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Is fast crash likely? Pt. 2

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

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Re: Is fast crash likely? Pt. 2

Unread postby kublikhan » Wed 13 Sep 2017, 15:19:52

Or: Oil prices will be well above $1.68 per barrel in 2021. Oil production will continue. Economic activity will continue. And you will all end up with egg on your face. I'm betting on my scenario. Actually risking my money on it in fact.
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Re: Is fast crash likely? Pt. 2

Unread postby marmico » Wed 13 Sep 2017, 15:28:54

The ETP Bozo masquerading as a prophet with the abracadabra abacas states $1.68 for a barrel of oil in 40 months. Let me guess when it comes to foodstuffs - a dozen eggs for 2 Haida wampum beads and a bushel of grain for 10 Tasmanian sea shells. You people are fookenstoopidretards. Yoshua gets a break - he's under unaffordable medication having a hard time graduating from the tricycle to the bicycle with the obligatory scrapped knees and elbows.
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Re: Is fast crash likely? Pt. 2

Unread postby runningman » Wed 13 Sep 2017, 16:37:48

While accepting the general premise of the ETP model, I still wonder if the pricing forecast part of the model could “break” before 2019 or 2020.

As I understand the price backcast and forecast is a relationship established with the BTU’s in a barrel available to the non-Petroleum Productions System part of the economy. For most of the backcast and forecast period the dollar has functioned as the world’s reserve currency, and WTI has been a leading price benchmark. The United States was the world’s largest producer of oil, or it largest user, or both. From 1972 the dollar has been implicity (or maybe explicitly) linked to oil through the petrodollar system.

All of these conditions are changing? China is now the world’s largert oil importer. As you have no doubt read, China is setting up trading oil mechanisms outside of the petrodollar system. Russia, China, etc. are working to establish trading and finance systems outside of the U.S. and European backed financial and monetary system. The dollar’s role as a reserve currency is declining and could change dramatically with the next financial crisis. (See Jim Rickards, and others) Of course, there are agruments against this, such as China’s own credit problems. (Understatement?)

A breakup of the current financial system and the loss of the U.S. dollar as the reserve currency would not be good news for anyone in the U.S. If that happens, I suppose you could score an academic point on this site with the Hills Group by saying that the ETP pricing forecast for 2019 or 2020 did not pan out, but you might be doing that while waiting in line for gasoline at the only working gas station within miles. Time will tell.
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Re: Is fast crash likely? Pt. 2

Unread postby BahamasEd » Wed 13 Sep 2017, 16:45:37

You do remember that oil sold for less than $10 US dollars a barrel for over a 100 years, spending a lot of that time under $2.

High oil prices are the "Not Normal" thing, in both 'money of the day' and inflation adjusted. Oil over $30 in the money of the day was a very rare thing until the last 20 years

Oil Prices 1861-2009.png
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Re: Is fast crash likely? Pt. 2

Unread postby kublikhan » Wed 13 Sep 2017, 17:01:48

You are talking about nominal dollars BahamasEd, not real dollars. Take a look at the orange line on that graph. It was never under $2.
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Re: Is fast crash likely? Pt. 2

Unread postby donstewart » Wed 13 Sep 2017, 18:27:58

Charles Hugh Smith on Central Banks and Bubbles

http://www.oftwominds.com/blogsept17/it ... t9-17.html

Smith's point is that whatever is happening in the stock and bond markets and in the housing market is heavily distorted by government policies. The same point can be made about higher education and health care.

'Adjusting' everything for inflation is probably meaningless in the world the central banks have given us. The money which has been created has mostly flowed to oil production (in the form of high yield bonds with very low yields due to Zero Interest Rate Policies). The central bank policies has likely had little impact on oil consumption. As Smith notes, 'investment' has tended to stick with financial vehicles rather than real investments.

One could argue that the 'glut' of oil, rather than being a resultant of declining work capacity per barrel, is actually a result of the twisting of the economy by the central banks. Or....one could argue that the declining work potential of a barrel of oil has joined forces with the malevolence of the central banks to bring about the dire financial condition of the oil industry, as well as much of the rest of the actual productive part of the economy.

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Re: Is fast crash likely? Pt. 2

Unread postby shortonoil » Wed 13 Sep 2017, 19:24:32

'Adjusting' everything for inflation is probably meaningless in the world the central banks have given us.


Adjusting oil for inflation using the BLS inflation index is worse than meaningless. It is downright deceitful! It is an obvious bold face lie. If oil in 2005 were adjusted from 1960 for inflation its price would have been $331.85 per barrel. The petroleum industry quoted inflation adjusted prices for many years, until the discrepancy became so large it started to look ridiculous. By 2014 the inflation adjusted price of WTI would have been $746.08. The inflation adjusted price of oil can be buried where it belongs; under the category of "massive bullshit'!

