All the stories about $82 oil miss the reality that oil prices are very low right now when factoring in the ELM and global oil depletion. If the greenback had held its high value reached against the Cdn dollar in 2002, oil would be $50 right now. The Yuan is so extremely undervalued that China has absolutely nothing to fear from higher prices (at least in the short to medium term the Chinese price for a barrel is whatever they want it to be). The price rise in Euros has been negligible. So few of the stories mention the reality- a US dollar in freefall. Simmons might hit his predictions (with a little help from Bernanke and George).
You have to think about cause and effect. The massive infusion of debt ala M3 and the fact that Opec is dollar pegged has worked to keep oil prices relatively low. But with the latest shenanigans the US has signaled that its willing to trash the dollar. So expect OPEC to unpeg and expect oil in dollar terms to skyrocket as OPEC effectively fights to retain the real value of its currency holdings. Its very much a petrodollar game. This says to me that the US is confident that OPEC cannot significantly increase production so we are in end game mode now.
At a personal level you should have plans in place to react quickly to events starting next summer. WT ELP recommendation is important.
One thing you may want to consider is a safe hideout if you live in a large city like Los Angeles.
This means not going on vacation and saving your vacation days working with your employer to work remotely etc.
You need to be able to leave the city quickly if rioting
breaks out.
With the way things are going the combination of financial games and peak oil could easily lead to rioting in many of our larger cities this summer. I expected some shortages and limited disturbances but now I think things have a good chance to fall apart as the costs of food and gasoline skyrockets and the economy slumps into the first stages of a deep recession.
This means of course that the stage is set for Bush to impose martial law and postpone the national elections if he wishes.
Why are you still here memmel? Take what money you have get to a remote warm island and live out your days peacfuly there. See ya dude, we'll miss ya ;)
The price of gasoline today is only about 3/4 of what it was in 1979-80(edit; adjusted for inflation). If I recall correctly, there was no rioting at that time. Just how high do you think the price of gas needs to go to get people rioting?
Do persons on Prozac or Zoloft riot? In 1980, anti-depressant use in the USA wasn't what it is today (IMO suicide might be chosen over rioting in 2007).
Shaman: Weren't there rumours of a riot if OJ was found guilty (last time)? Somehow I don't think he carries the same weight this time around. I haven't seen Kid Nation- I thought the reality show trip reached its low point with the show where midget guys had to chose between midget chicks or supermodels.
Jon Stewart did a nice thing with the tasering incident by highlighting the reaction to the incident in the surrounding audience. Basically, no reaction at all! They looked really bored by the whole thing! So much for rising to the defense of your fellow student. Stewart's comment was spot-on: "I guess they want it all to be over so they can go home and watch the video on youtube"
the reaction to the incident in the surrounding audience. Basically, no reaction at all!
What are the by-standards supposed to do? Throw themselves on the police? Point and say "Help! Help! He's being oppressed! See the oppression inherent in the system!"
Your excerpt was fine, except that that article had already gotten so much attention. I only pruned it because the open threads have been so long recently.
I agree with you about undervalued, but I think that Simmons' bet was that oil prices in 2010 would be at or above $200 in constant inflation adjusted 2005 dollars.
Since the dollar is rapidly becoming not terribly welcome in polite society overseas, I wonder when we will see an implicit, or explicit, threat of US military force, in order to keep the oil coming to the US.
The scary thing to contemplate is to assume, for the sake of argument, that we had to exchange things of value for imported oil, rather than rapidly depreciating currency, which you can of course take to its logical conclusion down to the microeconomic level, which is a question I have posed several times:
The question to ask yourself is what essential goods and/or services do you have to offer food and energy producers, in exchange for food and energy.
One advantage that oil patch types have is that we have been through a collapse. We don't have to imagine what it is like to see about 80% of your industry's net cash flow vanish in a few days (early 1986)--been there, done that.
The inflation numbers posted by in the CPI seem more bogus every month, totally out of connection with what a middle class guy like me experiences. The "core" rate of 2-3% is utterly ridiculous, and most of the folks I hang out with agree that there is a serious disconnect.
This site has alternative numbers supposedly based on the way the inflation rate was calculated back in the early nineties. It shows current inflation for the last few years in the 5-7% range, which I find much more believable. Do any other TOD'ers know anything about this site?
