Oil spirals below $55 per barrel
posted at 10:35 am on November 13, 2008 by Ed Morrissey
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Oil continues to drop to lows not seen in almost two years as the global markets plumb the bottom of the financial collapse. Yesterday’s trading closed below $55 per barrel despite OPEC warnings of production cuts:
Oil dropped to a 22-month low under $55 on Thursday as evidence piled up global recession would have a deep impact on demand and news OPEC might take more emergency action did only a little to halt the sell-off.
U.S. crude futures were 19 cents firmer at $56.35 by 1158 GMT, recovering from a session low of $54.67 — the weakest level since January 30, 2007.
London Brent crude fell seven cents to $52.30.
The International Energy Agency on Thursday in a monthly report slashed its global oil demand growth forecast for next year and said this year’s increase in consumption had been the slowest since 1985.
Growth forecasts got cut in half from last month, and traders foresee a glut on the markets throughout 2009. A global recession will curtail need for expanded energy use, and speculators — remember them? — aren’t buying oil futures as a result. OPEC has twice warned that they would defend specific price levels, only to see the market ignore them completely. They’re in danger of becoming irrelevant.
This has ramifications far beyond the gas pumps, where prices have returned to 2006 levels. Domestically, the ambitious programs of the Democratic Party relied in part on the ludicrous “windfall profits” taxes that Barack Obama pledged to impose on the oil industry. Revenues and profits will tumble on these prices, removing that revenue source from the incoming administration. Either Obama will have to scale back his programs or massively increase tax revenues from other sources.
Internationally, though, the lower price will help kneecap Iran, Venezuela, and Russia. Venezuela’s crude is only desirable when other sources cost too much; otherwise, their sulfuric crude is a poor alternative to other oil, and the price will fall even farther for Hugo Chavez’ product. Iran and Russia built their economic and military strength on expensive oil. Now that the price of oil has collapsed, both countries will have enormous hardships in maintaining their militaries, their internal security, and their ruling regimes. Vladimir Putin in particular will now have to start making nice with the G-7, as Western financial assistance will almost certainly be required to keep Russia afloat.
Overall, though, the traders are betting on a long, hard recession throughout most of 2009. That prediction appears to have grown stronger since the election of Obama and his soon-to-be-adopted economic policies.
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$1.89 – $1.95 in Denver
Common Sense on November 13, 2008 at 12:03 PM
This may not last, but it is as good as a second economic stimulus check-writing exercise, and it doesn’t come from our tax dollars or more borrowing by the government, it comse out of the hides of Chavez, Putin, and Ahmadinejad. Talk about a win-win!!
Gas taxes are regressive, and a cut in gas prices is therefore progressive – it puts proportionately more money back in the pockets of the poor and middle class, who tend to drive older and less fuel-efficient cars and have longer commutes. So liberals should be very happy about it. *wink*
rockmom on November 13, 2008 at 12:08 PM
Yeah, it’s hard to say when the switch gets flipped on runaway inflation since the West is now getting into hellish deflation. But once it kicks in it could get really crazy fast. They could chaotically overlap and we could find a “balance” not in normality but in a hyperinflationary depression in a couple of yrs. The derivatives haven’t even really started the mass destruction phase because so much is being hidden off the books still. And speaking of market dislocation and mixed signals, even though gold prices are “stable” there’s now a possibility of a gold default.
econavenger on November 13, 2008 at 12:10 PM
rockmom on November 13, 2008 at 12:08 PM
Yep good point. High oil prices are geopolitically always pro-authoritarian. That’s one reason the far left has hacked the US political system to block domestic oil.
econavenger on November 13, 2008 at 12:15 PM
In three months you are going to wish for 4.00 gas, and all that went with it.
The reason for the decline, is a serious decline of the world economy.
If it was for over production, or the U.S. introducing new energy into the market then the news would be great.
But the fact is, the decline is because we are in a serious economic decline.
You may be happy at the pump, but you are going to pay for it more severely in other ways.
HIgher taxes, larger government, more intrusive government, high unemployment, etc.
AS I had stated, great news at the pump, but the reason is bad, really bad…no celebration until the economy turns around…and that is going to take another 6 to 9 months.
right2bright on November 13, 2008 at 12:16 PM
I have to say, Neil Cavuto owes Bill O’Reilly an apology. Cavuto tut-tutted O’Reilly’s claim that gas prices are high due to speculators and people manipulating the market. Gas prices have been cut in HALF in less than a quarter as the financial markets tanked.
Excuse me, but can simple supply & demand explain that? No. Thus, O’Reilly actually was right.
Outlander on November 13, 2008 at 12:22 PM
Speculators believe that the supply will exceed the demand in the future, thus prices fall.
Ropera on November 13, 2008 at 12:34 PM
Cavuto and O’Reilly are 2 amataurs next to me!
