Oil price enters "danger zone" to world economy

[pstarr]

xeno1: Peak Oil has had no discenible effect. It's essentially alarmist nonsense.

xeno2: Peak Oil is causing oil prices to spike and that wi help us easily and smoothly transition to a world full of Chevy Volts.


Dude, go debate yourself. Tell us who ends up winning.

Xeno is coming apart at the seams. Check out my post at the Simmons Memorial Thread, where Xeno quoted a local community farmer as proof Simmons (a Harvard MBA) was wrong about the economic effects of peak oil. funny!!!!!

How can a cornie survive here? Thick skin? Thick headed? Just thick?

The Chief Economist at IEA just said what? Yesterday it was Simmons who said what? huh?

GDP = private consumption + gross investment + government spending + (exports − imports)

Oily, you take note why don't yah?

[eXpat]

Top 10 Reasons why 2011 isn't 2008.

http://www.reuters.com/article/idUSTRE7023D120110103

No surprises here.

Ok, let´s see that piece you just linked (if you linked i presume you agree with it)
Some of the reasons that are given in that article are:
1) SPARE OIL PRODUCTION CAPACITY
Markets have a greater supply cushion in 2011 than they did in 2008. Analysts estimate OPEC has extra capacity of between 5-6 million barrels per day (bpd) of output it could bring on, primarily from Saudi Arabia, to cool off overheated markets, according to a Reuters poll.
Really!!! but just really???? Not according to this:

I also briefly present a recent history of OECD and Non OECD oil supplies/consumption. Based on this analysis, it is probable that demand for OPEC supplies could grow by approximately 2 Mb/d between 2010 and the end of 2011. Putting the estimated current OPEC spare capacity of 2 Mb/d together with the expected increase in demand for OPEC oil supplies of 2 Mb/d suggests that during 2011, OPEC's spare capacity may be completely eroded--a very serious situation.

http://europe.theoildrum.com/node/6859

2) SPARE OIL REFINING CAPACITY
Limited spare global refining capacity also helped push up prices in 2008, but since then significant extra capacity has been added in emerging markets such as India and China. In addition, U.S. refiners have capacity shut in due to low margins, which could be brought back online if needed.
Global refining capacity rose by 2.2 percent in 2009, supported by a nearly 600,000 bpd rise in India and a 800,000 bpd increase from China, according to the 2010 BP Statistical Review. (Graphic: link.reuters.com/kuc44r )
So India and China which are trying to push their economies to grow are going to use that capacity not to sustain their growing economies but for the well-being of foreign ones like the US? It is true though, that the US refiners have capacity shut http://www.reuters.com/article/idUSN1415859620100714

3) INVENTORIES
Crude stockpiles held by OECD countries have jumped since 2008, giving the group more padding to compensate for any supply disruption. OECD days of forward demand cover hit 60 in the third quarter of 2010, up from 53 days three years ago, as the economic crisis hit demand.

EIA: US crude inventories down 5.3 million barrels last week
Crude oil prices were higher in New York after the US Energy Information Administration said that crude stockpiles in the US fell by more than expected again last week.
The EIA said that crude oil inventories were down by 5.3 million barrels last week to 340.7 million barrels, against an expected decline of 2.4 million barrels, but stockpiles remained 6.8 percent above the five-year average.
Additionally, distillates in storage dropped by 600,000 barrels last week to 160.7 million barrels, twice the expected decline, while gasoline stockpiles added 2.4 million barrels to 217.2 million barrels, much more than the gain of 900,000 barrels expected by analysts.
The EIA also said that demand for gasoline was up 1.8 percent in the past four weeks, but that refinery activity was down slightly to 87.7 percent of available capacity

http://www.oilmarketer.co.uk/2010/12/22/eia-us-crude-inventories-down-5-3-million-barrels-last-week/

Crude Oil and Liquid Fuels Overview. Gradual tightening in global oil markets continues to support world oil prices. Projected liquid fuels consumption growth of 2 million barrels per day (bbl/d) in 2010 is almost double the growth in supply from countries outside of the Organization of the Petroleum Exporting Countries (OPEC), which has led to rising demand for OPEC crude oil production and declining global oil inventories. While overall commercial oil inventories in the Organization for Economic Cooperation and Development (OECD) countries remain high, stock levels are unevenly distributed with some regions experiencing tightness in recent months. Both floating and reported on-shore inventories have been declining, and EIA believes that the projected continued reduction in OECD stocks over the forecast period should lend support to firming oil prices.

http://www.eia.doe.gov/emeu/steo/pub/contents.html

4) GLOBAL DEMAND
While global demand fell in 2008 from record highs in 2007, consumption rebounded strongly in 2010 and is expected to rise by 1.43 million bpd to a record 87.78 million bpd in 2011. Analysts polled by Reuters in December estimated demand rising to 88.6 million bpd.
See previous points, also, who are this "analysts", can we see their sources and data?