Went down to CV_ Pharmacy to stock up on generic brand antihistimes (this IS Florida). Last time I restocked, about 2 months ago, generic brand was $1.99 for 24 non-drowsy pills. This trip the price was $10.99 for the same generic brand, same box, same 24 pills. But there is no inflation. Didnt buy any and later today will check out the Dollar Store...sometimes they have the same thing for a buck!
I think there is a lot of "hidden" inflation going on. That's why I posted the Bloomberg article the other day about boxes/packages getting smaller or less product in the same size box, but charging same price. You would have to track historic price per ounce in that case to detect the inflation.
I find the use of the term "core rate", which excludes food and energy, to be government new-speak at its worst. Food and energy are the core of the economy not the remainder. I spend more money on food and energy than anything else. Where I live the most common stores are gas stations and grocery stores or a mixture of the two. Whole states and regions of the country are mainly food or energy producers. Iowa in the Midwest and Texas in the South are examples. To marginalize this part of the economy by excluding it in inflation data is obviously fraudulent. In the black is white and white is black world these fools live in, they probably think it's clever, but few are being fooled in the real world IMO.
Every time I hear "core rate of inflation" I know I'm listening to a lie.
I find economics to be just slightly less obtuse than my wife but I think there is a justification for removing food and fuel:
Since food and fuel are woven into the price of everythng and they are the most volatile commodities if you leave them out you remove the volatility yet keep the EFFECT of those components in the overall numbers.
Perhaps some needs to create a food and energy index that tracks JUST food and energy. I think that figure would prove to be extremely useful.
Another truth respecting the vigilance with which a free people should guard their liberty, that deserves to be carefully observed, is this--that a real tyranny may prevail in a state, while the forms of a free constitution remain.
I’m having trouble with this 200 $ in the (relatively) short term. A short time ago (june/july) – before it broke through the 80$ barrier this week, the markets where crawling in their skins to avoid this 80-level, and that was before the financial shocks ..
If the market is gonne behave like this every time it has to pass another accumulated “ten” – I see demand destructions and rationings as solutions to the challenge.
OR … a big OR, unless the $-value goes to “nothing”. The ELM is there though, under all circumstances, doing its thing.
How did the market behave? When oil first got near $80, the news was the credit crunch and oil was being almost entirely ignored. Since then, oil has gone over $82, and the markets haven't really seemed to care (the equities markets have bounced back). Why do you describe them as "crawling in their skins to avoid this 80-level"?
My main point speek is that I don’t believe in the 200$ barrel – for a set of reasons – short, such money doesn’t exist in the world IMO, other measures will se daylight before...(magnitude, ability, consequences)
In following the headlines news – they’re always focused on the”next ten” – What will happen then (?) – speculations up-down-sideways --- and the Magic Markets doesn’t like all those scary possibilities… What’s “IN” today is the shit ready for us at 100$ (heading-sample-link-norwegian )
From memory I have a feeling that crude tend to hover for “a long time just under tens” (60, 70, 80 $) … than just above as in 81..82 $ range – and my hard facts to this is simply in a box labeled psychology ;-), disappointed?
I don't disagree that $200/barrel is unlikely because we simply won't afford it - demand destruction will happen first. I was just wondering what you were seeing that makes you think the market was reacting particularly to oil's currently high price. From where I sit, the mainstream reaction to oil's highs seems pretty ho-hum. Just taking it in stride.
To me it is all further example of the huge cognitive dissonance people like myself go through as we read TOD side-by-side with MSM news sources.
$200/barrel is unlikely because we simply won't afford it
There are places in Europe where fuel costs are equivalent to $400 a bbl. A good chunk of that is tax but they can manage to operate society at that price level. Doubt that the same could be said for North America so your point is still valid.
Yeah, that tax bit is crucial though. When Europeans buy a gallon (or liter) of gas, they aren't just buying gas, they are buying health care and roads and infrastructure, etc. In the US, we still pay for those things too, but separately.
Speek: Oil has gone from $10 in 1998 to a current $82 with zero demand destruction in the USA (usage has increased). Hard to say how much demand destruction at $200, but my guess is it won't be as much as expected.
