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Page added on December 5, 2014
Oil and the Global Slowdown
The world economy is slowing down and the authorities are fretting.
Japan, Italy, and Greece are all in recession. China is slowing down according to official statistics, and even more according to whispered accounts.
Germany, France and the Netherlands are all at stall speed.
According to the BLS, the United States is doing just great at nearly 4% growth for two straight quarters, but you wouldn’t know that either from the quality of the few jobs being created (which is low) or from consumer spending (also low).
The worry, as always, has nothing to do with the central banks’ concern for you, your job, your children, the actual prices you pay, wealth equality, or the future, and everything to do with the simple fact that the stability of the banking system absolutely depends on a steady stream of new loans.
The problem, as always, is that we have a monetary system that is either expanding or collapsing. It has no steady state.
Either money and credit are expanding and the banks are relatively happy or the banks are collapsing and demanding taxpayer bailouts. It’s really that stark. We are being driven by our system of money, we serve it not the other way around, which is a tragedy of both epic and comic proportions.
I guess with the binary choices of growth or collapse before them it only makes sense for the current crop of central bankers to do whatever it takes to keep that system limping along, er growing, for as long as possible.
In 2008 and 2009, net credit creation was only slightly negative, but that was enough to very nearly cause the entire system of money and banking in the developed world to collapse.
Now after the most heroic period of interest rates forced to zero (ZIRP) and below (NIRP in Europe) and the grandest experiment with money printing in global history, credit growth is somewhat back on track but not enough to ease the banker worries or to justify their actions.
So the bankers continue to pump, jawbone, and panic at every slight downturn in financial market prices because that’s all they have left in the world upon which they can hang their reputations.
The actual economy, the one that lives on Main Street, never really bounced back fully, at least not compared to past recoveries. Growth, jobs and incomes all were anemic compared to prior recoveries. Investment in new capital was and remains dead in the water.
Bad Ideas Repeated
Left unsaid by practically everyone, always, is that it was never a very good idea in the first place to weld our perceptions of adequate economic growth to a scheme that relied upon continuously compounding debt at a faster pace than economic growth.
We did this for so many decades in a row that everyone forgot to question whether it made sense to do this.
It did not, but too many decades had passed for anyone to remember another time.
So when the crisis came, which was rooted in too much debt, there were no sane voices in the central banks or halls of government power saying, hey you know what? That wasn’t such a good idea. Perhaps we should pay off our past debts and then take on new credit at a pace no faster than our growth in income.
Instead, there was a blind adherence to the prior policy of fostering rapid credit creation, not because it made any particular sense at all, least of all math sense, but simply because that’s how things had always been done.
Well, not ‘always’ but at least during the past 4 decades when everybody in power was learning about how things are done.
Looking forward, not only does it not make sense to attempt to increase debt faster than income, it makes no sense to continuously compound debts and other claims on real wealth because resources are not infinite.
Whether it’s now, or in ten years, or in a hundred, sooner or later the economy of ‘stuff’ cannot grow any more simply because there won’t be enough land, ore bodies, or energy to do do so.
Just because a lot of powerful people are ignoring something does not make it go away. Bad ideas are still bad ideas whether they are being ignored by even the most important people, or not.
Central Follies
The world’s central banks have been given a lot of leeway as they’ve done what they can to stimulate more economic growth. Leaving aside the impossibility of sustainable exponential growth in a finite system, how have the central banks done?
How would we score their efforts so far?
Well, if you are in the Eurozone or Japan, the answer has to be ‘poorly.’ Trillions have been spent, government deficits, enabled by central bank printing, have exploded and yet growth of the sort that could justify these efforts has not returned.
Massive new debts and no improved means of paying them back. Why people will spurn a company that engages in such obviously poor financial and management practices but give a free pass to nations and central banks that do the same thing is a mystery to me.
If the past efforts have not yielded the expected results then what will even more of the same efforts brings us except a bit more time before an even larger financial accident?
Those in charge always arrive at the same conclusion, which is to even more of the very things that have already not worked.
Given the macroeconomic data as we have it, there’s nothing that would rationally or logically support the prices we see for equities and bonds we currently see.
Both equities and bonds are priced to perfection, eagerly awaiting a world where high economic growth can justify their historically elevated prices.
