[NoWorries]

$this->bbcode_second_pass_quote('', '
')
None of this means a disaster for the US or any other part of the developed world. Even a $500 barrel of oil (in real terms) would reduce US real income (as conventionally measured) by no more than 10 or 11 percent compared to where it would have been otherwise. That’s 3 or 4 years of trend growth - nasty, but no disaster, if properly managed. And there would be considerable environmental benefits from a more energy-efficient lifestyle, which are not captured by conventional GDP- or consumption-based measures of real income. ...Certainly, truck drivers and taxi cab drivers will be hard hit. Their industries will have to contract....

[jdumars]

I am dubious of many of his conclusions. But OTOH, there were many people who said $100 oil would be an apocalypse, and so far it really isn't. I wish everyone on here could have participated in the World Without Oil alternate reality game (http://www.worldwithoutoil.org). It was very instructive as to what might really go down as oil gets more expensive.

[NoWorries]

jdumars

Point taken, but bear in mind the pump price still has not yet caught up with the price per barrel. Prices per barrel have risen over 100% in the past 12 months; over the same time frame pump prices have increased approx. 20% to 30%.

So we're really still living in a 95-dollar-per barrel world right now.

(Someone feel free to openly correct me if I'm wrong on that. I'm on here to learn just like everyone else.)

[SMA]

Your link appears to be broken; this is the referenced article.

I'm in no position to judge the correctness of his position but I do agree that it sounds bizarre. Just because we have adjusted to high fuel prices here in Europe doesn't mean we will readily adjust to empty supermarket shelves. We are just as dependent as any other urbanized society on oil-fueled transportation to bring just about all the stuff we need into the cities. Not to mention the involvement of oil in the production of all that stuff.

[DantesPeak]

$this->bbcode_second_pass_quote('NoWorries', 'j')dumars

Point taken, but bear in mind the pump price still has not yet caught up with the price per barrel. Prices per barrel have risen over 100% in the past 12 months; over the same time frame pump prices have increased approx. 20% to 30%.

So we're really still living in a 95-dollar-per barrel world right now.

(Someone feel free to openly correct me if I'm wrong on that. I'm on here to learn just like everyone else.)

[jdumars]

...and much of that $40/Bbl infrastructure is in disrepair and will need to be replaced.

[Cashmere]

Idiocy.

Couple things to keep in mind . . .

The U.S., and by extension the world, has entered into a major economic downturn. So even without the pressures of oil price increases, we're already hurting very badly.

The current price of oil (145) has not been priced into products you're buying right now.

For example, iron ore to China just went up 95% in price.

It'll take a long time for that increase to totally work its way into the system.

I think that today's price of oil will only be felt, totally, at this time next year.

I never thought 100 dollar oil would be the end.

200, I think, is the end of commercial air travel and the cheap life.

300 is the end of modern life.


Lots of steps in between, of course.

keep in mind that also working against the author is depletion/scarcity/rationing.

Maybe 15 dollar a gallon gas could be survived.

But NO gas will not be survived by the modern world.

[Munqi]

Isnt the price of oil actually a lot lower in reality if you consider the inflation on the dollar? As in alot cheaper for everyone else but the US.


Could the american economy function with these oil prices without taking debt?

[DantesPeak]

$this->bbcode_second_pass_quote('Cashmere', '
')
But NO gas will not be survived by the modern world.

[NoWorries]

Thanks for all the replies.

Incidentally, does anyone know what Prof. Willem Buiter was predicting (in terms of the price of oil) 2 years ago? That might give us a better insight into his overall rationale, and whether he is of an overly-optimistic mindset or not (where the price of oil is concerned).

[scalbers]

$this->bbcode_second_pass_quote('NoWorries', 'j')dumars

Point taken, but bear in mind the pump price still has not yet caught up with the price per barrel. Prices per barrel have risen over 100% in the past 12 months; over the same time frame pump prices have increased approx. 20% to 30%.

