Oil at US$200 would trigger global recession, Deutsche Bank warns

[eyeball]

The sooner the better. I think a slow grind will only leave more people behind and result in more time for resentment and social unrest to build. If everyone is in the same boat at the same time however, the shared pain might lead to a more humane solution. Surely the banks can't foreclose everyone. Blood would be running in the streets if they did.

Story

Edited June 26, 2008 by eyeball

[sharkman]

I think $200 oil would make the politicians open up drilling activity, gas refining, and nuclear energy, all in one foul swoop. It's a brave new world.

[blueblood]

200 dollar oil means the world economy is booming and means good time charlie for Canada.

A recession if it did happen, would drop oil and we'd start the same song and dance again.

[WIP]

The sooner the better. I think a slow grind will only leave more people behind and result in more time for resentment and social unrest to build. If everyone is in the same boat at the same time however, the shared pain might lead to a more humane solution. Surely the banks can't foreclose everyone. Blood would be running in the streets if they did.

Story

I think you're going to have to look pretty hard to find a silver lining around this story! $200 a barrel oil not only means recession, it means skyrocketing inflation because of higher transportation costs and oil-based organic compounds used in making plastics and fertilizers are going to raise the price of food and just about everything you buy at Walmart! There have already been food riots in a number of third world countries; things will likely get a lot worse, before they get better!

[jdobbin]

Oil at $142 a barrel this morning.

I guess the big question is when $200 oil is going to come.

[eyeball]

Probably sooner than we think.

If someone had come in here a year ago and said oil would soon be $142.00 per barrel they'd be questioned about other conversations they might have had with their kitchen appliances.

[Pliny]

My prediction would be that the high price of oil will stimulate alternative technological innovation. Oil will not reach $200/barrel this time around.

I predict it will drop after summer and even a little bit through summer overall. The price is already getting people to reduce consumption by their own choice. I'm sure they would like to continue to consume as they have been doing, that is, without giving it a second thought, but they can no longer ignore the cost.

All that is going on is inflation and an oil bubble. Oil is of course necessary to the economy in western societies, and the price increase will be felt there the most. what the central bank does to fight inflation - ha, ha, is raise interest rates. Interest rates and credit availability will be curtailed. It will be harder to get a loan or get a mortgage. This of course, further reduces consumption and a recession occurs.

Supply and demand has a say in the price of oil but the industry is too cartelized and regulated to fully allow supply and demand to govern the price. Some countries will even nationalize their oil industry such as in Venezuela. It is hard to say if their objective is remove the influence of the corporate cartel or just seize all the profits from the industry for themselves - in the ha, ha interests of the People for the "collective good" - ha ha

[Wild Bill]

My prediction would be that the high price of oil will stimulate alternative technological innovation. Oil will not reach $200/barrel this time around.

"Technological innovation"? Just what does that mean?

I'm a "techie" type of guy and find your use of that term to be kinda vague. If you're talking about accelerating the numbers of hybrids and high efficiency diesel cars on the road, I would agree. The trouble is, that's not where we see all the pain.

What about heating our homes? Brand new homes are being made very energy efficient. We may see solar techniques applied or other "new fangled" technologies.

However, the majority of us live in older homes. What can we do? After you've stuffed or foamed in as much insulation as you can and replaced all the windows that's about it for retrofits. How many of us can afford to dump the old house and just buy a new one?

What about the old widow on a fixed income?

The problem of retrofitting is what slows down the collective ability to cope with rising energy costs.

Right now if you google up some suppliers of wind and solar equipment to get your house "off grid" you'll find you're talking around $30,000. That's a lot of money to pony up! Even at today's energy prices it might take decades to reach break-even.

We in the city may not even have wind as an option! Those vanes do make a lot of noise. Imagine if everyone in the city had one.

That leaves only solar cells. I've been reading articles since the late 60's about new manufacturing techniques that were going to give us cheap solar cells in just a couple of years. It's been nearly 50 and I haven't seen them yet!

Again, as a techie I've often noticed how many people think that science and technology is like some kind of magic. It can do anything you want if you just throw enough money at the research. Sometimes it works but more often the very idea proves wonky! Mother Universe has laws about the way she works and she doesn't always care about your wishes and how much money you spend. Something either works or it doesn't.

It may be that solar cells can NEVER become cheap!

There may be some other solutions that we haven't yet conceived but they aren't likely for a long time. We have a pretty good grasp right now on what science and technology can offer, at least for the next few decades.

