CONGRESS 2003......HMMM......WHO HAD CONTROL?
The incentive, part of President Bush's economic stimulus package approved by Congress earlier this year, is gaining attention from car dealers and accountants across the country.
Published on Monday, December 1, 2003 by the Minneapolis Star Tribune
Going Backwards
Tax Breaks Target Big SUVs
by Elizabeth Dunbar and Rob Hotakainen
WASHINGTON, D.C. -- Taking the advice of her accountant, Carolyn Hodgson found a way to reduce her federal taxes this year: She spent $38,117 on a sport-utility vehicle.
After deducting the cost of the 2002 GMC Yukon Denali from her 2003 income, Hodgson figures she'll end up saving about $14,000.
"It helps offset some of the other rising expenses businesses are facing," said Hodgson, of Plymouth, who bought the SUV for her Edina delivery business.
Bad policy. It encourages the use of the most fuel-inefficient means of transportation in urban America.
Minnesota Democrat Jim Oberstar
The incentive, part of President Bush's economic stimulus package approved by Congress earlier this year, is gaining attention from car dealers and accountants across the country.
For years, business owners have been able to use vehicle purchases as tax write-offs for equipment, but now the rules have changed dramatically.
In a move intended to encourage businesses to invest in new equipment, Congress is allowing a full deduction of as much as $100,000 for business equipment. In previous years, the equipment deduction was limited to $25,000.
Included in the category of equipment are vehicles weighing more than 6,000 pounds when fully loaded -- which can mean heavy-duty pickups used in construction work or Cadillac Escalades.
For those who buy smaller vehicles, the tax benefit is much less attractive. The maximum deduction businesses can take this year for a new car weighing less than 6,000 pounds is $10,710. And while the deduction for large vehicles can be taken in a single year, the deduction for smaller cars must be spread out over five years.
In New York, RIA senior tax analyst Bob Trinz is urging people who run small businesses or professional practices to "buy yourself an SUV for Christmas." And in the Twin Cities, car dealers are realizing that the break could be good for business.
"We're going to take advantage of this and go after it in the next 60 days," said Michael Kahn, sales manager at Stillwater Motors.
Kahn said the tax break has meant a bigger demand for trucks, vans and SUVs. For example, instead of stocking two or three Chevy Express cargo vans, Kahn has 15. And he's trying to get the word out because he says it will help his business and the economy.
Heft helps
The tax law is encouraging a bigger-is-better mentality among both auto dealers and the buying public.
To qualify, vehicles must be used mainly for business. At least 38 vehicles hit the 6,000-pound weight requirement, including Dodge Durangos, Lincoln Navigators and Toyota Land Cruisers. Buick introduced a new luxury SUV for 2004 that barely meets the cutoff: 6,001 pounds fully loaded. A buyer who has more than $50,000 to spend could shop for a Range Rover or a Hummer H2.
"We've seen a change in the type of vehicles that some people are buying," said Cheryl Meyer, an accountant with Biebl and Ranweiler in New Ulm, Minn. The firm's tax advisers have been talking about the tax breaks at state and national conferences for accountants.
Some dealers are expecting an end-of-the-year rush because small-business owners who buy and use qualifying vehicles before Dec. 31 can deduct the entire amount from their taxable income this year.
So far, Kahn said, funeral homes, construction companies, real estate agents and delivery services are among those taking advantage of the tax break.
"People come in and want to upgrade their whole fleet, so they're coming in with big orders," he said.
Tom Johnson, a Minneapolis tax adviser for Boulay, Heutmaker and Zibell, said he hasn't seen people buy vehicles that they don't need or can't afford.
"It's still an economic decision," he said. "But if they need a vehicle like that, it makes it much more attractive."
Even with the tax break, consumers have to think about how much they'll spend on gas. The larger SUVs generally get between 9 and 15 miles per gallon.
Hodgson said she already discovered the drawback.
"This thing is horrible," she said of her Denali, adding that she's at the gas pump every three days. "I step on the gas and you can just watch the gas gauge drop."
Opponents fuming
Environmentalists and fiscal watchdogs are fuming.
They say that not only is Congress failing to increase fuel-efficiency standards, but now Washington is allowing tax breaks that encourage bigger vehicles.
"Just by increasing the fuel efficiency of our cars and trucks, we could answer a major part of the challenge of America's energy future," said Sen. Richard Durbin, D-Ill.
"As long as SUVs are flying off of dealership lots, the current break makes no fiscal sense," said Keith Ashdown, vice president of policy for Taxpayers for Common Sense.