Ropera on November 13, 2008 at 12:34 PM
Pardon my engrish
Ropera on November 13, 2008 at 12:34 PM
I’m on a roll!
Ropera on November 13, 2008 at 12:35 PM
See: crosspatch on November 13, 2008 at 11:54 AM
It’s the Yen carry trade, hedge funds, etc. All these massive investments are unwinding and now causing a flood into cash (USD) to escape their positions. But no one wants to be holding USD long term any more either. That’s why the dollar spike is “artificial” as I called it or just abnormal, temporary and unsustainable.
We also still benefit at the moment from having the reserve currency, but that’s not going to be supported for much longer. China is looking for the right time to crack the whip on our backs. Who knows what these financial summits will bring? But the goal of the majority of the world now is to manage our collapse efficiently for themselves, not to help return us to how we operated in the past with our “dollar hegemony.”
econavenger on November 13, 2008 at 12:42 PM
Demand world wide has dropped dramatically. England is proposing 0% prime interest loan. I don’t think people realize how severe the economic crisis is across the globe. That alone would account for the “oversupply”, oil and the futures in oil is bleak, primalarly because of the economic slowdown.
I too thought Cavuto was wrong and O’Reilly was right. And I posted such, but I was wrong…Cavuto was correct. As soon as there was an economic slow down, production and transportation slowed, we ended up with an oversupply.
We (world) are now producing more oil, then we are using…thus the price correction is because of supply and demand…
This is not a good thing, or at least the reason is not good.
Now you could argue that the slowdown took the speculators out of the market, but that is chicken or the egg argument.
right2bright on November 13, 2008 at 12:49 PM
Yes, supply and demand exactly explains it. High oil and gas prices are an incentive for oil producers to make as much as possible, and a disincentive for people to drive or use petroleum products.
So for now, it came back to reality. Inevitable that it will go back up though at some point.
firepilot on November 13, 2008 at 12:50 PM
Funny how when oil prices were skyrocketing, so were the prices at the grocery store, and economists said they were related.
Now that oil prices have dropped, there has been no drop in prices at the grocery store. What do the economists say now?
moonsbreath on November 13, 2008 at 12:52 PM
I concur with your fear of deflation and would like to thank the media for spreading some amount of panic (”Don’t buy! The world is ending!”). Granted, it’s not all their fault, but in the past, the masses wouldn’t know here nor there and this could have all worked itself out outside of public scrutiny. Their presence, though, has sent everyone into bunkers and foxholes as every talking head is predicting inevitable global atrocities in the near future… as if they understood any of what they were spewing. (sigh)
fiscallyconservative on November 13, 2008 at 12:53 PM
The western powers created Saudi Arabia and make kings of the Sauds. We told them they had oil, then we started pumping it for them and buying it from them.
If we ain’t gonna drill our own, then let’s just take the damn oil from under the Saudis’ stinking feet and they can try and stop us while we hold a gun to Mecca’s head.
I am soooooooo sick of these terdz.
Akzed on November 13, 2008 at 12:54 PM
Does this suggest the Renminbi will become the dominant currency and replace the USD? I get my salary in RMB, so that could be good for me personally in the short term, but I don’t see it happening anytime soon.
DarkCurrent on November 13, 2008 at 12:57 PM
I wonder if the oil price drop off is not directly related to the Lending market drying up.
If the oil speculators had been gambling, using Borrowed money, to speculate in the oil futures market then the decrease in available Loan Capital has stopped that game.
Romeo13 on November 13, 2008 at 12:58 PM
That combined with the more general drop in demand resulting from suddenly reduced credit seems like a reasonable hypothesis to work from.
DarkCurrent on November 13, 2008 at 1:02 PM
The fact is China has it’s own economic and financial interests to look out for. China is still highly dependent on the US as an export market. Almost nothing China produces can’t be produced elsewhere, so attempts to “crack the whip” on America would hit them in the ass.
Replace “China” with “Japan” and I heard essentially the same in the 80’s (back when my salary was paid in yen) and it never materialized for the same reason. Also, China is not nearly as economically developed overall as Japan was then or now and so has much less capacity to absorb the side effects.
DarkCurrent on November 13, 2008 at 1:17 PM
Utopia-Americans don’t need SUVs. SUVs are only needed by Democrat Party members, their families, their donors and their lickspittle media.
The rest of us can shove rickshaws around and since the Democrats will destroy what’s left of the economy (thanks Rep. Frank and Rep. Dodd!), you won’t have a job to go to anyway.
Have a nice day!
NoDonkey on November 13, 2008 at 1:21 PM
It is so complex and interrelated…but if the economy remained strong, the oil price would have remained strong.
It will take years to sort everything out, but my hunch is it will actually (amazing as it seems) fall back to the many millions of people who treated their homes as an investment rather then a home. Once that “investment” dried up, the money leveraged against that disappeared.
