John Hofmeister, the former CEO of Shell Oil’s U.S. operations, is warning that there is a “better than 50 percent chance” the price of gas will spike on continued heavy demand in emerging markets.
He also sees West Texas crude prices touching “the midteens to $120 a barrel some time this year.” West Texas currently trades just under $100 per barrel.
Price inflation is about to accelerate because of Ben Bernanke money printing and oil will lead the way.
Let's not forget the the impact of the impending war with Iran depending on O's re-elections prospects.
ReplyDeleteWill this increase be partially offset by a collapsing Chinese economy and demand for oil?
ReplyDeleteI doubt it, these scumbags will always fabricate another way to keep the oil at 100.00 - 120.00
DeleteYes, it seems like they always have and excuse for raising the price but never have a reason to lower it other than the fact that people can't afford to buy it and won't.
DeleteThe Ex CEO of Shell is saying that gas is going to spike because of heavy demand from emerging markets. I would have thought the takeaway message would be that the the price increase will be caused by heavy demand from emerging markets, but your conclusion does not reflect that.
ReplyDeleteBTW, what do you think of the Divisia monetary index compared to an unweighted simple-sum aggregate like M2?
http://www.centerforfinancialstability.org/amfm_data.php
I'll grant that an unweighted simple-sum aggregate like M2 is only a rough estimation of "money" growth, but that is only because it is difficult to know what exactly money is in the first place. Assigning weighted growth rates to different components of money is theoretically a fun game, but in the real world the problem remains how to weight the individual components and you can't convince me that any empirical work, including Divisia can create proper weights.
DeleteAs for oil, I believe there are a number of secondary bullish factors that could impact oil, such as that mentioned by Hofmeister, and I do point them out. But even if all the secondary factors fade away, Bernanke remains the primary causal factor behind the next upward move in oil.
That's interesting because everyone is trying to figure out why gasoline and petroleum usage numbers have tanked and are portending a deep recession. The Baltic Dry is also indicating a deep recession. What is he seeing that no one else is in terms of usage numbers? I understand the while money printing thing you are referring to but something just does not add up.
ReplyDeleteGood point made here. The trick is seeing how recession is closely linked to inflation, although it seems contradictory. Bob W's money/inflation thesis is right. The money printing is the government's attempt to compensate for a lack of income. Producers of real goods make up for the lack of income (seen in drop-off in usage) by raising prices on the reduced quantities for those who still have the income to pay. Those who have the income that pays those higher prices are the first to get the freshly printed money, as well as those who keep their income/jobs the longest. As for the reference to emerging market demand, that may be partly a way to focus attention away from the oil producers (which while acting rationally by raising prices, may suffer political repercussions if they become the target of ire).
DeleteWhat about the fact that gasoline consumption in the United States is at the lowest point since WWII? If prices spike upwards, usage will set a new post war low. That can't be good for anyone.
DeleteWhere's the beef Mr Wenzel?
ReplyDeleteUS retail gasoline deliveries have fallen off a cliff the last 2 months. Is Hofmeister's prognostication predicated on the price of crude rising due to em demand?
"Because he said so" is a little thin on reasoning & analysis.
Is it Hofmeister or your contention it's a Bernanke Bucks commodity price inflation effect?
Rather than subject our citizens to higher prices and thus more suffering for the poor, wouldn't our government be better served to cut all unnecessary spending rather than to print money to offset their recklessness?
ReplyDeleteYes this would be the responsible & wise thing to do, but which party has the emotional maturity to do it given that they would be voted out by those of us that have grown to expect/demand entitlements?
DeleteIf gas goes to $5.00 + and oil prices go north of $115-120. you can bet Obama will turn it into a tactical election advantage and issue an edict to impose a "Windfall Tax" on the big oil companies to punish them and make himself look good during his election campaign.
ReplyDeleteAs well he should. Our economy is being held hostage by "Corporate Profits" at the expense of the "Corporate Customer". You can espouse any political philosophy you wish, the point is near when consumers cannot be bled any drier. There is more to life than money. It is time for integrity and compassion for our fellow countrymen to come into vogue. Obama 2012
DeleteVote for Ron Paul and save your country.
ReplyDeleteYes, Ron Paul is the only one who sees it right. This out of control money printing has to stop! We are heading down, down and further down.
DeleteI suspect the price is being driven by speculation by big banks like Goldman Sachs. I'm suspicious of the fact that the last time gas prices were this high, crude was over $140 a barrel. Present crude prices should be yielding a price of around $3/gal.
ReplyDeleteIf indeed it is the big banks, look for them driving the price down after September to help in the reelection of their boy, Barry. I'd be looking for $2.50 gas on Nov. 1st.
America has more oil and natural gas than Saudi Arabia,but with the delay in drilling caused by the environmentalists and those who want to crush America we are at a disadvantage. As Ronald Reagan said... the problem is the government,,, don't wait for Congress to solve your problem... government is the problem
ReplyDeleteHERE COME THE SPECULATORS DRIVING THE PRICE UP. WHY DONT WE REOPEN ALL THE OIL REFINERIES THAT WERE CLOSED AND DROP THE PRICE FOR ONCE. ALL OF US HERE IN THE US ARE STRUGGLING TO MAKE ENDS MEET AS IT IS. GAS DOESNT NEED TO BE WHAT THEY ARE NOW! I DRIVE TO WORK TO PAY FOR THE GAS TO DRIVE TO WORK, MEANWHILE MY FAMILY IS STARVING!
ReplyDeleteOil is priced on the commodities market, oil futures are priced by what buyers are willing to pay for future oil. Buyers bid on future prices. Currently buyers see increased demand from emerging markets and a reduced future supply . Reduced domestic production and possible unstable imported future delivery (for several reasons) have led buyers to "speculate" (assume) future oil prices will be higher. Hence the increase in oil prices. "It's a supply problem dummy" Presidential releases from the "strategic oil reserves" are done so to lower prices and this usually works because "supply increases". Want lower gas prices? increase the supply! This isn't brain surgery, think for yourselves. As for reducing demand? That only works if you can reduce the demand from China and India. How's that gonna happen? Won't. As for "taxing" the oil companies to reduce prices. How do you think that works? Increase a companies's expenses in the hopes that will lower costs. Again, does that make even the smallest bit of sence to you? P.S. another news flash ,25% of the pump price of gas is.....taxes. Shocking I know. Hear any talk of reducing those "record taxes". I didn't think so. Regean got oil down to $10 a barrel. How did he do that class. By restricting domestic drilling? By increasing oil companies production costs? Are you even capable of independant thought?
ReplyDelete