De Caprio is 'a girlie man' as Arnold would say. He plays good 'boy' roles. A great actor? So many like him. Jack Nicholson? He only plays one role. If you like that role, you think he is a good actor. Personally, I cannot stand Meryl Streep. Not since Kramer versus Kramer. In Deer Hunter she spoke her parts like she had down syndrome. And that was a good movie she was in.
I think that one problem that we all have is talking about post peak oil depletion like it is Hollywood. We have all been influenced by it, but reality is not likely to look like anything we have seen in the movies.
If we talk euphemistically about 'thinking outside the box', so to speak, then frames of reference like movies may actually be holding us back. How many references have we seen to Mad Max?
I am NOT a big fan of Kunstler, but I read him anyway. This is actually one of the best posts he managed to pen in 2006.
Not so wonderful. December 18, 2006
I think it was well thought out. Maybe I just liked the movie? ; - )
PeakOil is You
THE Energy Recession Thread (merged)
Re: Why peak oil doesn't mean a recession
by MrBill » Fri 29 Dec 2006, 03:26:20
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: Why peak oil doesn't mean a recession
by Doly » Fri 29 Dec 2006, 07:06:06
$this->bbcode_second_pass_quote('MrBill', '
')If we talk euphemistically about 'thinking outside the box', so to speak, then frames of reference like movies may actually be holding us back. How many references have we seen to Mad Max?
')If we talk euphemistically about 'thinking outside the box', so to speak, then frames of reference like movies may actually be holding us back. How many references have we seen to Mad Max?
I agree with you 100% on this one. We should stop thinking that peak oil is going to go like some Hollywood movie or other.
Instead, we should be doing some careful study of where things are going, with the facts in hand. I've been trying to do something of the sort for the last two years.
You can all find a first draft of my scenario in my website (press the www button below and go to "Resources"). I'm working into a more complete study. And I'm trying to get the local council in Brighton to look into this.
That is far more useful than talking about Mad Max.
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Re: Why peak oil doesn't mean a recession
by MrBill » Fri 29 Dec 2006, 07:21:31
Thanks very much for the link, Doly. Going there now. Cheers.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: Why peak oil doesn't mean a recession
by bodigami » Mon 01 Jan 2007, 16:41:24
$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('MrBill', '
')If we talk euphemistically about 'thinking outside the box', so to speak, then frames of reference like movies may actually be holding us back. How many references have we seen to Mad Max?
')If we talk euphemistically about 'thinking outside the box', so to speak, then frames of reference like movies may actually be holding us back. How many references have we seen to Mad Max?
I agree with you 100% on this one. We should stop thinking that peak oil is going to go like some Hollywood movie or other.
Instead, we should be doing some careful study of where things are going, with the facts in hand. I've been trying to do something of the sort for the last two years.
You can all find a first draft of my scenario in my website (press the www button below and go to "Resources"). I'm working into a more complete study. And I'm trying to get the local council in Brighton to look into this.
That is far more useful than talking about Mad Max.
Yeah, Peak Oil isn't "like the movies". Maybe society is too numbed with neon lights (technology). But still, "we don't know how the monkeys will react".
Thanks for the link!
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What happens to oil in a recession?
by Eli » Wed 01 Aug 2007, 23:41:26
I am wondering what will happen to oil in a recession now with the world riding on the plateau or post peak as many of us think it is now. Unlike before when there was a recession we have places like Chindia who have started to consume a lot more oil. I seriously wonder if they will be able to reduce their need for oil even in a global recession.
The other thing that I think that has been increasingly obvious is that oil production and exploration is becoming ever more expensive. What is going to happen to the economics of oil prodcution once when we enter a global recession?
The projects that we need to embark on to make up the continual losses around the globe are huge and expensive. If I am the head of an Oil company and I see everything is headed down the crapper as far gdp is concerned I am going to think twice before spending multi billions on that latest mega project.
The net effect could end up meaning that we are still at peak or facing down the barrel of it again very quickly because the necessary investment was not made.
The other thing that I think that has been increasingly obvious is that oil production and exploration is becoming ever more expensive. What is going to happen to the economics of oil prodcution once when we enter a global recession?
The projects that we need to embark on to make up the continual losses around the globe are huge and expensive. If I am the head of an Oil company and I see everything is headed down the crapper as far gdp is concerned I am going to think twice before spending multi billions on that latest mega project.
The net effect could end up meaning that we are still at peak or facing down the barrel of it again very quickly because the necessary investment was not made.
Last edited by Ferretlover on Thu 19 Mar 2009, 08:29:29, edited 1 time in total.
Reason: Merged with THE Energy Recession Thread.
Reason: Merged with THE Energy Recession Thread.
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Re: What happens to oil in a recession?
by SILENTTODD » Thu 02 Aug 2007, 03:06:40
What happened in the 1970's? A period I lived through as an adult, came of age during the first oil crisis of 1973.
