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Page added on June 1, 2018
This Is What an Oil Shock Looks Like
If it looks like a duck, swims like a duck, and quacks like a duck, it’s probably a duck. And right now, this duck is looking a lot like an oil shock:
- In Brazil, a strike by truckers protesting the price of fuel brought the economy to a halt over the past week, interrupting exports of soybeans, coffee and chicken and prompting some to call for a return to military dictatorship;
- In India, prices for diesel and gasoline have hit multi-year records, leading to demands for the government to cut taxes and for a price cap to be imposed on state-controlled Oil & Natural Gas Corp. – a self-defeating expedient, as my colleague Andy Mukherjee explained this week;
- Governments in Thailand, Vietnam and Indonesia and implementing or planning increases in retail fuel subsidies to protect consumers from the effects of rising oil prices and weakening national currencies;
- Airline profits have probably peaked because of headwinds from fuel costs, according to Alexandre de Juniac, chief executive officer of the International Air Transport Association. Philippine budget carrier Cebu Air Inc. this week promised to impose fresh fuel surcharges;
- Moody’s Investors Service just blamed high oil prices in part for a 0.2 percentage-point cut in its outlook for India’s 2018 GDP growth, and warned of the potential of falling consumption spending and rising inflation across the globe if current high prices are sustained.
No Worries
Internet searches for oil shock-related terms show the world isn’t concerned about prices
Source: Google Trends
Judging by internet searches for the term, an oil shock is the last thing anyone should be worried about. It seems insane to be stressing over oil when Brent is struggling to break through $80 a barrel and West Texas Intermediate is bobbing around $70, about one-third lower than their levels four years ago. But crude has a short memory.
Over a Barrel
Crude oil prices during the 1990-1991 Gulf War price spike were merely a return to the pre-1986 average. They still helped spark a global recession
Source: Bloomberg
Take the first Gulf War. In the five months between Saddam Hussein’s 1990 invasion of Kuwait and the start of Operation Desert Storm, a spike drove West Texas Intermediate to an average $30.84 a barrel. Despite representing little more than a return to the status quo before Saudi Arabia flooded the market late in 1985, those prices were high enough to help spark the early 1990s recession.
A 2011 analysis of previous oil shocks by James Hamilton of the University of California, San Diego, suggests they’re a strong predictor of downturns. Rapid oil price increases have preceded 10 of the 11 U.S. business cycle peaks since World War II; only in 1970, 1973 and 2003 – during or in the immediate aftermath of recessions 1 – did a run-up in prices fail to herald the peak.
Future Shock
Rapid oil price increases have an uncanny knack for predicting peaks in the U.S. business cycle
Source: Hamilton, D. (2011) “Historical Oil Shocks”, Bloomberg data
Note: There was also a business cycle peak in April 1960, which we’ve not shown for design reasons since there was no nearby run-up in oil prices. “Invalid date” indicates there’s yet to be a peak.
Over the past 11 months, Brent crude is up 62 percent and West Texas Intermediate has risen 46 percent – but does that constitute an oil shock? By one measure, it could. One way of analyzing such events, pioneered by Hamilton, is to compare current oil prices to their highest level over the previous three years.
Where prices are below their previous peak, any increase can be considered a return to the norm; where they’re above that level, there’s the possibility of a genuine shock. On a Hamilton-style measure, we’re seeing the strongest flashing red light since 2008. 2
Crude Measure
By one way of analyzing it, we’re seeing the largest oil shock since 2008
Source: Bloomberg, Bloomberg Opinion calculations
Are such fears premature? Real global growth will reach 4 percent this year for the first time since 2011, the Organisation for Economic Co-operation and Development forecast this week. Consumer prices, which have been slumbering for a decade in developed countries, could arguably do with an extra kick from higher energy prices to fuel core inflation and speed the return of central bank rates to pre-crisis levels. The Conference Board’s U.S. Leading Index, one widely watched measure of turns in the business cycle, is at some of its highest levels on record.
No Surprises Please
Citigroup’s index of global economic surprises is showing the weakest result in five years, but so far emerging markets are only mildly negative
Source: Bloomberg
At the same time, we shouldn’t expect to see many other signs of weakness yet because oil shocks are prophets, not partners, of slowing growth. And while higher prices don’t yet appear to be seriously crimping consumer spending in rich countries, trucker strikes and government subsidies elsewhere are a strong signal that the cost of crude and slumping currencies are eating into incomes elsewhere.
