Meltdown

[m_gigena]

It is relative rates of inflation that drive currency prices, so while inflation is low in the US, it is as low or lower around the world. 

We argentinians stay as outliers, as usual.
And the real inflation may double the official figures. The problem is public debt was renegociated to be adjusted to inflation ratios, so if the government shows the real inflation through official institutions each single public budget, at any level, will collapse.

[m_gigena]

We argentinians stay as outliers, as usual.
And the real inflation may double the official figures. The problem is public debt was renegociated to be adjusted to inflation ratios, so if the government shows the real inflation through official institutions each single public budget, at any level, will collapse.

Ours is half Venezuela, though.

But we don't have Dudamel, so I think we are even.

[Lilas Pastia]

Ours is half Venezuela, though.

But we don't have Dudamel, so I think we are even.

Is Venezuela's new currency the Dudamel? How many in a dollar?

[MishaK]

Is Venezuela's new currency the Dudamel? How many in a dollar?

Are the smaller units of Dudamels called Smurfs?

[karlhenning]

It's sort of like the guinea; there's no actual dudamel note, but it's 4 2/3 pesos.

[BachQ]

Should have, but it was not possible . . . .

There was no oil in the world?

[Lilas Pastia]

Are the smaller units of Dudamels called Smurfs?

Ah, lala! the things we hear...

The base unit is the curl. 100 curls = one dudamel.

Ole!

[m_gigena]

Ah, lala! the things we hear... The base unit is the curly. One hundred curlies = one dudamel.

So hair growth is a dudamel appreciation?

[bwv 1080]

Based on Larry's research, we in the US need to step up our competitiveness in pornography production.  A large current porn account surplus would do alot to strenghen the dollar.

[MishaK]

It's sort of like the guinea; there's no actual dudamel note, but it's 4 2/3 pesos.

Wrong coutry, Karl. In Venezuela the currency is the Bolivar.

[BachQ]

Oil hits record $100 a barrel
Wed Jan 2, 2008 6:13pm EST
By Richard Valdmanis

NEW YORK (Reuters) - Oil prices vaulted to a record $100 a barrel on Wednesday as violence in Nigeria, tight energy stockpiles and a weaker dollar triggered a surge of speculative buying, dealers said.

Oil's climb to the psychologically key triple-digit price helped send stocks tumbling on Wall Street and further darkened an already gloomy economic outlook in the United States, which has been battered by a housing crisis and credit crunch.

"Oil hitting $100 a barrel has sparked some concerns about the consumer and inflation," said Todd Salamone, vice president of research at Schaeffer's Investment Research.

U.S. crude traded once at $100 a barrel, up $4.02, before easing back to settle $3.64 higher at $99.62. It remains below the inflation-adjusted high of $101.70 hit in April 1980, a year after the Iranian revolution.

London Brent crude rose $3.99 to $97.84.

"Oil could rise further from here. It's simple supply-and-demand fundamentals," said Kris Voorspools, energy analyst at Fortis in Brussels.

The White House said it would not open up the nation's emergency crude oil reserve to lower prices. Two members of the Organization of Petroleum Exporting Countries said the cartel was powerless to bring the market down from its lofty height.

Crude prices jumped 58 percent in 2007, the biggest annual gain this decade. Oil prices have nearly tripled since 2000 -- driven by rising demand in China and other developing countries, tight stockpiles and geopolitical turmoil.

Weakness in the dollar has added to gains across the commodity sector as investors supported the underlying value of products denominated in the softening currency.

Wednesday's price surge of more than 4 percent came after suspected militant attacks in Nigeria's main oil city, Port Harcourt, heightened concern over the potential for further disruptions in shipments from the world's eighth largest oil exporter.

"With the military and the militant warlords engaged in a violent tit-for-tat, the risk for oil disruptions in Nigeria remains higher than in the past few months," said Olivier Jakob of Petromatrix.

Frequent attacks by militant groups since February 2006 have driven thousands of foreign oil workers from the oil-rich Niger Delta and cut oil exports by about 20 percent.

