[eastbay]

Peak oil isn't the immediate cause. Greed is. However, the initial stages of the economic calamity now underway will be soon accelerated beyond belief by the coming high cost and scarcity of liquid energy.

Expect the fun to begin shortly after the election.

[Tyler_JC]

$this->bbcode_second_pass_quote('alokin', 'R')ecession is not only the fault of Bush, under Clinton the interest rates were yet lowered to an unresponsible percentage, Bush only went on with the bad policy of depth.

I think PO is only one little cause of the recession, which is driven by depth.

What I would be interested is how will other countries suffer?

One thing is really interesting: oil prices remained relatively high. Until now they didn't get back to let's say $70/barrel. Even there must be some demand destruction.

[cube]

$this->bbcode_second_pass_quote('Tyler_JC', '.')..
To that last charge I respond...GREAT!

We need sustained high oil prices in order to motivate real change.

If prices crash back down to $20/barrel and all of these renewable energy projects go out of business, it rolls back the clock 20 years.

High energy prices will sustain the current renewable energy boom and prevent backsliding into inefficiency, like we did last time the world ran out of oil (1980s).

[LoneSnark]

But Cube, 'people' did not opt for Ethanol, politicians did. I think people will respond appropriately to high prices because they are spending their own money.

I think politicians will respond inappropriately because they are spending other people's money.

So, Ethanol is just another example of stupid politicians to add to the pile we already have.

seldom_seen, your graph is more a measure of inflation, not the debt itself. When talking post 1913 dollars you need to stick to inflation-adjusted dollars if you want it to mean anything.

Finally, Gerben called it: recessions happen, just like death and taxes. If we don't have one in 2008 we will have one in 2009, or 2010, whenever. It is inevitable; we are human and therefore prone to bouts of exuberance and pessimism. High oil prices may have caused it to happen sooner, but low oil prices would not have prevented it.

But as I have explained before, the great depression was a unique event in human history. Our history books are filled with the lessons and therefore they are unlikely to be repeated. So another 'great depression' is not going to happen. But, a repeat of the early 1980s recession is possible, as JPL suggested, just not likely. In my opinion this recession will be more similar to the early 1990s recession, which was driven by high oil prices (Iraq war), unwinding housing bust from the S&L collapse, and spiraling government deficits.

[cube]

$this->bbcode_second_pass_quote('LoneSnark', 'B')ut Cube, 'people' did not opt for Ethanol, politicians did. I think people will respond appropriately to high prices because they are spending their own money.

[nero]

$this->bbcode_second_pass_quote('LoneSnark', 'B')ut as I have explained before, the great depression was a unique event in human history. Our history books are filled with the lessons and therefore they are unlikely to be repeated. So another 'great depression' is not going to happen. But, a repeat of the early 1980s recession is possible, as JPL suggested, just not likely. In my opinion this recession will be more similar to the early 1990s recession, which was driven by high oil prices (Iraq war), unwinding housing bust from the S&L collapse, and spiraling government deficits.

[virgincrude]

Ludi: exactly. How do you get out of a recession with high energy prices?

That's why we're freaked over this supposedly 'normal' recession- as gerben would have it-. This one is different because of the dwindling resources which drive the economic model which allowed for the various 'bubbles' in the first place. With absolutely NO economic model alternative, how is any economy going to drag itself up and out of recession? I think it just aint gonna happen. This is the long dark slide, the long twilight of the soul.

It's a fascinating scenario: presidential election year, two unwinnable wars ongoing, dollar slide, economic standstill. And that's another straw to grab: how will any future pres FUND another war? Wars need money, lots and lots of it. Where's it gonna come from? Some coalition of the willing? I think not.

Here in Spain, as in France, UK and Italy, we are pissed off with 4% inflation on basic goods. The real price of milk, bread, and meat have risen more than the rate of inflation, as much as 20% largely due to the ridiculous decision (as cube says) to burn our food for fuel. And reassurances from politicians that we can weather the storm are falling on deaf ears, because too many of us can remember the 1980s that JLP mentions. But this time, there will be no reduction of crude prices, since even though the major economic motor of the west is slowing down to an utter halt, there's plenty of markets willing to slurp up what they no longer buy.

