WHEN REASONS PREVAIL
August 27th 2008 05:20
This post is still about oil. I know a lot of people will disagree with me if they happen to read this, but isn’t that the essence of democracy, we are all free to say whatever we want to say? Within reason, we can agree to disagree - without having to bash each other’s head.
Nope. I am not just saying that figuratively. See, these past few months, the Philippine government and the MILF (Moro Islamic Liberation Front) panels have been trying to hammer out a deal that, hopefully, will bring lasting peace in a number of areas in Mindanao.
A few days ago, the deal hit a snag when a number of local government entities (not represented in the panels but will be affected by the proposed agreement) went public with their opposition to the deal and asked the courts for a temporary restraining order (TRO) vs. the signing of the memorandum of agreement between the MILF and the government on the said deal.
The MOA was supposed to have been signed in Malaysia (Malaysia brokered the deal) but the courts issued the TRO and the deal was not signed on the designated date.
To show their feelings toward this development, with nary a warning, two commanders of the MILF attacked several towns and villages in the Provinces of Maguindanao and Lanao del Norte killing civilians (more than 40 men, women and children), burning their houses and businesses and executing captured enemies. It was totally barbaric…
But I said this post is about oil so… First, let me talk about oil…
I am not a seer so I can be immediately proven wrong, maybe as soon as I am able to finish writing this, but so far, the developments, as they have presented themselves point to the conclusion that the price of oil will not keep climbing till it reaches the moon.
I am not going to ask anyone to bet that it is going down, but that is where I am placing mine. Like I said, I can be totally wrong.
What made me place my bet that way? Just a few observations like: the way the stories that are coming up that favors the continued rise of the price of oil seem to be drying up. Whatever is left is pretty much like wishing that the hurricanes and storms and whatever threatening disasters (man-made or natural) will be bad enough to cause shortages or disruptions of oil supply.
But that is just my impression.
What is more than just my impression is the way the high price of oil is causing high inflation. Stories about oil’s inflationary effects (because of high price) are being widely reported. And so far, that has been causing the price of oil to drop - and the markets to rise.
Now, that gives me another impression: that somehow, reason is beginning to prevail in what could be a consistently unreasonable market - a reason that says that the price of oil has to be tamed if we do not want to see a runaway inflation.
While the others may not want to put them into words, I think everyone knows the reasons why the price of oil cannot continue to keep rising forever, shortage or no shortage. No matter how much energy is flowing in a liter of oil. No matter how hard it may be to look for alternative sources of energy. A price of oil that is too high will just cancel out all the benefits it provides.
Of course, there are people that will continue to think otherwise, but no matter how fleeting, I believe, reasons sometimes prevail.
So, what was the mention of the MILF attack all about?
Well, that was about “reasons” and losing one’s head. When those two MILF commanders, attacked and razed those villages and towns and killed non-combatants, the national government of course reacted by sending the troops after them and, as a result, more fighting has erupted and casualties from both sides are now mounting.
So far, the number of evacuees have reached some two hundred and fifty thousands (250,000) and the education of the young children in the areas affected have been disrupted.
I suppose all I am trying to say is that when reasons no longer prevail… there’s bound to be some casualties… in a war or in the stock market.
Nope. I am not just saying that figuratively. See, these past few months, the Philippine government and the MILF (Moro Islamic Liberation Front) panels have been trying to hammer out a deal that, hopefully, will bring lasting peace in a number of areas in Mindanao.
A few days ago, the deal hit a snag when a number of local government entities (not represented in the panels but will be affected by the proposed agreement) went public with their opposition to the deal and asked the courts for a temporary restraining order (TRO) vs. the signing of the memorandum of agreement between the MILF and the government on the said deal.
The MOA was supposed to have been signed in Malaysia (Malaysia brokered the deal) but the courts issued the TRO and the deal was not signed on the designated date.
