[Graeme]

World Economy Would Collapse If Oil Hit $200, Deutsche Says $this->bbcode_second_pass_quote('', 'T')he global economy would collapse if oil hit $200 a barrel, said the top energy analyst at Germany's largest bank.

``Two-hundred dollar oil would break the back of the global economy,'' Deutsche Bank AG's Chief Energy Economist Adam Sieminski said in an interview today in Tokyo. ``Next step after $200 would be global recession and bad news for everybody.''

[Cochise]

why don't they tell us something that we don't know???

[DefiledEngine]

I thought it was already collapsing?

[SILENTTODD]

Does this mean we won't be able to fly to Grammy's house each Christmas?!

[memmel]

For once I think they are being a bit melodramatic. I can see bankers being unhappy but this is only another 60 dollar increase on our current prices and about and additional dollar on a gallon of gas.

I'd guess this would result in at most a 5% contraction in the worlds economy not including growth if you included growth slowing down first then 200 dollar oil would introduce a mild and patchy recession.

I think 300 will send us closer to a global recession but we won't hit one until oil is at 500 a barrel. But then it should pretty much go strait into a depression.

At basically 140 a barrel we still have housing in the US insanely priced with a slow housing collapse underway. At the rate its moving its 2010 or so before prices even return to pre-bubble levels in most areas.
Pretty much the same for the rest of the overheated economy. Unemployment is just now picking up steam. No way 200 a barrel is going to dramatically change this. Overall people still have plenty of room to absorb higher fuel prices. Many countries still have significant subsidies. And the US economic stimulation thing was really a gasoline subsidy in disguise for those smart enough to use it correctly. I suspect we will get a similar handout next year that more people will devout to gasoline.

Expansion esp building etc that most banks depend on will drop sharply so a depression in finance will probably happen but this is a banking problem not a overall economic problem.

I do agree that the combination of 200 oil and the recent and ongoing banking fiasco will probably cause serious problems for the profitability of the banking sector and this will work to stop growth but the end of growth is not the end of the world economy. Even the first few years of shrinking is not going to be a huge problem.

Its when we hit the 300-500 range that real problems start cropping up.

[anony_mus]

Since the lions share of oil consumed is used for transportation, the primary affect of $200 - $250 oil will be a paradigm shift in the way we get around. Other forms of transportation will be come substituted - bicycles, mopeds, trains (ala warren buffet), less air travel etc. And that's not such a bad thing considering the reduction in greenhouse gasses emissions. Gas usage is down less than 2% at $140 so it hasn't even begun yet.

The affects of inflation will definitely be felt and have to be delt with and that's a wild card. The US had crazy inflation in the 70's and survived that.

So collapse? Its going to take a lot more than $200 oil. Its the developing nations that are going to have the most problems.

[bodigami]

$this->bbcode_second_pass_quote('anony_mus', '(')...)
So collapse? Its going to take a lot more than $200 oil. Its the developing nations that are going to have the most problems.

[socrates1fan]

$this->bbcode_second_pass_quote('anony_mus', 'S')ince the lions share of oil consumed is used for transportation, the primary affect of $200 - $250 oil will be a paradigm shift in the way we get around. Other forms of transportation will be come substituted - bicycles, mopeds, trains (ala warren buffet), less air travel etc. And that's not such a bad thing considering the reduction in greenhouse gasses emissions. Gas usage is down less than 2% at $140 so it hasn't even begun yet.

The affects of inflation will definitely be felt and have to be delt with and that's a wild card. The US had crazy inflation in the 70's and survived that.

So collapse? Its going to take a lot more than $200 oil. Its the developing nations that are going to have the most problems.

[Plantagenet]

I don't understand the panic by the Deutschesbank.

The EU has a tax rate on fuel of approximately 100%. Thats the reason gas costs twice as much in EU countries as in the U.S. This smart policy gives them the ability to to fiddle with their gas price.

The EU could simply reduce or drop their gas tax entirely, as French President Sarkozy is suggesting, and actually have gas prices LOWER then today even if oil goes to $200/barrel.

[Starvid]

$this->bbcode_second_pass_quote('DefiledEngine', 'I') thought it was already collapsing?

[dohboi]

His actual quote talks about a global recession. Does anyone really doubt that this is already in the cards?

[DantesPeak]

$this->bbcode_second_pass_quote('memmel', 'F')or once I think they are being a bit melodramatic. I can see bankers being unhappy but this is only another 60 dollar increase on our current prices and about and additional dollar on a gallon of gas.

I'd guess this would result in at most a 5% contraction in the worlds economy not including growth if you included growth slowing down first then 200 dollar oil would introduce a mild and patchy recession.

I think 300 will send us closer to a global recession but we won't hit one until oil is at 500 a barrel. But then it should pretty much go strait into a depression.

At basically 140 a barrel we still have housing in the US insanely priced with a slow housing collapse underway. At the rate its moving its 2010 or so before prices even return to pre-bubble levels in most areas.
Pretty much the same for the rest of the overheated economy. Unemployment is just now picking up steam. No way 200 a barrel is going to dramatically change this. Overall people still have plenty of room to absorb higher fuel prices. Many countries still have significant subsidies. And the US economic stimulation thing was really a gasoline subsidy in disguise for those smart enough to use it correctly. I suspect we will get a similar handout next year that more people will devout to gasoline.

