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Thread summary:

Oil future: energy supply, market, loan, credit card, debt.

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Old 02-02-2008, 02:51 PM
 
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Since a new thread was requested, here it is.

There's been an argument that the supply of oil will not keep up with demand. This will ensure that oil prices, and other types of energy prices will remain very high, and will never go down, or will not go down much.

This arguement is based on the assumption that there is a dependence on oil, and the demand for oil will grow indefinitely regardless of price.

I believe that those who give this argument underestimate the force of the market, a force that should be compared to that of the weather.

Let's start with a driver of prices, jobs:

Job growth has slowed, and recently begun to deminish. It should be understood that the growth of wages has deminished when compared to inflation. Considering inflation is now beginning to increase while wages and job growth are not, and the economy is also slowing, it doesn't bode well for oil prices. Also consider that energy and house prices are not included in inflation.

Housing:

Never, in the history of this nation, has housing grown in price as much as it has over the past 8 years. When you consider that wages have not grown in real value, the almost doubling in housing prices was not sustainable. This is going to bring about the most spectulalor crash in housing values since The Great Depression. Housing values could go down anywhere from 15 percent to 40 percent over the next two to three years, bringing negative equity to many homes.

Credit cards:

In order to cope with the increasing cost of housing, energy, and food prices, house holds have resorted to using credit cards to grow their ability to spend. This has caused a very false sense of wealth for households, and really brought about the current demand in products/energy/etc. When many of these cards are cut, or go into default, the ability for households to spend as much will go down severely, as it ought to.

Fed rates:

If jobs diminish, and banks cut lending, and inflation continues to go up, the feds will be forced to increase the fed rates by the end of the year. This will further constrict spending/borrowing, and make it more expensive, and make the benefit of saving much more attractive.

Overseas:

China, India, and the Middle East are profiting from this run up in credit. Yet the two areas that are creating this profit are Europe and the United States, and it will be discovered that once these customers stop spending nearly as much, there will not be enough customers to sell their goods and services to. They will suffer similar effects to their economy as Europe and the United States will suffer.

Innovation:

It should not be forgotten that market forces will force companies to bring forth innovation. Nothing forces companies to change the way the serve products to customers then sheer pain. As companies like Ford and GM compete with the global car market, they will be forced to spend R&D on developing new ways of developing cars.

The government or private sector will also find that roadways are no longer sufficient to be solely depended on for transportation, so there will be new developments in transit systems that allow for commuters to get to their jobs conveniently, reliably, and affordably.

These infrustructural changes will take a long time, and their effects will certainly take 5 years to really begin to see, and 20 to 30 years to see the full effects, but if well planned, will make oil a horrible long term investment.

Nuclear plants:

These are becoming in vogue, and will make dependenance on electricity more possible, and keep it relatively affordable.

The overall effect:

All of this is going to bring about a decline in the price of oil. It's going to be a painful process, and the economy will certainly struggle through this. But oil will peak, and go down in both demand and price, as in the long term lifestyles change.

I'd love to hear some counterarguments.
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Old 02-02-2008, 04:22 PM
 
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we kind of banterd back and forth our feelings in the other thread and nobody ever knows how things play out, but my best guess is slight rollback to 50-70 range if we slow down alot and then ZOOM, 100-125.00 DURING THE RECOVERY or higher. we all like to think lots of solutions are on the horizon but here we are 40 years after i sat on the gas lines and nothings changed.
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Old 02-02-2008, 04:57 PM
 
Location: Scranton
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Can't really argue with what you say. I'm not in the field of oil or economics, but I am a consumer.

The Auto Company's have already begun. All the majors currently have whole classes of flex fuel and Hy brids.

If wages don't begin to keep pace with inflation than that is trouble in many ways. I think part of this $300 bone that W has thrown us, is just to keep the dogs from jumping the fence.

It seems to me that ethanol is being kept away from the prime market here in the US. Oil company's in the NE, and East Coast have not bought in. They own the gas stations and blending stations on the east coast. Hard to find an E-85 pump on the east coast. Hard not to find one in the Mid-West. Ethanol prices are actually at lows due to oversupply. New plants are being put on hold for this reason, and because of the shortage of chemicals to run them. I do believe ethanol will be the transition that will help get us to the next link in the energy chain. Brazil has proved that it can be done. We have also, but never committed. Why should we send our kids to fight in the middle east to defend oil, when we can keep them at home and create jobs with ethanol. It's not the cure all, but it will definitely help.

Nuclear Energy is a must. We are now at the mercy of science to make it safe, and make it cheap. Accept this.

Housing went through similar highs before. In the 80's prices skyrocketed, and in the 90's they plummeted. This is cyclical, and I am not going to pretend to be able to predict it. The history that I have seen in 50 years, is that it goes up and down. I am still here.

North America and Europe will always be large consumer markets for China and any other developing industrialized countrys. I hear allot of fear mongering about who owns our debt, but once they begin to buy in, they must help maintain the economy, if for nothing but their own profit. That is the best incentive. They loose, if we don't pay.

If oil supply is on the decline, than we have no choice, we have to adapt. I think we are still one of the worlds leading producers. And we will continue to be that, and the leading consumer for a long time to come.
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Old 02-02-2008, 05:17 PM
 
276 posts, read 627,852 times
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Quote:
Originally Posted by mathjak107 View Post
we kind of banterd back and forth our feelings in the other thread and nobody ever knows how things play out, but my best guess is slight rollback to 50-70 range if we slow down alot and then ZOOM, 100-125.00 DURING THE RECOVERY or higher. we all like to think lots of solutions are on the horizon but here we are 40 years after i sat on the gas lines and nothings changed.
I'm not so sure. I think the next few years are going to be a spectutular recession, and during that time, many will learn alternative ways of conducting business without depending on oil. Folks will be able to enjoy fewer things, and when that happens, it will take awhile for consumerism to come back to the economy.
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Old 02-02-2008, 05:38 PM
 
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They had a special on the History Channel the other evening about how we we eventuallly run out of oil and need to start thinking of other methods of cars and transportation. As China and India get more cars on their roads, it will use up more oil consumption faster and we will need alternative solutions. This program got me thinking about how I am going to heat my next house.