You take 130 million homes depreciating in value by just 15%, and you are talking trillions (over 5 trillion) of dollars out of the economy.
Now adjust to 30% and you are talking about $10 trillion just in paper.
Take the defaulted loans, slow payment, second mortagages, and you are talking maybe another 10 or 15 trillion.
Next thing you know you are talking about a lot of money.
Enough to start the collapse in stocks, futures, then bonds, then companies because they need the stock sales. Because basically we (companies, government and individuals) based our economy on an ever expanding one.
right2bright on November 13, 2008 at 1:23 PM
Correct, the only economy to rely on is the U.S. (as sick as it is) China relies more on us then we on them.
The dollars flow more to China, then the other way around. So if we stop buying who gets hurt more? We keep more money here, and they “lose the sale”.
right2bright on November 13, 2008 at 1:26 PM
I’m not optimistic about his policies, but the mess we are in is so large that his recent election has had little to do with where the Dow average is today–Hank Paulson did more than anyone yesterday to knock a few hundred of the Dow. Obama can make things worse, but in the short run he can maybe trigger a small rally just by naming a Treasury Secretary, indicating some stimulus, and providing some assurances for the auto industry.
dedalus on November 13, 2008 at 1:43 PM
I’m sure the media would not have connected the Dow dropping like a stone since McCain’s election with McCain’s election. Of course not.
The Dow’s dropping because anyone owning a business has now idea what this clown Obama or his clown Congress will do next with regards to taxation, collective bargaining or banking.
High taxes and an uncertain business climate is exactly what caused the Great Depression. Maybe voters should have thought of that before the voted for this vague notion of “Change”, which equals “an uncertain business climate”.
NoDonkey on November 13, 2008 at 1:51 PM
You Yanks got it good. Oil has come down about 60% from their recent highs, but the price of gas up here has only come down 30%. We still pay $2.55 per US Gallon. For some reason our gas stations have not dropped the price commensurate with the drop in oil prices.
keep the change on November 13, 2008 at 2:00 PM
Taxes are the least of the Dow 30’s worries right now, since few are showing much in the way of profits. The massive deleveraging around the world is taking loans away from businesses, shareholders away from stocks and money away from consumers.
dedalus on November 13, 2008 at 2:03 PM
Keep the change, I like that.
Soon, we’re going to be wanting a “change” from a dimwitted, corrupt and incompetent President Obama, I predict.
Then that whole “Change” deal is going to sound pretty bad to Baracky.
NoDonkey on November 13, 2008 at 2:04 PM
The oil quote is usually a futures contract that hasn’t been delivered yet, so it leads the price of gasoline a little bit. Also, there are refining costs that get factored in so the barrel of oil is just one part of the cost we pay at the pump.
dedalus on November 13, 2008 at 2:06 PM
You need to pay in USD to get the discount.
DarkCurrent on November 13, 2008 at 2:06 PM
No, I’m thinking it will have to be something like this Special Drawing Rights paper-gold solution then eventually a formal global currency. And yes it’s true that China is currently constrained from just dumping dollars, but they still have lots of leverage to use on us in return for their assistance.
More on the SDR idea here from last year.
econavenger on November 13, 2008 at 2:11 PM
Taxes are always a long term issue. Who’s going to make an investment in capital improvements when you have no idea how this neo-Marxist President is going to do with regards to labor and taxation?
.
When the world’s largest economy is showing all the signs of military weakness coupled with a political climate that’s hostile to business, it’s not helping matters a bit.
Barack Obama coupled with an incompetent and corrupt Democrat Congress will be a disaster for this country and for this entire planet on so many different levels and it’s already starting in anticipation of their ability to FUBAR everything they touch.
NoDonkey on November 13, 2008 at 2:13 PM
Lots of unhappy arabs just now.
Still, they can carry on buying distressed western assets with the trillions they have made since 1973
Ares on November 13, 2008 at 2:14 PM
I can’t find the words to express my glee at the declining revenues of OPEC, Chavez, Russia and especially Iran. But, of course, Obama when he is sworn in will now probably block off-shore drilling. The price of a barrel of oil will go back up. We still need to find more and at the same time conserve.
SC.Charlie on November 13, 2008 at 2:17 PM
I see your point, but we’re talking oil prices here.
There was never a global shortage of oil, and yet prices skyrocketed.
Just as now, they are saying oil demand has declined and driven the price down?
http://www.wtopnews.com/?nid=111&sid=1516764
Whats interesting is that worldwide demand is NOT dropping, its staying flat (not expanding as in the past).
So, why the sharp decrease is oil Price? Unless somehow oil speculation was involved to a LARGE part?
Romeo13 on November 13, 2008 at 2:18 PM
I’m carefully reading the link provided. Meanwhile, my contention is that China currently has no leverage to use against the US that doesn’t predictably do more damage to China itself. What am I missing?