Rep. Betty McCollum, D-Minn., and 26 other House Democrats are cosponsoring a bill that would plug the SUV loophole. A similar bill has been introduced in the Senate by Barbara Boxer, D-Calif.
"Giving tax breaks to encourage the selling of these heavy, gas-inefficient SUVs . . . doesn't do anything to help us reduce our dependency on oil," McCollum said.
Minnesota Democrat Jim Oberstar, the ranking member of the House Transportation and Infrastructure Committee, said the tax break is "bad policy," adding: "It encourages the use of the most fuel-inefficient means of transportation in urban America."
While the legislation to plug the SUV loophole is pending, nothing is scheduled to change anytime soon. When Congress considered an energy bill earlier this month, efforts to change the deduction back to $25,000 failed. Under current law, the $100,000 deduction will end on Dec. 31, 2005, returning to the $25,000 level.
For now, business groups argue that the increased deduction is helping businesses expand, even if it means more people are buying SUVs.
"In the big picture, you're stimulating the economy by giving small business owners a bigger deduction," said Raj Nisankarao, president of the National Business Association.
He said that people often forget that the new $100,000 limit is allowing businesses to purchase more equipment and supplies than the $25,000 limit permitted.
But McCollum said the need for an SUV tax break has never come up in conversation with a small-business owner.
Though Hodgson said she appreciates the tax break, she wonders whether the money could be spent elsewhere.
"It just seems like this is helping the people who are already successful," she said.
© Copyright 2003 Star Tribune
Showing posts with label Price of Oil. Show all posts
Showing posts with label Price of Oil. Show all posts
Tuesday, August 5, 2008
Friday, July 25, 2008
Many oil industry insiders believe this is a bubble
Peak Oil or Oil Bubble? - The Oil Bubble ArgumentWritten by FrugalTrader on Jul 24, 2008 filed under Ed Rempel
This is a guest post from Ed Rempel (CFP and CMA). For those of you joining us recently, Ed has written a number of controversial articles for MDJ in the past. Today’s article is a continuation from yesterdays post with a counter argument that it’s not peak oil but an oil bubble.. Make sure to participate in the poll at the end.
In his 1998 book, “The Roaring 2002’s”, demographics expert Harry Dent predicted that the large block of baby boomers in their peak earning years would cause one financial bubble after another. Since then, we had the tech bubble, a real estate bubble in the US, nearly an income trust bubble in Canada, Chinese stock market bubble, and now what looks like an oil and resources bubble.
Just like the unlimited potential of the internet that led to the tech bubble, there are real explanations for oil’s rise, but they do not explain a price increase from $10 to $145/barrel.
Arguments in favour of a Oil Bubble
1. Index futures for oil and resources have been created in the last couple of years and have resulted in massive speculation that has driven much of the oil price rise. Many institutional investors are allocating a portion of their assets to commodities primarily through the futures market, which has created incremental “investment demand”. Commodity index futures are about 80% oil. Because of the comparatively high price inelasticity of both oil supply and demand, relatively small disruptions in supply or increments in demand can have outsized effects on price.
According to a May 19, 2008 report titled “Blame It on Your Pension Fund” from Probability Analytics Research in Chicago, open interest in the West Texas Intermediate (WTI) crude and Brent Crude oil contracts traded have more than tripled over the last 5 years, rising by 1.3 million. At 1,000 barrels per contract, this represents incremental demand of 1.3 billion barrels of oil, or about 53% of the increase in world oil “consumption” over that period. Index speculators would not necessarily have accounted for all of that increase in open interest, but Michael Masters (Masters Capital Management), in testimony before a Senate subcommittee on May 20, 2008, estimated that over the last 5 years, index speculators through the futures market increased their net exposure to petroleum products by the equivalent of 848 million barrels of oil, an impact roughly equivalent to the 920 million barrel increase in demand from China over that period.
In a tight market for physical oil, how large a price impact could the incremental investment demand from commodity indexers have had? Probability Analytics Research estimated the equilibrium oil price without investment demand is $60-75 per barrel, with investment demand adding roughly $60 to the price of oil.
2. Demand is not out-pacing supply. In the last 12 months, world oil demand is up only 2%, while supply is up 2.5%. Meanwhile, the price has nearly doubled. How can this be anything other than pure speculation?