I agree with seldom_seen: It appears we are now at the end of line, as there is no creative financing techniques or bunker buster bombs that can revive depleted oil fields.

That, and the Export Land Model which tells us the producing countries will need an increasing supply for home consumption, means for once I agree with Tyler: a gradual and painfull change will be forced upon us.

I think Americans would do well to take some lessons from Argentina and the Cubans, I reckon the US is going to look a lot like those countries as far as economy goes, in five years time

[MrBill]

I do not believe at any level that this US lead global slowdown is in any way related to post peak oil depletion as high crude prices are being caused by a) recent rapid global growth - two-thirds of the new demand is coming from Chindia according to the IEA, and b) nominally high oil prices are a reflection of US dollar weakness and not absolute high prices.




The US dollar was $0.8240 against the euro in 2001. $90 crude is approximately 60 euros at today's exchange rate of $1.4875. If oil was 60 euros, and the US dollar was still as strong as it was in 2001, then crude in US dollars would be $50 and not close to one hundred. This reflects strong demand plus currency devaluation. To look only at the nominal price in US dollars is to lose half of the information.

Assets are falling in price because they were high by historical standards. What I like to call having a Japan Moment [sup]TM[/sup]. When prices can no longer climb any higher (in real terms) they have to fall....
$this->bbcode_second_pass_quote('', 'R')esearch by Shiller shows U.S. house prices were virtually unchanged in inflation adjusted terms between 1890 and the late 1990s, before rising a spectacular 71 percent on the same basis from 1997 to 2005.

[dorlomin]

http://www.atimes.com/atimes/Global_Eco ... 2Dj04.html

This article does a decent job of joining some dots. The idea is that back in 98 the US produced half of its oil consumption and oil was $10 a barrel, this created the exburbs and the big SUVs and the like. As US production dropped and oil consumption spiked the balance of trade went down and interest rates were raised to defend the dollar, these higher interest rates and increasing energy costs to live in exburbs started the cascade of defaults and dropping consumer spending. The dollar took a further dive driving up the cost of oil again, leaving less money in pockets for luxuaries hurting retail sales. The knee bone being connected to the thigh bone, this leads to job layoffs and so forth.

Not the whole picture I will grant you, but oil has had its own part in all of this.

[MrBill]

$this->bbcode_second_pass_quote('dorlomin', 'h')ttp://www.atimes.com/atimes/Global_Economy/JB02Dj04.html

This article does a decent job of joining some dots. The idea is that back in 98 the US produced half of its oil consumption and oil was $10 a barrel, this created the exburbs and the big SUVs and the like. As US production dropped and oil consumption spiked the balance of trade went down and interest rates were raised to defend the dollar, these higher interest rates and increasing energy costs to live in exburbs started the cascade of defaults and dropping consumer spending. The dollar took a further dive driving up the cost of oil again, leaving less money in pockets for luxuaries hurting retail sales. The knee bone being connected to the thigh bone, this leads to job layoffs and so forth.

Not the whole picture I will grant you, but oil has had its own part in all of this.

[sjn]

It seems to me there are two incompatible world views at work here. It comes down to whether you construct your reality based on a monetary/financial foundation, in which energy is merely another cost of doing business or whether energy/natural resources/environment is the fundamental base on which everything else rests.

[MrBill]

$this->bbcode_second_pass_quote('sjn', 'I')t seems to me there are two incompatible world views at work here. It comes down to whether you construct your reality based on a monetary/financial foundation, in which energy is merely another cost of doing business or whether energy/natural resources/environment is the fundamental base on which everything else rests.

[virgincrude]

Thanks Mr. Bill. Excellent stuff, as usual. And clarifying.



Still. That leaves us with the prospect of a future global recession/downturn due reliably to PO.

or not?

Do you forsee the US managing to crawl out of this one in the long or short term?

