Get your crystal balls out

by **spot5050** » Fri 24 Jun 2005, 14:12:33

Look at the chart below and at the same time think about this question;

"Bearing in mind that expensive oil has a nasty habit of causing a recession, how high can the price of oil go?"

Link to chart: oil prices adjusted for inflation

I think that;

1. I need to get out more.
2. Before I go out, I would like to understand the above.

(Yes the chart is a little out of date, and yes this question has been debated a few months back, but the world moves on, people change, opinions change, and anyway no consensus was reached last time so I think it's worth revisiting.)

by **turmoil** » Fri 24 Jun 2005, 14:28:45

if this is a two part question, i do not understand the second part.

by **Carlhole** » Fri 24 Jun 2005, 14:32:26

I think crude is going to spike upwards to about $100 in the near future give or take $10, then it will settle back to around $65 and begin a slow steady rise. As this happens, recognition that we will HAVE to do something about our oil consumption will take hold seriously in the mainstream news.

...wait a sec, my crystal ball is fogging up, oh shit, it's showing me pictures of genetically modified human beings with big large eyes and no genitals.

by **Trindelm** » Fri 24 Jun 2005, 15:38:24

yes.. and they are walking into large.. silvery saucer shaped vehicles theat fly.. flying.. saucers yes! they. are. in. "flying saucers".
I see them travelling through time, gang-probing country-folk and stealing cattle.

And one is talking to me.. his name is freh.. no fred yes and he is hungry there is a famine on his world or the world to be and he must replenish his hunger with mountains of Straw Berry Ice Cream They are stealing dairy cows and ransacking strawberries from our present earth!
Such visions and horrors!! Enough!!!

This is not a gift but a curse...why lord whyyyy!!!

by **RiverRat** » Fri 24 Jun 2005, 16:13:00

By looking at the graph, it appears that the US was able to withstand almost 4 years of $60 and above oil prices (inflation adjusted from late ’79 – ’83). Also, we were able to withstand almost 3 years at $70 and above. By ‘withstand’, I mean society not completely collapsing.

It took about a year to spike from $50 to $94.48.

I would postulate that we could withstand higher prices but for shorter durations. I would say that oil at $95-$100 in current dollars would put the brakes on rampant demand. The wild card in the equation is just how leveraged the typical consumer is. We have far more personal and government debt than we did in the mid 70’s to the early 80’s.

On a back off the envelope calculation, $100 oil would equate to about $4 per gallon gas. I think we could only sustain that for a sort period of time (maybe a little over 6 months).

by **Tanada** » Fri 24 Jun 2005, 17:14:17

I think there is a boiling frog effect at work here as well. What I mean is, to boil a live frog you start out with a pan of cold water, the frog doesn't notice the gradual change soon enough to jump out before it cooks.

If the price keeps rising $10.00 US per year, or even $15.00, I think people will adjust, the economy will slow but not stop and alternatives will move in as the price crosses profit thresholds for each substitute.

Moving from $27.00 to $ 60.00 over 24 months has not slowed the world economy much at all, if we had jumped from $30 straight to $60 I think we would be in a deep recession right now, because consumer spending is based in large part on confidence in the future. A gradual rise is not thrilling, but it isn't terrifying either, and people make mental adjustments.

The real problem is, will the price continue to grow in a survivable manner, or will it be a case of TSHTF and panic buying drives the price sky high in a month, stalling the world economy and crashing us into depression?

by **jaws** » Fri 24 Jun 2005, 17:58:37

Remember we are not yet at the peak. Total global oil output has yet to fall, all we have seen is a deceleration in supply growth and rapid acceleration in demand growth. The big spikes in prices and economic hardship come when the decline begins. It will be like the 1979 event every year.

by **Tanada** » Fri 24 Jun 2005, 18:19:24

$this->bbcode_second_pass_quote('jaws', 'R')emember we are not yet at the peak. Total global oil output has yet to fall, all we have seen is a deceleration in supply growth and rapid acceleration in demand growth. The big spikes in prices and economic hardship come when the decline begins. It will be like the 1979 event every year.

by **Carlhole** » Sat 25 Jun 2005, 12:36:31

I've noticed that recent news reports that have compared today's prices to the record highs of the early eighties have steadily ratcheted those inflation-adjusted records higher. Some have used a figure as low as $65, most have said crude traded for about $80 in 2005 dollars. Now stories are quoting the mid-nineties. The variance is the result of people using different inflation-factors.

I wonder what figure a very rigorous analysis would arrive at for the all-time record price of crude adjusted to 2005 dollars?

by **agni** » Sat 25 Jun 2005, 17:44:04

$this->bbcode_second_pass_quote('Carlhole', 'I')'ve noticed that recent news reports that have compared today's prices to the record highs of the early eighties have steadily ratcheted those inflation-adjusted records higher. Some have used a figure as low as $65, most have said crude traded for about $80 in 2005 dollars. Now stories are quoting the mid-nineties. The variance is the result of people using different inflation-factors.

I wonder what figure a very rigorous analysis would arrive at for the all-time record price of crude adjusted to 2005 dollars?

by **Novus** » Sat 25 Jun 2005, 20:04:46

Here is what my crystal ball tells me. I increased the Red line to represent the $60 that is already here and then made prediction through 2006.

Link to chart: oil prices adjusted for inflation

by **Macsporan** » Sun 26 Jun 2005, 08:26:24

AAAAEEEEEI!

by **pea-jay** » Sun 26 Jun 2005, 16:08:59

Besting the 1979 price is a large milestone. Until then, every two-bit economist will keep refering to the fact oil is still cheaper than 1979 in inflation adjusted terms, so shut up and stop bitching.

Going above that really does put us into uncharted territory. I also agre that how we cross it also makes a difference. Bolting across 1979 in a fit a panic has whole different implications than inching across it on a quiet tuesday afternoon's worth of trading on NYMEX.

by **spot5050** » Mon 27 Jun 2005, 20:08:32

$this->bbcode_second_pass_quote('RiverRat', 'B')y looking at the graph, it appears that the US was able to withstand almost 4 years of $60 and above oil prices (inflation adjusted from late ’79 – ’83). Also, we were able to withstand almost 3 years at $70 and above.

by **spot5050** » Mon 27 Jun 2005, 20:35:15

$this->bbcode_second_pass_quote('Tanada', 'I') think there is a boiling frog effect at work here

by **jato** » Mon 27 Jun 2005, 20:44:16

I had to link those charts to fix the page formatting.

I can't stand having to scroll side-to-side for any length of time.

by **Petro** » Mon 27 Jun 2005, 20:54:51

Jato!
$this->bbcode_second_pass_quote('', 'I') can't stand having to scroll side-to-side for any length of time

by **jato** » Mon 27 Jun 2005, 21:03:37

I already move it a million times per day! If I can save a few dozen mouse moves multiplied by hundreds of viewers of this thread then I feel better.

See, just by responding I have moved the mouse even more and had to type all of this text!

:-D

(more typing a mouse clicks)

by **spot5050** » Mon 27 Jun 2005, 22:32:47

I hate it when people start those threads where you have to scroll side-to-side....

... damn it was me <g>.

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