3. Most oil experts assume the proper oil price should be between $60-90/barrel. Almost all oil analysts assume a price of $80-90/barrel when valuing oil company shares. The $60-70 range is often quoted by Saudi Arabian oil minister Ali Al-Naimi as being a realistic price for oil, since that is the marginal cost of production for alternative energy sources. In fact, OPEC, which controls 40% of the world’s oil, states that there is “no justification for oil above $80/barrel” and that “fundamentals do not support a price above $80/barrel”.
4. Anecdotal evidence is that the long-awaited demand reductions resulting from high oil prices may have begun. The widely-used quote is: “The cure for $145 oil is $145 oil.” Airlines—choking on $4 per gallon jet fuel prices—are slashing capacity. Sales of gas-guzzling SUVs and light trucks are collapsing in the U.S., while small cars and hybrids are flying off the lot. Public transportation use is increasing. Many are changing jobs to be closer to home, or moving closer to their job. Oil demand is starting to drop off throughout the OECD. Demand responses take time, but we may have reached a tipping point. Gary Becker, an economist at the University of Chicago, has calculated that in the past, over periods of less than 5 years, oil consumption in the OECD dropped by only 2% to 9% when oil prices doubled. But over longer periods, consumption dropped by 60%.
5. Oil supply increases may be on the way. Six years is not a long time in the context of the time it takes to develop an oil field. The last doubling of oil prices has occurred in the last year or so. No supply response over that time frame could have been reasonably expected. The largest new field for years was just discovered in Brazil and is estimated to contain 5-8 billion barrels.
6. Huge amounts of oil are thought to exist off-shore. George Bush just lifted an executive ban that has existed since 1990 on off-shore oil drilling. If the legislative ban is also lifted, then off-shore drilling can finally start. Drilling is banned in many other regions rich with oil or gas resources due to long-term energy strategies and environmental concerns.
7. Oil-producing countries do not necessarily have the incentive to increase production as rapidly as oil-consuming nations may want. They may believe that they will maximize the long-term value of their oil reserves by developing them more slowly.
8. Oil price subsidies in many countries will become increasingly difficult to maintain. Higher gas prices in these countries would result in lower demand. The latest jump in oil prices is making subsidies much more costly, and strains on governmental budgets are forcing some nations to lift subsidies. On May 24, Indonesia raised fuel prices by +30%, followed shortly by Taiwan (+13%) and Sri Lanka (+24%). China has just recently increased its gas prices, since the subsidies that amounted to about 1% of GDP.
9. Many European geologists, especially in Russia, still believe in the abiogenic theory. Oil is widely considered to be a fossil fuel in the West, but this belief is far from unanimous world-wide. The abiogenic theory states that oil is created by carbon released by microbes that migrates upward from the earth’s mantle. It has been popularized in the West recently by Thomas Gold, professor at Cornell University. If it is correct, then not only can oil be continuously created, but there may be far more oil in the earth than most believe. Oil companies have not drilled in areas most likely to contain abiogenic oil. Most geologists consider oil to be a fossil fuel, but the abiogenic theory has not been proven false.
10. Governments have not responded with official policies and have not officially expressed concern. Peak Oil has been discussed endlessly in the press and in the financial industry. Governments must know what is going on and are not concerned.
11. Alternative fuel sources will reduce our need for oil. Humans are adaptive. There are many fuel sources available now and high oil prices will make alternative sources much more viable.
12. Peak Oil is being a marketed. Most of the strongest proponents of Peak Oil are in the investment industry working for companies that have made huge amounts of money from rising oil prices.
13. Many oil industry insiders believe this is a bubble. Those that believe this is a bubble include OPEC, Saudi Arabian oil minister Ali Al-Naimi, Richard Rainwater (Texas oil billionaire), and George Soros (legendary hedge fund manager).
What is your opinion?
Many readers of MDJ are well-read in many issues, so your opinions here would be very interesting. What is your opinion? Which are we currently witnessing?
A. The beginning of Peak Oil.
B. An oil bubble.
http://www.milliondollarjourney.com/peak-oil-or-oil-bubble-the-oil-bubble-argument.htm
This is a guest post from Ed Rempel (CFP and CMA). For those of you joining us recently, Ed has written a number of controversial articles for MDJ in the past. Today’s article is a continuation from yesterdays post with a counter argument that it’s not peak oil but an oil bubble.. Make sure to participate in the poll at the end.
In his 1998 book, “The Roaring 2002’s”, demographics expert Harry Dent predicted that the large block of baby boomers in their peak earning years would cause one financial bubble after another. Since then, we had the tech bubble, a real estate bubble in the US, nearly an income trust bubble in Canada, Chinese stock market bubble, and now what looks like an oil and resources bubble.
