Why does the oil price matter

[Mega]

In the early 70's oil was $3, by the end of the 70's it was $30 (x10 price rise).......in 200 it was $25 ish......now $100 ish (x4 price rise)..........the World didn't end.

[Starving Steve]

Re: Why does the oil price matter

The pot-heads think they are going to live off of solar-energy paint, "smart-grid technology", burning dung, wood-stoves, cheap platinum-wires, rare-Earth elements, lithium on the Moon, frozen methane in deep ocean-trenches, windmills, "green-tech", pot-plants, drug-dealing, faith, hope, break-throughs, geo-thermal, tidal-power, Segways, bird habitat-preservation, new spending, trust-deeds, and appeasement of (and a love-in with) radical-Islamists.



I could add burkas, burning-garbage, and QE to this list, but I think my point is clear.

[ggirod]

Re: Why does the oil price matter

Sorry to answer your question with a long document, but the topic is complex and the link below leads to a .pdf that explains it well. In fact, the price of oil does not matter anywhere as much as the Energy Return on Investment (EROI) which is basically how much energy (or $) you need to put in to get how much energy out. The EROI for fossil fuels is experiencing an accelerating drop which, irrespective of how much supply there in fact is, will cause lots of economic pain. Now, of course, the worse the EROI, generally the higher the price of oil but the price is obvious and visible while the EROI is more subtle. To understand more, this tutorial article presents the topic rather clearly. It is one of many, but maybe the most recent.

In the early 70's oil was $3, by the end of the 70's it was $30 (x10 price rise).......in 200 it was $25 ish......now $100 ish (x4 price rise)..........the World didn't end.

The years you mention are the years when the seeds of our economic destruction were planted. As the oil price rose, so did inflation, with the obvious effects over the years. Further, when we reached our domestic Hubbert peak in the early '70s our gold started draining out of Fort Knox to the Middle East so rapidly that we had to abandon the last vestiges of a gold standard. So, the EROI, as reflected in part by the price of oil, does matter. It matters a lot.

[Blindweb]

Re: Why does the oil price matter

I'm starting to realize that even the economic writers I thought 'got' peak oil don't have the full picture, like Chris Martenson, Tyler Durden, and Charles Hugh Smith. Peak oil isn't some Great Depression sized bump in history. It is the end of industrial society, collapse of Roman Empire esque.

[c1ue]

Re: Why does the oil price matter

I'm starting to realize that even the economic writers I thought 'got' peak oil don't have the full picture, like Chris Martenson, Tyler Durden, and Charles Hugh Smith. Peak oil isn't some Great Depression sized bump in history. It is the end of industrial society, collapse of Roman Empire esque.

Well, by your definition iTulip doesn't 'get' peak oil either.

Because Peak (Cheap) Oil isn't about the end of the world.

It is about a series of economic upheavals due to rapidly fluctuating oil prices.

It isn't the end of industrial civilization though.

[Dave Stratman]

Re: Why does the oil price matter

Well, by your definition iTulip doesn't 'get' peak oil either.

Because Peak (Cheap) Oil isn't about the end of the world.

It is about a series of economic upheavals due to rapidly fluctuating oil prices.

It isn't the end of industrial civilization though.

I'm not sure whether this article should go here or start a separate thread, but it certainly illustrates a current effect of oil prices:

Food Prices 18.5% Higher than a Year Ago

Written by Gail Tverberg

Saturday, 01 January 2011 23:55

Message : Receive a Free copy of our Report: Investing in Oil and learn how to minimise your risk and maximise your profits when investing in the Oil Markets. Click here I am busy working on some bigger projects that I can’t write about yet, but I thought I would put up a little scanned in section from today’s WSJ relating to food prices. Food prices are now 18.5% higher than a year ago, and higher than when they reached their peak in 2008. High food prices are a concern, both for poorer people in the US, and for the huge number of poor people around the world. If food prices go up, many will not be able to pay for sufficient food for a well-balanced diet (assuming they could in the past). And of course, as food prices go up, people will cut back on spending on more discretionary items, since they have to eat. The current rise in prices does not look like it has hit a maximum yet. The recent run-up in oil prices may not be fully reflected in the food costs. All of this is concerning. By Gail Tverberg Gail Tverberg is a writer and speaker about energy issues. She is especially known for her work with financial issues associated with peak oil. Prior to getting involved with energy issues, Ms. Tverberg worked as an actuarial consultant. This work involved performing insurance-related analyses and forecasts. Her personal blog is ourfiniteworld.com. She is also an editor of The Oil Drum.

[Mashuri]

Re: Why does the oil price matter

When you look at the price history of oil in stable money, like gold, you'll find that one ounce would get you 10-15 barrels of crude. Right now oil is in the cheapest part of this range at ~15 barrels per ounce. Oil is still cheap.