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Dallas Fed: Don't Blame Bankers for $147

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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby Pops » Thu 20 Oct 2011, 09:10:33

I'd say the bottom line is supply can't grow enough to meet demand.

But you're right the economic conditions aren't unprecedented, however unlike the 70's and early '80s the oil price is not being manipulated, at least not in the massive way it was by the Arab producers did after the US peak (I guess that keeps my post on topic ;^) ). That's not the whole story of the crash but it's a big part of the non-recovery.

I agree too that we've past peak conventional oil, something lost on many who poo-poo PO but it's a big deal. In fact the end of cheap oil is such a big deal, it's the thing peak oil worriers worried about since they started worrying. Yet the poo-pooers act as though a slight uptick in supply at $100+ is a refutation of the whole idea of limits.
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby babystrangeloop » Thu 20 Oct 2011, 09:40:27

$this->bbcode_second_pass_quote('GoIllini', '
')I am trying to understand why you believe Peak Oil has occurred when BP reports oil production has increased:

$this->bbcode_second_pass_quote('', '[')b]Statistical Review of World Energy 2011 > Review by energy type > Oil
BP / 2011

In 2010, world oil production grew by 1.8 Mb/d and surpassed the level reached in 2008. Growth was the largest since 2004 ...


But if you look at their data (2MB XLS spreadsheet) you see the following for world oil:

$this->bbcode_second_pass_code('', '
Year Barrels Tonnes
2008 82015 3933.7
2009 80278 3831.0
2010 82095 3913.7
')

So the shape of all that growth is:
Image
Flat with a crater in the middle!
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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby GoIllini » Thu 20 Oct 2011, 12:34:21

$this->bbcode_second_pass_quote('Pops', 'I')'d say the bottom line is supply can't grow enough to meet demand.

But you're right the economic conditions aren't unprecedented, however unlike the 70's and early '80s the oil price is not being manipulated, at least not in the massive way it was by the Arab producers did after the US peak (I guess that keeps my post on topic ;^) ). That's not the whole story of the crash but it's a big part of the non-recovery.

Really? I agree with you on 1973/74, but when Iran got taken off the market in '79, the West was in deep trouble. Nobody was manipulating oil prices back then. Today we are seeing similar revolutions in Libya, Egypt, and unrest in many other oil-producing countries. It is not a stretch to say that there are many geopolitical issues still going on. Some of them today are about the economics of millions of poor people in those states; some of the unrest back in the '70s was also about millions of hungry poor people.

$this->bbcode_second_pass_quote('', 'I') agree too that we've past peak conventional oil, something lost on many who poo-poo PO but it's a big deal. In fact the end of cheap oil is such a big deal, it's the thing peak oil worriers worried about since they started worrying. Yet the poo-pooers act as though a slight uptick in supply at $100+ is a refutation of the whole idea of limits.

"Cheap oil" also ended in '73. The economy adapted and became more efficient. I agree with you that things are more difficult this time around- we did not have China back in the '70s and the technology requires much bigger and riskier projects in a very risk-averse market. I also think the secular bull we'll see when we come out of this will be weaker than it was in the 80s and 90s unless we get some new technology like E-Cat or ITER makes fusion economical.
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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby GoIllini » Thu 20 Oct 2011, 13:54:45

$this->bbcode_second_pass_quote('pstarr', 'C')heap oil did not end in '73.

Ok. When did a barrel of oil cost $4 after 1973?


$this->bbcode_second_pass_quote('', 'P')rices fell after the OPEC quota war which began in 1984 and maintained their historical low all during the 1990 thus pumping up the US economy in our greatest boom ever.

But not to $4/barrel.

$this->bbcode_second_pass_quote('', 'T')he Clinton years. Wrong about China; is not hurting our economy, but rather supporting it with bond buys and cheap good.

It's also competing with us for natural resources.

$this->bbcode_second_pass_quote('', 'W')rong about oil-field costs also. The infrastructure cost of past giants and mega fields, Ghawar, Canterall, North Slope, etc. dwarf today's piddling efforts.

Maybe, but they could be done incrementally. It didn't require a billion-dollar semi-submersible drilling rig to put some oil derricks into Ghawar.

