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I love high oil prices!!!

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October 21, 2009 – Comments (13) | RELATED TICKERS: BYDDY , UNG , LEU

I am regular reader of Paul Monica's views...Only reason for me to come to money.cnn.com. With reference to article posted at http://money.cnn.com/2009/10/20/markets/thebuzz/index.htm.
I know lot of people will go against me here on my stance......But I am in strong favor of oil price hike. Please be patient to listen what I am trying to say. Trust me I am not someone who is speculating or betting on oil stocks. I am researcher working at National Center for Supercomputing Applications and strong follower of commodity prices and its impact. Here are my reasons why I would love to see oil hovering over $4 gallon and why its strongly in favor of US economy and overall well being.
1) $2 or $3 gallon oil never enough to make people realize all the sins attached to oil dependence.
Close to $4 gallon we start thinking about alternative energy investments, changing urban design, public transportation, making US self dependent. I was seeing more such awareness when prices were $148, I've stopped seeing these articles anymore on money.cnn.com.
2) High oil prices is what destroyed our whole auto industry...and why? Because our auto industry was never prepared for such situation.....global markets have started investing in efficient energy paradigm a decade ago. I see cars running on Natural Gas in India and China why dont I see them in US when US is largest producer of Natural Gas. It has sufficient natural gas to stop it to use single drop of oil. I am not saying natural gas is only answer...I am saying oil dependent auto industry wont sustain for long time...People will demand for more more energy efficient cars...we want our auto industry adaptable enough to answer changing needs. US auto industry destruction was for good, now we will see birth of auto industry in US which will be much more competitive.
3) Here in US we pay much less for gasoline than what others pay in Europe and Asia. In europe its $8 gallon and around $5 in Asia. Hence they are much ahead of US in terms of energy efficient technology. There you see public transport running on electric energy or batteries. Poorest country like india has all electified railway lines. They long back stopped using diesel rail engines because rail industry was not able to compete with other transportation medium. Europe has started pusing battery running buses for public transport. China and India has pushed strict laws to use natural gas based public vehicles for dense metro areas to control pollution and bring down energy prices. They have low cost technology and expertise to convert gasoline based car/heavy vehicle to natrual gas vehicle. We dont have it here! They have large number of gas stations equipped to deliver natural gas. We dont have it here!
4) Whole globe (other than US) knows oil can kill them...whatever they do still they need more and more oil...they are doing best to change technologies and looking ahead towards non oil based enegery resources. In US we are much behind.
5) Its true there is supply and demand side of story affecting oil prices...Supply and demand  affecting oil prices more significantly than wall street speculation. Last price shock to $148 barrel was more due to unexpected strong demand from emerging markets like Brazil, Russia, India and China (Bric nations). Wall street speculators only brings slight bias towards more high or more low but they cannt affect fundametals.  Demand will keep increasing unless we give away oil habit.
6) There was significant drop in demand which lead us to $32 barrel due to production cut by several factories throughout the gloabe due to recession or anticipation of mass scale depression. We didnt cut our drive doesnt mean all different type s of consumers were not cutting oil consumption. Its multifacted, a Furniture Manufacturing company cutting production due to drop in demand of furniture from all banks ironically affects oil prices. Low furniture production leads to low transportation of lumber and low delivery of final  furnished products brings down oil demand hence we saw oil close to $32. Now banks and all other hit sectores have started showing profits, this itself is sufficient to bring back oil price demand.  Already BRIC nations are on track to growth, they are the ones who are controlling demand more than US.
7) There is strong correlation between low dollar and high oil prices. Both goes together. If oil prices are high, we have high trade deficit and brings down value of dollar. If dollars goes low due to other reasons...oil priced in dollar on mercantile exchanges goes higher automatically. Thats what going on in last 6 months. I dont see dollar raising anytime in future...so we will have higher prices..Trust me, low dollar is in our favor....its bringing back export business...it will bring back jobs and it will make US more competitive infront of emerging markets. This is the game China is playing since last two decades. From last two years Indian goverment has also started attempts to depriciate their currency to increase export. We need low dollar and high oil prices.

In summary...we need higher oil prices due to all reasons I mentioned above. It will help us in long term. From last 6 months we have seen same thing, $32 barrel seems like depression and $80 barrel now giving us feeling of recovery!!!

13 Comments – Post Your Own

#1) On October 21, 2009 at 3:02 PM, energydk (< 20) wrote:

I too read Paul R Monica's articles on CNN. Thanks for excellant and enlightening follow up.

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#2) On October 21, 2009 at 3:04 PM, kailashkotwani (< 20) wrote:

Good write up.

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#3) On October 21, 2009 at 3:10 PM, rahul20india (< 20) wrote:

At this point we cannot afford high oil prices...there is significant risk of cutting on consumer spending.