DarkCurrent on November 13, 2008 at 2:23 PM
I agree. The debt situation between the US and China (combined with the fact that China needs the US market) makes it more a situation of either being able to ensure mutual destruction. The Chinese are very into survival (unlike the situation with the OPEC countries and societies).
progressoverpeace on November 13, 2008 at 2:31 PM
I understand, but when the barrel price doubled, the pump price doubled, but when it halved, the pumped price didn’t halve.
keep the change on November 13, 2008 at 2:35 PM
Oil demand has not declined… Just like the .com, the housing, and the energy bubble, demand was inflated. It’s the same thing.
A few greedy people made a bunch of money by creating a false demand causing prices to sky rocket.
romanianhacker on November 13, 2008 at 2:43 PM
No one who produces internationally looks at the current day demand, but what future demands are. Five years ago they were building and expanding expecting an ever expanding sell, that is what the inventories are based on, not today, next week, or even next month, barely next year.
That fact that it is stagnant is a disaster, and the anticipation (I suspect) is less demand.
The skyrocket in pricing (I am sure some contributed to “investors”) is still based on demand. They speculated that demand would outstrip production (chicken or the egg?), they were right for awhile, but now the reverse is happening. I suspect a lot of these speculators are sucking wind.
But it is so hard to actually discern was it the anticipation of lack of supply or someone buying up resources and making it scarce…I think it was a gamble on the market, and that would mean the speculators, although making great profits for a couple of years, are probably basically wiped out now.
Now here is the question…if the oil prices go up, do the speculators jump back up into their windows??
right2bright on November 13, 2008 at 2:44 PM
To keep the change:
The average fuel taxes (federal and state) placed on a gallon of gasoline in the United States is 47 cents. Here in South Carolina I saw regular gasoline at $1.87.
SC.Charlie on November 13, 2008 at 2:47 PM
Speculators are affecting the market just as much as ever, but their influence on the ups and downs is only a part of the picture, and not the biggest part. There are always commodity traders bidding high while others bid low. Sometimes one side guesses correctly, sometimes the other – but the speculators haven’t gone anywhere. If Bill O’Reilly had to make his living as an economist, he would be surfing in dumpsters for taco wrappers to lick. The biggest influence is that fuel users are buying less for now – that drives the price down every time.
whitetop on November 13, 2008 at 2:47 PM
I would also make one other note about China that is quite interesting (even if I have no idea what it means for the future):
China seems to be the only empire that decided to bound its own expansion. The Great Wall of China is not interesting in its huge design, but in what it said about the society that built it. The Chinese, as powerful as they were, decided to never pursue expansion outside of the sizable chunk of land they occupied. It is clear that they could have done quite a lot, had they wanted, but they decided against growth, essentially, in what I consider the oddest social decision in history. We see other clips of this attitude in that China had many of the keystone technologies long before anyone else (like moveable type) but never leveraged those inventions to their full potential. Again, this is some odd rejection of growth. We also see this reflected in the CHinese preference for stability, which is another anti-growth attitude.
I’m no China expert and have developed these ideas from looking at a few isolated pieces of Chinese history, but I was always intrigued at what I saw. I don’t know what this says about the future, but this is one reason that, while I am suspicious of Chinese intentions, it is tempered by what I see in their past – or, in how I interpret it, at least.
progressoverpeace on November 13, 2008 at 2:49 PM
I for one am anxiously awaiting my refund of the windfall “profits” that the state of Connecticut raked in due to the gross receipts tax when the price of oil was rising.I wonder why a windfall is only undesirable when it falls into the hands of private business and not the government?
JohnnyL on November 13, 2008 at 2:52 PM
I konw! I know! They are all saying it’s Bush’s fault, right? Yea, right.
MikeA on November 13, 2008 at 2:53 PM
Well, it’s basically a game of chicken and China can gamble that we blink first, because we will. Obama would probably be willing to comply out of pure ideology. See this article for some of the demands.
This is an alternative idea to fix the dollar dilemma if the world leaders don’t decide to go with a Bretton Woods II deal using SDR. Any of this stuff is going to be very tough to enact, but global desperation is setting in. The IMF is going to have a difficult time bailing out the whole world. Something needs to fundamentally change to restore confidence on a global scale. Yes a lot of it is a loss of confidence from the news stories now, but the truth is we we’ve lived in denial about our banking and finance system. It’s been a total scam since the 80’s.
econavenger on November 13, 2008 at 3:05 PM
China didn’t build the wall to keep itself in. It was built out of fear of external invasions, which came anyway. Historically, China has rarely if ever demonstrated interest in direct conquest of other nations. Most of it’s fighting has been among people that considered themselves Chinese. It has shown a remarkable ability to absorb invasions to the point that invaders themselves become self-identified ‘Chinese’ after a few generations. Now it seems even the Chinese are being slowly but surely absorbed into US culture.
