates, unleashing a torrent of cheap money -- bringing the total monetary injections since 2007 to nearly $7 trillion, enough to give every man, woman and child on Earth more than $1,000. But now, even these bankers have doubts.
Several central bankers -- including Bank of Japan governor Masaaki Shirakawa, former European Central Bank President Jean-Claude Trichet and Jaime Caruana, who runs the Bank for International Settlements -- warned at a conference organized by the Federal Reserve in Washington last weekend that policymakers needed to be on alert for the negative consequences of their actions and recognize their limits.
Bernanke, though, seems happy to ignore the risks, given his hint earlier this week of more stimulus.
How cheap money can backfire
The bankers' warning was this: While lower interest rates ease the pain of high debt, they reduce the incentive for businesses and governments to fix their debt problems. You can see this in the way Washington keeps avoiding the hard choices on the national debt and deficit. You can see this in the way Americans aren't really shedding their debt, aside from those defaulting on mortgages, and are instead using low interest rates to roll over lofty credit balances.
Low rates and a dramatic expansion in the monetary base have also failed to encourage any meaningful new borrowing businesses would use to increase production or hire more workers, thus stimulating economic growth.
In other words, with the banking crisis behind us, we no longer have a problem the Fed can fix. We need the White House and Congress to address our structural problems -- including inefficient health care, a broken education system, dilapidated infrastructure and foreign trading partners not playing by the rules -- to get the economy we want. This will create the jobs and the income needed to cut our overall debt levels and return the economy to a more normal footing with less volatility and drama.
At this point, all the Fed and its unchecked cheap money can do is cause inflation, push up commodity prices and damage growth, Shirakawa warned. In fact, this has already begun to happen. Led by the impact on gas prices, all the extra money is beginning to act as a negative factor. And growth is slowing as prices rise.
Using data from this week's report on manufacturing activity from the Federal Reserve Bank of Dallas, the chart below illustrates this. New orders are down. Yet prices paid for raw materials are up. Worse than inflation, this smells like stagflation, the most dangerous of the modern economic ailments. It's like a drug-resistant staph infection -- easy to catch but hard to kill. (Anyone who lived through the early 1980s and 20%+ interest rates can tell you how hard.)
.
More cheap money from the Fed, in whatever form, will only increase inflation, push gas prices toward $7 a gallon and further damage the economy via lower consumer confidence and lower real wages. But tightening the money supply isn't easy, either; it would send stocks lower, raising the risk of a new recession.
There are only two options ahead for the Fed and the economy, and gas prices are key to both. So before we get to them, we need to look at why oil prices have gone from $76 a barrel in October to near $110 now.
Why gas prices are up
Geopolitical tensions with Iran certainly play a role, but are worth only around $10 a barrel, according to Société Générale analysts. Rising demand isn't a factor, with global oil usage dropping in the fourth quarter.
The main reasons are constrained supply and all the cheap cash floating around.
How the Fed can fight inflation
.
The problem with supply is lower output, mainly because of the emptying reserves in the North Sea but also because of disruptions in places like Colombia, Syria and South Sudan. The world is depending on excess capacity in Saudi Arabia to fill the gap. This is despite the fact that U.S. resources are running high, with the number of development drilling rigs in operation going from 200 back in 2009 to nearly 1,000 now.
According to estimates by Barclays Capital, and assuming the Saudis can increase production to nearly 12 million barrels per day (from 10 million now), global spare capacity will drop to just 600,000 to 1 million barrels per day this summer, down from nearly 5 million barrels in 2009. That increase won't be easy. Measures include reviving the Dammam, the kingdom's first production facility, tapped in 1938 and mothballed in 1980.
But as sanctions against Iran kick in, SocGen estimates we will lose upward of 800,000 million barrels of supply. When Riyadh heats up this summer, and the Saudis burn more oil to power the air conditioners cooling their mega-malls and opulent homes, spare capacity could drop to zero. Any release from the U.S. Strategic Petroleum Reserve is likely to have a limited impact, according to Barclays, and rich-world oil reserves are at five-year lows anyway.
The Fed's aggressive stimulus efforts aggravate the situation. Not only does a weaker dollar tend to increase the price of real assets, but ultralow interest rates also encourage oil producers to keep their oil in the ground, say Bank of America Merrill Lynch analysts. Why pump now when the cash that oil generates will go into accounts and investments earning almost no return?