Frankly, I do not know why we haven't thought of other ways before this so that we can stop depending on the Middle East for oil/fuel.

Housing, I agree. It's a pendulum and right now I think we are heading into a recession.
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Old 02-02-2008, 06:01 PM
 
Location: Northern Wayne Co, PA
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I love your idea about the result of this being that people will learn to live with less and business will need to get creative about figuring out ways to avoid excess consumption.

Actually, I work remotely for my company, and the trend is getting huge. Companies don't even want the overhead of office space if they can avoid it. And, then I don't need to drive work, saving more oil.

For as depressing as this topic is to think about, if it creates a massive consciousness shift where people move away from the age of consumerism, it is a blessing in disguise!
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Old 02-02-2008, 06:09 PM
 
Location: Northern Wayne Co, PA
620 posts, read 1,905,539 times
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Hi Hat, It is amazing how it has gotten this far without any real developments on the alterna energy front, isn't it? My own feeling tends toward global conspiracy on the part of the power elite who own these multinational corporation profiteering at our expense. For as wild as it sounds, it's the only thing that can explain it in my mind.

There are a lot of amazing scientists working on fascinating energy experiments. Why their research does not receive more funding blows my mind. If we had put all the Iraq war money behind renewable energy instead, imagine what our Now could've been like, instead we have a serious recession and countless hard-working people who can not even afford to heat their homes this winter.
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Old 02-02-2008, 07:18 PM
 
276 posts, read 627,852 times
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Quote:
Originally Posted by MermanMike View Post
I love your idea about the result of this being that people will learn to live with less and business will need to get creative about figuring out ways to avoid excess consumption.

Actually, I work remotely for my company, and the trend is getting huge. Companies don't even want the overhead of office space if they can avoid it. And, then I don't need to drive work, saving more oil.

For as depressing as this topic is to think about, if it creates a massive consciousness shift where people move away from the age of consumerism, it is a blessing in disguise!
It's partly depressing, yet as with many things, it's not ALL bad. There's an opportunity for folks to simplify their lives a little, and enjoy the world around them more. Perhaps folks won't take so much for granted.
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Old 02-02-2008, 09:50 PM
 
Location: Wake Forest
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Interesting read businez guy! Only counters I would have is that the price of oil is based on the US dollar. As the dollar plummets against other world currencies the price of oil MUST increase irregardless of Demand/Supply factors. The real pain will be felt once the US Dollar is no longer the defacto standard for the buying and selling of oil around the world. Demand will drop with the world economies but that will only drive up the cost. Less produced oil means higher cost of what is produced. Many oil rich countries are use to the lavish life styles oil has brought them so they will want to maintain that life style through higher prices if demand drops. Oil is hovering around $90 per barrel which is all time highs now because the dollar is at all time lows against world currencies. There is a direct relationship of the two irregardless of the Demand / Supply factors.

The other area is with credit cards and housing. The Federal Government is pumping billions of dollars of liquidity in to the US banks so they can loan more money. Consumer spending accounts for over 70% of the US economy. If people don't pay on credit we don't have an economy, simple as that. So when we all get the economy bailout checks later this year, ask yourself where that money came from?? Does the US Gov really have the means to back those checks up????? Our kids and grand kids will find out as our grand fathers and great grandfather found out in 1929. History has a way of repeating itself. The similarities between the events that lead up to the great depression in this country to the events happening right now is scary. Consumers over extended in housing, credit, and stocks. Just what you see now. So will it be 2009 that will be the next 1929???? Time will tell.
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Old 02-02-2008, 11:01 PM
 
276 posts, read 627,852 times
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Quote:
Originally Posted by dansdrive View Post
Interesting read businez guy! Only counters I would have is that the price of oil is based on the US dollar. As the dollar plummets against other world currencies the price of oil MUST increase irregardless of Demand/Supply factors. The real pain will be felt once the US Dollar is no longer the defacto standard for the buying and selling of oil around the world. Demand will drop with the world economies but that will only drive up the cost. Less produced oil means higher cost of what is produced. Many oil rich countries are use to the lavish life styles oil has brought them so they will want to maintain that life style through higher prices if demand drops. Oil is hovering around $90 per barrel which is all time highs now because the dollar is at all time lows against world currencies. There is a direct relationship of the two irregardless of the Demand / Supply factors.

The other area is with credit cards and housing. The Federal Government is pumping billions of dollars of liquidity in to the US banks so they can loan more money. Consumer spending accounts for over 70% of the US economy. If people don't pay on credit we don't have an economy, simple as that. So when we all get the economy bailout checks later this year, ask yourself where that money came from?? Does the US Gov really have the means to back those checks up????? Our kids and grand kids will find out as our grand fathers and great grandfather found out in 1929. History has a way of repeating itself. The similarities between the events that lead up to the great depression in this country to the events happening right now is scary. Consumers over extended in housing, credit, and stocks. Just what you see now. So will it be 2009 that will be the next 1929???? Time will tell.
We'd still have an economy, it's just that a few things would happen. First, the fed can't keep rates low like this when we have a problem with the cost of fuel like we do, and inflation is getting so bad. They will eventually have to raise rates and hike up interest rates.

For the next few years I'd imagine we will NOT have much of an economy. However, you can't forget that the value of other currencies will go down also relative to the dollar, this isn't just a one way thing.
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