DarkCurrent on November 13, 2008 at 3:14 PM
Progressoverpeace, your knowledge of Chinese history is extremely lacking. Start with looking up the Chin Dynasty and then the Chinese seizure of Tibet. The Chinese also tried, but of course failed to conquer the Japanese. Too bad that some one like Chin did come along and unite all of Europe around the same time.
SC.Charlie on November 13, 2008 at 3:18 PM
Oops, progressiveoverpeace, I guess you might say that the Romans did much of what Chin did at the same time, but were unable to coalesce their conquests into ONE nation.
SC.Charlie on November 13, 2008 at 3:23 PM
Yes, I know. But the decision to build such a wall (especially as expensive as it was) not only serves as protection but puts a definite limit on growth. Once you spend that much wealth on something, there’s little appetite for going past it and rendering it useless. Most other societies accepted certain risks of large-scale invasion in preference for an ability to expand, had they the ability.
Like I said, this always struck me as odd, and slightly reassuring in contemporary times, though I still don’t know what it all adds up to, especially as we move into space.
I agree. I’m just not sure how individualism is going to affect China, being something very different for them.
progressoverpeace on November 13, 2008 at 3:24 PM
I know when Japan tried and mostly suceeded in conquering China (one of the major battlegrounds is outside my window). When was it that China tried to conquer Japan?
DarkCurrent on November 13, 2008 at 3:24 PM
Well, the MAD analogy is a good one but it’s more a game of chicken where China can gamble that we blink first and win, because we’ll do almost anything now and Obama would probably be willing to comply out of pure ideological kinship. See this article for some of the demands.
This is an alternative idea to save the dollar if the world leaders don’t decide to go with a Bretton Woods II deal using SDR. Any of this stuff is going to be very tough to enact, but global desperation is setting in. The IMF is going to have a difficult time bailing out the whole world. Something needs to fundamentally change to restore confidence on a global scale.
Yes there’s an added loss of confidence from the news stories now, but the truth is we’ve lived in denial for too long about our banking and finance system and it caught up with us. Wall Street has been milking one scam after another since the 80’s and once the banks decided to be like Wall Street and get rich quick, it was unsustainable. The serious warnings were put out 5 years ago and the media put little effort into real reporting until this year. That’s about as helpful as if they did real reporting on Obama now.
econavenger on November 13, 2008 at 3:29 PM
I was talking about large-scale, which in China’s case meant westwards. You are correct, though, I know little of Chinese history. But when one has such examples of decisions and behaviors, the rest tends to come down to commentary.
Maybe I’m wrong. Maybe not. But I explained how I see things. Others can look at my interpretation and decide for themselves. I will say that having moveable type (just to pick one example) was such a huge advantage over everyone else that China should have been able to leverage that into the same power that Europe did. But China never did. That demands an explanation that goes far beyond any infighting, since the gap was a long, long time.
progressoverpeace on November 13, 2008 at 3:31 PM
Something weird with a posting delay on the site today so I expanded it and thought I was posting it for the first time.
econavenger on November 13, 2008 at 3:32 PM
I guess the second post was eaten too though
econavenger on November 13, 2008 at 3:33 PM
I see the Wall as a demonstration (like China’s recent orbital flights). I’ve been to the wall 3 or 4 times at different locations. I always wondered why it was even considered necessary. In many places it adds a few meters to the tops of peaks that nobody was likely to come over anyway, since there are sheer cliffs on the outside face. A lot of treasure could have been saved by just building the low parts, but it served as an impressive symbol of technological capability so it was done.
DarkCurrent on November 13, 2008 at 3:39 PM
I haven’t read your links yet, but I agree with your general assessment. I would call it ‘brinksmanship’ – which, unfortunately, is something that the US has lost all talent at, or appetite for. BHO will certainly be rolled over on this one, besides the fact that his own desires are likely anti-capitalist and anti-growth, and the result is not going to be anything decent.
Many of us have been talking about the unsustainability for a long time, but people didn’t want to hear about it. It was the American people who basically banned all pain and declared recessions to be illegal – or, at least, politically so. I understand that many traders and execs were caught in this system and the pain necessary to fix it was too great, given that no one else saw any problem. That happens a lot with problems that are introduced incrementally and people get trapped in them, as it were. I think that our society punishes people who take care of problems before they are evident and rewards people who take action after disaster has occurred.
progressoverpeace on November 13, 2008 at 3:45 PM
Progressoverpeace, the Chinese had a huge armada of ships that at for a brief time occupied the Indian Ocean. Here is a link to Wikipedia on this little known fact.
http://en.wikipedia.org/wiki/Mongol_invasions_of_Japan
The Chinese somewhat like the Koreans, Japanese and even Russians tended to keep themselves. Of course the Koreans and the Japanese had to be coaxed into the 19th century world. If I remember correctly the Koreans captured some American soldiers/marines in the early-1800s and summarily executed them. And, the Japanese were dumbfounded when Commodore Perry sailed into Toyko harbor in the 1850s with an American fleet of modern warships.
