A Crude Economy?

[TheNegotiator 13]

You know, I've been looking at the price of oil for a while now and thinking it's a problem for "the recovery". The questions you have to ask yourself are 1- Is the price of oil a good reflection of dwindling global resources? 2- Is the price of oil reflective of the diminishing value of the currency it's priced in? 3- Can the global economy currently rebound with a high value of oil? 4- What can central bankers do about it and would they do it anyway?

 

The spike which saw values top out in mid '08 at just shy of $150 per barrel was blamed at the time on speculation. But is that all it is? I mean just look at the recent Libor revelations. It's a nailed on certainty that there is a whole heap more corruption in the world. People tend to do what they feel they can get away with or won't be pulled up on and then convince themselves it's morally justafiable. Well maybe some people are happy to do wrong in fairness. But the point is, this is human nature. Not acceptable in a civilized society. Don't mistake what I'm saying. So you have to assume there is something going on behind the scenes to artificially alter fair price. Look at what happened when everyone thought the apocalpyse was nigh. We hit a low of circa $30 per barrel only 6 months after being nearly $150!!

 

What ever your opinion on why/if we have a high oil price, I'd be interested to hear it. I'd also really like to know whether anyone else believes that the high price of oil specifically is really hindering any economic recovery. I think it really, really is. Especially where small business is concerned. But that is really just opinion. I feel we need to drop back to somewhere in the region of $50 and hold for a while in order to really "stimulate" the global economy. But can that happen with the Federal Reserve willing to dilute the value of the dollar at any hint of poor data?

 

It's funny how Europe is being pointed out as having an inadequate system when really isn't the entire system currently flawed??

[TheNegotiator 13]

This is the non-backadjusted continuous contract of crude since late '05.

 

[MightyMouse 12]

You know, I've been looking at the price of oil for a while now and thinking it's a problem for "the recovery". The questions you have to ask yourself are 1- Is the price of oil a good reflection of dwindling global resources? 2- Is the price of oil reflective of the diminishing value of the currency it's priced in? 3- Can the global economy currently rebound with a high value of oil? 4- What can central bankers do about it and would they do it anyway?

 

The spike which saw values top out in mid '08 at just shy of $150 per barrel was blamed at the time on speculation. But is that all it is? I mean just look at the recent Libor revelations. It's a nailed on certainty that there is a whole heap more corruption in the world. People tend to do what they feel they can get away with or won't be pulled up on and then convince themselves it's morally justafiable. Well maybe some people are happy to do wrong in fairness. But the point is, this is human nature. Not acceptable in a civilized society. Don't mistake what I'm saying. So you have to assume there is something going on behind the scenes to artificially alter fair price. Look at what happened when everyone thought the apocalpyse was nigh. We hit a low of circa $30 per barrel only 6 months after being nearly $150!!

 

What ever your opinion on why/if we have a high oil price, I'd be interested to hear it. I'd also really like to know whether anyone else believes that the high price of oil specifically is really hindering any economic recovery. I think it really, really is. Especially where small business is concerned. But that is really just opinion. I feel we need to drop back to somewhere in the region of $50 and hold for a while in order to really "stimulate" the global economy. But can that happen with the Federal Reserve willing to dilute the value of the dollar at any hint of poor data?

 

It's funny how Europe is being pointed out as having an inadequate system when really isn't the entire system currently flawed??

 

Oil dropping to the $50 area will provide relief to the economy; however, I wouldn't call it stimulus. $50 oil from these levels would probably equate to $1200 to $2000 per household (just a guess) in the USA, but it is not going to stimulate job growth. High oil prices are mostly passed onto the consumer, so they pay when it increases and benefit when it decreases. Will corporations attempt to grow and expand with the knowledge that oil has provided economic relief to consumers? It probably wouldn't happen right away, but if corporations got used to the fact that oil was going to remain at the $50 level, then perhaps they would build it into the equation and eventually the relief would equate to additional stimulus.

 

Oil is a commodity and like all other commodities, when prices are high, more supply is brought to market. I agree that we will see $50 oil or maybe less, provided Ahmadinejad is a good boy and doesn't force us to solidify a second term for our incumbent chief in November.

 

Sure, there is the potential of increased demand and the threat of "peak oil" but both of those issues are factors to impact us in the next few decades and not good reasons to have oil at $100+ today.

[Obsidian 10]

Iran plans to sell oil via private group, evade ban | Reuters

interesting article

 

I do not believe that price of oil is related with the amount of global sources.

 

I can understand small fluctuations in the market but 20-30% change in a couple of months does not sound so logical.

[TheNegotiator 13]

Iran plans to sell oil via private group, evade ban | Reuters

interesting article

 

I do not believe that price of oil is related with the amount of global sources.

 

I can understand small fluctuations in the market but 20-30% change in a couple of months does not sound so logical.

 

Interesting. Although what is 20% of Iran's oil supply in terms of global supply? I didn't find any better data (although I didn't look too hard either) but wiki has some as a guide- note it's mostly from 2009. If 20% of Iran's production as the article suggets is brought back onto the market, 834,400 barrels/day or 0.954% of prior global production would be again available. Is that a massive amount really? Could opec not do much more than that and also could existing refinery efficiency not improve things much more? My guess is that even with the increased supply, if 'they' wanna keep the price high, 'they' will.

