tisdag 1 mars 2011

Jim Rogers: "Saudi Arabia Is Lying About Being Able To Increase Its Oil Production"

Jim Rogers joins Zero Hedge in being highly skeptical about just how credible Saudi's call for a 1MM + boost in its oil supply is: "Saudi Arabia has been lying about the reserves for decades. Saudi Arabia the last two times said they are going to increase production and they couldn't increase production. Don't fall for that. The reason oil is going up is the world is running out of known reserves of oil." Of course, then there is the question of does one trust the Quantum fund creator who retired at 37, or does one go with the sellside lemming brigade of monkeys with typewriters who will groupthink anything and everything to death, just to get paid another completely unwarranted bonus. As to those who are concerned that the commodity "bubble" is about to pop, Rogers says: "It's still years away." And some reinforcement for the gold and silver bulls: "Gold will certainly go over $2,000 by the end of the decade, and silver will pass $50." And as a hedge to his great commodity bull market call, Rogers continues to be short Nasdaq stocks. His thesis: "If the economy gets better I am going to make money in commodities, if it doesn't get better, I am going to make money in commodities cause they are going to print huge amounts of money." Call it the adjusted Tepper call. Rogers is also holding a contrarian all on the dollar: "I own some dollars now because there was a huge drop in the dollar. I do sometimes like to buy things when they collapse, and sometimes I don't. Sometimes I lose money." We assume this is merely a short-term revulsion trade as all the near-record USD shorts get flushed out as we highlighted in the latest Committment of Traders update.

Full interview:

If You Think This Oil Spike Is Temporary, Check Out This Chart
This oil price spike is going to be anything but short lived, if you believe this chart from Morgan Stanley.

It details how by the year 2013, there's not going to be any excess supply in the system. That means, even if the Saudis aren't lying about being able to ramp up production like Jim Rogers says, they've only got two more years to do so before that spare capacity evaporates.

So beyond the Middle East instability trend, there's a much bigger problem lurking.
Read more: http://www.businessinsider.com/oil-spare-capacity-2013-2011-2#ixzz1FK2IAKBL

Then if you also scanned trougt the abowe link in regards to countries that will be hurt by and benefit from an oil price over $100 per barrel then you need to remember that's then not the whole story.

Add to this complex matter also "the food" challenge as described below by Mr Jeff Rubin whell then there are very few countries that will get out of an oil price increase as winners. As both a comodity, oil and grain exporter possibly Canada might be the ONLY one?

Then also remember that you have a situation with rapidly increasing economies and explosive population growt in almost all of the oil producing countries that will consume more and mor of that oil that they still are able to produce so as flat and future falling oil production combined with a steady and explosive growth of domestic consumtion means less and less volume of oil to export. So then going forward in coming years and even if oil price would be hiked up well the earnings from oil exports will start to decline. Given that these oil producing countries are so very dependent on earning from oil then the social domestic challenges they will face will be tremendous. It just cryes out social instability all over the place.

Soaring Oil Prices A Double-Edged Sword in the Middle East
Why is the Arab world convulsing with social and political unrest when triple digit oil prices should be bringing enormous wealth to the region? The answer may be that the link between energy inputs and food prices suddenly makes soaring oil prices a double-edged sword in the world’s largest food importing region.

Egyptians are about to find out that it is a lot easier to eradicate your local dictator than feeding your population. The crush of poverty is felt under the weight of a population of 80 million people who live in a country where average annual rainfall is less than two inches and where only 3% of the land is arable. Aside from a narrow strip along the life-sustaining Nile River, Egypt is basically an inhospitable desert.

Yet the population of Egypt has tripled to 80 million today from 27 million in the early 1960s. While the birth rate for an average Egyptian woman has fallen from six children to just over three, it still fuels more than 2% annual growth in the population. At this pace, Egypt’s population will double to 160 million by 2050.

But the country is already importing 40% of its food supply and 60% of its grain. Even a brutally repressive regime like Hosni Mubarak’s still spent 7% of the country’s GDP on food and energy subsidies. Can a replacement regime afford to spend more?

Not likely, particularly when the country’s oil production peaked in 1996 and has subsequently declined by 30%. Oil exports are down 50% thanks to strong demand for its subsidized fuel.

The problem facing Arab countries today is higher oil prices feed directly into higher food prices. While oil may be massively subsidized in the Middle East, it’s not in major grain exporting countries such as Canada, Russia and Australia that Arab nations increasingly count on for their food supply.

From the diesel fuel that runs tractors and combines to the power needed to pump water through irrigation systems, modern agriculture is one of the most energy intensive industries. And the Middle East is the largest food importing region of the world. As the price of oil goes up, so does the price of food imports.

Egypt’s problems feeding runaway population growth is not unique to the region.. They are in evidence throughout the Middle East given the masses now out in the streets in Libya, Algeria, Yemen, Jordan and Bahrain demanding regime change. Could Saudi Arabia be next?

Population growth in the Middle East is rapidly outstripping the carrying capacity of the land. Democratic reform may be what is on the protestors’ lips but demographic reform is at the heart of the region’s problems.

My comment - Peak Oil is the reason ALL oil producing repressive political regimes including Saudi-Arabias ruling elite eventually has to fall. Now it's just a matter of when. Then note that e.g. Egypt peaked oil in 96, imports some 50% of its food and 60%of it's grain. Compare this to the US where their oil peaked in 74 and now imports some 70% of all their oil. Sure the US got grain but given future oil prices how sustainable is it agricultural system as it's designed today? Bottom line - when will the social instability also start to hit the US?

So then we need to the compex issue of Peak Oil also add the question how economical and food inflation may add to this complexety? A fair guess might be that oil from the middle east will not be very awailable for the rest of the world in coming years and that cost for food production will increase due the the hig dependency on oil in our modern agricultural system. On average the costs in a typical american farm is 50% oil related.Kinda gives you an idea, given the challenges with PO, where food prices now are heading..., doesen't it..?

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