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Effects of rising oil prices on the economy

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

Re: Effects of rising oil prices on the economy

Unread postby GHung » Tue 06 Feb 2018, 00:40:27

Darian S wrote:
Outcast_Searcher wrote:
GHung wrote:After 2008, consumption dropped significantly until QE and ZIRP kicked in, which is about the time oil prices jumped up as consumption began to rise. Hard to determine true cause and effect when markets and consumer confidence are being manipulated to such an extent.

Ah yes, that strawman again. If you don't like what the markets tell you or if you don't understand it, then blame the big "manipulation conspiracy", those shadowy figures that invisibly "manipulate" the markets in ways you dislike so.


Debt is up pretty much everywhere. Underemployment is rising. People are one check loss or emergency away from bankruptcy. The auto sales are down, phone sales are down, the retail apocalypse is going down. Exxon mobil failed to meet expectations despite rise of oil prices and has had to borrow to pay dividends.

That the global economy is stressed is evident. Spiralling debt is a sign that the can was kicked because the world could not afford.


Seems O_S is missing the part where QE, ZIRP, and NIRP were indeed market manipulation. Or maybe he's not man enough to admit it, and that this manipulation did help support consumption levels at high prices. He resorts to framing this as some conspiracy theory, "shadow figures",, all that. What a chump. This was market manipulation on a massive scale, in his face, and transparent for all to see. Further, those high oil prices were enabled, in part, by mass injections of conjured capital into markets.

The very real fact that O_S frames anything that doesn't fit his narrative as doomerism or conspiracy theories reveals he holds the same paranoia he accuses others of.
Blessed are the Meek, for they shall inherit nothing but their Souls. - Anonymous Ghung Person
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Re: Effects of rising oil prices on the economy

Unread postby GoghGoner » Tue 06 Feb 2018, 17:11:15

Don't agree with the oil price analysis but the rest of the article is good. Current oil prices should have a small drag on the economy going into summer and, if they plateau within $10 of the current price, I don't expect any major issues. However, if they keep rising those folks without any discretionary spending won't be able to afford their subprime loans again.

https://www.barrons.com/articles/crude-subdued-why-oil-prices-wont-spike-1517624714

At the same time, a doubling of energy costs takes a significant bite out of U.S. households’ budgets, with energy costs directly accounting for about 6.5% of consumer spending. Even more problematic, this is a regressive tax, disproportionately draining lower-income households’ discretionary spending power. Last year, energy represented 8.7% of spending by the bottom 20% of households, compared to 4.9% for the top quintile. Moreover, the bottom group lacks net assets to tide them over bad outcomes.

...

On balance, it’s likely that the economy-wide effects of the energy shock, though unpleasant, won’t derail growth. We are tentative, however, because commodity markets are volatile. In recent work with Christoph Trebesch of the Kiel Institute, we counted more than twice as many boom-bust cycles in commodity prices than in capital flows since 1820. The global economy looks to be riding a roller coaster.
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Re: Effects of rising oil prices on the economy

Unread postby Outcast_Searcher » Tue 06 Feb 2018, 17:28:01

Darian S wrote:
Outcast_Searcher wrote:
GHung wrote:After 2008, consumption dropped significantly until QE and ZIRP kicked in, which is about the time oil prices jumped up as consumption began to rise. Hard to determine true cause and effect when markets and consumer confidence are being manipulated to such an extent.

Ah yes, that strawman again. If you don't like what the markets tell you or if you don't understand it, then blame the big "manipulation conspiracy", those shadowy figures that invisibly "manipulate" the markets in ways you dislike so.


Debt is up pretty much everywhere. Underemployment is rising. People are one check loss or emergency away from bankruptcy. The auto sales are down, phone sales are down, the retail apocalypse is going down. Exxon mobil failed to meet expectations despite rise of oil prices and has had to borrow to pay dividends.

That the global economy is stressed is evident. Spiralling debt is a sign that the can was kicked because the world could not afford.

Sigh. No citations, I see.

Doomer newsletter writers have been claiming the US will collapse any time because of too much "unpayable debt for well over 30 years (since I started paying attention -- probably much longer than that). And yet here we are. So let's not pretend debt is something new.

The trend for overall US household debt compared to GDP looks very good over the past decade. Things look MORE affordable overall for US households, not less.

https://fred.stlouisfed.org/series/HDTGPDUSQ163N

US unemployment is at a better level than it's been in a long time. It's been flattening, but it's almost a percent below the traditional definition of "full employment".

https://tradingeconomics.com/united-sta ... yment-rate

Since when is it new news that many Americans don't save much money? It's not. A lot of that is a lack of spending discipline. That's unfortunate, but it's NOT a sign of something bad happening now or debt doom.

The MEDIAN US household income is now roughly $60,000 a year. So let's not pretend people are having to eat cat food in mass amounts, even before you count all the various programs like the earned income credit, food stamps, etc.

http://www.businessinsider.com/us-censu ... ome-2017-9
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Effects of rising oil prices on the economy

Unread postby marmico » Tue 06 Feb 2018, 17:33:33

Thus far, you need to squint hard to see any household spending drag from rising oil prices. The personal income tax cuts will act as an offset in 2018.

https://fred.stlouisfed.org/graph/?g=iaTT
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Re: Effects of rising oil prices on the economy

Unread postby ralfy » Tue 06 Feb 2018, 21:24:30

Another catch is that the economy mentioned in the thread title does not thrive with people "generally doing enough."
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Re: Effects of rising oil prices on the economy

Unread postby GoghGoner » Wed 07 Feb 2018, 05:55:51

marmico wrote:Thus far, you need to squint hard to see any household spending drag from rising oil prices. The personal income tax cuts will act as an offset in 2018.

https://fred.stlouisfed.org/graph/?g=iaTT


Historically, I could make an argument that the US is the swing consumer, meaning that if oil prices go up, the demand in US goes down and prices are significantly constrained. [if the graph continued out to 2018, you would see that oil consumption in the US is now higher than any other time in history]

How will the extra money affect oil demand in the US? Will it be more inelastic this year and we will see much higher oil prices because of that. That would trigger higher inflation and more action from the central bankers.

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Re: Effects of rising oil prices on the economy

Unread postby marmico » Wed 07 Feb 2018, 10:58:56

Historically, I could make an argument that the US is the swing consumer, meaning that if oil prices go up, the demand in US goes down and prices are significantly constrained.


OK. Your graph of US consumption says otherwise. Plot the regression of the real price and consumption. Common sense says otherwise. China and (now) India are the swing consumers.

I have a high degree of confidence that US petroleum consumption (oil + natural gas liquids) peaked in 2005 at 40.3 quads.

https://www.eia.gov/totalenergy/data/mo ... sec1_7.pdf
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