Canada's 'housing bubble' deemed close to bursting

[tkip]

tkip instead of saying BS take a look at this link...you think oil has peaked?...oil has not peaked its just harder to get government to approve oil permits to start drilling...so many huge pockets of oil is located its the environmental impact it will have.

http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=6824

even the Saudis are saying price is going up because of speculators and banks....

Pure nonsense. You clearly have no idea what you're talking about.

The Saudis are saying this to calm markets and distract from the fact that behind the scenes, there is a huge problem with producing more oil. They have promised on many occasions to meet demand issues with their "space capacity" but always fail to do so. They don't have any spare capacity. That's why they and others lie.

It's that simple. It's not rocket science. But you can't tell people the hard, cold truth because they don't want to hear this.

Oil producing countries have been producing flat out since the peak in 05' and certainly since the price first made it's stellar climb then collapse along with the global recession with prices now hovering around $100/barrel and all the while the dominos are lining up and beginning to collapse.

Why do you think there's been food riots in parts of the world and ever increasing food prices globally? What's driving up the costs? Energy.... Again, the recent proposal by the IEA into tap in oil reserves like the SPR is a huge inidcator that something is wrong. If there were plenty of oil and spare capacity, then why raid reserves?

Scapegoating the speculators is a distraction. Too many insiders from the oil industry and some having worked in Saudi Arabia, have come forward with warnings. The recently deceased Matt Simmons was a big voice on this topic and he worked in the industry for decades including Saudi Arabia. Did you know that Saudi Arabia keeps it's reserves top secret?

No one knows how much they have but more and more, former insiders are coming forward and saying that reserves have been hugely exaggerated.

It's the same argument regarding drilling in the states. Deniers claim that the US could be off foreign oil if only the companies were allowed to drill in those unknown fields that contain tens of billions of hidden oil. Pure delusion. If there were really this abundance of oil just waiting to be drilled then why does the US spend nearly a trillion dollars a year importing the stuff?

They would just go and get the oil in their own backyard instead of other countries including those they invade to get the stuff. Think about it....

 

[gristle]

Again. Bullshit. Sorry to burst your bubble but this is fantasy.

Anyone that pays attention knows that large oil/hybercarbons discoveries peaked many years ago. If you're thinking shale then this too won't save us. It takes a lot of energy to get the stuff out of the ground and shale isn't anywhere as energy dense as oil. Think oil sands.

I'll call you on the bullshit claim. You cite the oil sands, and I'll point out that in my lifetime there were people arguing strenuously that these deposits would never be economically viable. That has turned out to be very wrong.

Shale oil is an enormous reserve that has not been exploited simply because there is no need to. There are over 600 known shale and oil sands deposits around the world. Together they are estimated to hold between 2.8 and 3.3 trillion barrels of oil. The Green River, which covers parts of Colorado, Utah and Wyoming, is estimated to contain some 1.2 to 1.8 trillion barrels of oil - over half the entire know shale oil reserves. Existing accessible reserves are sufficient to cover contemporary demand, hence the absence in aggressively accessing known shale oil reserves.

All that being said, your error is in failing to understand that it is not hydrocarbon reserves, but production capacity (including refining) that is producing any apparent bottleneck in meeting contemporary demand. A clear case in point is Venezuela where the Chavez government has mismanaged a stagnating oil industry. In 2010, that country produced less oil than it produced in any year during the 1970's - not because they are running out of oil, but because there has been a failure to reinvest in production capacity.

In 2009, a peak year for peak oil alarmists, there were 225 new oil discoveries adding up to over 10 billion barrels of new oil reserves. In 2009, the U.S. Geological Survey and the US Interior Department indicated that as much as 115 billion barrels of technically recoverable oil lie offshore in US federal waters, and that as much as 565 trillion cubic feet of natural gas may also be contained in the outer continental shelf of the United States. The USGS also estimated that the Arctic region may contain up to 412 billion barrels of oil and that the Arctic Circle alone may have additional reserves of 1.7 trillion cubic feet of natural gas - over an above what is presently known to exist. There are now some 2 trillion barrels of known recoverable conventional oil reserves not yet classified as "proven" that will eventually become accessible with new technology and investment (this is in addition to the "proven" reserves).

