View Full Version : Egypt Debt Buoyed by Obama Guarantee for $1 Billion Eurobonds: Arab Credit
Egypt Debt Buoyed by Obama Guarantee for $1 Billion Eurobonds: Arab Credit
By Alaa Shahine and Ahmed A Namatalla
- Jun 14, 2011
President Barack Obama’s guarantee on $1 billion of Egyptian Eurobonds is poised to reduce the country’s borrowing costs, helping the transition to democracy after six decades of autocratic rule.
The support that Obama pledged last month may cut yields on the five-year debt by 200 basis points, or the equivalent of $100 million, according to the median estimate of five fund managers surveyed by Bloomberg. Yields on Egypt’s one-year bills jumped to the highest level since November 2008 following the uprising that ousted President Hosni Mubarak in February. The country last sold international debt in April 2010.
“The American backing is a complete game changer,” Michael Cirami, who helps manage $12 billion in assets for Boston-based Eaton Vance Corp., said in a telephone interview. “There may be a spill-over effect that it’s going to reduce the risk premium of their non-guaranteed debt and help them re-enter the market eventually on their own.”
Obama is offering assistance for the planned Eurobond sale as the International Monetary Fund forecasts Egypt’s economy may grow 1 percent this year, the slowest pace since 1992, and Moody’s Investors Service says the country’s public finances are “significantly” weaker than countries with similar credit ratings. The budget may post its biggest deficit in at least a decade in the fiscal year ending this month, hampering efforts to create jobs and reduce the poverty rate, reasons that sparked the anti-Mubarak revolt, according to the Finance Ministry.
Presidential Vote
Egypt will hold presidential elections this year to elect what could be the first civilian leader since the military took power in a 1952 coup, according to surveys from organizations including Washington-based Pew Research Center.
Obama’s May 19 pledge, part of a package that also includes $1 billion in debt forgiveness, was followed by a $3 billion loan agreement with the IMF, a plan for a $2.2 billion loan from the World Bank and $4 billion in economic and budgetary aid from Saudi Arabia.
The commitments helped bring Egypt’s default risk down to the lowest level since Jan. 14, the day when a popular revolt toppled Tunisian President Zine El Abidine Ben Ali, triggering the protests against Mubarak on Jan. 25.
Default Swaps
Egypt’s credit default swaps, which had peaked at 442 basis points, or 4.42 percentage points, on Jan. 31, plunged to 306 basis points today, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. The yield on Egypt’s 10-year dollar bonds maturing in April 2020 has tumbled 46 basis points since May 19 to 5.73 percent. The rate had peaked at 7.07 percent on Jan. 31, according to data compiled by Bloomberg.
The extra yield investors demand to hold Egypt’s international debt over U.S. Treasuries also fell, declining 37 basis points since May 19 to 313. Middle Eastern debt yields are on average 349 basis points more than Treasuries, according to the JPMorgan EMBIG index.
Egypt needs to sell a five-year Eurobond soon to diversify the way it raises debt because the local market is “squeezed” after the government increased borrowing to plug the deficit, Finance Minister Samir Radwan said by telephone on May 23.
“Egypt’s rising borrowing needs, to finance the widening budget deficit after the revolution, have put a lot of pressure on the local treasury-bill market,” Mohamed Abu Basha, an economist at Cairo-based EFG-Hermes Holding SAE, the biggest publicly-traded Arab investment bank, said by telephone. “Diversifying should lower the overall cost of borrowing.”
Rising Yields
The Ministry of Finance has failed to raise the targeted amount in the last eight sales of one-year bills, according to data compiled by Bloomberg. The yield on the notes surged 230 basis points this year to 12.97 percent, central bank data show.
The country last tapped international markets with the sale of $1.5 billion of bonds in April 2010. Egypt has $1 billion in 8.75 percent Eurobonds maturing in July this year, according to data compiled by Bloomberg. The yield on those bonds declined 70 basis points since May 19 to 3.217 percent.
Egypt is rated Ba3, three levels below investment grade, by Moody’s, which lowered the rating for a second time this year in March. Standard & Poor’s rates Egypt BB, in line with Turkey, Jordan and Guatemala.