SC.Charlie on November 13, 2008 at 3:49 PM
It’s not like MAD. At present and for the foreseable future China cannot sustain itself without the US market. Unlike MAD, it’s not a question of whether the US can respond in time or not. If the US is damaged significantly China is damaged worse.
Aside: I’m not saying China is not a potential threat longer-term. It is and should be considered as such.
DarkCurrent on November 13, 2008 at 3:52 PM
To DarkCurrent, there are a number of Chinese walls that were built over a number of centuries.
SC.Charlie on November 13, 2008 at 3:52 PM
I don’t doubt that a lot of its construction was for a display of power, like the pyramids, and that the wall also served the function of a communications channel – but it was still a wall that was used for these other purposes. Very different from what other empires built for the same sorts of displays and functions.
progressoverpeace on November 13, 2008 at 3:52 PM
Thank GOD President Bush will be credited for the lowering of energy costs…………….
Seven Percent Solution on November 13, 2008 at 3:54 PM
Charlie, the key is the string “Mongol” in the URL. The Mongols invaded China, then used it as a staging ground for attempted invasions of Japan via Korea (which was also invaded by Mongols).
DarkCurrent on November 13, 2008 at 3:56 PM
To progressoverpeace, the American people have been carrying a heavy load ever since it became involved in the Second World War. It is the only maritime superpower in the world. The United States because of its location needs to keep the world’s sea lanes open for trade.
SC.Charlie on November 13, 2008 at 3:59 PM
I had a feeling you were talking about this. I don’t consider the Mongol invasion to be ‘Chinese’.
Yes. I believe that a lot of this comes down to the collectivism/tribalism that has been the foundation of many Eastern cultures, which is inherently less dynamic and less productive than cultures running on individualism (or greater parts, at least). The Eastern cultures certainly never lacked for genius, but those cultures seem to have held back the utilization and growth of their genius with their collectivist orientations.
progressoverpeace on November 13, 2008 at 4:00 PM
I know, I’m surrounded by four of them built recently.
DarkCurrent on November 13, 2008 at 4:00 PM
DarkCurrent, you say, “I’m surrounded by four of them built recently.” Just how recent?
One of the most interesting things that I like to think about is the bit of land between North and South Korea. That little strip of land has been unoccupied for over fifty years now, with little or no human habitation. I wonder what will happen to it when Korea is reunited.
SC.Charlie on November 13, 2008 at 4:08 PM
Yep, and the world doesn’t appreciate what we do. No good deed goes unpunished.
This is why I am against irresponsible and incorrect gift-giving, especially in a cross-cultural context. Gift-giving is one of the most basic notions in any culture (there are even notions of rudimentary exchange economies among chimps) and we cannot treat the rest of the world as if they look on gifts the same way that we do, since they don’t. In some places, incorrect gift-giving can get you killed because of how it’s viewed by the local culture and the mistakes made by using our culture as the measuring stick. IMO, this is why our moves to help many nations just backfire on us.
progressoverpeace on November 13, 2008 at 4:09 PM
If I could make a few amendments as below I think we’d fully agree:
DarkCurrent on November 13, 2008 at 4:09 PM
I agreed with the original comment, and I agree more with this one.
progressoverpeace on November 13, 2008 at 4:11 PM
About 5 years. Sitting near a corner as I am, I can reach two without leaving my seat. The other two are about 12 feet to my right and 10 feet behind respectively.
DarkCurrent on November 13, 2008 at 4:14 PM
I would suggest that you read up on Alfred T. Mahan and his book “The Influence of Seapower Upon History,1660-1783″
http://en.wikipedia.org/wiki/Alfred_Thayer_Mahan
SC.Charlie on November 13, 2008 at 4:20 PM
Missed my point. Just like in the stock market today, there is a disconnect between reality, and the futures market.
The more capital that is poured into a single market, the more the price will rise, independent of its actual worth.
I think that there was a lot of capital floating around out there for speculators to play with… which drove the oil futures market to an artificialy high level… and now that the loan capital is not so readily available, we’re seeing oil drop to a reasonable price level.
Something, BESIDES supply and demand has been jerking the price around… and I’m just trying to figure out what.
Romeo13 on November 13, 2008 at 4:27 PM
Romeo13, markets sometimes are over-sold and sometimes over-bought. Hysteria does get the better of us humans. The great example of an over-bought market is the fantastic tulip market in the Netherlands about five hundred years ago.
SC.Charlie on November 13, 2008 at 4:31 PM
We might need to bail out OPEC. There’s a coffee can on my desk. Dig deep, people.
Chuck Schick on November 13, 2008 at 4:33 PM
Personally, I think that Steve Jobs, Bill Gates and Warren Buffet need to buy out General Motors and remake the brand. I know that the latter two are Democrats. Now that would be a patriotic thing to do………but, I not going to hold my breath.
