 | DrumBeat: August 14, 2007 | The Oil Drum | The Resurgence of Risk – A Primer on the Developing Credit Crunch |  |
80 comments on Oilwatch Monthly - August 2007
Comments can no longer be added to this story.
| Show without comments | PDF version
80 comments on Oilwatch Monthly - August 2007
Comments can no longer be added to this story.
| Show without comments | PDF version
User login
Personnel
Editors
Contributors
Peak Oil Primers
Archives
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- July 2006
- June 2006
- May 2006
- April 2006
- March 2006
Vital Trivia
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
GAIA Host Collective
"Its a bit strange that right now both our oil supply and monetary system are susceptible to a single calamity."
A global recession will cause demand to drop. Prices will drop and production will not increase. But the prices will not induce additional exploration and development.
I think eventually growing emerging markets will mop up the excess at low prices. For nations who are too deep in the credit crunch, they will see oil prices drop for a while and the prices rise as the productive nations mop up excess. The nations stuck in depression/recession will see inflation at the same time. What is a central banker to do in this situation?
I happen to doubt prices will drop that much if at all. What will drop is investment in the oil industry because of uncertainty about future prices plus OPEC will continue to pull back production especially KSA which would I'm sure be happy to have real reserve production if they have peaked.
We will see next year. But I'd be surprised if prices drop below 70 and expect them to stay in a 70-100 band between major events. The weakest post peak argument is that demand destruction will cause prices to drop. Since this means demand will drop under supply which does not make a lot of sense given a lot of pent up demand already exists for cheaper oil.
This is conventional wisdom but it assumes that a recession lowers production faster than production drops naturally. If production drops faster than consumption drops due to the recession, prices can actually increase during an economic downturn.
In short, you have limited yourself to thinking in terms of when oil was plentiful. It is less plentiful now and there may be consequences depending on if/when consumption intersects production declines.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone