<Xmas Open ThreadThe Oil DrumI'm sure it will be just a friendly chat!!!>

79 comments on Monday's Open Thread

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Francois on December 26, 2005 - 6:06pm Permalink | Subthread | Parent | Comments top
I think you have to account for the different factors behind the oil price - namely (a) pure market supply and demand, (b) a fear factor that seems to be waning, (c) speculation, and then finally (d) plain old inflation. Of these, inflation seems to be the one not talked about often. Measured against the gold price, which doubled since 2001, the present oil prices look a lot less threatening. Even taking the CPI as measured by pre-Clinton formula at 6% compounded per year (see http://www.gillespieresearch.com/cgi-bin/bgn/) you can account for a big part of the present oil price increase over the last 5 years.

Talking about $100 oil in 2010 needs to be in the context of which dollars you are measuring with. In particular as a lot of us expect inflation to accelerate.

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BioDiesel on December 26, 2005 - 9:13pm Permalink | Subthread | Parent | Comments top
This is my feeling as well.
Agric and I talk about it some, but mostly engineers post here, so they are not all that interested in economic issues.
Inflation is out of control all over the world right now, kinda of the "hush hush", in these economic "boom times".  All that money must go somewhere and the housing bubble has hid most of it since 2001.  When people start pulling their money out of housing, they must put it somewhere, if it goes into oil.....look out.  A bad hurricane season could put the speculators at the edge of their seat.  The price of oil has much more to do with inflation than anything else, as long as the supply stays somewhat stable.
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Descolada on December 27, 2005 - 1:17am Permalink | Subthread | Parent | Comments top
You'll be happy to know that the housing numbers for November indicated a 12% decline in new home purchases, which, in economic measurements, is completely staggering.  From some economists you can hear the murmer of bubble bust talk.  Perhaps it's now sooner and no longer later.  
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Stuart Staniford on December 27, 2005 - 2:09am Permalink | Subthread | Parent | Comments top
Be careful drawing a conclusion from that number too quickly.  The error bars in those numbers are huge.  See this discussion at The Big Picture.  
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Atticman on December 27, 2005 - 9:38pm Permalink | Subthread | Parent | Comments top
Also Stuart,there is a recurring concept that is rarely talked about in this whole spectrum of topics.

Oilmen in particular are playing poker with all sorts of variables.And by nature they hold their cards covered to their chests!I have spent my last 33 years living in an oil field in North Texas and have to deal with them because I have oil under my HomeStead!

Have worked on triple deep hole rigs.

The old fields are still producing 75 yrs after discovery

New oil is still found in Texas

Shut in oil/gas is rarely discussed,but it is a fact that Texas is not producing near what it could if real crisis appears

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Jack Greene on December 28, 2005 - 12:21am Permalink | Subthread | Parent | Comments top
Good point.

But how big is the overall impact?

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peakearl on December 28, 2005 - 2:15pm Permalink | Subthread | Parent | Comments top
With steadily decreasing US and TX production and $60 prices, you'd have a lot of convincing to do to get me to believe any really significant production increase is possible.
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Agric on December 29, 2005 - 9:46pm Permalink | Subthread | Parent | Comments top
Well made that point Stuart. 'New house sales' are NOT 'new houses bought' nor are they even 'new houses started'. They are mostly (in these times, anyway) more like: here's a pretty picture and a piece of land, can I have some money in exchange for an option to buy the maybe house in perhaps a year's time.

There is plenty of evidence that the domestic real estate market has peaked for now, properties for sale are at the highest level since 1986. Australia and UK seem to be ahead of the US on the property market cycle. Based on their experience the slow down should be mild and manageable, but one can never be sure...

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