$this->bbcode_second_pass_quote('', 'A')s for E-Cat/ITER; unicornian nonsense also
Probably, but black swans fly both ways.
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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby Pops » Thu 20 Oct 2011, 14:12:34

$this->bbcode_second_pass_quote('GoIllini', 'O')k. When did a barrel of oil cost $4 after 1973?

In real, inflation adjusted dollars oil never cost $4 a barrel, look at the chart I posted above.
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby Pops » Thu 20 Oct 2011, 14:13:10

Beat me to it.
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby GoIllini » Thu 20 Oct 2011, 15:10:02

$this->bbcode_second_pass_quote('pstarr', 'T')hose expensive deep-water rigs are moved around and amortized over thousands of wells and hundreds of fields, so no comparison. The very stationary dedicated Cantarell nitrogen plant is the world's largest. The Trans Alaska Pipeline System is the world's largest pipeline systems -----for one oil field. The Ghawar infrastructure is visible from space.

Those were all funded in less volatile markets with lower required inflation-adjusted IRRs. When blue-chip tech stocks are paying 4% dividends, growing earnings 10%/year and trading with a P/E of 10, you're looking for a 14% inflation-adjusted IRR to fund new projects.

$this->bbcode_second_pass_quote('GoIllini', 'G')ollini, it's kind of useless debating you. You seem to have an denialist troll agenda. All your blather is a distraction to contradict the Dallas Fed's essential point; that fundementals i.e. the demand/supply equation and not speculation, cartels, oil-company collussion are responsible for high oil prices. You have been unable to counter their argument so why try?

LOL, who's the troll here? I showed up trying to offer a perspective from someone who's paid in part to consider what fed statements mean for the markets.

I don't disagree with the fed report, but it's important to view this in the context of the late '70s too. You can't have four years of high oil prices unless they're driven by something fundamental. But eventually, the supply and demand will readjust and inflation-adjusted oil prices will stop increasing.
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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby Pops » Thu 20 Oct 2011, 15:28:27

$this->bbcode_second_pass_quote('GoIllini', 'Y')ou can't have four years of high oil prices unless they're driven by something fundamental. But eventually, the supply and demand will readjust and inflation-adjusted oil prices will stop increasing.


HaHA! That's pretty good.

Don't you get the whole drift of the 250,000 posts on this site?

The Fundamental of which you speak was mentioned by your very self no more than a few posts back:
$this->bbcode_second_pass_quote('GoIllini', 'M')ore like peak conventional oil.


It's seems to me you are letting your normalcy bias get in the way. Cheap oil is over, we're finding no more and the reserves are declining continuously. The hard-to-get oil can not replace the easy-oil fast enough so the total amount of liquids supplied will decline and/or the effective price will increase more or less continuously until either no one wants oil or no one can afford the expense of obtaining it.

What do you think all this hair pulling is about?

$5 gas?
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)
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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby Bruce_S » Sat 22 Oct 2011, 18:19:38

$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('GoIllini', 'O')k. When did a barrel of oil cost $4 after 1973?

In real, inflation adjusted dollars oil never cost $4 a barrel, look at the chart I posted above.


Your chart does not encompass the real price of oil over the modern era.If you had used the full time frame, you would see that oil was quite expensive, and trending cheaper, from 1860 to 1930. Stable in real prices from 1930 to 1970. More expensive from 1970 to present.
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Re: Dallas Fed: Don't Blame Bankers for $147

Unread postby Bruce_S » Sat 22 Oct 2011, 18:27:53

$this->bbcode_second_pass_quote('pstarr', '[')img]http://www.inflationdata.com/inflation/images/charts/Oil/Inflation_Adj_Oil_Prices_Chart_sm.jpg[/img]


Nice chart. So cheap oil ended in 1973. I stand corrected. We've been living with more expensive oil for nearly 4 decades, and people can still afford to drive monster trucks to and fro. I didn't see the Fed trying to dodge responsibility for causing prices since then, but I imagine they are more worried about their careers than their predecessors, who undoubtedly would have shouldered some part of the blame for truly being around during the end of cheep oil.
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