To show their feelings toward this development, with nary a warning, two commanders of the MILF attacked several towns and villages in the Provinces of Maguindanao and Lanao del Norte killing civilians (more than 40 men, women and children), burning their houses and businesses and executing captured enemies. It was totally barbaric…
But I said this post is about oil so… First, let me talk about oil…
Illustration pic source: Wikipedia
I am not a seer so I can be immediately proven wrong, maybe as soon as I am able to finish writing this, but so far, the developments, as they have presented themselves point to the conclusion that the price of oil will not keep climbing till it reaches the moon.
I am not going to ask anyone to bet that it is going down, but that is where I am placing mine. Like I said, I can be totally wrong.
What made me place my bet that way? Just a few observations like: the way the stories that are coming up that favors the continued rise of the price of oil seem to be drying up. Whatever is left is pretty much like wishing that the hurricanes and storms and whatever threatening disasters (man-made or natural) will be bad enough to cause shortages or disruptions of oil supply.
But that is just my impression.
What is more than just my impression is the way the high price of oil is causing high inflation. Stories about oil’s inflationary effects (because of high price) are being widely reported. And so far, that has been causing the price of oil to drop - and the markets to rise.
Now, that gives me another impression: that somehow, reason is beginning to prevail in what could be a consistently unreasonable market - a reason that says that the price of oil has to be tamed if we do not want to see a runaway inflation.
While the others may not want to put them into words, I think everyone knows the reasons why the price of oil cannot continue to keep rising forever, shortage or no shortage. No matter how much energy is flowing in a liter of oil. No matter how hard it may be to look for alternative sources of energy. A price of oil that is too high will just cancel out all the benefits it provides.
Of course, there are people that will continue to think otherwise, but no matter how fleeting, I believe, reasons sometimes prevail.
So, what was the mention of the MILF attack all about?
Well, that was about “reasons” and losing one’s head. When those two MILF commanders, attacked and razed those villages and towns and killed non-combatants, the national government of course reacted by sending the troops after them and, as a result, more fighting has erupted and casualties from both sides are now mounting.
So far, the number of evacuees have reached some two hundred and fifty thousands (250,000) and the education of the young children in the areas affected have been disrupted.
I suppose all I am trying to say is that when reasons no longer prevail… there’s bound to be some casualties… in a war or in the stock market.
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Comment by Louie
Climate Forum
Climate Red
randomthoughts
Phil's Wellness Tips
as for the oil price, things always move further than you think mainly because markets are predominantly ruled by good old fear and greed
Comment by British bulldog
Now let's get rational about oil!
There are three reasons for it to go down, a reduction of demand in a recession or demand destruction because of high prices, a strengthening of the US dollars value that it is priced in, and new discoveries ( and there have been a few in places like Myanmar and Brazil recently).
Three reasons for it go up are: geopolitical for instance Russia bombing the Caspian to the West through Georgia pipeline like last week, bad hurricanes, like over Haiti yesterday and heading for Gulf of Mexico oil installations today and consumption higher than production.
China alone is responsible for around half the extra demand this last few years, so economic growth there is a key to future demand
When people say they're not finding much more it's not wholly true, though the North sea is declining, a new field there started drilling this week.
The price of oil can be also influenced by speculative inflows. As equities began to decline to fall at the end of last year, investors looked to move their money into something else and commodities were a frequent choice, both hard ( minerals) and soft ( food), but this is a relatively small part of the total picture.
Since a high of 147$ a barrel around 6 weeks a go it has come down to 116 now on demand destruction in the US once gasoline went over 4$ and not least before Beijing's Olympic shut-down, as well as a stronger dollar. Many expect further falls. They will only accelerate when the US economy is in good enough shape for interest rate increases which will further increase the value of the dollar and hence lower oil and as equities by then should also be rising speculation should move into equities and away from commodities It is likely then that in a years time oil will stand at around 80$ a barrel, or at 60% of recent highs, but if China were to start growing at over 10% again this would put some upward pressure on the price.