A good old-fashioned recession
The Fed doesn't control oil prices, of course. But what the Fed does next -- how it reacts to oil prices -- will have a broad impact what we pay for everything, including oil. There are many variations but they all boil down two basic choices:
Option 1: Gas prices stay high, inflation increases, the economy slows, and the Fed stops the stimulus, allowing the $400 billion "Operation Twist" initiative to end in June with no follow-up.
Stocks are likely to drop in this environment, according to Barclays Capital strategist Barry Knapp, with an order of magnitude similar to what was seen following the end of QE1 in 2010 and QE2 in 2011, as well as the 8% to 10% corrections seen when Fed started to normalize its policy stance in 1983, 1994 and 2003.
This is a road to recession, just before the November elections. It's a painful path. But from a long-term perspective, it's the more desirable one because it forces the Fed to back off -- and fight inflation, as it should.
Option 2: Thanks to Saudi production increases and Chinese purchases of Iranian oil, gas prices drop enough for the Fed to justify additional stimulus with a straight face. Inflation will remain high, but the Fed will dismiss it as "transitory" or "temporary." Bernanke unveils QE3 -- likely worth $600 billion, focused on mortgage securities and shaped to minimize any impact on oil prices -- by the end of June.
Stocks will scream higher in a liquidity-fueled rally heading into Election Day. But we'll face another round of inflation, a rancorous political climate and lost economic momentum in early 2013.
In other words, we're back to Option 1. We can take our medicine now or later. But eventually, we must treat the stagflation infection. The bottom line is that we need Bernanke to stop the stimulus. Unfortunately, I don't think he will...
So in the weeks to come, as you cringe in agony during your fill-ups, keep this painful template in mind. If the Fed keeps stimulating, gas prices will keep rising; the two go hand in hand. If the Fed stops stimulating, prices might fall -- but we'll head into a recession, and you'll have less money.
For the average American, more affected by 7.2% inflation than by the liquidity junkies on Wall Street and their boosters at the Fed, this is a Sisyphean nightmare in two octane levels: regular unleaded and premium.
http://money.msn.com/investing/it-is-on-the-fed-vs-gas-prices-mirhaydari.aspx?page=0
sorry for the gaps...the graphs didn't load. see them at the site linked.
As refineries close, experts say U.S. gasoline shortage may strike during peak driving season
Published: Friday, March 23, 2012, 7:00 AM
By Bloomberg News
Follow Google Maps
A rising number of oil refineries have closed along the East Coast.
The biggest wave of refinery closures on the U.S. East Coast is raising the specter of gasoline shortages during the peak-demand driving season.
The region will have lost almost half of its refining capacity in six months by July, according to data compiled by Bloomberg based on Energy Department statistics. Requests to send gasoline on Colonial Pipeline Co.’s link from the Gulf Coast to the eastern U.S. have exceeded capacity since August, company data show.
Gasoline futures have risen 24 percent this year, the most of any of the 24 commodities in the Standard & Poor’s GSCI index, on speculation that the closures will crimp supply in New York Harbor, the benchmark contract’s delivery point, just as improving U.S. economic growth and job hiring spurs demand. At the same time, shipping rules limit the availability of tankers to supply the region from the Gulf, while European refiners reduce exports in the face of lower profit margins.
"Domestic infrastructure remains extremely constrained and there is not enough time for that to be resolved by summer," Amrita Sen, a London-based analyst at Barclays Plc, said Wednesday in an e-mail. "Gasoline supplies will be highly constricted as a result and prices will have to rise to attract more imports."
Gasoline for April delivery fell 0.5 percent to $3.3396 a gallon yesterday on the New York Mercantile Exchange. Spot prices for reformulated fuel in the U.S. Gulf Coast were 7.13 cents a gallon above Nymex futures, according to data compiled by Bloomberg. Regular gasoline at the pump in the East Coast was $3.811 a gallon as of March 19, 7.7 percent higher than a year earlier, Energy Department data show.
The risk of shortages increases the prospect of record costs for motorists during a U.S. presidential campaign. Pump prices may reach an average of $4 a gallon this summer and might climb to near $5 in some areas of the East Coast, Stephen Schork, president of the Schork Group, an energy-consulting firm in Villanova, Pa., said in an interview with Bloomberg Radio March 5.
In its most recent gasoline price survey, AAA reported last Friday that a gallon of unleaded in New Jersey cost $3.63, up from $3.39 a year earlier. As prices inch towards $4, the state’s motorists are paying an average of 20 cents less than drivers nationwide.
