Temporary Recession or the End of Growth?

[snakela]

Re: Temporary Recession or the End of Growth?

'Reduce Consumption : Produce Locally'

yeh, we'll grow avocados and oranges here in new hampshire. duh.

That makes me think of the hippies that sell stunted tomato and herb plants at the local farmers market out of old beater cars. Driving a shit-box van 20 miles to unload 10 plants is better than 20,000 of the same thing coming from 1000 miles away via semi-truck or rail? Ya right.

Then there's the opportunity cost of manually harvesting food? Geesh oil is going to have to be rarer than gold to make something so stone-aged economically optimal.

We've got the FIRE economy on one side trying turn us into debt slaves in exchange for shiny gadgets on one side and aging hippies trying to turn us into starving serfs in exchange for a good conscience on the other.

[mooncliff]

Re: Temporary Recession or the End of Growth?

Admittedly it was a quick read but I didn't see any support for such statements as, "during the period from 2005 to 2008 energy stopped growing..." Maybe it's true but he should site his source(s). Also, he should be more clear with his language, does he mean energy production or use or both?

I think he is referring to what this graph shows.


http://www.ecosilly.com/wp-content/p...st20090515.png


What is most amazing is that the IEA had been making forecasts for decades BUT DID NOT ACTUALLY AUDIT THE 800 LARGEST FIELDS IN THE WORLD... In 2007, they conducted for the first time an audit of the 800 largest fields, and said "Oh, oh..."

See this interview.

http://www.guardian.co.uk/business/2...eak-energy-iea

[WildspitzE]

Re: Temporary Recession or the End of Growth?

Gas prices what, doubled? Say I commute 30 miles a day to work and get 18mpg. 433 gallons a year. This guy is trying to say $2 gas going to $4 gas, or an extra ~$900/year broke my budget and collapsed the house of cards? Or was it more likely my teaser mortgage payment going from $1100/mo to $2500/mo??

Hopefully he didn't just limit it to that example, short of using it as an analogy of how the increased oil cost affected the consumer.

I haven't read the article yet, but I would hope that the guy understands that an increased cost of oil will not only affect the consumer's retail gas bill -- it affects everything: from corporate earnings to the cost of food.

Our systemic requirements for energy dependent growth (mostly because of debt) actually make cost-push inflation relevant for energy costs.

[Morgasbord]

Re: Temporary Recession or the End of Growth?

Hopefully he didn't just limit it to that example, short of using it as an analogy of how the increased oil cost affected the consumer.

I haven't read the article yet, but I would hope that the guy understands that an increased cost of oil will not only affect the consumer's retail gas bill -- it affects everything: from corporate earnings to the cost of food.

Our systemic requirements for energy dependent growth (mostly because of debt) actually make cost-push inflation relevant for energy costs.

That was my own simple analogy, not his. And yes, it is more complicated, as energy cost will cause cost-push inflation in many areas. I was trying to express the relative effect of energy cost inflation versus the effect of stupid financial decisions, with my comparison of rising gas vs. the massive increase after a mortgage reset.

The peak oil community doesn't get the value of the dollar vs oil. They are saying "See! We told you peak oil would raise the price of everything and crash the economy!" They are right, but for the wrong reasons. Oil is priced in dollars; if you expand credit and devalue the dollar, such as the Fed did after the dot-com crash, the oil price will "go up", but so will stocks, and all other commodities, and nearly everything else priced in dollars, which we also saw in the past few years. I don't buy the idea that peak oil popped the housing bubble, led to Lehman collapse, etc; that was inevitable with or without rising energy costs. I don't think their party has started yet.

[santafe2]

Re: Temporary Recession or the End of Growth?

The peak oil community doesn't get the value of the dollar vs oil. They are saying "See! We told you peak oil would raise the price of everything and crash the economy!" They are right, but for the wrong reasons. Oil is priced in dollars; if you expand credit and devalue the dollar, such as the Fed did after the dot-com crash, the oil price will "go up", but so will stocks, and all other commodities, and nearly everything else priced in dollars, which we also saw in the past few years. I don't buy the idea that peak oil popped the housing bubble, led to Lehman collapse, etc; that was inevitable with or without rising energy costs. I don't think their party has started yet.