Our view here at Peak Prosperity is that the days of rapid economic growth are behind us, and that if we do experience rapid growth again it is from much lower levels as we rebound from some major slump.
But to grow even more from here, even if that’s just 4% annually across the globe implies that we’ll find a way to fully double the entire world’s consumption of resources in just the next 18 years.
That’s the nature of compounding…even 4% growth means a 100% increase in just 18 years.
Because oil is the main engine of growth, and we know that even with 2.5 trillion dollars of additional spending over the past 9 years the world is producing roughly the same amount of oil as ever. Why? Because depletion of existing reserves is being matched by new production.
Unless investment in oil production really accelerates from here, new production will be swamped by existing declines.
In the US we know that even under the best of circumstances shale oil, the one and only engine of increased oil production growth, will peak in 2020.
But these are no longer the best of circumstances and oil is now priced well below the actual cost to get most of the shale oil out of the ground:
(Source)
As we can see in that chart, the only plays that are still viable at today’s prices are the core areas of the Bakken and Eagleford plays, which should not surprise anybody. Those were the ones drilled first and hardest because they are the most economic.
Oil prices most recently peaked in the summer of 2014, and then began a slump that really picked up steam in October and now everybody is talking about it.
The fun thing about the shale companies is that they are incredibly nimble and very sensitive to prices. They can stop drilling at any time. As soon as they do, the peak of shale production will be measured within a month.
While they have not stopped drilling, the speed of the pullback is incredible and drilling permits dropped by a whopping 40% in November alone as compared to October:
New U.S. oil and gas well November permits tumble nearly 40 percent
(Reuters) – Plunging oil prices sparked a drop of almost 40 percent in new well permits issued across the United States in November, in a sudden pause in the growth of the U.S. shale oil and gas boom that started around 2007.
Data provided exclusively to Reuters on Tuesday by industry data firm Drilling Info Inc showed 4,520 new well permits were approved last month, down from 7,227 in October.
The pullback was a “very quick response” to U.S. crude prices, which settled on Tuesday at $66.88 CLc1, said Allen Gilmer, chief executive officer of Drilling Info.
New permits, which indicate what drilling rigs will be doing 60-90 days in the future, showed steep declines for the first time this year across the top three U.S. onshore fields: the Permian Basin and Eagle Ford in Texas and North Dakota’s Bakken shale.
The Permian Basin in West Texas and New Mexico showed a 38 percent decline in new oil and gas well permits last month, while the Eagle Ford and Bakken permit counts fell 28 percent and 29 percent, respectively, the data showed.
(Source)
I have to ask – 40% – is that a lot? Yes, it sure is. And in just one month.
Notice that the decline in permits was even quite pronounced in the core shale plays revealing that even within the Bakken and Eagleford there are operators who don’t believe it makes economic sense to drill at these oil prices.
The shakeout that is coming to that industry is going to be quite pronounced and we’re expecting some serious fireworks as investors wake up to the fact that sometimes defaults really do happen and losses are a part of this game….something the central bank liquidity injections have managed to mask and forestall for quite some time now.
The bottom line, though, is that without growth in oil economic growth is hard to achieve. I’ll go further and say it’s impossible to achieve, at least under the old paradigm of consumption based growth.
If oil prices do not recover and quickly, the US shale miracle will rapidly turn into a shale bust. The decline rates on these wells are ferocious. With that loss of production will go the entire narrative that says our energy predicament is safely off in the future and that we can safely ignore it for now.
And with the loss of that fantasy will go the sky-high valuations we currently see for stocks and bonds. After all, the operative question always should be what is the value of these stocks and bonds in a world without growth?
To me the answer is simple; a lot less.
Unfortunately nobody – and I mean nobody – in the any central bank is even remotely talking about or in any way displaying that they are even dimly aware of the role of energy in economic growth. To them it is all about the banks.
And the banks need growth like your body need oxygen. Sure, you can hold your breath for a minute or two, maybe longer with training, but after that things get dicey and quickly.
There are signs everywhere across the globe now that the central banks have failed to induce growth in the real economy, and have instead simply bought some time at the expense of pushing things even further into a zone of massive malinvestment, rank speculation, and badly inflated prices.
In short, we are now past the point where the next correction could be survived injury free. It’s going to hurt.