That should provide an extra impetus to governments in Saudi Arabia and Russia in deciding how much to increase exports. With U.S. crude locked up onshore by infrastructure bottlenecks, a surge in supply and easing in prices may be the only thing standing between us and the next downturn.
81 Comments on "This Is What an Oil Shock Looks Like"
MASTERMIND on Fri, 1st Jun 2018 12:31 pm
Sleepwalking Into The Next Oil Crisis
https://www.forbes.com/sites/rrapier/2018/03/23/is-the-world-sleepwalking-into-an-oil-crisis/#509edc8b44cf
Once the world is in a full blown oil/energy crisis here soon, with people unable to drive to work, school buses unable to run, farm tractors running out of fuel to grow our food, we’ll be existing in such a state of chaos and confusion that we won’t give a damn about the weather/climate – we’ll instead be focused on one thing and one thing only – where’s my food!
MASTERMIND on Fri, 1st Jun 2018 12:57 pm
Fox News proposes blasting down school walls with cannons in event of school shootings..
https://imgur.com/a/6WWGsZt#5ksKUJz
You can’t make this stuff up..
MASTERMIND on Fri, 1st Jun 2018 1:09 pm
Are we facing an oil shock? These signs say yes
https://economictimes.indiatimes.com/news/economy/indicators/are-we-facing-an-oil-shock-these-signs-say-yes/articleshow/64410090.cms
There will be blood!
george on Fri, 1st Jun 2018 3:13 pm
This has been going on since the Baghdad to Berlin railway construction starting in 1903.
It’s all about oil .
dave thompson on Sat, 2nd Jun 2018 12:45 am
Most in the U$ do not realize the knife edge balance our “modern” way of life relies on FF and how easy a disruption could/will happen.
Cloggie on Sat, 2nd Jun 2018 4:47 am
Thank god the world is running out of oil. Soon the oil price will be at $150 at again, causing substantial demand destruction and a new equilibrium between supply and demand.
SUV-owners will look pretty silly in their tanks-pretending-to-be-sedans. America is majestically blundering itself into a new crisis:
https://www.bloomberg.com/news/features/2018-01-16/why-the-american-sedan-is-marked-for-death
Is there reason for hope? Yes there is, glad you asked.
The price of renewable energy is rapidly decreasing and with $150 oil will finally beat fossil fuel (ignoring storage, which can be ignored until 30-40% share power generation).
Meanwhile ALL car companies and most industrialized nations are preparing themselves for the autonomous car, which would imply, if fully implemented, A GIGANTIC DEMAND DESTRUCTION OF OIL. Think factors of 4-7, which the same transportation output:
https://www.youtube.com/watch?v=y2X1ehdJQSI
Dredd on Sat, 2nd Jun 2018 4:51 am
Shock … you want shock (Why Sea Level Rise May Be The Greatest Threat To Civilization – 6) ?
That is an oil shock.
Cloggie on Sat, 2nd Jun 2018 4:53 am
Google-company Waymo is cooperating with Fiat Chrysler to send another 62.000 autonomous cars (hybrid minivans) onto the roads by the end of 2018.
https://www.nu.nl/gadgets/5292842/waymo-voegt-62000-zelfrijdende-taxis-toe-bestaande-vloot.html
Waymo plans to introduce a taxi service in the US consisting of autonomous driving cars. Customers can order a ride via their mobile phones and app.
According to Waymo have their cars traveled more than 9,6 miljoen kilometers on public roads and 8 billion simulated kilometers.
MASTERMIND on Sat, 2nd Jun 2018 6:54 am
Clogg
Renewable’s produce electricity..Oil isn’t used for electricity..Its used for 90 percent of the worlds transportation..
Cloggie on Sat, 2nd Jun 2018 7:20 am
“Renewable’s produce electricity..Oil isn’t used for electricity..Its used for 90 percent of the worlds transportation..”