Just like the unlimited potential of the internet that led to the tech bubble, there are real explanations for oil’s rise, but they do not explain a price increase from $10 to $145/barrel.
Arguments in favour of a Oil Bubble
1. Index futures for oil and resources have been created in the last couple of years and have resulted in massive speculation that has driven much of the oil price rise. Many institutional investors are allocating a portion of their assets to commodities primarily through the futures market, which has created incremental “investment demand”. Commodity index futures are about 80% oil. Because of the comparatively high price inelasticity of both oil supply and demand, relatively small disruptions in supply or increments in demand can have outsized effects on price.
According to a May 19, 2008 report titled “Blame It on Your Pension Fund” from Probability Analytics Research in Chicago, open interest in the West Texas Intermediate (WTI) crude and Brent Crude oil contracts traded have more than tripled over the last 5 years, rising by 1.3 million. At 1,000 barrels per contract, this represents incremental demand of 1.3 billion barrels of oil, or about 53% of the increase in world oil “consumption” over that period. Index speculators would not necessarily have accounted for all of that increase in open interest, but Michael Masters (Masters Capital Management), in testimony before a Senate subcommittee on May 20, 2008, estimated that over the last 5 years, index speculators through the futures market increased their net exposure to petroleum products by the equivalent of 848 million barrels of oil, an impact roughly equivalent to the 920 million barrel increase in demand from China over that period.
In a tight market for physical oil, how large a price impact could the incremental investment demand from commodity indexers have had? Probability Analytics Research estimated the equilibrium oil price without investment demand is $60-75 per barrel, with investment demand adding roughly $60 to the price of oil.
2. Demand is not out-pacing supply. In the last 12 months, world oil demand is up only 2%, while supply is up 2.5%. Meanwhile, the price has nearly doubled. How can this be anything other than pure speculation?
3. Most oil experts assume the proper oil price should be between $60-90/barrel. Almost all oil analysts assume a price of $80-90/barrel when valuing oil company shares. The $60-70 range is often quoted by Saudi Arabian oil minister Ali Al-Naimi as being a realistic price for oil, since that is the marginal cost of production for alternative energy sources. In fact, OPEC, which controls 40% of the world’s oil, states that there is “no justification for oil above $80/barrel” and that “fundamentals do not support a price above $80/barrel”.
4. Anecdotal evidence is that the long-awaited demand reductions resulting from high oil prices may have begun. The widely-used quote is: “The cure for $145 oil is $145 oil.” Airlines—choking on $4 per gallon jet fuel prices—are slashing capacity. Sales of gas-guzzling SUVs and light trucks are collapsing in the U.S., while small cars and hybrids are flying off the lot. Public transportation use is increasing. Many are changing jobs to be closer to home, or moving closer to their job. Oil demand is starting to drop off throughout the OECD. Demand responses take time, but we may have reached a tipping point. Gary Becker, an economist at the University of Chicago, has calculated that in the past, over periods of less than 5 years, oil consumption in the OECD dropped by only 2% to 9% when oil prices doubled. But over longer periods, consumption dropped by 60%.
5. Oil supply increases may be on the way. Six years is not a long time in the context of the time it takes to develop an oil field. The last doubling of oil prices has occurred in the last year or so. No supply response over that time frame could have been reasonably expected. The largest new field for years was just discovered in Brazil and is estimated to contain 5-8 billion barrels.
6. Huge amounts of oil are thought to exist off-shore. George Bush just lifted an executive ban that has existed since 1990 on off-shore oil drilling. If the legislative ban is also lifted, then off-shore drilling can finally start. Drilling is banned in many other regions rich with oil or gas resources due to long-term energy strategies and environmental concerns.
7. Oil-producing countries do not necessarily have the incentive to increase production as rapidly as oil-consuming nations may want. They may believe that they will maximize the long-term value of their oil reserves by developing them more slowly.
8. Oil price subsidies in many countries will become increasingly difficult to maintain. Higher gas prices in these countries would result in lower demand. The latest jump in oil prices is making subsidies much more costly, and strains on governmental budgets are forcing some nations to lift subsidies. On May 24, Indonesia raised fuel prices by +30%, followed shortly by Taiwan (+13%) and Sri Lanka (+24%). China has just recently increased its gas prices, since the subsidies that amounted to about 1% of GDP.
