Oil Bubble?

[Fish]

WOW,That sounds great!!!!!!!!!!!!We'll all frolic through the woods and play the freakin flute too.

I gotta admit, after a hard day in the fruit orchards, it does sound good!

<a little Jethro Tull music here>

LOL..........

[billybob]

Here it is suppose to be oil, and your frollicking through the hedges, having a good time with Ian and crew....right on.

[Jeff Matthews]

For Jeff:

"

Published on July 6th, 2008

Representative Jay Inslee (D-WA) has introduced legislation to establish a
feed-in tariff (FIT) for renewable energy. Feed-in tariffs have made Germany a
solar powerhouse that employs 40,000 people in the solar industry alone, and an
estimated 140,000 jobs in renewable energy. FITs have not been a topic of
discussion in this country, but now that is sure to change, as the conversation
shifts to ways to finance the growth of renewable energy. Renewable Energy World
reports that:

“Inslee’s legislation would require utilities — at the request of any new
renewable energy facility owner — to enter into a 20-year fixed-rate power
purchase agreement. Uniform national “renewable energy payment” rates would be
set by the Federal Energy Regulatory Commission at levels that would provide a
10% internal rate of return on investment for available commercialized
technologies in regions constituting the top 30th percentile of renewable energy
resource potential in the U.S..”

In plain English, this means that if you install solar PV panels on your home,
the utility has to buy the electricity you generate at a higher rate than
retail, guaranteeing you a return on your investment. Extending this power
purchase agreement for 20 years gives everyone — especially those who want to
invest in renewables or start a small business installing solar panels —
assurance of return on their investment.

In Germany this has motivated citizens and businesses to put up solar panels
wherever they can, allowing Germany to get 14.2 percent of its energy from
renewable sources. Though Inslee’s legislation has little hope of getting
through this Congress (they are still stalling on renewing the existing solar
energy tax credits), FITs will surely be in the news more as the election season

heats up.

-------------

Soooo, look at the jobs creation! And it's clean for god's sake. 14% from renewables.

 That ought to say something to people who keep barking that is impossible.

Yes, please.... please! Take my tax dollars and put them to use on something that makes no economic sense whatsoever. If you were a private investor and there was no subsidy, you would run from that investment "opportunity." But since it creates "jobs," that's okay - just please, take my tax dollars, please. It's disgraceful to put people to work on something where the materials and labor are not productive enough to merit their own returns. It would be like taking YOUR tax dollars and hiring 3 men to open my driveway gate for me when I come home after work. It makes no sense. Germany's program only sounds good because people are so "sensitive" about energy costs. It is much akin to spending an extra 20 minutes driving across town to save 2 cents per gallon at a cheaper station, where the trip itself wiped out the savings and then, some.

All I would ask of government is to act like it's money they are spending.

[Jeff Matthews]

I am not sure what you mean by those examples. Each has merited returns. Dams, roads, levees. The only one that might not is the moon landing. That one is questionable, but it was more about exploration.

As to power, there is no merit in sell at .20, buy at .50. The electricity is generated, and it is consumed. There is not some major, widespread benefit to the public by buying it at .50 when you can buy it all day long in another form for .15. "If you're gonna eat $5, you might as well get more meat!"

[Jeff Matthews]

For Mark:

Merrill Downgrades SunPower, Evergreen on German Subsidy Fears; Keeps First Solar at Buy

Posted by Tiernan Ray

Shares of solar power technology firms are tanking following a note from Merrill Lynch analyst Mark Heller cutting his rating on SunPower (SPWR) and Evergreen Solar (ESLR) from “Neutral” to “Sell” because Germany’s government may cut subsidies for solar by as much as 25%. Subsidies are currently necessary to goose investment in solar power in many countries.

According to the Bloomberg account of things, Heller thinks analysts’ expectation of a 16% cut is too low. “An increasing number of politicians are advocating a bigger cut to the German solar subsidy due to the escalating cost,” Bloomberg quotes a Merrill analyst, Matthew Yates, as writing in the report. The note follows another note that came out yesterday from Calyon Securities analyst George Kotzias that claimed the escalating burden on taxpayers was prompting the German government to consider cutting the subsidy by 15%, according to the Associated Press. The US’s own investment tax credit is a looming issue for solar later this year and next.

