Jim Rogers sees oil at US$200 as world is running out of reserves

INTERNATIONAL. Investor Jim Rogers is bullish on oil as crude prices collapsed to four-year lows and the world is running out of known oil reserves.

Rogers said he is the world's worst market timer and a horrible short-term trader, but a sharp sell-off in oil prices suggested a bottom.

Rogers, who remains bullish on commodities, estimated known world oil reserves at today's consumption rate are about 16 years, which indicates crude prices will again trend higher.

"Oil Reserves are dropping 7% a year and these drop in reserves will cause serious supply problems in the near future."

"We're going to see US$200 oil at some point, it may be by 2013. It's a sad fact but the world is running out of known oil. Oil will make a big comeback," he said"


More at Business Intelligence Mideast here.

Charles Hugh Smith: Oil Down $16 to $130, Everything Wonderful Again: Not

Full blog post here.

Frequent contributor U. Doran sent in this link from the Association for the Study of Peak Oil & Gas-USA: Peak Oil Is A Done Deal .

Bottom line: Saudi Arabia and Russia, which together pump about 23% of the world's oil, are both in depletion decline. So are Mexico, the North Sea, etc.

Simply put: every time the "Oil Bull" is declared dead, as it was in January, it rises with extraordinary alacrity to new heights. The reason is not gol-durned speculators but supply and demand--even as demand inches downward, supply is declining even faster.

Let's put "demand destruction" in the U.S. in its proper context. 300,000 barrels a day is chump-change in a nation which burns 21 million barrels a day. if supply were increasing by leaps and bounds as it was in the 80s, fine, then you could have a huge demand-supply imbalance in favor of supply. But by even the most optimistic estimates, "excess capacity" (all in heavy crude few can refine) is about 1.4 million barrels a day--a razor-thin margin.

I have predicted one last "head-fake" decline in oil prices, but it's going to take serious reduction in demand, on the order of 4-5 million barrels a day globally, to get that drop.

Peak Oil Now--or not?

I've been reading about the recent spike in energy prices from a couple of different sources that I don't always read on a regular basis. It's kind of giving me pause about the underlying reasons for the spike. At first, I immediately attributed the price spike to increased demand from India and China. The supply/demand variable is a given precipice to price spikes in peak oil circles so, naturally, it was the first thing I thought of. However, I think there are other factors in play here as well.

I almost hate to give reference to Newsmax, because by my nature I attribute Newsmax to be a right-wing rag, and I lean more toward anything written with a liberal bias. I'm not sure how to peg Information Clearinghouse except that it seems more independent and is definitely not mainstream, although I do tend to accept the possibilities the articles that IC publishes (I owe to my inherently rebellious side). Nonetheless, I've been taught to identify the source and its biases, and also to read literature that doesn't always coincide with my own viewpoint. So, here I am presenting some articles from sources I don't naturally agree with in order to be fair and more educated on the subject myself.

After taking in this data and all of the previous data over the course of the last 4 years, I think I've come to the conclusion that while my view of peak oil remains intact, I do believe there are other variables at work at this particular time. I'm not sure that the world has actually peaked as I/we have no definitive proof that it has occurred. I think we will only know in hindsight without the proper hard evidence of proven reserves in all of the world. My feeling is that we are on a plateau and will seesaw up and down for quite awhile before sliding straight down.

What are the variables masking this seesaw plateau, you ask? In my opinion, the variables include availability of sweet crude vs. sour crude, the availability of refineries to meet demand and what grades of oil they have the ability to refine, the increase and decrease of consumption across the world, the fluctuations of demand destruction around the world caused by the higher oil prices, weather events affecting the physical extraction and transportation of oil, geopolitical events affecting exploration, extraction, processing & transportation of the oil, and market manipulations. These are just a few of the variables I can think of at this time.

With all of that said, I will give you the links to the two articles that tell me something other than JUST peak oil is in the mix:
Information Clearinghouse: The Great Oil Swindle
Newsmax: The Dollar and Oil-The Truth

The Oil Drum also has a good thread about the recent spike with some mainstream video of discussions on TV here if you want to look.

If you have time to read them, tell me what you think. Am I completely off the track?

The Coming Energy Wars by Rana Foroohar

Full article from Newsweek online here.

This spring, America hit a historic point. With average gas prices per gallon edging toward $4, America's notoriously profligate ways started to change fast. Americans are driving less, using mass transit more, buying fewer gas guzzlers, indeed shopping less wantonly in general, and lowering their previously unshakable confidence as consumers. Suddenly, Americans are acting differently; if not exactly like Swedes, then not quite like themselves, either. It's a shift that could change the world.