9. Many European geologists, especially in Russia, still believe in the abiogenic theory. Oil is widely considered to be a fossil fuel in the West, but this belief is far from unanimous world-wide. The abiogenic theory states that oil is created by carbon released by microbes that migrates upward from the earth’s mantle. It has been popularized in the West recently by Thomas Gold, professor at Cornell University. If it is correct, then not only can oil be continuously created, but there may be far more oil in the earth than most believe. Oil companies have not drilled in areas most likely to contain abiogenic oil. Most geologists consider oil to be a fossil fuel, but the abiogenic theory has not been proven false.
10. Governments have not responded with official policies and have not officially expressed concern. Peak Oil has been discussed endlessly in the press and in the financial industry. Governments must know what is going on and are not concerned.
11. Alternative fuel sources will reduce our need for oil. Humans are adaptive. There are many fuel sources available now and high oil prices will make alternative sources much more viable.
12. Peak Oil is being a marketed. Most of the strongest proponents of Peak Oil are in the investment industry working for companies that have made huge amounts of money from rising oil prices.
13. Many oil industry insiders believe this is a bubble. Those that believe this is a bubble include OPEC, Saudi Arabian oil minister Ali Al-Naimi, Richard Rainwater (Texas oil billionaire), and George Soros (legendary hedge fund manager).
What is your opinion?
Many readers of MDJ are well-read in many issues, so your opinions here would be very interesting. What is your opinion? Which are we currently witnessing?
A. The beginning of Peak Oil.
B. An oil bubble.
http://www.milliondollarjourney.com/peak-oil-or-oil-bubble-the-oil-bubble-argument.htm
Thursday, July 17, 2008
Lou Dobbs, HAS FAILED his viewers
Lou Dobbs: If I recall, Gen Petreaus advised Congress and GW Bush that there would be a small window of opportunity! This profound success is exactly what? Have we stopped paying the Sunnis and Shias? Is the window closing or when did that window close? So we know this success is REAL, like you proclaim to be. Exactly what is the success here Lou Dobbs?
You are doing a great job keeping the AMERICANS as IGNORANT as your opinions. Just a tip: opinions are like buttocks, we all have one!
Lou, I thought your expertise was money ? Yet, your devotion to attack Obama throughout your show is quire blatant. But that is ok.
I am curious Mr. Dobbs, when and where was your last trip out of this country? You really need to inform your audience of your passport history. Just so we can verify your expertise when the knowledge we are seeking, from the MEDIA, (which includes you, RADIO and CNN) for information regarding foreign policy or international relations? Please educate us of all your WORLDLY experience. Please Mr. Dobbs, show us!
One last thing, for now, you, Lou Dobbs, HAS FAILED your viewers with incorrect, TRUE information regarding our country’s Financial Institutes in this country! You are an ECONOMIST, or at least PROCLAIM to be. Where have you been Mr. Dobbs? This has not happened over night. Just where have you been? You are a complete FRAUD. And have failed to expose this fraud that is now just sprouting. How long have you known about this fraudulent economy?
You have an agenda. But maybe you can try some real TRUTH and let us know what you REALLY WANT? By the way, I never hear you propose any real answers to all your WHINING!
You are doing a great job keeping the AMERICANS as IGNORANT as your opinions. Just a tip: opinions are like buttocks, we all have one!
Lou, I thought your expertise was money ? Yet, your devotion to attack Obama throughout your show is quire blatant. But that is ok.
I am curious Mr. Dobbs, when and where was your last trip out of this country? You really need to inform your audience of your passport history. Just so we can verify your expertise when the knowledge we are seeking, from the MEDIA, (which includes you, RADIO and CNN) for information regarding foreign policy or international relations? Please educate us of all your WORLDLY experience. Please Mr. Dobbs, show us!
One last thing, for now, you, Lou Dobbs, HAS FAILED your viewers with incorrect, TRUE information regarding our country’s Financial Institutes in this country! You are an ECONOMIST, or at least PROCLAIM to be. Where have you been Mr. Dobbs? This has not happened over night. Just where have you been? You are a complete FRAUD. And have failed to expose this fraud that is now just sprouting. How long have you known about this fraudulent economy?
You have an agenda. But maybe you can try some real TRUTH and let us know what you REALLY WANT? By the way, I never hear you propose any real answers to all your WHINING!
Friday, June 6, 2008
Columbia Healthcare (which merged with HCA)......
