Deutsche warns oil price may hit $100

[swag]

http://business.scotsman.com/index.cfm?id=887522004

Deutsche warns oil price may hit $100

JAMES DOW ECONOMICS CORRESPONDENT


OIL prices could potentially hit $100 per barrel, analysts at Deutsche Bank warned yesterday - as the cost of US light crude hit a 21-year record of almost $44.

Adam Sieminski, Deutsche’s global energy strategist, claimed that oil supplies have become so tight in recent weeks that a serious disruption in the Middle East could send prices rocketing to unprecedented heights.

He said: "It is worth asking ourselves - ‘what would happen tomorrow if we lost four million barrels a day, due to some accident?’ Or let’s say Iraq’s two million barrels a day became unavailable. OPEC’s got no spare capacity. And that could be it - $100 per barrel."

Sieminski stressed that this was not a wild claim. "The last time OPEC was at 95-100 per cent capacity was in 1973-74, and again around 1980. And disruptions put prices up by 50 to 100 per cent.

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[RebelYell]

1. That would be the nail in the chimp's coffin n/t

[Voltaire99]

18. Along with that of the US economy.

Let us hope fervently that oil prices don't double. We must not wish for 1929 again; even Bush is better than a depression.

[whosinpower]

26. Heh, it is not just the US economy

That would be affected - the entire world economy would suffer big time - perhaps even collapse entirely.

[Mari333]

2. I recently heard that SUVs arent selling

it will take this to wake the US public up. Sad, isnt it.

[BraveDave]

3. I have a bike.

WTF do I care?

[Mika]

5. What a simple and limited perspective

"WTF do I care?"


Me me my my mine?


Are you living on some sort of one human island?

[uncle ray]

7. and you buy no goods?

at least none that come on a truck, or use fuel to manufacture? just because you don't buy gasoline, doesn't mean a 100%+ increase won't affect you!

[Terran]

10. Do you grow all your own food too?

If not, I suggest you pay more attention to this issue.

[NickB79]

13. I'm guessing you use a little plastic here and there?

And that you eat a bit of food fertilized with petroleum-based fertilizers? And I'm guessing that a lot of the goods you buy are transported on big semi-trailers that burn gasoline or diesel?

You should care, because our entire society revolves around cheap oil. Once its gone, our society is in for a rude, painful awakening.

[PROGRESSIVE1]

4. Deutsche Bank is very well respected!

This claim is to be taken seriously.

[grannylib]

8. They own many US companies which are now outsourcing jobs over

seas fir cheap labor, $8/hour being of course an OUTRAGEOUS wage to be paying an American worker in the 21st century. Don't get me wrong, they may well be correct about this, but know who they are as well.
I used to work for one of their companies. Trained my replacements too.

[hatrack]

24. OPEC "Unable To Immediately Increase Outpout" - Yee hah!!

EDIT

"Today, the president of the Organisation of Petroleum Exporting Countries said the cartel could not immediately increase output to help bring prices down."

EDIT

Well, this could become interesting.

[Wwagsthedog]

6. The grocery and drug stores are less than a mile away from me.

Yes, I have two legs and a bicycle. The question is - will the trucks that bring stuff to the stores be able to get there?

[HopeArrival]

9. Say hello to ANWR, offshore and NP drilling

Not even Robert Redford and Carl Pope could stop the US from drilling its way to the much needed spice. The US wheels must turn and they will be greased by the blood and toil of those that try to halt them if need be.

We will come to despise the much revered eminent domain.

[mom cat]

12. Hi and a big welcome to DU, I liked your post. Keep it up!

:hi:

[HopeArrival]

15. Thank you

I hope I'm here to help...

[goforit]

11. Adios ............Bushistas!!!!

[mike1963]

14. I'll catch hell for this, but $100/bbl sounds great to me

I worked in the oil fields for 30 years with my dad who was an independent oilman. Worked my ass off, actually. When he died, I inherited some modest overriding royalties which are the bulk of my income...I figure I earned it. {putting on asbestos undies...ready for the flames} :D

[HopeArrival]

16. asbestos is out...Nomex is in

I see your 100$ / bbl and raise you 100$ / square inch of Nomex :-)

[MadHound]

25. Something to think about though friend

Would your "modest overriding royalties" be able to keep pace with the skyrocketing inflation that would result from a barrel of oil doubling in price? Somehow I think not.