I have this strong suspicion that some social engineers with little or no technical background are manipulating things, with a blind belief that the pain will force attention towards alternatives that while they themselves have no comprehension about, they are sure that the tech boys will be able to deliver.

If this were to prove true they may well find that the resentment over the pain they've cost the general populace may put them at risk of lynch mobs!

[August1991]

The sooner the better. I think a slow grind will only leave more people behind and result in more time for resentment and social unrest to build. If everyone is in the same boat at the same time however, the shared pain might lead to a more humane solution.

Sadly eraises yeball, it appears to be envy that motivates your comment. Envy is the great destroyer of originality and creation. You want to bring everyone better than you down to your level. How sad.

But what if the rest of the world, envious, were to bring Canadians down to their level? eyeball, you are among the top 10% richest people in the world. What would it accomplish if we took away your toilet, running water and electricity and made you live in a shack? Would that make for a more "humane world"? Eyeball, yours is the logic of Pol Pot and Stalinism.

----

BTW, I read the (short) NP article and I think a simple point was ignored. Imagine that you pay your local gas station by personal cheque. Now, does it matter if the gas station raises the price if it never cashes your cheques? In many ways, that is the current world situation.

A high world price for oil may provoke a recession but not in the way you imply.

-----

Predicting the future price of oil is a game for the strong-willed. I note that it's gone from about $95/barrel to $140 in the past six months. What real world changes justify such an increase? At the same time, at $140, alot of older wells become profitable again, alot of exploration is justified, alot of consumption patterns change and alot of alternatives become interesting. IOW, markets - like life in general - are all about incentives.

There may be some other solutions that we haven't yet conceived but they aren't likely for a long time. We have a pretty good grasp right now on what science and technology can offer, at least for the next few decades.

I have this strong suspicion that some social engineers with little or no technical background are manipulating things, with a blind belief that the pain will force attention towards alternatives that while they themselves have no comprehension about, they are sure that the tech boys will be able to deliver.

I too don't believe that "technology" is a deus ex machina but necessity is the mother of invention. Between "social" engineers and "real" engineers, I tend to listen to the social engineers. Our world is human.

[Wild Bill]

I too don't believe that "technology" is a deus ex machina but necessity is the mother of invention. Between "social" engineers and "real" engineers, I tend to listen to the social engineers. Our world is human.

If you prefer listening to social engineers that of course is your right.

However, if we ever happen to be out on a hike together and we come across a bridge that was designed and inspected by SOCIAL engineers, would you mind going first?

[eyeball]

Sadly eraises yeball, it appears to be envy that motivates your comment. Envy is the great destroyer of originality and creation. You want to bring everyone better than you down to your level. How sad.

No, not at all. I just think we need a solution that recognizes we're all in the same boat is all.

But what if the rest of the world, envious, were to bring Canadians down to their level? eyeball, you are among the top 10% richest people in the world. What would it accomplish if we took away your toilet, running water and electricity and made you live in a shack? Would that make for a more "humane world"?

No, it would probably only help concentrate the ownership of land into the hands of the banks. Up to 25% of some neighbourhoods are now owned by the banks that foreclosed on them.

Eyeball, yours is the logic of Pol Pot and Stalinism.

I doubt that's what you said when Bear Stearns was bailed out. By the way I wonder how many people they've forclosed since then?

BTW, I read the (short) NP article and I think a simple point was ignored. Imagine that you pay your local gas station by personal cheque. Now, does it matter if the gas station raises the price if it never cashes your cheques? In many ways, that is the current world situation.

A high world price for oil may provoke a recession but not in the way you imply.

What do you think it implies?

In the US right now forclosures are happening at rate of something like 11000 per week. The article's opening sentence warns that the global economy could collapse so who knows what the rate of forclosures will be in that case. What indeed will be accomplished if millions of people are living on streets that are lined with empty houses? Disease will certainly increase given that all the toilets and running water are owned by the banks.

Wild Bill wrote

I have this strong suspicion that some social engineers with little or no technical background are manipulating things, with a blind belief that the pain will force attention towards alternatives that while they themselves have no comprehension about, they are sure that the tech boys will be able to deliver.

I share a similar belief about economic engineers. They are just as divorced from reality and just as certain their prescriptions for the economy will deliver.

[bush_cheney2004]

In the US right now forclosures are happening at rate of something like 11000 per week. The article's opening sentence warns that the global economy could collapse so who knows what the rate of forclosures will be in that case. What indeed will be accomplished if millions of people are living on streets that are lined with empty houses? Disease will certainly increase given that all the toilets and running water are owned by the banks.