In all, contemporary estimates indicate some 12 to 16 trillion barrels of recoverable oil. The capacity to recover that oil improves each year with innovation and technological advances. The lifetime of this reserve will be further improved through technological efficiency with respect to consumption - which is virtually all for transportation.

 

[fiendishlibrarian]

http://www.youtube.com/watch?v=7sySuIXG_IM

 

[tkip]

I'll call you on the bullshit claim. You cite the oil sands, and I'll point out that in my lifetime there were people arguing strenuously that these deposits would never be economically viable. That has turned out to be very wrong.

Shale oil is an enormous reserve that has not been exploited simply because there is no need to. There are over 600 known shale and oil sands deposits around the world. Together they are estimated to hold between 2.8 and 3.3 trillion barrels of oil. The Green River, which covers parts of Colorado, Utah and Wyoming, is estimated to contain some 1.2 to 1.8 trillion barrels of oil - over half the entire know shale oil reserves. Existing accessible reserves are sufficient to cover contemporary demand, hence the absence in aggressively accessing known shale oil reserves.

All that being said, your error is in failing to understand that it is not hydrocarbon reserves, but production capacity (including refining) that is producing any apparent bottleneck in meeting contemporary demand. A clear case in point is Venezuela where the Chavez government has mismanaged a stagnating oil industry. In 2010, that country produced less oil than it produced in any year during the 1970's - not because they are running out of oil, but because there has been a failure to reinvest in production capacity.

In 2009, a peak year for peak oil alarmists, there were 225 new oil discoveries adding up to over 10 billion barrels of new oil reserves. In 2009, the U.S. Geological Survey and the US Interior Department indicated that as much as 115 billion barrels of technically recoverable oil lie offshore in US federal waters, and that as much as 565 trillion cubic feet of natural gas may also be contained in the outer continental shelf of the United States. The USGS also estimated that the Arctic region may contain up to 412 billion barrels of oil and that the Arctic Circle alone may have additional reserves of 1.7 trillion cubic feet of natural gas - over an above what is presently known to exist. There are now some 2 trillion barrels of known recoverable conventional oil reserves not yet classified as "proven" that will eventually become accessible with new technology and investment (this is in addition to the "proven" reserves).

In all, contemporary estimates indicate some 12 to 16 trillion barrels of recoverable oil. The capacity to recover that oil improves each year with innovation and technological advances. The lifetime of this reserve will be further improved through technological efficiency with respect to consumption - which is virtually all for transportation.

The fantasies people will cling to, to justify that we can continue BAU in the face of reality is just incredible.

The only reason why these areas have become viable to tap into is that the ever rising oil price due to oil production peaking globally makes it easier to develop these areas. This in of itself is a sign that the days of cheap, plentiful oil are over. Why is this so difficult to understand?

And since you clearly don't understand the stats. The world consumes 30 billion barrels per year. And there is no hard evidence that hundreds of billions of barrels of oil wait for us in the artic. The government agencies are lying to the public. This is the reality. So all this talk of deep sea drilling in the artic and offshore drilling should tell you something.

People are being told everything is fine and nothing to worry about because trillions of barrels of recoverable oil are just lying there so you can go and have a nice day now. It's the same lie that's told to us that we can keep sustaining a population in the billions and growing in the face of declining resources. Somehow, people don't understand the term finite.

And another big flaw in your argument is the assumption that we can afford to drill and get all this trillions you refer to. If oil prices plummet again, then this goes out the window. It won't happen.

You only go to the hard, more expensive stuff when you've used up most of the cheap, plentiful stuff. This delusion that trillions of easy oil just lying around waiting to be discovered is a lie. Again if there were so much oil and deposits just lying around in the ground, then oil companies and oil producing countries would just drill and the world would be awash in oil and prices would plummet.