5) RESOURCE NATIONALISM
Resource nationalism among oil-producing nations was on the rise in 2008, with governments cutting back supplies to increase prices, taking larger stakes in projects and revising terms for current and future projects.
Countries such as Venezuela and Russia, which were at the fore of the movement in 2008, currently are seeking greater foreign investment as part of efforts to boost oil output.
Really again? Well, one of the bigger investers in Venezuela is certainly China, but that´s is because they want the oil to power their factories and to move their vehicles, thay have been making contracts with Venezuela for several years already http://uk.reuters.com/article/idUKN0223219920101202. Resource Natioalism as he calls it, is well and alive.
As for the russians http://www.atimes.com/atimes/Central_Asia/MA05Ag01.html and http://www.telegraph.co.uk/sponsored/russianow/business/8239316/Russias-raw-deal-among-the-Bric-countries.html

6)THE DOLLAR ISN'T FALLING
You are joking right?
, etc, etc
But why do i bother? is Shorty! we know his ways

[OilFinder2]

GDP = private consumption + gross investment + government spending + (exports − imports)

Oily, you take note why don't yah?

OK, I will.

>>> CLICKY HERE <<<

In Q3, US real GDP grew 2.6%, of which 0.79% was government spending. So even without government spending, GDP would still have grown 1.81%.

In Q2, US real GDP grew 1.7%, of which 0.8% was government spending. So even without government spending, GDP would still have grown 0.9%.

In Q1, US real GDP grew 3.7%, and in this case government spending contributed a negative 0.32%. So taking into account your criticism, GDP actually grew a nice 4.02%.

Ditto for Q4 2009. If it weren't for negative government spending, GDP would have grown a nice 5.28%.

So, your point is . . . ???

[Xenophobe]

xeno1: Peak Oil has had no discernible effect. It's essentially alarmist nonsense.

Which peak oil? Ones in the past? Present? Future? But as best anyone can tell so far, it has been more than a bit alarmist.

xeno2: Peak Oil is causing oil prices to spike and that will help us easily and smoothly transition to a world full of Chevy Volts.

No it isn't. Real oil prices have been on an ever increasing trend since 1970. And I don't think I have ever used the word "easy", although it might be a reasonable one considering that the Volts have arrived before the current plateau has ended, or the next peak has even begun:

http://earlywarn.blogspot.com/2010/12/p ... crude.html

Dude, go debate yourself. Tell us who ends up winning.

Humanity wins! Yet another bout with zealotry....recedes into history...hey! Our kids will be recycling the same stuff in another generation, if this round is indicative of how often these hysterias come around.

[eXpat]

The economy can thrive on higher crude prices. I advocate we double them tomorrow and step boldly into our "using less crude by choice" future. We've been waiting for peak oil to cause needed change for decades now

Really!!!
Like what? Zimbawe?
http://english.peopledaily.com.cn/200509/08/eng20050908_207313.html
Never mind, recession or depression, the price of oil will keep rising not matter what, and we will see and enjoy the wisdom of your words

[Xenophobe]

The economy can thrive on higher crude prices. I advocate we double them tomorrow and step boldly into our "using less crude by choice" future. We've been waiting for peak oil to cause needed change for decades now

Really!!!
Like what? Zimbawe?

US, G8 examples have been provided. Are you saying we became Zimbabwe while we were enduring those OTHER price increases rather than growing our, and the G8 economy, in a robust manner! Imagine that! What part of Zimbabwe USA do you live in? Is the dieoff happening there? Tell us, please, the good people here have been waiting half a decade for the second coming (or the third, depending on how you feel about Koresch) and the Rapture with it.