SC.Charlie on November 13, 2008 at 4:39 PM
A little odd fact of the world flower market is that today in The Netherlands daily auctions held there control around 60 to 70 percent of the world flower sales…………perhaps that great tulip boom/bust five hundred years ago has something to do with this fact.
SC.Charlie on November 13, 2008 at 4:44 PM
This could start a war as the iranians do not want
to loose all of that money.
I would not be surprised to see them start something up
Just as an excuse for another oil shock.
We cannot stop being economical when buying our vehicles for we must not give them an edge.
jcila on November 13, 2008 at 4:46 PM
Being in the oil and gas business, the low prices we are “enjoying” at the moment put quite a bit of uncertainty in my future.
It’s correct, lower prices ARE due to inactivity in the economy. With things the way they are, energy use is cold, not hot (worldwide).
Not as many goods being delivered, no new construction, sales of energy consuming products halting, business and personal travel decreased dramatically…etc. etc.
The futures market naturally follow reality or should I say precede.
Goodeye_Closed on November 13, 2008 at 4:50 PM
what’s with all the China fear? Is a cold war with China just what the doctor ordered?
Goodeye_Closed on November 13, 2008 at 4:53 PM
Wide swings in the price of crude oil only creates uncertainty. It makes it difficult for producers, traders and users of the commodity to plan for the future.
SC.Charlie on November 13, 2008 at 4:57 PM
This week China announced its own stimulus package of around $585 billion. They are going to lower its taxes ……. while Obama is promising to raise ours.
SC.Charlie on November 13, 2008 at 5:00 PM
Oil might be falling now, but OPEC will slash production so it jumps to around $75. I think we’ll be looking at $2.80 gas again by around July. We’re fortunate enough to have the low gas prices now, so we should appreciate it.
http://jumpinginpools.blogspot.com/2008/11/how-low-will-oil-prices-go.html
orfannkyl on November 13, 2008 at 5:04 PM
You may be right…that is above my pay grade.
The real problem is not that the price is dropping (that’s good), it is the reason for the drop. The world economy is slowing quickly. When you have England toying with the idea of a 0% prime, you know things are bad.
As I posted earlier, take $15-30 trillion out of the market (depreciation in home prices) and it will effect the economy.
right2bright on November 13, 2008 at 5:05 PM
Thing is that the depreciation of home price is only realized when you sell a home. As long as people stay in their homes, they don’t lose a thing…
Case in point… my house. I bought it 10 years ago for 189K. It currently would list at about 280K… but 18 months ago would have listed at 330-340K….
Now, did my house depreciated in the last 18 months? Technicly… but I’ll still make 90K or so if I sell right now… and thats not including 10 years of equity…
Soooo… some of these HUGE numbers we see are loses of what MAY have been if we had sold at the highest time… compared with todays worth, and not the more accurate measurment of what we bought it for, compared to todays worth.
Romeo13 on November 13, 2008 at 5:13 PM
Gasoline prices are low, but due to our nation’s handicapped refiners, diesel prices remain high. Since 100% of our shipping industry relies on diesel…
TMK on November 13, 2008 at 5:30 PM
one major factor controlling oil prices is it’s tie to the US dollar.
The US dollar was seeing a devaluation that led to the high oil price run up earlier this year.
Currently the US dollar is high against other currencies because the US financial crisis has spread globally and as people get out of stocks and into currencies they are settling out in USD as a safety net (certainly the US won’t go under, other markets more volatile than ours as dollar was already deflated).
This has led to the latest Oil price reduction
If you track oil versus gold – it’s much more stable
All comodities are going down as deflation (lack of spending) takes hold
pretty soon the US dollar will tank (as it was heading that way) and the oil prices will skyrocket.
Oil reserves worldwide are declining, the oil bubble is real and Amercians have paid too little for oil for far too long. When the surplus in the oil markets ends (35% of GOM production still shut in from hurricanes) the prices will head back up.
Enjoy you cheap gas now, it won’t last
Don’t buy that flashy SUV on the soon to close car lot.
Obama’s energy plan will only quicken higher prices and further dependence on foreign oil.
We may benefit in the short run, but many are predicting $200 oil in the near future.
audiotom on November 13, 2008 at 5:35 PM
The value for anything is what a willing buyer and willing seller will agree.