Update: In the Merrill Report, which just appeared over the transom, I note that First Solar (FSLR) is kept at a “Buy” rating, while lowering the bank’s price target on the shares to $325 from $360. First Solar is somewhat insulated from subsidy cuts, think Heller & Co., because its superior cost structure “is at least 2 years ahead of the competition,” including Applied Materials (AMAT) and German manufacturer Q-Cells (QCE.DE). Heller & Co. now think FSLR should trade at a multiple of 50x 2009’s projected earnings, down from a multiple of 55x the analysts assigned back on May 12.

__________________________________________________________________________________________________________________

It seems the Germans are finally coming back to their senses. Note, most interestingly, that the last paragraph mentions stock shares in these solar-related companies trading at 50-55x earnings. My God! Does "fad theory" ring a bell here?

[Colin]

“A better idea. Everyone get's together and works together to make a good fruit harvest with enough for all, but no waste. The people are energetic and healthy. The land is preserved and fruitful, and there are no mounds of wasted fruit. All winners, no losers.” Mark, you idealistic, communal dreamer! Sounds purrty. Doesn’t work. Enlighten self interest (greed, self-preservation, etc.) works. A campout with 20 people?

Yes, dozens of times as a cub, boy and explorer scout; organization and teamwork in action.

People tend to forget there is no space unless you have objects. There is no earth until you have sky, and no one is poor until someONE is rich.” Very true, very wise. Yet ever since the first apple, humans have not only objects (we are tool users), but also wealth. Queue up one of my all time favorite albums, Jethro Tull’s Song from the Woods.

Jeff is against any kind of social engineering by the government. Not a bad idea. Neither is a national energy policy of self sufficiency. But private industry won’t be organizing the national campout. Government has to. Why because natural market forces in the mid-term lead us to burn more cheap fossil fuels.

All my decades of campouts, mostly during Minnesota winters, were organized and lead by patrol, troop and post leaders (me, other higher-ranking kids and the adult advisors). To attain energy self-sufficiency now, government has to offer rules and incentives to alter natural market forces.

T. Boone Pickens this morning on NPR said that North Dakota wind farms can power the nation’s electricity. To change the energy source of the electrical industry requires massive incentives and policies.

And probably huge debts. I am well aware of the fantastic Reagan/Bush deficits; I was talking about the amount of federal revenue they raised.

[Jeff Matthews]

“Jeff is against any kind of social engineering by the government. Not a bad idea. Neither is a national energy policy of self sufficiency. But private industry won’t be organizing the national campout. Government has to. Why because natural market forces in the mid-term lead us to burn more cheap fossil fuels.

To attain energy self-sufficiency now, government has to offer rules and incentives to alter natural market forces.

Market forces are the only forces where people use their brains. The cost-benefit is readily apparent. Why the heck would you pass up cheaper sources and go to more costly ones? This is what I seem to be hearing: "Oh my Gosh! Fossil fuel costs are surging. I can't believe it. We're in turmoil! So.... even though fossil fuels are cheaper now, let's pass them up for something more expensive." It's the same as "I'm so sick of being hooked on expensive fuel, that I'm willing to just bite the bullet and buy even more expensive fuel." Ridiculous!

I'll let all you folks bite the bullet and rip yourselves off from some altered financial logic. Me? I'll just go with the market.

Don't get me wrong. I'm ready for something that is cheap or free. Just remember, however, the key words are "cheap" and "free." I don't know how they brainwash the masses into thinking "expensive" is "cheap." It is amazing, to say the least. Ever feel like this?........

[pauln]

Interesting thinking from Jim Kunstler...

"One consequence is that other nations sitting on our exported
dollars (from our massive trade deficit) have apparently decided to
spend off those dollars rather than wait for the fullblown financial
collapse of the nation issuing them. My guess is that they are spending
those dollars on oil, the primary resource of industrial economies, and
that they are prepared to outbid other contestants (including the USA)
no matter what -- because they know the dollar is losing value, and
that those losses are apt to accelerate over time, and what else would
they spend them on? I suspect this is behind the rising price of oil
more than anything else -- certainly more than the phantom
"speculators" the right wing is yelling about -- and that behind the
spending off of those exported dollars are the geological facts of oil
being a finite resource inequitably distributed around the world."

