[dhfenton]

This article is specificly directed at investors. Oil bubble means that oil stocks are over valued in their opinion. The crash they are referring to is a crash in the price of oil stocks. They make a couple of remarkable observations to make that determination. First, they say demand will weaken. I don't know how they made that determination. They also say that it is becoming evident that there is abundant supply; again, I don't know how they made that determination. Given those conditions the futures market in oil would indeed come crashing down. Stocks for oil companies would also probably lose value. The assumptions they make seem to be very contrary to the world oil market we see today. The important point is that they aren't saying we're going to have a supply shock (peak oil). Don't misinterpret this to support Peak Oil, actually it is quite the contrary, it says Peak Oil isn't happening.

[bruin]

This guy believes oil conservation and oil alternatives, such as oil sands, will cause oil prices to fall. I can see the conservation path helping out, i.e. recession. Of couse, if we are in a recession then we are in the turmoil of PO, aren't we now?

http://money.cnn.com/2005/06/16/news/in ... /index.htm

[cat]

It seems to me that most economists, these guys included, do not take the fact that oil is a finite resource into consideration. They assume we will have oil forever, or at least until the forseeable future. They probably have never been educated on the subject and are so focused in their own narrow expertise that it doesn't occur to them to look at the bigger picture. Economics does get very complicated and is about as perdictable as the weather. It is probably most useful to gather what information they do offer and make your own conclusions based on your knowledge of "peak oil". It can be frustrating though, I was reading an interview with three intelligent economists in Harper's the other day, and they saw the most pressing economic problem as Social Security, not one mention of energy.

[chris-h]

Only in a case of a limited nuclear war could their predictions come true.

[MicroHydro]

Not possible. Here is a more likely scenario:

1) Global economy and equity markets drop (agree with that)
2) Oil consumption drops (agree with that)
3) OPEC and other producers breathe a sigh of relief for the opportunity to rest their over stressed fields and top off their emptying tank farms. Agressive production cuts keep Dubai oil above the $50 target. There has been a paradigm shift. Fifty dollar oil is seen not as a problem but as a solution. Recall that oil producers need a stable price of $50+ to justify spending billions on new projects. Any short term market panics will be quickly terminated by production cuts.

[Sgs-Cruz]

Um, look down about seven threads:

http://www.peakoil.com/fortopic8862.html

[JoeW]

....There is a crowd of economic "dissidents" out there ... and they claim (with god backing)

well, if god is backing them, then who are we to disagree?

[nth]

Not possible. Here is a more likely scenario:

1) Global economy and equity markets drop (agree with that)
2) Oil consumption drops (agree with that)
3) OPEC and other producers breathe a sigh of relief for the opportunity to rest their over stressed fields and top off their emptying tank farms. Agressive production cuts keep Dubai oil above the $50 target. There has been a paradigm shift. Fifty dollar oil is seen not as a problem but as a solution. Recall that oil producers need a stable price of $50+ to justify spending billions on new projects. Any short term market panics will be quickly terminated by production cuts.

Will Saudi be willing to reduce production?

Historically, they have been slow to cut production causing the crash and price of oil drop to the low teens in the past few years.

It is this drop in oil price that caused the current supply restraint. Or else, we should see Gulf of Mexico and West Africa more developed than currently. They had a slowdown in investment and development caused by the big drop in oil price. These projects are back to full speed ahead.

Again, this is unrelated to PO analysts who said PO this year. They believe in OPEC- more specificly, Saudi PO. If Saudi PO, no current projected oil coming online can replace them.

[bruin]

Doh!

[jimmydean]

I think he is hedging on some form of global economic slowdown coupled with a continued strong demand in the U.S. for more fuel efficient vehicles. Given Bush's proposed $4K subsidy for buying hybrid type vehicles it wouldn't be that far fetched than over the next 5 years U.S. demand actually goes down by 5M bbl/day or more.

