[SeaGypsy]

The article linked misses the point in Pop's posts about the steady run up disregarding the 'blip' of price panic. To my eye the rise looks like an organic reflection, suggesting the market is actually mostly in control/ conversely that attempts at price setting will henceforth (as they have already) prove ultimately futile.

[Cog]

Agreed

The price of $100 WTI and $110 Brent has been remarkably stable for quite a while now. The price reflects the real world of supply/demand. Such a price, IMO, can not be sustained by the OECD countries going forward. And defintely they can not withstand an oil shock without crashing their economies.

[SeaGypsy]

I think you and a lot of others miss this point though Cog.
When our economies are forced into standby mode, we are still burning through massive amounts of resources. OECD countries are much more capable of rapid slim down; their base requirements being far less.

[Cog]

Yes we can trim down our use of fossil fuels a lot. But understand that trimming down means a loss of jobs in some parts of the economic sector. One man's austerity is another man's job.

[SeaGypsy]

Just to put it really simplistically:

An American on foodstamps/ medicaid/ with basic services costs what?
Expressed in dollar terms whilst remembering there is currently a 2 year minimum lag between actual unemployment and benefit reduction to baseline? I don't live there, so I don't know.

Here where I live and we have close to topline SS by world standards, each unemployed requires over $300 a week in bennies and add ons. Add another 25% if they are disabled, double it if single parenting. Scandinavian costs are similar or higher, with housing guarantees added.

I know the US system spends a lot less per citizen over a long view, provides much less guarantee, expects much higher self reliance. But regardless of system or level of comparative spending per capita; our western SS system baseline probably averages well over $100 per week/ $5000 a year, just to keep the plebs from looting and pillage.

Compare this to the developing world:

Very basic infrastructure by comparison.

Zero financial expectation of support from the government, ever.

In place local food networks drastically reducing mandatory food miles.

Strong family and local support network structures, not as yet replaced by social/ government contract as in most of the developed world.

Much smaller average vehicle size and much higher vehicle occupancy.
Loose planning controls, allowing for the emergence of ultra low cost spontaneous human dwelling (squats) and microbusiness.

A bureaucracy used to getting the bulk of it's funding in paper envelopes.

Generations of high mortality. Preparedness for disappointment.

Baseline in these places is between $1 & $3 PPD/ $350 to $1000 per year per person; which needs be found somewhere to keep people from starving and mahem. An average Asian family with an injection of $3000 to $5000 can build a lifelong self sustaining business (historically speaking).

I know the maths is loose, but the concept is quite obvious.

[Corella]

$this->bbcode_second_pass_quote('', 'P')lantagenet wrote: Yes, theoretically just a matter of leadership and organisation skills.

But leaders with organization skills, understanding and vision are severely lacking right now in DC and in the EU and other countries. So far Governments in the US and Europe are more concerned with which bankers, deadbeat countries, bankrupt corporations, real estate speculators etc. get bailed out then with any kind of transformative plan for the future.

[Pops]

$this->bbcode_second_pass_quote('pstarr', 'N')ice chart. Is it yours? But how do you read "efficiency"? That's a positive spin on things. Would it be so hard for you to spin the thing a bit gloomier for us doomers? I see two contradictory trends converging and a resulting trap between our ability to pay and the necessary price to produce. Kind of a pincer movement on our lives.

[Corella]

i´m afraid your pincher is a quite real threat, Pops & pstarr. The ceiling is actually a virtual thing, inflation eg could help to take from depties. We will see how technical development which the doomers allways underestimated will influence and possible substition by natural gas and lower energy consumption and what Saudi Arabia really can do and... Risky times, no doubt about...

[Revi]

I think oil could go up to whatever the price is in gold. The Iranians are making deals with India to sell oil for gold, or a gold backed currency. The price of a gallon of gas right now in silver is about $6.00 a gallon. I think that will be the price eventually for all of us. I figured that out with the value of a 90% silver quarter right now. It's worth $6.01 at the current silver price. Back when we used real silver coins in 1964 the price of a gallon of gas was around a quarter. That same quarter now buys almost two gallons, so it's still cheap. That may change if countries start to demand precious metals or precious metal backed currency for payment. Here is a posting of the value of US silver coins based on the price of silver right now:

http://www.coinflation.com/silver_coin_values.html

Of course there are lots of other factors, including the health of the petrodollar that keep the price of gas down here in the US, but the bedrock reality is that the value of things doesn't change much in terms of silver. Eventually the market will price it in and we'll be paying $5 or $6 a gallon because the producer wants to get their price regardless of what kind of fiat currency it is denominated in.

Here's an article about how Iran could hurt the petrodollar system:

http://www.321energy.com/editorials/cas ... 12712.html

[ralfy]

$this->bbcode_second_pass_quote('SeaGypsy', 'T')he article linked misses the point in Pop's posts about the steady run up disregarding the 'blip' of price panic. To my eye the rise looks like an organic reflection, suggesting the market is actually mostly in control/ conversely that attempts at price setting will henceforth (as they have already) prove ultimately futile.

[SeaGypsy]

I think the summation is wrong because the initial assumptions are wrong.
Without writing a million words on the topic, let me suggest that the shifts in where energy goes, where wealth is created, distribution of that wealth, all of this is going to change drastically. And yes it will be a technical recession in most parts of the world, especially ours. But those expecting the BRICs to fall in a heap with Europe's demise or even the US' are going to be disappointed.

