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Title: Roubini Predicts Oil Will Hit $150 Per Barrel, Traders Betting On $200
Source:
Forbes
URL Source: http://blogs.forbes.com/chrisbarth/ ... barrel-traders-betting-on-200/
Published: Mar 7, 2011
Author: Chris Barth
Post Date: 2011-03-08 09:08:54 by Happy Quanzaa
Keywords: Obamanomics in Action
Views: 37191
Comments: 41
“Oil price shocks have led to US recessions in 1974-75, 1980, 1990, 2001 and 2008-2009. 3 of these were caused by Mid East political shocks,” notoriously bearish economist Nouriel Roubini wrote on his Twitter account at the end of February.
Last Wednesday, he made another bold prediction: “If troubles spread to other countries such as Bahrain and Saudi Arabia, this could push oil prices up to $140 to $150 per barrel, which could trigger a double-dip recession in the periphery of Europe and the U.K.”
While the predicted oil price may seem shock-worthy, the correlation of oil prices and recession should not. As James Hamilton, an Economics Professor at the University of California, San Diego, wrote last year, rising oil prices are a potential retardant to economic recovery, both in the automotive sector as well as across consumer spending in general.
“I could certainly imagine that an abrupt move up in gasoline prices from here could hurt the struggling recovery of the domestic auto sector and dampen overall consumer spending,” Hamilton wrote in a fascinating post on EconBrowser.com. “I do not think it would be enough to give us a second economic downturn, but it could easily be a factor reducing the growth rate.”
Hamilton wrote that statement when oil prices had just pushed past $90/barrel. Now, price per barrel is at its highest level in over two years, and Roubini, known for his gloom and doom predictions, says the tough ride is just beginning. According to Forbes’ Robert Lenzner, Roubini’s predicted price of $150/barrel could take 2% out of the U.S. GDP.
It seems that plenty of traders agree with Roubini’s bearish outlook. A chart published today by Bloomberg shows a sharp increase in traders buying call options on $200/barrel oil futures, which expire on May 17th.
When Roubini sat down with Steve Forbes in January, he made predictions about the future of the U.S. economy. Thus far, he has been proven wrong about his take on unemployment, which he stated would remain above 9%.
He also, however, predicted a U.S. GDP growth of 2.7% this year, below the consensus of 3.2%. If oil prices continue to rise and the U.S. economy responds negatively, Dr. Doom could find himself in the rare position of having been overly bullish.
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Begin Trace Mode for Comment # 31.
Nope.
Cause $4+ gasoline, you might as well make it ten, for all the Bottom 98% can afford it.
$3.50 plus is causing major problems now.
#2. To: mcgowanjm, Happy Quanzaa (#1)
Isn't capitalism wonderful (for the top .005%)?
#3. To: Godwinson (#2)
Isn't capitalism wonderful (for the top .005%)?
It would be wonderful if Big Government hadn't killed free market capitalism with it's statist draconian regulations, mandates, and the world's highest corporate tax rate and let Evil Capitalist Pig Big Oil drill here and now. As for your top .005%, look for them at Obama's Crony Capitalist Country Club, their names are Government Electric, Government Motors, Warren Buffet, Jeffrey Immelt, the 1000 ObamaCare waivered corporations, and a few hundred more of Dear Leader's closest fiends.
#6. To: Happy Quanzaa (#3)
It would be wonderful if Big Government hadn't killed free market capitalism with it's statist draconian regulations, mandates, and the world's highest corporate tax rate and let Evil Capitalist Pig Big Oil drill here and now.
Why would oil companies want lower prices? Have you missed their efforts to reduce refining capacity over the last 20 years or so?
#7. To: go65 (#6) (Edited)
Why would oil companies want lower prices? Have you missed their efforts to reduce refining capacity over the last 20 years or so?
Speculators set the price using by predicting supply and demand, of which they have no control. And no, I haven't missed their efforts to reduce refining capacity, it was included in my comment regarding regulations, you either missed that or it was to abstract for your comprehension level.
Anyhow, drills turning and new refineries under construction would bring the speculator price down even before the first drop was produced. The speculators are betting, big loss or big gain. If Roubini is right and it goes to $150, and some buy at $200, then some will get burned when this surge tops out. But the instability of the supply is what makes the potential of huge gains possible and as long as the supply comes from the Middle East then it's always as gamble as to when the next interruption in supply will happen.
#24. To: Happy Quanzaa (#7)
Speculators set the price using by predicting supply and demand, of which they have no control. And no, I haven't missed their efforts to reduce refining capacity, it was included in my comment regarding regulations, you either missed that or it was to abstract for your comprehension level.
you continue to ignore the fact that energy firms have cut refining capacity to drive up prices.