British Bulldog
Comment by Market Newbie
Stock Market Punk
Even Davao, which is in Mindanao is safe (I went there about 3 times last year). And, guess what, just before I saw your comment here this early evening, I was talking to an Illinois University Associate Professor (a woman) who said she is looking forward to coming back again to the Phils. soon because she fell in love with Davao. But if you haven't noticed, I have not even written about Davao.
I agree, British Bulldog, the things you enumerated are rational observations about oil.
Comment by British Bulldog
Good news!
A 1.8% rise in US stocks overnight featuring a 5% gain in financials and a 4% drop in oil bodes very well for the PSE this morning. I predict a 60 point gain despite yesterday's .25% interest rate increase here.
As for Louie's confidence in visiting the Phillipines. You're fine here as long as you take care. No one is completely safe anywhere now!. As long as you avoid the wrong parts of Manila and moslem Mindanao you have thousands of beautiful islands to enjoy peacefully. I particularly like the Coron group of islands south of Mindoro and north of Palawan. Unspolit and inspirational to visit.
Good luck everyone today,
Regards,
British Bulldog
Comment by British Bulldog
Should i say 'all' as I'm really not sure many people read these blogs?
US down overnight on Dell (IT ) missing earnings targets on global slowdown as well as a report that US consumers were stretched in July ( though of course oil and food prices have dropped since)! Oil was steady.
I personally don't think that's too much to worry about overall here in Phil on Monday, but consumer and tech stocks may feel some pressure and so a modest fall is likely. Whay may induce further falls though is a big spike in oil if the hurricane does it's very worst in the Gulf of Mexico on Sunday/Monday.
I thought Obama was hot, but you can get too much of this inspirational talk and so he should get down to the policies, but of course you never hear about those in a Filipino election, as it's all about character/graft! As for McCain, nice guy but too old. Does he even know how to switch on a PC never mind download streaming video? As for singing 'Bomb Bomb Iran' to the Beach Boys Barbara Ann tune, he's off his head. To take a look at his running mate, she's almost totally inexperienced ( her last job was Mayor in a small town in Alaska!!!!) and yet is an erratic old man's heart beat away from being 'the Leader of the Free World'.
Scary stuff!
Have a good weekend everyone, ( if you can!)
Regards,
British Bulldog.
Comment by Fobzy
Fobz
Keep up the good work, glad you've attracted a British Bulldog.
Comment by British Bulldog
No I'm not referring to seasons when looking at Agri prices ( although of course they do have an effect here). Where I come from in the UK, we can get anything anytime as we just import from Spain anything we can't grow in winter and the price hardly changes whereas the price of hauling food ( or providing energy) to around 7007 islands is awesomely dysfunctional and a key factor in why this country will continue to struggle.
I'm actually referring to for instance the internationally traded price of rice which was 24$ 3 months ago(ish) and is 18$ today, as investors have baled out of commodities and into for instance airlines, who benefit from lower oil prices.
As for higher food prices, they on balance would be a good thing here as the poor of this nation are mostly subsistence farmers who grow their own food ( to eat) and so would not be affected negatively on the food they eat, but would derive greater income at the expense of the middle class on what they grow and sell. This would produce a better balanced and more ethical society at ease with itself, though I'm not suggesting that the middle class have it easy either, just relatively easier!!!!
Regards to all,
British Bulldog
Comment by British bulldog
So the PSE just keeps climbing even when other Asian bourses fall!
Is it just about oil the import of which is a grievous burden to this country and which fell to 106$ earlier today the lowest for months?
For those of you that answer yes, iI'm currently 40% short as this week US car manufacturers will deliver poor results to stress the market, then in 2 weeks time Financials report again and Goldman expect another 10Billion$ of ( collateralised debt obligation) write offs in the near future from Lehman, Morgan Stanley and JP Morgan.
Of course too, oil won't decline for ever and September is usually a bad month as investment managers clean up their portfolio's ( sell their dog (bad)investments) for a better looking year end report.
So good luck y'all, but don't think the pain is alll behind us yet.
Regards,
British Bulldog.