$this->bbcode_second_pass_quote('Pops', 'I')'m a little surprised, I gotta admit, oil and commodities are looking soft today and the expansion seems to be fizzling out. I really hoped the economy would hold tough till oil got up at least to where it was last time before growth choked.
Not a very good sign I'm afraid if the world can't stomach $120 oil (OPEC Basket) for a month. I wondered whether we might actually be more resilient after the punctuated evolution event we saw at $147 killed off some of the weaker consumers and we could stand $160 or $180 for a while. Looks like that idea may turn out to be wrong.
Really I was just blabbin away when it struck me that it could be entirely possible the economy just keeps getting beat up to the point the ever-higher-price bit just can't happen.
What about China? It's economy grew at the blistering pace of 9.7% last quarter, with minimum wages up 24% from last year. Surely their economy should be feeling the same drag high oil prices cause. Yet their economy is still growing like a rocket. And their love of buying gas guzzling automobiles is accelerating, not diminishing. I'm thinking Outcast_Searcher was closer to the truth that economics is more complicated than simply mirroring oil price movements. 
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Peak Economy (was Oil Price Softening)
Re: Oil Price Softening? (from Challenge Thread)
by kublikhan » Thu 05 May 2011, 20:50:05
$this->bbcode_second_pass_quote('', 'C')hina posted yet another quarter of stellar economic growth in the first quarter of 2011, with its gross domestic product (GDP) growing 9.7%. Of course, while China may be experiencing some acute growing pains, its economy regressed the least in the wake of the global financial crisis - and it will continue to operate as the engine of global economic growth going forward, even if the United States relapses into recession.
China already has made some remarkable progress in rebalancing its economy. The country's trade surplus is narrowing and wages are on the rise.
The central government is targeting an increase in minimum wages of 13% a year through 2015. Additionally, Chinese Premier Wen Jiabao aims to increase per capita household income by 7% a year in real terms during that period. He's also pledged to improve the social security and healthcare systems to help low-income households and to raise the personal income tax threshold - all in an effort to give the country's 1.3 billion people more spending power.
"We will ensure that people's income increases keep pace with economic growth and people's salary growth keeps pace with the productivity rise," Wen said last month in an online chat with the Chinese public. China's 31 provinces boosted minimum wages by an average of 24% last year.
Rolls Royce saw its China sales rise 600% last year, putting it above Britain as the company's second-biggest customer behind the United States.
China's luxury car sales are expected to rise to more than 909,900 units this year, up from about 727,200 last year, according to forecasts by IHS Automotive. And that number could climb to 1.6 million by 2015.
China is already the world's largest auto market, with 18 million units sold last year. That figure is expected to grow to 23 million by 2015.
The oil barrel is half-full.
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Re: Oil Price Softening? (from Challenge Thread)
by rockdoc123 » Thu 05 May 2011, 21:36:15
funny how all those who were adamant that the recent price rise was completely due to lack of supply and hence imminent peak oil have gone quite. The news out today and commentary indicates the market was looking for a reason to panic. They pushed up oil prices beyond where they needed to be to match demand and supply because of speculation the Middle East crisis would pull too much oil off the market and now they are selling like madmen with an explanation that the death of Bin Ladin means a big piece of the threat uncertainty has been removed (whereas most people believe it has likely increased because of that event) and OH....look more unemployment (which apparently was due to one time events related to the shutdowns in Japan) and gasoline demand is down (even though distillate and jet fuel demand remains quite strong). I think this is a classic example of what happens in speculative markets. Once things have been in one position too long (high prices, low prices) the speculators get antsy and close their positions and when a few of them do it herd mentality sets in. It doesn't take much of an excuse to make that happen.
I think the market will test the low 90's and then return on its way back up once the short selling is sorted out.
I have an instructive project for folks to try. Take a number of oil companies you are familiar with and plot up the differential between WTI and their share price versus WTI. Everything was marching along pretty well until early 2011 where the two diverged and stayed that way. I think this tells us something about market drivers.
I think the market will test the low 90's and then return on its way back up once the short selling is sorted out.
I have an instructive project for folks to try. Take a number of oil companies you are familiar with and plot up the differential between WTI and their share price versus WTI. Everything was marching along pretty well until early 2011 where the two diverged and stayed that way. I think this tells us something about market drivers.
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Re: Oil Price Softening? (from Challenge Thread)
by thuja » Fri 06 May 2011, 00:15:12
I haven't gone "quiet." The average price of oil this year far supercedes last year's average. And if you look at the overall price average, it has risen steadily for the last decade.
Price volatility is indeed one of the hallmarks of supply issues. I expect many more boom and busts to come.
