oil

Why the Deflationary Recession of 2009 isn't just about Oil

When I diaried last week that we were in the midst of the biggest deflation since the Great Depression, I was met by a number of naysayers (at another blog) who criticized the diary on the grounds that the deflation was just the artifact of the bursting of the Oil bubble, nothing more.
That is not the case. We are undergoing a real deflation for the first time in over 50 years because consumers are full of debt and tapped out of cash, their assets (homes and stocks) are going down in price, and they are unable or unwilling to spend the money they have begun to save at the gas pump. With consumers not buying, demand for manufactured goods has cratered as well. I'll show why below the fold.

Banks Using TARP Funds to Speculate in Oil Markets

Prepare to be deeply offended. Banks to who the US government has given billions of dollars of loans are using this money in order to speculate in global oil markets. First, let's start off with the news brought up yesterday on Daily Kos by Scout Finch. Around 80 million barrels of oil are being stored at sea.

Norway's Frontline (FRO.OL: Quote, Profile, Research), one of the world's biggest oil tanker owners, said on Friday oil firms were storing "about" 80 million barrels of crude oil at sea, possibly the highest in a quarter of a century....

30 to 35 Very Large Crude Carriers (Very Large Crude Carriers) capable of carrying two million barrels each and 10 Suezmaxes with a capacity of a million barrels each were being used by oil firms for floating storage in the last few months.

The Consumer catches a Silver Lining

Lost in this past week's dismal news for 401k retirement reports (can we call them 201k's now?) is a silver lining for the consumer: this recession, like every 20th century recession before it, has created enough demand destruction to break the back of inflation. Been to your local gasoline station this past week? Odd are, you are seeing prices you haven't seen in a long time. In fact, the price of Oil per barrel is now lower than it was a year ago. Here's the graph demonstrating that truth:

Why I'm a little worried about the drop in oil

Can't sleep, been thinking about the price of oil, worrying about it to be honest. Now you may be thinking "Venom, what are you crazy? A putz? A drop in the price of oil is a good thing!" And I would reply, yes, under normal circumstances it is. But these days, things ain't so normal. Actually, right now, oil is up since yesterday, but it's been in a slide for the past week or so.
A prophetic lunch

A couple years ago, I had lunch with a trading friend/mentor of mine at Hackney's on Harms Road. He was an older gentleman, made his money in options, in fact was one of the first to trade at the CBOE back in the 1970s. We had just gotten back from one of those sales seminars from Equis, a company that makes a product called Metastock. While gobbling down on Hackney's infamous onion loaf and later cheeseburgers, topics ranging from the software to commodities came up. This was around 2002, and Enron was still in the headlines.

Manufacturing Monday: Gustave's effect on energy & manufacturers

By now, Hurricane Gustav is ravaging the great city of New Orleans and the surrounding Gulf Coast. Our hopes and prayers goes out to the good folks of the area. Well you probably have guessed, that Johnny Venom would've found the economic angle on all this. Rest assured, fellow Kossacks, I won't let you down! But once again, I do hope for the best for the folks aflicted by Gustave.

Gustave could raise the price at the pump, among other things

Manufacturing Monday: The so-called Big Three, and the taxpayers' money

Greetings folks, the start of new week and thus we kick off another episode of Manufacturing Monday! Never a dull moment when it comes to covering stuff that either goes into the products you buy, or the impact that that consumption leads to. Now originally, I had these other items on bio-fuels, hydrogen cars, China and oil, and a few other things. But I see now that my section on the bailout of the US automakers is so big, that the whole thing is too long. So, if it is OK with you, I will post those items tomorrow.

A road often driven by these three

North Pole Stand-off

Submitted by on

Canada, Russia, Denmark, Norway and the United States are squaring off over 1.2 million square kilometers (460,000 square miles) of Arctic seabed, thought to hold 25 percent of the world's undiscovered oil and gas. Experts estimate the ridge has ten billion tons of gas and oil deposits and significant sources of diamonds, gold, tin, manganese, nickel, lead and platinum.

Global economic tipping point: at the intersection of China and Oil

The US is no longer the engine, or at least the sole engine, of global economic growth. That mantle is shared, at least, with Europe, and even moreso with emerging Asia, and nowhere so much as China, now the world's 4th largest economy and 47wallst.com/2008/07/china-a-10-gdp.html">growing at a rate of 10% a year.
That growth has run smack up against at least short term limits on the availability of resources -- metals, livestock, rice, and more than anything else, Oil.
While growth in the US peaked about two years ago and has been generally declining since, most recently measured at about 1.9% (but perhaps in a year or three retroactively to be revised into negative territory, as Q4 2007 just was), China in particular has continued to boom, as I described in China's Out of Control Inflationary Boom.

Cars, Suburbia, and Conspiscous Consumption

America is dangerously dependent on foreign oil.

In 2007, the United States imported around 13.44 mbd (million barrels daily) from other countries. This represents an almost 2% reduction over the preceding year. Nonetheless, oil represents a huge economic Achilles Heel for the US.

At the current $145.29/barrel
price for crude on the spot market, a year's worth of oil imports would cost the US $713 billion. Or 5.2% of 2007 US nominal GDP. Or almost three times our trade deficit with the People's Republic of China. It doesn't take a rocket scientist to figure out that this is bound to impact the US economy.

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