There is some substance to your argument but we should be clear with regard to US$ impact on the peak cost of oil in July of 2008. While the dollar did move down about 16% from January of 2007 to July 2008, the cost of a barrel of oil almost tripled, ($52 to $147).

The author also noted that "energy" had peaked in 2005. Another poster here sited a chart showing a peak in oil production in 2005. I'm sure GRG will know if this is correct but for now we at least know that the cost of oil moved up after considering the fall in US$ value, about 2.5X in 18 months.

It may be difficult to tie the financial collapse directly to the peak cost of oil in mid summer 2008, but it's likely more dangerous to assume that the financial collapse was only coincident and bore no causal relationship.

You should make sure you read EJ's articles on peak cheap oil to gain a more clear understanding of the iTulip thesis regarding energy costs and economic impact.

The next time oil moves up to the $120-$200 range, we'll be able to watch the impact in real time and we'll all be much more clear about how much our economic structure requires cheap oil.

[tacito]

Re: Temporary Recession or the End of Growth?

I don't think their party has started yet.

There is an economic professor in Spain (Santiago Niño Becerra) who thinks that the party started 15 years ago. His theory is that we woudn't have had the economic growth of the last 15 years without the serial bubbles created by the Fed. (If I'm not mistaken, I think that i-Tulip would agree with that assertion since the 2000's crisis, more maybe not).

You don't need to have peak oil to have an oil crisis. It's enough to have a growing oil production (pre peak) that has a growth rate clearly lower that the growth rate of the global economy. With that interpretation, the current crisis is the crash of a credit bubble, but the credit bubble was the only way that the system had to continue with bussiness as usual. And the system took the path of least resistance, starting with the changes in the reserve requirements from the 1990's.

Not that I'm 100% convinced by that theory. I just bring it here as another point of view on the subject.

[Morgasbord]

Re: Temporary Recession or the End of Growth?

I've attached a chart that many have probably already seen, showing the price of oil in dollars vs. the price oil oil in gold. What it attempts to show is that oil hasn't gone up in "real" terms yet compared to other "real" commodities.



Santa Fe has a point that a 16% reduction in dollar value doesn't fully explain a near tripling in oil price. But people will not sit still and watch their dollars lose value; they will react. I think it's a combination of reduced dollar value, oil output not meeting demand, either because of peak oil, and/or oil producers' unwillingness to blow more real goods after less valuable paper (there is a quote of a Saudi minister saying as much, but I can't find it), smart money overreacting to dollar devaluing, etc, and just the shear amount of easy-credit dollars floating around looking to park somewhere. When the purple line in the above chart starts to go up with the others, then I think peak oil cost-push is upon us.

There is an interesting point in Heinberg's article - the idea that the economy will grow then pull back as energy cost puts a "ceiling" on the growth, but after each "contraction", the floor price of energy will be higher. EJ had posted a chart at one point diagramming this, but it's from his next book or something so he contractually can't fully explain it. Shame.
It seems like this pattern would be the 'natural' tendency of the economy moving forward as peak oil is exherted, but! The financial oligarchs are still in control. What shenanigans will they pull moving forward? Will it obscure, damper, or magnify that tendency?

[labasta]

Re: Temporary Recession or the End of Growth?

Your loss.....

Somehow I doubt it.

A very brief skim read seemed to sum it up as "it wasn't the credit crises really, it was peak oil that caused the depression"


No?


He tries and lists a million separate pieces of correlating evidence as his case in point?

I was wondering why they peak oilers took so long at trying to take credit for the depression. Maybe gathering lots of "evidence" takes a long time. I expected them to bleat about in September 2008.


Price has nothing to do with scarcity as far as oil is concerned IMO. The product is too inelastic.

If the world had been oil-rationed or oil was at $5000 a barrel, then I would have changed my tune.

As someone has already said, the increase in the oil price marginally put up diesel prices here in Europe from 1 Euro a litre to what... 1.40? I don't think it threatened globalisation much. The global cashflow imbalance just started its re-balancing phase (which the PTB are desperately trying to put back).

Nice try though. A bit of a waste of effort perhaps.

[tacito]

Re: Temporary Recession or the End of Growth?