I think Pops has a good theory that each wave of boom/bust may be coupled with ever increasing demand destruction due to economic depressions. And this may lead to price never being able to surpass a certain dollar figure for too long without causing a crash. This would be a deflationary cycle coupled with ever worsening depressions.
I somewhat agree that the world cannot handle extremely high price of oil at a sustained level. However, if governments act to pump the market full of ever increasing liquidity, we could see extreme inflationary pressure on all commodities, including oil. The debate continues...but I place my bets on inflation at this stage of the game.
And yes Rockdoc...Peak Oil has a very strong effect on price...and specifically on volatility of price. This has been....predicted by many of us.
Price volatility is indeed one of the hallmarks of supply issues. I expect many more boom and busts to come.
I think Pops has a good theory that each wave of boom/bust may be coupled with ever increasing demand destruction due to economic depressions. And this may lead to price never being able to surpass a certain dollar figure for too long without causing a crash. This would be a deflationary cycle coupled with ever worsening depressions.
I somewhat agree that the world cannot handle extremely high price of oil at a sustained level. However, if governments act to pump the market full of ever increasing liquidity, we could see extreme inflationary pressure on all commodities, including oil. The debate continues...but I place my bets on inflation at this stage of the game.
And yes Rockdoc...Peak Oil has a very strong effect on price...and specifically on volatility of price. This has been....predicted by many of us.
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Re: Oil Price Softening? (from Challenge Thread)
by the48thronin » Fri 06 May 2011, 02:58:08
$this->bbcode_second_pass_quote('thuja', 'I') haven't gone "quiet." The average price of oil this year far supercedes last year's average. And if you look at the overall price average, it has risen steadily for the last decade.
Price volatility is indeed one of the hallmarks of supply issues. I expect many more boom and busts to come.
I think Pops has a good theory that each wave of boom/bust may be coupled with ever increasing demand destruction due to economic depressions. And this may lead to price never being able to surpass a certain dollar figure for too long without causing a crash. This would be a deflationary cycle coupled with ever worsening depressions.
I somewhat agree that the world cannot handle extremely high price of oil at a sustained level. However, if governments act to pump the market full of ever increasing liquidity, we could see extreme inflationary pressure on all commodities, including oil. The debate continues...but I place my bets on inflation at this stage of the game.
And yes Rockdoc...Peak Oil has a very strong effect on price...and specifically on volatility of price. This has been....predicted by many of us.
Price volatility is indeed one of the hallmarks of supply issues. I expect many more boom and busts to come.
I think Pops has a good theory that each wave of boom/bust may be coupled with ever increasing demand destruction due to economic depressions. And this may lead to price never being able to surpass a certain dollar figure for too long without causing a crash. This would be a deflationary cycle coupled with ever worsening depressions.
I somewhat agree that the world cannot handle extremely high price of oil at a sustained level. However, if governments act to pump the market full of ever increasing liquidity, we could see extreme inflationary pressure on all commodities, including oil. The debate continues...but I place my bets on inflation at this stage of the game.
And yes Rockdoc...Peak Oil has a very strong effect on price...and specifically on volatility of price. This has been....predicted by many of us.
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Courtesy and Courage Sincerity and Self-control Honor and Loyalty a Code to Live By!
What do the miners do when the canary dies? EVACUATE THE MINE not argue about the color of it's feathers or buy a parrot instead.
Where is my pitchfork and torch? I need them for a visit to the castle!
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Re: Oil Price Softening? (from Challenge Thread)
by Pops » Fri 06 May 2011, 08:24:42
$this->bbcode_second_pass_quote('kublikhan', 'I')'m thinking Outcast_Searcher was closer to the truth that economics is more complicated than simply mirroring oil price movements.
All right, you don't have to agree with me but you don't need to condemn me for dabbling in economics!
I wrote the opening ramble in response to poor economic news before the big drop in oil price, it follows that oil fell but I wasn't predicting anything, just speculating. Maybe I should change the name of the thread to "Peak Oil Price" or does that sound too corny?
HeHe, and along the lines of the supply/speculation argument - I guess speculator supply must have fallen quite a bit yesterday!
Anyway, you have a point about China still growing, khan, but realize in many places the minimum wage was only $120 a month! And even raising it to $150 worries them:
$this->bbcode_second_pass_quote('', 'T')he double-digit increases in major manufacturing centers like Guangdong, and the cities of Shanghai, Tianjin and Beijing follow wage hikes last year that have further raised labor costs, accelerating a shift by makers of inexpensive goods to lower cost places like Vietnam and Indonesia.
Lore also has a point, the cycles are becoming shorter, official recessions in '80*, '91, '00, '08, '11-'12?
So anyway, to condense the idea, the economy will contract with each oil price spike and won't fully recover before the next price peak - so each price peak will be lower than the previous.
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-- Abraham Lincoln, Fragment on Government (July 1, 1854)
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