For a minute there I thought I had to get off my couch, when all the while the fact is we don't have to do anything much but keep things afloat for just a few decades more! In fact, we'd best shut up about PO, because if our offspring finds out we knew about it all along, they'll turn and wring our necks come 2036!
Posted: Fri May 16, 2008 2:39 pm Post subject: Re: Another Record ($127.79)
Zardoz wrote:
Are all "psychological barriers" broken now? Is that an obsolete concept?
In terms of price, yes, it is obsolete. That is not the critical barrier.
The important barrier, one not yet addressed, is that an essential and irreplaceable resource is in irreversible decline. When that barrier becomes obsolete, you'll know it. Panic - financial and otherwise - will occur.
They think that there will be an average of $141 in the second half of the year.
I feel a twinge of hypocrisy in praising GS for their high price predictions, but let's tacitly go with that.
An average of $141 in the sceond half of the year would mean the goose is cooked.
Well put post.
A few brave souls here figured where the oil market was heading, but even GS and its famed superspike report was woefully behind reality. Keep in mind this latest prediction only comes as oil was in the $125 area - about $20 or so higher than their prior year forecast for 2008.
The first actual superspike report predicted $105 oil by about now if a major political crisis developed in the Mideast. I see no such crisis - and no $105 oil. Through some shoddy news investigation, GS first revision of its superspike report a few years back is now considered the original prediction. I could go on and on about how past predictions keep changing - but my point is that even the most pessimistic are racing as fast as possible to revise multiple times their outlook for oil.
It makes one wonder if it is even feasable to predict where the price of oil will be going. But it is fun to predict, and even more fun to point out that 99% of the energy analysts have been caught being dead wrong about what the price of oil will be.
Has yet to materialize....lol...but hang on to your f@#king hats when it does start to happen....lol...lol.
I'm curious to know what some predictions are as to when we will start to REALLY start to feel the true impact of the current oil prices.
The rate of inflation at the grocery store is awful but to me still seems very low considering the speed at which the cost of food production and transport has risen due to the oil spike. So when will we really start to see it reflected at the checkout lane? 2 weeks? 2 months? 6 months?
Joined: Apr 16, 2008 Posts: 85 Location: Western PA, USA
Posted: Fri May 16, 2008 10:59 pm Post subject: Re: Another Record ($127.79)
I heard awhile back that during the Great Depression global oil demand fell like 90 percent. If so, wouldn't that cause oil prices to plunge if our global economy incurred a second Great Depression? I know that oil production might have peaked or soon will peak. However, wouldn't a deep recession/depression kill of a large amount of the excess demand growth from China/India as they can't afford to buy cars like they have if they all lose their jobs in large numbers? I am assuming that this recession becomes a depression and lasts a half decade at least. Also worldwide unemployment will be over 15 percent. What would oil prices trade at under this scenerio? Right now seems to be a tug a war between a slowly declining economy and declining worldwide production.
Joined: Apr 05, 2005 Posts: 2395 Location: South of Atlanta
Posted: Sat May 17, 2008 7:56 am Post subject: Re: Another Record ($127.79)
Forney,
Your probably right. Global Depression lasting more than just a few years. Timing is problematic but my guess is within 3-5 years it begins in earnest, possibly sooner with unpredictable "Black Swan" type events.
Oil demand will go down but how much is also a very difficult thing to predict. It will be significant at the outset I think. It's what we all fear will happen and the very fact you may see this leads to a host of other very bad potential things which just prolong the agony. War, hunger, etc. It probably will go on for a long time until enough folks die or we figure out some new pardigm for energy use.
Your becoming a doomer, it's almost as if there just is no way out. Make the best of what time you have left.
Joined: Jun 18, 2005 Posts: 3762 Location: In a van down by the river
Posted: Sat May 17, 2008 9:11 am Post subject: Re: Another Record ($127.79)
Forney2008 wrote:
I heard awhile back that during the Great Depression global oil demand fell like 90 percent. If so, wouldn't that cause oil prices to plunge if our global economy incurred a second Great Depression? I know that oil production might have peaked or soon will peak. However, wouldn't a deep recession/depression kill of a large amount of the excess demand growth from China/India as they can't afford to buy cars like they have if they all lose their jobs in large numbers? I am assuming that this recession becomes a depression and lasts a half decade at least. Also worldwide unemployment will be over 15 percent. What would oil prices trade at under this scenerio? Right now seems to be a tug a war between a slowly declining economy and declining worldwide production.