Below is a graph that shows the actual price of WTI in comparison to the BLS inflation adjusted price. Not much question here!

click to enlarge
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Re: Is fast crash likely? Pt. 2

Unread postby kublikhan » Wed 13 Sep 2017, 19:44:52

If you don't want to look at real dollars then you can look at how much of our consumption budget is being spent on gasoline. In 1960 we were spending about 4.8% of our household consumption on gasoline and other energy. In 2011 this was around 3.8%. Last year it was 2.1%. Let me repeat that just in case you don't quite get what that means: Last year we spent less than half as much of our budget on gasoline as we did in 1960. Even if you look at a high oil price year like 2008 or 2011 it STILL comes out less than 1960.
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Re: Is fast crash likely? Pt. 2

Unread postby StarvingLion » Wed 13 Sep 2017, 20:38:53

Academia in 1980: "Don't worry, we have enough oil for 300 years"
Academia in 2008: "Don't worry, we have enough oil for 40 years"
Academia in 2017: "Don't worry, we have enough oil for 13 years"
Academia in 2020: "Don't worry, we have enough oil for 3 years"
Academia in 2021: "Don't worry, we have enough oil for 1 month"
EV's are fuel-less automobiles and Thorium Reactors are fuel-less reactors. Perfect.
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Re: Is fast crash likely? Pt. 2

Unread postby pstarr » Wed 13 Sep 2017, 21:58:28

StarvingLion wrote:Academia in 1980: "Don't worry, we have enough oil for 300 years"
Academia in 2008: "Don't worry, we have enough oil for 40 years"
Academia in 2017: "Don't worry, we have enough oil for 13 years"
Academia in 2020: "Don't worry, we have enough oil for 3 years"
Academia in 2021: "Don't worry, we have enough oil for 1 month"

It'll never run out. And if it does, then they will give us fair warning. And then we can call on fusion power (just around the corner) and drive Musk's EV's to Mars. Where we will eat Mars-o-Mellows.

There's always VR-Land.
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Re: Is fast crash likely? Pt. 2

Unread postby creedoninmo » Wed 13 Sep 2017, 22:40:25

Marmico; when you have sunk to the level of taking shots at Yoshua; you are absolutely low down scum.
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Re: Is fast crash likely? Pt. 2

Unread postby Outcast_Searcher » Wed 13 Sep 2017, 23:22:37

donstewart wrote:Charles Hugh Smith on Central Banks and Bubbles

http://www.oftwominds.com/blogsept17/it ... t9-17.html

Smith's point is that whatever is happening in the stock and bond markets and in the housing market is heavily distorted by government policies. The same point can be made about higher education and health care.

'Adjusting' everything for inflation is probably meaningless in the world the central banks have given us.

Don Stewart

Inflation is a huge impact long term. Any investments are viewed by people who know what they are doing, in terms of nominal dollars (i.e. factoring in inflation). After all, you can't spend 1900 or 1980 dollars in 2017 and tell the store "inflation shouldn't count because of the mean old fed".

To give some perspective, a 1980 dollar had spending power of nearly three dollars in 2016. A 1900 dollar spent like a bit over $27 in 2016.

So the fed may well be depressing inflation, but that doesn't make inflation "meaningless" in the long term.

What if inflation comes roaring back? Is inflation meaningless if the price of things at the store is rising rapidly but your salary is not?
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Re: Is fast crash likely? Pt. 2

Unread postby onlooker » Thu 14 Sep 2017, 06:50:45

I think this simple graph depicts how in fact given ongoing inflation real wages for most US workers have not increased in in some cases has decreased
This shows about the span of 4 decades worth of data
http://www.pewresearch.org/fact-tank/20 ... r-decades/
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Re: Is fast crash likely? Pt. 2

Unread postby shortonoil » Thu 14 Sep 2017, 07:02:20

Inflation is a huge impact long term.


Did you miss the BLS data above; apparently. The 2015 BLS inflation adjustment is 8.01 on a 1960 dollar. The 2015 price of oil was $48.67, adjusted for inflation to 1960 would have made it $6.08. It sold in 1960 for $2.88. The BLS inflation adjustment lost 1.1 barrels of oil between 1960 and 2015. Now is that a really accurate way to appraise the value of oil? The inflation adjusted price of oil is a big fat hoax. The BLS inflation adjustment does not even come close to representing the true price of oil, and it hasn't for the last 58 years.

The only long term huge impact on oil from the inflation index is on the damn credulous fool that believes it!
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Re: Is fast crash likely? Pt. 2

Unread postby marmico » Thu 14 Sep 2017, 07:14:20

ongoing inflation real wages for most US workers have not increased


Real average hourly wages for production and nonsupervisory workers have been increasing for 20+ years.

