[SoothSayer]

After readiing tons of articles, posts etc I have a suspicion that we will experience an oil price plateau for a couple of years.

Are there any economists out there who can tell me what say $70 oil could do to the economy if sustained for 2 or 3 years?

How would price volatility of say plus/minus 15$ affect the situation? Would we in fact even notice any difference to our way of life at that price level?

[aldente]

Doubt it, no effect.

[IslandCrow]

About a month ago I calculated that I could manage my present driving even if oil went over $200-300 barrel. What would hit me hard, and sooner is if heating oil say went to $120 / barrel. I am in the process of changing heating systems.

So I could manage quite well if oil stayed at $ 70 / barrel for some years, PROVIDED I can still keep my job. I suspect that energy costs would do major damage to my employer, and so that sooner or later I might have to take salary cuts to keep the job. This would radically lower the limit of how I could manage with rising oil costs.

Sorry if you were looking more for an answer in text book economic format, but I find that I can understand things better with more concrete examples

[SoothSayer]

IslandCrow, excellent response - thanks.

Real, pragmatic data from real people is much more valuable than "projections" or "estimates".

[peaker_2005]

$this->bbcode_second_pass_quote('SoothSayer', 'I')slandCrow, excellent response - thanks.

Real, pragmatic data from real people is much more valuable than "projections" or "estimates".

[Teclo]

Yeah it will have no effect - if you live in a western country!

So this overlooks one tiny little detail.... the west will be outbidding all the poorer countries who are already in an energy crisis

Do you seriously think they will go 'oh well, we were made to suffer'
Yeah right, they will join forces (oh like south america?), work against US interests wherever possible, and funny... aren't there a lot of poor African, pakistani, indian, asian nations with a lot of muslims... sure, they will become peace loving Sufi's

The really dumb thing is that the US is outbidding everyone else on money it borrows from the rest of the world. This is the equivilant of sticking a firework up your arse and paying someone else to light it

Martin

[MadMarcus]

Another individual data point.

My job would be safe but my earnings would be frozen (public school teacher). My commute is reasonably short (10 miles) and direct driving costs would not be a big problem. Due to some luck with a previous house we have a very small mortgage so the only problem with the house are repairs or improvements.

Overall spending is already low and my guess is that we could handle the inflation without real problems. We would save less in our passive savings (the money market account) but our active savings (401k and IRA) would probably be the same as previously. Yes, I've read all of the info about investments tanking, I find that I can't convince myself to pull out of the market.

Oddly enough a prolonged ride around $75 would probably convince my wife to take ome or two final plane trips out of the county. I've never been a big material items person but I like experiences.

[Micki]

Yeah, I can also bear with $200 oil. But like you said, what if my employer can't? Then I could loose my job. And what if other companies raise their prices, then it would be even worse.
Here in Australia, National Foods recently announced 3% price increases to a number of base products directly as a result of high energy costs. That is the first time I have hear this coming so clearly from that industry.
So even if I keep my job and my salary doesn't keep up with price increases, I will be worse off.
So on a second thought I think $200 will be really bad for most people.

[Michael_Layden]

Always interesting to see everyone looking at this from their own point of view, $70 a barell will mean an additional 100 Billion a year taken out of the US economy for three years and sent overseas.
The real impact will be much much higher, this is money taken out completely from the local economy, If everyone has 20-30 dollars less a week to spend then people wont go to Movies, dine out, buy computer games, make as many phone calls. I.e all the luxuries will be cut back and many of these are the very things which have fueled the growth in service jobs.



With less money in everyones pockets people will have to reduce borrrowings and their will be more and more people stretched and out of work, how long will a property bubble survive this. The price of Oil will not effect anyone much only IF all the house of cards keeps up.

I expect Oil prices to start dropping long before 3 years as we see massive demand destruction as the oil addicts die off. It won't be a case of the developing world competing against the developed. More Oil competing against all other industries for the consumers take home pay. Eventually collapse of non essential industries will give the oil savings needed !!

Its very much a death by a thousand cuts. You might be able to afford it but your killing your country doing it.

[Jack]

I think the U.S., Europe, and China would do just fine with $70 oil and a 20% volatility. In fact, I suspect the global economy would prosper and individual consumers would heave a sigh of relief. I also think that such a scenario is rather optimistic.

As was pointed out, the poorer countries and people will be forced out of the market by price. But there are control mechanisms in place to deal with the domestic poor, and foreign countries have leaders who can be managed. Countries such as Venezuela can posture and scream, but in the end their burgeoning population forces them to sell their oil - and so the developed countries benefit.

So, if your scenario were to play out, we in the affluent countries would continue to enjoy cheap goods, inexpensive and abundant food from around the world, and a continuation of the present lifestyle. Transportation would be more expensive, but we would be unable to detect any change in traffic on the highway or crowding at the airport.

[MOCKBA]

$this->bbcode_second_pass_quote('Jack', 'I') think the U.S., Europe, and China would do just fine with $70 oil and a 20% volatility. In fact, I suspect the global economy would prosper and individual consumers would heave a sigh of relief. I also think that such a scenario is rather optimistic.

[whereagles]

I could live with a $200-300 barrel. That would be like $20/gallon or something where I live.

Right now I spend roughly 20 gallons of gasoline a month, but could easily chop that off to 10 by driving less. At $200 a month it would put a dent to my finances, but I could handle it.

However, I don't think most could. Average wages here are around $1000 bucks a month, so most people would have to drop their cars or their houses (most likely the house!!!).

[mmasters]

$this->bbcode_second_pass_quote('MOCKBA', '')$this->bbcode_second_pass_quote('Jack', 'I') think the U.S., Europe, and China would do just fine with $70 oil and a 20% volatility. In fact, I suspect the global economy would prosper and individual consumers would heave a sigh of relief. I also think that such a scenario is rather optimistic.

[mmasters]

$this->bbcode_second_pass_quote('MOCKBA', '')$this->bbcode_second_pass_quote('Jack', 'I') think the U.S., Europe, and China would do just fine with $70 oil and a 20% volatility. In fact, I suspect the global economy would prosper and individual consumers would heave a sigh of relief. I also think that such a scenario is rather optimistic.

[MOCKBA]

$this->bbcode_second_pass_quote('mmasters', '
')Drug money yield from herion in Afghanistan and coke money in Columbia laundered into the US financial system. Is it any question why these countries have become one-stop-shopping for dope or why the bush folks et. al turn a blind eye/ or are buddy-buddy with them?

[oneoblivion]

Another semi personal perspective:

Prolonged 70 a barrel wont hurt me much as I work from home.

However my brother does foundation masonry and is already hurting, depending on where they are working he might have to travel 100 miles a day round trip while making 8 dollars an hour.

He is spending close to 400 dollars a month on gas, which is about a third of his paycheck after taxes. Even with the low cost of living here he would be in a lot of pain if it weren't for room mates.

It's the poor who do manual labor, own older vehicles or work trucks and must travel fairly large distances daily that will really be hurting. (this especially applies to people doing the construction for McMansions and your typical housing developments). Gas theft is already on the rise in the relatively poor neighborhoods here.

This gets me a little scared personally, 4-5 dollars a gallon and these people will be choosing between food and heating (if they aren't already). I am personally expecting to see a decent rise in crime rates due to this over the summer.