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The Oil Shock Model-Simplified

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Re: The Oil Shock Model-Simplified

Unread postby StarvingLion » Sun 14 Aug 2016, 02:14:51

$this->bbcode_second_pass_quote('', 'O')il is NOT expensive.


Fundamentals don’t count anymore in our fraudulent markets... We don’t have markets anymore; we just have interventions... This financial engineering is all a hallmark of communism or central planning. Central planning has a track record of failing.

I look at what is transpiring in the crude oil market as yet another engineered or financial trickery on the part of the financial elites... What this breakdown in the crude oil price is going to spawn another financial crisis. It will be tied to the junk debt that has been issued to finance the shale oil plays in North America.

The banks are all insolvent.

and therefore the Oil Complex is insolvent. Oil is cheap ONLY because the elites want it to be cheap to enable the big BAIL IN HEIST. In reality, the price of oil is infinite because ERoEI has dropped below the minimum threshold necessary to maintain any kind of civilization.

There is a trillion dollars worth of junk debt that is held largely on the books of large financial institutions in the western world. When these bonds start to fail, they will trigger the next collapse. We all know all western world countries have adopted bail-in legislation in their most recent budgets.

And they are printing money non-stop now. NON STOP....and it still can't possibly save the system.

Deutsche Bank has 75 trillion in derivatives exposure and its stock is hitting new lows in 30 years. What does this tell you? Industrial Civilization cannot continue, thats what.

THE SYSTEM IS COMPLETELY ON LIFE SUPPORT WITH MASSIVE MONEY PRINTING

I predict China will launch a surprise military invasion of Australia within 3 months.
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Re: The Oil Shock Model-Simplified

Unread postby Tanada » Sun 14 Aug 2016, 10:40:34

I have to reluctantly disagree with ROCKMAN on this one. The terms cheap and expensive re relative to the income of the people doing the buying and how much they value whatever it is they are buying.

Therefore if the world consumer on the whole was willing to pay $90/bbl in 2010-2014 and now only has to pay $45/bbl oil is cheap. The fact that they are still paying more inflation adjusted than they were in 2006, or 1996 or 1986 is of academic interest, but it does not effect their day to day lives in a way anyone outside of the economics world view sees. Yes they have proportionally less cash to spend on other things than they did 1, 2, 3 decades ago, but the long term trend has been going that direction since the 1950's. The rate of change outside of the shocks and bubbles along the way has been slow enough to escape individual notice.
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Re: The Oil Shock Model-Simplified

Unread postby ennui2 » Sun 14 Aug 2016, 12:58:29

$this->bbcode_second_pass_quote('pstarr', 'R')eal lives were devastated by the recent oil shock.


First of all, if you're talking about 2008, that's not so recent anymore. Second of all, the devastation was from ARM resets. How much sympathy do you have for people who bought into the exurbs with liar loans during the housing runup, PStarr? I thought you were ANTI suburb? Didn't they get what was coming to them for buying into the suburban pipe-dream? Why do you pivot from mocking the BAU lifestyle to mourning for them this way?

Oh, I get it, you have to evoke the image of "real lives" being "devastated" because we have yet to experience Toecutter and his band of Mutant Zombie Bikers.

Image

You can't really do anything but create that vague image, though, because the worst people can talk about these days is under-employment since unemployment is low and the stock market is raging.

Pound for pound there's probably more people put out of work by CHEAP oil than expensive oil (in the oil industry sector) and no, I don't shed any tears over them.
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Re: The Oil Shock Model-Simplified

Unread postby ROCKMAN » Sun 14 Aug 2016, 14:01:05

T - "The fact that they are still paying more inflation adjusted than they were in 2006, or 1996 or 1986 is of academic interest, but it does not effect their day to day lives in a way anyone outside of the economics world views it...".

So do I understand you correctly: you don't feel consumers have the daily lives much affected today from buying refinery products made from $40/bbl oil compared to what they were paying in 1998 for products made from $17/bbl oil? IOW paying $0.88/gallon MORE for a gallon of gasoline ($125 billion/year MORE in 2016 then they would have for paid for the same volume in 1998) wouldn't have a meaningful impact? I don't think you need a Ph.D in economics to appreciate the magnitude of $125 BILLION PER YEAR. I'm sure someone working at Walmart for $9/HR can appreciate it. LOL.

