[emersonbiggins]

$this->bbcode_second_pass_quote('Petroleo', 'T')o me this excercise convinced me of Matt Simmons argument that oil is still very very cheap even at todays prices.

[Ludi]

Americans have a negative savings rate. They are putting their fuel purchases on credit. Effects won't be apparent immediately.

[Pops]

$this->bbcode_second_pass_quote('JohnDenver', 'C')all me crazy, but when I step out my front door, things look EXACTLY like they did when oil wasn't cheap.

[jato]

$this->bbcode_second_pass_quote('', 'C')all me crazy, but when I step out my front door, things look EXACTLY like they did when oil wasn't cheap. I mean EXACTLY. The roads are choked and overflowing with cars. The freeways are clogged with traffic jams so long you can't even see the end of them.

[SolarDave]

$this->bbcode_second_pass_quote('JohnDenver', 'W')hat's the latest oil price? $75?

Let's see... since its lows in the late 90s, oil has now

GONE UP BY %650

So where's all those scary peak oil effects people??

[SolarDave]

Sorry, Ludi, I missed your reply. You are way ahead of me.

Really, I doubt we will see direct effects. People won't park their cars until either gasoline or money runs out completely.

In the meantime, they will drive themselves into the ground.

And - speaking of effects - which American car manufacturers are in trouble? What could possibly be causing that? And what will happen to our economy if the airlines and car manufacturers tank? We will find out sooner than you think.

[deconstructionist]

I don't think that prices measured in fiat currencies are a viable indicator that oil production has peaked... Perhaps the dollars that we price the oil in have peaked as well. Just look at the price of gold. Dollars are getting less and less valuable every day. I know I'm not the first to suggest that when you compare the price of oil to the value of gold, the rise in oil pices gets much much smaller... the federal reserve is printing up dollars like they are going out of style. and perhaps they are...

i think that the only true indicator of the peaking of world oil production is... rather are... production figures... and even then we'll only know a few years afterwards, being able to look back on the data in retrospect... and even then--how do we trust numbers published by big oil companies that are posting record profits by making us believe that oil is scarce?

oil prices and reserve data is manipulated by the oil industry. the value of fiat currencies are manipulated by the central banks. and it is quite likely that production figures--and perhaps production itself--is being manipulated as well.

but regardless, what comes out of the ground is what comes out of the ground. when saudi arabian production peaks, the rest of the world will follow. whether the dollar sticks around long enough to keep the price of oil set to what the central bankers and big oil execs want it to be is a different matter entirely. the price of oil is largely a reflection of the diminishing value of the dollar. the amount of oil that gets pumped from the ground has a lot to do with the value of that dollar, but ironically, the less oil there is, the more dollars are worth, since they are the only currency that oil can be bought or sold for... it's more complicated than just noting the percent increase of the price of oil in dollars. way more complicated...

[nero]

It is quite impressive that a trippling in price hasn't had that large an effect on the economy. Here is my take on it: (Sorry in advance for the long post)

From a macroeconomic perspective when the price of oil triples some people (in the oil industry) benefit and increase their consumption while others are faced with higher prices and cut back. Overall since the US is a net importer the effect should be somewhat negative. However it is never that simple, the flow of dollars out of the economy is mitigated by several factors.

1. Increased exports of goods and servces to oil exporting countries

2. Increased investment in the American economy by oil exporting countries. (Either buying assets or debt)

3. The Fed masks the net flow of dollars out of the country by buying government debt and thus increasing the money supply.

A better way to look at it is not importers versus exporters but consumers versus producers.

Define the global oil industry as the producer and the rest of the world including governments, shareholders,and oil industry employees as consumers. From that point of view only the retained oil industry earnings matter. If the government receives windfall royalties or if the oil industry employees are able to negotiate higher salaries or if the shareholders receive extra large dividends, that extra money should be deducted from the increase in the total cost of oil to the consumers since the money simply flows right back to the consumers.

What matters is the actual oil industry retained earnings that result in an increase consumption by the oil industry itself. If the oil industry had taken all their windfall profits form 600% higher oil prices and used the money to invest in more rigs and more platforms the cost to the economy would be huge. People wouldn't be able to afford to buy cars because all the steel would be going into producing casing for new oil wells.

That is why the macroeconomic effect hasn't been noticable, the oil industry has not adjusted their investment radically to take into effect the higher oil prices. There certainly has been some effect. The cost of finding oil has doubled in the past 5 years. Some of that is due to inflation in the costs of raw materials and salaries but some of it is real increased consumption by the oil industry in pursuit of more marginal oil (eg. oil sands, ultra deep water, GTL etc.). Overall the industry realistically doesn't have the capacity to increase their real investment by more than about 10% a year because they lack the resources in skilled people and equipment to do so. If they push any harder all it does is cause inflationary pressure in oil industry salaries and raw materials.

[PrairieMule]

From where I am sitting here at the monolithic mortgage company the check has come due for the spike in consumer debt. The months of paying a extra dollar for a jug of milk, box of cheerios, and filling up every week is boiling but not yet at critical mass in suburbia. When I look at how the envelope is being pushed on Debt to Income ratios of some of these deals, I see the writing all over the wall. It's been almost a year since they tightened up on the CH7 bankrupcies and the Jones are not going to file a CH13 with a wage earner plan. The Jones have opted to roll it into the note and pat themselves on the back by saying "it's a great tax deduction" instead of taking a hit on their FICO score.