SC.Charlie on November 13, 2008 at 5:35 PM
Gee, Iran and Venezuela were banking on oil being at least 90 dollars per barrel to fund their mischief. Now it’s half that, so I hope they’re crying in their beer (well Iranians are muslims so I guess they won’t be drinking alcohol, so that makes it all the sweeter.)or maybe in their camel’s or goat’s milk. Right now the 2/3 cut in the price of oil from its 154 dollar high is a greater economy booster and tax cut than anything the Obamanation and his democrat minions could deliver through Congress. So what liberal is now gonna cry about Big Oil and its nefarious plans? Or maybe they are soooo devious that seeing Obama’s going to win the election they drove oil down so that there wouldn’t be any excess profits to tax? Yes, dems will have an excuse for anything unbeholden as they are to facts.
eaglewingz08 on November 13, 2008 at 5:52 PM
Noooooo, not quite…foreclosure at an all time high, worse effect then depreciation, now we are talking about maybe 30-40% under the market on a foreclosure.
Re-finance, can’t take as much out because of the devaluing, and in many areas, re-finance was a standard every few years. Was it wise? probably not, but it was “safe”.
So there are two areas where you don’t have to re-sell. Then each mortgage company has that asset on their books. That asset depreciates, so does their portfolio. So you don’t have to sell your home, for the home to impact a portfolio, since few own that home…the mortgage company does, and it take the hit.
No offense, but you are too naive.
The So. Calif. market alone is enough to upset the nations economy, add all the other areas and you have a disaster.
When you have a state like Calif. begging for relief, keep in mind that that state alone, if it was a country, would be probably be number 4 economically. When they go down, the country goes down. Add NY, and you have disaster, and their home prices are horrendous. A little tweaking in those states assessed values, and you have a lower tax base…still another way of taking money out of the economy.
You can argue all you want, but for the past twenty years, home sales and prices (all real estate) have driven our economy, right or wrong that is what has driven middle America and made them financially secure. Stocks were bought by middle America because of the re-financing and “flipping” of homes. Now that is out of the equation (and it should be), we have a huge, vast, multi trillion dollar a year “hole”, that right now we have no way to fill.
A hole in income, a hole in taxation…and no government adjustment, or payroll adjustment—-yet.
When the real estate market levels, when government gets spending under control…then we have a stable economy.
Real estate will be mid next year, government who knows…
right2bright on November 13, 2008 at 5:56 PM
Not quite, it is also what the tax assessor appraises it at. Homes are now being appraised at a lower value without being sold for tax relief, but “tax relief” is hurting the city, counties, and states.
My tax base has nothing to do with how much I or a buyer thinks it is worth…the tax appraiser establishes that. We are talking about 130 million homes, just a $10 change in each one is $1 trillion dollars.
Staggering figures, incomprehensible that $1 per month on each home up or down in taxes account for $1 trillion dollars.
right2bright on November 13, 2008 at 6:02 PM
Upside down …………. is your mortgage higher than the value of your house, some people are. Not a nice situation in which to be.
SC.Charlie on November 13, 2008 at 6:04 PM
I think, and I may be wrong, but one of just a few diesel refineries are dedicated to Venezuela. Too lazy to Google, but I am pretty sure that we allowed, for trade purposes, to dedicate one refinery to Venezuela…and that was our main diesel refinery.
Someone correct me if I am mistaken.
right2bright on November 13, 2008 at 6:06 PM
It isn’t important if you are not needing to sell, the thing to do is get ahold of your tax appraiser and make sure your house is de-valued for tax purposes.
You can save hundreds at least.
right2bright on November 13, 2008 at 6:08 PM
Right2bright, unless the tax appraiser is willing to buy the house his valuation means nothing………..except that you pay less in property taxes.
SC.Charlie on November 13, 2008 at 6:32 PM
I blame Geo. Bush.
So, tell us 9% Nancy, when will you thank those evil oil speculators for the price going down?
Or does your nappie only wad when the price goes up?
locomotivebreath1901 on November 13, 2008 at 6:32 PM
Outlander on November 13, 2008 at 12:22 PM
And you may be right as well.
maverick muse on November 13, 2008 at 6:34 PM
All so we can have more money for spending. You don’t think this is all intertwined? hmm? Timing is everything. Problem is our country isn’t making a damn thing worth buying anymore except shotguns.
Heating oil is not following this trend. How about that.
johnnyU on November 13, 2008 at 6:40 PM
Just like they said in the 80’s? Well it took decades to catch nup to us but OPEC emerged as a force yet again. Unless we tap our own oil supplies OPEC is in the same scenario that it was before. Economic recovery means sky high prices will set in again. It is just a matter of time.
Theworldisnotenough on November 13, 2008 at 6:51 PM
That is what I said, it takes money off the tax rolls, which hurts the local economy.
Seeing as you missed an important part, that would mean a 15-20% in a lower tax base in CA, which would be that much less in taxes, a disaster.
Now you may say that is CA, big deal, but how CA goes, so goes the country. They are nearly 20% of our GNP, if you don’t think their economic health is important to me in NC, you are very naive.
Now read my part about just $1 per month in less taxes on each home, and that alone is taking over $1 trillion out of our tax roles…the figures are staggering, and the impact is staggering, and with very little movement.
right2bright on November 13, 2008 at 6:58 PM
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