That applies to 2018 indeed, but all around the planet companies and governments, with Norway #1, are planning for electrification of transport, either with batteries, fuel cells, or via a rail in the road:
https://deepresource.wordpress.com/2018/05/08/e-road-e-vehicles-breakthrough-in-sweden/
Davy on Sat, 2nd Jun 2018 7:29 am
Norway has a population the size of a city get a grip on scale. Get out of your chauvinistic blinders.
LetStupidPeopleDie on Sat, 2nd Jun 2018 6:13 pm
If you read between the lines, top official are telling us the peak oil is here or we have past the peak oil point. This is one example
Saudi Arabia names businessman as labor minister in small shift away from oil reliance
https://www.marketwatch.com/story/saudi-arabia-names-businessman-as-labor-minister-in-small-shift-away-from-oil-reliance-2018-06-02
I am surprise the Bloomberg posted such news article. Are we reaching the point where people are stating to realize the economics is not a real science and peak oil is proving that economics are voodooism sciences..
Sissyfuss on Sat, 2nd Jun 2018 9:27 pm
Still no MBS in the flesh. Getting curiouser and curiouser.
MASTERMIND on Sat, 2nd Jun 2018 10:29 pm
Sissy
Trump’s wife has been missing for over three weeks as well..I bet Trump got mad and beat the living shit out of her..
GregT on Sat, 2nd Jun 2018 11:24 pm
“Trump’s wife has been missing for over three weeks as well..I bet Trump got mad and beat the living shit out of her..”
I’d be more willing to bet that she’s getting ready to file for divorce, either that or Melania and Donald junior are celebrating cocktail hour in the Bahamas, with some of the other .0001%ers like Davy and his ‘family’, waiting for this entire shitshow to boil over.
MASTERMIND on Sat, 2nd Jun 2018 11:36 pm
Greg
Melania needs to show us her papers..We have already seen everything else..
LMFAO!!
MASTERMIND on Sat, 2nd Jun 2018 11:38 pm
How This Economic Recovery Ends
Every time there’s full employment, there’s a spike in oil prices. And guess what comes next.
The first and most extreme case was the 1973 OPEC oil embargo that began in October 1973. At that time the unemployment rate was 4.6 percent. Over the next five months the price of oil tripled in global markets, plunging the U.S. into an immediate recession that eventually coincided with the resignation of President Richard Nixon.
The second case was the First Gulf War. The unemployment rate touched as low at 5 percent in early 1989. Because of rising tensions in the Middle East, eventually leading into Iraq’s invasion of Kuwait and the American military response, the price of oil jumped from around $16 in June 1990 to $40 later that fall. Recession began in July.
The late 1990s boom in the U.S. may be remembered more for technology stocks, but it also coincided with an oil spike. After the emerging market crises of 1998, the price of oil dropped as low as $11 a barrel. Yet by March 2000, as technology stocks were peaking, it had soared to over $33 a barrel, its highest level since the Gulf War. And in the last economic cycle, even as the housing market was collapsing, the price of oil soared, rising from $52 a barrel in January 2007 to almost $150 a barrel by the summer of 2008.
https://www.bloomberg.com/view/articles/2017-06-14/how-the-u-s-economy-will-enter-its-next-recession
GregT on Sat, 2nd Jun 2018 11:49 pm
Hey MM,
Is it really your birthday dude? If so, Happy Birthday!
MASTERMIND on Sat, 2nd Jun 2018 11:59 pm
Greg
Thank you..Went to an arts festival in my city today..It was great..
GregT on Sun, 3rd Jun 2018 1:19 am
No worries MM. Glad to hear you had a great day.
Cloggie on Sun, 3rd Jun 2018 2:05 am
Still no MBS in the flesh. Getting curiouser and curiouser.
Trump’s wife has been missing for over three weeks as well..I bet Trump got mad and beat the living shit out of her..
They both ran off to Italy. There in Venice MSB is buying her nice things, mostly shoes, and says tender words. Back at the hotel at night Melanie rewards MBS with golden showers of gratitude and volunteers to dance on his sword. And at the moment of total bliss and surrender Melanie shouts: “I hate you Stormy!”
https://amp.businessinsider.com/images/59208ff2639147970b8b5284-750-500.jpg
Cloggie on Sun, 3rd Jun 2018 2:12 am
Thank you..Went to an arts festival in my city today..It was great..
