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Is fast crash becoming more likely?

General discussions of the systemic, societal and civilisational effects of depletion.

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Is fast crash becoming more likely?

Unread postby Quinny » Sat 06 Dec 2014, 17:09:56

Having moved from thinking we were nearing a fast crash scenario, I have become more resigned to a slow grinding descent into poverty - one of the reasons I decided to take the leap :)

If we consider the price drop potentially causing cancellations of projects like this.

http://uk.reuters.com/article/2014/12/05/uk-oil-investment-idUKKCN0JJ0D220141205

and Pop's wedge theory together with the etp model pricing theory like this

http://www.thehillsgroup.org/depletion2_022.htm

Are we potentially reaching a tipping point where fast crash might be on its way?
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Re: Is fast crash becoming more likely?

Unread postby Paulo1 » Sat 06 Dec 2014, 23:13:31

Quinny,

I have waited with astonishment for the Dow to sink. Why hasn't it, yet? When it does, how much? Who the hell knows? What will the fall out be? Nothing makes sense anymore. Nothing, be it markets, stats, employment numbers, market fundamentals, oil price behaviour, US foreign policy or lack thereof, nothing.

I cannot believe it when I see people walking down the road texting on their phones. I feel like slapping them or feeling sorry for them at the same time.

I wouldn't be surprised if protest violence doesn't spread across the lower 48 and I wouldn't be surprised if nothing happened come Christmas and a new downturn in the weather drives people inside. What if there is one more shooting? Or two? Then, all bets might be off.

I have used the past few years to somewhat consolidate where we are with our plans and property but wonder if I should have just bought stocks and toys and put holidays on the credit card?

If it hasn't crashed yet, with all the phony financing and market shenanigans, I expect it won't anytime soon. I too believe we are witnessing a slow stair step down with each generation since the late 70s. Every person I know is working and doing okay for the most part. Getting by, I suppose. But they are no where near as well off as my generation and I have yet to hit sixty. I also think much depends on a persons health care coverage and personal health. We have single payer universal health care where I live. If you get sick or hurt yourself you get help. That is a huge advantage. Without that people are just one illness or accident from financial ruin.

Anyway, I see each day defying all economic odds and simply shrug my shoulders. I wonder/worry about climate change and wonder if it will hit our neck of the woods in a bad way? (So far it hasn't). I do know that if there is serious climate induced migration in this over-crowded world it won't be quiet. Sooner or later choices will come down to either working together and solving problems, or going to war and killing off threats.

I cannot even guess what will happen and simply live each day and try and enjoy everything as much as possible. I am building furniture for my kid's Christmas presents this year and hope to focus on that for the next 3 weeks. I made a dollhouse for my grand daughter. They are coming for a visit next week and they will cut their Christmas tree and we will haul it home on my little tractor. We will drink rye and rum in the evening and watch Hockey Night In Canada. On Sunday they will go home.
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Re: Is fast crash becoming more likely?

Unread postby pstarr » Sun 07 Dec 2014, 11:56:37

Fast crash could happen any time, or no time at all. More likely in places that depend wholly/largely on food/energy imports or adjacent to very poor places. Doesn't sound like the US. Wouldn't want to be in Europe. :?
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Re: Is fast crash becoming more likely?

Unread postby MonteQuest » Sun 07 Dec 2014, 14:09:59

With the continued "quantitative easing" electronically buying toxic assets we are open to two distinct possibilities for a fast crash IMHO:

1. How will the FED and other central banks unload these toxic assets from their balance sheets? Maybe the Fed will simply swap the "bad" assets on its own balance sheet for the "good" assets of the banking system. The Fed is balancing its books based on the current face values of these securities, not what they are worth if marked to market. So, this strategy only works if the reverse liquidity swap is even, which it can't be, thus inflation will rear it's ugly head.

Could the FED become insolvent? If it did, it can bail itself out by printing money. If they ran up against a limit, then the Treasury via the taxpayer could bail out the FED, until they wouldn't. 8)

2. What happens when these excess reserves are introduced into the money supply? $2.6 trillion of excess reserves are sitting there. That's $26 trillion of possible new money that could be infused into the economy. 8O Currently, the FED is paying banks three billion dollars a year to banks to hold these reserves. A political hot potato with the GOP coming to power in Congress.

