Strengthening Constitutional Self-Government

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Get Ready to Pay Up Deneen!

Recalling my friendly wager with Pat Deneen from just two months ago that oil would come back down below $75 a barrel in the fullness of time, here’s a dude who says it’s heading for $65 soon.

I note also that the most recent stats from the Dept. of Energy show U.S. oil consumption is down 800,000 barrels a day in response to current high prices. Who says markets don’t work?

Discussions - 5 Comments

Yes, markets do work - inflation is up, banks are imploding, the stock market is down 20%, and oil is still at about $115 (amazing that we now think this to be "cheap"). Lest we think the market only goes up! Oil may get down as far as Steve suggests, but we shouldn't imagine that the economy will be healthy as a result (It's doubtful, if not obvious, that the supply is not there, so the price is going down as the result of "demand destruction" - what Steve acknowledges we are now experiencing. Such destruction doesn't suggest a robust economic picture).

The Russians and/or the Iranians may yet come to my aid (alas), if they end up using energy as a weapon. Things are quiet in the energy markets right now, but it's doubtful they'll remain that way.

In any event, I'm in good shape - if I lose, I can pay with what I'm not putting in the gas tank. If I win, I'll pick a place that emphasizes locally produced food. Either way, good times...

I agree with what much you have said, but even locally produced foods are not the answer becasue of this: EXECUTIVE ORDER 10999
allows the government to take over all food resources and farms.

To see the rest of these gems from the 1960's and after go here.

Mentioning the energy card is a very good observation in my opinion, but another aspect is that Russia has kicked out most of the NWO banks lately. Anyone who thinks whoever runs the Western Nations is not provoking this is not looking at the evidence. Just search for the declassified documents that say the strategy is to encircle russia with puppet states and set up the missle defense system so they can be clobbered. Compare the missle defense system to the militarism of WWI. Regardless of the psyop double think most Americans are subject to you do not encircle and threaten an entity with force to aviod a war.

I agree with Patrick Deenen that the typical understanding of "cheap" is at odds with the market understanding of "cheap". The guy who thinks oil is going down to $65 thinks oil at $115 is expensive, the guy who thinks oil at $115 is cheap thinks it might still hit $200. You can't complain that americans are willing to consider oil at $115 cheap if you also think that we are mooving towards peak oil, an even weaker dollar and an economic boom in India and China.

There are scenarios where I would consider oil at $300 cheap and oil at $65 expensive.

It is the various and differing views on what the true scenarios are that drives the speculation in the first place. The guy who thinks that $65 is possible thinks that not all the components that justify higher prices are absolutes, they are contingent upon a host of assumptions. So he lists some assumptions that justified higher prices that turned out to be less significant: "observing that recession and conservation are gutting demand, Iran is at the negotiating table, the dollar is soaring against the euro in reaction to the worsening European economy, and the summer has proved milder than normal, sapping the use of air conditioning nationwide."

In other words if the assumptions change, the price changes.

The author of this piece attacks a straw man position when he says: "Their opinion that crude moves purely on real demand is BS. When the fast money comes out, there's a giant sucking sound."

This opinion is not really BS when you consider that "real demand" is itself a calculation. In other words there is no such thing as real demand. There is of course present demand, and you can cobble together data on actual usage, but demand is always to an extent a foward looking guess. Therefore crude does move on "real demand", but real demand is not "real demand" to any greater extent than my estimation that Obama will win 277 to 261 against McCain is the final result. "Real demand" is the sum total of all interaction/predictions of real demand, or else it is historical data that some joker will try to retrofit.

The fact that commodity markets do swing wildly should be no suprise to anyone who pays attention to politics. Lets replace the barrel of oil with stock in Putin. Not too long ago in the wake of the death of AS discussion turned upon being prudent and humble in regards to the politics of Russia. More intelligent folks than myself suggested that AS was the greatest man of the 20th century, and I confined myself only to the retort that Henry Ford being american was probably more influencial. At this point had I suggested that Putin was a tyrant and no great man could ever have praised him, I would have been justly ridiculed. Yet it seems that wild swings occured not long after in the price of Putin stock. Putin went from $150 to $.02 in no time flat, following some sort of situation in Georgia. Were this the market I would have sold Putin at $150 and bought him at $.02. In so doing I would be speculating, but I would be acting as a force for moderation. There is no way the real Putin underwent a drastic change, all that changed was opinion and public perception about him and the situation in Russia(albeit perhaps only on the "right", the "left" probably agreed with the nation article.)

Also putting blame on speculators is hilarious. If speculators are wrong they go broke. A speculator and his money are soon parted, especially if they are as wrong as some folks said they were. Speculators are not problems, they are simply arrogant, but the distinction between speculator and non-speculator is somewhat fluid seeing as how the entire question to be determined is "real demand". The speculators might just as easily be driving prices down contrary to real demand. Ironically if you know that speculators are to blame one way or the other then you either know what the real demand and supply will be, or you simply know what I knew in regards to Putin going from 150 to .02. If the first case applies you are probably a speculator, if the second then you are simply blogging and paper trading a lot.

Steve knows better than to let the price move of a few weeks or even a day to lead him to begin celebrating his likely winning of this bet with 2 years, 10 months left to go - and I do too. Still, since he started this, it should be noted (as I suggested in the above comment) that tensions with Russia and the still-falling dollar resulted today (8/21) to a $5 rise back over $120 bbl. I don't think we're out of the woods, by any stretch....

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