#25. To: go65 (#24)
energy firms have cut refining capacity to drive up prices
That's stupid, we haven't built a new refinery in 30 years because Big Government makes it cost prohibitive with it's draconian regulations and restrictions. Dear Leader and the Obamacrats want even more with their Cap & Tax plan.
#27. To: Happy Quanzaa (#25) (Edited)
That's stupid, we haven't built a new refinery in 30 years because Big Government makes it cost prohibitive with it's draconian regulations and restrictions. Dear Leader and the Obamacrats want even more with their Cap & Tax plan.
Great, you can repeat Fox News talking points. Congratulations.
The reality is that energy companies cut refining capacity to drive up prices. And it's happening globally, Conoco just announced plans to cut refining capacity in 2012 from 2.7 mbpd to between 2 and 2.2. Shell cut 15% of its global refining capacity last year. Meanwhile U.S. refining capacity rose from 2003 to 2010 before falling as refiners cut capacity due to falling demand.
Are you aware that between 1975 and 2000 only one application was filed with the EPA for approval to build a new refinery, and it was approved?
#28. To: go65 (#27)
Moonbats ignoring the obvious:
------
But getting an oil refinery built is next to impossible, hence the 30-year construction drought. There will always be environmental activists who fight any new proposed refinery, regardless of where it might be located and how environmentally safe it is. And our environmental rules give them the upper hand.
The environmental impact-report process mobilizes the "not in my back yard" elements to oppose any proposed refinery, but it does not mobilize people or groups who are looking at national energy needs. You wind up with a very lopsided discussion where potential problems are thoroughly and perhaps overly represented, but the only group pointing out the benefits of the refinery is the "evil" oil company asking to build it — even though every automobile driver would benefit.
Consider the example of Arizona Clean Fuels, which has been trying to build a small refinery outside Yuma for almost 10 years. It took five years just to get air-quality permits. Now they hope to be operational in 2010, 15 years after they started the project.
President Bush recently signed a new energy bill that tries to make it easier to build new oil refineries, especially in areas with high unemployment — where the new jobs would likely be welcome. And yet, special-interest groups decried the provision as an environmental and public health injustice, arguing that these communities won't want refineries but won't have the political power to fight them off.
The opposition to building new refineries ignores the dramatic technological improvements that have been made since an oil refinery was last constructed here in 1976. New, clean refineries emit far less pollution than older refineries, with new scrubbers and design changes that dramatically reduce sulfur and other emissions. And at the same time our ability to model and map emission characteristics and distribution lets us choose the best locations for new facilities — where they will have the least possible impact on people and the environment.
Even as gas prices have soared beyond $2.50 per gallon in many parts of the country, Americans have not stopped driving. We might tighten our budgets elsewhere to make up for the added expenses, but we show no signs of giving up our cars. At some point, we need to admit our dependence on gasoline and add the capacity and refineries that will help lower gas prices.
Our environmental review process needs to embrace local concerns and impacts, but it can't facilitate the "not in my back yard" resistance that completely derails plans for any new refineries.
http://reason.org/news/show/122716.html
#29. To: no gnu taxes (#28) (Edited)
you post partisan opinion pieces, I post facts:
Reality:
Conoco just announced plans to cut refining capacity in 2012 from 2.7 mbpd to between 2 and 2.2. Shell cut 15% of its global refining capacity last year. Meanwhile U.S. refining capacity rose from 2003 to 2010 before falling as refiners cut capacity due to falling demand.
Domestic refining capacity:
#31. To: Happy Quanzaa, No Gnu Taxes (#29) (Edited)
Exxon Mobil Corp. says it believes that, by 2030, hybrid gasoline-and-electric cars and light trucks will account for nearly 30% of new-vehicle sales in the U.S. and Canada. That surge is part of a broader shift toward fuel efficiency that Exxon thinks will cause fuel consumption by North American cars and light trucks to peak around 2020—and then start to fall. “For that reason, we wouldn’t build a grassroots refinery” in the U.S., Rex Tillerson, Exxon’s chairman and chief executive, said in a recent interview. Exxon has continued to expand the capacity of its existing refineries. But building a new refinery from scratch, Exxon believes, would be bad for long-term business.
Replies to Comment # 31.
Exxon has continued to expand the capacity of its existing refineries. building a new refinery from scratch, Exxon believes, would be bad for long-term business.
Because of the multitude of environmental and social justice issues a new refinery would bring.
End Trace Mode for Comment # 31.
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