[rangerone314]

I figure the world is going to do an economic "reset" to where China and India will be the center of most activity on the Earth, just like that neck of the woods had been for centuries in ancient times. Seemed the driving force in the post-Medieval Europe was trade with India and China.

[ralfy]

It's probably BRIC that supports Kevin Drum's argument, i.e., even if demand goes down for OECD, demand from BRIC will offset that. At best, there will be a 9-pct increase in energy produced from oil and gas sources for the next two decades, but that may be lowered if conventional sources follow historical flow rates. On top of that, demand may rise by around 2 pct per annum because of, among other reasons, BRIC and emerging markets.

The scenario, then, is, at best, a permanent global recession as demand keeps hammering at supply that barely goes up. And when supply goes down either eventually or due to unforseen reasons, even BRIC and emerging markets won't be able to get more oil no matter how much funny money is created.

[FarQ3]

Seeing as I work in the oil production business, I look at the same problem from a different view from the average consumer. Relative oil production costs are rising exponentially, the same as costs for nearly every other product on the planet. And like all of those other products, production costs are also closely tied to energy costs. Unfortunately even at $75/bbl there are a number of large oil projects economically jeapoardised. So it seems for now that $85-90/bbl is the floor level. Even at $147/bbl actual worldwide demand destruction was minimal due to the emerging influence of BRIC. Today however demand destruction in the USA hasn't resulted in much lower oil prices worldwide as BRIC is consuming 'that' much more oil than in the past and additionally conventional crude is in decline.

If the oil price were to drop, oil will be stored where feasible until there is no storage capacity and then production will be taken offline starting with the less economic facilities being shut down. When a facility becomes uneconomical to operate it is shut down and mothballed, it deteriorates (especially offshore locations) and then requires maintenance and regulatory approvals before restart. Once shutdown for more than a few months, it becomes very expensive to restart production. In the case of 'low production' facilities, they may never be restarted. A dropping oil price is a 'double whammy' as production is both curtailed and then becomes extremely cost prohibitive to restart which will result in less available oil.

The USA has 320,000,000 inhabitants, population there is growing at a rapid rate. Even by implementing the best energy efficiency measures, the rate of increased efficiency may well soon be outstripped by increasing population. I can't see the USA implementing a 'one child policy' like China has. I also can't foresee any logical reason to deduct that oil use in the USA will reduce by at least the same amount as BRIC's oil use increases. There are still too many ways for us to use more oil being invented every day! This to me still translates to the type of oil price oscillations that Jeff Rubin talked about.

When continued decline becomes starkly evident, oil market panic will ensue. Not only that but it is already evident that most nations cannot survive having oil supply disrupted for even a few weeks. Oil, now more than ever is an economical weapon.

[ralfy]

The problem isn't just population but consumption per capita. For example, the U.S. has less than 5 pct of the world's population but consumes up to 25 pct of world oil production, probably almost half of that needed to power up more than a third of the world's passenger cars (around 250 million out of 670 million). Even if the U.S. birth rate flattens it is still in overshoot. If the global population were to be cut down by 75 pct, it will still overshoot if those remaining follow countries like the U.S.

[SeaGypsy]

And for the time being, those holding real liquid capital are skirmishing for opportunity. Under capitalism, capital MUST always move towards growth and away from reduction in growth. Isn't it weird how the Chinese seem to understand capitalism better than many of those who claim to have invented it?

[eXpat]

Feeling the heat of Iran in the pocket
Iran Oil Embargo Sends US Gas Prices Soaring
$this->bbcode_second_pass_quote('', 'T')ensions between Iran and the West have sent oil prices to more than $105 a barrel, a nine-month high.

Drivers have already started to feel the squeeze at the gas pump. Gas prices shot up 2 cents overnight after Iran announced on Sunday it would stop selling oil to Britain and France.

A stream of ominous events in the Persian Gulf have pushed prices at the pump to a record level for President's Day weekend, well over $4 a gallon in parts of California.

"They are getting pretty ridiculous," Hollywood resident John Jesenski said. "I suppose they have been for a while now. But it just seems to be getting higher and higher."

"It's going to cost me over $70 to fill up my car, so yeah, it's out of hand," one Bay Area resident commented.

Forecasters at GasBuddy.com predict the price may be on its way to $5 a gallon by Memorial Day weekend.

"Things will only get worse in the future," said Patrick Dehann, senior petroleum analyst for GasBuddy.com. "A lot of gas prices will be tied to the economy. Gas prices will remain at elevated levels.

Although prices are lower in Texas than California, consumers in the Lone Star State are hurting as well.

"Mama is not happy about that, no," one Houston resident said. "It used to take $30. Now it takes about $50."

[SeaGypsy]

This is one of those occasions occurring increasingly where WTI price lag is becoming huge. Here in Australia this price is announced as THE OIL PRICE even though we don't buy any oil from West Texas directly. Most of Australia's imported oil is Tapis from Singapore which broke through $120 last week and now looks rapidly headed for $130. Brent is going similarly through the roof.

Americans should ask themselves how much their oil will go for once transport chokes are opened up to allow export to properly compete with onshore refiners? I think if there was a magic wand waved over the USA's oil logistics, supply will go up, price will quickly catch up to Brent and Tapis and you will be paying a LOT more for your own oil.

[Plantagenet]

$this->bbcode_second_pass_quote('SeaGypsy', ' ') WTI price