Investors are also particularly sensitive to signs of further fund investment in commodities at the start of the year. The broad Reuters/Jefferies CRB Index of commodities rose nearly 17 percent in 2007 as the sector rebounded from a loss in 2006.

A further decline in U.S. crude stockpiles -- already running at a three-year low -- was also expected. Weekly government data will be released Thursday, a day later than usual due to the New Year holiday.

Stocks of crude in the United States were expected to have fallen 2.2 million barrels last week, the seventh straight week of decline, as refiners processed more crude, according to a Reuters poll.

Distillate stocks, which include heating oil and diesel, were forecast to have declined by 500,000 barrels.

[BachQ]

From Timesonline

Yesterday's increase recalled the economic crisis after the Iran-Iraq war when oil hit $36.83 per barrel, equivalent to $90.46 today. The all-time inflation- adjusted high of $101.70 was reached after the Iranian revolution in April 1980. Analysts said yesterday that the lack of investment in bringing more production on stream around the world, coupled with political tension in the Africa and the Middle East, meant that oil prices were likely to remain high.

[BachQ]

WALL STREET JOURNAL

Oil Hits $100, Jolting Markets
Boom Cuts U.S. Clout,
Revives Middle East;
Dark Days for Detroit
By NEIL KING JR. , CHIP CUMMINS and RUSSELL GOLD
January 3, 2008; Page A1

The surging price of oil, from just over $10 a barrel a decade ago to $100 yesterday, is altering the wealth and influence of nations and industries around the world.

These power shifts will only widen if prices keep climbing, as many analysts predict. Costly oil already is forcing sweeping changes in the airline and auto sectors. It is intensifying the politics of climate change and adding urgency to the search both for fresh sources of crude and for oil alternatives once deemed fringe.


The long oil-price boom is posing wrenching challenges for the world's poorest nations, while enriching and emboldening producers in the Middle East, Russia and Venezuela. Their increasing muscle has a flip side: a decline of U.S. clout in many parts of the world.

Steep gasoline prices also threaten America's long love affair with the automobile, while putting strains on many lower-income people outside big cities, who must spend an increasing share of their budgets just on fuel to get to work.

No one can say for sure whether sky-high oil -- part of a price boom in a wide range of commodities, from gold to wheat -- is here to stay. But most in the industry agree that a 20-year stretch in which oil was consistently cheap is long gone. The global thirst for oil shows little sign of retreating, and large new discoveries are few. Some in the industry say prices could go far higher; others suspect that speculators -- or an economic slump in the U.S. or China -- could send prices falling in the near term.

Yesterday, with a single trade, crude-oil futures hit an intraday high of $100 a barrel, a record for the U.S. benchmark. For the day, they rose $3.64 to a record close of $99.62 a barrel. Crude is still shy of the inflation-adjusted peak of $102.81 a barrel set in April 1980, amid political turmoil in Iran and unrest elsewhere in the Middle East. The 1980 peak in nominal terms was $39.50 a barrel.

The arrival of $100-a-barrel oil adds to the pressure on the U.S. economy, which has sustained a big blow from a drop in housing prices and a wave of foreclosures. Even at today's prices, though, the oil spike alone isn't enough to push the world into recession, economists say.

When crude oil hit its 1980 high, drivers squealed and the economy slumped. So far there is no comparable pain, and America, which consumes a quarter of the world's crude, retains its taste for big cars and energy-devouring homes. That's largely because the U.S. economy is more efficient and most Americans spend less of their disposable income -- about 4% -- on gasoline than in 1980, when they spent about 6%.

The robust economies of Asia, especially China, have so far swallowed the price surges with relative ease. That's because the price spurt this time is itself largely caused by surging demand within the developing world, not by politically induced supply shocks as in the 1970s and early 1980s.