Ahem...that's the beauty of market based economies....forclosed properties will be purchased just as before, often at a lower price. "Millions of people" will go back to living wherever they did before. "Disease" will be unchanged. Life goes on.....

[Pliny]

"Technological innovation"? Just what does that mean?

I'm a "techie" type of guy and find your use of that term to be kinda vague. If you're talking about accelerating the numbers of hybrids and high efficiency diesel cars on the road, I would agree. The trouble is, that's not where we see all the pain.

The accent should be on "stimulate". I could also add "accelerate". I can't predict what is out there. Man, after all, wasn't meant to fly. You can be a "techie" and on top of the latest but what can come out of left field is anybody's guess.

There are lots of things that don't get to see the light of day because of fixed concepts as well. I cite the discovery of heliobactar pylori and the fact it was ignored by the medical establishment, and I have to include governments with socialized medicine here, for ten years before it was even considered for experimentation and proper peer review. Heliobactar pylori was the cause of 90% of people's stomach ulcers. Twelve years after the discovery the treatment was approved and "acid blockers", formerly available by prescription only, became available over the counter - no longer as an expensive drug for the management of a medical condition but as a cheap and simple stomach acid reducer.

I don't doubt you are on top of things technically but as I say who knows what's in the works. Most inventors like to keep their work private, at least until a patent is pending.

Edited July 2, 2008 by Pliny

[Wild Bill]

The accent should be on "stimulate". I could also add "accelerate". I can't predict what is out there. Man, after all, wasn't meant to fly. You can be a "techie" and on top of the latest but what can come out of left field is anybody's guess.

There are lots of things that don't get to see the light of day because of fixed concepts as well. I cite the discovery of heliobactar pylori and the fact it was ignored by the medical establishment, and I have to include governments with socialized medicine here, for ten years before it was even considered for experimentation and proper peer review. Heliobactar pylori was the cause of 90% of people's stomach ulcers. Twelve years after the discovery the treatment was approved and "acid blockers", formerly available by prescription only, became available over the counter - no longer as an expensive drug for the management of a medical condition but as a cheap and simple stomach acid reducer.

I don't doubt you are on top of things technically but as I say who knows what's in the works. Most inventors like to keep their work private, at least until a patent is pending.

Quite right, it's impossible to predict what comes out of the blue with certainty. However, the more we are educated the better we can be at the difference between a thoughtful prediction and a wild-assed guess! My point is that many of those asking to manipulate our tax spending, environmental laws and whatnot have little or no education in the technical details of what they are seeking to control. Saying we may have a pleasant surprise out of left field is one thing as an observation but quite another as a basis for government policy! I submit that most environmentalists and politicians are just too ignorant of how science and technology works to take it for granted that under pressure it will produce ANY desired product or result! A poli-sci major is unlikely to understand Newton's Third Law but he can be a genius at plying political pressure.

And again, it's one thing to come up with a new way to reduce the energy bill for a home but it's still likely to be far more cost-effective for a new build than a retrofit.

Counting on artificially raising energy prices with taxes in order to FORCE a new technological breakthrough is more like taking your month's wages and buying lottery tickets than a sensible strategy to "save the planet"!

[Pliny]

Quite right, it's impossible to predict what comes out of the blue with certainty. However, the more we are educated the better we can be at the difference between a thoughtful prediction and a wild-assed guess! My point is that many of those asking to manipulate our tax spending, environmental laws and whatnot have little or no education in the technical details of what they are seeking to control. Saying we may have a pleasant surprise out of left field is one thing as an observation but quite another as a basis for government policy! I submit that most environmentalists and politicians are just too ignorant of how science and technology works to take it for granted that under pressure it will produce ANY desired product or result! A poli-sci major is unlikely to understand Newton's Third Law but he can be a genius at plying political pressure.

And again, it's one thing to come up with a new way to reduce the energy bill for a home but it's still likely to be far more cost-effective for a new build than a retrofit.

Counting on artificially raising energy prices with taxes in order to FORCE a new technological breakthrough is more like taking your month's wages and buying lottery tickets than a sensible strategy to "save the planet"!

Couldn't agree with you more on the economic and social engineering aspect of attempting to save the planet!

Something could come out of the blue and rival the importance of the invention of the wheel.

[GostHacked]

Wild Bill.

Right now if you google up some suppliers of wind and solar equipment to get your house "off grid" you'll find you're talking around $30,000. That's a lot of money to pony up! Even at today's energy prices it might take decades to reach break-even.

