. May 19, 2008 SouthAmerica: Reply to qobar and to iloveoptions Thank you for your support on this forum, since most people who enjoy reading and agree with many of my analysis usually send me a direct email because they are afraid of being flamed on this forum by the usual suspects. I wonder if there is any American economist trying to estimate the extra 100âs of billions of US dollars that has been transferred from the United States to the oil producing countries because the Bush administration started a war against Iraq. Since George W. Bush started talking about going to war against Iraq the price of oil has increased consistently from US$ 28 per barrel to the current US$ 128 per barrel. Since 2002 the United States has been paying extra for a barrel of oil the George Bush/Dick Cheney extra premium which is made up of: the Iraq war premium, plus the rhetoric premium related to Iran and Venezuela. How much extra cumulative premium has been transferred from the United States to the oil producing countries around the world in the last 7 years? Maybe US$ 500 billion, or US$ 700 billion or even more? Anyway, I wonder if Americans had a better use for that money if it had been used inside the United States to help its domestic economy. .
Americans have been "neoconned". The word neoconned is now part of the english lexicon. verb, neoconned, neo.con·ning, noun Informal. âadjective 1. Fabrication of information to abuse voter confidence: a neocon trick. âverb (used with object) 2. to swindle; trick: The neocon politician neoconned his voters out of all their savings. 3. to persuade by deception, cajolery, etc. to neocon. ânoun
yes - they are good for printing out and lining the bottom of the bird cage. He is the Jack Hershey of his thread
. June 27, 2008 SouthAmerica: In the article that I wrote and it was published in September 2002 on Brazzil magazine âCountdown to Armageddonâ I mentioned the following: âIf the United States attacks Iraq and now there is talk in Washington of the possibility of the U.S. even take over Saudi Arabia's oil fields (according to an article on The New York Times of August 12, 2002), oil prices will skyrocket to between US$ 60 and US$ 80 per barrel. What does the Bush administration think the consequences of that act would be to South America? We already have a bad economic environment in South America, and that continent will not be able to absorb the economic impact of such an increase in the price of oil.â At that time when I wrote that article oil was trading around US$ 26 per barrel and I thought that if oil price reached the US$ 80 dollars per barrel that would cause major hardship to most countries around the world, mainly the ones that would have to import a high percentage to meet its internal oil needs. I donât understand why the price of oil trading around US$ 140 dollars per barrel is not devastating the economy of many countries just like a Hurricane Katrina.. Now I am curious about how high the price of a barrel of oil can go. I wonder what price is the breaking point that would push the global economy over the edge of a cliff. It is just my gut feeling that as the price of a barrel of oil reaches the $ 150 or $ 170 dollar level during the summer at the same time a chain reaction of events will start to surface and people would start realizing of the extent of the damage done to the global economy and to individual countries. I am not smart enough to be able to forecast the surprises that might be in store and are coming -in the pipeline as a result of the skyrocketing price of oil. We might have things that are going on right now that it will surprise everybody when people start realizing the extent of the damage to the entire economic system. I know that part of the problem regarding the price of oil is related to the fact that the US currency (US dollar) is becoming just a big pile of CONFETTI. Maybe I am overreacting about the price of oil and its impact on the economies of countries around the world â maybe because I am looking at it from a Confetti perspective and in terms of Confetti the price it seems a little high. I am looking at this problem, as someone who is living here in the US, but maybe the price of oil is not the one that is becoming too high in world markets and instead the US currency the US dollar it is the real culprit in this story because it is slowly becoming worthless. Now Libya also entered the game and they are playing their part â How high the price of oil can be pushed to? How much is too high: US$ 150, US$ 170, US$ 200 dollars per barrel or even higher? In the meantime the oil producing countries are laughing all the way to the bank to the tune of billions of Confetti in extra oil revenues. What happened to the talk about bombing Iran? We need that kind of rhetoric to continue for the price of oil to be able to reach the US$ 200 dollar per barrel level in the near future. ******* âOil Surges Above $140 to Record as Libya Warns of Output Cutâ By Mark Shenk Bloomberg News â June 27, 2008 June 26 (Bloomberg) -- Crude oil jumped above $140 a barrel to a record as Libya threatened to cut output, OPEC's president said prices may reach $170 by the summer and the dollar weakened. Libya may curb output because of a U.S. law that