Look at this chart and you can see the potential for a very bad ending.

Image

Read more here: http://www.heritage.org/research/reports/2014/08/quantitative-easing-the-feds-balance-sheet-and-central-bank-insolvency
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Re: Is fast crash becoming more likely?

Unread postby dolanbaker » Sun 07 Dec 2014, 14:29:44

I don't expect there to be a real crash anytime in the near future. Oil production will continue to "motorboat" on top of the available finance for new projects. but, it is looking more than likely that we've just past the "absolute peak" of oil production and that any peaks in production will not reach the levels currently being produced.

The lower prices will of course give millions of consumers a bit more breathing space, the sensible ones will use this space to clear debt and buy wise, the rest will splash out on stuff that they will regret later.

After 2008 the rules were changed, so a repeat is unlikely but where things do go pear shaped, savings will be raided to save the banking sector along with another round of QE. The deflationary cycle we're currently in will eventually mean that we'll soon be paying for the banks to hold our money rather than the other way round. This has already started for large inter-bank lending. Charges that the financial institutions used to be able to hide in the difference between interest rates have become visible and are being added to the bill, as opposed to being covertly taken during transactions.

The only likely scenario for a crash appears to be in the asset bubbles that are inflating all over the place, a lot of well off people & those who have trusted their savings with them are at great risk of losing their shirts when these bubbles burst.
Ronald Coase, Nobel Economic Sciences, said in 1991 “If we torture the data long enough, it will confess.”
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Re: Is fast crash becoming more likely?

Unread postby pstarr » Sun 07 Dec 2014, 14:49:56

I leave my options open. While a fast crash in the US is highly unlikely, it is not impossible.

As soon as the last of the current 'boom' is over (when $70 oil no longer supports the Bakken Red Queen's electrolyte IV) and as global 6.7% yoy decline takes hold, many important places in the world will erupt in riots, rebellion, and civil disturbance where our stuff comes from . . . as per the "Arab Spring." This stuff has consequences around the world.

Consider Mexico, our immediate neighbor. The country is already mired in an economic war. We can blame it on the drug cartels, the countries oil-production problems (protectionist policies, failing Cantrell) or whatever. Or we can really open our eyes to the truth; Mexico City: urban population 21.2 million. Due north of failing states Guatemala, Horrendous, El Salvador. Unhappy migratory population.

Does this destabilize the US? Perhaps. Perhaps not. But it might just shut off another 1 mb/d of crucial oil? Do we fast crash then? Maybe.
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Re: Is fast crash becoming more likely?

Unread postby Timo » Mon 08 Dec 2014, 13:39:59

Fast crash or slow crash all depends on your definition of "crash."

What exactly is a crash? Public anarchy? Military coup? Public revolution? Military dictatorship? Worthless money? An electric grid that won't function?

Define what you mean by "crash."
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Re: Is fast crash becoming more likely?

Unread postby Tanada » Mon 08 Dec 2014, 14:52:19

Timo wrote:Fast crash or slow crash all depends on your definition of "crash."

What exactly is a crash? Public anarchy? Military coup? Public revolution? Military dictatorship? Worthless money? An electric grid that won't function?

Define what you mean by "crash."


Of the choices you offered only Public Anarchy and Electric grid that won't function are really crashes. IMO of course.
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Re: Is fast crash becoming more likely?

Unread postby basil_hayden » Mon 08 Dec 2014, 22:03:25

Quinny,

I think you're right, at least the slope of the line has changed; I'd bet most of the public thinks it's gone flatter but many here perhaps know better and see the steepness increase due to the feedbacks.
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Re: Is fast crash becoming more likely?

Unread postby ralfy » Tue 09 Dec 2014, 00:17:18

In relation to this topic, one might consider this article which was shared in other threads:

"On the cusp of collapse: complexity, energy, and the globalised economy"

http://fleeingvesuvius.org/2011/10/08/o ... d-economy/
http://sites.google.com/site/peakoilreports/
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Re: Is fast crash becoming more likely?