Besides, while this might benefit you, what would happen to your friends, family and loved ones who don't happen to be in the position you're in?

Just some food for thought.

[Jacobin]

17. A sure sign that the price will go down

I'll give away my age and tell you I remember when Armand Hammer, president of Occidental Petroleum said oil was going to $90/barrel in about 1982. It promptly fell over a period of years and got as low as 10.

Just five years ago, Shell Oil was saying they didn't expect oil to go above $15 for many years.

(Not to dismiss the problem of Peak Oil which is REAL and will happen, but not in the next few years but certainly in the next few decades).

Recessions and expansions in different regions of the world, OPEC turning the spigot on and off, stupid presidents invading oil rich countries and other such things will make it swing wildly back and forth for the next few years.

[Elginoid]

30. one VERY big difference than in Armand Hammers time-

three actually-

1. China's growing unqunchable thirst for the black stuff.

2. Ditto for India

3. What's going on in Iraq

[Jacobin]

31. True, but economic booms are invariably followed by

economic busts, including those in Asia.

Long term, the price is going to be very very high. In the short and medium term, it will bounce all over the damn place.

However, if the House of Saud falls, all bets are off, and we are in for a major shit storm.

[Media_Lies_Daily]

19. THAT'S going to leave a mark!

[puerco-bellies]

20. We (the world) are pumping flat out

And still NYMEX Crude Oil is at record levels. Any disruption and we will have $50bbl overnight. A serious disruption and $100bbl is not at all unrealistic. Never again will we see crude below $30.

[squidbro]

21. Let it happen

I know that cheap oil is driving the world economy.

It will be painful for most, but I welcome a rise to $100 and beyond.

Perhaps that's what it will take to get our economy off of fossil fuels and save the environment.

If it takes outrageous oil prices to save the environment, so be it. It is but a small price to pay for the safety of our planet.

Heaven forbid that we have to resort to walking, riding bicycles and the like in order to reduce our fuel expenses. But hey, it is better for us and our world.

[Geo55]

22. It's going to happen ,

and it is going to be a BIG attitude adjustment.
I only wish things could be managed inteligently...
given our track record as a species , I don't know.
I believe we are entering a very strange and new world.

[Minstrel Boy]

23. bring it on

The end of cheap oil may yet give the world a fighting chance.

[llmart]

27. I agree with you 100%.

Americans need a wake up call that's even worse than 9/11. Less than 3,000 lives were lost in 9/11, but boy, when you hit good ole' Americans in their pocketbooks and lifestyles, well, then you have a real catastrophe! Look around you people. Maybe you're not as old as I am, but it may surprise you that you CAN exist without your cell phones, gourmet food, SUV's, boats, skeedoos, RV's, closets full of clothes, ten purses, etc. etc. etc. And you might even find that life is much more fulfilling without all the "stuff."

[happyslug]

28. Lets look at the full impact of this:

To do so you must remember the following:

1. There are 42 Gallons to 1 Barrel of Oil

2. The Federal Gasoline Tax is 18.5 Cents per gallon

3. Each state has its own Gasoline Tax: http://www.lmoga.com/taxrates.htm for details

4. Oil prices are "normalized" either through OPEC rules or through the market(What I mean by this is "Brent" oil may be X dollars, Saudi Oil will be slightly less, and Libyan oil slightly more, the price differences reflect the difference int he cost to refine and ship the oil to your local Gasoline station. "Brent" oil is the most commonly used "benchmark" and is the most commonly used Benchmark.

5. Do to "price stickiness" it takes only four weeks for the price at the oil field to reach your pump, but eight weeks for any price drop to go from the oil field to reach your local gasoline pump. For this reason this will be ignored, but watch as prices goes up rapidly but drops slowly, this is price stickiness coming into play.