allows terror victims to seize assets of foreign governments as compensation. OPEC President Chakib Khelil said oil may surge on a European interest rate rise, France 24 reported. Oil, gold and copper climbed today as the dollar dropped because the Federal Reserve gave no signal of higher interest rates yesterday. ``The Libyan comments are helping send us higher,'' said Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``The Libyans are responsible for only about 2 percent of production, but with supplies tight every missing barrel will have an impact.'' Crude oil for August delivery rose $5.09, or 3.8 percent, to $139.64 a barrel at 2:59 p.m. on the New York Mercantile Exchange, a record settlement price. Futures touched $140.39 today, surpassing the previous intraday record of $139.89 reached on June 16. ``I think you're seeing a clear flight from equities into commodities,'' said Kyle Cooper, an analyst at IAF Advisors in Houston. Record oil prices helped send U.S. stocks tumbling. The Standard & Poor's 500 Index plunged 38.82, or 2.9 percent, to 1,283.15 in New York. The Dow decreased 358.41, or 3 percent, to 11,453.42. GM Plunges General Motors Corp., the largest U.S. automaker, plunged the most in three years as Goldman Sachs Group Inc. advised selling the stock because of a worsening sales outlook amid soaring gasoline prices, falling consumer confidence and tight credit. GM fell $1.38, or 11 percent, to $11.43 in New York Stock Exchange composite trading. Libya's National Oil Corp. Chairman Shokri Ghanem declined to say when a decision would be made on whether to lower Libyan production or give any indication of the size of the cut under consideration. The African country produced an average 1.85 million barrels of crude oil a day last year, or 2.2 percent of global supply, according to a report this month from BP Plc. Ghanem said the cuts may be made because of a law passed by Congress in January that would let families of American victims of Libyan-linked attacks confiscate Libyan assets and those of companies doing business with the North African nation. At least two lawsuits have already been filed in Washington. U.S. legislation allowing lawsuits against the Organization of Petroleum Exporting Countries may also lead to reductions, Ghanem said. NOPEC President George W. Bush has said he'd veto a so-called NOPEC bill passed in May by the House of Representatives, because it may limit the availability of gasoline and further increase fuel prices. An oil price of $150 a barrel may be ``around the corner,'' Ghanem said in a Bloomberg Television interview. A decision by the European Central Bank to increase interest rates in July may cause the dollar to decline and prompt investors to buy more oil, Khelil, who is also the Algerian oil minister, told the Paris-based television channel. Prices would ease toward the end of the year, he said. Threats against Iran would also support prices during the summer, he said. A political crisis that would stop Iran's oil production would push prices over $200 a barrel, to possibly $400 a barrel, he said. Saudi Arabia pledged it will pump an extra 200,000 barrels a day next month to calm the oil market at a June 22 meeting. The kingdom hosted the summit of 35 producing and consuming countries in the Red Sea port of Jeddah. OPEC Matters ``The Saudis go out of their way to have this specific meeting outside the OPEC frameworks, and if you're the OPEC president, you want to be important, so you come out of it and say $150 to $170,'' said Roger Read, an analyst at Natixis Bleichroeder in Houston. ``He's trying to prove he matters and OPEC matters and the Saudis don't make all the decisions.'' The dollar is also lower on a forecast that the ECB will boost interest rates. The currency's drop against the euro made commodities cheaper for buyers outside the U.S. The dollar was at $1.5756 per euro as of 4:38 p.m., from $1.5666 yesterday. ``Now the worry is that the European Central Bank may raise rates, which would be the same as another Fed cut,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. The Federal Reserve yesterday left its benchmark interest rate at 2 percent and said ``uncertainty about the inflation outlook remains high'' as energy and commodity prices continue to rise. Leaving the interest rate unchanged ended the most aggressive series of rate cuts in two decades. Commodity Rally ``Commodities are rallying because there's a lack of confidence that the Fed will raise rates,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``They didn't raise rates yesterday and it doesn't look like they will raise them soon. Their statement yesterday was too wishy-washy.'' The Reuters/Jefferies CRB Index of 19 commodities jumped 11.13, or 2.5 percent, to 463.27, after earlier reaching a record 463.41. The index gained 49 percent in the past year. Brent crude oil for August settlement rose $5.50, or 4.1 percent, to settle at a record $139.83 a barrel on London's ICE Futures Europe exchange. Prices climbed to $140.56 today, the highest since trading began in 1988. Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aaRbgtzwZjpg&refer=home .
1.5 to 1.7 TRILLION is the number......thanks Cheney/bush (btw, george is the sock puppet on Shotgun Cheney's hand).