Unread postby DesuMaiden » Tue 09 Dec 2014, 08:14:45

The faster the pathetic system of neoliberal capitalism collapses the better. Neoliberal capitalism is all about making as much profit by any means possible, and this system is killing the planet and humanity. For example, jobs in the manufacturing industry are exported to whatever place which has the cheapest labour because capitalists want to minimize labour fees to maximize profit. Jobs in the shoe manufacturing industry are exported to Indonesia, for example, because the labour in Indonesia is cheaper than the labour in the USA and other developed nations. Neoliberal capitalists make a huge amount of money despite the fact their workers in developing nations are paid barely enough money to survive. It is an incredibly unfair system that needs to be abolished...the sooner it collapses, the better off humanity will be.
History repeats itself. Just everytime with different characters and players.
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Re: Is fast crash becoming more likely?

Unread postby pstarr » Tue 09 Dec 2014, 11:13:45

Yes Desu, capitalism has brought untold wealth to the world as well as grinding poverty. So has socialism. But that is not the point.

Can the decent away from our petroleum-based infrastructure remain orderly, without chaos and bloodshed? How can a complex system (increasingly tied together by just-in-time inventory and manufacturing) function without petroleum? So for instance, we don't even have warehouses and loading docks anymore. Just containers.

Image
We can't go back.
Image

Similarly (chain) restaurants don't have kitchens, just freezers, packaged meals and microwaves. Retail stores don't have stockrooms. Farms don't store produce; it's picked and shipped out on refrigerated trucks. I could go on. There are tipping points, chaos/complexity studies tell us that highly energetic systems can change state quickly. Rebellion disrupts.
There's nothing deeper than love. In fairy tales, the princesses kiss the frogs, and the frogs become princes. In real life,the princesses kiss princes, and the princes turn into frogs

“Bitterness is like cancer. It eats upon the host. But anger is like fire. It burns it all clean.”
― Maya Angelou
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Re: Is fast crash becoming more likely?

Unread postby dolanbaker » Tue 09 Dec 2014, 14:14:39

Put simply, in many cases the efficiencies of scale are near the limits of current technology, so these parts of the system will probably be the last to crash! It's the wasteful processes that will be forced to change first, cheaper oil will do the opposite as it allows this waste to grow. The next time oil prices go up, which they will when demand catches up with supply &/or supply drops to meet demand. Then a whole new batch of consumers will be caught swimming naked.
Ronald Coase, Nobel Economic Sciences, said in 1991 “If we torture the data long enough, it will confess.”
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Re: Is fast crash becoming more likely?

Unread postby Tanada » Thu 27 Oct 2016, 11:09:48

dolanbaker wrote:Put simply, in many cases the efficiencies of scale are near the limits of current technology, so these parts of the system will probably be the last to crash! It's the wasteful processes that will be forced to change first, cheaper oil will do the opposite as it allows this waste to grow. The next time oil prices go up, which they will when demand catches up with supply &/or supply drops to meet demand. Then a whole new batch of consumers will be caught swimming naked.


I agree fully with your sentiments. Every technology or technique goes through an invention, acceptance, broad appeal, diminishing returns pattern. An example I tend to harp on a lot is flying. We went from balloons to airships to gliders to biplanes all in the invention and early acceptance phase, then from 1935-1955 we rapidly progressed from wood/cloth/propeller aircraft to all metal jet propulsion. This culminated in the 1970's with the Concorde SST and Boeing 747 Jumbo. Since 2001 the SST has been discontinued, Boeing is talking about ending 747 production and the Airbus A380 Super Jumbo is losing so much money Airbus is considering cancelling future orders and ending production before they even complete current orders.

Humans like to push boundaries and discover where the limits are. It is a fundamental part of our nature. We have demonstrated after a fashion that very fast and very large passenger aircraft are both uneconomical in today's world. But air travel did not end, it just changed.
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Re: Is fast crash becoming more likely?

Unread postby Newfie » Sun 30 Oct 2016, 17:58:10

I guess I think we are tending more towards fast collapse. IMHO our world supply chain is overly complicated. We are doing noting to make it more resilient. So as time goes by, the complexity increases, and that favors fast collapse.
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Re: Why a fast crash is inevitable

Unread postby Yoshua » Fri 11 Aug 2017, 10:02:51

marmico wrote:
So what is your point, marmico?


