Do we really have $100 oil or are we really using dollars that are only worth 50 cents?
Answers
2703 points
MNSL answered 11 months ago …
I think Oil price should be between $ 50 to $80. May be in the long rung it can go up.
Many analysts think the surge above $100 will be shortlived, oil company projections are still based on crude at $50. If leverage is forced out of 10,000 hedge funds as some suspect it will, the drop in some commodities might be spectacular.
I give below recent website and its contents.
http://www.khaleejtimes.com/DisplayArticleNew.asp?xfile=data/theworld/2008/January/theworld_January385.xml&section=theworld&col=
70-dollar mark for oil is ‘realistic’ : Sarkozy
(DPA)
14 January 2008
Riyadh/DOHA - Before rounding off his visit to Saudi Arabia and arriving in Qatar, French President Nicolas Sarkozy told reporters in Riyadh that a 100-dollars-a-barrel is too high a price for oil, suggesting that a ‘realistic’ price is 70 dollars.
‘When the price of oil increases three-fold in four years to reach 100 dollars per barrel, I feel perturbed about the nature of such increases,’ said the president, who questioned the effects of the rocketing cost on purchasing power and on poorer nations with a shortage in alternative energy resources.
‘We believe that the realistic price for oil should be 70 dollars,’ he added.
Sarkozy, accompanied by heads of top French firms, had just landed in Doha for bilateral talks between Qatar and France. Qatar marks the second leg of a Gulf tour which has already seen him sign bilateral cooperation agreements in Saudi Arabia.
In Qatar, flush with cash and investment opportunities and abundant in oil, the French president was expected to focus on economic cooperation.
However, his statements regarding the soaring oil prices echoed in Qatar even before he arrived, sparking a reaction from Doha’s oil officials.
Qatari Energy Minister Abdullah Bin Hamad Al Attiyah said the rise to the 100-dollar mark was a fleeting development.
The minister cited an incident last Friday when markets closed on a price of 92 dollars per barrel as proof that the rise and fall of oil prices is connected to fluctuations and traffic in the market, in addition ‘to how buyers here and there use local political situations’ to manipulate the prices.
‘We, as the Organization of Petroleum Exporting Countries (OPEC), always act when we see a decrease in crude oil in the market,’ he added.
OPEC, which includes countries such as Saudi Arabia, Iran, Qatar, and Venezuela, had previously deflected similar criticism during the last OPEC summit in November by saying inflation had lessened the value of the dollar over the years and so the price as such was sensible.
The price of oil reached the record mark of 100 dollars for one barrel (159 litres) earlier in January. Upward pressure on the price has increased along with growing concern over the adequacy of oil reserves as well as the weakness of the US dollar.
Meanwhile, during his time in Saudi Arabia, Sarkozy signed four agreements reflecting the main areas of cooperation that Paris seeks to expand with the oil-rich monarchy.
The four deals cover the areas of oil and gas, political cooperation, investment, and education and vocational training, local reports said.
The political agreement coordinates the dialogue between the two states, while the oil and gas deals open doors for cooperation and investment in the energy sector, according to a Monday report by the Saudi-owned daily Al Sharq Al Awsat. The financial details of the business deals were not yet disclosed.
Meanwhile, under the new technical training and education spending agreements, French universities are to receive more Saudi students.
Sarkozy arrived in Saudi Arabia Sunday evening for a two-day visit, accompanied by a delegation including the heads of major French firms keen for a share in Saudi allocations worth 500 billion dollars for projects in the non-defence field.
The French president discussed with senior Saudi officials French- Saudi bilateral relations, branding King Abdullah Abdel-Aziz ‘a friend of France’ and the oil-rich kingdom ‘a strategic partner.’
Sarkozy is reported to have offered millions of dollars worth of potential deals, in which France is likely to significantly invest in the kingdom’s construction sector.