Interesting to note that Greg and millimind are posting at the same hours, where meathead is still “on one ear”, as the Dutch saying goes:
https://nl.bbimages.eu/images/users/7625/benb/13bb_780_md.jpg?1433936646
Note that “buthole” Missouri is at the same latitude as Michigan, where ostensibly millimind is from.
I have no doubt that Greg is from BC. Perhaps even meathead can now figure simple things out. Don’t hold your breath.
GregT on Sun, 3rd Jun 2018 2:24 am
Hmmm Cloggie,
I heard Melania was hanging out in Richard Branson’s retreat in the Bahamas with the Obamas?
http://www.chicagotribune.com/news/opinion/huppke/ct-met-melania-trump-missing-huppke-20180531-story.html
Maybe when psycho (.0001 %er) boy wakes up from his beauty rest in the morning, he can fill us all in on the details.
Cloggie on Sun, 3rd Jun 2018 2:27 am
Sorry Greg, but that seems to be classified information as I get this:
“Unfortunately, our website is currently unavailable in most European countries. We are engaged on the issue and committed to looking at options that support our full range of digital offerings to the EU market. We continue to identify technical compliance solutions that will provide all readers with our award-winning journalism.”
Cloggie on Sun, 3rd Jun 2018 5:01 am
Hey MM,
Is it really your birthday dude? If so, Happy Birthday!
Let me show me from my humanistic side by NOT expressing my birthday wishes for millimind.
Davy on Sun, 3rd Jun 2018 5:41 am
“Note that “buthole” Missouri is at the same latitude as Michigan, where ostensibly millimind is from. I have no doubt that Greg is from BC. Perhaps even meathead can now figure simple things out. Don’t hold your breath.”
Ask him dumbass. I am going on what he told us. It is not a big deal other than it shows how stupid you are about NA.
Anonymouse1 on Sun, 3rd Jun 2018 5:48 am
The exceptionalturd is not one of 1%, much less, the .0001%. In reality, he is one of the 20%.
http://www.newsweek.com/nearly-1-5-americans-suffer-mental-illness-each-year-230608
(I thought it would be a lot higher). But 20% is still pretty ….exceptional.
Although to his limited credit, he does stand out by suffering from multiple (un)treated mental problems. I’m pretty sure that does not qualify him for membership in the .0001%.
Davy on Sun, 3rd Jun 2018 5:51 am
“with some of the other .0001%ers like Davy and his ‘family’, waiting for this entire shitshow to boil over.”
Well, grehgiee, you are the $MIL Butthole Columbia boy with the doctor wife. I am a permaculture goat and cattle farmer who withdrew from the life you are living because it did not appeal to me. What my family does is their business. I see them a few times a year. Again the translation of your attack is a whine and a moan from getting your teeth kicked in yesterday. What a pussy.
Davy on Sun, 3rd Jun 2018 5:53 am
“Hmmm Cloggie, I heard Melania was hanging out in Richard Branson’s retreat in the Bahamas with the Obamas?”
Now the groupies are talking tabloid trash. Just goes to show how bereft of intelligence these guys are.
Davy on Sun, 3rd Jun 2018 5:59 am
Weasel, imbeciles like you often tell on themselves when they constantly harp on another about something this many times reflect on what is going on with themselves. You and grehgiee constantly talk about mental illness and meds which I see as pointing to the fact you both have a mental illness and are on meds. Judging from your comments you are still having issues. Both of you stalk and prick and rarely say anything of value which points to anger issues and obsessions. Adding to your mental issues is your sexual deviances. It appears you also like bestiality. You are always talking about that too.
Cloggie on Sun, 3rd Jun 2018 6:11 am
“Ask him, Clogmeister. I am going on what he told us.”