[eXpat]

It has been repeated ad nauseum here but just for benefit of Shorty I gonna post why actually oil prices DO MATTER to the economy,

Macroeconomic Impacts of High Oil Prices

U.S. demand for crude oil arises from demand for the products that are made from it—especially gasoline, diesel fuel, heating oil, and jet fuel; and changes in crude oil prices are passed on to consumers in the prices of the final petroleum products. Increases in crude oil prices affect the U.S. economy in five ways:

* When the prices of petroleum products increase, consumers use more of their income to pay for oil-derived products, and their spending on other goods and services declines. The extra amounts spent on those products go to foreign and domestic oil producers and, if wholesale margins increase, to refiners. Domestic producers may pay higher dividends and/or spend more on oil discovery, production, and distribution. Foreign producers may spend some or all of their extra revenues on U.S. goods and services, but the types of goods and services they buy will be different from those that domestic consumers would buy. How quickly and how much domestic and foreign oil producers spend on U.S. goods and services and financial and real assets will be critical in determining the effects of higher oil prices on the aggregate economy [18].
* Oil is also a vital input for the production of a wide range of goods and services, because it is used for transportation in businesses of all types. Higher oil prices thus increase the cost of inputs; and if the cost increases cannot be passed on to consumers, economic inputs such as labor and capital stock may be reallocated. Higher oil prices can cause worker layoffs and the idling of plants, reducing economic output in the short term.
* Because the United States is a net importer of oil, higher oil prices affect the purchasing power of U.S. national income through their impact on the international terms of trade. The increased price of imported oil forces U.S. businesses to devote more of their production to exports, as opposed to satisfying domestic demand for goods and services, even if there is no change in the quantity of foreign oil consumed.
* Changes in oil prices can also cause economic losses when macroeconomic frictions prevent rapid changes in nominal prices for final goods (due to the costs of changing “menu” prices) or for key inputs, such as wages. Because there is resistance on the part of workers to real declines in wages, oil price increases typically lead to upward pressure on nominal wage levels. Moreover, nominal price “stickiness” is asymmetric, in that firms, unions, and other organizations are much more reluctant to lower nominal prices and the wages they receive than they are to raise them. When a nominal increase in oil prices threatens purchasing power, the adjustment process is slowed, with multiplier effects throughout the economy [19].
* Finally, higher oil prices cause, to varying degrees, increases in other energy prices. Depending on the ability to substitute other energy sources for petroleum, the price increases can be large and can cause macroeconomic effects similar to the effects of oil price increases.

http://www.eia.doe.gov/oiaf/aeo/otheranalysis/aeo_2006analysispapers/efhop.html

[Xenophobe]

It has been repeated ad nauseum here but just for benefit of Shorty I gonna post why actually oil prices DO MATTER to the economy,

Ad hom deleted

[pstarr]

CLICKY HERE <<<

I did CLICKY THERE and what I found was percent change. Not percent total. Here is the truth

[pstarr]

xeno1: Peak Oil has had no discernible effect. It's essentially alarmist nonsense.

Which peak oil? Ones in the past? Present? Future? But as best anyone can tell so far, it has been more than a bit alarmist.

You know that EIA, IEA, BP use different metrics to determine yearly production. That is the reason you read different dates. I have explained this to you many many times, as if to a child. But like a petulant child, you refuse to listen. Rest assured I will lectured again on this subject, until you grow up, go to your basement closet, or are sent to a reform school.

xeno2: Peak Oil is causing oil prices to spike and that will help us easily and smoothly transition to a world full of Chevy Volts.

No it isn't. Real oil prices have been on an ever increasing trend since 1970. And I don't think I have ever used the word "easy", although it might be a reasonable one considering that the Volts have arrived before the current plateau has ended, or the next peak has even begun:

http://earlywarn.blogspot.com/2010/12/p ... crude.html

Ever increasing trend? BS. The run up to $147 was unprecedented. You are wrong. You know it. Therefore you lie. Regarding easy? Thuja is correct. Your constant refrain these days is that the Volt Leaf etc will mitigate the effects of peak oil. But how can they? Peak oil is a liquid fuel problem and the Volt and Leaf etc. are electric vehicles in want of generation and transmission capacity. You know that. We explained it to you. Remember?

Dude, go debate yourself. Tell us who ends up winning.

Humanity wins! Yet another bout with zealotry....recedes into history...hey! Our kids will be recycling the same stuff in another generation, if this round is indicative of how often these hysterias come around.

You spelled hysteria wrong. Not thinking straight? Not surprised.

[pstarr]

It has been repeated ad nauseum here but just for benefit of Shorty I gonna post why actually oil prices DO MATTER to the economy,

Did you miss the part where oil prices have ALREADY been going up for decades....right along with the US, G8 and world economy?

Of course they MATTER, you just can't base your world view on such a limited perspective.

You seem educated? Why don't you think?

[thuja]

xeno1: Peak Oil has had no discernible effect. It's essentially alarmist nonsense.

xeno2: Peak Oil is causing oil prices to spike and that will help us easily and smoothly transition to a world full of Chevy Volts.


Dude, go debate yourself. Tell us who ends up winning.