This isn't happening. To insist that speculators and environmentalists are responsible for high prices is just laughable.

 

[cdr108]

Scapegoating the speculators is a distraction. Too many insiders from the oil industry and some having worked in Saudi Arabia, have come forward with warnings. The recently deceased Matt Simmons was a big voice on this topic and he worked in the industry for decades including Saudi Arabia. Did you know that Saudi Arabia keeps it's reserves top secret?

....

in response to your bullshit ...

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/marketreportenergyfutures.pdf

Futures and options open interest quintupled between 2000 and 2008. We show that this growth involved a considerable lengthening in the maturity structure, and a sea change in the trader composition, of market activity. More explicitly, we identify three trends in futures trading-related data that speak to the development of co-integration of prices across the futures term structure. One, open interest at maturities greater than one year grew nearly twice as fast as open interest at shorter maturities. Several categories of traders now carry much larger long-dated positions (one year or more) than they held in near-dated contracts (three months or less) in 2000. Two, swap dealers’ market share grew markedly during the key years of 2002 and 2003 amid the start of a commodity index investment boom. Three, “traditional commercial” aggregate market share has halved since 2000 as financial traders greatly expanded calendar-spread trading. Indeed, the market share of financial traders has more than doubled, from less than 20 percent of all open futures and futures equivalent
option positions in 2000 to more than 40 percent in 2008.


http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/hearing072809_stupak.pdf

According to CFTC data, from January 2008 through the end of June 2008, index investors poured $55 billion into major commodity indexes, pushing the price of crude oil from $99 per barrel to $140 per barrel. Gasoline prices spiked to a national average of more than $4 a gallon, with prices reaching more than $5 a gallon in some regions of the country.

That same market collapsed over the course of the next six months, with prices plummeting to $30 per barrel by December 2008 as investors withdrew $73 billion from the market. This was not a coincidence. The dramatic drop in oil prices was occurring at the same time index investors fled the market. From January 2009 through May 2009, you can see the price rise from $35 per barrel to $70 per barrel as index investors come back into the market and pour in $35 billion into major commodity indexes.

I have three charts here illustrating the fact that supply and demand fundamentals are still not driving the oil market. This year, domestic oil supplies are at a 20-year high, oil demand is at a 10-year low, yet in June, oil was trading at more than $70 a barrel, up from $35 a barrel in January, representing a price increase of more than 100 percent in the first six months of the year. This comes in the midst of the worst global economic decline since the Great Depression, but oil prices keep going up!

The driving factor contributing to an increase in the price of oil this year was the surge of funding from index investors back into the oil markets. According to an independent analysis of CFTC data on oil futures positions, index investors increased their crude-oil holdings to the equivalent of more than 600 million barrels in June, up more than 30 percent from the end of 2008.

There have been a number of reports and studies over the past few years implicating excessive speculation as the cause for volatility and price increases in the commodity futures markets. In October 2007, the Government Accountability Office (GAO) released its report on the ability of the CFTC to properly monitor energy markets to prevent manipulation. The GAO found that the volume of trading in energy commodities had skyrocketed, specifically after the Enron Loophole was enacted in 2000. The GAO also found that while trading has doubled since 2002, the number of CFTC staff monitoring these markets has declined.

On June 23, 2008, the Oversight and Investigations Subcommittee held its second of two hearings on the effect speculators have on energy prices. [Fadel Gheit, Managing Director and Senior Oil Analyst at Oppenheimer & Co. Inc., said in his testimony:
“I firmly believe that the record oil price in excess of $135 per barrel is inflated. I believe, based on supply and demand fundamentals, crude oil prices should not be above $60 per barrel.”3

In 2000, physical hedgers – businesses such as airlines and trucking companies that need to hedge to ensure a stable price for fuel in future months – accounted for 63 percent of the oil futures market. Speculators accounted for 37 percent. By April 2008, physical hedgers’ share of the same market had dropped to 29 percent, with speculators now controlling an astonishing 71 percent of the oil market. The market was taken over by swap dealers and speculators, a considerable majority of whom have no physical stake in the market.