That’s not good enough. For his tribe, lying and deceiving is part of what prof Kevin MacDonald calls their “group evolutionary strategy”.
https://en.metapedia.org/wiki/Jewish_group_evolutionary_strategy
https://en.wikipedia.org/wiki/The_Culture_of_Critique_series
But it doesn’t matter, in the end this Dutch proverb will always prevail:
https://spreuktegeltje.nl/wp-content/uploads/2017/06/Oude-wijsheden-Al-is-de-leugen-nog-zo-snel-de-waarheid-achterhaalt-hem-wel.-6745.jpeg
“Al is de leugen nog zo snel, de waarheid achterhaalt hem wel”
(“even is the lie whichever fast, the truth will catch up with him”)
Their tribe is considerably smarter than the average Caucasian, especially the US branch, not to mention Russia…
https://www.youtube.com/watch?v=VBHXEusG4Pk
…which puts them at the permanent temptation of deceiving us, because it is so easy.
The trouble for them is, there is such a thing as Karma, comparable to a police register or the Australian boomerang. Sooner or later the combined actions, lies, deceptions will come back to haunt them. It is the eternal pendulum of action and reaction. First IQ beats numbers, but eventually superior fists beat IQ points.
https://www.biblebelievers.org.au/expelled.htm
https://furtherglory.files.wordpress.com/2014/04/arbeitsign.jpg?w=634&h=375
Anonymouse1 on Sun, 3rd Jun 2018 6:18 am
Actually, you have withdrawn from REALITY, exceptionalturd. Long time now, and it isn’t aging well, and neither are you. BtW, why do you persist in lying about being a ‘farmer’ of some sort? It’s been established, you simply do not have the time for anything resembling ‘farming’. Even if you cut yours and ‘mushminds’ posts by 50%, that still would have you sitting at your….phone is it? Furiously mashing the refresh button all day long.
Your busy schedule of non-stop ranting and raving here, leaves little time for ‘permaculture’. Although, its probably a safe bet you do find time for the goat.
Somehow.
Davy on Sun, 3rd Jun 2018 6:19 am
“But it doesn’t matter, in the end this Dutch proverb will always prevail: (“even is the lie whichever fast, the truth will catch up with him”)”
The dumb dutch guy told on himself just like the Canadian weasel. You guys are a hoot!! Neder, you are one big lie and the truth catches up to you daily when your fantasies unravel.
Davy on Sun, 3rd Jun 2018 6:29 am
Hot damn, my comment hit the spot with the weasel. Weasel you are a hoot. I always know when you hurt from a bitch slap with reality because you make a return comment. Most of the time you ambush and run. LOL, so, what kind of mental issues do you have? Was I close with the anger issues and obsession? I am pretty sure I was on to you with the unemployed school dropout millennial living with mom still.
Cloggie on Sun, 3rd Jun 2018 7:03 am
The “neutering machine” is running at full speed, the only remaining rationale of his presence here, now that peak-oil is not forth-coming any time soon.
Ah well, other people play golf or collect stamps. As long as it keeps them from the street.
Davy on Sun, 3rd Jun 2018 7:20 am
Lol, neder, my contribution is more relevant than your Nazi glory revisions and future Eurasiatard empire nonsense. BTW, going to run as I write this. I don’t have the luxury of playing leisure games like you mentioned. I farm and that is a full time job. My mental challenge is nuetering extremist here. If you haven’t notice there are a lot less idiots here like you since my clean up effort started.
MASTERMIND on Sun, 3rd Jun 2018 9:38 am
Clogg
George Soros warns the European Union is on the brink of collapse — and Trump is partly to blame
http://www.businessinsider.com/george-soros-president-trump-eu-collapse-2018-5
Its over..hope you enjoy eating your zoo animals..LOL
MASTERMIND on Sun, 3rd Jun 2018 9:45 am
Brexit: No-deal would lead to immediate food and medicine shortages, government ‘doomsday’ study claims
https://www.independent.co.uk/news/uk/politics/brexit-no-deal-food-medicine-shortage-doomsday-armageddon-david-davis-a8381076.html
Don’t worry Nigel will just hop in his private jet and fly away..!
Cloggie on Sun, 3rd Jun 2018 11:01 am
“Brexit: No-deal would lead to immediate food and medicine shortages, government ‘doomsday’ study claims”
If the UK walks out without paying, the EU can compensate itself with Gibraltar. And next allow Russia to use the Spanish-owned base. Spain is rather Russia-friendly, sea page 12:
https://www.utu.fi/fi/yksikot/tse/yksikot/PEI/raportit-ja-tietopaketit/Documents/Braghiroli_%20Carta%201509%20web.pdf
1.0 = dedicated love, 0.0 hostile
Greece 0.89
Austria 0.75
Italy 0.72
Spain 0.64
Germany 0.64
France, Holland 0.55
0.50 = neutral/indifferent
UK 0.39
Poland 0.11
Baltics 0.00
GregT on Sun, 3rd Jun 2018 11:43 am
“BTW, going to run as I write this.”