So who won the debate...the "peak oil is alarmist BS with no ramifications"? Or the "peak oil associated high prices will help us transition to Volt Nirvana"?

[OilFinder2]

CLICKY HERE <<<

I did CLICKY THERE and what I found was percent change. Not percent total. Here is the truth

Percent change is what Fatih Birol in the opening article was referring to. So basically you tried to change the subject. Again.

But if you insist, if you clicky here, your own formula for GDP gets us the following percent totals:

Q3 real GDP = $13,278.5 billion dollars
Q3 total gov't expenditures = $2,589.6 billion dollars
---------------------------------------------------------------
That makes total government spending 19.5%, not 40-50%, as per your chart. So sorry, try again.

[OilFinder2]

Ad hom deleted

You spelled hysteria wrong. Not thinking straight? Not surprised.

You seem educated? Why don't you think?

[pstarr]

xeno1: Peak Oil has had no discernible effect. It's essentially alarmist nonsense.

xeno2: Peak Oil is causing oil prices to spike and that will help us easily and smoothly transition to a world full of Chevy Volts.


Dude, go debate yourself. Tell us who ends up winning.

So who won the debate...the "peak oil is alarmist BS with no ramifications"? Or the "peak oil associated high prices will help us transition to Volt Nirvana"?

The answer is:

xeno1 won the debate. Because xeno1 was correct we he said that peak oil has no discernible effects, that it's essentially alarmist nonsense, even though xeno2 said that we'll need to transition to a world of Chevy Volts.

xeno2 won the debate. Because xeno2 was correct when he said that Peak Oil is causing oil prices to spike and that will help us easily and smoothly transition to a world full of Chevy Volts, contrary to xeno1's assertion that peak oil has no discernible effects.

It should be apparent that xeno1 and xeno2 are not having tea together. But they are knitting the same crazy doily.

[pstarr]

Ad hom deleted

You spelled hysteria wrong. Not thinking straight? Not surprised.

You seem educated? Why don't you think?

is this a puzzle?

[mos6507]

Ad hom deleted

Now that's encouraging

[pstarr]

Ad hom deleted

Now that's encouraging

Half his comments have been deleted as of late. I have to assume it is because Ad hom deleted

[nobodypanic]

things look like they're easing up today.

btw, i'd pay more attention to something like the S&P500 to oil ratio than just price by itself.

[eXpat]

Will 2011 see another crude oil price spike to $150/bbl?

Summary
Christopher Swann with Reuters wrote on "The elusive art of forecasting oil's path", reported by International Herald Tribune of January 4. The insatiable thirst of an expanding Asia will push crude oil prices above $100/bbl say the oil bulls. But in fact the cost of crude may be held down as Russia, Brazil and West African nations increase supply. OPEC still has shut-in capacity of 5.4 million bbl/day. Improved recovery techniques prolong oil field life. Natural gas liquid output is increasing.

Analysis
No one doubts that crude oil prices can take the crazy hops. From one day to the next prices can go up or down by more than $2.50/bbl. Forecasting future crude oil prices can be regarded as a fool's game. Still, in spite of Mr. Swann's belief that we will not see another crude oil price spike in 2011, he overlooks or ignores a few basic considerations. First of all, a natural decline rate of unknown amount but accurately narrowed between 4.5 and 6.7%/year, steadily erodes the capacity of about 900,000 existing worldwide oil wells which together produce 72 million bbl/day of black oil. Almost 3 years have gone by since the $147/bbl crude spike in the summer of 2008. Somewhere around 10 million bbl/day of 2008 capacity has disappeared since then. Only the steady efforts of about 4,000 drilling rigs operating worldwide around the clock have been able to make up most of that decline. Whether or not OPEC has shut-in capacity of 5.4 million bbl/day is arguable. OPEC rig count has remained at high levels since 2008. The evidence is that they are drilling for production. This view is supported by the reality that without massive, expensive fieldwide redevelopment projects, OPEC production would be falling rather than remaining relatively constant. Some observers think the worldwide annual decline rate has remained at 4.5%/year for 30 years. Others think that huge redevelopment projects now underway all over the world speed up the rate. One analysis made in 2009 suggested the true rate was 6.7%/year. It is quite possible that the 2011 decline rate has already passed 7.0%/year. Then throw in the recent Energy Information Administration's calculation that the moratorium in the Gulf of Mexico will cut U.S. domestic production by about 220,000 bbl/day for 2011. In summary, some strong and undeniable negatives offset the rosy assessment of Mr. Swann. He may be right. I think he is wrong.

http://www.glgroup.com/News/Will-2011-see-another-crude-oil-price-spike-to-$150-bbl--52083.html