. June 27, 2008 SouthAmerica: The people on this forum are lucky because if they read my postings on a regular basis usually they read information that were away ahead of what the mainstream media where able to grasp and start reporting to the American people. Here are some more food for thought regarding oil prices: I will not be surprised if we end up with gas lines here in the US in the near future. It will give the new generation of Americans a little taste of the 1970âs. Most Americans have not realized as yet the nightmare that the high price of oil has created to your local gas station owner â right around where you live anywhere in the United States. Here is what is going on. Most gas stations have a certain credit line that they use to buy gas from their distributors. Most of these lines of credit worked well over the years when the price of gasoline were rising slowly and gave time for the system to adjust accordingly. Then suddenly oil prices went through the roof at the same time when banks and most types of financial institutions were getting in deep trouble around the US. In recent months I have noticed that some gas stations around our area closed down for short periods because they had run out of gas. Then I found out that the people who run gas stations are having a terrible time when they buy their inventory of gas to sell to the public â today their credit lines that had been set many years ago are not enough for them to buy all the gas that they need today at the new prices. As a result of that situation many gas stations are buying half the gas that they need to operate properly because of their new credit line limitations and they canât get their credit lines increased because of the current widespread credit crisis. To make things even worse, what is also happening is that distributors have cut the credit lines of a lot of gas stations because the banks did cut the credit lines of these distributors. And some distributors are demanding cash at the time of delivery from these gas stations. Since many gas stations are located in major highways or on desirable pieces of real estate, many gas station owners are thinking of getting out of the business and using their property for something else. The gas station business is becoming a nightmare for the gas station operators. I used to hate when I was in the gas lines of the mid 1970âs and I sure that I am going to hate even more when I am in the gas lines of the 2008 and 2009âs. .
Excellent Commentary................ .................................................................................... SouthAmerica wrote... SouthAmerica: The people on this forum are lucky because if they read my postings on a regular basis usually they read information that were away ahead of what the mainstream media where able to grasp and start reporting to the American people. ....................................................................................... 1000% agree.....keep up the good work !!!!!!!
. June 28, 2008 SouthAmerica: Thanks for the kind words of support from some of the readers of this forum I appreciate your constructive comments. Someone on this forum sent me an email asking me the following question regarding this thread: âplease explain in "layman's terms" how a weak dollar causes oil to rise?â I am going to try to put it in simple terms for this fellow a very complex subject, here we go⦠At the root of his question is a question about how currencies move relative to the currencies of other countries â for example what makes the US dollar decline over time against the euro? Foreign exchange rate is a very complex subject, but I will try to put it in simple terms for this fellow. Oil is priced in world markets in terms of US dollars and it has been like that for many decades. What makes the currency of a country move in relation the currency of other countries is a very complex subject, but to compound the problem the US dollar has been playing a unique role in the international monetary system since the demise of the gold standard. Some of the things that are important and affect the value of a currency in relation to other currencies includes the relative inflation rate of each country, their international trading position, the economic outlook of a country, and so onâ¦Central bank interest rate setting inside each country such as the Fed Funds rate in the US in relation to the central bank interest rate on other countries also affect the flow of money from a currency to another. Let me give you one simple example that helps the value of the US dollar to decline â The US Federal Reserve keeps lowering the Fed Funds rate in the United States as the central banks of other countries start raising their rates - then when people take their US dollars and sell it to buy for example euros, the value of the euro goes up in relation to the US dollar â and the US dollar lost some value in relation to the euro. As the US dollar is declining in relation to the euro you need more US dollars to be able to buy one euro. Commodities price (including the price of oil) from other countries have to be adjusted accordingly to account for the lost of value of the US currency in relation to other currencies. Let me give you another example from the perspective of another country in this case Brazil. When president Lula became president of Brazil 6 years ago at that time you needed $ 4 Brazilian Reais (the Brazilian currency) to buy US$ 1.00 Right now you need only $ 1.5 Brazilian Reais to buy US$ 1.00 In January of 2003 at the time when Lula became president the market price of oil was around US$ 26 per barrel. Today oil traded at one point at US$ 143 per barrel â and during that period the US dollar market price of oil went up 5.5 times in dollar terms. Look what happens in