This excessive speculation is a significant factor in the price Americans are paying for gasoline, diesel and home heating oil. Even the executives of the major U.S. oil companies recognize this. On April 1, 2008, in testimony before the House Select Committee on Global Warming, Mr. John Lowe, Executive Vice President of ConocoPhillips said:
“It is likely that the large inflow of capital into the commodity funds is temporarily exaggerating upward oil price movements.”


3 companies & 2 men are sued over oil-pricing scheme in 2008; Now they are at it again

URL: http://able2know.org/topic/172572-1

WikiLeaks: Saudis often warned U.S. about oil speculators
By Kevin G. Hall | McClatchy Newspapers

WASHINGTON — When oil prices hit a record $147 a barrel in July 2008, the Bush administration leaned on Saudi Arabia to pump more crude in hopes that a flood of new crude would drive the price down. The Saudis complied, but not before warning that oil already was plentiful and that Wall Street speculation, not a shortage of oil, was driving up prices.

Saudi Oil Minister Ali al Naimi even told U.S. Ambassador Ford Fraker that the kingdom would have difficulty finding customers for the additional crude, according to an account laid out in a confidential State Department cable dated Sept. 28, 2008,

"Saudi Arabia can't just put crude out on the market," the cable quotes Naimi as saying. Instead, Naimi suggested, "speculators bore significant responsibility for the sharp increase in oil prices in the last few years," according to the cable.

What role Wall Street investors play in the high cost of oil is a hotly debated topic in Washington. Despite weak demand, the price of a barrel of crude oil surged more than 25 percent in the past year, reaching a peak of $113 May 2 before falling back to a range of $95 to $100 a barrel.

One cable recounts how Dr. Majid al Moneef, Saudi Arabia's OPEC governor, explained what he thought was the full impact of speculation to U.S. Rep. Alan Grayson, D-Fla., who in July 2009 was in Saudi Arabia for the first time.

According to the cable, Moneef said Saudi Arabia suspected that "speculation represented approximately $40 of the overall oil price when it was at its height."

Asked how to curb such speculation, Moneef suggested "improving transparency" — a reference to the fact that most oil trading is conducted outside regulated markets — and better communication among the world's commodity markets so that oil speculators can't hide the full extent of their trading positions.

Moneef also suggested that the U.S. consider "position limits" — restrictions on how much of the oil market a company can control — something the CFTC is considering. But the proposal to prevent any single trader from accumulating more than 10 percent of the oil contracts being traded hasn't received final approval, and the CFTC also has yet to define what it considers excessive speculation.

Saudi concerns also came up during a May 2008 meeting in Riyadh, the Saudi capital, between U.S. officials and Prince Abdulazziz bin Salman bin Abdulaziz al Saud, the assistant petroleum minister.

Prince Abdulazziz was "extremely worried" that high prices would destroy the demand for oil, according to the May 7, 2008, account of his meeting with embassy officials.

"Aramco is trying to sell more, but frankly there are no buyers," the cable quoted him as saying, referring to the Saudi state oil company. "We are discounting crudes."


URL: http://able2know.org/topic/172572-1


URL: http://able2know.org/topic/172572-1

 

[tkip]

You guys can believe that speculators and environmentalists are causing high oil prices if you like. Or that trillions of oil is just waiting to drilled, flooding the markets and thus saving the day. I believe that peak oil is the underlying cause, that it's unfolding now and starting to wreck havoc with our economies. Like I said earlier, the IEA's proposal to raid reserves to sell to the market is,,,, telling.

 

[CN Tower]

http://www.theglobeandmail.com/repo...el-gets-a-shield-from-tyranny/article2078985/

250 billion barrels recoverable here.

Tkip, your thoughts svp.

