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131 comments on UPDATED: The Oil Market's Historic Swing to Continuous Contango--Has Peak Oil "Tipped"?

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nrgyman2000 on May 21, 2008 - 9:58am Permalink | Subthread | Parent | Comments top

Increased oil prices reduce almost everyone’s disposal income (it acts as a tax).

For the US a doubling in the oil price will heavily impact their already high trade deficit? How long will other nations be able or willing to finance an accelerating American trade deficit?

Some of this lenders like China will also be impacted by the increase in oil prices, and should thus (under equal circumstances) be left with less US dollars to finance an accelerating US trade deficit.

Obviously something will have to give when the oil price reach critical levels (I don’t know what that price is as of now and when in time this will happen) even adjusted for a US dollar in almost free fall.

The increase in oil prices will affect food prices, interest rates, travelling etc. thus forcing the average household to increasingly prioritize their available means.

NGM2

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JimFive on May 21, 2008 - 11:57am Permalink | Subthread | Parent | Comments top

Increased oil prices reduce almost everyone’s disposal income (it acts as a tax).

It does not act as a tax. A tax moves money from the citizen to the government which the government then (ostensibly) uses within the domestic economy. A high oil price (for an importer) moves money from within the domestic economy to an external economy. Since our economy is measured by how much money is moving around within it, moving money outside of the economy is bad for the economy.
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JimFive

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nrgyman2000 on May 21, 2008 - 3:25pm Permalink | Subthread | Parent | Comments top

Jim,

Thx for the more precise formulation. (slight populistic use of a picture from my side)

For an oil importer I agree, increasing oil prices will move and increased amount of money out of the economy.

My prime intention was however to draw attention to that there must (as of now) be a limit to how high oil prices will go before it starts to affect demand.

Looking at EIA data for total petroleum products consumption it looks as this zone is being entered now, looking and the increasing number of airlines reporting cutbacks and reduction in flights, the present run up in oil prices have already stated to take some effect on demand (consumption). And there is probably more in the pipeline.

I would expect there to be a timelag from the run up in prices until it turns up in reduced demand.

NGM2

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131 comments on UPDATED: The Oil Market's Historic Swing to Continuous Contango--Has Peak Oil "Tipped"?

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