Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on March 26, 2016
Cheap Oil Slow to Boost Global Growth
International Monetary Fund researchers said the benefits from cheap oil may not materialize until demand in the global economy picks up and central banks in advanced nations move away from near-zero interest rates.
Despite a significant drop in oil prices since June 2014, economists are still looking for the positive effects of cheaper oil. While the main reason why prices have fallen has been an increase in global supplies, a new IMF report shows that domestic demand has been weaker than forecast in oil-exporting countries last year, while falling short of expectations in oil importers such as the U.S. and Europe.
Researchers argued that in an environment where oil prices are low and central banks cannot reduce policy interest rates further, “the decline in inflation owing to lower production costs raises the real rate of interest,” making it more expensive to borrow and stifling demand, the paper said.
Conversely, when oil prices rise while central banks are hesitant to aggressively raise rates, higher prices are expected to be “expansionary by lowering the real interest rate,” IMF researchers led by chief economist Maurice Obstfeld noted, referring to interest rates adjusted for inflation.
While consumers are benefiting from cheap fuel prices, persistently low inflation makes the job of central banks harder, according to the IMF paper.
“The current episode of historically low oil prices could ignite a variety of dislocations including corporate and sovereign defaults, dislocations that can feed back into already jittery financial markets,” the fund’s researchers wrote. “The possibility of such negative feedback loops makes demand support by the global community — along with a range of country-specific structural and financial-sector reforms — all the more urgent.”
31 Comments on "Cheap Oil Slow to Boost Global Growth"
rockman on Sat, 26th Mar 2016 10:21 am
Seems like they’ve gotten caught in the chicken/egg loop: did (A)the high oil prices cause the global economy to slow or (B) did the global economy stalling cause the oil prices to fall.
In either case lower oil prices will help the economy to recover. But if dynamic is really closer to (B) then the recovery might take a long time to materialize.
joe on Sat, 26th Mar 2016 10:23 am
Man, they just dont get it. Its the economy stupid! Or the Chinese economy stupid! 10 years of building ghost cities and mag lev trains to nowhere have taken their toll. China is exhausted. Europe and US are demographically fixed to remain low growth economies as Baby Boomers and the age pyramid stagnate growth, this is an unavoidable fact of good health.
Growth HAS to come from developing economies, those basket case countries that the US just signed a massive trade deal with TPP anyone, or did they forget that?
Northwest Resident on Sat, 26th Mar 2016 10:32 am
Could it be that the so-called “cheap oil” isn’t actually all that cheap? Today’s price might be “cheap” relative to the unsustainable and ultimately destructive debt-and-muppet-driven high price of oil before it dropped like a rock. But $40 per barrel, while “cheap” enough to drive frackers out of business and put oil-dependent export nations on death watch, STILL isn’t “cheap enough” to match the truly cheap oil that fueled post-WW2 economic expansion. Not even close.
The deterioration in global economic growth is unstoppable. Massive debt and fraud have bought time, but time is running out. We are on the gently sloping downside of a wild economic ride previously fueled by cheap oil, with a sudden drop-off dead ahead.
shortonoil on Sat, 26th Mar 2016 10:47 am
“Despite a significant drop in oil prices since June 2014, economists are still looking for the positive effects of cheaper oil”
AND — they are going to have a long time to wait. Oil is no longer capable of powering a growth economy. It is called DEPLETION and has been a well understood concept for a couple thousand years. How they managed to miss it indicates that they have been hiding under a rock since Julius Caesar was Emperor.
All we can do is hope that they hold their breath until that economy comes back. We could see it in a few centuries?
http://www.thehillsgroup.org/
Apneaman on Sat, 26th Mar 2016 10:53 am
Less expensive is not the same as “cheap”.
onlooker on Sat, 26th Mar 2016 11:09 am
As Short states Oil is no longer capable of igniting growth in mature modern overly complex and energy consuming economies. The benefits are becoming more and more marginal even as costs increase. Net energy is simply decreasing and that trend should continue indefinitely.
marmico on Sat, 26th Mar 2016 11:27 am
The January 2016 percent change from a year ago of the rolling 12 month vehicle miles traveled is up ~3%.
https://research.stlouisfed.org/fred2/graph/?g=3XpT
The last time that happened was in 2000. U.S. growth continues to rise.