Image
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Re: Is fast crash likely? Pt. 2

Unread postby donstewart » Thu 14 Sep 2017, 07:53:39

Off on a (hopefully informative) tangent

Begin with the IDEA of a sane, sustainable society which allows for more happiness than humans have historically enjoyed.

*It won't depend on dollars or Euros or yuan. It will be about real needs and real production to meet those needs.
*It will separate momentary gratification from long term contentment, with frivolity kept firmly in its place.
*It will deal with our genetic heritage. For example, our bodies are not designed to get a whole of serotonin (the contentment molecule) into our brain. Presumably, natural selection didn't allow our species to get TOO comfortable. If we want to enjoy our pipe and slippers, we may need to rather radically change our environment. Exactly how we change it, and what we realistically do to change it, are still speculative. (See The Hacking of the American Mind by Robert Lustig, MD. )
*Electricity without fossil fuels will be a huge challenge. (See Kris DeDecker's current article:
http://www.resilience.org/stories/2017- ... wer-alone/
*Taking off from DeDecker's figures on electric automobiles, and noting Alice Friedemann's nagging about trucks moving the huge preponderance of actual weight, we can anticipate that transportation is going to be a huge concern. Nobody has any really bright ideas about replacing oil.
*In the absence of easy transportation, the world will relocalize in ways that modern people barely understand.
*Food systems will have to be completely re-engineered. For example, cooling might revert to spring houses, which can't handle more than perhaps half a billion people on Earth.
*DeDecker's next installment will explore how we might replace an 'on demand' electrical system with a 'when available' electrical system. My initial reaction is that most everything we have built in the last 50 years won't work in a 'when available' system. If we are running out of cheap to extract oil, how do we propose to build a new infrastructure? Who picks the survivors?

So where is inflation in all this? Carey King at the U of Texas has calculated that there are around 17 people who are not involved in primary energy production for every person who is involved in primary energy production. THAT, I think is the best measure of inflation we have. We can probably expect that ratio to decline to perhaps 5 or maybe lower. What about the financial world? The measures there are essentially measures of leverage. When the physical system begins to contract, I expect the leverage ratios to fall precipitously. As the data previously discussed here indicate, the current leverage ratios are unsustainable.

The only justification for assuming that inflation will continue due to upward pressures on wages (the socially acceptable reason why the central banks are trying to stoke inflation) is that Modern Monetary Theory is how the world will really work in a Limits To Growth scenario. If we allow ourselves to think about non-socially acceptable reasons why governments will destroy the currency, then the sky is the limit. But then we are in a Tim Morgan scenario where people lose faith in money and everything financial collapses.

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Re: Is fast crash likely? Pt. 2

Unread postby Cog » Thu 14 Sep 2017, 07:56:48

Still preaching the fast crash Don? LOL some things never change.
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Re: Is fast crash likely? Pt. 2

Unread postby shortonoil » Thu 14 Sep 2017, 09:32:28

If we allow ourselves to think about non-socially acceptable reasons why governments will destroy the currency, then the sky is the limit. But then we are in a Tim Morgan scenario where people lose faith in money and everything financial collapses.


Three of the FANGs (which account for most of the increase in the S&P 500) have never turned a profit. Most of the growth stocks are just burning through mountains of cash; chasing market share. Tesla is the quintessential example. The world is no longer able to replace its petroleum reserves, and a third of the Western World's sovereign debt is paying negative interest rates. Productivity is falling around the world. When investments can only generate negative returns the monetary/ economic system has failed. At that point tomorrow will never be better than today. Not only do people lose faith in money, they lose faith in what tomorrow can bring. We become a society with no tomorrow, and in a day, no today!
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Re: Is fast crash likely? Pt. 2

Unread postby asg70 » Thu 14 Sep 2017, 10:23:19

onlooker wrote:I think this simple graph depicts how in fact given ongoing inflation real wages for most US workers have not increased in in some cases has decreased
This shows about the span of 4 decades worth of data
http://www.pewresearch.org/fact-tank/20 ... r-decades/


That's not peak-oil, though. Just the result of greed and corruption in a regime of trickle-down economics.
Hubbert's curve, meet S-curve: https://www.youtube.com/watch?v=2b3ttqYDwF0
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Re: Is fast crash likely? Pt. 2

Unread postby Revi » Thu 14 Sep 2017, 10:33:18

I think things work until they don't any more. It's like those caribbean islands before and after Irma. One day you are living in an island paradise with running water, A/C and lots of great food and media. Along comes Irma and the next week you are in a windowless and roofless shack with nothing, defending what you have from other desperate people who have lost everything.
Deep in the mud and slime of things, even there, something sings.
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