In Part II: Central banks have lost, deflation is here, we look at the various global warning signs that slow growth has morphed into something more deadly to the banking system; deflation and recession. We’ll discuss and review the basic commodities that are telling us far more than the distorted stock or bond prices ever could about the true state of global growth and future economic prospects.
Copper, oil, iron ore, coal, gold and silver are all telegraphing major economic weakness ahead. The next round of deflation will be absolutely punishing for financial markets and possibly even spark international conflicts given the raw state of diplomacy and east-west tensions.
29 Comments on "Oil and the Global Slowdown"
poaecdotcom on Fri, 5th Dec 2014 4:39 pm
Excellent article hits all the nails on the head. Great job.
Only issue I had was this “The fun thing about the shale companies is that they are incredibly nimble and very sensitive to prices. They can stop drilling at any time.”
Not so much. They are debt loaded to the eyeballs with lease contracts and hedged prices that cannot be stopped at anytime……. They either pump and produce some $$$ or they do not and default.
shortonoil on Fri, 5th Dec 2014 4:50 pm
Excellent article, and as we have repeatedly stated petroleum’s capacity to power the economy is declining. A contracting economy is a deflationary economy, and that does not bode well for the world’s fiat monetary system. It requires perpetual growth to be maintained.
Neither does it bode well for future petroleum prices, and declining prices means reduced E&D, which translates into a smaller, and smaller extractable reserve. With 39% of the US economy, and about 33% of the world’s economy directly powered by the energy that results from petroleum consumption, and that energy availability is falling, the conclusion can be hardly be in doubt.
http://www.thehillsgroup.org/
GregT on Fri, 5th Dec 2014 5:32 pm
Yes this is an excellent article, still every bit as good as when it was posted here the last time. Yesterday.
Some things are worth repeating……….
Makati1 on Fri, 5th Dec 2014 7:19 pm
The quiet war will become nuclear before the end. Why? The only powers that count today are nuclear armed. How did the last three empires (Spain, England and Germany) end? Wars. How will the Empire today end? War. But this one has to be nuclear as the Empire cannot win any other way and it knows it.
Having used nukes before, it will not hesitate to do so again. And Russia and China know this. Hence, Russia’s return to patrolling the shores of North America and upgrade of it’s nukes and military. Ditto for China.
This is one scenario that I hope I am wrong on, but it is looking more and more likely if you follow the events around the world. Not in any USSA propaganda outlets, but the general feel of those coming from outside the MSM Iron Curtain.
Apneaman on Sat, 6th Dec 2014 2:22 am
MSM Iron Curtain. lol- love it. Kudos if you originated it.
Makati1 on Sat, 6th Dec 2014 5:21 am
Apneaman, I’m never certain where my ideas come from, because I read so many articles and books. About 10,000 articles every year and at least a dozen new books. I just thought, since we are back in the Cold War that we needed an Iron Curtain, but on the Western side this time. Maybe it will catch on. lol
bobinget on Sat, 6th Dec 2014 7:46 am
http://seekingalpha.com/article/2730125-oil-markets-sentiment-and-lame-thinking-are-currently-in-the-drivers-seat
Just as there are no short explanations for our oil dilemma, there are no quick fixes.
Give the link above a chance. It’s hardly definitive
but what is today.
bobinget on Sat, 6th Dec 2014 7:55 am
I’ve made clear in the past, shrinking oil prices are temporary. one wishes lower oil prices would encourage reduced consumption… for the sake of the planet.
Do you believe consumption has really fallen?
Perhaps as gasoline prices shrink, folks will be encouraged to buy more housing.
Where will that end?
Guys may not get into the Pick Up and go cruise
but they will spend more on Christmas gifts.
That will end well i’m sure.
Davy on Sat, 6th Dec 2014 8:31 am
Bob said – I’ve made clear in the past, shrinking oil prices are temporary.
Bob, do you have any clarifications for that bold statement? Are you saying long term or short term or both? I can see your point if production destruction proceeds beyond a safe point with a price spike occurring when vital supply levels are breached. Do you really think prices can continue to rise long term if economic damage has been done both to the oil sector and the economy? A few extra dollars in consumer’s hands will not do much especially when other costs are in a steady rise for example health care, food, and education. Lower gas prices do little to stimulate the rich or industry. Only cheap money, rates, and central bank protection will move that group.
