Comments on: 2016 Oil Contract Rise Above $100 a Barrel

By: Lune

Lune — Mon, 17 Mar 2008 06:58:00 +0000

I look forward to your post.

BTW, Yves, when do you sleep?? I’m on the west coast so I’m not burning as much of the midnight oil. Either you’re extraordinarily dedicated to the financial world (and it is more riveting than anything on late-night TV, even the everpresent soft-core porn on cable at this hour , or you’re living outside the Eastern timezone…

By: Yves Smith

Yves Smith — Mon, 17 Mar 2008 06:37:00 +0000

I’m about to put up an article from the hated but I think pretty sound Ambrose-Pritchard that makes a similar case. The consensus is that the Fed can beat deflation, I don’t buy that. It would be better if it could (maybe, I’m not even certain of that since the amount of pump priming we’d have to do would tank the dollar so badly as to create massive instability and much ill will). More on that with the post.

By: Lune

Lune — Mon, 17 Mar 2008 06:29:00 +0000

Color me skeptical (at least somewhat

Firstly, the U.S. is about to enter a profound recession/depression. We’ll likely go the Japan route and lose at least a decade getting back on our feet.

Secondly, sustained prices above $3/gal will lead Americans to consume less, especially in the long term. Already, sales of SUVs are tanking and small cars like the Toyota Yaris are coming up (remember that for our greatly expanded GDP, the U.S. today consumes about the same amount of oil as it did before the 70’s supply shocks; a direct result of the efficiency initiatives undertaken after those price spikes).

Thirdly, while everyone expects China and India will make up the shortfall, China is looking increasingly fragile as well. Much of their growth is export-driven, and the lack of large internal markets means they’ll likely go into recession as soon as the U.S. and other export markets start contracting. Also, their increasing social unrest, high inflation, and inefficient allocation of capital (their banking system makes the U.S. look pristine) means they’re facing an implosion of staggering proportions real soon too.

Of course, I could be wrong. the Peak Oil mavens keep saying we’re actually at peak oil right now, in which case, the decline in demand I’m forecasting may not keep up with the reduction in supply that is predicted as well.