Well, I wasn't assuming the DD necessarily happens in the US first, and also we do seem headed for a recession. So, I do find $200/barrel in 2005 inflation adjusted dollars by 2010 to be unlikely. If it happened, it would indicate to me our economy was stronger than I thought!
Speek: I don't know what you are thinking. The US economy is struggling right now and gasoline usage shows no sign of declining. It is up from when oil was at $10. Your thesis that $200 oil rules out a recession is nonsensical.
Yergin was just on CNBC, although I don't think that he made a price projection this time. In any case, for the benefit of trader types, I issued the following "Red Alert" on 6/28/07. WTI is up about $13 since 6/28.
WTI is trading at about 2.2 Yergins, Brent at about 2.1 Yergins. (One Yergin = $38/barrel).
June 28, 2007
To: Interested Parties
From: Jeffrey J. Brown
Subject: RED ALERT: DANIEL YERGIN ISSUES STRONG "BUY SIGNAL" FOR OIL
CNBC just quoted Daniel Yergin as saying that, without the "fear premium," oil prices next year should be down to $60.
Most of you probably recall Daniel Yergin's previous predictions for lower oil prices. Based on prior experience, once Yergin issues a prediction for lower prices, one should expect oil prices to be 100% or more higher than his predicted price, within one to two years of his prediction--think $120 or more within one to two years.
Regarding his $38 prediction, do a Google search for Daniel Yergin and click on "Daniel Yergin Day"
From "Daniel Yergin Day":
In my opinion, Mr. Yergin serves as an excellent symbol of the major oil company/major oil exporter/energy analyst group. And since oil prices are now trading at close to $76 per barrel--twice Mr. Yergin's prediction--I hereby designate July 13, 2006 as "Daniel Yergin Day," in honor of Mr. Yergin's continued efforts to, in effect, persuade Americans to continue driving large debt financed vehicles, on long commutes to and from large mortgages.
All the stories about $82 oil miss the reality that oil prices are very low right now when factoring in the ELM and global oil depletion. If the greenback had held its high value reached against the Cdn dollar in 2002, oil would be $50 right now. The Yuan is so extremely undervalued that China has absolutely nothing to fear from higher prices (at least in the short to medium term the Chinese price for a barrel is whatever they want it to be). The price rise in Euros has been negligible. So few of the stories mention the reality- a US dollar in freefall. Simmons might hit his predictions (with a little help from Bernanke and George).
You have to think about cause and effect. The massive infusion of debt ala M3 and the fact that Opec is dollar pegged has worked to keep oil prices relatively low. But with the latest shenanigans the US has signaled that its willing to trash the dollar. So expect OPEC to unpeg and expect oil in dollar terms to skyrocket as OPEC effectively fights to retain the real value of its currency holdings. Its very much a petrodollar game. This says to me that the US is confident that OPEC cannot significantly increase production so we are in end game mode now.
At a personal level you should have plans in place to react quickly to events starting next summer. WT ELP recommendation is important.
One thing you may want to consider is a safe hideout if you live in a large city like Los Angeles.
This means not going on vacation and saving your vacation days working with your employer to work remotely etc.
You need to be able to leave the city quickly if rioting
breaks out.
With the way things are going the combination of financial games and peak oil could easily lead to rioting in many of our larger cities this summer. I expected some shortages and limited disturbances but now I think things have a good chance to fall apart as the costs of food and gasoline skyrockets and the economy slumps into the first stages of a deep recession.
This means of course that the stage is set for Bush to impose martial law and postpone the national elections if he wishes.
Why are you still here memmel? Take what money you have get to a remote warm island and live out your days peacfuly there. See ya dude, we'll miss ya ;)
The price of gasoline today is only about 3/4 of what it was in 1979-80(edit; adjusted for inflation). If I recall correctly, there was no rioting at that time. Just how high do you think the price of gas needs to go to get people rioting?
Do persons on Prozac or Zoloft riot? In 1980, anti-depressant use in the USA wasn't what it is today (IMO suicide might be chosen over rioting in 2007).
Are you counting Britney, OJ, the World Series, Kid Nation, and so on as Prozac and Zoloft?
Shaman: Weren't there rumours of a riot if OJ was found guilty (last time)? Somehow I don't think he carries the same weight this time around. I haven't seen Kid Nation- I thought the reality show trip reached its low point with the show where midget guys had to chose between midget chicks or supermodels.