Persian Gulf
Yields are falling in oil-rich Persian Gulf nations that have avoided Egypt-style revolts. The average yield on Gulf debt tumbled 38 basis points this year to 4.9 percent on June 13, according to the HSBC/NASDAQ Dubai GCC Conventional US Dollar Bond Index that tracks 85 securities in the region. Credit default swaps for Saudi Arabia, the world’s biggest oil producer, have climbed 19 basis points this year to 94 today, less than one-third of Egypt’s default risk.
The U.S. currently gives Egypt $1.5 billion a year in aid, including $1.3 billion for its military. The U.S. last forgave Egyptian debt -- $6.7 billion worth -- in 1990 following the Arab country’s participation in the coalition that ended the Iraqi occupation of Kuwait.
Credit default swaps for Morocco, which is rated Ba1 at Moody’s, trade at 171 basis points, according to CMA. The North African kingdom’s total debt is below 50 percent of economic output. Egypt has a debt-to-GDP ratio of more than 70 percent.
The cost to protect debt from Bahrain, the island-kingdom where anti-government protests this year prompted other Persian Gulf countries to send a military force to restore order, from default through credit-default swaps is at 233 basis points. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent if a government or company fails to adhere to its debt agreements.
Budget Support
The Egyptian government has sought $9.5 billion in budget support from international sources, according to a document on the Finance Ministry’s website detailing the government’s plan for the fiscal year that starts next month. The government projects the budget shortfall may reach 11 percent of gross domestic product compared with about 10 percent this year.
“Egypt suffers from deep-seated political, socio-economic challenges,” Moody’s said in a statement May 24. “These include chronic high rate of unemployment, elevated inflation and widespread poverty.”
Unemployment rose to 11.9 percent in the first quarter this year, compared with 8.9 percent in the previous three months. Food prices, one of the reasons that sparked the revolt against Mubarak, have risen about 20 percent this year, according to the government’s statistics agency.
Lack of details on the timing of coming aid, as well as concern over the formation of the next government after September’s elections, may make donor nations and international lenders hesitant to fulfill their pledges, said Liz Martins, Dubai-based senior economist at HSBC Holdings Plc.
‘Urgent’ Situation
“Most creditors will be wary of lending to an administration that does not yet exist,” she said in an e- mailed response to questions. “In the meantime, the fiscal situation for Egypt is urgent, and banks are having to step up to finance the growing deficit.”
Local lenders have increased purchases of treasury bills after foreign investors trimmed their holdings of Egyptian securities by $4.9 billion in the first quarter this year, according to central bank data.
The U.S. backing will help reduce the risk and spur demand among investors, said Sergey Dergachev, who helps manage the equivalent of $8.5 billion in emerging-market debt at Union Investment Privatfonds in Frankfurt.
“The U.S. guarantee helps to get more interest from investors and calm investors’ nerves a little bit,” he said in an e-mailed response to questions. “But underlying credit risks for Egypt are nevertheless very high.”
http://www.bloomberg.com/news/2011-06-13/egypt-debt-buoyed-by-obama-guarantee-for-1-billion-eurobonds-arab-credit.html
Muddy
06-14-2011, 09:33 PM
Brought to you straight from the Headlines at Drudge...!!
It's funny that the Dow being up 140 points today was just a tiny little 3 word snippet on his site... :lol:
Brought to you straight from the Headlines at Drudge...!!
It's funny that the Dow being up 140 points today was just a tiny little 3 word snippet on his site... :lol:
Great! Because the DOW had been trending down for months, did the media give you that info too?
Muddy
06-14-2011, 09:39 PM
Actually, I check the market on CNN's site daily... :thumbsup:
Brought to you straight from the Headlines at Drudge...!!
Hey headline boy!
The headline means at the top above the main title, this story was down the page! In a news paper format, it would be called "below the fold"!
Where exactly do you see it?
http://i.imgur.com/cZ5U8.png
Muddy
06-14-2011, 09:46 PM
I looked at Drudge earlier and it was the top one with huge letters across the entire screen..
I looked at Drudge earlier and it was the top one with huge letters across the entire screen..
:hand:
When a story peels off the headline, it goes to the top of the left column! If what you say is true, this story would have plunged faster then Obama's poll numbers!