But there are signs of strain. China, in a bid to limit demand and the huge fuel subsidies it gives consumers, announced in October that it would impose an almost 10% increase in domestic prices for gasoline and diesel fuel. Other countries that heavily subsidize domestic fuel use, which include the oil-rich states Iran and Venezuela, are feeling the pinch as prices climb.

Impact on Middle East

Oil's run-up is bringing the most startling changes of all to the Middle East. Big producers like Saudi Arabia and the United Arab Emirates are using their billions in profits to build their economies with roads, schools, airports and entire new cities. The value of hydrocarbon exports from the Middle East and Central Asia is expected to approach $750 billion this year, almost four times the level in 2001, according to the International Monetary Fund.

The region's new wealth has triggered a bout of deal making that has bankers rushing to the petrostates of the Persian Gulf. McKinsey & Co. estimates that the world's biggest investors of petrodollars -- including state-owned vehicles known as sovereign-wealth funds -- now manage as much as $3.8 trillion in assets. The Abu Dhabi Investment Authority, which McKinsey estimates manages $900 billion in assets, is today among the world's largest financial-market participants -- about the same size as the Bank of Japan.

Underscoring the region's new global financial heft, Abu Dhabi recently swooped to the rescue of Citigroup Inc. with a $7.5 billion cash infusion as it struggled with write-downs from this year's credit crisis.

Even before that deal, Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and the United Arab Emirates, which includes Abu Dhabi, spent about $124.3 billion in the past three years buying up foreign companies, real estate and other assets, according to London-based Dealogic. One transaction underscores the region's financial-markets ambitions. Dubai, also part of the UAE, agreed to a complex deal with Nasdaq Stock Market Inc. that essentially gives Dubai major stakes in Nasdaq, the London Stock Exchange and Nordic exchange OMX AB.

This wave of oil wealth is blunting America's influence. Oil money has galvanized the might of Russia under President Vladimir Putin. He has overseen a dramatic consolidation of power and rollback of democracy in Moscow, while sticking a thumb in the West's eye on issues ranging from independence for Kosovo to the U.S. bid to build an anti-Iran missile-defense system in Europe.

Surging oil prices have also weakened the Bush administration's efforts to use financial pressure to get Iran to back off its nuclear program. China, eager to secure all possible access to energy, increasingly is turning to Iran as a trading partner, with oil going east and Chinese technology heading the other way. High oil revenue, meanwhile, has kept the otherwise rickety Iranian economy humming and Iran's current government firmly in power.

In Khartoum, the once-drowsy capital of Sudan, glimmering skyscrapers are rising along the Nile as oil riches attract investors from Asia and the Persian Gulf. Sudan, accused by Washington of supporting terror groups and killing civilians in Darfur, had been hobbled for years by U.S. economic sanctions. Those restrictions are having less effect now, with the desire for oil resources high and with both know-how and capital pouring in from the Gulf and Asia.

Venezuela will continue to use its oil prod, perhaps more aggressively than any other country. In 2005, in one of a series of jabs at the U.S., Venezuelan President Hugo Chávez began offering cut-rate heating oil to poor neighborhoods of the Northeastern U.S. He also has used favorably priced fuel to prop up Fidel Castro and win friends in South America, while shouldering aside U.S. efforts to champion regional trade deals.

Full-Blown Oil Shock

For poor nations that don't produce oil, the past several years have been a full-blown oil shock. The price rise adds another obstacle to providing modern energy to the estimated 1.6 billion people who have no access to electricity and the 2.4 billion who cook with traditional sources like wood, coal or dung. A recent World Bank study concluded that a sustained $10 increase in the price of a barrel of oil translates roughly into a 1.5% knock to the gross domestic product of the world's poorest countries.

Few places have been harder hit than Malawi, a small southern Africa country with annual per capita gross domestic product of just $179. According to the World Bank report, a $10 oil-price increase is expected to translate into a 2.2% fall in the GDP of Malawi, where tobacco is the dominant cash drop.

