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Tuesday, September 06, 2005

When 'For Good' means 'Three Days'

When Michael Cullen says it.

During an election campaign touted by Labour as 'all about competence and credibility,' The Cullender pronounced that high petrol prices were here to stay. That was three short days ago.

I posted on this as follows:

He knows bugger all about financial management but you'd think a historian would have enough brains to look back to the 70s and see how quickly supply and demand brought oil prices back from their tempory peaks, when similar idiots were making similarly foolish predictions.
Linked Article

Today, yes only three days later, I hear on Radio Left Wing News that international oil prices have dropped by some ten percent as OECD countries release part of their massive reserves to cover the emergency in the Gulf of Mexico. The Great Historian seems to have forgotten about these reserves and their strategic purpose when he made his learned prediction.

Why do the news media pay any attention to this incompetent fool?

Posted by Adolf Fiinkensein | 9/06/2005 09:47:00 am

20 Comments:

Blogger Gooner said...

The media might, but business clearly doesn't. See above.

9/06/2005 10:00:00 am  
Blogger Alan Howard said...

Maybe Cullen is right, that the high prices ARE here to stay. Just because the world market drops in price doesn't mean that NZ will drop its local price at the same time. Remember, record profit for these companies is more important than following the world trend - unless it's to increase profit, that is.

9/06/2005 12:34:00 pm  
Blogger Adolf Fiinkensein said...

Alan Howard, you really are an idiot. Were you one of Cullen's history pupils?

9/06/2005 01:04:00 pm  
Blogger ZenTiger said...

Alan might be right. High taxes under Labour are here to stay. Just because the world markets are adopting flatter taxes and achieving boosts to economic growth doesn't mean NZ will.

Remember, record surpluses for this government is more important than following the world trend and reducing taxes and flattening the structure.

9/06/2005 01:23:00 pm  
Blogger Lucyna said...

New Zealand is supposed to have reserves too. Apparently we even had the facilities to store them via the WW2 army fuel tanks that were concreted in because we apparently don't need them.

9/06/2005 01:52:00 pm  
Blogger Antarctic Lemur said...

Adolf, how the hell did you get the Linked Article to appear in the body when its automatically added to the end of each post?

9/06/2005 01:54:00 pm  
Blogger Tane said...

Well, it all depends on how you define cheap. Oil is what, $63 a barrel at the moment, give or take a buck? That's still pretty bloody high by any standards, except those we adopted two months ago when oil first went above the $60 mark. Funny how your standards change.

Maybe oil will drop down to a 'mere' $40, which is still higher than it was 3 years ago. If there is a decent sized global recession on the horizon, and I suspect there is, oil may drop even further, as demand falls significantly below supply. That will hold until the world economy picks up, oil demand picks up, and we run full tilt into stagnant production, political turmoil and ageing infrastructure. Then it'll be back to $60 plus oil.

If there is no recession, then Cullen is right, high oil prices are here to stay, 10% drop or not.

9/06/2005 01:57:00 pm  
Blogger Adolf Fiinkensein said...

Fellers, go and do what Cullen didn't do. Go and see what oil prices were in 1972 -74. My memory is that they peaked at somewhere around $60/barrel back then. Inflation adjust that for today and I suggest you'll have a comparable figure somewhere around $120/barrel. Current prices are not high in reality, just in the minds of incompetent Treasurers who need a diversion to help scare the natives.

9/06/2005 02:28:00 pm  
Blogger Adolf Fiinkensein said...

Al, I just blocked and copied the text with the adjacent link from the old podt to the new post. That's about the limit of my technical competence.

9/06/2005 02:30:00 pm  
Blogger Antarctic Lemur said...

OK. Was just checking.

9/06/2005 02:41:00 pm  
Blogger Antarctic Lemur said...

Forbes picks oil bubble to burst within 12 months, suggests most of the recent oil price increases is due to speculation rather than real demand:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/08/31/cnoil31.xml&menuId=242&sSheet=/portal/2005/08/31/ixportal.html

9/06/2005 02:43:00 pm  
Blogger Antarctic Lemur said...

Actually according to his original column, he says the reason petroleum prices have surged is the US Feds inflationary monetary policy:
http://www.forbes.com/business/global/2005/0509/011.html

"There's hardly a hedge fund in the country that hasn't taken fliers on petroleum futures. Inventories, already very high, are surging in anticipation that oil is headed even higher. Goldman Sachs' prediction that oil could go as high as $105 a barrel is a sure sign that prices are peaking: We haven't heard such talk since the early 1980s, just before oil went into a devastating deflationary spiral."

9/06/2005 02:45:00 pm  
Blogger Tane said...

Oil is not expensive compared to what it was back in 1979-81, agreed. So, if there is to be any sort of oil shock, it'll have to be at a higher price for a longer period than it is now to qualify as an oil shock. Mind you, the price it's at right now is high enough to have a knock on effect on the economy. Not high enough to cause a recession maybe, but high enough to knock a percent or two off growth.

