Tuesday, August 04, 2009


I've been commenting a lot on blogs lately, hopefully I haven't
offended Lou Minatti with my depressing visions of the future
economy and geopolitics. I'm still betting that oil prices are going to crash
(which is sad to me) then they'll rebound because decline rates are a
fact of life. Right now a couple percent of oil production per day are going
into storage on oil tankers or storage tanks. When storage is full or if
traders think it is almost full, prices will crash.

The competing effect is whether the economy will increase demand
or if production will decline enough before that crash happens. When demand
starts to get close to actual supply and oil in storage starts to decrease,
prices are going to go back to $140 before you can say peak oil.

One driver of decreasing supply is natural production decline. All oilfield's
production rates decline and if money isn't spent on driling and
workover then production will decline as reservoir pressure decreases.
As long as this "crises" atmosphere continues and drilling stays slow,
production will decline.

The other effect that will drive up long term prices is the dollar. I think
in the medium to long term the dollar has to go down so that trade and
investment comes to some kind of balance. Maybe it's just my upbringing,
but i don't think we can go on spending more than we make forever. One
way that the USA would stop importing so much oil is if the dollar goes down
relative to the rest of the world. The price of oil in the US would go up and
imports would go down until our income and outgo meet up at some point.

That would happen by Obama devaluing the dollar or if enough investers around
the world vote with their feet and sell their dollars. That's when the real nutty
comments started to flow. All of this is a plan by the red chinese! Their goal
was to destroy the usa and create a workers paradise around the world. If
that was their plan, it seems to be on track, as industry and jobs are outsourced
to china destroying our future, while dollars that are acceptable around the
world flow into the mandarin's coffers. [muhahahahaha]

Once the chinese use up some of their dollars buying land and oilfields around
the world in sudan, Iraq, south america, nigeria, then they pop the last balloon
dump the rest of their dollars to make things so expensive in the usa that the
economy collapses and only fuel, food, clothing, steel, cars etc that are made in
the usa are available. The questions then become does the usa have guts to
crawl back out of the hole that we have created? Make our own stuff; make stuff
of high enough quality at a low enough price that other people want to buy it?
Does the chinese government care if their capitalist economy collapses when they
are communists? I think not.

At that point I'm nearly out of red wine so my 'creative' juices stop. Instead of
a gizmo on comments to make sure i'm not a bot, there should be a breathalizer.
Anyway, less commenting in the future for joey. Apparently I cross the line too
easily from witty oilfield guy to neak noil nirther.

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