Net energy may be decreasing but the energy intensity of the economy is also decreasing. Less energy units per unit of income.
http://www.eia.gov/totalenergy/data/monthly/pdf/sec1_17.pdf
Apneaman on Sat, 26th Mar 2016 11:30 am
marmi the 1% boot licker. Maybe you’ll get strung up with them some day?
The Great Ponzi Scheme of the Global Economy
http://www.counterpunch.org/2016/03/25/the-great-ponzi-scheme-of-the-global-economy/
Apneaman on Sat, 26th Mar 2016 11:39 am
The World’s Most Famous Economic Hitman Confesses – They’re Coming for Your Democracy
“What you may not know, is he’s currently making the rounds warning us that all the corporatist mercenary tactics employed against third-world nations to financially benefit U.S. conglomerates are now being turned inward on American communities.”
“Among other things, U.S. cities are now on the target list. The combination of debt, enforced austerity, underinvestment, privatization, and the undermining of democratically elected governments is now happening here.”
http://libertyblitzkrieg.com/2016/03/25/the-worlds-most-famous-economic-hitman-confesses-theyre-coming-for-your-democracy/
onlooker on Sat, 26th Mar 2016 11:41 am
Ah yes Marmico propping up the propped up Economy. How quaint.
onlooker on Sat, 26th Mar 2016 11:49 am
I think they do not need AP to do much, the whole system has already been irreparably corrupted. Just a few bribes here and there should do it. The politicians and their lackeys are ripe for selling out whomever and whatever including the future habitability on this planet.
Apneaman on Sat, 26th Mar 2016 11:59 am
It’s kinda absurdly hilarious onlooker. Case in point, the insanity in south Florida.
http://www.miamiherald.com/news/local/community/miami-dade/miami-beach/article41146359.html
onlooker on Sat, 26th Mar 2016 12:03 pm
Yes AP, greed, corruption and ignorance sure make these spectacles on this planet surreal in a freakish way.
onlooker on Sat, 26th Mar 2016 12:07 pm
By the way AP and others, I read something about the author of “Confessions of an Economic hitman” Apparently, he was heavily recruited from college. The establishments seeks out bright people on campus or so it seems. Anyway, from his words he just could not stomach anymore what he was doing even if he was compensated handsomely. Thus, at peril too himself and family, he decided to write that book.
shortonoil on Sat, 26th Mar 2016 1:26 pm
“The January 2016 percent change from a year ago of the rolling 12 month vehicle miles traveled is up ~3%.”
Which is pretty incredible considering that gasoline consumption over the same time period increased by 0.04%.
http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_15.pdf
All finished products increased by 2.0%. Diesel fell by 18%; it must be those eighteen wheelers are doing more coasting downhill in this booming economy?
Anonymous on Sat, 26th Mar 2016 2:27 pm
Never asked: How exactly, will ‘cheap'(ish) oil, help with record levels of consumer, corporate and public debt? How does it reverse the declining quality of resources? Or how does it make people want to ‘consume’ more, when most of us already have more than we ‘need’ already? Most people now, are only buying things they ‘need’ as opposed to things they ‘want’. The cost of energy has little to do with circumstances that made things this way. The cost of ‘energy’ was a only a small part of a much larger set of problems. That thing we call ‘the economy’ is so bad, even the big boxes, the ultimate end-game of the consume, drive, import from China economy, are shuttering stores.