June 5, 2008 10:55
Richard Rainwater turns bearish on oil. For now
Posted by Justin Fox | Comments (0) | Permalink | Trackbacks (0) | Email This
Billionaire investor Richard Rainwater has turned bearish on oil. Only temporarily bearish, mind you, but it still struck me as big enough news to write my column about this week. It's not online just yet (update: now it is), but in the interest of serving this blog's readers with the freshest possible news (and because Time's PR folks are about to start flogging the story), here are the basics:
Rainwater made his name managing the investments of the oil-rich Bass family of Fort Worth in the 1980s, steering them most famously into Disney stock when Disney absolutely was not cool. Then he struck out on his own, bankrolled the creation of hospital rollup Columbia Healthcare (which merged with HCA, after which some bad stuff happened, but let's not get into that here), and married Darla Moore (famously christened by Fortune as the "Toughest Babe in Business"). Then, in about 1997, he became convinced that oil prices would start rising soon, and committed much of his fortune to betting on that rise.
That bet has paid off to the tune of about $2 billion, a success that has been documented in detail in the pages of Fortune not once but twice.
I was working on a column on whether the price of oil has gotten ahead of itself or not, I remembered those Fortune stories, and I thought it might be interesting to hear what Rainwater thought of all the talk of an oil bubble. I asked Oliver Ryan, author of the most recent of those articles, to introduce me. Oliver called Rainwater, and reported back that Rainwater had something pretty interesting to tell me.
That he did. "I sold my Chevron," he said in the first few seconds of our phone conversation. "I sold my ConocoPhillips. I sold my Statoil. I sold my ENSCO. I sold my Pioneer Natural Resources. I sold everything."
Rainwater did this, he said, right after the price of oil passed $129 a barrel, which happened on May 20. He did it because he thinks oil demand is headed down in the U.S. as Americans change their habits in reaction to $4 gas. He remains a believer in peak oil; he just thinks prices have risen so much that we're due for a significant correction--after which he'll start buying into oil again.
Interestingly, Rainwater does not buy into the argument that "index speculators" (pension funds, endowments, and other institutional investors that have been buying into commodity indexes) are a big factor in the recent price rises. He also doesn't think it's the fault of oil companies, OPEC, or any other villain. "It’s just supply and demand, it’s as simple as that," he said.
Richard Rainwater turns bearish on oil. For now
Posted by Justin Fox | Comments (0) | Permalink | Trackbacks (0) | Email This
Billionaire investor Richard Rainwater has turned bearish on oil. Only temporarily bearish, mind you, but it still struck me as big enough news to write my column about this week. It's not online just yet (update: now it is), but in the interest of serving this blog's readers with the freshest possible news (and because Time's PR folks are about to start flogging the story), here are the basics:
Rainwater made his name managing the investments of the oil-rich Bass family of Fort Worth in the 1980s, steering them most famously into Disney stock when Disney absolutely was not cool. Then he struck out on his own, bankrolled the creation of hospital rollup Columbia Healthcare (which merged with HCA, after which some bad stuff happened, but let's not get into that here), and married Darla Moore (famously christened by Fortune as the "Toughest Babe in Business"). Then, in about 1997, he became convinced that oil prices would start rising soon, and committed much of his fortune to betting on that rise.
That bet has paid off to the tune of about $2 billion, a success that has been documented in detail in the pages of Fortune not once but twice.
I was working on a column on whether the price of oil has gotten ahead of itself or not, I remembered those Fortune stories, and I thought it might be interesting to hear what Rainwater thought of all the talk of an oil bubble. I asked Oliver Ryan, author of the most recent of those articles, to introduce me. Oliver called Rainwater, and reported back that Rainwater had something pretty interesting to tell me.
That he did. "I sold my Chevron," he said in the first few seconds of our phone conversation. "I sold my ConocoPhillips. I sold my Statoil. I sold my ENSCO. I sold my Pioneer Natural Resources. I sold everything."
Rainwater did this, he said, right after the price of oil passed $129 a barrel, which happened on May 20. He did it because he thinks oil demand is headed down in the U.S. as Americans change their habits in reaction to $4 gas. He remains a believer in peak oil; he just thinks prices have risen so much that we're due for a significant correction--after which he'll start buying into oil again.
Interestingly, Rainwater does not buy into the argument that "index speculators" (pension funds, endowments, and other institutional investors that have been buying into commodity indexes) are a big factor in the recent price rises. He also doesn't think it's the fault of oil companies, OPEC, or any other villain. "It’s just supply and demand, it’s as simple as that," he said.
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