Wednesday, September 09, 2009

The Case of The Falling Dollar: China Good OPEC Bad (Update Doug Ross post)

The inspiration for this headline rests with a post Stacy McCain had made on his blog The Other McCain

Monday, September 7, 2009

China ditching the dollar?

I read McCain's comments on how he thought gold may rise in price.

It did.

In his comments section, you can see what I said. It is the first comment where I talk about crude prices rising.

And crude prices have risen since McCain's post.

From the WSJ: OIL FUTURES: Crude Settles Higher On Weak Dollar

When it comes to gold, people don't really sweat it if it climbs. What people do sweat is the price of gas.

And because of this, arguments have taken place where oil companies are evil and they are accused of manipulating the market.

What has transpired over the last few years is; the weak dollar and currency traders have manipulated the crude oil markets. And environmentalist and their supporters have worked in concert with each other on benefiting in the crude oil futures market.

On this blog, I recently pointed to the PetroChina Syndrome where I pointed to a column written by Jon Dougherty for WorldNetDaily in 2000, on eco-friendly heavy oil extraction methods that were developed in the Athabascan fields.

As I stated in that thread, recently, PetroChina has purchased a 60% holding in the company. And most of the oil will go to China.

As to date, I have not been able to find an environmental lawsuit against the Athabascan field. You will however, find numerous lawsuits against other heavy oil fields in Alberta.

These fields supply the U.S. with a sizable amount of oil that is refined in the United States. Future development in the heavy oil fields in Alberta were going to be sent down a new Keystone Pipeline project owned by TransCanada and ConocoPhillips.

That project just came under attack by a lawsuit brought forth by environmental groups.

Now keep in mind the oil being extracted from the Athabascan field could have been sent down the Keystone Pipeline to be refined in the United States.

What is interesting is how the news has handled the rise in the price of oil. And how it was reported when it came to who and why the price of oil had risen.

In a thread titled: The Isms of Politics: Palinism vs Obamaism, I pointed to headlines, quotes and paragraphs:

"…Just one trade from Warren Buffett, the legendary oracle of Omaha; George Soros, the hedge fund speculator; or Prince Alwaleed bin Talal bin Abdul Aziz al Saud, the Saudi prince reckoned to be the richest man outside America, is, in the words of the Old Testament prophets, 'a sign'.

To understand the market is to follow the prophets, but their power is such that many of their movements are shrouded in secrecy. In the United States, share transaction announcements are delayed for up to six months because they spark mania bordering on anarchy.

But with currency speculation, impact is instantaneous. When on 28 June, Soros said the US dollar could fall 30 per cent by the end of the year, the dollar immediately collapsed to near parity with the euro. Soros's spokesman refused to say whether the fund operating in his name, Quantum, bet prior on a downward movement, but it's possible. Mind you, in subsequent weeks the dollar has clawed back losses. For Soros's sake, let's hope he 'covered his shorts'.

Berkshire Profit Climbs on Buffett’s Bet Against Dollar

We made one large sale last year. In 2002 and 2003 Berkshire bought 1.3% of PetroChina for $488 million, a price that valued the entire business at about $37 billion. Charlie and I then felt that the company was worth about $100 billion. By 2007, two factors had materially increased its value; the price of oil had climbed significantly, and PetroChina's management had done a great job in building oil and gas reserves. In the second half of last year, the market value of the company rose to $275 billion, about what we thought it was worth compared to other giant oil companies. So we sold our holdings for $4 billion. A footnote: We paid the IRS tax of $1.2 billion on our PetroChina gain. This sum paid all costs of the U.S. government - defense, social security, you name it - for about four hours.

Followed with headlines:

Weak Dollar Central to Oil Price Boom

The Faultlines in the US The Decline of the Dollar

Now in today's news, you have some news agencies putting out headlines that read:

Oil futures gain on Globex ahead of OPEC summit

The emphasis being on OPEC and production when the real problem is with the crude prices resting on the weak dollar, which was enforced by the news from China, that McCain pointed to.

The focus has quickly changed from the few reports made on China's comments to the numerous comments made by OPEC on no need to change the production amount.

When it comes to demonizing a country in the news media, China will always come up smelling like a rose and OPEC will be second behind the oil companies when it comes to being evil.

Update: Doug Ross has post on currency collapse

Currency Collapse: The Obama Legacy

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