Oil price over $147 for the first time-now above $80

[Ed Mahmoud]

The Germans developed ways to make liquid fuels from coal during the war when their oil sources became tight. High temperature steam is reacted with coal to form hydrocarbons, which can be further refined to produce useable liquid fuels. The apartheid government of South Africa, fearing an oil embargo, set up a company called Sasol, that still exists to this day, that manufactures liquid fuel from coal.


When gasoline becomes expensive enough, coal to liquid technology will start taking off in this country.

[Dionne]

It's called oil shale. It just so happens the U.S. has the largest known deposits in the world. Huge areas in western Colorado contain oil shale.

[HURAKAN]

Oil Surpasses $103 for First Time
By GILLIAN WONG – 2 hours ago

SINGAPORE (AP) — Oil prices surpassed $103 a barrel for the first time Friday as persistent weakness in the U.S. dollar and the prospect of lower interest rates attracted fresh money to the oil market.

Prices were supported by comments Thursday from Federal Reserve Chairman Ben Bernanke, who said the American economy is not immediately threatened with stagflation, a combination of economic weakness and rising inflation.

Investors chose to see the comments as confirmation of their beliefs that the Fed will continue cutting interest rates to try to shore up the economy.

Lower U.S. interest rates tends to weaken the dollar, and crude futures offer a hedge against a falling dollar.

"Due to the weakening dollar and the rising fear of inflation, investors have put money into commodities, oil included," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

"Commodities, as tangible assets, do not face as much inflationary threat as opposed to holding a currency," Shum said. "Even though the value of money is changing, the asset continues to have an intrinsic value."

Light, sweet crude for April delivery jumped to a new trading record of $103.05 a barrel in Asian electronic trading on the New York Mercantile Exchange before slipping back to $102.79 a barrel, up 20 cents, midafternoon in Singapore.

On Thursday, the contract jumped $2.95 to settle at a record $102.59 a barrel.

Shum warned that a price bubble was emerging in the crude futures market as investors ignored market fundamentals that have shown continuous increases in U.S. crude supply while several recent forecasters have lowered oil demand growth predictions for this year due to the slowing economy.

"We've seen seven straight weeks of builds in crude oil inventories. The oil market fundamentals are softening and yet we see record highs being set, day in and day out," Shum said.

Shum warned of the possibility of a sharp correction at some point, though unlikely in the near term.

"Right now, there's a lot of trading based on emotion — emotions are high and that could keep crude oil at elevated levels, but the market faces the risk of a price collapse."

The Japanese government on Friday urged the oil cartel OPEC to increase output to help ease record prices.

"The high crude prices are gradually damaging the global economy. This will damage the economies of oil-producing countries," Minister of Economy, Trade and Industry Akira Amari said.

The Organization of Petroleum Exporting Countries holds its next policy meeting on March 5. It is likely to decide to keep current production levels unchanged, or even cut production, according to reported comments by OPEC President Chakib Khelil.

Khelil noted that oil inventories were growing, and that the recent rally in oil prices has been driven by the U.S. dollar's weakness and speculative trades amid geopolitical risks.

Crude prices are within the range of inflation-adjusted highs set in early 1980. A $38 barrel of oil then would be worth $97 to $104 or more today, depending on the how the adjustment is calculated. A direct comparison with daily Nymex prices is difficult because historical data, gathered before the crude futures contract was created in 1983, are based on average monthly prices posted by oil producers.

In other Nymex trading, heating oil rose 0.82 cent to $2.8538 a gallon while natural gas futures added 0.1 cent to $9.444 per 1,000 cubic feet.

In London, Brent crude futures rose 9 cents to $100.99 a barrel on the ICE Futures exchange.

[feederband]

Closed over $104 today

[HURAKAN]

Oil nears $105 for the first time
Unexpected drop in crude supplies, OPEC decision send prices to record high.

By David Goldman, CNNMoney.com staff writer
March 5 2008: 3:10 PM EST

NEW YORK (CNNMoney.com) -- Oil prices neared $105 a barrel Wednesday for the first time ever after a government report showed a surprise dip in crude supplies and OPEC announced its decision to not increase production.

U.S. light crude for April delivery settled at a record $104.52, up $5, beating the previous settlement high of $102.59 set last week. After the settlement, crude prices rose as high as $104.95, topping the previous all-time intraday high of $103.95 set Monday.

In its weekly report, the Energy Information Administration said crude stocks fell by 3.1 million barrels last week. Analysts were looking for a rise of 2.3 million barrels, according to a Dow Jones poll. Oil was up $2.05 to $101.57 a barrel just prior to the inventory report's release at 10:30 a.m. ET.

The severe and unexpected decline was perhaps caused by last week's fog in the Gulf Coast region.

"It looks like some oil was lost in the fog," said senior Alaron Trading analyst Phil Flynn. "Analysts didn't think it would affect supply, but it did."

Distillates, used to make heating oil and diesel fuel, fell by 2.4 million barrels while gasoline supplies rose by 1.7 million barrels. Analysts were looking for a 1.9 million barrel decline in distillate supplies and a 900,000 barrel rise in gasoline stockpiles.

Refinery usage was higher than the previous week, operating at 85.9% capacity last week, in line with analysts' expectations.