Overall I too agree...we need a way to get rid of oil habit...and higher prices are a way to make business to spend more on alternatives.

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#4) On October 21, 2009 at 3:16 PM, davejh23 (< 20) wrote:

"Here are my reasons why I would love to see oil hovering over $4 gallon and why its strongly in favor of US economy and overall well being."

$4/gallon oil, or $4/gallon gas?  Depending on the USD, I wouldn't be suprised to see $4/gallon oil...$200+/barrel.

"US auto industry destruction was for good, now we will see birth of auto industry in US which will be much more competitive."

I think we're already starting to see the birth of a new auto industry.  There are many small start-ups that are doing great things...I wouldn't be suprised if the largest US auto maker 20 years from now is a company that I've never heard of at this point...I believe the technologies will be available much sooner, but it might take time for the public to come to trust a new automaker.  Some states, like Utah, have good networks of natural gas fueling stations, and I believe many states are following.  Large companies, like Siemens and others, are already developing alternative energy vehicle technologies that will change the existing auto market as well.  I think the change is coming whether we have $4/gallon gas in the interim or not...of course, depending on the USD, the US could go from having some of the cheapest gas prices to having the most expensive gas prices.

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#5) On October 21, 2009 at 3:29 PM, kkotwani (98.20) wrote:

thanks davejh...I mean to say $4 gasonline.

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#6) On October 21, 2009 at 4:02 PM, carcassgrinder (43.82) wrote:

good read.  thank you.

I still think you are stretching trying to justify a 400% fluctuation in oil over 9 months with a supply/demand arguement.  Those numbers are achieved by high volume/ high volatility...which has everything to do with speculation and very little to do with true price discovery. 

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#7) On October 21, 2009 at 4:13 PM, shopgirl456 (72.82) wrote:

I agree with you that we need to curb our dependance on oil,but I don't like raising the gas prices. When the prices for gas go up everything else (groceries,public transportation,etc..) goes up along with it. The alternatives to oil need to be made cheaper so they will be more attractive to buisnesses. And then they will want to implement these applications more often.

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#8) On October 21, 2009 at 4:28 PM, lemoneater (58.83) wrote:

You go, shopgirl! (Did you get the name from the movie "You've Got Mail?" We watch it once a year during Christmas vacation along with "Shop Around the Corner.")

Whenever gas prices go up too much, that means less discretionary purchasing for us, which means less driving to nice places to hike, almost no eating out, and less to almost zero book and DVD purchasing.

Surely we can be motivated to search for alternate energy solutions without wishing high oil prices on the lower middle class!

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#9) On October 21, 2009 at 4:59 PM, leohaas (29.60) wrote:

Excellent post!

You are forgetting one very important reason: national security.

Much of the money we are spending on oil goes to countries where the people, their regimes, or both hates us with a passion. Actually, some of these people and regimes hate us so much that they are willing to commit suicide while killing as many of us as they can.

For our national security, it would be great if we stopped importing oil. Our military can withdraw from at least half of the 100 or so countries where they are right now. Maybe people would hate us a little less. At the very least we stop funding the d@mn terrorists who want to blow us up.

Lets disengage from all those lunatics completely. Stopping to buy their oil would do the trick.

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#10) On October 22, 2009 at 4:02 AM, PdoBear (25.51) wrote:

The price of fuel affects everything. All products are transported by trucks at some point. Lower purchasing power plus inflation. Nice.If you're really worried about the enviroment, take away the mortgage allowance for single family dwellings. --That is far more relevant to climate change than oil prices.

Enjoy your stagflation Americans.

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#11) On October 22, 2009 at 7:00 PM, Chuckamok73 (< 20) wrote:

Excellent piece, kkotwani, and excellent comment, leohass. Anything who thinks the Saudis are our "friends" is an idiot. They push their Wahhabi crappola abroad, so they don't have to deal with it themselves.

Screw them and let them drink their oil. Obama needs to push for ng-fueled vehicles, especially semis, NOW. We need a Manhattan Project to get this moving, NOW. And bless those brave "little guys" who developed the shale gas fields.

The time is NOW. Seize the day. 

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#12) On October 26, 2009 at 9:44 AM, ayekappy (< 20) wrote:

Not bad, but why did you have to use your 2 other accounts to recommend and fill up the first 2 comment lines?  The 2nd comment was just blatant(you're kkotwani, #2 was from "kailashkotwani") but the first one was also kinda blatant because of the horrible spelling and grammar.

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#13) On January 07, 2010 at 9:19 PM, BrandonPaulChevy (< 20) wrote:

I hate high oil prices..but I love Electric vehicles. Well, Just want to compare fuel powered vehicles and the electric ones. I really prefer the electric vehicles because the parts are more stable. The axle of my electric car for example is more stable than that of my oil powered car.

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