I do agree with you in the short term because of the supply damage that is coming. Prices overshoot and over correction are typical, historical, and economically justifiable there is nothing new with that. I do want to know why you will not at least acknowledge the quantifiable and supportable evidence given by Short from thehillsgroup.org. I am referring to Hills group’s contention long term depletion of economic value of oil leading to permanently lower prices. You do not even mention these conditions.
Bob, your view is one of “this is what has been the case and this is how this should happen now” is simplistic. You appear to be in denial of quantifiable trends in the dynamics of energy and the economy. So in conclusion I will accept rising oil prices at some point but I will not buy into another rising trend beyond or near the price we saw in the most recent bumpy plateau. I for my part admit that I may be crying wolf as doomers have done for years now. Yet, the evidence is pointing to this time being different.
Apneaman on Sat, 6th Dec 2014 9:48 am
bobinget
I Gave your link a chance, but when the guy uses a Geico commercial and “the analysts and the opinion makers who show up daily on CNBC and Bloomberg” it’s pretty obvious he is writing for minds exclusively informed by TV. Also there was no option provided to close the registration box. Join or leave. That kind of shiftiness and trickery is a good indication of a dishonest person. AKA a cunt.
bobinget on Sat, 6th Dec 2014 10:12 am
Davy,
As we know, it’s impossible to give a simple reply
as to ‘why’ (i believe) oil prices will go higher, near term.
Lets take one ‘reason’ at a time.
Geopolitical: definition of “World War”…….
http://en.wikipedia.org/wiki/World_war
another:
noun
“a war involving many large nations in all different parts of the world. The name is commonly given to the wars of 1914–18 and 1939–45, although only the second of these was truly global.”
Now, I’ll freely admit this ‘world war’ is
Asymmetric warfare war “between belligerents whose relative military power differs significantly, or whose strategy or tactics differ significantly”.
Asymmetric warfare – Wikipedia, the free encyclopedia
en.wikipedia.org/wiki/Asymmetric_warfareWikipedia
IOW’s ‘old’ 20th century weapons, (mighty navies, armies, nuclear weapons, heavy bombers, tanks etc) are already obsolete.
The following is a list of metastasized terrorist groups;
http://en.wikipedia.org/wiki/List_of_designated_terrorist_organizations
As you see, these groups proliferate almost daily.
Many, but not all, are financed by oil money.
No income, no fighters. (no time to
analyze why more then half the young men almost all the women in certain countries are unemployed, lacking skills or anything save Islamic teachings).
Suffice to say, conditions invite growing numbers of recruits.
Because welfare (such as it is) education,
food imports, government debt, payrolls are totally dependent on oil revenues, it’s not difficult envision
(i love this word) ‘unrest’ in EVERY oil exporting
nation.. (except Norway and Canada)
We are already seeing Venezuela’s society break down along economic status lines.
Nigeria has a full fledged civil war.
Saudi neighbor, Yemen now in al Qaeda control,
breaking down.
Libya, a failed state. Ripe for ISIS taking control.
Iraq takes more casualties today then during US occupation. How do you think that goes down?
Another OPEC member Algeria:
Al-Qaida in the Lands of the Islamic Maghreb (AQIM) and Movement for Unity and Jihad in West Africa (MUJAO) are both active in and operate throughout Algeria. In January 2013, an AQIM-linked organization “Those Who Sign in Blood”, led by Moktar Belmoktar, attacked a gas production facility near In Amenas, Algeria. The group held dozens of western and Algerian hostages for four days; this attack resulted in the deaths of dozens of hostages, including three U.S. citizens. Mokhtar Belmokhtar remains a threat and is at large in the region. http://travel.state.gov/content/passports/english/alertswarnings/algeria-travel-warning.html
I could go on but Davie, I’m sure, already gets the picture.
Davy on Sat, 6th Dec 2014 10:23 am
Bob, your picture is above ground POD which points to production destruction leaving an economy damaged and unable to grow in itself further damaging production and growth. Bob, this is a vicious cycle down not a reason for higher oil prices.
You can’t decouple importers and exporters. The war excuse for more economic activity is a dud. Bob, better example needed. Maybe you and Marm need to team up for you defense of growth and higher oil prices. They have landed on death ears with me.
bobinget on Sat, 6th Dec 2014 10:47 am
Apneaman,
If you do not believe popular culture, in this case small investors who have suffered great losses in the last several weeks are not deeply influenced by
‘Mass Media’ then we have little to agree on.