The only running you did was to other threads Davy.
“I don’t have the luxury of playing leisure games like you mentioned. I farm and that is a full time job.”
If you were working for me, I’d fire your sorry ass. You spend far too much time playing your mentally challenged leasure games.
“My mental challenge is nuetering extremist here. If you haven’t notice there are a lot less idiots here like you since my clean up effort started.”
You would be the biggest extremist on this forum Davy, and a completely delusional one at that. Mentally challenged would be an understatement.
Now tell everyone again; Who would be all of those “a lot less idiots” that you have so valiantly cleansed from this forum?
Davy on Sun, 3rd Jun 2018 11:58 am
“The only running you did was to other threads Davy.”
TRANSLATION: Not only did Davy neuter me he bitch slapped me and hurt my stupid inbred butthole Columbian pride.
“If you were working for me, I’d fire your sorry ass. You spend far too much time playing your mentally challenged leasure games.”
That’s funny because you don’t have a job. Your wife wears the pants and brings home the bacon. Lol.
“You would be the biggest extremist on this forum Davy, and a completely delusional one at that. Mentally challenged would be an understatement.”
TRANSLATION: a neuter whine. LMFAO
“Now tell everyone again; Who would be all of those “a lot less idiots” that you have so valiantly cleansed from this forum?”
Well two that come to mind are asshole Canadians Ape man and Truth has a liberal bias. Your stupid neighbor Butthole Columbian friend Antaris is another Canadian chump who has moved on. Do you want me to keep a list?
GregT on Sun, 3rd Jun 2018 12:20 pm
All individuals Davy, who do what they want, when they want to. You have no bearing on what other people think, say, or do, whatsoever. Plain and simply more of your usual paranoid delusions.
Davy on Sun, 3rd Jun 2018 12:43 pm
greggie, go start a self help blog or something. What I am hearing out of you is snorting and grunting so don’t bother me. I consider you just another stupid inbred West Coast Canadian smart ass obsessed with anti-Americanism.
GregT on Sun, 3rd Jun 2018 12:52 pm
I’ll do what I want, whenever I feel like it Davy, and I couldn’t care less what you think about anything at all.
You’ve got both serious emotional and psychological issues. You’re clearly not playing with a full deck buddy.
Cloggie on Sun, 3rd Jun 2018 12:55 pm
“I consider you just another stupid inbred West Coast Canadian smart ass”
“Inbred smart ass” is not a very smart ass thing to say.
MASTERMIND on Sun, 3rd Jun 2018 1:30 pm
If the struggle between the US and China merely leads to a trade war, the world can consider itself lucky. Historically, when a rising power challenges the existing top dog it has more often than not led to bloodshed..
-Larry Elliot
Davy on Sun, 3rd Jun 2018 1:34 pm
Sure you do grehgiee. You are obsessed with me. You even go as far as threaten to come down and find me. I presume with a gun or something. In November you wanted to ass fuck me. You stalk the site to prick me. You are one sick inbred grehggie. Bite yourself and taste your blood maybe you will feel alive.
Anonymouse1 on Sun, 3rd Jun 2018 2:18 pm
Yeesh, you really do need exceptionalturd, and plenty of it. Not this will do any good or even register with you, but, NONE of those things *ever* happened, dumbass.
MASTERMIND on Sun, 3rd Jun 2018 2:23 pm
NAFTA is dead and Canada should move on
https://www.theglobeandmail.com/opinion/article-nafta-is-dead-and-canada-should-move-on/
GregT on Sun, 3rd Jun 2018 3:33 pm
Your condition continues to deteriorate Davy, just as I predicted that it would. You aren’t doing yourself any favors by continuously being in conflict with so many other people on this site.
You have nobody to blame but yourself buddy. Please go and get some badly needed psychological help, before you end up on the front page news.