Peek oil is back!

[GRG55]

Re: Peek oil is back!

...Rather than a minor geopolitical blip the conflict is a transition from cold war into a hot war that permanently reshapes the global energy picture.

Excerpt from an email I sent to someone earlier tonight:

"...I remember back circa 2005/06, a time of particularly frequent violence in Iraq in the aftermath of Gulf War 2. I was shuttling regularly between London and the Persian Gulf, and was on a British Airways flight one night that winter. The plane flew down the length of Iraq before reaching the head of the Gulf and starting the descent into Manama, Kingdom of Bahrain. It was an unusual crystal clear night and I could see the lights of Baghdad reflected in the waters of the Tigris River, and had no difficulty picking out Al Falujah, Karbala and An Najaf to the west. I can vividly recall my thinking about the contrast of being aloft in a marvelous creation of collaborative human ingenuity, a Boeing 747, the peaceful appearance of the jewel like glow of human settlements against the black of the desert, and the horror of the daily killings in those same settlements all to avenge some historical grievance in a futile effort to restore honor.

Given the present lack of a competent military presence in the region (USA and international naval forces notwithstanding), we may be in the early stages of the most significant redrawing of the map/borders in the Middle East since the end of the Ottomans a century ago."

[coolhand]

Re: Peek oil is back!

Indeed, but after the oil price spike that triggers the recession that causes the collapse in global oil demand that then results in lower prices.

Unless the Fed crashes the economy before that and we get a recession without an oil price spike (low probability).

More likely the simmering crisis in the sandbox explodes into a fresh conflict that produces a long-lasting versus temporary interruption in oil supplies and gives us an oil price spike that triggers a recession but unlike previous episodes the matter is not quickly resolved.

Rather than a minor geopolitical blip the conflict is a transition from cold war into a hot war that permanently reshapes the global energy picture.

So if we get an oil spike and then a recession with rates at 0% and the Fed's balance sheet at $4.4T or 25% of GDP, what do they do? Negative rates? Do they take QE up to 50% of GDP since aggregate debt levels are now back to & beyond prior 07 highs, with many of the "bad behaviors" coming back (cov-lite, etc.)?

More importantly, will our creditors allow us to do so? Unlike all prior recessions in history, they have an alternative trade system (yuan/euro & yuan/xxxx swaps) and settlement system (physical gold exchanges in Shanghai, Moscow, Dubai, London, Singapore, S. Korea) ready to go.

Do we really think they will stand idly by and allow the Fed to export energy and food inflation into their countries again to paper over US bad behavior & structural problems in the global currency system? Or will they simply switch to their new system, cut out the dollar and turn the Fed's liquidity hoses back at the US, leading to the "Poom" EJ has long looked for here, as the USD finally loses petrodollar status to gold.

In short - the actions of the last 5 months suggest foreign nations have NO interest in allowing the dollar to remain GAGFO much longer; if the US has another recession that the Fed stimulates into, I think it is not only possible but likely that we will get an oil spike, followed by an even greater oil spike as the dollar's "exorbitant privilege" is removed.

Ironically, this is the only way US oil production can increase much from here it seems (Monterrey Shale?)...

[lektrode]

Re: Peek oil is back!

......
In short - the actions of the last 5 months suggest foreign nations have NO interest in allowing the dollar to remain GAGFO much longer; if the US has another recession that the Fed stimulates into, I think it is not only possible but likely that we will get an oil spike, followed by an even greater oil spike as the dollar's "exorbitant privilege" is removed.

Ironically, this is the only way US oil production can increase much from here it seems (Monterrey Shale?)...

yeah, would guess that 200bux/barrel would make all sorts of pigs fly....
;)

California is thought to hold 4x the amount of shale gas reserves than in the North Dakota Bakken region. The only problem is environmental regulation and time frame limiting the extraction process (fracking). Highlighted in the green regions below are the major basins with carbon sequestration potential.

[Mega]

Re: Peek oil is back!

..............& good luck at getting it!
Mega

[Mega]

Re: Peek oil is back!

So when are we to see Judgement Day?
Mike