:facepalm:
Muddy
06-14-2011, 09:54 PM
Yes, I am lying.. :ok:
Yes, I am lying.. :neutral:
I figured! :beatdown:
:coat:
Muddy
06-14-2011, 09:58 PM
Do we have a sarcasm smiley on here? :lol:
Deepsepia
06-14-2011, 10:07 PM
Great! Because the DOW had been trending down for months, did the media give you that info too?
The Dow is, today, about where it was in March.
And that is %60 above where it was when Obama took office, when he took office the S&P 500 stood at about 880, today its 1287. The DJIA (which is less used, but more familiar) has moved almost identically with the SPX)
If your preferred measure of our Presidents is the performance of the stock market during their term, then you can have no complaint with Obama.
http://picload.org/image/lagpad/firefoxscreensna.jpg
Teh One Who Knocks
06-14-2011, 10:11 PM
Do we have a sarcasm smiley on here? :lol:
: + | put together = :neutral:
:|
The Dow is, today, about where it was in March.
And that is %60 above where it was when Obama took office, when he took office the S&P 500 stood at about 880, today its 1287. The DJIA (which is less used, but more familiar) has moved almost identically with the SPX)
If your preferred measure of our Presidents is the performance of the stock market during their term, then you can have no complaint with Obama.
http://picload.org/image/lagpad/firefoxscreensna.jpg
Dow Falls in Longest Slump Since 2004 Amid Concern About Economy
By Inyoung Hwang - Jun 4, 2011
U.S. stocks fell this week, sending the Dow Jones Industrial Average to its longest streak of losses since 2004, after worse-than-estimated reports on jobs and manufacturing fueled concern earnings growth will slow.
All 10 Standard & Poor’s 500 Index groups dropped, with declines exceeding 1.3 percent. Newell Rubbermaid Inc. (NWL) sank 15 percent, leading declines in the Standard & Poor’s 500 Index, after cutting its profit forecast. J.C. Penney Co. and Stanley Black & Decker Inc. (SWK) slumped more than 6 percent as investors sold companies tied to economic growth. General Motors Co. (GM) and Ford Motor Co. (F) decreased at least 4 percent after sales growth missed projections.
The S&P 500 lost 2.3 percent to 1,300.16, the biggest weekly decline since August. Its five-week losing streak is the longest since 2008 and puts the index at its lowest level since March. The Dow fell 290.32 points, or 2.3 percent, to 12,151.26, also posting a fifth-straight weekly slump.
“It was a C-minus week for the economy,” said David Sowerby, a Bloomfield Hills, Michigan-based money manager at Loomis Sayles & Co., which oversees more than $150 billion. “These are the kind of weeks that remind investors stocks don’t just go straight up. There was enough data this week to begin to connect the dots that uncertainty remains.”
The S&P 500 has retreated 4.7 percent since closing at an almost-three-year high of 1,363.61 on April 29. The Citigroup Economic Surprise Index for the U.S. has sunk to minus 117.20, meaning reports are missing projections by the most since January 2009, two months before the S&P 500 tumbled to the lowest level in 12 years.
Payrolls Report
Labor Department figures showed payrolls increased by 54,000 last month, falling short of the median forecast in a Bloomberg News survey that called for a rise of 165,000. The jobless rate climbed to 9.1 percent.
Michael Shaoul, whose Marketfield Fund Ltd. beat 81 percent of competitors last year, said that while the payrolls report was disappointing, it may also be a signal the slowdown in the economic data is near its peak. Private-sector hiring has risen by an average 145,000 a month over the last year, faster than economists had predicted, according to Shaoul. He noted that weaker nonfarm payrolls reports in February and July 2004 failed to derail the last bull market, which peaked in October 2007.
‘Significantly Lower’
“What the data will do, however, is accelerate the process of economic revision, with estimates of U.S. growth being forced significantly lower across the board,” Shaoul wrote in a note to clients. “As damaging as the process may be for asset values, it has surprisingly little to do with the actual ability of corporations to generate revenue.”