Sunoco Inc. and ConocoPhillips have shut two plants in Pennsylvania and plan to idle a third that together could process more than 700,000 barrels a day of oil. Hovensa LLC closed a plant in the U.S. Virgin Islands that was the largest offshore shipper to the region.
Colonial will expand a line supplying fuel to New York Harbor by 125,000 barrels a day by 2014, the company announced at a San Diego conference March 12. Cargoes arriving from abroad may account for 36 percent of Northeast gasoline consumption this year, the Energy Department said Feb. 27.
The closures reduce the capacity to produce summer-grade reformulated gasoline, or RBOB, the fuel on which Nymex futures are based, with the approach of the peak driving season between the Memorial Day weekend in late May and Labor Day in early September.
"It’s more difficult to make than winter grade and you’ve got a lot of major producers out of the market," Edward L. Morse, the global head of commodities research at Citigroup Inc. in New York, said yesterday in telephone interview. "I don’t know where the material is going to come from."
http://www.nj.com/business/index.ssf/2012/03/as_more_refineries_close_exper.html
what you think they were gonna give us a break?
Disco nailed it, They don't want us to have cheaper prices...it's been engineered, and the telling is in the above.
Peace
Published: Friday, March 23, 2012, 7:00 AM
By Bloomberg News
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A rising number of oil refineries have closed along the East Coast.
The biggest wave of refinery closures on the U.S. East Coast is raising the specter of gasoline shortages during the peak-demand driving season.
The region will have lost almost half of its refining capacity in six months by July, according to data compiled by Bloomberg based on Energy Department statistics. Requests to send gasoline on Colonial Pipeline Co.’s link from the Gulf Coast to the eastern U.S. have exceeded capacity since August, company data show.
Gasoline futures have risen 24 percent this year, the most of any of the 24 commodities in the Standard & Poor’s GSCI index, on speculation that the closures will crimp supply in New York Harbor, the benchmark contract’s delivery point, just as improving U.S. economic growth and job hiring spurs demand. At the same time, shipping rules limit the availability of tankers to supply the region from the Gulf, while European refiners reduce exports in the face of lower profit margins.
"Domestic infrastructure remains extremely constrained and there is not enough time for that to be resolved by summer," Amrita Sen, a London-based analyst at Barclays Plc, said Wednesday in an e-mail. "Gasoline supplies will be highly constricted as a result and prices will have to rise to attract more imports."
Gasoline for April delivery fell 0.5 percent to $3.3396 a gallon yesterday on the New York Mercantile Exchange. Spot prices for reformulated fuel in the U.S. Gulf Coast were 7.13 cents a gallon above Nymex futures, according to data compiled by Bloomberg. Regular gasoline at the pump in the East Coast was $3.811 a gallon as of March 19, 7.7 percent higher than a year earlier, Energy Department data show.
The risk of shortages increases the prospect of record costs for motorists during a U.S. presidential campaign. Pump prices may reach an average of $4 a gallon this summer and might climb to near $5 in some areas of the East Coast, Stephen Schork, president of the Schork Group, an energy-consulting firm in Villanova, Pa., said in an interview with Bloomberg Radio March 5.
In its most recent gasoline price survey, AAA reported last Friday that a gallon of unleaded in New Jersey cost $3.63, up from $3.39 a year earlier. As prices inch towards $4, the state’s motorists are paying an average of 20 cents less than drivers nationwide.
Sunoco Inc. and ConocoPhillips have shut two plants in Pennsylvania and plan to idle a third that together could process more than 700,000 barrels a day of oil. Hovensa LLC closed a plant in the U.S. Virgin Islands that was the largest offshore shipper to the region.
Colonial will expand a line supplying fuel to New York Harbor by 125,000 barrels a day by 2014, the company announced at a San Diego conference March 12. Cargoes arriving from abroad may account for 36 percent of Northeast gasoline consumption this year, the Energy Department said Feb. 27.
The closures reduce the capacity to produce summer-grade reformulated gasoline, or RBOB, the fuel on which Nymex futures are based, with the approach of the peak driving season between the Memorial Day weekend in late May and Labor Day in early September.
"It’s more difficult to make than winter grade and you’ve got a lot of major producers out of the market," Edward L. Morse, the global head of commodities research at Citigroup Inc. in New York, said yesterday in telephone interview. "I don’t know where the material is going to come from."
http://www.nj.com/business/index.ssf/2012/03/as_more_refineries_close_exper.html
what you think they were gonna give us a break?
Disco nailed it, They don't want us to have cheaper prices...it's been engineered, and the telling is in the above.
Peace
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ooops
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