Most "real" commodities need lots of oil to be obtained: mining is oil intensive and so is agrifood. So I would expect prices of real commodities to grow in price along oil. Gold is different because, even if mining gold is oil intensive, most gold is already mined. However, gold is at the same time a commodity usefull for making jewels and an store of value. The role of store of value has been increasing while fiat money has been inflating, so there is a bull market in gold. That too could explain the flat price of oil in gold.

The "commodity" that I would expect to fall in price against oil is human work, because oil limits the total size of the economy but population is still growing, and educated workforce is growing too, thanks to education advances in the BRIC countries. I don't have a chart, but I think that that is what has been happening: real purchasing power going down and being replaced by credit (at least purchasing power for non discretionary items).

So I think that this chart is compatable with a crisis generated by a near peak oil. I cannot prove that that's the case, however.

[santafe2]

Re: Temporary Recession or the End of Growth?

When the purple line in the above chart starts to go up with the others, then I think peak oil cost-push is upon us.

Seven posts in almost 2 years, you should take the time to post more, we'd all benefit. It's possible with more support and the naming of a trigger point your idea could be stated as a thesis. Such as: When an ounce of gold purchases less than 10 barrels of oil for 3 consecutive years, the era of peak oil has arrived. Or a contrary thesis: When an ounce of gold buys less than 10 barrels of oil the economy will be sufficiently stressed where the price of oil will drop.

With more thought, these two ideas can be combined and certainly others added but I'll leave that to members with more time.

Here's a couple of charts that illustrate oil cost in US$ and gold.
goldandoil.jpg

[santafe2]

Re: Temporary Recession or the End of Growth?

The "commodity" that I would expect to fall in price against oil is human work, because oil limits the total size of the economy but population is still growing...

Great observation, thanks. You can bet there are no politicians bringing this up. This observation begs a more far reaching observation and that is that the value of humans in general will be falling as the world economy stagnates and population continues to rise.

[santafe2]

Re: Temporary Recession or the End of Growth?

After reading this article more completely I find it very similar to a GATA, (gold conspiracy site), style article where the writer is completely convinced his thesis is correct and interprets all evidence as supporting his thesis.

As always happens with this style of writing, the author is all over the place from paragraph to paragraph, moving from peak oil which he spends little time attempting to prove to real estate, the auto industry, finance, debt, market based solutions - (to the problem he's not proved), an attack on economics, over population, etc., etc.

I'm not saying this article isn't an interesting read. His idea that we shouldn't save the banks because we don't need them now that our economy isn't going to grow is certainly provocative but he offers no proof.

He sees conspiracies everywhere. Homes are not built with too little insulation because there's no market for them yet, it's because of "established interests in the construction industry".

But after all of this rambling and causal dart-boarding his conclusion is one many of us at iTulip will agree with: There will be no full economic recovery. It just seemed like an odd path to get to that conclusion.

For a better read:
I was fortunate to read a post by Stockman on the "Have we had enough of Peak Oil yet?" thread that details the rise in speculation and the use of derivatives in oil futures trading. It makes a reasonable case for re-regulating the oil futures market. If interested, you can read that article here:

http://www.bakerinstitute.org/public...ket-082609.pdf

[mooncliff]

Re: Temporary Recession or the End of Growth?

I think the main point is that the IEA never actually audited the largest oil fields, but made rosy forecasts for decades. When they actually audited the largest 800 fields, they suddenly said there was a problem. I never paid attention to the price of oil, only to total energy available for export, and that looks flat for the last few years. All the cheap easy to pump oil is gone, so we are now hoping we can pump from seven miles under the sea off Brazil. The US has an infrastructure that requires cheap energy to function. Of course there are huge amounts of fossil fuels remaining, but can we get it for a reasonable price? Also, every net energy importer must have someone to sell the oil on the open market. The amount of oil available on the open market is set to fall rapidly as exporters (UK, China, Mexico, etc) have lost or will lose the ability to export. The energy problems may be solved say by 2020 or so, but I think we are in for at the very least a bumpy decade... I will keep my eye on how much cheap energy is actually available for sale on the world market. If you look at that and you are dependent on imported energy, I think you will be quite disturbed.