The biggest decline in the S&P 500 since August is creating a buying opportunity for investors, according to Blackstone Group LP’s Byron Wien. The price-to-earnings ratio for the S&P 500 has fallen close to its lowest level in 2011, according to Bloomberg data. The index currently trades at 14.8 times earnings, near this year’s low of 14.7 when it fell in March after Japan’s earthquake.
“Investors should be looking for buying opportunities,” said Wien, the vice chairman of Blackstone Advisory Partners, whose parent, New York-based Blackstone Group LP, is the world’s largest private-equity firm. “The economy is not as bad as it looks right now. Corporate profits will be good, very good. People are asking me, ‘Do you still think the market can get to 1,500 by the end of the year?’ I do.”
Jobs Data
The S&P 500 tumbled the most since August on June 1, following an ADP Employer Services’ jobs report that trailed estimates and data from the Institute for Supply Management that showed manufacturing expanding at the lowest pace in more than a year. A separate report this week showed that more Americans than forecast filed applications for unemployment benefits.
Newell Rubbermaid declined 15 percent to $14.97, the biggest retreat in the S&P 500. The maker of Sharpie pens and Rubbermaid containers cut its full-year profit forecast, saying economic woes are hampering consumer spending.
J.C. Penney declined 10 percent to $32.26 and Stanley Black & Decker retreated 6.1 percent to $68.93. The Morgan Stanley Cyclical Index sank 3.9 percent this week, while the S&P 500 Consumer Discretionary and Materials Indexes led losses in the S&P 500, declining 3.2 percent each.
Limited, Gap
Limited Brands Inc. and Gap Inc. (GPS) reported May sales this week that trailed analysts’ projections as increasing prices and surging gasoline costs deterred budget-conscious shoppers. Limited fell 4.9 percent to $37.44. Gap lost 6.7 percent to $17.92.
Auto companies also fell after sales last month missed analysts’ estimates on higher gasoline prices. GM dropped 6.9 percent to $29.12 this week, while Ford slumped 4 percent to $14.01. GM deliveries declined 1.2 percent to 221,192 vehicles, the Detroit-based automaker said on June 1. The average estimate was for a 1.5 percent increase. Ford light-vehicle deliveries decreased 2.6 percent to 191,529, compared with analysts’ average estimate for a 0.5 percent decline.
“This is a confidence issue for the consumer discretionary sector,” said Jeffrey Kleintop, chief market strategist at LPL Financial Corp. in Boston, which manages $300 billion. “We’ve seen retail sales hold up reasonably well and consumers have continued to spend. This jobs report combined with the weakening trend in housing could undermine some of the support for the retailers.”
Sealed Air Falls
Sealed Air Corp. (SEE) sank 14 percent to $21.89. The maker of Cryovac food packaging, Jiffy protective mailers and medical supplies agreed to buy Diversey Holdings Inc. for $2.9 billion to add sales to emerging-market food-processors concerned about product safety. The company is handing Clayton Dubilier & Rice LLC an almost $1 billion windfall at the expense of its own shareholders by paying a 52 percent premium for Diversey, according to data compiled by Bloomberg.
Juniper Networks Inc. slid 13 percent to $32.33. The network equipment maker’s Chief Executive Officer Kevin Johnson indicated at a Bank of America Corp. conference this week that “the quarter is back-end loaded,” fanning concern that results will be worse than investors anticipated.
“We’re about to go into the pre-announcement season which, as we have seen in the economic data, is likely to be somewhat disappointing to investors,” Kleintop said. “We will hear a number of companies taking down guidance and back away from what they’ve issued previously and that could create more down draft in a June swoon for stocks.”
http://www.bloomberg.com/news/2011-06-04/dow-falls-in-longest-slump-since-2004-amid-concern-about-economy.html
Deepsepia
06-14-2011, 10:49 PM
Dow Falls in Longest Slump Since 2004 Amid Concern About Economy
Just look at the numbers. The Dow has had a moderate decline over three months. Its had an exceptional 30 months.
If you bought the S&P (or the Dow) when Obama was inaugurated, you'd be up %60. If you bought on January 1, 2011 you'd be slightly up. If you bought on March 15, you'd be down about %7.
If your belief is that the market should never go down . . . well good luck with that one.
The simple fact of the matter is that in the 30 or so months that Barack Obama has been President, the market is up between %50 and %60 (depends on the index you prefer).