Business is very brisk in the Mortgage industry despite the high rate and usual "soaking" homeowners with points and fees adding 2-5% to the note balance. Why? Why are people lining up to be soaked on a refi or heloc? They really don't have any other choice. Incomes have not matched inflation or costs of goods and as pointed out by other folks here. It's going to be a good run for some of my old coworkers for the next 6 mo to 3 years? After then, deals are going to be tougher to do which is where my dept comes-credit repair. My dept had 12 people in it in 2002 and now we have over 500. I should be able ride out the storm till the actual bubble bursts and buy then have enough to have debt free start in the cattle business.

JD wants to know where the beef is, well its right here being transfered consumer debt into less equity on a overvalued property . Soon time will do it's thing and the beef will travel to the tubes. At that point we will no longer care about where is the beef, but we will all be loittering on the net saying "Where is the shit?".

[CARVER]

$this->bbcode_second_pass_quote('JohnDenver', 'S')eriously, if you blindfolded me, put me in a time machine, took the blindfold off, and then asked me: Where are we? ...

[CARVER]

No need for time travel, just travel will do, and you don't have to go far:

Horn of Africa food crisis

The Palm Dubai

Not different times, both are happening today and are not that far apart. There are huge gaps between rich and poor, even within countries, and I think that will remain to be the case.

[eric_b]

We're not even there yet. This process may take decades.

We may be plateauing... maybe not. Fact is we're still awash in oil, there's
never been as much being consumed as there is now. 80+ million barrels
a day. That's something like a 1000 barrels a second being consumed
24/7. Poof. Simmon's calculated that even at $70.00/barrel oil is still only
around 10 cents a cup - far less than a cup of coffee.

http://www.finfacts.com/irelandbusiness ... 5583.shtml

You aint seen nothing yet. Wait until prices for gas have quadrupled at the
pump, and there are shortages on top of that. Then we'll see how well the
economy is doing.

[the_red_pill]

$this->bbcode_second_pass_quote('', 'C')all me crazy, but when I step out my front door, things look EXACTLY like they did when oil wasn't cheap.

[PrairieMule]

$this->bbcode_second_pass_quote('the_red_pill', ' ')You think a guy in Mexico who makes $400/mo notices that gas is double what it was two years ago? HELL YES he does. That is why he is risking his life to cross the border and come to the US to make $400/week!

[kochevnik]

$this->bbcode_second_pass_quote('JohnDenver', 'W')hat's the latest oil price? $75?

Let's see... since its lows in the late 90s, oil has now

GONE UP BY %650

So where's all those scary peak oil effects people?? You know, the knock-on effects caused by the end of cheap oil.

[ShaneT34]

"So where's all those scary peak oil effects people?"

The former, or furloughed employees, and their families, of Ford, USAIR, United, Delta, General Motors, American Airlines, Northwest, Delphi Automotive, and others may be in a position to provide you with some insight.

When your neighbor loses his job, its a recession; when you lose your job its a depression.

For many of these former employees with pensions, and full medical and dental coverage, who are now trying to find work selling brooms in Walmart the effects may seem scary enough.

But your point is well taken: for many across America the only impact they have 'seen', (so far), is an increase in pump prices. Hence no scary peak oil effects. Yet.

[Concerned]

$this->bbcode_second_pass_quote('JohnDenver', '')$this->bbcode_second_pass_quote('Andy', 'O')il at $75 per barrel is still cheap.

[MonteQuest]

Why, JD?

Two answers:

Cultural direction

Asset inertia

Take a seat and watch it unfold.

Are you in a hurry?

[MonteQuest]

Besides, you choose all the dire predictions and lumped them into one heap.

Most people who have studied this know there will be a lag, as the implications of higher energy prices work their way through the various economies.

You remember my scenario, JD?

Post Peak Oil: The Slow Decline?

What's coming next?

$this->bbcode_second_pass_quote('MonteQuest', 'S')ince virtually all commodities use petroleum fuel to move from production to consumption, as fuel prices rise whether by market forces or by currency decisions by OPEC to offset the loss in revenue as the dollar declines due to our trade imbalance, all commodity prices must also rise. Whew! What a mouthful! This will create inflation. To curb the inflation, the Fed will raise interest rates. And as the price of food and other essential commodities rise--along with house payments tied to variable rate mortgages--luxuries and dispensable goods and services will drop out of the family budgets and the standard of living will decline and unemployment will rise.

[crapattack]

If everything is more expensive than in the 90's, why not oil too? More money in the markets means more ability to absorb high costs. But there are signs. Ford and GM are having a hell of a time. Seems that nobody wants those SUV's they bet the future on, while Toyota can't keep up with Prius orders. In Vancouver public transit use has excellated over 25% in the last 2 weeks due directly to rising gas prices. I've heard several mainstream talk shows talking about "how are you coping with high gas prices?".

As for people stuck in the burbs with great big morgages and commutes - what the hell do you expect? They'll try to make do until the 'gas fairy' comes by to lower the prices. When it gets so high that their provisional solutions don't work you'll start to see the changes - don't rush it, it's coming soon enough and when it does won't you feel great knowing you were wrong in helping all those folks not prepare. Good for you JD, spreading the 'do nothing' gospel against all evidence contrarywise. You scoff at PO but it looks to me like you're running on nothing but hunches and hopes.