Tuesday, June 10, 2008

The Bear weighs in.

Financial Times
Gazprom predicts oil will reach $250
By Carola Hoyos in Deauville and Javier Blas in London
Published: June 10 2008 09:00 | Last updated: June 10 2008 13:22

Gazprom, Russia’s gas monopoly, on Tuesday predicted oil prices would reach $250 a barrel in 2009.

The striking prediction came as the International Energy Agency, the developed world’s energy watchdog, warned that record high prices were needed to choke off demand in order to balance the oil market.

It is the IEA’s most candid admission to date that oil supply is struggling to catch up with Asian demand, and follows the sharp rise in prices last week, which saw crude jump more than $16.24 in less than 36 hours to a record $139.12.

...In its monthly oil market report, the IEA said “supply growth so far this year has been poor and higher prices are needed to choke off demand to balance the market”. It added: “Abnormally high prices are largely explained by fundamentals”.

Mr Miller agreed with the IEA’s assessment, saying that speculators were not ”a determining influence”. He said: ”Competition for resources and their use is growing.”

The market responded by pushing prices back up after they had fallen below $134 earlier in the session. Nymex July West Texas Intermediate rose 70 cents to $134.95, while ICE July Brent added 53 cents to $134.38.

As expected, the IEA cut slightly its forecast for annual oil demand growth, but surprised the market with a deep reduction in its forecast for supply growth from non-Opec nations, leaving the world more dependent on the producers’ cartel.

...The non-Opec supply growth forecast for 2008 is now below the growth achieved by the group both in 2007 and 2006, in spite of significantly higher oil prices.

The agency also warned that the imbalance between demand and supply forced a counter-seasonal drop in rich countries’ oil inventories in April. It estimates that stocks fell in April by 8.1m barrels, compared with a traditional increase in April of about 30m barrels.


Smaller suppliers are tapped out, their production rates falling to the point where they have basically enough for their own needs and little, if any, to export. In addition, North Sea production is poised for a steep decline.



I heard today that some businesses are going to a 10-hour four day workweek. I wouldn't be surprised to see schools with buses adopt something similar to this. This move allows businesses to cut down on their utility costs by shutting down for three days, and cuts down on the employees commuting expenses, obviously. I would hope that the extra day off might be spent volunteering and contributing co-op hours, working on community gardens and home gardens, and teaching a young person a craft or skill.

Oh, wait. That's what a sustainable community would do with their spare two days a week. So far, I don't see any evidenced that we are one.

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