Well buying a car today is costing just as much or more. Here in Canada, prices are 20-30 grand for a decent vehicle. So invest in a money sucking car, or invest in the future profit your home can garner. Gotta think ahead.

BTW, I read the (short) NP article and I think a simple point was ignored. Imagine that you pay your local gas station by personal cheque. Now, does it matter if the gas station raises the price if it never cashes your cheques? In many ways, that is the current world situation.

A high world price for oil may provoke a recession but not in the way you imply

This does not make any sense to me at all.

I had predicted in another thread here, that it would reach 200 by next year.... that might be sooner!!

[Wild Bill]

Wild Bill.

Well buying a car today is costing just as much or more. Here in Canada, prices are 20-30 grand for a decent vehicle. So invest in a money sucking car, or invest in the future profit your home can garner. Gotta think ahead.

This does not make any sense to me at all.

I had predicted in another thread here, that it would reach 200 by next year.... that might be sooner!!

Actually, if I were younger your idea would have more appeal. I'm not sure if right now I would live long enough to make a profit on $30k to go off grid. However, if I were 30 again it might make more sense. In 20 or 30 years to reach payback who knows if I'll be still alive?

Even so, I need my van and have no other alternatives. Public transit would be totally inappropriate for me. For heat and electricity the grid is my alternative at "convenient easy monthly payments", despite the atrocious rate. I'm not aware of any cheap financing for a solar voltaic system for my house.

[eyeball]

I submit that most environmentalists and politicians are just too ignorant of how science and technology works to take it for granted that under pressure it will produce ANY desired product or result! A poli-sci major is unlikely to understand Newton's Third Law but he can be a genius at plying political pressure.

And again, it's one thing to come up with a new way to reduce the energy bill for a home but it's still likely to be far more cost-effective for a new build than a retrofit.

Counting on artificially raising energy prices with taxes in order to FORCE a new technological breakthrough is more like taking your month's wages and buying lottery tickets than a sensible strategy to "save the planet"!

I submit I'm not a biologist, a lawyer, a scientist, a climatologist, an economist or ecologist but as a citizen of a democracy however I am expected to be an expert in electing the people who have been chosen to make important desicions that are based on what these fields of study find. I might as well consult chicken guts than count on what I've heard politicians say on the matter of what or what not to do about climate change or alternative energy. The debate amongst these decision makers seems no better organized or articulate than what you hear on most message boards these days. They're obviously as clueless as anyone else. At the moment all I have are my instincts to guide me. They're telling me that if right-wingers are against climate change polices then the policies must be a good thing. Not very scientific or rational but what else am I supposed to go on?

We have central banks and supreme courts to deal with the economic and legal questions that lay-people simply can't be entrusted with. Perhaps a similar technocratic executive-like approach should be used to make the educated scientific decisions that neither politicians nor the people who elect them are qualified to make. I have no objection to using a peer-review board or supreme court-like panel of scientifically educated people to make the sort of binding decisons that judges and central bank governors make. Surely this could be done within the same constitutional framework of checks and balances that govern judges and central bank govenors. In any case it would be nice if we could just get on with whatever has to be done so we can move on to other things.

Edited July 3, 2008 by eyeball

[Wilber]

Actually, if I were younger your idea would have more appeal. I'm not sure if right now I would live long enough to make a profit on $30k to go off grid. However, if I were 30 again it might make more sense. In 20 or 30 years to reach payback who knows if I'll be still alive?

That's the way I look at a lot of this. To convert my home to geothermal heating would cost so much that even if it saved me a thousand a year, I would probably be in my mid nineties before I broke even. Not going to happen unless the systems get much less expensive.

[White Doors]

That's the way I look at a lot of this. To convert my home to geothermal heating would cost so much that even if it saved me a thousand a year, I would probably be in my mid nineties before I broke even. Not going to happen unless the systems get much less expensive.

Yes, but the payments you make on the investment is an asset in yoru home and ups the resale value. The payments to the power company are neither.

[Wilber]

Yes, but the payments you make on the investment is an asset in yoru home and ups the resale value. The payments to the power company are neither.

Possibly but not necessarily, some renovations return more on investment than others. Kitchens are number still number one as far as I know. As I probably won't be living in my present home for more than another five years, return on investment will be a primary consideration for any renovation I may make.

[Pliny]

Just passing by to gloat. Gas prices seem to be going down. Hmmm...

Another reason that I didin't mention is that at the high prices all the suppliers want to get on board to see some bigger profits. Well, that supply becomes greater than demand after awhile and the price goes down.

What say ghost hacked...still wagging your finger at $200/barrel.....sooner rather than later?