6. The cost per gallon to operate your local gasoline station is about 10 cents per gallon (Varies by station and as such can only be estimated)
Lets look at how this works:

My Local Gasoline price: $1.859 per gallon
Less Federal Gasoline Tax: (.184)= 1.675
Less State tax: (Pa $.259)= 1.416
Cost of Gasoline per gallon less taxes = 1.416 when price is $1.85 per gallon (This is when Gasoline has been around 42 gallon a barrel for a couple of weeks):


Now with oil price cited in barrel, lets look at it per gallon:

$42 per barrel = $1 per gallon.

Thus the cost of refining and shipping to my local gasoline station is about $.416 per gallon (WHich I must add the gasline taxes of .445 per gallon or a total of .861 per gallon.


We now have All of the POST-oil field prices and can calculate what the local price will be at $100 per gallon:

$100/42 = $2.38 per gallon PLUS .861 which will equal= $3.241 per gallon.

Givne that the Average Driver drives a car that gets 20mpg and drives 15,000 miles per year. You see that the averge driver uses 750 gallons of gasoline per year. At $2 a gallon that equal $1500 per year, at $3 per gallon $2250 per year. In effect this means to the average driver about the lost of $800 a year in income or lost of $66 per month. Does not sound like a lot but it is a lot when you look at what the poor has to live off (Pennsylvania gives its residents on Welfare only $174 PER MONTH, and the Federal Standard of Need, the amount the people on SSI receive, is only $591.40).

This will hit the poor hard and ripple through the rest of the economy.

[Jacobin]

29. You don't get one gallon of gasoline for every gallon of oil

in a barrel.


One 42-gallon barrel of crude oil yields:
Product Gallons per Barrel*
Gasoline 19.5
Distillate fuel oil1 9.2
Kerosene-type jet fuel 4.1
Residual fuel oil2 2.3
Liquefied refinery gases 1.9
Still gas 1.9
Coke 1.8
Asphalt and road oil 1.3
Petrochemical feedstocks 1.2
Lubricants 0.5
Kerosene 0.2
Other 0.3
*The total volume of products made is 2.2 gallons greater than the original 42 gallons of crude oil, representing a processing gain.

http://www.omegamotors.com/enjoy/gasoline/gasoline_04.html

[happyslug]

32. Those are what comes out of an Average Barrel of Oil/

When you go by that you make two errors, first is that all of the above comes out of every barrel of oil. That is NOT the case. Oil is processed in bulk and each batch will be made to what the producing thinks he can sell. Thus refiner A may take his barrel and use it to produce gasoline, while Refiner B takes his barrel and uses it to make lubricates, while Refiner C uses his barrel to produce diesel fuel. Each will pay the exact same amount for his barrel and use it as he seas fit. The market will take all of these demands for oil and set the price. Thus the fact that the "Average" barrel is used as you point out does not mean that happens to EVERY BARREL. I am using 42 gallons per barrel for that is the unit oil is sold in. It is than processed into the items you mentioned, but if the barrel is used to produce gasoline you will get about 42 gallons of gasoline out of it (They will be some change do to Gasoline being thiner than oil but not enough to vary the calculations I was doing)



The second error you make is that what you give is how an average barrel is used NOT how every barrel is used. When you produce gasoline you get Co-products and By-products (Which are the items in your list). Some of these Co-products and By-products are really just slightly different fuels than gasoline and are just substitutes for Gasoline (and are called "Co-products"). Other items are produced that just fall out of the process to make gasoline (These are called By-products). While Co-products and By-products are produced at the same time as a main product, the difference is whether the item produced is in addition to the main product (Thus is a co-product") OR if it would be produced no matter what (and thus a "by-product").

Now sometime a by-product will become a co-product and than even a main product. This is what happened to Gasoline, originally in the 1860s Gasoline was a by-product of producing Kerosene. With the invention of the Automobile, Gasoline became a co-product and finally the Main Product with Kerosene as a co-product (Kerosene and Kerosene Jet Fuel are interchangeable as a fuel but treated differently for Fuel taxation purposes and thus listed separately).