[TheNegotiator 13]

Oil dropping to the $50 area will provide relief to the economy; however, I wouldn't call it stimulus. $50 oil from these levels would probably equate to $1200 to $2000 per household (just a guess) in the USA, but it is not going to stimulate job growth. High oil prices are mostly passed onto the consumer, so they pay when it increases and benefit when it decreases. Will corporations attempt to grow and expand with the knowledge that oil has provided economic relief to consumers? It probably wouldn't happen right away, but if corporations got used to the fact that oil was going to remain at the $50 level, then perhaps they would build it into the equation and eventually the relief would equate to additional stimulus.

 

Oil is a commodity and like all other commodities, when prices are high, more supply is brought to market. I agree that we will see $50 oil or maybe less, provided Ahmadinejad is a good boy and doesn't force us to solidify a second term for our incumbent chief in November.

 

Sure, there is the potential of increased demand and the threat of "peak oil" but both of those issues are factors to impact us in the next few decades and not good reasons to have oil at $100+ today.

 

I didn't say it will see $50/barrel but it could and I do think it would benefit business and the global economy as a whole. You're right I'd say about the corporations just pushing the price onto consumers, but also in some cases do consumers then consume less because of that? I would think so. But the big impact I feel it could make is on small businesses who haven't got stacks of cash and the demand for their services/products is variable. A small business might have to pay more to employees to keep them if that employee is on low wages and travels to work by car for example. Component parts of their products cost more in energy to build, more in materials, more in labour and more in shipping to get to them. This makes the end product more expensive and a consumer who possibly is struggling financially themself will look at it and potentially choose the cheaper product from the big corporation even if it's lower quality because they can still be competitive on price based on economy of scales/ability invest in cost cutting/efficiency measures.

[Obsidian 10]

Interesting. Although what is 20% of Iran's oil supply in terms of global supply...... if 'they' wanna keep the price high, 'they' will.

 

even a small wind turns into a tornado in the hands of a speculator

 

if we find alternative power source, oil prices would drop like a rock...

 

wondering what is the current cost of production though...is anybody working in oil industry?

[Landser 10]

if we find alternative power source, oil prices would drop like a rock...

 

Well, I personally don't think that these sources can be discoverer in the nearest future.

 

The oil industry has just HUGE lobby that is going to stifle any project endangering oil companies profits. The alternative sources in my opinion can be discovered only when there's a clear sign of all global resources depleting.

[MightyMouse 12]

even a small wind turns into a tornado in the hands of a speculator

 

if we find alternative power source, oil prices would drop like a rock...

 

wondering what is the current cost of production though...is anybody working in oil industry?

 

If we found alternative power sources, I suspect that oil prices would soar.

 

Even when alternative sources are found, our current infrastructure is still fossil fuel based and would take decades to convert. Oil has inelastic demand. An oil supplier would likely manipulate the price while demand remains inelastic. I know I would.

[Obsidian 10]

Well, I personally don't think that these sources can be discoverer in the nearest future.

 

The oil industry has just HUGE lobby that is going to stifle any project endangering oil companies profits. The alternative sources in my opinion can be discovered only when there's a clear sign of all global resources depleting.

 

honestly, i find it really weird that we can't find an alternative to oil in this century...anyway...

how about car makers for example? do you think they would care about oil companies if they had a chance to introduce an engine working with a cheap and reliable power source?

[MightyMouse 12]

honestly, i find it really weird that we can't find an alternative to oil in this century...anyway...

how about car makers for example? do you think they would care about oil companies if they had a chance to introduce an engine working with a cheap and reliable power source?

 

Of course they wouldn't. But, those who would lose because of the new technology would attempt to block passage of safety features for the new technology or some other tactic to stall or cause anguish to the company with the new technology. Not everyone is excited about new technology.

 

The horse and buggy association was a huge opponent of roadway projects in the early 20th century.

[Obsidian 10]

Of course they wouldn't. But, those who would lose because of the new technology would attempt to block passage of safety features for the new technology or some other tactic to stall or cause anguish to the company with the new technology. Not everyone is excited about new technology.

 

The horse and buggy association was a huge opponent of roadway projects in the early 20th century.

 

maybe it is time to invest on a stable or a solar power farm

[Landser 10]

do you think they would care about oil companies if they had a chance to introduce an engine working with a cheap and reliable power source?

 

Well, the question then would sound like 'who's lobby is stronger, oil companies or auto-makers'?

 

I also hope that the day will come when the ecological friendliness comes to the fore. I mean like the real one, not today's obsession with electrocars and related bullshit. But unfortunately for now the price of energy plays more important role than it's greeness.

[Obsidian 10]

Well, the question then would sound like 'who's lobby is stronger, oil companies or auto-makers'?

 

I also hope that the day will come when the ecological friendliness comes to the fore. I mean like the real one, not today's obsession with electrocars and related bullshit. But unfortunately for now the price of energy plays more important role than it's greeness.

 

I think the question is; will my grandchildren see oil or automobile?

[TheNegotiator 13]

Well, the question then would sound like 'who's lobby is stronger, oil companies or auto-makers'?

 

I also hope that the day will come when the ecological friendliness comes to the fore. I mean like the real one, not today's obsession with electrocars and related bullshit. But unfortunately for now the price of energy plays more important role than it's greeness.

 

What's the most important is that people start to act responsibly rather than with just profits in mind. I don't know if that can or will change...