[nth]

It seems to me that most economists, these guys included, do not take the fact that oil is a finite resource into consideration. They assume we will have oil forever, or at least until the forseeable future. They probably have never been educated on the subject and are so focused in their own narrow expertise that it doesn't occur to them to look at the bigger picture. Economics does get very complicated and is about as perdictable as the weather. It is probably most useful to gather what information they do offer and make your own conclusions based on your knowledge of "peak oil". It can be frustrating though, I was reading an interview with three intelligent economists in Harper's the other day, and they saw the most pressing economic problem as Social Security, not one mention of energy.

No, this guy has no knowledge of the oil industry. The economics of the oil industry right now doesn't support oil crash. Oil correction yes, but not crash.
Oil producers cannot afford to sell oil cheaply anymore. Production costs are too expensive. Exploration costs are very high. Revenue sharing with governments are very high.
All new fields require more money than old fields. We are talking about more than doubling last decades costs.

[aahala]

I noticed the article used the word "could" seven times, once with
the bullish $105 price and the others with the bearish prediction.

This reminds me, "I COULD win the lottery this week."

Since that statement does not violate a physical law, or internal inconsistency then the statement COULD be true.

[nth]

I noticed the article used the word "could" seven times, once with
the bullish $105 price and the others with the bearish prediction.

This reminds me, "I COULD win the lottery this week."

Since that statement does not violate a physical law, or internal inconsistency then the statement COULD be true.

are you expecting them to say "it will"
i can see lawyers salvating.

[shortonoil]

.
If this guy believes that tar sands are going to make a difference, he's probably not worth listening to. Tar sands are at best, only a small energy gain.
.

[clv101]

I think it's very likely that today's high prices could cause enough demand destruction to depress oil prices significantly. This isn't a 'good thing', it's how peak oil could be expressed - as an economic disaster first and foremost with the underlying energy disaster going virtually unseen.

[agni]

I think he is hedging on some form of global economic slowdown coupled with a continued strong demand in the U.S. for more fuel efficient vehicles. Given Bush's proposed $4K subsidy for buying hybrid type vehicles it wouldn't be that far fetched than over the next 5 years U.S. demand actually goes down by 5M bbl/day or more.

I doubt hybrid vehicles would make that big a difference. Cars have a long lifespan, typically 10 years or more. Even if every single vehicle being sold now started to be a hybrid, the effect would probably just lower the growth rate of consumption. The real gains could come if cities were setup in such a way that it was easier to use public transport and if commutes, or at least long jams, were drastically reduced.

-A

[MacG]

I think it's very likely that today's high prices could cause enough demand destruction to depress oil prices significantly. This isn't a 'good thing', it's how peak oil could be expressed - as an economic disaster first and foremost with the underlying energy disaster going virtually unseen.

I tend to agree. This is the scenario I think is most plausible of them all. And it might indeed be a Good Thing. I remember the hysteria in 1973-74, and admitt to beeing slightly scared by thinking about what it would look like if PO really hit the media.

It is much better with a series of recessions and depressions. At least more people have a mindset to handle that without resorting to hysteria.

[clv101]

The reason I don't say it's a good thing is that without recognising the energy disaster we won't even attempt to address it. We won't go on a major efficiency or alternatives drive. We'll just have one big, nasty, ever-deepening depression.

[airstrip1]

In April 2005 Goldman Sachs were predicting a super spike that would push oil to £105 a barrel in the near future

http://news.bbc.co.uk/2/hi/business/4399537.stm

Now Morgan Stanley think the oil market will crash.

My immediate thought is that Goldman Sachs are long oil and Morgan Stanley are short. All these institutions have a vested interest in the market so their pronouncements need to be regarded with a touch of cynicism.

[Ardalla]

Yes, it implies that PO is NOT a reality. As a result of normal business cycles and a slowing of the world ecomomy, the present high price of oil cannot likely be maintained. Several examples/trends are given.

Indeed, if you isolate all the data that supports a price collapse and ignore the data saying that it's not likely, then you end up with this conclusion.