Not sure but I don't think that's what you meant to imply.
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Re: The Oil Shock Model-Simplified

Unread postby ennui2 » Sun 14 Aug 2016, 16:00:04

$this->bbcode_second_pass_quote('pstarr', 't')he real world, a place where lots of folks can no longer afford expensive petroleum.


Lots of folks? Where are these people? Produce these people. Show me how their economic situation is somehow a product of peak-oil rather than them having already been poor for years if not decades.

And Rockman's creative accounting is academic. People's behavior tells the whole story of whether they're really suffering at the pump or not.

http://www.nytimes.com/2016/06/05/busin ... again.html

Last year Americans drove 3.15 trillion miles on this so-called "expensive" petroleum.

Seriously, not all of those miles were driven by the demonized techno-nerd demographic you love to lump me into as an epithet. It's not a 1%er thing. Gas is cheap--for everyone.
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Re: The Oil Shock Model-Simplified

Unread postby AdamB » Sun 14 Aug 2016, 16:29:16

$this->bbcode_second_pass_quote('pstarr', 'N')ot just economists Tanada. Real lives were devastated by the recent oil shock.


In an industry that folks love to despise, there isn't any sympathy when their jobs and careers are devastated.

But those who BENEFIT from their hard work, innovation, and technology....they are far more in number, and weren't devastated in the least. Here is one those of HUNDREDS OF MILLIONS that benefit from the glut.

Image
Plant Thu 27 Jul 2023 "Personally I think the IEA is exactly right when they predict peak oil in the 2020s, especially because it matches my own predictions."

Plant Wed 11 Apr 2007 "I think Deffeyes might have nailed it, and we are just past the overall peak in oil production. (Thanksgiving 2005)"
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Re: The Oil Shock Model-Simplified

Unread postby Outcast_Searcher » Sun 14 Aug 2016, 16:55:07

$this->bbcode_second_pass_quote('ROCKMAN', '')$this->bbcode_second_pass_quote('Tanada', ' ')- "The fact that they are still paying more inflation adjusted than they were in 2006, or 1996 or 1986 is of academic interest, but it does not effect their day to day lives in a way anyone outside of the economics world views it..."


So do I understand you correctly: you don't feel consumers have the daily lives much affected today from buying refinery products made from $40/bbl oil compared to what they were paying in 1998 for products made from $17/bbl oil? IOW paying $0.88/gallon MORE for a gallon of gasoline ($125 billion/year MORE in 2016 then they would have for paid for the same volume in 1998) wouldn't have a meaningful impact? I don't think you need a Ph.D in economics to appreciate the magnitude of $125 BILLION PER YEAR. I'm sure someone working at Walmart for $9/HR can appreciate it. LOL.

Not sure but I don't think that's what you meant to imply.

I'll try to defend Tanada here, because I agree with the points made in the quotes above.

First Rock, why cherry pick 1998? When I look at a chart of the inflation-adjusted price of oil, 1998-99 looks like a big dip, both in inflation adjusted and in nominal terms. If I look at the prices for the last decade, $40 looks more like a minimum than something high. If I look at prices for the 20 years prior to that ('86 to '06), it looks like the typical inflation adjusted price is at least $30 (by eyeballing the linked chart). And of course, the prices the decade before that made anything close to $40 look like a GIFT.

In fact, per the chart, the average since 1946 was $41.78, and the average since 1980 was $53.08. Quite a difference than cherry picking a very low price from a big dip year, and acting like that was the "normal" experience from decades ago.

http://inflationdata.com/articles/chart ... ces-chart/

So first, there aren't higher prices to defend vs. the past 36 years or the past 70 years, when the prices are hovering a little above $40.

Second, even if oil products WERE meaningfully more expensive, the US economy in consistently becoming less energy intensive (less energy consumed per dollar of GDP). So energy produces less financial stress on consumers overall than it used to.

And finally, even IF energy prices were somewhat higher, the middle class can afford it, based on the overall economy.

For example: when US consumers, by the tens of millions, are buying new cars at north of $30,000 on average, and driving up the already significant cost of single family houses and apartments via net demand (so they clearly can afford such prices/rents), it's not like they can't afford gasoline at $2.00ish a gallon or Natural Gas at current prices to heat/power those homes and cars.