I think you have to make some very big distinctions from now and then. Right now we need every piece of grain we can get to keep this world fed. During the depression there was an excess of food production, too much spare capacity.
You also cannot ignore how desperately places like China and India need oil now. These countries are now growing ever more dependent on oil because it is the only energy source that can help them carry such large populations.
Oil will come down but food and energy will continue to be the most expensive items on the planet.
Posted: Sat May 17, 2008 9:18 am Post subject: Re: Another Record ($127.79)
I think we are now going hyperbolic. If you add a feedback loop or two to a system experiencing exponential growth, it tends to kick it into a hyperbolic curve, truly explosive growth.
Increasing demand and flattening production have set oil prices on an exponential curve since 2000, about doubling every two years since then: $10 in 2000, 20 in '02, 40 in '04, about 80 in '06...
Now on top of that, we are starting to have feed back loops:
Export lands are starting to want to use much more of their own energy sources rather than sending them all over seas, at whatever price;
As these producers realize the price of this limited commodity is going to go up indefinitely, they will have better and better incentives to leave it in the ground ever longer since they can anticipate that it will be worth ever more in the future;
Other hording phenomena will soon kick in (note Bush's attempt to increase the Strategic Petroleum Reserve);
As Jack just pointed out, when traders start realizing that they are dealing with a commodity with real geological limits that are being reached, panic will set in, driving the price ever higher...
I'm sure some of you can think of other such feedback loops that have started or soon will kick in.
So when you add even one or two of these feedback loops onto an already exponential growth curve, you get hyperbolic growth, and it's not pretty. Basically, instead of doubling over a fixed period of time, the price increases a set amount over an ever shrinking period of time, till you reach infinity--that is until all trading of oil in dollars becomes impossible.
So if we take a couple weeks ago as our starting point for the sake of mathematical convenience, the price was about $120, about double what it was a year ago--an increase of $60 over a period of a year.
If this represent a blip from which it will return to its now "normal" exponential growth of doubling every two years, we should expect the price not to rise much above $160 this year not hit $320 till about 2010.
If this is a new level of exponential growth, then we will now see doubling every year.
Both of these scenarios are really bad, but I would now say that they represent wild-eyed, pollyannish optimism at this point--really bad, but still best-case scenarios.
Given the tendency mentioned above for added feedback loops to knock growth from exponential to hyperbolic, we should see another $60 rise in the next four months, and then another in the next two months--so another doubling over the next HALF-year.
But this is just the beginning. From there it would keep rising $60 at ever shrinking stretches of time: in about three weeks, in about two, in about ten days, nine, eight.... then two day, one day, and then it is increasing by $60 in less than a day, less that and hour, a minute....
By next year about this time, by these calculations, oil will not be purchasable by any quantity of dollars. Essentially this is hyperinflation of the dollar in relation to oil.
So that's my latest. I don't give the system more than about a year before oil becomes for all intents and purposes un-purchase-able by those holding any quantity of dollars.
Of course, it is unlikely to be a smooth ride up--there will be huge peaks and craters as people assume that oil can't go higher and cash out, only to find that oil does go up further and their cash is worthless.
I hope to heaven that I'm wrong, but this model points pretty strongly in the direction of total collapse within about a year.
But then again, maybe the magic of the market will solve everything afterall
Thoughts?
Here's a bit on feedback loops from Wikipedia (my emphasis):
"A system in equilibrium in which there is positive feedback to any change in its current state is said to be in an unstable equilibrium, whereas one with negative feedback is said to be in a stable equilibrium.