So we're really still living in a 95-dollar-per barrel world right now.

(Someone feel free to openly correct me if I'm wrong on that. I'm on here to learn just like everyone else.)

[Serial_Worrier]

$300/barrel = world economy in smouldering ruins!

[Alanintx]

Didn't Matt Simmons just say on CNBC Friday that he is surprised oil is much more expensive?

What is Saudi production falls, say, 5 per cent in four years? And it becomes clear they peaked and are going over the other side in a hurry?

Sounds to me like the good professor's opinion is in line with Simmon's projections in his book.

[Fiddlerdave]

You have to love a view from an Ivory Tower. Does our dear professor think that 10% income cut would occur evenly across the board for all income brackets?

The reality will be the top continues their 20% increases, or may a little slowdown in increase, and the bottom 2/3 of income brackets will suffer a 80% drop in income, and be eating clay and cardboard like they do in Haiti.

The resulting society will not be apleasant place for anyone.

[kilik]

At the same time USA is probably the country in the world which has the biggest potential to reduce consumption. Millions of Americans are able to switch to lighter/more efficient cars that could reduce their consumption by 50%. In Europe and Japan people are already driving 40 MPG cars.

Could we handle $500/barrell? It depends on WHEN. If it happened tomorrow it would be chaos, if we see a steady, linear rise to $500 in 2015 we would be able to adapt.

[Bas]

link to article doesn't work.

To me it seems he makes the classic mistake of only thinking price, assuming that there will be plenty of supply if we're willing to pay which is not the case; we're going on a slope of production decline, and once we do hit $500, maybe in a few years, next we might hit $1000 a few years later.

Also the 10 or 11% would in practice be much bigger as again you can't equate the price of oil to the cost of what that price of oil will cause in the economy which would obviously more that that: this "economist" forgets that in a recession the foremost thing that happens is a decline of the utility of production capacity and besides that this won't be your ordinary recession as reduced oil supply will also mean an actual drop production capacity, and one that will continue to drop.

[f2tornado]

I wouldn't go so far as "no problem" but $500 oil would equate to about $14/gal gas using the current 35:1 oil price to gas price spread. My just over one mile commute would cost about a buck a day (I bike as it is). If you add a car pool buddy you are down to $7/gal equivalent and if you gave three buddies you are down to $3.50 which is below the current price. If you ditch the full size SUV you might be able to reduce those figures by a relative factor of three. Go for a Prius and you can trim another 2/3 of the fat. If an EV Prius is out by then then the cost is reduced by another 2/3 or more. My box of cereal might cost $8 by then but I could always eat a smaller portion and could afford to lose at least 10 pounds. Demand destruction has to start at some price and at current price levels this is already happening at a slow pace in the U.S. Further, U.S. demand of Chinese junk will diminish as discretionary income is reduced which will eventually crush energy demand in China. I doubt oil ever gets to $500 barring some short-term catastrophic event. At some point the U.S. would declare a national security threat and essentially force drilling on just about any piece of land. A $500 price makes Colorado oil shale seem awfully attractive. Hopefully but then peak oil discussion will shift to peak metal production. At least we can recycle rare metals and probably mine plenty of out old landfills.

[Cashmere]

ftorn - I disagree.

It's not as simple as higher MPG cars.

1st, people have to buy them.

Prius is 24k today.

In 5 years, it's probably 35k.

The cheapest EV I see approaches 40k.

That doesn't even consider trucking.

The affect on the price of everything cannot be ignored.

Car pooling to work is a temporary amelioration of part of the problem, but what's the point if there is 25% unemployment and bread costs 10 bucks a loaf?

[emersonbiggins]

[deleted]

[f2tornado]

$this->bbcode_second_pass_quote('Cashmere', '
')Car pooling to work is a temporary amelioration of part of the problem, but what's the point if there is 25% unemployment and bread costs 10 bucks a loaf?