Unless you've decided to pick individual weeks and months and you blame Obama when the market goes down -- and of course, ignore him when it goes up-- then you have to call the performance outstanding.
I personally don't think that Administration policy has much to do with what's been happening recently: its more a combination of the end of QE2, a necessary correction to a frothy market (eg LinkedIn IPO), high commodity prices and in particular the Japanese earthquake. You'll note that the market has been going down consistently since mid-March, you'll also note that the Japanese earthquake was 11 March. The earthquake has had a lot of impacts, so far all bad ones.
1) Japan has gone into recession, with the economy contracting by %3.5 (annualized rate)
2) supply chain is disrupted -- all kinds of necessary parts for auto and other manufactures are back ordered
3) Japanese and other insurers are presumably selling off US stock market assets to pay claims. Estimated costs keep rising-- the most recent number I've heard is $50 billion, no reason to expect that it won't go higher. TEPCO (the Fukushima plant operator, and one of the world's largest private utilities), will most likely go bankrupt or require a bailout -- the Fukushima costs look like they'll continue to be massive for some time)/
Just look at the numbers. The Dow has had a moderate decline over three months. Its had an exceptional 30 months.
If you bought the S&P (or the Dow) when Obama was inaugurated, you'd be up %60. If you bought on January 1, 2011 you'd be slightly up. If you bought on March 15, you'd be down about %7.
If your belief is that the market should never go down . . . well good luck with that one.
The simple fact of the matter is that in the 30 or so months that Barack Obama has been President, the market is up between %50 and %60 (depends on the index you prefer).
Unless you've decided to pick individual weeks and months and you blame Obama when the market goes down -- and of course, ignore him when it goes up-- then you have to call the performance outstanding.
I personally don't think that Administration policy has much to do with what's been happening recently: its more a combination of the end of QE2, a necessary correction to a frothy market (eg LinkedIn IPO), and high commodity prices than anything the Administration's done or not done.
First off, this wasn't a thread about how wonderful Obama is for stocks! :roll: Yeah, we all know how wonderful he is and that you will vote early and often for his second anointing!
Did you give that same high praises to Bush when the DOW rollercoastered between 8,200+ in Sep 2001 to 14'000 on July 19, 2007?
This is getting boring and stupid again. :roll:
Deepsepia
06-14-2011, 11:16 PM
First off, this wasn't a thread about how wonderful Obama is for stocks! :roll: Yeah, we all know how wonderful he is and that you will vote early and often for his second anointing!
Did you give that same high praises to Bush when the DOW rollercoastered between 8,200+ in Sep 2001 to 14'000 on July 19, 2007?
This is getting boring and stupid again. :roll:
Because its your non-stop "let's pick through the news and find a reason to trash the President with bad data" -- basically, you seem to look through the day's headlines, ignore whatever might reflect favorably on the President, and gravitate towards whatever inflammatory buzz is lighting up Drudge.
As to Bush's record, if you leave out the fact that he left the economy in bankruptcy, sure it was all great.
The fact is, he entered office with a budget surplus and he left behind a nation whose financial system was insolvent-- his own Treasury Secretary said so.
That's a disastrous performance.
Disastrous for the nation, disastrous for investors. I don't know of an eight year span that produced returns as poor as those of the Bush Administration.
Without bailouts, every major US bank would have failed, and all three US auto companies would have liquidated. The economic disasters of 2007-2009 were significantly more severe in many ways than those of 1929-1933 -- the US banking industry was actually in much better shape in 1930 than it was in 2008.
Obama's policies actually have been a smaller part of the government response to the financial crisis than most understand-- the restructuring of the auto industry would be the biggest thing they've done. By far, though, the Federal Reserve has been the lead in trying to refloat the economy -- which is probably a bad idea.
Because its your non-stop "let's pick through the news and find a reason to trash the President with bad data" -- basically, you seem to look through the day's headlines, ignore whatever might reflect favorably on the President, and gravitate towards whatever inflammatory buzz is lighting up Drudge.
As to Bush's record, if you leave out the fact that he left the economy in bankruptcy, sure it was all great.