When Bozo the Weasel crawls out from under his rock to wax poetic about lack of refinery profitability, others can point to the crack spread data (updated monthly by the EIA) and understand that Bozo is a fooken stoopid bozo.


The increase in the crack spread is just evidence of lower quality crude taken in by the refineries... Exactly what shorty claims... The increase in the crack spread is necessary to be able to make profit on lower quality crudes.

The rest of us dummies (you and I) are just trying to understand what the hell shorty is saying.
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Re: Why a fast crash is inevitable

Unread postby shortonoil » Fri 11 Aug 2017, 10:31:13

When Bozo the Weasel crawls out from under his rock to wax poetic about lack of refinery profitability, others can point to the crack spread data (updated monthly by the EIA) and understand that Bozo is a fooken stoopid bozo.


It is seriously doubtful that you even know what a crack spread is, or how to use it. Now tell us all about it? In the meantime I will wait until the first of the year to get paid. You lost! WTI $48 this morning, and going down. So stop your whining, you've got four months to come up with money. Just cut back on your Wild Irish Rose intake, and you should be fine.

What does the Etp Model say about supply and demand; absolutely nothing. It is an equation that gives the energy relationships for the petroleum production system. Demand is an economic concept with no absolute definition. It is a vague concept that was created by economists. It has no numerical value associated with it, and thus can not be incorporated into the equation. The equation generates numerical output. What the Etp Model does say is that the Petroleum Production System will never again be able to supply as much energy to the remainder of the economy as what that System is consuming during the production process. The non petroleum producing sector of the economy will need to put more energy into acquiring the production of petroleum, and its products than it will be getting out of it. The difference would have to come from some other energy source. Presently that transfer is taking place via the accumulation of an additional $2.7 trillion per year in debt, and growing. At some point either the Petroleum Production System, or the non petroleum producing sector of the economy must collapse.
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Re: Why a fast crash is inevitable

Unread postby marmico » Fri 11 Aug 2017, 10:34:38

The increase in the crack spread is just evidence of lower quality crude taken in by the refineries


What increase?

I know you just graduated from the 12 inch rim tricycle to the 28 inch rim bicycle. But sheesh...yoshua's crack spread...

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Re: Why a fast crash is inevitable

Unread postby rockdoc123 » Fri 11 Aug 2017, 10:50:09

The increase in the crack spread is just evidence of lower quality crude taken in by the refineries... Exactly what shorty claims... The increase in the crack spread is necessary to be able to make profit on lower quality crudes.


you are definitely not understanding how this works. The refineries know what they can sell their products for, they can't raise prices willy nilly as it affects demand so the positive cashflow side of crack spread is relatively fixed. What isn't fixed is the cost side or what they pay for crude inputs. Now if you are right then they would have to pay more for crude because they need more of it with you saying it is crappy (whatever the hell that means). IF they are paying more then the crack spread goes down, not up.

As well Shortonoil has been going on and on about how refineries aren't making any money, it is a constant cry from him. The crack spread demonstrates that is not the case. If he was correct then the crack spread would not be positive it would be zero or negative and refineries would have been crawling all over themselves to hedge their bets by buying product and selling oil (which they haven't been doing).

The fact of the matter is the US refineries can currently handle all of the light and super light oil that is being produced and there is additional room for more. That will increase as more refineries like the one currently being built by Raven Petroleum in Duval county which will handle light crude exclusively or the similar light crude refinery being built by Koch Industries at Flint Hills, last month Valero noted they would switch all of their US refineries to run the maximum amount of light crude possible. Prior to any new additions being made the refinery industry in the states claimed they had an additional 1 MMb/d of spare capacity for light and super light crudes, so sorry the light crudes are not causing the refineries to lose their shirts.
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Re: Why a fast crash is inevitable

Unread postby asg70 » Fri 11 Aug 2017, 11:26:00

shortonoil wrote:What does the Etp Model say about supply and demand; absolutely nothing.


There's no way to provide a useful model of a commodity and its impact on the economy without covering supply and demand.
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