Has the oil fever finally peaked?

...the recent record-high prices have fueled a boom in exploration. And as that boom begins to yield more oil, the industry will gain a greater ability to ramp up production in one place in order to make up for any shortfall elsewhere.

This should reduce the impact of a supply disruption in, say, Iran or Nigeria, and ease what experts refer to as the security premium that's currently build into oil prices.

"That [premium] is in the neighborhood of $25 dollars a barrel," said James Williams, an energy economist at the consultancy WTRG Economics. "That number would go away, or most of it would go away, if we had more spare production capacity."

And that's not even considering shale and the tar sands, which are now coming on line, and will remain that way, as long as prices don't drop back into the twenties.

In the words of Ghân-buri-Ghân, the winds are changing.

As I've been saying, current oil prices are unsustainably high. If they stayed this high, there would be trillions of dollars in profits to be made from alternatives. All that new supply would drive down the price.

There's also enormous room for reduction in demand as new capital investments are made, as can be seen in the decline in demand for SUVs vs. smaller cars. This change takes a while to kick in, but tends to persist even after prices come down again, due to consumer memory and technological ratcheting (hybrids won't suddenly become an unproven technology again after oil declines, for example).

One final thing: stockpiles of oil and oil products are at high levels. Stockpiling allows the market to absorb more oil than it actually consumes, but if the stockpiles become saturated this buffer goes away and prices can decline rapidly (particularly if, seeing the prices declining, some of those storing oil attempt to sell it.)

Sounds like $278 for SpaceX, $207 for RpK.

Haven't heard annual breakdown.

Is it just me, or are the wires reporters hopelessly behind on the concept of this program?

As I've been saying, current oil prices are unsustainably high.

Yes, I've been saying that, too. I'm perennially amused by people who fantasize that the prices will go to $150 or $300/barrel. It was just a matter of how long it would take to fall, not if.

Then again, it could be simple supply/demand, where demand is falling off as the US slides into a recession from the housing bust and it's ripple effect.

It is supply and demand but not for the reason you mentioned. The housing market is more of a slow leak than a bust and I don't think it is causing a cascade failure in the economy

Orville: "as the US slides into a recession"

What US are you talking about???

DU land or Dimsylvannia I would wager Cecil. I guess the rest of us in Realityville didn't get the memo.

Cecil Trotter wrote:

>> Orville: "as the US slides into a recession"

> What US are you talking about???

Well, if an unemployment rate of 4.7% can be "the worst job market since Hoover", then an economic growth rate of 5.6% can be a "recession." It all depends on which party is in the White House, you see.

Mike

Wow... I can just see Orville crashing through some wall yelling, "Oh Yeaah! Kool-Aid Man is here!"

In the real world, US GDP is up and US personal income is up. We don't even have 1Q of decline, much less 2Q.

It sounds nutty to ask for, but now is the time to implement an import tax on oil. We need oil prices to stay high so that we can begin to wean ourselves off of cheap oil.

An import tax that would keep imported oil at $50/bbl would protect the US oil industry, allow it to continue without a crash that will destroy it for another five years, and start to edge people towards other answers, like nuclear or space solar power.(hey, while i'm dreaming lets go all the way)

Hmmm... according to Google, this is at least the 4th time that you've run this story Rand. The first time was when Oil was at the "unsustainable" level of $48 a barrel.

Your last one was 29 June, which was followed by another jump in oil prices.

The current price level is certainly nothing to do with supply. However, how long the market can keep forcing the price up through uncertainty is a completely different matter.

We need oil prices to stay high so that we can begin to wean ourselves off of cheap oil.

If you do this by an oil tax, the effect is to move oil-intensive industries offshore. You then import the oil in stealth form, in products and materials that embody oil processed elsewhere.

You could try taxing a wide variety of products based on their 'oil content', but this would be the kind of detailed central economic management that never works well.

Paul's right. Artificially propping up prices is just asking for worse trouble.