Expansion esp building etc that most banks depend on will drop sharply so a depression in finance will probably happen but this is a banking problem not a overall economic problem.

I do agree that the combination of 200 oil and the recent and ongoing banking fiasco will probably cause serious problems for the profitability of the banking sector and this will work to stop growth but the end of growth is not the end of the world economy. Even the first few years of shrinking is not going to be a huge problem.

Its when we hit the 300-500 range that real problems start cropping up.

[vision-master]

$this->bbcode_second_pass_quote('Graeme', '[')b]World Economy Would Collapse If Oil Hit $200, Deutsche Says

$this->bbcode_second_pass_quote('', 'T')he global economy would collapse if oil hit $200 a barrel, said the top energy analyst at Germany's largest bank.

``Two-hundred dollar oil would break the back of the global economy,'' Deutsche Bank AG's Chief Energy Economist Adam Sieminski said in an interview today in Tokyo. ``Next step after $200 would be global recession and bad news for everybody.''

[Plantagenet]

$this->bbcode_second_pass_quote('DantesPeak', 'I') look for a second round of government action (the first being rebates) to be put into place even before this year's election.

[eastbay]

It's going to take a lot more than $200/bbl oil to stop The Machine. I was just in Malaysia and even with the limited and lingering (although recently modified ) subsidy, the freeways around KL and the primary N/S freeway are jammed with cars and trucks totally ignoring the posted speed limit speeding along as if the stuff was free.


This from a nation with a per capita GDP almost exactly the same as Mexico's. Interestingly, they're in a similar position too. Both about to become net energy importers after many decades sitting pretty in 'export land'.


So, IMO, if a nation like Malaysia can keep trucking along (mostly) just fine with $140/bbl oil, North America and Europe and the rest of the developed world can also (mostly) make ends meet with 2, 3, or 4 times the per capita income on $200/bbl oil.


So, in conclusion, Deutsche Bank is blowing political smoke for some reason. Maybe they're pushing to get the EU nations to reduce their petrol taxes. Maybe something else. I'm not sure what is the General Breaking Point, but $200/bbl oil isn't anywhere near Planet Doomsville folks. So relax.

[TreebeardsUncle]

Agree with mel... . The economy will do just fine with $200/barrel oil and $5.50/gallon gas. $300/barrel oil would bring us up to about $8/gallon gas which would really set back suv production. $500/barrel oil would bring us up to about $13/barrel. That will be enough to make driving around everywhere in cars a bit less appealing. In America it would encourage car pooling. In the third world, they would move to scooters and motorcycles.

g

[gazzy_mondo]

Anyone here remember when the World would end when oil hit $100 a barrel?

The fact is if there is still petrol to buy then people will pay for it regardless of how much it costs. The reason being is because the vast majority of people are ignorantly addicted to the stuff.

The affects of $200, $300 won't make a difference to those addicted.

[yull]

The world economy was never going to collapse overnight the second oil hit $100. It takes years just to work it's way through the system. Have patience!
Oil price sustainned at $100 a barrel is going to be extremely damaging. Besdies, it is SUSTAINED oil price that matters. A spike doesn't matter. The 1 year moving average has only just nudged above $100 a barrel.
Oil sustained at $140 for at least a year could collapse everything. $200 sustained doesn't bear thinking of.

I think a more useful thing to look at in fact is to take a 2 or 3 year moving average. I'm not sure what that would be at the moment, but only around $80 a barrel I would imagine.

Some also seem to think that the only use of oil is personal transport, but personal transport is only a small fraction of world oil use, around 20-30% if I remember correctly. The rest goes into industry, agriculture, shipping, truckers, airlines etc. It doesn't matter if we can afford oil at $30 a gallon, the rest of the economy won't. The recession from the rest of the economy buckling means inflation, rapid price rises in everything, wage cuts, unemployment. This alone is enough to hurt people in their cars as there's less to spend on personal transport.

[patience]

Yull, I agree, oil forms too great a part of developed economies to dismiss a sharp price increase. I see it now in my relatively poorer area of Indiana. Those with the lowest incomes are in desperate straits, losing homes to foreclosure, moving in with relatives, eating poorly, and trying to sell whatever they have. The poor young guys are scrounging junk to sell, and stealing it if necessary. If the price of oil (and everything else) ratchets up, so does this line of desperation, and we get more crime, more foreclosures which lowers real estate values, and more failing businesses.

Two local employers here are near a breaking point, one makes auto parts, and the other makes high-end hardwood flooring. Both have lost about 20% to 25% of their business, and that is falling more. A third company makes lawn mower components, and has had some layoffs, but I don't have as much info on them,

For our local economy, I see $200 oil (and doubled gas prices according to some) as being far too much for the US economy to handle. Like you said, it's the knock-on effects that hit hardest, especially food prices.

[gazzy_mondo]

oh I know the World wasn't going to end overnight. I'm just using it as an example. The frightening reality is how quickly we have started a discourse on oil at $200.

When I joined PO back in Nov 2005 (under a different name now lost in the ether like so many oldies on here recently) $100 to many was a fantasy and there were plenty of Cornucopians lambasting Peak Oil as Doomer porn. How many months has it been when oil hit $100?

Answer = Seven.

Oil hits $100

I like the fact that they live under the misguided belief that a recession is a sure fire way to reduce consumption

As my previous incarnation I posted this chart I drew up. Note the bit where the early 90's recession caused a huge cut in demand for oil.