My original point is that based on the evidence so far, Cullen was correct to say that oil is high, and will remain so "..for good". A 10% drop at this level is nothing. Would a 10% drop in the petrol price alleviate things for the nation's drivers, down to a 'cheap' $1.35? It'll take a substantial, and sustained drop in the oil price, to below $40, for us to laugh at Cullen on this one.

As for why oil is high, speculation be damned. It's because we, the human species, use a lot of it, and will continue to lose a lot until it runs short and the price explodes. I agree with you, $60 a barrel is cheap; as Matt Simmons puts it, 10 cents for a cup of oil is an unbelieveable bargain.

The price of oil will only collapse if there is a sudden surge in production (highly unlikely) or a sharp drop in demand (usually caused by a recession, or worse, a depression). Forbes may be right, but the medicine will not be very nice.

9/06/2005 04:28:00 pm  
Blogger Tane said...

Uhh, it looks like I contradicted myself a bit. Please let me explain.

When I said that "Oil is what, $63 a barrel at the moment, give or take a buck? That's still pretty bloody high by any standards" I was referring to what we, living in 2005 are used to.

When I then talked about oil as being cheap, I meant it is cheap in terms of what we get from it (the economic and social benefits) as well as in comparison to the highest it's ever been in history.

So, at $60+ a barrel oil is expensive (compared to what we paid 3 years ago, and what we expect to pay for it) and cheap (compared to how high it has gone in the past).

I hope that has clarifed matters...... Clear as mud?

9/06/2005 04:32:00 pm  
Blogger Adolf Fiinkensein said...

Tane you make the same error as have done all the doomsayers before you. You fail to account for man's ingenuity and consequent technological advances. The day soemone learns how to safely dispose of spent nulcear fuel rods is the day the price of oil goes through the floor. It will happen, just as the day the Ruskies learn to cheaply transport logs over the tundra you can kiss goodbye to your forestry investments in NZ. So you see, a sharp drop in demand is easily possible without the attendant catastrophe you predict.

Go back to Cullen's original outburst. He burbles about thr price of petrol being higher than it's been since the mid 1970s. Well back then the salaries of graduate ag scientists were around $8,000 per annum. Today they are around $35,000 per annum. For petrol to be any where near 1975 prices on that basis it would have to be costing $6.00 per litre.

We are experienceing a temporary and minor upward spike in oil prices. That's all.

9/06/2005 04:45:00 pm  
Blogger Alan Howard said...

Adolf, your beliefs that oil will drop when mankind "learns how to safely dispose of spent nulcear fuel rods" is more of a pipe dream than a reality check. Even though Shell has already found ways of cheaply creating and 'harvesting' more oil from the rocks, I still don't see the price of oil dropping. Your theories imply instant drops based on advancements of technology, but IF - and it's an IF, not a when - nuclear fuel rods can be safely stored, I don't see that affecting main industry for some decades, at least. Your beliefs MAY happen within the next 50 years, but they may not. I wish you luck in continuing to base your arguments on the fantasies that occur in your mind. :-)

You can read more about Shell's new approach to creating oil here.

9/06/2005 05:59:00 pm  
Blogger Adolf Fiinkensein said...

Alan Howard, they are not beliefs, they are common sense. Why do you think business leaders are calling for proper investigation of nucear power and nuclear propulsion? I suggest to you the likelihood of a huge technological advance in energy technology during the next fiteen years (not 50)is very high. You have your head in the sand, albeit oil dand.

9/06/2005 06:14:00 pm  
Blogger Antarctic Lemur said...

Alan we covered the Shell story several days ago.

Why don't you re-examine your opinion, given you just provided a good example of people inventing new technologies and methods for oil extraction in response to market demand and potential profit.

Various scientists are involved in researching techniques for productively using spent fission fuel rods. At some point a breakthrough technology will be commercialised.

9/06/2005 06:27:00 pm  
Blogger Alan Howard said...

Forgive me for not seeing the article several days ago. However, did you read the article I linked to Al? They've been investigating this new technology since 1981, and only now having some success. Over 20 years worth of research and development is not something that's a result of today's market demand. And I agree that technological developments will help introduce new fuels and ways of doing things, however, it's not something that's going to drive down oil prices within the foreseeable future. My opinion stands. :-)

9/06/2005 07:37:00 pm  
Anonymous Anonymous said...

Alan: FGSM, go read some Paul Zane Pilzer, and then you might be convinced that technology is the key determinant to the advancement of the human race.
Scientists will continue to make new discoveries in all fields. What they need is encouragement, and their sponsors need tax breaks, to make it worth their while to push for those advancements.

Adolf: I still remember my physices teacher at high school telling me that he did consulting work for the UN in the 70s and 80s, and one of their key tasks at the time was to distract the public from the ongoing experimentation into nuclear fission and fusion. Unfortunately, the idea they came up with was global warming (they couldn't sell it at that time because it looked like the world was getting colder, so they let the microfluctuations in the earths temp oscillate back to the warming period before they could really pump the theory- the greenies have bought it hook line and sinker)

9/06/2005 09:22:00 pm  

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