Oil Prices Are Dropping - Phew, we survived that...let's go back to normal now

So oil prices hit a record $135 a week ago, then they dropped back down to $127. No big deal. It went up a lot, but the markets just got excited.

Umm...just to be clear, we're talking about some topsy turvy behaviour that is still north of $120, and for that matter, $110. If this rollercoaster ride says anything, it is that the markets are now VERY volatile. By the way, just before they went down to $127, they went back up to $133 (from $130). This means there is a lot of tension pushing and pulling at that price.

Oil prices fall below $127 a barrel

A friend was also saying that since 65% of the UK oil price is comprised from taxes, the actual price of oil isn't even expensive. Exactly. Oil is still very very cheap. The prices producers are paid is still very little. So, you say, why can't we just remove these government taxes? 2 reasons:
1) because that would increase demand, which is exactly what we don't want to do.
2) because these fuel taxes are a primary source of income for government. Without them, most departsments would be crippled. What is happening in any event is while those taxes remain in place, economies are increasingly tipping towards recession as disposable incomes increasingly fail to achieve parity with these higher price levels. Thus higher fuel prices also begin to erode the income of entire governments.

Bubble or Bumbling: Send in the idots to brilliantly pontificate about oil (they're pretty crazy, so far, but get the right answer here)

"The future is here, it's just not well-distributed yet"- William Gibson

There are plenty of explanations for what's happening in the global oil markets. It's caused by the economic boom in the world's largest developing countries, particularly China and India. It's caused by the unwillingness of the oil cartel Opec to pump more crude. It's caused by the fact that the world has reached peak oil - the moment in our history where supplies of the black stuff start to dwindle.

All of these factors may have contributed to the upward trend in the oil price over the past six years, which has seen the cost of a barrel of crude rise from around $20 a barrel to $135 a barrel today. None of them really explain, however, why the price should have gone up by more than $5 in the past 24 hours and by a third in little more than a month. That sort of price action is the result of a speculative frenzy of the sort that was witnessed in the dotcom mania of the late 1990s. The oil market, to put it simply, is a massive bubble waiting to be popped.

[And] in the oil market, the fundamentals no longer matter.- Larry Elliott

NVDL: Really? Is that Elliot or Idiot? Actually the bubble that needs to be popped is the thought bubble of lunacy that envelops your brain, and since you're writing and communicating this garbage, you're also infecting the human intellectual stream with this nonsense. Here's the correct assessment of these high prices:

Oil's No Bubble
Lionel Laurent and Carl Gutierrez, 05.21.08, 4:00 PM ET

Oil's astonishing rise is becoming a cliché on Wall Street, but the rise is real and will keep going until supply catches up with demand. "The story of the past month has been the sudden surge demand in China for diesel fuel," said Jeff Rubin, Chief Economist and Chief Strategist at CIBC World Markets. Power plants in some areas in China are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power.

Rubin stressed, though, that the spike in demand over the past month is only a footnote to the bigger story: "Even at $133, demand hasn't been reined in, and without a real raise in supply we think it's ultimately going to go over $200 a barrel."

NVDL: To summarise, fundamental factors, the simplest possible explanation, are why oil is going up. Again (repeat after me if it'll help you remember): Supply is not able to meet demand. It's Economics 101, and yes, it really is that simple. And some of the most brilliant and esteemed economics writers, and 'experts' are still arguing that it's not even happening. Reality is going to hit these denialists very very hard. It's going to hurt. Because now stubbornly and stupidly reasoning against reason is really going to cost us, and we can't afford to continue being the dimwitted species that fucked up the planet.

An interesting additional point: the reason why oil companies haven't built additional refineries since the mid 70's is they know there is no reason to - because we haven't found the means to produce more than we are producing now, and haven't for some time. There have been no major new oil field discoveries since the early 80's, when all we found was the North Sea, Prudhoe Bay and some Russian oil. Now it's 20 years later exept we found all the big stuff (that wasn't so big after all) there was to find. So that in itself says a lot. Actions - of the oil companies - speak louder than statements from OPEC or anyone else.

Another question: for those informed few of us, what do we do? Do we wait until the world catches on? Do we also operate as per normal, or do we begin to proactively make the sort of changes that we can only guess, and estimate and imagine are the most practical, reasonable and rational. My guess is we start fending (and thinking) for ourselves NOW.

Peak Oil Panic: What can we do?

For starters, don't pretend that it's not happening. Monitor the situation. My concern right now is that it is accelerating very quickly, and there are already riots in Johannesburg. It's not impossible that this city, including the burbs and the work places where I will be, may be quite different at 5pm today. They might not be, but you and I need to monitor how things are changing, because right now, change is on course to be rapid and take us by surprise. And best to speak and learn from people who have seen this coming - I'm one. But there are plenty of resources that can offer intelligent advice about this: www.theoildrum.com, www.kunstler.com and No Impact Man are just 3 good one's.

Pay attention to what they are saying. Try to undertstand the systems at work. The bad news is systems will breakdown even further and this will happen more rapidly. The good news is we can start to form real communities now, and together, find ways to fend off the dark.

Today, right now, my advice is:

- monitor the situation
- evaluate your situation
- go to gym, get some exercise (I already have and it's 8:42am)
- speak to family and friends
- don't quit your job but start to consider an overhaul to your lifestyle - where you live, how you live, where you work, what you do, how you get there, how you're spending money, how much you're spending on food, and consider your family's interests
- right now you have to serious manage your money and your consumption, not just of things, but food
- start living healthy now, and try to contribute to the solution by using less of things you don't really need
- monitor your own stress levels; you need to stay strong and healthy in order to function, so get enough sleep, eat well, exercise, maintain a good balance
- be helpful and supportive towards others because we are going to need each other now more than ever
- finally, have some faith that the sun will rise tomorrow, and the next day, whatever happens

I am going to be blogging less, exercising and sleeping more, as I need to address the same balance I've mentioned above.