$100 Oil

http://www.nytimes.com/2011/10/28/business/global/shell-earnings-double-in-third-quarter.html?scp=4&sq=Oil%20Prices&st=Search

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"More gold has been mined from the thoughts of men than has ever been taken from the earth." (Napoleon Hill)

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As of Friday evening, oil was at a little over $99 per barrel (Brent Crude @ $114 plus). In the past, my thoughts were always about the negative side of prices hitting triple digits per barrel but now I'm reading continually about oil prices going back up because there is "confidence" that
something will be worked out in Europe (and I hope that's true). Or, we're avoiding a "double-dip" recession here in the U.S. (meanwhile, we never got out of the first recession!).

So, if I understand this, oil prices are going back up because "confidence" is going back up. Now it used to be that oil prices went up on a supply/demand basis. So, any potential or actual "shortage" caused prices to rise. Some "Peak Oil" advocate proving a point about potential oil shortages might spike the price. Heavy demand increases from a country like China, same thing. War in the Middle East, same thing.

Here's a thought: speculators are bidding the price of oil per barrel up because they're betting demand won't be interrupted by any issues, at least in the short term. In Nymex Oil Contract Trading (1,000 barrels per contract), the average number of contract trades before reaching a producer or consumer is "50." That's right, 50 trades before the oil reaches its destination.

Let's talk about oil use rates. According to OPEC, the final worldwide oil use rates for 2008 thru 2010 were: 86 million bpd (barrels per day), 83.5 million bpd, and 85.59 million bpd. OPEC projects 86.64 million bpd for year end 2011. This doesn't look to me like a "run on the bank."

Yet, we are approaching $100 per barrel.

Some oil analysts feel that gasoline will hit $4 at the pump by spring. Those same analysts believe that $100 per barrel oil is a key milestone, usually indicating that the economy can afford to pay those prices.

So, "happy days are here again" because oil prices are about to hit $100 per barrel? This just as Libya is coming back on line with, perhaps, 700,000 barrels per day by year end on their way back up to 1.3 to 1.6 million bpd at their max production. Libya has a somewhat disproportionate impact on oil because their light sweet crude is valued for its minimum refining costs.

Somebody wake me when oil hits $150 per barrel and we're all still positive about it.