From here

[jacksonbart]

Not fear Hollywood will save the day. I do what ever Matt Damon would do. Matt Damon.

[Colin]

T. Boone Pickens on U.S. energy policy:

http://online.wsj.com/article/SB121556087828237463.html?mod=googlenews_wsj

The problem with “the USD slide as a cause for the run-up in oil” argument is reality. The USD stopped going down compared to the Euro this year, while Crude has doubled.

"Speculators" are not phantom. Mutual funds and investors of all shapes and sizes are net long the market, Have been for years. Open interest (net positions) is double what it was 2 years ago. People jumping into boom markets like stocks, then housing, now oil, do not create the problem, they merely make it worse.

[InnerTuber]

Market needs specs

In no particular order of importance -

Markets without specs have little or no volatility - the trade just plays with itself. Not all bad, but of little value.

No volatility implies little or no price movement. Options values sink or become non-liquid.

No price movement eventually means liuttle/no use even for the hedgers/trade.

No traders means no market (contracts do die, errrrr get delisted).

Any person that can open a trading account can short oil or any other commodity, or buy puts when they think it is overbought. Specs also can push the prices too low, just isn't happening right now. Specs usually have a lot more "bullets" in their guns to effect price moves versus trade accounts that are hedging physical or future inventories (bank/cash/audit controls - usually).

I say we need both specs and hedgers!!!!

Peek at commitment report below - specs and trade actually increased their short position! Granted specs are net long. Trade is net short. Seems normal to me for a rising market.

NO. 2 HEATING OIL, N.Y. HARBOR - NEW YORK MERCANTILE EXCHANGE CFTC Commitment of Traders *Combined Futures and Options* Jun 24, 2008
Reportable Positions as of Jun 24, 2008							Non- Reportable Positions
Speculators			Commercial		Total
Long	Short	Spreading	Long	Short	Long	Short	Long	Short
27857	16325	58579	152958	175712	239394	250616	39042	27820
Changes from last report - Change in Open Interest: 9518
116	330	-832	9126	9482	8410	8980	1108	538
Percent of Open Interest for each category of traders
10.0	5.9	21.0	54.9	63.1	86.0	90.0	14.0	10.0
Number of traders in each category; Total Traders: 34
34	21	41	62	66	118	112
(CONTRACTS OF 42,000 U.S. GALLONS)							Open Interest: 278436

[Colin]

Thanks for posting the COT, I thought it would be hard to find, BTW, this is HEAT, not Crude, yet it shows that long specs are only 10% of the market, compared to short commercials (hedgers) being 63% of the market. (No surprise there, commercials are short Heating Oil futures going into summer while purchasing the physical for winter; its called hedging and they get an accounting break for doing it.)

We used to use COT to take commodity option positions on the same side as the commercials, because sooner or later the markets would move in that direction, about 2/3 of our clients doubled or tripled their money on such moves! This means sooner or later Heat will drop.

[InnerTuber]

Opps, wrong chart - thanks Colin! Bout the same conclusion - specs long, trade short. Hedge exempt positions much larger than spec positions as you pointed out above. Almost 50 50 so nobody has a clue I'd venture. Everyone likes to blame specs I guess.

I think your trading logic was sound until recently, particularly with Ags. A couple things to consider.

1) 401k funds have nowhere to go and are really doing some strange things to markets. Every group that manages the actual contract (the overseeing Boards or Committees) want those spec funds allocated against their commodity. In Ags it's usually cotton, coffee. Smaller contracts can't pull enough liquidity to pass the test. I wrote the NFC contract and while I think it was a good idea, 3 hurricanes and canker killed it. Just bad timing. It's still there, just de-listed tho. Probably need to open it up to Brazilian if it goes again. The All Florida logic made sense until the crop was 135MM or so.

2) Exchanges can represent world production and other countries have other laws.

3) Some commercial accounts hide out as specs. I'll call that the typical Cargill vs Dreyfus battle!

4) Anti-dumping orders, IMHO often what a waste to help the undeserving. That outta get somebody riled up. You all paid for it.