[MrBill]

$this->bbcode_second_pass_quote('virgincrude', 'T')hanks Mr. Bill. Excellent stuff, as usual. And clarifying.



Still. That leaves us with the prospect of a future global recession/downturn due reliably to PO.

or not?

Do you forsee the US managing to crawl out of this one in the long or short term?

[sjn]

$this->bbcode_second_pass_quote('MrBill', '
')physical reality > economic consequences > social reaction > political response > etc.

there is no disconnect. just different ways of looking at the same cause and effect relationships...

[virgincrude]

Mr. Bill said: "That is a direct wealth transfer from consuming nations to producing ones. That consistant drain on foreign reserves is not going away. What is it that America exports anyway?"

Indeed. I have been wondering the same thing recently. Not many American cars on these roads ... what else, let's see ...Hollywood consistently outstrips those oh so excellent must see European Cinema productions. And on Spanish TV at any given time of the day or night you can be guarranteed to capture some old US TV gems. "Baywatch" was my five year old daughter's favorite during the summer. Now she's deeply into "Xena, Warrior Princess".

Can't think selling this dross provides much income to the US, but hey maybe I'll get me a 'Visor Organiser' ... hmmm. Have to buy me a 'visor' for that ...

[aflurry]

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('Tyler_JC', '.')..
To that last charge I respond...GREAT!

We need sustained high oil prices in order to motivate real change.

If prices crash back down to $20/barrel and all of these renewable energy projects go out of business, it rolls back the clock 20 years.

High energy prices will sustain the current renewable energy boom and prevent backsliding into inefficiency, like we did last time the world ran out of oil (1980s).

[BigTex]

Recessions come at intervals of 7 years or so. Every recession is blamed on whoever seems to be pulling the levers at the time, but the fact is people just seem to expand and contract their spending at the intervals described above. For some reason, historically there seems to be an oil price spike every 7 years or so as well. I don't know what to make of that.

Everyone is tempted to say "this time it's different" when something really good or really bad happens, but the regression to the mean always seems to overtake elation or despair.

Peak oil will undoubtedly give us a lot of trouble, but I don't think that this particular recession is a function of peak oil, though the recent price spike can't have helped things.

The larger long term problems are probably the retirement of the U.S. baby boom generation, which will probably move into high gear in 2012 or so (Twilight Zone music plays), and the wild card in the global doom deck, which is the bird flu.

In the next ten years, I don't think you can go wrong betting against the U.S. dollar. I think that 2008 is probably going to be a lot like 1968 (minus the hippies)--stagnant war sucking resources, inflation becoming a serious problem, change of administrations with no apparent continuity of policy (for better or worse), and an unlikely moderate Republican looking like he may become President. Lots of other similarities if you think about it.

What would have been a good investment strategy from 1968 through 1980 will probably be a good investment strategy from 2008 through 2020 as well.

I can't wait to see the consumer price index in about ten years. It will exclude everything except bags of dirt and used styrofoam cups, and will show the usual 2-3% rate of inflation.

[sittinguy]

PO didn't cause it but,, it will be the reason we never get out of this one. I also think this is the beginning of the slow slide down

[Iaato]

What a pile of ......... uh, constructs. Except for SJN, Virgin Crude, and Seldom, who see our little global system for what it is; a world overpopulated with a plague of humans, powering on right up to the wall using a teeny bit of renewable resources, and sucking at the last yummy dregs in the storage tank of non-renewable resources.

Money's got nothing to do with it. Except that it's an inaccurate measuring stick for some human parts of the economy. Seldom's graph depicts Americans' response after 1970 to the impact of using up our storages in this country, and having to buy storages from other countries after our oil peaked. Our response was to deposit IOUs all over the world. I'm still amazed that everyone let us do it. So, did Peak Oil cause this soon-to-be-global-depression? Heck yes. Now that the world is Peaked, IOUs won't work anymore.

You guys are going to have to get past the "man rules the earth" fantasy. Your fossil fuel slaves have given you delusions of royalty. Maybe you will figure it out once the gas pump is empty.