Malawi subsidizes the price of gasoline and paraffin, a petroleum-derived fuel its people use for lighting and cooking. But according to an IMF study, the government is now passing along to the population all fresh increases in energy costs, and then some. Pump prices in Lilongwe, the capital, climbed about 19% in October, to the equivalent of $5.16 a gallon.

"When gasoline goes up, everything goes up, so we really have to struggle to earn a living," said James Mdachi, 43 years old, an assistant accountant for the government. He and his wife, a teacher, bring in about $200 a month, to support three children and five other dependents.

A world away, U.S. industry has so far managed to take the oil surge in stride, although economists fret that this may not last long. Auto makers, for instance, may have even more reason to fear high oil prices today than they did in the late 1970s, when price shocks and gas lines tipped Detroit's auto giants into crisis. Then and now, surging petroleum prices caught U.S. auto makers with model lineups full of powerful rear-wheel-drive vehicles designed for an era of cheap gas.

Auto makers have more things to fret about now. Surging oil prices embolden political leaders to call for tougher fuel-efficiency standards and other moves to discourage car use, such as fees that London and some other big cities levy on commuters who drive into congested districts. These ideas are gaining traction because of concern that petroleum-fueled cars and trucks exacerbate climate change. Groups worried about global warming are finding allies in more-conservative circles whose main concern is to enhance security by reducing reliance on oil from unstable nations.

After 20 years of largely leaving fuel-economy standards alone, the U.S. in December enacted an energy bill that requires auto makers to boost the average efficiency of their new-vehicle fleets to 35 miles a gallon from 27.5 by 2020. Auto makers got some important concessions, such as credits for building vehicles designed to burn ethanol and a new classification system that will make it easier for them to continue to sell larger vehicles. But the bill marks the end of an age in which the industry was able to make vehicles heavier and more powerful without making significant gains in fuel efficiency.

Moreover, the 2007 energy bill may not be the last auto makers hear from Washington. As part of her presidential campaign program, Sen. Hillary Clinton has proposed a target of 55 miles per gallon for cars and trucks by 2030.

These proposals threaten a fundamental automotive marketing strategy: Bigger is better. Industry executives, particularly in Detroit, worry that without the freedom to market large, powerful vehicles, their businesses will be decimated.

The fall of the Ford Explorer is emblematic of how $3-a-gallon gasoline has undermined Detroit's profit model. In 1999, Ford sold more than 428,000 of the midsize sport-utility vehicles, at an estimated $4,000 in profit each, and earned record profits of $7.2 billion. In 2007, through November, Ford sold just 126,930 Explorers.

Costly fuel gives a further edge to Japanese makers like Toyota Motor Corp. and Honda Motor Co. because of their expertise in small-vehicle and small-engine design. And if more markets tilt toward small, efficient diesel engines, as Western Europe already has, that's a plus for European companies such as Volkswagen AG or Renault SA.

General Motors Corp., the biggest U.S. car maker, is gambling that it can develop its own technology for plug-in hybrids and fuel-cell vehicles fast enough to stay in the game. GM is heavily promoting its plug-in hybrid Chevrolet Volt model, even though it isn't due to hit the market until 2010.

Raising Air Fares

In the global airline industry, meanwhile, pessimists just a few years ago were predicting that some carriers would fail if crude hit $45. The industry has proved adaptable, with airlines grounding their oldest and thirstiest planes, raising fares and drastically reducing labor and operating expenses.

But if oil's ascent keeps pushing up jet fuel prices, travelers are sure to feel a squeeze. John Heimlich, an economist for the Air Transport Association, predicts that if oil stays where it is or goes higher, airlines will identify their worst-performing routes and then cut the number of flights assigned to them, substitute smaller planes or cancel the routes.

Oil's rising cost is sure to put a sharper focus on calls to promote alternative fuels and curb burning of carbon-based fuels. The record there so far is decidedly mixed.

Pricey oil and a quest for "energy independence" have led to an ethanol boom, but higher corn prices now pinch that industry's profits. Historically, ethanol sold at a premium to gasoline; today there's so much ethanol available that it's selling at a discount.