Another example of a Co-product is Distillate Fuel oil (More often called "Diesel Fuel") and home heating oil (These are treated as two different products in your list but are interchangeable in actual usage, the difference is Diesel fuel is subject to Federal taxation while Home Heating fuel is not). Home heating fuel and Diesel fuels are generally produced at the same time as Gasoline but which one is being favored changes on the time of year. In the spring Gasoline is preferred (For the upcoming Summer driving months), in the fall home heating oil and fuel Oil is preferred (For the upcoming home heating season).

Between these four types of fuel you are looking at 35.4 gallons of the 42 gallons in a Barrel of oil. Thus you have 35.4 gallons of a barrel being used for fuel and as such setting the price at your local gasoline station.

Now an argument can be made the above are all "Main Products" of refining oil, for people will produce them whether gasoline is made or not. The same can be said of the following products, Asphalt and road oil 1.3, Petrochemical feed stocks 1.2, and Lubricants 0.5 for a total of 3.0. When there is a shortage of any of these items, oil is used to make these as the "Main Product" with much lower levels of Fuel being made as a co-product.

The remaining 3.6 gallons (and most of the 2.2 gallon "gain" in processing) tend to be by-products. By-products are products that are produced at the same time as a main product, but generally are produced for themselves. Even if in short supply, are rarely produced for the cost to make them out of the main ingredient (in this case oil) tend to be uneconomical (Ether do to to high a cost to produce OR simply the cost to produce just for the by-product is more than you can get for the by-product. In the production of by-products All cost to refine is allocated to the cost to produce the main product and Co-products NOT the by-products. By-product are rarely profitable in themselves but can be profitable ONLY if most of the costs of producing the by-product is carried by the main product).

My point here is that simply because we use oil for more than gasoline does not mean my calculations are wrong. I admit it is a implication of the real situation but if you look at the above and the real road you objection is also a implication. Given the real world we can use 42 Gallons of oil will produce 42 gallons of Gasoline for the rough calculations we are using. Neither one of us are in the production of oil, gasoline or any oil derived product (Where the production of co-products and by-products would be important). I was just setting up a formula to give a rough idea of what the pump price will be at $100 a barrel NOT a guess what it exactly will be.

[struggle4progress]

34. Gotta cut taxes for the rich! It's not fair! They've already ...

suffered enough from fueling their Hummers!

[KansDem]

33. Hey, Deutsche Bank! Any update on those "put options?"

If I recall correctly, someone connected with the 9/11 report thought this information wasn't worth looking into.

Lest we forget:

Suppressed Details of Criminal Insider Trading Lead Directly into the CIA’s Highest Ranks

CIA Executive Director “Buzzy” Krongard managed firm that handled “PUT” options on United Airline Stock

by Michael C. Ruppert

A September 21 story by the Israeli Herzliyya International Policy Institute for Counterterrorism, entitled “Black Tuesday: The World’s Largest Insider Trading Scam?” documented the following trades connected to the September 11 attacks:

- Between September 6 and 7, the Chicago Board Options Exchange saw purchases of 4,744 put options on United Airlines, but only 396 call options… Assuming that 4,000 of the options were bought by people with advance knowledge of the imminent attacks, these “insiders” would have profited by almost $5 million.

- On September 10, 4,516 put options on American Airlines were bought on the Chicago exchange, compared to only 748 calls. Again, there was no news at that point to justify this imbalance;… Again, assuming that 4,000 of these options trades represent “insiders,” they would represent a gain of about $4 million.

and...

“The uncollected money raises suspicions that the investors – whose identities and nationalities have not been made public – had advance knowledge of the strikes.” They don’t dare show up now. The suspension of trading for four days after the attacks made it impossible to cash-out quickly and claim the prize before investigators started looking.

and...

Krongard joined the CIA in 1998 as counsel to CIA Director George Tenet. He was promoted to CIA Executive Director by President Bush in March of this year. BT was acquired by Deutsche Bank in 1999. The combined firm is the single largest bank in Europe. And, as we shall see, Deutsche Bank played several key roles in events connected to the September 11 attacks.

http://www.hereinreality.com/insidertrading.html