I’ve been saying from the outset…”this is NOT 2008″ There has been no financial collapse. In fact the dollar acts like king of the hill. Banks are recording record profits, housing sales way higher.
unemployments lower, supposed pro business Republicans in both law-making bodies, oil prices going lower, what’s not to love?
(old joke) “you know that crap game at
Jimmies is crooked, why do ya go? “It’s the only game in town”, replies the mark..
bobinget on Sat, 6th Dec 2014 10:51 am
Another stock market joke;
Overheard on line at horse track betting window;
“Gotta break even today, I need the money”
J-Gav on Sat, 6th Dec 2014 10:55 am
Martenson clearly points out THE major failing of our monetary system: ” … either expanding or collapsing; it has no steady state.”
In a debt-based system, the economy must always grow, hence the necessity to keeping lending money, even to people who have no chance of ever paying back the loan. Bubble after bubble is the inevitable outcome of such stupidity/criminality.
But crime does pay: all this is good for the banks, large corporations, hedge funds and Wall Street; very bad for everbody else.
It’s past time for a sea-change in the issuance of money circulation (well, OK, ‘only’ 97% of it -the rest is the small change we carry around and which is actually created by the government).
The issuance but also the credit conditions attached to loans, must be returned to its rightful owners – we the people.
Note that this would not be a new ‘reformette’, tinkering around the edges. It requires a systemic overhaul which TPTB will fight at every turn. But without it, there is little or no chance of effectively confronting the major issues of our time: from poverty, infrastructure collapse, rotting education and health systems to biodiversity loss and climate change.
bobinget on Sat, 6th Dec 2014 10:59 am
Well then, WADR Davy, we disagree.
The US dollar and economy is the cleanest shirt in a pile of exceptionally dirty laundry. Go figure.
I’ll be willing to concede it was H drilling and H fracking that save the country from a far deeper depression. Now, we need to celebrate cheaper oil and gas while it’s here instead of looking for who to blame for Benghazi or gender or marriage equality.
bobinget on Sat, 6th Dec 2014 11:19 am
J-Galv’s last comment about our major issues,
climate change, aging infrastructure, biodiversity loss, poverty, education are more then valid.
It’s just not what this topic is directly concerned with.
Topic: “Oil and the global slowdown”
I’ll simply maintain lower oil prices are not the cause of any perceived ‘slow down’. WE can’t have it both ways. (defying inflation in the last seven years)
“The world cannot stand oil over $115!” or, just as
silly, “lower oil prices are a sure sign of impending global collapse”…
We’re a mass of contradictions.
Davy on Sat, 6th Dec 2014 11:57 am
Bob, do you understand the thinking with the Goldilocks range oil prices have to remain in for a healthy producer and consumer relationship? I would maintain you corns can’t have it both ways. You can’t have a healthy economy when oil is up and healthy economy when oil is down if it is out of this range.
GregT on Sat, 6th Dec 2014 12:45 pm
J-Gav’s comment is spot on. The biggest threat to our economies is not the price of oil, but our monetary systems themselves. Infinite exponential growth is impossible, yet that is exactly what these systems require.
It is the central banks themselves that will ultimately bring our societies down. Not the availability, or the cost of oil. It is also the central bankers that will once again drive us into war.
We have no hope of solving any of our predicaments from resource depletion to war, as long as usery is allowed to continue, and the bankers control the world.
J-Gav on Sat, 6th Dec 2014 12:55 pm
Bob – I take note of your careful phrasing: ” … not what this topic is DIRECTLY concerned with.”
Though I appreciate that, I still must take issue since “global slowdown” (also part of the title) IS directly related not only to monetary, economic and financial imbalances and injustices, but also to the way our energy future is being handled in our energy present. To make a long story short, the same competitive dog-eat-dog logic applies.
GregT on Sat, 6th Dec 2014 12:57 pm
“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
Napoleon Bonaparte
bobinget on Sat, 6th Dec 2014 2:06 pm
GregT offers a pre Fed quote from Napoleon Bonaparte.
Bob Inget offers post Federal Reserve quotes:
“It’s pretty much my favorite animal. It’s like a lion and a tiger mixed… bred for its skills in magic.”