 

[Jonny5]

http://www.theglobeandmail.com/repo...el-gets-a-shield-from-tyranny/article2078985/

250 billion barrels recoverable here.

Tkip, your thoughts svp.

I know very little about the oil production process and that article sounded great until I read this comment:

I appreciate the article, but you have mistaken oil shale with shale oil. The two are very different.

Shale oil (as exampled by the Eagle Ford play) is a hydraulic fracturing extraction process for what is ultimately conventional petroleum. The situation in Israel and within the Shfela Basin is not the same.

The Shfela Basin contains oil shale (also found in the Green River Formation in the western United States). There is no oil in oil shale, rather, it is Kerogen. The Oil Shale has to either be physically mined (like near surface oil sands) and then retorted via a heating process that 'cooks' the kerogen into a synthetic crude...or, if the oil shale is deep, an in-situ process of heating the shale and then extracting the 'cooked' kerogen (now petroleum) takes place.

So, to reiterate.

Shale Oil = horizontal drilling/hydraulic fracturing
Oil Shale = kerogen rich rock - mined first and 'cooked' into oil

Similar sounding, but completely different

That sounds like it fits perfectly into tkips thesis. The oil we are finding is becoming much more difficult and expensive to extract. From another comment on the article:

Near Collingwood Ontario (Craigleith) Canadians were the leaders in 'shale oil' (kerogen) production over 150yrs ago. They extracted the oil by burning up the plentiful local trees to heat the shale.

What killed the operation? An energy resource with higher EROEI came along in places like Oil Springs and Petrolia, ON.

You could call what is going on right now 'peak oil'...but more correctly what we have is declining EROEI's for all available energy sources. The party's over.

 

[tkip]

That sounds like it fits perfectly into tkips thesis. The oil we are finding is becoming much more difficult and expensive to extract. From another comment on the article:

Thank you very much for pointing this out. This is what I've been trying to say.

We're running out of the easy, cheap and conventional oil. What we find instead are these unconventional fields where we have to mine and then refine this stuff into something that can be used. Like the tar sands. This process alone uses a lot of energy like natural gas.

So it's becoming much more expensive to produce something that takes the place of oil and this reflected also in market prices. We're in trouble cause we built our modern society completely on cheap oil and global production peaked in 05'. And in the period following peak, prices have made their steady climb to sit where they are now.

People should stop paying attention to the MSM and read the reports from other sources. And don't believe the IEA cause they're intentionally misleading the public and governments. They kept saying world production would increase to something like 130 million barrels per day and then have been revising that number down every since.

Like I said before, you don't start looking at the hard, expensive stuff unless you've used up the easy, cheap stuff first.

 

[cdr108]

You guys can believe that speculators and environmentalists are causing high oil prices if you like. Or that trillions of oil is just waiting to drilled, flooding the markets and thus saving the day. I believe that peak oil is the underlying cause, that it's unfolding now and starting to wreck havoc with our economies. Like I said earlier, the IEA's proposal to raid reserves to sell to the market is,,,, telling.

your explanation for current high oil prices fails for me several ways:

* OPEC/Saudi Arabia contend there is no shortage of oil.
Considering they control a majority of the supply, would it not be in THEIR interest to say 'peak oil' as that would cause prices to be higher, yet they don't ?!? compare that to what R/E agents always say, supply is limited, so prices go up.

* even OPEC said "speculation represented approximately $40 of the overall oil price ..."

* from CFTC - In 2000, physical hedgers – businesses such as airlines and trucking companies that need to hedge to ensure a stable price for fuel in future months – accounted for 63 percent of the oil futures market. Speculators accounted for 37 percent.

* from CFTC - By April 2008, physical hedgers’ share of the same market had dropped to 29 percent, with speculators now controlling an astonishing 71 percent of the oil market. The market was taken over by swap dealers and speculators, a considerable majority of whom have no physical stake in the market.