Projects include linking the two holy cities of Mecca and Medina with a French-constructed railway, in addition to further extending Jeddah International Airport and refurbishing Saudi Arabia’s civil airline.
Water purification and distribution projects and other ventures in areas such as electricity, air and naval defence were also discussed.
The French president addressed Saudi Arabia’s Majlis Al Shura, a high-level consultative body, before resuming his Gulf tour. He is also due in the United Arab Emirates later where deals for civil nuclear projects are expected to be sealed.
116 points
GigaBill answered 11 months ago …
The true answer is yes.
But that is over simplified.
Inflation in many forms from many directions is part of the answer.
Production subsidies (or lack thereof) are part of the answer. In providing subsidies governments inflate indirectly the prices.
Exploration funding (or lack thereof) by majors is part of the problem. Majors can't reasonably explore virorously enough to prove and then expand reserves. The juniors must take up the slack. The juniors however cannot always place enough resources into play to satisfy new government auctions for rights. (are you starting to see a death spiral here?)
I am not an economist - I am an engineer. My understanding is my understanding. My vision is not perfect.
I await others who can provide a more "academic" answer.
Respectfully,
"GigaBill" - an acolyte of "Gumshoe"
2703 points
MNSL answered 11 months ago …
Hi Ivan001. I thought of sending another website and its contents.
http://afp.google.com/article/ALeqM5hFJxWhGyregrBxSQkuhiOEXhDb8w
NEW YORK (AFP) — Oil prices receded Wednesday in reaction to rising US crude reserves and after US President George W. Bush called on OPEC members to hike output, traders said.
Meanwhile, the International Energy Agency kept its 2008 forecast for oil demand unchanged despite growing expectations of a recession in the United States, which could curb demand.
New York's main oil futures contract, light sweet crude for delivery in February, closed down 1.06 dollars at 90.84 dollars per barrel, after earlier falling as low as 89.26.
In London, Brent North Sea crude for February delivery settled down 1.23 dollars at 89.75 dollars per barrel, after striking a low point of 88.71.
Prices fell after the US Department of Energy (DoE) said American reserves of crude climbed by 4.3 million barrels in the week ended January 11.
The reading outshone market expectations for a gain of 1.25 million barrels and broke an eight-week run of successive falls.
"The inventory data is very bearish," said Nas Nijjar at CMC Capital Markets. "Everything is a lot higher than expected."
Oil prices remain at elevated levels, but have shed some 10 dollars since striking a record high in New York of 100.09 dollars per barrel earlier this month.
OPEC Secretary General Abdullah al-Badri told AFP on Wednesday that high oil prices were not caused by a shortage of oil supplies and that other factors were to blame.
Stressing that the organisation saw no shortages, he said OPEC would be prepared to increase production if it saw evidence that supply and demand were out of balance.
The United States, meanwhile, is facing recession fears at home as the collapse of the housing market combines with high oil prices to make the economy a key issue in the campaign for the November presidential election.
"Sentiment amongst market participants has really dropped as it is looking more and more likely that the US is sliding into recession," Sucden oil analyst Nimit Khamar said.
Bush, currently on a tour of the Middle East, has voiced hope this week that the Organization of the Petroleum Exporting Countries would increase oil output to combat high prices, after his talks with King Abdullah of Saudi Arabia, the world's top crude producer.
"The president said there's a hope that as a result of these conversations that OPEC would be encouraged to authorise an increase in production," White House spokeswoman Dana Perino said earlier Wednesday after Bush arrived in Egypt from Saudi Arabia.
"He's worried about high oil prices and how they can negatively affect economies around the world," Perino added.
OPEC again insisted it was not responsible for the high cost of crude.
"Let me be clear, the high prices which we are witnessing are not because of any shortage of crude oil in the market," al-Badri said in an email reply to questions submitted by AFP.
"OPEC is constantly monitoring the oil market and if at any time fundamentals justified such a move, the Organization stands ready to raise production," he said.
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