But gasoline demand, attracting more attention as traders anticipate the upcoming summer driving season, remained low, averaging just 9.1 million barrels per day over the past month and only 0.4% above the demand during the same period last year.

Oil prices were also supported by OPEC's decision not to raise crude output beyond current levels at its Wednesday meeting in Vienna, Austria.

Libyan National Oil Corp. chairman Shokri Ghanem said the cartel decided not to adjust oil production because demand has steadily weakened and is expected to continue to weaken at least until July.

But not all analysts believe OPEC is solely focused on demand.

"OPEC is more interested in the price than they are in selling oil," said Flynn. "But by trying to keep prices over $100 a barrel, they're going to end up selling less oil at a higher price."

The cartel's decision came despite President Bush's pleas Tuesday that OPEC consider the "consequences of high energy prices."

"I think it's a mistake to have your biggest customers' economies slowing down as a result of higher energy prices," he said.

OPEC's recent supply policies are a 180-degree reversal from previous decisions when they used to increase oil supplies out of fear of high oil prices, Flynn argues. But they may come to regret it.

"This will be looked back on as a major blunder, because it will bite them down the road" he said. "This will only inspire America to produce more oil and alternative fuels, and make other countries look past the cartel for oil."

Oil prices have risen nearly five-fold since 2002. Most analysts blame rising demand and tight supply. That has also attracted floods of investment money, and exaggerated the effects of supply disruptions.

[Cryomaniac]

This is madness, as I'm sure I've said many times.

[feederband]

This is madness, as I'm sure I've said many times.

MADNESS !!!! THIS IS SPARTA!!!!!!!!!

[Cryomaniac]

This is madness, as I'm sure I've said many times.

MADNESS !!!! THIS IS SPARTA!!!!!!!!!

[Cryomaniac]

Oil price has gone over $105!

http://www.kitco.com/market/

[gtalum]

We've all seen the real estate bubble pop. I think the oil bubble is unsustainable and also about to pop. There is no underlying reason, even with the dollar collapse, for oil to be over about $60-$70 per barrel. I'm selling most of my energy holdings over the next few weeks.

[RL3AO]

I hope you are right.

[Dionne]

I dunno. With Exxon in record profit territory and the continued rise in crude.....something seems awry. I keep hearing global demand.....not just demand here in the states. As a contractor to one specific realtor we remain busy. Huge demand for rentals and low end housing. It is the mortgage industry that is hurting....not the real estate in itself. Lumber is lower now than in the last 10 years. If you have the cash, this IS the time to build. It is clearly a buyers market. We have made adjustments to compensate for fuel costs....we no longer haul material....delivery is a great option, we now have a smaller Ford Ranger as the chase vehicle, only one full size truck per project, car pooling employees to job sites.....we've basically ended all unnecessary driving. Advance planning and a sharp pencil makes a big difference.

[gtalum]

Global demand actually dropped 4Q 2007, primarily due to a massive drop in demand in the US. Just before a "bubble" pops, everyone thinks it will always go up. I'm becoming a big fan of contrary indicators, and this is why I think it's time to get out of oil. For a while, anyway. I also think it's time to get into real estate, for similar reasons.

[Nimbus]

The European Central Bank decided not to lower interest rates today. They are starting to get worried about inflation so they kept the rate at 4 %. That action put more pressure on the US dollar and caused oil prices to climb. I think a surprise decision by the Federal Reserve to freeze or raise US interest rates would break the bubble in oil prices here in the US. Oil and commodities are fairly high now so there is not much room left at the top.

The real estate markets are very spotty. In Pascagoula, MS for example house prices were up by 6.64 percent year on at the end of December. Over 5 years they were up 54 percent. You can't expect that kind of return in all areas of the country though.

http://www.ofheo.gov/media/pdf/4q07hpi.pdf

[Cryomaniac]

You do realise that if the fed raise intrest rates, the stock market would probably collapse.

[Nimbus]

The Dow jones has good support in the 10,000 to 11,000 range. If that level were reached in the short term it would look like a big drop. Would it be better to have the stock market make a slow slide to those levels boosted by unsuccessful interest rate cuts?

A year or more from now we might be better off if we killed inflation.

[Cryomaniac]

That of course is the dilemma. Raise interest rates and cause a short term, large, market correction, or lower rates, causing an increase in inflation.

[Nimbus]

Over time a weaker dollar increases exports from the US and tends to reduce imports into the US. With fuel prices high US factories are forced to become more efficient so a weak dollar is not all bad news.

[gtalum]

A big drop in the stock market wouldn't be all bad. A short deeper recession would be better for us in the long run than a long, drawn out shallow one would be. There is a lot of unjustified on-paper value out there that needs to be shored up or eliminated before the economy will stabilize again. The course the Fed is taking right now is going to (or already has?) lead us into 1970's style stagflation, which is extremely difficult to fix.

[gtalum]

Over time a weaker dollar increases exports from the US and tends to reduce imports into the US. With fuel prices high US factories are forced to become more efficient so a weak dollar is not all bad news.

To a certain extent you are right, but I think we've passed the point of "good" in a weak dollar. We depend too much on oil and other global market commodities for a weaker dollar to be a net benefit to us. Plus it really sucks for those of us who like to travel abroad from time to time...