While I agree that expectation for $20 bbl are gone, valuations of $90-147 are not based on supply/demand.
True value is more around the $50-60 bbl range

 

[tkip]

I keep saying to stop believing what certain agencies like the IEA and countries like Saudi Arabia put out through statements insisting they can increase production and drive prices down. It's not the truth. Saudi Arabia has repeatedly demonstrated that they can't produce more and certainly don't have the spare capacity to help keep prices down. If they could, they would have done so already.

These are links for vids to watch that better explains the problem.. I'm not saying I have the answer. I'm just saying there's a big problem staring us in the face. And listen very carefully to what Jeff Rubin says in his speech in the first link. The man is very smart and understands perfectly the nature of the topic and problem. He's also more optimistic than I am.

http://www.youtube.com/watch?v=CUD4tvTImxU
http://www.youtube.com/watch?v=PYmnriCJ18I&feature=related
http://www.youtube.com/watch?v=GCUPZC-68Sc&feature=related

I also visit the website TheOildrum on a regular basis. Lots of engineers, geologists, some traders and former oil workers give lots of feedback on the topic. And the vast majority believe in peak oil. There's not much else I can say on the topic. If you still disagree then we can have this debate again down the road and compare notes.

 

[SimonP]

your explanation for current high oil prices fails for me several ways:

* OPEC/Saudi Arabia contend there is no shortage of oil.
Considering they control a majority of the supply, would it not be in THEIR interest to say 'peak oil' as that would cause prices to be higher, yet they don't ?!? compare that to what R/E agents always say, supply is limited, so prices go up.

The explanation that I've heard is that the Saudis are just as concerned by an overly high price as an overly low one. Their ideal is for the price to hover around $70. If prices get too high, western governments are going to start seriously looking into long term alternatives to oil. If the price of oil hits $200, maybe hydrogen suddenly makes sense. One of the biggest problems with hydrogen is the huge upfront cost of concerting over the fuel infrastructure. But if this conversion does happen, then oil based wealth and power will disappear never to return.

 

[TrickyRicky]

Peak oil arguments aside (because they are tangential and not particularly relevent to this thread) there is an entire multi-year long thread on this topic in the real estate section.

I just want to take a moment to address this statement:

"Ho hum they been saying this since 2008...."

If you could predict housing cycles to within 3 years of their present status you could be a very wealthy man. I can tell right away that the people who obsess over present month to month data are unlikely to be successful real estate investors over long periods of time.

The majority of people investing in the present real estate boom will eventually take a haircut. This is fundamentally self-evident. The smart investor or owner already knows this and has already positioned herself to accommodate future market swings. By being proactive one can be happy with any direction or change in the market because all market movements present the prepared with fantastic new opportunities.

 

[Admiral Beez]

Canada may have a coming housing surplus and consequent bubble, but not in the City of Toronto. The GTA, and other markets may see a drop in prices as supply exceeds demand, but I can't see Toronto's prices taking a 25% drop in prices. The predicted population growth for Toronto will exceed the available housing stock.

 

[TrickyRicky]

I admire the confidence. However, for anyone reading this thread I would suggest not concentrate on getting wrapped up in who is right or who is wrong regarding potential future outcomes. Instead what I would suggest is that you consider that a 25% drop in value for housing in Canada is totally within the realm of possibility however remote you believe it to be. It happened before many times and it is completely independent of the population growth rate, meaning population growth is not relevent to the amplitude of change in pricing in the housing market in any given, say, 10 year period.

The real question then is not if what I'm saying is right or wrong but if you yourself can handle the following financial stress test:

-real estate values dropping 25% (example: your $400,000 condo becomes worth $300,000)
-borrowing costs doubling (example: your $1800 per month mortgage becomes $3600 per month)

If you can handle this personal financial stress test you have no worries and the market direction is only relevent to you as an exciting opportunity. However, if you cannot handle such a personal financial stress test than the market is a looming danger and the mere suggestion that my little stress test exercise is relevent or within the realm of possiblity will cause you to be defensive or argumentative or concerned.