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173 comments on How to Address Contrarian Arguments - part I

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vtpeaknik on November 24, 2006 - 11:06pm Permalink | Subthread | Parent | Comments top
Hi Valuethinker:

I think that what you wrote about "stuttering prices" is right, but therefore negates what you wrote above that: "an explosion in the oil price... there is no sign of that at the moment".  It's fallen somewhat in the last couple of months, but it's triple what it was a few years ago.  If you look at the big picture and ignore the "stuttering" I think that the price signal is there.  There are also indications of some "demand destruction", and no indication of "spare capacity".

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Valuethinker on November 25, 2006 - 3:48am Permalink | Subthread | Parent | Comments top
On 'demand destruction' is there any evidence world oil consumption has fallen?  As opposed to slowing growth?

I was struck, f'rinstance, by the rise in US SUV and light truck sales.  Not a harbinger of falling gasoline consumption!

As to prices.  In a world with very price inelastic supply and demand, you would get the same kind of price volatility.  I think you could fairly argue that the previous price of oil was 'too low' rather than the current price is 'too high'.  There is a minimum price (around $40-45/bl) which triggers new entrants such as Canadian oil sands production-- which is, indeed, happening.

The fact remains oil prices are below their recent peaks, below their all time peaks (1980) by a considerable margin, and consumption, AFAIK, is still rising.

We might be close to Peak Oil, but the market isn't telling you that yet.

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vtpeaknik on November 25, 2006 - 9:38am Permalink | Subthread | Parent | Comments top
The 'demand destruction' I am talking about is in poorer countries, not (yet) in the OECD.  And even in the USA there was a (small) response to the high prices last spring.  The recent SUV sales are a rebound from that drop, not a real increase.
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