Monday, September 8, 2008

Oil is Slick

I'll address this because I get way too many people whining to me about gas prices. As most people are ignorant, people who make believe that nothing is wrong until they're crying (crying on me), suffering them is painful and thankless. People ask the Arab gas station attendants to give them direction on gas prices, as if the dude's uncle sits on the OPEC board or something. It's more likely that the dude's cousin was the one of the people in the previous post. Having taken advice from an uneducated slug, they offer this "insight" to anyone who will listen.


I saw this shit coming from before the stench left Ground Zero. I was mentally prepared; $4.50/gal. gas didn't faze me. At this point, $3.50/gal. (Jersey) is like a treat. I'll start to gripe when it hits $6.50/gal.

Quite simply, as "cheap" (light sweet) crude will become less readily available, the price will have to move towards the market price of the next plentiful oil stash, which is the sandy stuff up in Canada and Chavez' sludge. I don't know what that price is (I'm going to guess $125/bbl.), but, even though we're not yet at that point, it was quickly factored into the market price (and then some).

Just like the late '90s stock market, which factored 30 years of growth into about two, there was going to be some pullback. When Crude was up in the $140s, my (electronically limited) friends, who didn't believe me 5(+) years when I told them this was coming, now tell me I was absolutely right. Even they understood that $140s Crude was unsustainable (at that point), so they optimistically prodded me, in the hopes that I would tell them that the price would go back to $60 and stay there. My response was that, at every stage of this 7 year rise, the price has dipped to a collection point, gathering momentum for the next push. Even if the price were to drop to $90 (I picked 90 because it seemed just outside the realm of probablility), it wouldn't stay there for very long.

As Crude action "settles" down, its price will become a function of the expectation of the timeframe for the migration from Saudi light to Canadian tar and Chavez sludge.

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