THE DOT - if this turns orange or red be alert

Saturday, June 14, 2008

oil and other fortunes - part 1

King Abdullah (Saudi Arabia) is one of the 5 richest people on this planet - people like Buffett and Gates are far below in the hierachy although the Forbes magazines famous list does show different. A simple math exercise will prove them wrong. The cost to get a barrel to the ship will cost him around 20 $ ( thats a generous assumption)

"Production cost" includes a world-wide average of US $7.35 per barrel in finding costs, $3.57 per barrel in lifting cost (what it takes to operate a producing well), and $1.00 in production taxes per barrel. 2003 numbers from EIA.

According to that figure, its more like 12$ but lets stick to 20$ since the quality of Saudi oil is getting poorer (higher Sulphur component) and right now they sell it above 130$ that gives him a margin of 110$ times 9,5 Mil. barrels a day makes a profit of 1045 Mil. or rounded down 1 Bil. Dollar a day. Keep it up for a month and you made 75% what Buffett made over his life in a month.J.R. Ewing a fictive figure from a TV show would have done anything for that?!

Now the supply and the demand are pretty much unchanged since last year around 84,5 Million barrel a day demand and 84,7 supply last year the price was oscillating around 70$ and now we reached the double price level and still the media propaganda machine keeps repeating its the physical demand moving prices up

Excerpt NYT

Plan Would Lift Saudi Oil Output to Highest Ever

Saudi Arabia, the world’s biggest oil exporter, is planning to increase its output next month by about a half-million barrels a day, according to analysts and oil traders who have been briefed by Saudi officials.
King Abdullah has called a meeting to address the causes of the oil price rally

The increase could bring Saudi output to a production level of 10 million barrels a day, which, if sustained, would be the kingdom’s highest ever. The move was seen as a sign that the Saudis are becoming increasingly nervous about both the political and economic effect of high oil prices. In recent weeks, soaring fuel costs have incited demonstrations and protests from Italy to Indonesia.

Saudi Arabia is currently pumping 9.45 million barrels a day, which is an increase of about 300,000 barrels from last month.

While they are reaping record profits, the Saudis are concerned that today’s record prices might eventually damp economic growth and lead to lower oil demand, as is already happening in the United States and other developed countries. The current prices are also making alternative fuels more viable, threatening the long-term prospects of the oil-based economy.

Well suddenly the OPEC who never saw a reason to rise the output - why should they , they make a killing was supported by the US government who were eager to raise strategic reserves in this stampede rally, has the interest of the world at heart. McCain is the first Republican to admit that there is a sort of market manipulation, Pickens the famous oil speculator is calling for higher prices and joins the mantra that the demand is driving prices - keep in mind this man is investing double digit Bil.Dollars in alternative energy (wind ) and that only works out if prices stays above 100$.

To put it into a different perspective the current price at 130$ make it a 4 Tril. a year industry for the raw material (just oil - natural gas is a second line of interest). In the following an older statistic just to give an idea how much it adds up until it reaches retail - for the sake of it lets assume an average 60% in costs or financial interest ( USA - varies to the upside in the most countries due to higher taxes) on top and we are at 6,5 Tril. - the GDP of America 2007 was 13.84 Tril.

Well in history that was enough of a motive to start wars and the reason why the Arabic sovereign funds are throwing money at bankrupt US banks is partly a kickback - the banks created the idea of index funds which doubled the crude price making a difference of 2 Tril. in profits the financing ( new capital for banks) of 300 Bil. - so far is a small price. It will only come at a high price for the US taxpayer since the cost for the Iraq war will easily exceed 1 Tril. plus the not random cost of living will have a severe impact on their average lifestyle.

Compared to 1981, inflation adjusted-prices today are 27 cents CHEAPER than the $3.11 all-time high (inflation-adjusted) gasoline cost in March 1981. For one example of a 1979-2005 inflation-adjusted and nominal price chart for gasoline,

actually I had here a graph showing the composition of gasoline but instead it showed a guy jerking off - another sign how evil and pervert this world has become - the link which is responsible for this graph- I am sorry for this discomfort

Finally one can say the Iraq war paid handsomely for some people and in an historic perspective, if the Ottoman empire (Turkey is the leftover) would still exist they would made a fortune these days commanding over 50% of the oil exploration but it seems to be dangerous to mess with Rothshild's. They offered the Ottoman emperor once to let go off all he owed them in order to get Palestine what he dismissed and the empire ended in disaster within a short time.

The other big oil player Russia had also an interesting timing in an historic context and here we also will find some of the richest people even not mentioned officially - with the latest one being ex-President and current Prime Minister Putin. He is said to have stocks worth of 40 Bil. $ in some Lichtenstein Holdings. During the crucial times when the communism collapsed the man in command was Yelsin and his family owns incredibly riches (not mentioned in any lists) which was organized by his daughter Tatiana, she made an Abramowitsch - who was a nobody - to whom he is today and as in many cases just created. He started out at 'Runican' a swiss oil broker and had suddenly some cheap amounts of oil at his hand which Tatiana (she might be in the secret richest top 5 list as well) organized for him. The Yelsin's made a simple transfer of money out of the Russia by selling to their outside outlets ( companies founded outside with their people sitting in there to make fortunes for them) oil far below market price so all they needed to do to sell it at market price.

Over 50% of the richest Billionaires in Russia have a Jewish orign and its striking that they got in control of this big fortunes so quickly. Basically it seems we have two powerful groups in Russia which are fighting for power and some had to flee like Abramovich after
Khaidarkovoskiy (owner of Yukos) was crashed by the Putin group for his ambitions in politics and the power balance was changed. That Abramovich owns the soccer club Chelsea and spends this insane sums to form this high profile team is said to be part of his life insurance strategy. He got so much attention through this and popularity in Britain that any assassination attempt would be to obvious and he belongs to the Yelsin group Although it is said he brought Yelsin to power ( a conglomerate with Beresowski, Tschubais, Gussinski ,Mamut and Abramovich) supported his reelection in 1996. Oil at 11$ the barrel in 1998 was a reason for the collapse of Russia's finances and caused a worldwide collapse of financial markets triggered by the break down of LTCM ( a hedge fund which had invested in various credit strategies based on normalising yield curves) gave the Putin group momentum - who was in the beginning also supported by Yelsin in exchange for his obscure Immunity deal. Basically all Billionaires acted out the same simple way which all second tier or third world countries do they get big companies or deals from the state more or less for free ( basically stealing) in obscure schemes working together with parts of the administration.

No comments:

About Me

I am a professional independent trader