Even in abundance, ethanol is a tiny factor in the U.S. fuel market, displacing a little more than 200 million barrels of crude oil annually, according to the Renewable Fuels Association. The blend of 85% ethanol and 15% gasoline called E85 is available at only bout 1,400 of the roughly 170,000 U.S. fuel stations. And though ethanol is blended into most U.S. gasoline, at up to 10%, calls to dial up that percentage have sparked controversy because of concern this might increase certain forms of air pollution.

Paradoxically, the high oil price in some ways hinders the quest to curb greenhouse-gas emissions. The oil price makes it economic to develop unconventional deposits such as Canada's oil sands. But the gummy substance is mined, and turning it into usable products takes extensive refining. Gallon for gallon, producing gasoline from oil sands emits far more carbon dioxide than making it from conventional crude.

The price rise has a similarly dirty impact at power plants. In the 1990s, when natural gas was cheap, many countries pushed to use more of that, in place of coal, to make electricity. This was good for the environment, because per unit of energy generated, natural gas emits about half as much CO2. But natural-gas prices roughly track oil prices, and they've been rising too. Their rise has prompted a resurgence in coal use, one reason greenhouse-gas emissions are going up faster than many expected. China, the second-largest oil user after the U.S., still meets the bulk of its energy needs with coal.

Oil's price run-up is fanning support for a revival of clean but controversial nuclear energy. The International Energy Agency, an energy watchdog for the U.S. and 25 other wealthy nations, has become a big promoter of nuclear power. Still, its latest annual outlook predicted the use of nuclear energy would grow by less than 1% annually world-wide between now and 2030, while coal usage would rise three times as fast.

The great oil boom of the 2000s has also wrought dramatic changes within the oil industry itself, which high prices will only intensify.

Oil-rich nations, seeking to take greater command of their resources, are marginalizing the once-mighty Western oil companies. For the first time since World War II, the future of oil and gas production isn't in the hands of Texas-educated engineers working for U.S. companies but of executives at companies like Qatar Petroleum and Russian behemoth OAO Gazprom.

Gone are the days when companies such as Exxon Mobil Corp. and Royal Dutch Shell PLC had an unmatchable combination of financial clout and technological know-how. Thanks to several years of high prices, government-controlled oil companies have the financial muscle to bankroll their own projects.

And they have access to the latest tools for finding oil and drilling holes. During the last downturn, in the 1990s, big oil companies outsourced many of these tasks to oil-field-service companies. Now the national oil companies can hire these service companies directly, bypassing integrated Western oil giants.

Schlumberger Ltd., the largest oilfield-service company by market value, has said its revenue from national oil companies tripled from 2002 through 2006, while its work for Western oil companies rose just 60%. "The growing influence of national oil and gas companies on the world energy market is abundantly evident even to the casual observer," ConocoPhillips Chief Executive James Mulva said in March.

Competing for Resources

As the state-owned giants grow more confident and self-sufficient, they have begun to compete aggressively for resources beyond their borders. Last year, Libya put some potentially oil-rich acreage out for bids. While Exxon Mobil won some of it, so too did state-controlled oil companies from Russia, India and China.

More than from their bank accounts, national oil companies' strength stems from their control of resources. Exxon Mobil, with a market capitalization of around $500 billion, is one of the largest and most successful publicly traded companies ever. But there are 12 state-controlled oil companies, such as Saudi Aramco and PetroChina Co., that control more oil reserves.

Driving this power shift is geology. Major new finds in North America and Europe have been rare for two decades. Western oil companies now control only about one in 10 barrels of the world's proven reserves. As the Western giants struggle to find fresh oil, the Aramcos of the world are only likely to rise in importance in the years ahead.

[Mozart]

Let me ask a dumb question-- why has the dollar became so weak in the past few years?

Because it's worthless paper and they just keep printing more...

[Mozart]

I hope that MozartMobster is still into gold..