Jon Stewart did a nice thing with the tasering incident by highlighting the reaction to the incident in the surrounding audience. Basically, no reaction at all! They looked really bored by the whole thing! So much for rising to the defense of your fellow student. Stewart's comment was spot-on: "I guess they want it all to be over so they can go home and watch the video on youtube"
the reaction to the incident in the surrounding audience. Basically, no reaction at all!
What are the by-standards supposed to do? Throw themselves on the police? Point and say "Help! Help! He's being oppressed! See the oppression inherent in the system!"
"Excuse me, Officer. May I have your name and badge number? Thank you. And you, yes, you with the taser. Name and badge number, please? Thank you."
I was wondering where to put this article I stumbled across this morning, so thank you for giving it a proper home, memmel!
Fears of dollar collapse as Saudis take fright
Edited to remove the long excerpt, since this article was discussed at length yesterday.
Well, I wouldn't have called it a "lengthy" excerpt, but thanks for the pruning anyway. :)
Most of my reading happens during the daytime, so I must've missed that discussion yesterday. Sorry 'bout that.
Your excerpt was fine, except that that article had already gotten so much attention. I only pruned it because the open threads have been so long recently.
I agree with you about undervalued, but I think that Simmons' bet was that oil prices in 2010 would be at or above $200 in constant inflation adjusted 2005 dollars.
Since the dollar is rapidly becoming not terribly welcome in polite society overseas, I wonder when we will see an implicit, or explicit, threat of US military force, in order to keep the oil coming to the US.
WT: he still might make it- the US guv is reporting an extremely low inflation rate (LOL) since 2005.
The scary thing to contemplate is to assume, for the sake of argument, that we had to exchange things of value for imported oil, rather than rapidly depreciating currency, which you can of course take to its logical conclusion down to the microeconomic level, which is a question I have posed several times:
One advantage that oil patch types have is that we have been through a collapse. We don't have to imagine what it is like to see about 80% of your industry's net cash flow vanish in a few days (early 1986)--been there, done that.
You didn't have to be in the oil patch to get economically blown apart.
The inflation numbers posted by in the CPI seem more bogus every month, totally out of connection with what a middle class guy like me experiences. The "core" rate of 2-3% is utterly ridiculous, and most of the folks I hang out with agree that there is a serious disconnect.
This site has alternative numbers supposedly based on the way the inflation rate was calculated back in the early nineties. It shows current inflation for the last few years in the 5-7% range, which I find much more believable. Do any other TOD'ers know anything about this site?
http://www.shadowstats.com/cgi-bin/sgs?
You must be new- shadowstats is debated on TOD a lot.
Went down to CV_ Pharmacy to stock up on generic brand antihistimes (this IS Florida). Last time I restocked, about 2 months ago, generic brand was $1.99 for 24 non-drowsy pills. This trip the price was $10.99 for the same generic brand, same box, same 24 pills. But there is no inflation. Didnt buy any and later today will check out the Dollar Store...sometimes they have the same thing for a buck!
I think there is a lot of "hidden" inflation going on. That's why I posted the Bloomberg article the other day about boxes/packages getting smaller or less product in the same size box, but charging same price. You would have to track historic price per ounce in that case to detect the inflation.
It's a bit sneaky if you ask me.
It could be called 'disinflation'..
Haaa...a new economic term...so inflation could be called "undeflation"?
River--
The only difference between 1.99 and 10.99 is a zero, so inflation is zero. Come on, not a tough concept if you work for the fed.
I find the use of the term "core rate", which excludes food and energy, to be government new-speak at its worst. Food and energy are the core of the economy not the remainder. I spend more money on food and energy than anything else. Where I live the most common stores are gas stations and grocery stores or a mixture of the two. Whole states and regions of the country are mainly food or energy producers. Iowa in the Midwest and Texas in the South are examples. To marginalize this part of the economy by excluding it in inflation data is obviously fraudulent. In the black is white and white is black world these fools live in, they probably think it's clever, but few are being fooled in the real world IMO.
Every time I hear "core rate of inflation" I know I'm listening to a lie.
I just want to say "hear hear". What an execrable joke to _remove_ food and energy, and call that the "core rate" of inflation.