The end result of a positive feedback is often amplifying and "explosive", i.e. a small perturbation results in big changes. This feedback, in turn, will drive the system further away from its original setpoint, thus amplifying the original perturbation signal, and eventually become explosive because the amplification often grows exponentially (with the first order positive feedback), or even hyperbolically (with the second order positive feedback). Indeed, chemical and nuclear fission based explosives offer an excellent physical demonstration of positive feedback. Bombarding fissile material with neutrons causes it to emit even more neutrons, which in turn affect the material. The greater the mass of fissile material, the larger the amplification, resulting in greater feedback. If the amplification is great enough, the process accelerates until the fissile material is spent or dispersed by the resulting explosion."
Posted: Sat May 17, 2008 10:22 pm Post subject: Re: Another Record ($127.79)
My out of thin air guesstimate is that we have at least 3 years before oil price becomes hyperbolic. When the depletetion rate becomes sharper... and population growth is still around current levels.
Recently, I was expecting some low prices of $115... but the price is still increasing with no fall backs. _________________ anagami.net
Joined: Oct 23, 2004 Posts: 5487 Location: New Jersey
Posted: Sun May 18, 2008 8:49 am Post subject: Re: Another Record ($127.79)
Great post dohboi.
I have long said here (back as early as 2005) that price increases in the US will accelerate by 2008 and reach hyperinflationary rates (something like 20% per year for ordinary consumer goods) by 2010. However the events of the last six months have me thinking that prediction may have been too optimistic, and things could get out of hand sooner.
As memmel has explained elsewhere, more likely instead of a smooth transition to ever faster increases in the price of energy (in terms of US dollars), things will become chaotic once worldwide oil and oil product stockpiles reach critically low levels (otherwise known as minimum operational levels). Essentially we have tranisitioned from local and scattered oil product shortages, to regional, and now national oil product shortages in a scant year or so. This game of whack-a-mole will end, and the point of chaos occurs, when it becomes perceived that oil product shortages have slipped below worldwide MOLs. Then no amount of price increase will eliminate oil product shortages in some parts of the world.
I do not know how close we are to the end game here, but it looks to be less than two years.
Posted: Sun May 18, 2008 9:47 am Post subject: Re: Another Record ($127.79)
This is not how I wanted to start my Sunday morning. I am sitting here with my coffee and now I want to switch to something much stronger...Thanks Dante!
Posted: Sun May 18, 2008 11:34 am Post subject: Re: Another Record ($127.79)
Homesteader wrote:
Some years ago now, if memory serves, didn't natural gas prices in CA increase 400% due to a 4% decrease in supply?
No, the slight decrease of 4% was capitalized on by Enron, who had captured control of the nat gas market, in an energy market that had been recently deregulated. There is much more to the oil and commodity market run up than meets the eye.
Salon:
"Feinstein reported that Enron controlled 50 to 70 percent of the trading market for natural gas deliveries into Southern California from May 2000 to June 2001, and it did so through bilateral sales, which require no public disclosure of their details.
Natural gas prices drive electricity prices, and California energy prices went through the roof, from $7 billion in 1999 to $28 billion in 2000 and $27.7 billion in 2001."
Joined: Apr 12, 2007 Posts: 1162 Location: Central NC
Posted: Sun May 18, 2008 11:39 am Post subject: Re: Another Record ($127.79)
threadbear wrote:
Homesteader wrote:
Some years ago now, if memory serves, didn't natural gas prices in CA increase 400% due to a 4% decrease in supply?
No, the slight decrease of 4% was capitalized on by Enron, who had captured control of the nat gas market, in an energy market that had been recently deregulated. There is much more to the oil and commodity market run up than meets the eye.
Salon:
"Feinstein reported that Enron controlled 50 to 70 percent of the trading market for natural gas deliveries into Southern California from May 2000 to June 2001, and it did so through bilateral sales, which require no public disclosure of their details.
Natural gas prices drive electricity prices, and California energy prices went through the roof, from $7 billion in 1999 to $28 billion in 2000 and $27.7 billion in 2001."
Yes, I remembered that it was engineered by Enron. However, couldnt that situation be used to support parabolic price increases can be caused by slight decreases in supply? Basically supporting evidence for dohboi's post above.
I know I'm out of my league here. However, dohboi made what appears to my untrained eyes a pretty compelling argument.
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