Q

If I was a rich man a few months ago Q, I would now be an even richer one 

[m_gigena]

Unusual 11 Mid-Day Movers 1/03: AKNS, SPN, BCON, NG Higher; JTX, RAD Lower

January 3, 2008 2:10 PM EST

Akeena Solar, Inc. (NASDAQ: AKNS) 29% HIGHER; continues to see upside after the Company announced that its state-of-the-art solar panel technology, Andalay, will be distributed in Europe, Japan and Australia under a license agreement with Suntech Power Holdings Co., Ltd. (NYSE: STP). Earlier this week, on Monday, Akeena's market cap was about $227 million. Today, the Company has moved past the $400 million market cap level.

[BachQ]

Unfortunately, solar panel technology is not necessarily a sure bet ........

Unusual 11 Mid-Day Movers 1/03: AKNS, SPN, BCON, NG Higher; JTX, RAD Lower

January 3, 2008 2:10 PM EST

Akeena Solar, Inc. (NASDAQ: AKNS) 29% HIGHER; continues to see upside after the Company announced that its state-of-the-art solar panel technology, Andalay, will be distributed in Europe, Japan and Australia under a license agreement with Suntech Power Holdings Co., Ltd. (NYSE: STP). Earlier this week, on Monday, Akeena's market cap was about $227 million. Today, the Company has moved past the $400 million market cap level.

Published on Cleantech.com (http://media.cleantech.com)
A good year for renewable energy?
By David Ehrlich
Published January 2, 2008 - 9:54am
It could be a strong year for alternative energy as a whole, according to a new report, but the second half of 2008 could pose a problem for solar stocks.

The report from Thomas Weisel Partners, Alternative Energy: 2008 Outlook, said investor interest in the sector remains extremely high, with solar and demand response likely to get the biggest boosts in the new year.

"Public and government opinion is rapidly shifting toward increased action on global warming, carbon emissions, renewable energy generation and new energy-efficiency technologies," said Jeff Osborne, an analyst at Thomas Weisel, in the report.

Over the past six months there's been a pronounced shift in the types of investors inquiring about stocks that Thomas Weisel covers, according to Osborne, with portfolio managers appearing to be building a cleantech theme for part of their portfolios.

St. Peters, Mo.-based MEMC Electronic Materials (NYSE: WFR) gets top marks in the cleantech sector for 2008 in the report, with Osborne raising Thomas Weisel's year-end price target on MEMC to $105 from $81.

In October, MEMC amended its long term agreement to supply solar wafers to Taiwan's Gintech Energy, increasing the value of the contract to between $3 billion and $4 billion (see MEMC, Gintech amend solar supply deal).

But all will not necessarily be well for solar.

The report sees a solid start to the year for solar on growth in the Mediterranean, but sees the second half of 2008 as a "black hole," citing subsidy changes in Spain, Germany and the U.S. and uncertainty around new polysilicon entrants in China and elsewhere.

In the U.S., new energy legislation failed to include an extension of tax credits for the solar industry.

The report sees heavy lobbying in early 2008 by the wind and solar industries to seek a separate bill, but the timing and specifics of any new legislation remains unclear (see U.S. solar & wind incentives on the way?).

Although the growth of solar is often tied to government incentives, the Thomas Weisel report highlights that demand response does not need government help to be economically viable.

"We continue to be bullish about the demand response industry as we enter 2008, particularly in the Commercial and Industrial (C&I) segment of the marketplace, which we favor over residential," said Osborne.

Utilities and grid operators are increasingly adopting demand response in their open market programs as well as forward planning, according to the report.

It notes that demand response capacity bid into the open market does not require separate state Public Utility Commission approval for pricing unlike demand response capacity committed to individual utilities under long-term contracts.

"We expect that C&I demand response aggregators like EnerNOC and Comverge's Enerwise will be active participants in these markets," said Osborne.

And unlike solar, demand response received a big incentive from the recently passed energy legislation in the U.S., with the new energy act creating a smart grid regional demonstration initiative.

The initiative allocates $100 million to support research and development in the industry.

