That’s a given. The strategy of the last ten years is becoming less opaque every day. I’m sure Barak Hussein Obama’s administration will have a bit better luck convincing native Iraqis to allow our “police force” to remain in country for just a few more years. Hell, he might even be related. This is classic bad cop/good cop (chronologically inverted cliche) on an international scale.

As for oil price forecasts, more typical bullshit from our banking masters. Here’s a tip, watch conventional crude oil production numbers instead of pricing. That is the road to the truth.

There is one more way to cheat:

Buy the Oil futures then have your retarded uncle blow himself up in an attack of your most annoying neighbour’s oil facility.

Don’t forget to blame Al Queda.

But surely they will also think again when the price rises, per your “permanent economic brake” scenario?

Though why such a thing should occur is still not entirely clear. After the first cycle(*), one would imagine a strategy of avoidance would quickly arise, given that people may be stupid, they are not insane. In short, super-efficient vehicles are an economic inevitability, and that will short-circuit your scenario.

(*) While the 2008 July spike was not part of a scarcity cycle, the net effect in terms of future vehicle purchasing decisions will likely be the same.

mdf: car buyers may think again about hybrids when they see gasoline prices fall.

Second, demand for oil fell from 67 MBD to 59 MBD in the first oil shock. That was due merely to higher prices.

Say What?

The early 1980s recession was a severe recession in the United States which began in July 1981 and ended in November 1982….

Another myth floating around out there is that OPEC is undisciplined. Actually OPEC showed amazing discipline during the 1980s:

From EIA International Petroleum Monthly, February 2008:

World Oil Supply

OPEC
1979 31.3
1980 27.4
1981 23.4
1982 19.7
1983 18.4
1984 18.4
1985 17.2
1986 19.2

One key difference this time is that in the 1980s non-OPEC production was increasing rapidly:

non-OPEC
1979 35.5
1980 36.4
1981 37.1
1982 38.3
1983 39.4
1984 41.0
1985 41.8
1986 41.9

That clearly is not happening this go-round.

World
1979 67.0
1980 64.0
1981 60.6
1982 58.1
1982 57.9
1983 59.6
1984 59.2
1985 61.4
1986 62.1

Like I have said repeatedly, at this particular stage of the game, if the Saudi royal family perceives that it is in its best interest for the price of oil to go up, it will go up. It’s really as simple as that.

I know that doesn’t sit well for those emotionally invested in market ideology, or in American exceptionalism, but these are the sad realities string Americans in the face.

I’m with Ms. Smith on this one: the recession will be a very hard kick in the gonads of oil consumption. OPEC will attempt to reduce production to drive the price up, but there are at least three unpleasant realities at work:

0) as noted above, the cartel will find it difficult to reign in the cheaters,

1) As production begins to equal consumption, volatility will increase. This alone will tend to bias a rational consumer towards efficiency, it being a hedge against the Saudi Oil Minister farting in public — and the concomitant freak out by traders at NYMEX.

2) No one will ever forget $150/bbl. No one. If only because the lead up to that price essentially killed the SUV market in the USA.

My own estimation is that with gas-electric hybrids on the loose — current manufacturers can’t keep up with demand, even in the face of nasty economic outlook — and PHEV’s almost in production, demand for oil is set for a long term decline (modulo Middle East drama). Numbers: half of all oil goes into passenger vehicles. Typical car on the road for 10-15 years, or a replacement rate of about 5% per year. A PHEV would erase ~80% of the oil consumed by a car. Putting it all together, this could amount to 3% per year reduction in oil consumption over 15 years.

With oil trading at $63 a five-year old could tell you that it would be “about $60″ next year.

Reading the conversation above, I agree, downward price pressures still exist. I can tell you one thing is that if oil drops to say $40 and then discovery and new investment slows, green
alternatives also slow.

When we finally come out of the recession – and peak oil hits – the price rise from $40 to $200 a barrel will be monumental.