[gego]

Looks good to me. The fewer people who know the future the better for those of us who do. There are only so many seats on the lifeboats.

[Doctor_Platos]

An interesting pyramid scheme I found on a drudgereport.com advertisement:

http://www.newsmax.com/fir/oilbust.cfm? ... ODE=1E10-1

$this->bbcode_second_pass_quote('', 'M')any experts predict that skyrocketing oil prices are just temporary and that a massive price collapse is coming that will bring oil down to $35 to $40 per barrel dwarfing the Dot-Com crash of 2000.

[pup55]

A collapse of the price to $45 is indeed possible, but I would say you do not want to be in the world of $45 oil.

Scenario: 1981-like economic crisis which puts a lot of people out of work, and keeps them from commuting and consuming.

[mekrob]

Pup, that's exactly what I was thinking. If the economy were to take a major hit now and go into recession, I think we'd still be looking at $50. It would take something spectacular for it to drop to $40, IMO. Something on the scale of the Great Depression if not worse. But given the economic situation, that really isn't too far of a stretch. The 12 month time period may be though.

[Texas_T]

$this->bbcode_second_pass_quote('pup55', 'A') collapse of the price to $45 is indeed possible, but I would say you do not want to be in the world of $45 oil.

Scenario: 1981-like economic crisis which puts a lot of people out of work, and keeps them from commuting and consuming.

[pup55]

$this->bbcode_second_pass_quote('', 't')he only way that oild would drop to that level would be DUE to a major recession

[Jellric]

$this->bbcode_second_pass_quote('', 'W')hy the current oil price spike has not caused a recession (yet) is beyond me..

[pup55]

kmann gave us the following little computation the other day from the time period around the hurricanes last year. The data is for Unleaded Gas, and I think it is quite good:

$this->bbcode_second_pass_quote('', 'C')hange in demand before price increase: + 2.3 % (yoy, 4 week ave.)
Change demand after price increase: -2.5 % (yoy, 4 week ave.)
Difference of change in demand: -4.8%
Price before hurricane: 2.29 (4 week ave.)
Price after hurricane: 2.83 (4 week ave.)
Change in price: 0.54 per gal

1 % decrease in demand per 0.11 increase in price
8.9 % decrease in demand per 1.00 increase in price

[MrBill]

$this->bbcode_second_pass_quote('', 'S')o, it remains to be seen what it will take, but per what we said earlier, $40 is possible but no one likes to think about what kind of a world we would be in if that was the case. The 2-3% economic contraction in 1981 gave us about a 15% decrease in the oil price over the next 3 years, so maybe 10% economic contraction would have to occur to get the current price from 65 to 40. That's about what happened at the start of the last depression. Also, as was pointed out earlier, something would have to happen suddenly and catastrophically enough for the price drop to take place within a year, to satisfy the assumption of the original question.

But that doesn't mean it's impossible.

[markam]

$this->bbcode_second_pass_quote('Jellric', '')$this->bbcode_second_pass_quote('', 'W')hy the current oil price spike has not caused a recession (yet) is beyond me..

[MrBill]

$this->bbcode_second_pass_quote('', 'W')hat will kill us is massive loss of value of the dollar. If the value of the dollar drop by half vs foreign currencies, we will see doubling of oil prices, plus a massive hit on costs for everything. Long term it could bring back jobs to the U.S., but short-term, it will kill the economy.

[Zardoz]

I don't see it. I can't see how so precious and crucial a commodity can ever return to those unrealistically-low prices, especially in light of this:

Net Oil

Novus is right about this, you know. Oil is going to become even scarcer than we doomers thought, sooner than we thought it could happen, and the energy traders have all caught on now.

Prices are not going to collapse, no matter how far south the economy goes. Pardon the cliche, but we really are moving into uncharted territory, where the old paradigms just won't work anymore.

[markam]

$this->bbcode_second_pass_quote('', 'T')here is no reason for the dollar to devalue by 50%, as other countries will be hit equally hard or harder than the US economy by high oil prices

[NEOPO]

$this->bbcode_second_pass_quote('Zardoz', 'I') don't see it. I can't see how so precious and crucial a commodity can ever return to those unrealistically-low prices, especially in light of this:

Net Oil

Novus is right about this, you know. Oil is going to become even scarcer than we doomers thought, sooner than we thought it could happen, and the energy traders have all caught on now.

Prices are not going to collapse, no matter how far south the economy goes. Pardon the cliche, but we really are moving into uncharted territory, where the old paradigms just won't work anymore.

[Zardoz]

Read this:

Speculators pile into oil

"...Wall Street is signaling it thinks the 'bull market' in crude is (in Street argot) 'secular', not 'cyclical'. That is, that the price of oil is rising because of structural changes in supply and demand, not short-term oil-company or OPEC manipulation. Investors are snapping up oil-futures contracts because they believe oil is cheaper now than it will be in the near or mid-term future...it's notable that big money is piling into oil speculation. That means peak oil's reputation as a fringe theory is looking more and more frayed. The denizens of Oil Drum, et al, officially have company on the corner of Broad and Wall in lower Manhattan, as well as in its midtown skyscrapers."

It ain't going back, folks, no matter what happens.

[Terrapin]

If:
The Iranians were to say they would stop refining uranium
and
al the factions in Iraq were to make nice
and
Hugo Chavez were to say “Ya know, the US isn’t really all that bad”
and
Nigerians were to decide that sabotage was not in their best interest.
and
all these folks followed through in these directions

The price of oil may drop into the $40-50 range

In other words, it ain’t gonna happen.

[kochevnik]

$this->bbcode_second_pass_quote('Zardoz', 'N')ovus is right about this, you know. Oil is going to become even scarcer than we doomers thought, sooner than we thought it could happen, and the energy traders have all caught on now.

[miraculix]

Some very good arguments outlined aboved.

I will have to disagree to a certain point.

It is absolutely possible that crude prices will drop to a $40/barrel level.

The underlying scenarios that will facilitate this are numerous.

Venezuelan President Chavez envisions the $50/barrel benchmark as the bottom market price that he wants to lock in.
That is not to far off and represents his publicly stated wish - They are probably looking at the high forties

The current price level is not justified, other than that it is driven by speculative overbuying. Crude production still is in line with demand, but the refining capacity is the bottleneck and will remain so.

There is always some lag time until higher crude prices permeate through the entire economy, once we see the full spectrum, there will be a significant demand reduction.

As for the US, inflationary pressures are mounting and I do not see any way out of debasing the dollar.

Since the world economy is intrinsically interdependent, the devaluation of the dollar will be gradual.

The wildcards are

Iran conflict
consumer confidence
massive supply chain disruptions

Bottom line is, nobody knows with any degree of certainty what is going to happen
Any of the aformentioned scenarios (+previous postings in this thread) are possible - even in modified not hitherto discussed configurations

The unfounded resilience of the US economy is based on lulling the American consumer in the happy-go-spending-forever illusion as long as possible and constant overinflation of the money supply (now masked by discontinuing to publish the M3 numbers)

The best course of action is to simplify ones life and start being happy with as little material amenities as possible. If the collapse does not happen, so what? You olny gained some independence from the debt ridden consumerism and did not lose anything really.

[Starvid]

I usually don't make price predictions because they are so dastardly hard to make. But I tell you this: the chances of seeing $40 oil without a major global recession are slim.

And even if oil comes down to $40, remember $40 was seen as outrageously expensive just a couple of years ago. Just check the first page of the "Another record" thread.

Call me when we are back in the $22-28 price band.