Suburban, Banking,retail expansion is not really cost-effective anymore and has marginal returns no matter what the ‘cost’ of energy is.
jewberg is a 1%er rag run by imbeciles FOR imbeciles.
marmico on Sat, 26th Mar 2016 2:44 pm
Which is pretty incredible considering that gasoline consumption over the same time period increased by 0.04%.
Why? It’s called declining energy intensity of the economy. In this instance, increasing fuel efficiency of the gasoline vehicle fleet.
Diesel. Manufacturing sucks. Less trucking. Reduced production exports due to currency exchange rates and reduced production to due the smash in the domestic oil and gas sector. And those oil/gas diesel rig gensets are idled. 🙂
shortonoil on Sat, 26th Mar 2016 2:46 pm
“Suburban, Banking,retail expansion is not really cost-effective anymore and has marginal returns no matter what the ‘cost’ of energy is.”
If energy was cheap enough the economy would explode. If energy was cheap enough someone would pump out the Persian Gulf, and turn it into a golf course. It was low cost energy that made modern civilization possible; that is why it is called the Fossil Fuel Age?
With enough energy there are no constraints; mine the Moon, Mars the asteroid belt, what ever to get the raw materials needed. Energy is the economy, and without it there is zero economy!
Anonymous on Sat, 26th Mar 2016 3:42 pm
I already asked this question, but Ill ask it again. How does ‘cheap’ oil, mitigate against record levels of accumulated debt? Or the overproduction of shoddily made goods? If anything, cheap oil might spur the production of more ‘goods and services’ we dont really need(while going to great lengths to avoid making goods and services we actually DO need). Overproduction of goods and the waste it generates is already causeing a cascade of problems that ‘cheap’ energy cant fix or reverse. Yes, free energy or energy from a vacuum might cause the economy to ‘explode’, but we dont live in that universe. That golden oil age had a much smaller population, much higher quality resources it could exploit, and still had lots of space to expand into.
Since that world no longer exists, we need to deal with the one that does. Yes, the elites could wipe out ALL debt tomorrow. That, + cheap energy could indeed spur a new round of ‘growth’. Though a lot of the old ‘growth’ would need to be torn down to replace with ‘new’ growth.But I don’t see any signs the elites are about to hit a big debt reset button any time soon.
bug on Sat, 26th Mar 2016 3:49 pm
Anonymous, the media uses that phrase/ idea the same as the media uses “energy independense”, it is what the American dolt wants to read/hear. That’s all.
Davy on Sat, 26th Mar 2016 5:58 pm
Nothing can spur a new round of growth. Growth is no longer in momentum and is likely decelerating. Even if growth is just stagnating that spells the end because our current growth is in diminishing returns. If a profound technological breakthrough occurred it is still not enough because it is a case of being too late. Our global system must break by necessity per its nature as an adaptive system. We can slow that break but not stop it. We can adapt better or worse but adapt it will be. Destructive change be force never ends well for those caught between natural forces and fragile civilization.
Bloomer on Sat, 26th Mar 2016 6:02 pm
The U.S. consumer has been the biggest beneficiary of low oil prices Their economy is doing much better then the global economy. Many countries like here in Canada, haven’t seen a dramatic fall in prices at the pump as in the U.S.
It will take longer for the lower price of oil dividend to impact consumption in the rest of the world.
Truth Has A Liberal Bias on Sat, 26th Mar 2016 6:15 pm
All you fucking retards who think you know economics need to look up inelastic demand. Just cuz the price drops in half doesn’t mean we leave our cars running in the driveway all night and just cuz it rises doesn’t mean we all sell our cars and ride horses. Price takes a while to impact demand. We need what we need and it’s not gonna change tomorrow because the price moves.
I’m still waiting for Short to explain how oil prices over $30 break the laws of physics. You change your tune every time the market moves. Last month you said anything over 30/barrel breaks the laws of physics. Two weeks ago you said your model shows prices should be 50. I guess we’ll have to take your word since your bullshit eTP model isn’t published and nobody wants to buy it. Futilitist owns to having a copy you gave him for free but he’s more retarded than Short.
