Friday, March 6, 2009

Cheap Crude

"Matthew Simmons has given 30-plus speeches in the past year, to audiences as diverse as the Pentagon and the Colorado School of Mines. ... Simmons believes Moscow's saber rattling is political cover for a more serious problem: a shortage of gas in Gazprom's pipeline system. 'This is really serious stuff. We've had a peak in Russian gas. Next year Europe is toast. Cold toast.' ... Can the deepest commodities market on earth be getting it so wrong? 'What would be really unfortunate is if 80% of the collapse in oil prices were the unforseen implications of the credit freeze,' he says. ... It wouldn't be the first time the market miscalculated. Simmons points to a framed copy of a 1999 cover story in the Economist--'Drowning in Oil'--which asserted that crude, then around $10 a barrel, would fall to $5 and stay there for a decade. Simmons (interviewed, but excluded from the article) insisted plentitude was a mirage and prices were set to soar. Nine months later oil passed $25 and the magazine issued a mea culpa. ... Simmons fears overproduction today will bring total collpase tomorrow. A fourth of the world's oil comes from the 20 biggest fields, 60% from the 800 biggest", Christopher Helman at Forbes, 2 March 2009.

I agree with Simmons. The commodities we are drowning in are: dollars and euros.

3 comments:

Anonymous said...

OK ... now we are getting somewhere...

Let's make oil the world's reserve currency... that would align politics, economics, social relations and consumption...

Yes... dollars and euros... just pretty printed paper...

Printfaster said...

Kind of like the Saudis hiding depletion by promising OPEC cutbacks.

The Russians have a weapon and it is oil and gas. Gazprom is part of the Russian defense ministry. It has in the past funded the military. Look for fuel to be treated as weapon and military commodity.

Look for things like surprise cutoffs to Europe. Oops, our pipeline just needed repair due to cold weather, or we need to repair our ailing infrastructure, Chechens bombed our gas distribution center, etc.

Just testing the system like Iridium. Feints.

Europe is dead without Russia and both know it. Look for a major move in gas next November just as things are getting interesting. Look at what happened to Bulgaria this last year. Coming to Germany and the west. Critical time is when storage is being built up.

What would six months of gas cutoff look like? Hard to imagine. Norway, the place to be next winter.

Add to that some sort of meddling in the gulf.

Anonymous said...

Yes Printmaster... yes...

Geo-oil politics...