The price of gasoline doubled (this was during a period we (America) were still producing over 2/3rds of our own oil)
The inflation rate went to double digits thru the rest of the 70’s from 1974 thru 1980.
I still drive to get every mile out of every drop of gasoline. I tell people buy only gold (or silver , I’ve come around), always have new tires on your car (for the time being).
Oh and most important!! Get a Bicycle, or two! you'll need them!!
The price of gasoline doubled (this was during a period we (America) were still producing over 2/3rds of our own oil)
The inflation rate went to double digits thru the rest of the 70’s from 1974 thru 1980.
I still drive to get every mile out of every drop of gasoline. I tell people buy only gold (or silver , I’ve come around), always have new tires on your car (for the time being).
Oh and most important!! Get a Bicycle, or two! you'll need them!!
Skeptical scrutiny in both Science and Religion is the means by which deep thoughts are winnowed from deep nonsense-Carl Sagan
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Re: What happens to oil in a recession?
by MrBill » Thu 02 Aug 2007, 04:37:58
Good question, Eli, because this is very topical. High prices today, unlike after the supply shocks in the 1970s, are definitely from higher demand for crude on the back of expanding economies, especially in Chindia and the rest of Asia and the developing world.
This insulates the price of oil from a slow-down or recession to be sure. There will be demand destruction at the margins from a slow-down, but transport fuel demand is rather inelastic in the short to medium term, and worldwide base demand is higher than it was in, say, 1999-2001 when we saw commodity prices, including oil, trough.
The Economic Effects of Oil Price Shocks
The core of world economies are using more oil because their economies have grown in absolute size, plus there are another 700 million people in the world since then, and no matter how low their consumption per person is, it is never going to be negative.
The IEA sees +2.2% p.a. increase in demand through 2012. They expect production to increase by just +1% over this period. Demand outstripping supply I believe spells higher real prices.
$this->bbcode_second_pass_quote('', ' ')Global markets are currently seeing a financial rather than an economic crisis, and while one cannot exclude the possibility of the current carnage having a meaningful impact upon the underlying economies, we would expect these effects to be largely confined to the G7 markets, in particular the US, as well as those emerging which are dependent upon short-term capital flows (one particular ex-EU accession state is seems rather exposed).
Thus, we see a compelling buying opportunity opening up for Russia - with strong earnings growth, far, far cheaper than India or China, and with infinitely better macros than Brazil, the Russian market is becoming increasingly undervalued.
Given the wild volatility in global markets, we are very hesitant as regards timing the bounce, but we would stress the fact that Russia is not affected by the credit rout in any meaningful fashion.
Only in the event (in our view, very unlikely) that the current turbulence turns into a fundamental collapse of the secular Asian/Emergings growth story will we be forced to change our very constructive view on Russia.
This insulates the price of oil from a slow-down or recession to be sure. There will be demand destruction at the margins from a slow-down, but transport fuel demand is rather inelastic in the short to medium term, and worldwide base demand is higher than it was in, say, 1999-2001 when we saw commodity prices, including oil, trough.
The Economic Effects of Oil Price Shocks
The core of world economies are using more oil because their economies have grown in absolute size, plus there are another 700 million people in the world since then, and no matter how low their consumption per person is, it is never going to be negative.
The IEA sees +2.2% p.a. increase in demand through 2012. They expect production to increase by just +1% over this period. Demand outstripping supply I believe spells higher real prices.
$this->bbcode_second_pass_quote('', ' ')Global markets are currently seeing a financial rather than an economic crisis, and while one cannot exclude the possibility of the current carnage having a meaningful impact upon the underlying economies, we would expect these effects to be largely confined to the G7 markets, in particular the US, as well as those emerging which are dependent upon short-term capital flows (one particular ex-EU accession state is seems rather exposed).
Thus, we see a compelling buying opportunity opening up for Russia - with strong earnings growth, far, far cheaper than India or China, and with infinitely better macros than Brazil, the Russian market is becoming increasingly undervalued.
Given the wild volatility in global markets, we are very hesitant as regards timing the bounce, but we would stress the fact that Russia is not affected by the credit rout in any meaningful fashion.
Only in the event (in our view, very unlikely) that the current turbulence turns into a fundamental collapse of the secular Asian/Emergings growth story will we be forced to change our very constructive view on Russia.
Source: Eric Kraus, Anyatta Capital, advisor to the:
Nikitsky Russia/CIS Opportunities Fund
August 2nd, 2007
Also, as you mentioned, oil companies are having to spend more in exploration, drilling, extraction, transport, refining and distribution, but they are finding less oil to replace reserves. Meanwhile, energy nationalization has put more reserves out of the multi's reach. You can argue about it all you want, but anecdotally I think it is fair to say that public companies are more transparent and efficient than NOCs. I compare a Lukoil, say, to a Gazprom, or ExxonMobil to Saudi Aramco, for example.
