[R-G] Rising Demand for Oil Provokes New Energy Crisis

[CeJ]

But it looks like the futures speculators are set on 100 dollars a
barrel as the goal, before taking profits the other way. A nice goal
to reach before the recession does set in, perhaps?
And by cutting interest rates, Bernanke fuels the speculation. The
speculators will leverage and pile into anything that makes money,
such as oil futures.

Is the American empire of capital at the stage where militarism and
speculation are the best bets for profits? Perhaps financial officers
in all sorts of companies--as well as the managers of OPEC trade
surplus wealth--are playing in oil futures, or playing in funds that
play in oil futures. An oil pricing bubble is all it is now. Better
get set to write off losses in oil futures the way we have seen it in
.com, telecoms, 'debt portfolios', etc. etc. Sooner or later, the
profitable 'black box' of oil price speculation will spill open.


>>>>>>>>>>>>
http://www.nysun.com/article/65172

Note to Mr. Paulson: Talk Down Oil Prices
		By LIZ PEEK
October 24, 2007


Instead of scaring everyone half to death about how terrible the
economy looks, Treasury Secretary Paulson and the chairman of the
Federal Reserve, Ben Bernanke, could have done something really useful
— like talk down the price of oil. Given that Chinese demand is
drooping like a wilted flower and that American consumption is also
below trend, it would not have been difficult.

For example, last week they might have pointed out that commodities
traders, as opposed to oil companies, are dominating the play. How do
we know?

For starters, Mike Rothman of International Strategy & Investment
Group points out that energy futures trading last week was running at
an all-time high of more than 13 times world oil demand. Thirteen
times! That's in comparison to the old rule of thumb that "daily
trading volume in a matured commodity market would be three times
world demand." He says the growth in trading volume raises questions
about the amount of leverage being applied to commodities positions.
No kidding.

Speculators have been buying oil, according to an independent energy
trader, Eric Bolling, based not on supply and demand but on tensions
in the Middle East — not just Turkey, but also Iran and Iraq. "In 22
years of trading, I have never seen such a geopolitical premium on the
price of oil," he says. Mr. Bolling is now short oil, because he
thinks the price has gotten way ahead of itself.

Let's look at the source of much of the bull case for oil — namely,
demand growth from China. The reality, as opposed to the hype, is
downright startling. The research team at ISI has examined data from
the International Energy Agency and U.S. Customs, and concluded that
China's oil consumption is growing much more slowly than expected. The
country is experiencing a substantial increase in oil efficiency, so
that despite GDP growth this year above 11%, oil demand has only
increased at a rate of 3.5% through the first three quarters.

The IEA has revised downward its estimate of China's oil demand growth
to 4%, reinforcing ISI's discovery. Keep in mind that the consensus
expectation has been for China to up its consumption of oil by at
least 7%–8%, a projection that has led to predictions of $100 oil.


In sharp contrast to some of the most excited headlines about China's
growing gasoline imports, the ISI Group points out that "China remains
a net exporter of gasoline, and that figure is larger for 2007 than
2006." (They point out that the country does import fuel oil.)

The Department of Energy data released mid-week disclosed a
significant slowing in oil demand in America. For the four weeks
ending October 12, American oil demand was up only 0.2% — or roughly
flat. Mr. Rothman says that compares to a consensus view that demand
in America would be up 1.6%. At the same time, last week's numbers
showed a greater-than-expected increase in crude oil inventories and
in gasoline and distillate supplies.

American demand and inventory numbers are especially surprising
considering that an expected shift to natural gas use has not taken
place. With natural gas prices lagging behind oil, consumers are
expected to switch, further reducing the demand for oil. Further
softening the outlook for oil consumption is the continued growth in
ethanol production, which is now up 30% from the start of the year, to
more than 6.9 billion gallons a year.

So how is this slowdown impacting the call on OPEC oil? According to
ISI data, tanker rates, which it views as a proxy for oil shipments,
have actually trended down of late and are currently running below
last year's level, and considerably beneath the average of the past
five years. Though this downtrend might reflect growth in the tanker
fleet, the IEA points out that net additions to capacity have of late
plateaued.

These trends suggest that OPEC leaders will move at long last to lower
prices. The ISI group thinks that at the next OPEC summit meeting,
scheduled for November 17, there is a possibility that the
organization will move to release extra production to the market.
According to Reuters, PetroLogistics is reporting that OPEC is already
raising output ahead of its November meeting.

OPEC leaders remember, even if Wall Street traders do not, that high
prices do indeed depress demand. They know that the run-up in recent
months could well contribute to an economic slowdown that could cause
Americans to cut back consumption. It's happened before, with
disastrous consequences to OPEC income, and it could happen again.
"There's no question that current prices are impacting demand," Mr.
Rothman says.

So much for $100 oil.>>>>>>>



CJ

/////////////////////////////////////////////////////////////////////////////////////////
A global view of higher education news - University World News
http://www.universityworldnews.com
////////////////////////////////////////////////////////////////////////////////////////