And there are more changes to come. So far the price shock has triggered the most obvious consumer shifts in the United States. Europeans, already greener, are also are buffered by a stronger currency, and Asians are protected from the spiking price of oil by subsidies that control the impact on gas prices at the pump. But if oil prices continue to rise, and the subsidy dam breaks, as seems likely, the energy revolution now transforming America will spread. "We sailed through $80 a barrel," notes energy authority Daniel Yergin, author of "The Prize: The Epic Quest for Oil, Money and Power" and chairman of Cambridge Energy Research Associates. "But that doesn't mean we'll sail through $200 a barrel. That sort of price would have enormous global consequences."

A year ago no one was talking about $200 oil, and now everyone in the markets is, for scary reasons. Oil prices climbed from $10 in 1999 to $95 last year without slowing the surging world economy, in large part because the markets believed the spike was at core driven by rising demand, particularly from India and China, which feeds growth. There was concern over supply, too, but nothing like the tumult prompted by the stranglehold OPEC imposed on the world in the 1970s, at least not until recent months. As the per-barrel price climbed over the last few months, with futures reaching $135 last week, the consensus began shifting to a new more gloomy view: that not only would long-term demand, led by China and India, continue to grow, but that the supply threats, including increasing conflict, falling investment, industry bottlenecks and downward estimates of big field reserves in major oil states—aren't going away any time soon. Now many (though not all) serious people take $200 oil—and the prospect of another '70s-style oil shock—seriously. Goldman Sachs warned that the $200 barrier could be hit within the next six to 24 months.
Click Here!

That's way too fast for comfort (or should be) even for those who welcome high gas prices as a way to induce energy conservation and fight global warming. Already skyrocketing oil prices are causing real pain for ordinary people, threatening global economic growth, and reviving the specter of inflation. The price pressure is now particularly acute in big emerging markets like China and India, which in recent years had become paragons of fiscal responsibility that tended to dampen global inflation by exporting cheap goods and services. Now they threaten to become exporters of inflation, particularly if energy price controls give way. Americans now making up for their losses at the gas pump by flocking to Wal-Mart for cheap Chinese goods would be out of luck. Make no mistake: $200 oil in 2009 would be a painful shock, not just a green tax on gas guzzlers.

Oil crosses $129 for first time, heads for $130

Click here for yahoo story.

excerpt:

NEW YORK - Oil prices spiked to a new trading high Tuesday, sweeping toward $130 a barrel as supply concerns intensified the momentum buying that has lifted crude deeper into record territory.

The June contract for light, sweet crude traded as high as $129.58 on the New York Mercantile Exchange before settling back to $129.09, up $2.04. The imminent expiration of that contract created additional volatility in the market, and raised the very real possibility that crude could hit $130 before the end of the day, when the contract was ending.

Retail fuel prices also shattered records set the previous day. The national average price for a gallon of regular gasoline touched $3.80 for the first time, according to AAA and the Oil Price Information Service, while diesel jumped nearly 2 cents to a record $4.54 a gallon. Gas prices are up about 19 percent from this time last year.

Oil's trek toward $130 coincided with the Labor Department's report of an unexpectedly sharp rise in wholesale inflation last month. The combination raised fears that inflation will slice into Americans' discretionary spending, and that sent stocks falling sharply on Wall Street.

Jim Ritterbusch, president of oil trading advisory firm Ritterbusch & Associates in Galena, Ill., said oil prices were being supported by strong demand for diesel fuel in Asia, and a weakening of the U.S. dollar against the euro, which makes oil cheaper for some investors overseas.

"We're getting a combination of two price drivers this morning," he said.

Oil prices are now about twice as high as the were just a year ago. Prices have been propelled by a number of factors, including supply concerns, soaring global demand and a sliding dollar.

Radio New Zealand quotes Association for Study of Peak Oil's Bruce Robinson

Click here for short news story.

business.iafrica.com: "Oil at $87 a barrel is cheap"

Click here for full story.

Snippet:
..."According to US government forecasts, world petroleum liquids consumption is expected to increases from 83 million barrels per day in 2004 to 118 million barrels per day in 2030.

That's an increase of almost 30 percent and there are not enough new oil reserves to meet this demand.

"The price of oil has to increase otherwise it would be betraying the laws of economics," said White.

"I bet that in 10 year's time after the Asian population has boomed and gentrified and peak oil has hit home hard, you will have to agree with me that oil at $87 a barrel was cheap, cheap, cheap," he said. ..."

CNN Money: $80 a barrel oil for this year--investor T. Boone Pickens

Another prediction, click here. Anyone else also hear that Warren Buffet is pouring his investments into the railroad system? Hmmm...what does he know that we don't?