And I'm not talking about the very poorest people who may choose to ride a bus or a bike or walk instead of owning a car. I'm talking about consumers overall -- the same class of consumers who have been buying energy products in the US for the past 70+ years. (And we've had rich, middle class, and poor people throughout that time).
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Oil Shock Model-Simplified

Unread postby Outcast_Searcher » Sun 14 Aug 2016, 17:03:32

$this->bbcode_second_pass_quote('pstarr', 'N')ot just economists Tanada. Real lives were devastated by the recent oil shock.


In the 2008-2009 crash, the lives that were devastated were because of the housing crisis and the banking fiasco. The "oil shock" was a very distant second place.

At that time, I lived, as I always had as an adult, to save money -- in very lower middle class apartments.

I had friends and neighbors who didn't make much money beyond what it took to get the bills paid.

I knew people in the spring and early summer of 2008 who parked their mid-sized SUV's and bought a beater to drive on their 50+ mile daily commute, to adjust to the soaring price of gasoline.

Aaaaaaaaaaaannnnnnnnnnnnnnnnnnndddddddddddddddddd that was about it.

Such people weren't being devastated or driven out into the street, or even being forced to move. They were merely inconvenienced for several months.

..

I realize that doesn't fit into the doomer hard crash meme, but that was very much the reality in lower-middle class America. I had a front row seat, based on where I chose to live.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Oil Shock Model-Simplified

Unread postby ROCKMAN » Sun 14 Aug 2016, 19:47:10

"And Rockman's creative accounting is academic." Nothing creative about the "accounting". I'm truly sorry if the FACTS don't support your spinning efforts.

"People's behavior tells the whole story of whether they're really suffering at the pump or not." Exactly. It is a FACT that those than afford motor fuel are driving more. Just as it is a fact that those consumers are spending $125 BILLION MORE TODAY for that privaledge then they would have in 1998. And that's $125 BILLION (with much being transferred out of the country) that they can't spend on other necessities.
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Re: The Oil Shock Model-Simplified

Unread postby ROCKMAN » Sun 14 Aug 2016, 19:56:33

"First Rock, why cherry pick 1998?" The Rockman didn't cherry pick anything. Read the post again: T picked 1998 for comparison and STATED that the difference between prices then and now would have little impact on the public.

Do you think $125 BILLION in HIGHER fuel cost has an insignificant effect on the economy especially given a large portion of those monies were transferred to foreign companies?
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Re: The Oil Shock Model-Simplified

Unread postby ennui2 » Sun 14 Aug 2016, 19:59:00

$this->bbcode_second_pass_quote('pstarr', 't')here is a a very large, very dangerous world outside the United States


If I keep backing you into a corner, sure, you can find poor people who can't afford gas even at $2.09 a gallon. I think you'll find that having gasoline at all is far less important than much more basic needs, like running water or enough basic calories to avoid starvation and to be able to run fast enough to avoid the rape/machete gangs. You know, Maslow's heirarchy of needs stuff. People at the very bottom were not put there by the $2/gal price-swing of gasoline low/high.

$this->bbcode_second_pass_quote('pstarr', '
')That world of hurt has the stuff you/we need to survive. ou both better start recognizing your connections and dealing with the consequences of peak oil. Or you will die.


Like what? The more you get pushed into a corner the more you sound like a revival-tent preacher.

Image

The overarching theme is that I'm simply not a righteous enough person, right? Why must you keep moving into the realm of handing out judgments? That has nothing to do with simply trying to analyze the situation for what it is. It has nothing to do with ascribing judgment. Judgment is all about ideological axes to grind. You can't seem to grasp that you do in fact harbor such an axe. But language like this is you brandishing that axe with big blinking lights over it. And when you do that, your objectivity and your credibility dissolves instantly.

$this->bbcode_second_pass_quote('', '
')And that's $125 BILLION (with much being transferred out of the country) that they can't spend on other necessities.


From Wikipedia: The United States' GDP was estimated to be $17.914 trillion as of Q2 2015

So the total economic hit that you're talking about is a glorified rounding error.