5) Electronic trading, good and bad points.

6) Fluctuating margin requirements. These can get quite painful, which is why when the DOW blows off it often drags the commodities with it as the big boys scramble to cover their stock positions liquidating their "small in the scheme of things" commodity positions for cash.

7) With the internet there are few real suprises that one can capitalize on. For example, you can't go out and see the orange is frozen, or the port is going on strike and have much of an advantage over the guy at his PC anywhere around the world.

I think most traders would agree, that eventually the market is right and comes in line with real supply and demand. The periods of aberation can be long and painful. Cool thing is for trade accounts, who cares where the price goes as long as you got what you needed to get done. Point being, if you need to sell 3 contracts to hedge your farm it doesn't much matter how long the market traded where you needed it to be. It got there is the operative word. So, the daily range can be a solution even when the close is a problem.

Yeah oil is ugly. Take a look at corn and natural gas. I'd bet the soda big boys are freakin! Lastly, buy lemon juice now! It's gonna get ugly - heh.

CRUDE OIL, LIGHT SWEET - NEW YORK MERCANTILE EXCHANGE Code-067651
FUTURES ONLY POSITIONS AS OF 07/01/08 |
--------------------------------------------------------------| NONREPORTABLE
NON-COMMERCIAL | COMMERCIAL | TOTAL | POSITIONS
--------------------------|-----------------|-----------------|-----------------
LONG | SHORT |SPREADS | LONG | SHORT | LONG | SHORT | LONG | SHORT
--------------------------------------------------------------------------------
(CONTRACTS OF 1,000 BARRELS) OPEN INTEREST: 1,294,480
COMMITMENTS
216,934 194,966 209,804 786,950 805,374 1213688 1210144 80,792 84,336

CHANGES FROM 06/24/08 (CHANGE IN OPEN INTEREST: -11,595)
5,797 8,046 -6,117 -20,896 2,163 -21,216 4,092 9,621 -15,687

PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS
16.8 15.1 16.2 60.8 62.2 93.8 93.5 6.2 6.5

NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 328)
89 126 127 83 100 261 270

I'm crawling back into my hole!

[Daddy Dee]

http://www.rockymountainnews.com/news/2008/jul/08/doctor-says-feds-hiding-ufo-energy-secret/

now this is serious business

[Colin]

The White House estimates that there are 18 billion barrels of oil offshore that have not been exploited because of state bans, 10 billion to 12 billion in the Arctic National Wildlife Refuge and 800 billion barrels of recoverable oil in the Green River Basin.

http://www.cnn.com/2008/POLITICS/07/14/bush.offshore/index.html

[InnerTuber]

And now Bush throws down the gauntlet for Congress to act. I don't mind a bit of goop on the beach if gas goes back under two bucks!

[JJkizak]

Watched on the NEWS about a secret oil shale extraction process in Colorado on 1 acre of ground that the oil companies are going ga ga over the results. This would tap a suspected 1.8 trillion barrels of oil. Theoretically no harm to environment except they use a lot of water in the process.

JJK

[stan krajewski]

Who bought all these SUVs? We did!!!

Could we possibly get together as a consumer block for one day a week and not drive?

We the American people, as consumers, have the power in our wallets to bring the oil companies, speculators and our own government to their knees with the untapped power of the boycott. What the hell are they going to do with all that extra oil? Drink it! They need us as much as we need them. But they are organized. We as consumers, are not.

A little individual sacrifice multiplied by millions would bring action like you have never seen before.

Besides, boycotting is neither Republican or Democratic. Just fed up people banding together to fight back against economic oppression.

Money talks. We just need it to speak for us.

In ny event, the current "oil bubble" will burst soon. Just like real estate did. It's speculation gone wild. And some will be left holding the barrel.

[Colin]

A report by the U.S. Geological Survey found that the area north of the Arctic Circle has an estimated 1,670 trillion cubic feet of natural gas -- nearly two-thirds the proved gas reserves of the entire Middle East -- and 90 billion barrels of oil.

http://online.wsj.com/article/SB121683690003077857.html?mod=googlenews_wsj

[sunburnwilly]

Take it from me , if you take this stuff you will see oil bubbles in your #2 .

"And be sure to take no gas for granted !"