The fact is, he entered office with a budget surplus and he left behind a nation whose financial system was insolvent-- his own Treasury Secretary said so.
That's a disastrous performance.
Disastrous for the nation, disastrous for investors. I don't know of an eight year span that produced returns as poor as those of the Bush Administration.
Typical typical typical!
You try so hard to maintain your HACK status.
I'm posting bad data? Yeah! When Bloomberg agrees with you, it's good data! When Bloomberg disagrees with you, it's bad data. So you're back to using a child's argument. :roll:
I can't post anything that attacks your dear Obama? Did you ever stop posting attacks on Bush? For how many years now?
Just the other day, his administration was trying to blame the bad economy on the tornado's and the earth quake in Japan. Yet, once again, you're bringing up the surpluses and how Bush spent them away. And always failing to include the bubble burst during the election, 911, Katrina, and other disasters as well as two wars. But Obama keeping the interest rates at the SAME level Bush had, means nothing. He spends a trillion dollars on crap "shovel ready" projects, and now jokes about it. :roll:
Everyone here knows that you're not this neutral "only the facts" annalist. We all know your political leaning and constant intellectual dishonesty.
So spare us the bullshit! It's so old!
Muddy
06-15-2011, 12:27 PM
Typical typical typical!
You try so hard to maintain your HACK status.
I dont think he has a hack status... He actually grasped the point of my original post ..
You know I think you are a smart fella and I enjoy the banter and posting with you, but really he nailed it.. :razz:
Because its your non-stop "let's pick through the news and find a reason to trash the President with bad data" -- basically, you seem to look through the day's headlines, ignore whatever might reflect favorably on the President, and gravitate towards whatever inflammatory buzz is lighting up Drudge.
lost in melb.
06-15-2011, 01:24 PM
http://viewthatonline.com/images/smilies/popcorn.gif
You know I think you are a smart fella and I enjoy the banter and posting with you, but really he nailed it.. :razz:
Gas is nearly $5 dollars a gallon and unemployment is over 9%, more then 2 1/2 years of hearing pie in the sky talking points with an additional year of media and pop culture glorification of this unqualified "community organizer" before that, the only positive reports on the economy are from his administration. And those are spun far beyond the way Deep spins them here.
If anyone out there is interested in posting that laughable swill, knock yourself out! I can still never get over the whining, "you only post the bad" who's stopping anyone from posting? Quit your bitching and post what floats your boat!
PorkChopSandwiches
06-15-2011, 03:05 PM
http://www.gifbin.com/bin/388yu349yu.gif
Muddy
06-15-2011, 03:47 PM
Gas is nearly $5 dollars a gallon and unemployment is over 9%, more then 2 1/2 years of hearing pie in the sky talking points with an additional year of media and pop culture glorification of this unqualified "community organizer" before that, the only positive reports on the economy are from his administration. And those are spun far beyond the way Deep spins them here.
If anyone out there is interested in posting that laughable swill, knock yourself out! I can still never get over the whining, "you only post the bad" who's stopping anyone from posting? Quit your bitching and post what floats your boat!
http://images.paraorkut.com/img/pics/images/h/haters_gonna_hate_obama-14261.jpg
Arkady Renko
06-17-2011, 10:33 AM
Gas is nearly $5 dollars a gallon and unemployment is over 9%, more then 2 1/2 years of hearing pie in the sky talking points with an additional year of media and pop culture glorification of this unqualified "community organizer" before that, the only positive reports on the economy are from his administration. And those are spun far beyond the way Deep spins them here.
If anyone out there is interested in posting that laughable swill, knock yourself out! I can still never get over the whining, "you only post the bad" who's stopping anyone from posting? Quit your bitching and post what floats your boat!
how are high gas prces Obama's fault?
KevinD
06-17-2011, 02:37 PM
Moratorium on drilling ring any bells?
Arkady Renko
06-17-2011, 03:11 PM
I can't see that moratorium affecting current gas prices. For one, the potential new ells would have taken quite some time to prepare so we wouldn't see a lot of oil from these hitting the markets just yet. And for another, oil is a globally traded commodity. So if the US production were to rise, say optimistically, 10%, that would mean about a 1 or 2% increase of world production. Effect on prices will be minimal.
