$200 oil ahead

A very insightful post at Zerohedge, well worth the read.

We have been saying it for weeks, and today even the WSJ jumped on the bandwagon: the sole reason why crude prices are surging (RIP European profit margins: with EUR Brent at a record, we can only assume the ECB will pull a 2011 and hike rates in 3-4 months even as it pumps trillions in PIIGS, banks bailout liquidity) is because global liquidity has risen by $2 trillion in a few short months, on the most epic shadow liquidity tsunami launched in history in lieu of QE3 (discussed extensively here in our words, but here are JPM‘s). Luckily, the market is finally waking up to this, and just as world central banks were preparing to offset deflation, they will instead have to deal with spiking inflation, because the market may have a short memory, itcan remember what happened just about this time in 2011. And the problem is that when it comes to the inflation trade, the market, unlike in most other instances, can be fast – blazing fast, at anticipating what the central planning collective’s next step will be, after all there is only one. And if Bank of America is correct, that next step could well lead to the same unprecedented economic catastrophe that we saw back in 2008, only worse: $200 oil. Note - this is completely independent of what happens in Iran, and is 100% dependent on what happens in the 3rd subbasement of the Marriner Eccles building. Throw in an Iran war and all bets are off. Needless to say, an epic deflationary shock will need to follow immediately, just as in 2008, which means that, in keeping with the tradition of being 6-9 months ahead of the market, our question today is – which bank will be 2012’s sacrificial Lehman to set off the latest and greatest deflationary collapse and send crude plunging to $30 just after it hits $200.

Of course the watermelons among us will probably blame it on “peak oil”, the technocratic myth.

 

3 Responses to “$200 oil ahead”

  1. Yes, peak oil is a 'myth' like mathematics is a myth.

    • Redmond says:

      Hi Ian

      Thanks for dropping by.

      1. have you read the article? Judging from your response, it would seem not.

      2. 2+2=4, Mathematics is real.

      3. The notion of "Peak oil", formulated by M. King Hubbert, the socialist who co-founded the "technocracy"movement, to promote the idea that people such as himself should plan society, however is not.

      From wiki

      The technocratic movement has its origins with the progressive engineers of the early twentieth century and the writings of Edward Bellamy, along with some of the later works of Thorstein Veblen such as Engineers And The Price System written in 1921. William H. Smyth, a Californian engineer, invented the word "technocracy" in 1919 to describe "the rule of the people made effective through the agency of their servants, the scientists and engineers", and in the 1920s it was used to describe the works of Thorsten Veblen.

      Early technocratic organisations formed after the First World War in both Europe and the United States. In the U.S., these included Henry Gantt’s "The New Machine" and Veblen’s "Soviet of Technicians". These organisations folded after a short time, but not before Howard Scott attended a series of "Soviet of Technicians" lectures

    • Redmond says:

      “I take this opportunity to express my opinion in the strongest terms, that the amazing exhibition of oil which has characterized the last twenty, and will probably characterize the next ten or twenty years, is nevertheless, not only geologically but historically, a temporary and vanishing phenomenon – one which young men will live to see come to its natural end” (1886, J.P. Lesley, state geologist of Pennsylvania).

      “There is little or no chance for more oil in California” (1886, U.S. Geological Survey).

      “There is little or no chance for more oil in Kansas and Texas” (1891, U.S. Geological Survey).

      “Total future production limit of 5.7 billion barrels of oil, perhaps a ten-year supply” (1914, U.S. Bureau of Mines).

      “Reserves to last only thirteen years” (1939, Department of the Interior).

      “Reserves to last thirteen years” (1951, Department of the Interior, Oil and Gas Division).

      “We could use up all of the proven reserves of oil in the entire world by the end of the next decade” (President Jimmy Carter speaking in 1978 to the entire world).

      “At the present rate of use, it is estimated that coal reserves will last 200 more years. Petroleum may run out in 20 to 30 years, and natural gas may last only another 70 years” (Ralph M. Feather, Merrill textbook Science Connections Annotated Teacher’s Version, 1990, p. 493).

      “At the current rate of consumption, some scientists estimate that the world’s known supplies of oil … will be used up within your lifetime” (1993, The United States and its People).

      “The supply of fossil fuels is being used up at an alarming rate. Governments must help save our fossil fuel supply by passing laws limiting their use” (Merrill/Glenco textbook, Biology, An Everyday Experience, 1992).

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