As for fuel cells and biofuels, the other two alternative energy industries covered in the report, at least biofuels is likely to do well.

The report said the hydrogen and fuel cell industry is still in the very early stages and remains too fragmented.

"We do not see sustainable profits for many of the participants over the next three to five years," said Osborne in the report.

In November, Vancouver, British Columbia's Ballard Power Systems (Nasdaq: BLDP) agreed to sell its struggling automotive fuel cell business to Daimler (NYSE: DAI) and Ford Motor (NYSE: F) (see Ballard selling auto fuel cell business to Daimler, Ford).

On the other hand, biofuels, which received a big push from the energy act in the U.S., are likely to do well.

The new law sets a Renewable Fuels Standard for annual production of 36 billion gallons of biofuels by 2022, a fivefold increase from current production levels.

The new standard includes a 9 billion gallon biofuel mandate for 2008, but the report cautions that high corn prices and infrastructure issues are likely to weigh on the stocks for at least the next two quarters.

And it won't just be transportation fuels getting all the attention. The report said diversification away from petroleum-based products will be a key theme in 2008.

"Products such as bio-plastics are likely to receive further attention as producers look to diversify their feedstocks out of the volatile gasoline markets," said Osborne.

[bwv 1080]

Because it's worthless paper and they just keep printing more...

I will take any worthless dollars anyone wants to unload

I will even offer quarters in return

[BachQ]

Oil $200 Options Rise 10-Fold in Bet on Higher Crude (Update2)

By Grant Smith


Jan. 7 (Bloomberg) -- The fastest-growing bet in the oil market these days is that the price of crude will double to $200 a barrel by the end of the year.

Options to buy oil for $200 on the New York Mercantile Exchange rose 10-fold in the past two months to 5,533 contracts, a record increase for any similar period. The contracts, the cheapest way to speculate in energy markets, appreciated 36 percent since early December as crude futures reached a record $100.09 on Jan. 3.

While analysts at Merrill Lynch & Co. and UBS AG say the slowing U.S. economy will lead to the biggest drop in prices since 2001, the options show some traders expect oil to rise for a seventh straight year. Demand will increase 2.5 percent in 2008, according to the International Energy Agency. U.S. inventories fell to a three-year low on Dec. 28. Production from Mexico is declining and Saudi Arabia is behind schedule in opening its newest field.

``One hundred dollars a barrel is actually 14.9 cents a cup, so we're still talking about oil being remarkably cheap,'' said Matthew R. Simmons, chairman of Simmons & Co. International, a Houston-based investment bank that focuses on energy. Inventories ``are tight as a drum and I don't see how we get out of this box,'' he said in a Bloomberg television interview last week. ``Demand clearly isn't starting to slow down.''

Global Consumption

World consumption will rise to 87.8 million barrels a day this year, 2.1 million more than in 2007, or about the same amount that Nigeria supplies, according to the Paris-based IEA, an adviser to oil-consuming nations. Demand from China alone will increase 5.7 percent to 8 million barrels a day as imports expand to support an economy that's likely to grow 11 percent, the IEA said.

Oil suppliers are straining to increase production. Saudi Arabia, the world's largest exporter, said last week that the 500,000 barrel-a-day Khursaniyah oilfield missed a December start date. Brazil's Tupi field, the second-largest find of the past two decades, lies more than eight kilometers (five miles) below the ocean surface and will take at least five years to develop.

Petroleos Mexicanos, Mexico's state oil monopoly, suffered a three-year, 40 percent decline at its Cantarell field, the world's third-largest. Fighting in Nigeria reduced production 11 percent since December 2005 to 2.18 million barrels a day, according to data compiled by Bloomberg.

U.S. Inventories

Speculators don't require prices to rise all the way to $200 to make money from options since they can sell the contracts on to others as their value rises. Nymex oil futures for February delivery were worth $97.41 a barrel in electronic trading at 11:11 a.m. London time, down 50 cents. December futures were at $93.59.