Davy on Sat, 26th Mar 2016 7:02 pm
What does one really know if they say they know economics? There are so many examples of economic theory failures. Economics is an expression of human’s feelings of exceptionalism which is an abject failure. Where else can you substitute fantasy for reality so well as is routinely done with economics. Economics is a human construct divorced from reality. The thinking behind economics got us to where we are now it will not get us out.
onlooker on Sat, 26th Mar 2016 7:16 pm
Absolutely true. In fact look at the GDP measurement that measures equally negative human conditions or outcomes as all other economic activity. But even more important is the overarching emphasis on making the Economy work or grow. We have been acting as though we are cogs needed for the well being of the Economy rather than sanely seeing the Economy as a tool to make lives better. Not to mention the over emphasis on materialism and associated greed.
JuanP on Sat, 26th Mar 2016 7:36 pm
Miami Beach is experiencing unprecedented development, traffic, and economic growth right now.
We keep building multimillion mansions and luxury condo towers as if the future was brilliant. There is no luck of buyers for them either. We are back to the days of properties with multiple bids selling above asking prices and flipping.
Traffic consists of a daily twelve hour jam that is worse than ever before. That is in spite of new boardwalks, more bicycles and bike trails, more motorcycles, and improved public transportation. Parking is getting harder everyday, too, we pay for valet or parking everywhere we go now. There are no free parking spaces anywhere. Even residents need to get up at 8 in the morning to pay for parking. Luckily, it can be done by phone these days.
The city’s economy keeps growing with a larger tax base, more businesses, particularly restaurants and unproductive bullshit like tattoo parlors, pet grooming and accessories, beauty parlors, tourist retail, etc.
The poor are getting kicked out as property prices and rents keep rising to levels the working and middle class can’t afford. The waters keep rising continually.
onlooker on Sat, 26th Mar 2016 8:11 pm
I wonder for how long Miami can keep up the facade that their is a future there?
makati1 on Sat, 26th Mar 2016 8:29 pm
That there are fewer and fewer that can afford oily products at any price never seems to find it’s way into these Imperial Essays from it’s propaganda outlets.
Oil can go to $5 and the economy will still not recover. Ever.
But dream on capitalists. You have finally met you Rubicon.
shortonoil on Sun, 27th Mar 2016 8:48 am
Since the beginning of the oil age the world has extracted 1,470 Gb of oil. Except for a tiny fraction of that production (0.02%) which is in storage, it was all consumed. That is, demand has followed production exactly for the last 150 years regardless of the price, or the production volume. The idea that there is a relationship between volume of production and price, which results in demand is ridiculous. Until recently, all the oil produced was consumed.
The reason has been because until recently oil was a very good value to the economy. The benefit of oil was greater than its price. That is what powered the stellar growth that the economy has witnessed for the last 150 years. That powering occurred because oil provided energy; it required less energy to produce it than it provided. That situation has now changed; it now requires more energy to produce it than it delivers. The result is that the economy can no longer grow.
Without growth the economy can not generate the demand needed to use any additional oil that is produced. As time progresses, and the energy to produce oil and its products increases it will not be able to use what is already being produced. The economy shrinks, demand goes down and so does the price. That is what is presently occurring.
When producers can no longer make money producing oil they will extract any cash that they can from their assets, and stop producing it. The Laws of Physics ultimately determines the deposition of oil; economics is a manifestation of an over active human imagination. It is a sideshow in a theatrical play called “Reality”.
http://www.thehillsgroup.org/
onlooker on Sun, 27th Mar 2016 9:08 am
Fabulous presentation of the peak oil/economic dynamic. Thanks a bunch Short.
Northwest Resident on Sun, 27th Mar 2016 9:29 am
It is a sideshow in a theatrical play called “Reality”.
A theatrical play which happens to be an epic tragedy. Please remain seated, ladies and gentlemen. The curtain is now rising on the final act.