So with the cost of building refineries having doubled since 2002, and it being increasingly hard to find new reserves, the oil companies have been using surplus cash to do share buybacks and to pay dividends to shareholders rather than plough that money back into exploration and development.
That itself is a signal that they think the risks outweigh the benefits. That also has to lower future potential supply growth, unless the oil juniors pick-up the slack left by retiring oil majors.
To answer your question directly I think that a US recession would affect nominal oil prices, but real prices will hold-up as demand outstrips supply. So relative to wage growth, or lack of it, oil will not get cheaper. Its nominal price will depend on the value of the US dollar as well. A weaker US dollar will result in higher nominal prices as expressed in dollars. However, even then I would expect the price of oil to remain quite stable as measured in euros or a backet of other currencies.
$this->bbcode_second_pass_quote('', 'C')ommodities including oil and metals will probably ``evade'' losses in equities and bonds that were sparked by the U.S. subprime mortgage-market rout, Goldman Sachs Group Inc. said.
Goldman commodity analyst Jeffrey Currie said he's sticking with a previous forecast for strong oil prices, predicting $95 a barrel by year-end if OPEC keeps production unchanged and $73 if the group starts pumping more.
``Fallout from the U.S. credit contagion for commodities is likely to be relatively limited,'' Goldman's Currie, James Gutman and Allison Nathan said in a July 27 note. ``Even if the U.S. recovery does stall, the impact on commodities would likely be relatively limited as it is emerging markets demand that has taken over as the main driver for commodities.''
Source: Aug. 1 (Bloomberg)
And given long-lead times you cannot expect that interruptions caused by uncertainty and/or a recession can quickly be corrected. Even with solid growth of 4-5% p.a. in the global economy over the past decade, quite stable, most of the supply increase came from using up existing spare capacity and not from new investment. Now that spare capacity is gone, due to higher global growth, so future supply growth can only come through the drill bit.
Of course, the world is still far too energy inefficient as the latest study from McKinsey shows. Not only do some countries still subsidize energy consumption, thereby encouraging more demand and inhibiting a shift to lower, more efficient energy use, but even in many countries that do not specifically subsidize energy use they still skew demand to automobiles, for example, by using public money to build more expressways and over-passes.
$this->bbcode_second_pass_quote('', ' ')In 14 states the retail price for gasoline is less than the world price for oil (comparison data is taken as of November 2006; one liter of crude oil cost $ 0.38 at that time). It is possible due to considerable state subsidies. Turkmenistan (2 US cents per liter), Venezuela (3 US cents), Iran (9 cents), Lybia (13 cents) and Saudi Arabia (16 cents) are out of competition. Qatar, Bahrain, Kuwait, Egypt, Yemen, Oman, Algiers, Brunei and United Arab Emirates also sell gasoline at very cheap prices.
Source: gasoline prices around the world
Heavy trucks that use lots of diesel compared to railways are not charged the true costs of road repair from heavy loads, and truckers themselves resist using extra axles to spread the load due to higher fuel prices. One can argue that if you are going to subsidize, you should subsidize rail transport that is more efficient in the long-run. Of course, a recession would cut freight demand, and therefore transport fuel demand in the USA, but do little to change the situation for the good in the long-run.
$this->bbcode_second_pass_quote('', 'A') report released Monday by the International Energy Agency forecasts a continued squeeze of the global oil and gas markets in the coming years, due to tighter supplies coupled with increased demand. Against this backdrop, a new Quarterly chart pack shows that growth in demand can be cut in half or more over the next 15 years—without reducing the benefits end users enjoy.
However, the other side of the equation is that oil companies are getting hit on the cost side from higher prices for all their equipment and manpower shortages for critical engineering and project management expertise. While higher energy costs are pushing up the costs of mining itself. A vicious circle.
Given that it is hard for oil cos. to increase their reserves, cheaply in any case, and their cost pressures are rising, their profitability and therefore their share prices, depend on being able to pass those costs along to end consumers. In a recession, perhaps harder to do.
Also, OPEC has been squeezing European refiners this summer, driving their margins negative. Hard to believe given record high prices and strong demand, but a reality. The price maker will want their pound of flesh as well. On the otherhand, if they are making money, they can afford to pay for the expertise being offered by junior oil companies, drillers and other oil service cos.
So you have to take a bottom up as well as a top down sectoral approach when choosing how to position higher oil prices, but the threat of a regional slow-down. Just as an example, Baker Hughes got hit because of falling nat gas rig demand in N. America, while Haliburton's share price has also under-performed its peers. Schlumberger has outperformed both due to its mix of assets and geographical reach. So each company on its own fundamentals and at the right price.