If you don’t know the majesty and pride of the rare and fearsome liger, now you know.
“You gonna eat your tots?”
“I don’t even have any good skills. You know like nunchuck skills, bow hunting skills, computer hacking skills. Girls only want boyfriends who have great skills!”.
“What are you going to do today, Napoleon?”-Kid on bus
“Whatever I feel like I wanna do GOSH!”
Napoleon Dynamite
GregT on Sat, 6th Dec 2014 2:11 pm
We certainly have come a long ways since Napoleon Bonaparte. And they call it evolution. Go figure.
bobinget on Sat, 6th Dec 2014 2:43 pm
J-Gav makes such important points,we can’t
ignore.
No doubt, we are living in ‘interesting times’.
From a thousand year drought in California that promises to cause untold hardship on millions.
Immigration from one most hostile region to one less so but still uninviting.
Income disparity. At all time highs in the US but completely out of control in Asia, Africa, Indian subcontinent.
One hundred year storms every five.
Looming and actual food shortages.
A population that can no longer be supported because ambient climate is changing faster
then adaptation.
In US, bankers intend to eliminate as many government controls as possible during the next two years.
Seventy million automobiles (not counting trucks motor bikes, tractors, equipment) will be on the world’s roads that were not in 2013.
Airlines will put on more flights, making money for the first time since invention of wheeled luggage .
AI wipes out humanity not a second too soon.
GregT on Sat, 6th Dec 2014 3:11 pm
“AI wipes out humanity not a second too soon.”
Hawking is losing it.
Davy on Sat, 6th Dec 2014 4:00 pm
Greg, I agree the “AI” that the less than mighty Hawking is preaching today is just more corn porn but with tech exceptionalism. We know the energy intensity and complexity of the whole hardware, software, and people power behind the computer age. This will be among the first to break down. Ruined economies of scale, disrupted just-in-time distribution, global grid instability, energy shortages, and critical resource unavailability will render one of highest of human achievements cold and useless in a short time.
I imagine there will be a real resistance to the strong forces of economic abandonment from a broad segment of the global population. This is because of the scale of reliance of our lives on digital technology. Yet, entropic decay will render IT useless without constant energy, complexity, and human management.
Our grand technological dreams of space travel, fusion, medical breakthroughs, and savage military tech are near an end. When the shift occurs to descent with a crisis at every level these fantasies will evaporate quickly. There is no better way to focus human attention then crisis. Fantasy and fun melt away instantly and the cold hard realities of food, shelter, and security take over. We are near this point friends.
Kenz300 on Sat, 6th Dec 2014 7:21 pm
Quote — “The world economy is slowing down and the authorities are fretting.
Japan, Italy, and Greece are all in recession. China is slowing down according to official statistics, and even more according to whispered accounts.
Germany, France and the Netherlands are all at stall speed.”
—————————
The drop in oil prices will help all these countries grow their economies…….. The lower oil prices will give a boost to the world GDP and help consuming countries recover from the Great Recession.
The drop in oil prices is like a tax cut for consumers of the world…… very stimulative for economies.
Perk Earl on Sat, 6th Dec 2014 10:29 pm
“AI wipes out humanity not a second too soon.”
“Hawking is losing it.”
I agree Greg T. It’s strange how people seem to anoint someone to be an expert on a topic when in fact they may not, like Yergin. So ought of a sudden this person people have silently declared as an oracle, Hawking, knows everything, like he’s the new Einstein or something. No, he’e been losing it for a long time now. Every few months he rolls out via his handlers some new drivel. Maybe he’s seen too many sci fi’s with computers taking over humanity like the one’s with Schwarzenegger.
“Suddenly that robot I bought had me in a rear naked choke and I had no choice but to give in to his demands and plug him back in for a recharge!”
Perk Earl on Sat, 6th Dec 2014 10:39 pm
“The drop in oil prices is like a tax cut for consumers of the world…… very stimulative for economies.”
Kenz, how does it help oil exporters where the price at the pump is already low? With an oil price north of $100 new production was barely keeping up with depletion, so how is a much lower price going to secure future supply? No doubt a lower price at the pumps in importing countries should have some positive economic impact, but how much will that eventually lead to high enough oil prices to secure future supply?