Is oil a different commodity to others?

[feihong]

Hi all,

As we all know oil reserve probably on the way of depletion (as per 'peak oil' thread), and will do so in rapid manner. So, will it be the only commodity that will not be correlated to a recession (barring soft commodities)? From what I can see, we still have plenty of iron ore, copper, nickel left, but it's the bottleneck in process time during a boom that caused rapid escalating price of these commodities, whereas the available crude oil is well and truely dwindling.

Any view on this?

 

[Dazz]

Yes it's very different.

Not many goods or services that most countries are prepared to send their young people off to war and die over....oil is one of them.

Does anyone know what the number one asset / strategic target is in Oz, that is afforded the most protection from the Defence Forces ?? It's kept pretty quiet so as not to bring attention to it, but it really is Oz's Achilles heel.

I feel privileged to work in such an important global industry. Absolutely everything in the modern world relies upon it.

 

[alexlee]

My question would be how much of the current oil price is due to speculation as opposed to actual demand.
Alex

 

[Kenster]

Does anyone know what the number one asset / strategic target is in Oz, that is afforded the most protection from the Defence Forces ??

I don't know, but making a guess here, nevertheless:

The coast off WA (eg. Carnavon Basin) and/or the Australian Antartica Territory?

 

[trendsta]

My question would be how much of the current oil price is due to speculation as opposed to actual demand.
Alex

The opposite view is oil isnt rising but rather the USD is falling ..
So, no speculation going on simply the value (paper money) that oil (a physical thing) is measured against is dropping in value .. When measured against AUD or swiss franc or brazilian real oil hasnt moved that much ..

100 here we come .. and head towards a recession US has to have ..

 

[adam31]

You can't pour copper into your fuel tank, iron ore isn't used to grow food and can't make plastics from nickel. The question is what resource can possibly replace oil. Dazzling, boy are you secretive nothing like those very moral oil companies.

 

[alexlee]

Nothing can replace oil. There are substitutes for some of its uses. Corn and sugar cane based ethanol, solar energy, and so on. The best we can hope for is to place SOME of our oil usage with alternative sources.

Ethanol, of course, has its own problems: increased food prices, for one.
Alex

 

[feihong]

My question would be how much of the current oil price is due to speculation as opposed to actual demand.
Alex

Even though a percentage of the current price of oil is due to speculation, the speculation portion reduces with time as fundamental demand for oil increases. This is clearly evident from the chart where oil peaked in 2005 before falling away and consolidate at about 50/bbl (to let fundamental catch up and to fulfil 4 yr cycle) and continue its strong upward momentum till now. Even if we have a massive correction now I believe the fundamental price of oil would be ~50-70/bbl mark, which is still very high.

I wholeheartedly share Dazzling's sentiment about oil because I'm also working in the industry. I constantly discuss this issue with my lead engineer and other engineers and the concensus is that as long as oil price stays at this kind of level, there will be prolonged job in the industry, thus shielding us from direct impact of a recession. There is credit to this argument, as most oil companies in the world are still using 25-30/bbl as their feasibility study benchmark (engineers are conservative).