Also, your use of the word necessities... The first thing people cut back on when they feel gas is too expensive is unnecessary travel. That's why I keep pointing to the road-trip statistics. THEY ARE NOT cutting back on travel so they can focus on just getting to the office and back again. They are jumping in their cars and driving around for fun. So there's really no evidence that people are in any meaningful way hurting from "expensive" oil.
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Re: The Oil Shock Model-Simplified

Unread postby StarvingLion » Mon 15 Aug 2016, 00:06:54

ennui2's Scamerica:

Renewables: Scam
Climate Change: Scam
Smart Grid: Scam
Shale Gas: Scam

All "companies" being marketing shells buying back stock from Money Printing.

All banks headed to perpetual BAIL-INS.

And then...

COLLAPSE
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Re: The Oil Shock Model-Simplified

Unread postby Tanada » Mon 15 Aug 2016, 09:28:26

$this->bbcode_second_pass_quote('ROCKMAN', 'T') - "The fact that they are still paying more inflation adjusted than they were in 2006, or 1996 or 1986 is of academic interest, but it does not effect their day to day lives in a way anyone outside of the economics world views it...".

So do I understand you correctly: you don't feel consumers have the daily lives much affected today from buying refinery products made from $40/bbl oil compared to what they were paying in 1998 for products made from $17/bbl oil? IOW paying $0.88/gallon MORE for a gallon of gasoline ($125 billion/year MORE in 2016 then they would have for paid for the same volume in 1998) wouldn't have a meaningful impact? I don't think you need a Ph.D in economics to appreciate the magnitude of $125 BILLION PER YEAR. I'm sure someone working at Walmart for $9/HR can appreciate it. LOL.

Not sure but I don't think that's what you meant to imply.


You did not understand me very well at all. The average Joe6P consumer does not realize on a consistent conscious basis where his money goes. I have found it is very rare for Americans to create a monthly budget where they actually sit down and delineate how much of their net income goes for what expense. Most of the people I have interacted with buy everything with a debit card or a credit card, then once or twice a month they sit down and pay the electric bill, gas bill, mortgage, car note and so on. Because people now buy their vehicle fuel via debit or credit card they see a price and think it is good or bad compared to recent history, stick the card in and fill up. There is a very strong disconnect between pump price and knowing how much of their total expendable income they use for it. Its just part of the credit card bill, or it was already paid out of their debit card account and whatever is left is what they have to pay utilities/mortgage/car note with.

Despite this fact people do remember that a year ago gasoline at their local pump was cheaper than the year before, but as we go forward those memories are being drown out by more recent memories. If prices hold here for another 6 months or a year and then return to 2013 levels there will be much wailing and gnashing of teeth over the fact that prices are "so high" but the reality is unless they go above the 2010-2014 average most people will just consider it "normal" pricing has returned.

Yes in macroeconomic terms the price of oil makes it difficult for the rest of the economy to grow because people have less disposable income. But the overwhelming majority of people from pan handlers on the street corner to Md's working in private practice people do not directly tie pump price with lack of disposable income.
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Re: The Oil Shock Model-Simplified

Unread postby shortonoil » Mon 15 Aug 2016, 10:39:01

"...oil is just not as valuable to the economy as it once was..". I'm not sure how one would quantify such an conclusion even if it were true."

It is actually quit easy to quantify. In 2015 the world's petroleum producers found a potential 2 Gb of new oil, the world burned 34. Oil companies have cut their E&D departments to the bone. Oil has become so valueless that no one is actually putting forth much effort to even find the stuff; even though they are pumping it 17 times faster than they are finding it. Of course, one could argue that oil companies have so much money that they don't think they will need, or want anymore in the future! It could also be that those big fat rich oil men are just getting lazy.
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Re: The Oil Shock Model-Simplified

Unread postby ennui2 » Tue 16 Aug 2016, 10:42:35

Oil has become so PLENTIFUL that no one is actually putting forth much effort to find the stuff.

When actual inventories rebalance, price will go up, investment will return, and then we'll see what's left to economically recover.
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Re: The Oil Shock Model-Simplified

Unread postby ennui2 » Tue 16 Aug 2016, 12:07:54

Huh? I'm talking about oil inventories we're actually burning through, not proven reserves. And BTW, over the weekend I found a station selling gas at $1.97! Still under $2! Your argument is intellectually bankrupt.
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