http://www.mysteryspot.com/
I think our peak oil brains have been standing on the side of Hubbert's hill so long that we have a hard time perceiving the true horizon. We expect a ball to roll downhill but our altered sense of perspective has a hard time telling which way is down.
This is from the "oil prices will never recover" thread, a blog rant from Economic-undertow:
Additional repayment obligations are set to be heaped upon the same customers who can’t bear the drillers’ present costs … this is what the crashing oil prices actually mean. Credit breakdown is taking place in plain sight, under the noses of- and unremarked by ‘real’ economists. That people cannot afford their petroleum doesn’t appear to matter; not nearly as much as how the same people ‘feel’ about the economists themselves.
Whether or not there is a "credit breakdown" is beside the point, in fact it is a misperception of the true situation. What is in plain sight is that people can't afford 100mmbopd @ $100/bbl but they can sure afford it at $50!
To drive home that that point (and tie in to my "hill" theme) it seems a lot more of us went over the hills and through the woods at Christmas last year:
Weekly consumption data from the government’s Energy Information Administration show that over the four weeks to January 9, implied US petrol consumption rose 7.1 per cent from the equivalent period a year before — the fastest rate of increase since 2004.
http://www.ft.com/cms/s/0/16717380-9c8e ... abdc0.html
Demand for motor fuel is up. Of course it is, that is what happens when ability to pay increases! Ability to pay increases when the price falls. The price falls when the supply exceeds demand. It ain't rocket surgery.
This drop in price is caused by the typical oversupply glut. But this time the price, for the first time since maybe forever, is not being defended by the "swing producer". Prior to the US peak in the early '70s the US was the de facto oil cartel and the Texas Railroad Commission the ruling body. The RRC controlled how much oil was produced in Texas (which was about half of US production) so they essentially set the world price. When the RRC pulled the stops after the peak and removed any limit to production, OPEC took over as the world's "relief valve," adjusting their production to match world demand and thereby moderating price.
This time OPEC decided not to play that role, and since US frackers had no one to tell them to slow down, they did what producers always do and produced flat out until they produced too much: Oversupply met falling demand from 4 years of record high oil prices and boom, glutsville.
Did you catch that part? Demand was falling prior to the glut. High price had impaired consumers ability to pay but the "desire" for oil was still there. Now that prices have fallen - due to the glut - it is inevitable that demand will increase and the price rise.
- - - -
Are there economic problems in the world? Yes
Are there economic problems with unconventional oil? Yes
Is there a huge, ongoing credit binge going on that might well collapse like Granny's cake when Junior slams the door? Yes
But demand for oil has clearly not collapsed. If you are thinking and preparing for an impending deflationary recession based on the premiss that oil demand - desire - has crashed and oil is no longer valuable you will be fooled. I don't usually make such bold predictions but I am this time simply because that meme is so far from reality.
In fact this may be the best little respite a Peaky Prepper could hope for. But the noise when demand like the good old days collides with falling production like the bad new days in 6 months or a year or 2 could be truly deafening. I've posted this from Kopits before but I'm gonna do it agian because it shows how out of touch the typical forecasters are, or at least might be, again:
Leads to:
http://www.prienga.com/blog/2015/1/20/s ... -explained
That 3mm/bbl shortfall is all the spare capacity and then some. If you aren't careful that snap back in price could really hurt.
The one thing that is worse than a invariably high oil price is a highly variable oil price. Businesses and consumers both like stability because it allows them to plan - yes Timmy, non-peakers plan too. Even a high and steady price is better for planning and mitigation. But wide swings in the price of oil, especially against a backdrop of huge PR budgets from all corners touting the fracking revolution, US "independence" from oil, the "revolution" in renewables, the resurgence of the US economy and on and on cause a disconnect; another false horizon, and allow the economy to make really bad deciscions. Those bad decisions lead to unexpected moves which are the "pinch points" where the average guy gets hurt.
So don't look this gift horse in the mouth. Which means don't over analyze the current low price. Rather use it to your advantage to further your plan, it won't stick around long - certainly not forever.
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