[yesplease]

$this->bbcode_second_pass_quote('NoWorries', 'I')s it just me, or is this truly a bizarre statement from someone who holds impeccable credentials? If what he's saying is correct, then all this fuss is really much ado about nothing.

I have never seen a debate so polarized. (And my background is in law, incidentally, not economics.)

[GeneralGreen]

500 dollar oil will happen...But I see these with the collapse of the USD
say now 1 dollar is worth 1 dollar..I expect the dollar to get inflated pretty dramatic...in say 2015 1 USD now will be worth like 3 USD then..thus 500 USD oil...
This is kind of what has been happening already..
in 2001 dollars oil now would really be only about 90 USD bbl..instead of 145 bbl. The dollar has fallen allot since 2001 esp vs the Euro.
500 dollar oil will be very serve to the US economy "and the worlds"
500 USD bbl would equal about 18 dollars a gallon of 87 octane gas.

[ROCKMAN]

For all: here's a little historical regurgitation: Now let’s jump back to 1986. (Don’t have a stroke – this is not a prediction….just a history lesson). The early oil price spike of the late 1970's sent the world into a deep recession and cut consumption by about 15% (10 million bopd). Suddenly the producers were loosing market share so they began lowering their asking price (remember…the producers will always be the ones setting the price) so they could take customers away from other producers. This period truly showed how ineffective OPEC was as a “cartel”. Crude prices didn’t immediately plunge. Saudi kept cutting back their production and loosing market share as the other members kept lowering their prices. Eventually Saudi was faced with shutting in their entire production stream to maintain pricing. At that point Saudi opened their wells up and quickly drove oil to $10/bbl. But, bear in mind, Saudi set the price at $10/bbl. It wasn’t us or any other buyer. Oddly enough, oil was $35/bbl in 1980 and folks were predicting $100/bbl in 5 or 6 years ($35 X 3 = $100….similar to $140 X 3 + $500).
After the price meltdown in the 80’s one would think Saudi et al would be watching the world economy very closely. They know another world wide recession would hammer prices again. They also know it takes a year or two for the effects of higher crude prices to filter through the world’s economies (remember: we’re just seeing the net effect on the economy of $70/bbl oil right now). But they also know that most of the exporting countries are in decline. Even more important: Saudi knows something none of us can be certain about – true Saudi decline rate. Saudi may be at PO…maybe not. But most of the other exporters are there now. This, IMHO, is the real key which wasn’t present in 1986: the realization (by the exporters, at least) that PO is in the near future. If demand destruction is offset to a meaningful degree by production decline we won’t see a repeat of 1986. But I think that is a big IF which I’ve seen no one offer a credible model either way. Not that aren’t some smart folks here but there are too many big variables which defy prediction. It just as easy to pick one net outcome as another since there is no current proof either way…just individual expectations.
The lack of competition among the exporters combined with the ability (so far) of the world economy to somewhat absorb the price increase that has led us to where we are today. Certainly the world economy is retracting to some degree. India, often mentioned after China, as a growing buyer of oil, appears to be collapsing as we speak. Time will tell if the world wide demand destruction outpaces declining production rates. There are a few big projects coming online in the next few years. I won’t guess how the demand destruction/production declines/new production will balance out in the next few years. But I do know that in 5 years Saudi will set the price for their oil (and essential the global price). And it may be $500/bbl or $40/bbl. But it will be their choice. All we (and the rest of the world) can do to effect that decision is conserve a lot more and drill a little more.

[VMarcHart]

$this->bbcode_second_pass_quote('Cashmere', 'C')ouple things to keep in mind ... [15 items later] $200 is the end of commercial air travel and the cheap life, $300 is the end of modern life.

[Sys1]

If 500$ oil is possible without a market crash, then we should invest all our money on oil, we potentially can win more than 3X our invest! Isn't it great? ;-p

[ROCKMAN]

Sys,

If oil went to $500/bbl w/o the market crashing the last place I would have my money is oil E&P. And I've been a petroleum geologist for over 30 years. No time now to explain now but think about bottom line profits vs. oil price.

[Mack12345]

I have to say that in my opinion there is noway that the world as we know it could possibly continue with oil at 500$ bbl .
14-15$ a gallon for gas is only a small part of the big picture .

People will be getting hungry before we reach this point .
Hungry = Desperate = Dangerous .

Millions of very very dangerous people will be in this country .