Crude futures rose 2 percent in the first three trading days of the new year. U.S. crude inventories fell to a three-year low of 289.6 million barrels on Dec. 28, according to a Jan. 3 Energy Department report.

``We haven't got to $100 on just a whim,'' said Paul Horsnell, head of commodities research at Barclays Capital in London. ``This is at heart also about longer-term concerns that supply capacity investment needs higher prices to keep up with demand growth.''

Barclays forecasts oil will average $87.40 a barrel this year, a 21 percent increase from the 2007 average.

The Nymex options, which give speculators the right to buy 1,000 barrels of oil in December, are becoming a favorite for traders even if they don't expect crude to reach $200 because they are a cheaper way to speculate than using futures contracts. Options expire worthless if crude fails to reach the ``strike'' price. There were 500 of the options on Nov. 7.

The price of the options rose as high as $550 last week before closing at $300 on Jan. 4. That amounts to 30 cents a barrel. The December futures to purchase 1,000 barrels in December rose 3.5 percent to $94,010, or $94 a barrel.

`Insurance' Bet

``The most common analogy used to describe options is that it represents insurance'' against ``low probability'' events, said Tim Evans, a Citigroup Global Markets Inc. energy analyst in New York.

Oil forecasters say there's no chance of $200 crude, as the U.S., which consumes a quarter of the world's oil, slows. Prices will average $78 a barrel this year, 20 percent below the current level, and $75 in the fourth quarter, according to the median forecast of 27 analysts surveyed by Bloomberg. The last time prices fell that much was in 2001, when they dropped 26 percent.

Jobless Rate

Merrill Lynch and Morgan Stanley in New York expect the U.S. economy, the world's largest, will slip into recession this year. The jobless rate rose to 5 percent in December, the highest in two years. The Institute for Supply Management's factory index fell to the lowest level in almost five years in December.

The U.S. probably expanded 1 percent last quarter, and gross domestic product will grow 2.3 percent in 2008, according to the median estimate of 63 economists surveyed by Bloomberg.

Oil is overpriced, given the outlook for the economy, said Jan Stuart, an analyst at UBS AG in New York. He forecasts an average price of $74 a barrel this year, little changed from 2007. Merrill Lynch's Francisco Blanch predicts $78 in the fourth quarter.

``I am afraid that we are going to see an economic slowdown that we have not seen the beginning of yet that will take some significant amount of oil demand off the table,'' Stuart said in a Bloomberg television interview Jan. 2.

Most strategists didn't foresee last year's 57 percent gain. Crude traded at an average of $72.36 in 2007. A Bloomberg survey of 29 analysts in September 2006 forecast a median price of $64.

Higher Numbers

``Going through $100 means that people are seeking more protection against a higher number,'' said Michael Lewis, a strategist at Deutsche Bank AG in London. Deutsche Bank expects oil to fall to about $80 a barrel.

Options trading indicates that the likelihood of crude reaching $125 a barrel in December has almost doubled since Dec. 25, to 18 percent, Lewis said.

While $200 may remain an outside chance, Simmons at Simmons & Co. showed he's willing to make that bet. He wagered $5,000 with New York Times columnist John Tierney in August 2005 that oil would average at least $200 a barrel in 2010.

The latest assessment from OPEC, which produces 40 percent of the world's oil, suggests prices will rise.

``There is enough oil in the market,'' Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, told reporters in Algiers two days ago. Khelil, who is also Algeria's energy minister, said rising prices aren't OPEC's fault. The group is scheduled to meets on Feb. 1 in Vienna.

``You will see even $200 oil in the next five years,'' said Jean-Francois Tardif, senior portfolio manager at Sprott Asset Management Inc. in Toronto.

The following table shows the median, mean, high and low estimates for the average price of Nymex crude oil futures during the four quarters of this year and the yearly averages for 2008 and 2009. The estimates from 27 analysts were compiled by Bloomberg.

[The new erato]

My wife works for a Norwegian oil company: Holy shit - this translates into a LOT!!! of CD's!