I can't see that moratorium affecting current gas prices. For one, the potential new ells would have taken quite some time to prepare so we wouldn't see a lot of oil from these hitting the markets just yet. And for another, oil is a globally traded commodity. So if the US production were to rise, say optimistically, 10%, that would mean about a 1 or 2% increase of world production. Effect on prices will be minimal.
you need to do a little more readin on how things actually work, bro - companies tend to...oh, plan for the future and when all of a sudden the biggest player on the board with some of the biggest reserves in the game announces that their resources will be more available, what do you think that does to the "supply" side of the equation?
or, what happened when bush lifted the offshore drilling moratorium? (if I had the time to dig up that graph...)
and then, what happened when Obama issued his reinstatement of it?
Deep still believes the myth of the "clinton surplus" - so of course that's his baseline by which Bush is judged, and not by who controlled the purse strings...so you can basically COUNT on assessments of those types being fundamentally flawed.
KevinD
06-18-2011, 12:48 PM
I think I've said itbefore, but will do so again for those who missed it: I'm intimately involved in the oil business. First off the so called "price of fuel" is total BS. The companies that refine and sell fuel base thier prices on the perceived future cost of oil...In other words, what you pay at the pump is what is estimated to be the cost in the future, NOT what it cost to produce that particular gallon. So, when something happens to the supply of oil, and overnight, the price at the pump changes, it's just a game.
And if you don't understand how a moratorium on all US companies drilling (but not foriegn companies btw) affects the supply, hence the cost, I don't really know what to say.
Arkady Renko
06-20-2011, 12:48 PM
sure, oil and gas prices are affected by speculative factors a great deal, but the question remains, how much would a tiny increase in world oil production actually affect prices at the end of the day? And if the market is so erratic and irrational, isn't it actually a good thing these reserves will remain untouched for now because they can be tapped with much greater effect at some point in the future when supply is smaller globally and the prices will have risen some more?
Teh One Who Knocks
06-20-2011, 12:55 PM
I can't see that moratorium affecting current gas prices. For one, the potential new wells would have taken quite some time to prepare so we wouldn't see a lot of oil from these hitting the markets just yet. And for another, oil is a globally traded commodity. So if the US production were to rise, say optimistically, 10%, that would mean about a 1 or 2% increase of world production. Effect on prices will be minimal.
And herein lies the problem...all the anti-drilling people keep saying the same thing (they come up with a timeline of approximately 10 years, so let's just use that for the sake of argument). If they would just shut their yaps and the government would get out of the way and get rid of the stupid moratoriums on US off-shore drilling, we would have by now had several well producing crude and getting the product on the market. Instead, they keep blocking the drilling with all kinds of BS and it keeps putting off having wells producing crude. They have been blocking full-scale offshore drilling for far longer than 10 years in this country and if they would have let it happen, we would have oil and it would make the anti-drilling about 'taking too long' to get crude a moot point.
And the biggest kicker in the whole thing? There are already other countries drilling in the Gulf close enough to the US that if they have an accident on par with the BP fiasco, it would still affect the United States, so penalizing US oil companies isn't just stupid, it's bad business on top of it.
sure, oil and gas prices are affected by speculative factors a great deal, but the question remains, how much would a tiny increase in world oil production actually affect prices at the end of the day? And if the market is so erratic and irrational, isn't it actually a good thing these reserves will remain untouched for now because they can be tapped with much greater effect at some point in the future when supply is smaller globally and the prices will have risen some more?
do you know how much it costs to buy oil and store it? because that's basically what speculators do. they make bets. lay out a ton of money. if their bet goes bad, they lose a shitload of money. its price margins, and nobody who's in that business has any real interest in seeing the price shoot up ridiculously, at least not long term (of course if you find out about this or that that's going to affect prices and you just about know the price uppage is coming, it makes sense to take that bet, but if the price shoots up too much....)
here's a good bit on what speculation is and what its effects are:
http://mjperry.blogspot.com/2011/05/what-can-onions-teach-us-about-oil.html
hint: speculation shields the general public from huge price swings and little else.
as to the future, you need to take enough out now to make shit run, otherwise you are handicapping long term growth - which also includes non-oil energy.
bloody pragmatism :razz:
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