terms of Brazil in local currency during that same time period. In January 2003 it took $ 104 Brazilian Reais ($ 4 Reais x US$ 26) to buy a barrel of oil in Brazil. In June 28, 2008 it takes $ 214 Brazilian Reais ($ 1.5 Reais x US$ 143) to buy a barrel of oil â in Brazil in terms of the Brazilian currency (local currency) during that time period the price of oil went up only 2 times. In the last 6 years the market price of a barrel of oil went up 5.5 times in the United States from US$ 26 to the current price of US$ 143. In the last 6 years the market price of a barrel of oil went up only 2 times in Brazil in local currency from $ 104 reais to the current price of $ 214 reais. Can you see how the currency affects the market price of oil in different ways to different countries? Let me give you another bit of information. In December 2001 the euro was trading at US$ .82 cents to Euro $ 1.00 In June 2008 the euro is trading at US$ 1.57 to euro $ 1.00 â basically the US dollar lost half of its value against the euro in the last 6 ½ years. There are various factors that affect the price of oil including demand for the product and the currency effect as you can see from above examples. The relative inflation rate between countries also affects the value of the currencies relative to each other. Please donât forget that deficit spending by the federal government also can affect in a negative way the value of a currency, and so onâ¦. I just saw the enclosed article published by Bloomberg News where OPEC President Chakib Khelil predicted that the price of oil will climb to $170 a barrel before the end of the year, citing the dollar's decline and political conflicts. The rise in the price of oil will continue to be devastating to many economies around the world including the United States as the price reaches the US$ 170 or even higher for a barrel of oil. . But I need to highlight one country that will not suffer as much from the rise of oil as everybody else â and that country is Brazil. The Brazilian economy it will not suffer as much of the economic shock caused by this massive increase in the price of oil as most countries from around the world â because most people has switched to using ethanol when they drive their cars. The Brazilian economy is semi-insulated from the current global oil shock, and since the Brazilian currency increased in value so much in the last few years against the value of the US dollar that soften the blow from higher oil prices even further. I want to remind the readers that Brazil became an oil exporting country for the first time on its history starting in 2007. And the in coming years Brazil will become a major supplier of oil to world markets. As the house of cards collapses in the United States the Brazilian economy looks as good as never before with great prospects for the future. I have one more comment regarding the Bloomberg News article where OPEC President Chakib Khelil predicted that the price of oil will climb to $170 a barrel before the end of the year, citing the dollar's decline and political conflicts. The political conflict part of his comment means the following: Ben Bernanke does not have the balls to increase the Fed Funds rate in the United States since he is playing politics with the US economy instead of doing his job to fight inflation by increasing the Fed Funds rate - because the US is in the middle of a presidential election year. ******** âOPEC Leader Khelil Says Dollar Will Drive Oil to $170â By Ahmed Rouaba Bloomberg News â June 28,2008 June 28 (Bloomberg) -- OPEC President Chakib Khelil predicted that the price of oil will climb to $170 a barrel before the end of the year, citing the dollar's decline and political conflicts. ``Oil prices are expected to reach $170 as demand for fuel is growing in the U.S. during the summer period and the dollar continues to weaken against the euro,'' Khelil said today in a telephone interview. The leader of the Organization of Petroleum Exporting Countries also serves as Algeria's oil minister. Political pressure on Iran and the depreciation of the U.S. currency have caused a surge in oil prices, Khelil said. New York- traded crude has more than doubled in a year and touched a record $142.99 a barrel yesterday on the New York Mercantile Exchange. OPEC ministers generally say that oil output is sufficient, even as Saudi Arabia, the biggest producer, pledged to pump an extra 200,000 barrels a day next month to calm the market. ``The market is completely supplied,'' Venezuelan Oil Minister Rafael Ramirez said yesterday. Libya announced possible production cuts, calling the market oversupplied. The rising cost of crude is not linked to supply, Khelil said today. ``There is more than enough oil in the market to meet the international demand,'' added the OPEC president, who will take part June 30 in an international energy forum in Madrid. Prices, which are up 38 percent this quarter, are heading for the biggest quarterly gain since the first three months of 1999, when oil traded between $11 and $17. Declining Dollar ``The decisions made by the U.S. Federal Reserve and the European Central Bank helped the devaluation of the dollar, which pushed up oil prices,'' Khelil said. Oil may extend gains if the ECB boosts rates on July 3, further weakening the U.S. currency. The dollar has declined 15 percent against the euro in 12 months. ECB President Jean-Claude Trichet reiterated June 25 that policy makers may increase the main refinancing rate by a quarter-percentage point next month to contain inflation. The Federal Reserve left the benchmark U.S. rate at 2 percent on June 25. On Sept. 18 the Fed began cutting rates to bolster an economy already reeling from the credit crisis. Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aclKiYe3Osv4&refer=home .