But if we've learned anything in the last 6-7 years, it's that up is down, good is bad, and black is white.
I weep for my country.
My new favorite word is "Jabberwocky" to explain the world. Nonesense, bordering on the absurd.
I find economics to be just slightly less obtuse than my wife but I think there is a justification for removing food and fuel:
Since food and fuel are woven into the price of everythng and they are the most volatile commodities if you leave them out you remove the volatility yet keep the EFFECT of those components in the overall numbers.
I'm pretty sure that's the official explanation.
Do we have a real economist here abouts?
does your wife know that you think she is obtuse?
she thinks he's cute which makes them both almost right
--
All these memories will be lost in time
like tears in rain
I suppose that's an equilateral angle to take!
Perhaps some needs to create a food and energy index that tracks JUST food and energy. I think that figure would prove to be extremely useful.
Another truth respecting the vigilance with which a free people should guard their liberty, that deserves to be carefully observed, is this--that a real tyranny may prevail in a state, while the forms of a free constitution remain.
Hi WT / BrianT
I’m having trouble with this 200 $ in the (relatively) short term. A short time ago (june/july) – before it broke through the 80$ barrier this week, the markets where crawling in their skins to avoid this 80-level, and that was before the financial shocks ..
If the market is gonne behave like this every time it has to pass another accumulated “ten” – I see demand destructions and rationings as solutions to the challenge.
OR … a big OR, unless the $-value goes to “nothing”. The ELM is there though, under all circumstances, doing its thing.
How did the market behave? When oil first got near $80, the news was the credit crunch and oil was being almost entirely ignored. Since then, oil has gone over $82, and the markets haven't really seemed to care (the equities markets have bounced back). Why do you describe them as "crawling in their skins to avoid this 80-level"?
My main point speek is that I don’t believe in the 200$ barrel – for a set of reasons – short, such money doesn’t exist in the world IMO, other measures will se daylight before...(magnitude, ability, consequences)
In following the headlines news – they’re always focused on the”next ten” – What will happen then (?) – speculations up-down-sideways --- and the Magic Markets doesn’t like all those scary possibilities… What’s “IN” today is the shit ready for us at 100$ (heading-sample-link-norwegian )
From memory I have a feeling that crude tend to hover for “a long time just under tens” (60, 70, 80 $) … than just above as in 81..82 $ range – and my hard facts to this is simply in a box labeled psychology ;-), disappointed?
I don't disagree that $200/barrel is unlikely because we simply won't afford it - demand destruction will happen first. I was just wondering what you were seeing that makes you think the market was reacting particularly to oil's currently high price. From where I sit, the mainstream reaction to oil's highs seems pretty ho-hum. Just taking it in stride.
To me it is all further example of the huge cognitive dissonance people like myself go through as we read TOD side-by-side with MSM news sources.
There are places in Europe where fuel costs are equivalent to $400 a bbl. A good chunk of that is tax but they can manage to operate society at that price level. Doubt that the same could be said for North America so your point is still valid.
Yeah, that tax bit is crucial though. When Europeans buy a gallon (or liter) of gas, they aren't just buying gas, they are buying health care and roads and infrastructure, etc. In the US, we still pay for those things too, but separately.
Speek: Oil has gone from $10 in 1998 to a current $82 with zero demand destruction in the USA (usage has increased). Hard to say how much demand destruction at $200, but my guess is it won't be as much as expected.
Well, I wasn't assuming the DD necessarily happens in the US first, and also we do seem headed for a recession. So, I do find $200/barrel in 2005 inflation adjusted dollars by 2010 to be unlikely. If it happened, it would indicate to me our economy was stronger than I thought!
Speek: I don't know what you are thinking. The US economy is struggling right now and gasoline usage shows no sign of declining. It is up from when oil was at $10. Your thesis that $200 oil rules out a recession is nonsensical.
Yergin was just on CNBC, although I don't think that he made a price projection this time. In any case, for the benefit of trader types, I issued the following "Red Alert" on 6/28/07. WTI is up about $13 since 6/28.
WTI is trading at about 2.2 Yergins, Brent at about 2.1 Yergins. (One Yergin = $38/barrel).
From "Daniel Yergin Day":
If I heard CNBC correctly, WTI closed just shy of $84, up about $15 since the Daniel Yergin "Red Alert."