PowerSwitch

Oil prices have risen by 8% in a week (http://news.bbc.co.uk/1/hi/business/8039672.stm) - sign of the next crisis and hyper inflation?

As soon as the stock markets go up - the price of oil follows (and actually out paces the stock markets by miles).

Not to mention, that the Sterling is now considerably weaker against the US Dollar (Petro-Dollar), and if the price of oil was to blast off again as it had done only last summer, of course we'll be in for much greater hardships.

I suppose I can now expect a barrage of replies from all those here who claim the current crisis had nothing, or next to nothing, to do with the big bang in the price of oil that had preceded it.

I've put "to a certain extent" because the situation appeared to have been set up by over-selling credit in the USA housing market rather than just oil price: then oil price rises triggered the credit crunch by catapulting lots of people who were previously "just getting by" into unpayable debt.

But it's like migraine: there's a cause (lurking in someone's metabolism) and a trigger (e.g. forgetting a meal, etc).

Papillon wrote:Oil prices have risen by 8% in a week (http://news.bbc.co.uk/1/hi/business/8039672.stm) - sign of the next crisis and hyper inflation?

I'm looking to trade the next downside in the stock market quite heavily. Oil has bounced with most markets but I'm of the view that 58/60 is about as high as it will go in this run and will fall with the main markets.
There is a lot of emotion in the market that the central planners have got this right and have saved the finaincial system from collapse. I say no , there will not be any recovery this year.
I still think in the game of rock paper scissors , I think deflation still has the upper hand.

We live in a complex, highly interconnected world ... no one single factor is likely to be key.

If oil goes back up is the US dollar likely to start sagging again?

Vortex wrote:We live in a complex, highly interconnected world ... no one single factor is likely to be key.

Completely wrong. The world runs on energy and energy alone. everything else is subject to its supply or lack of.

I agree with Vortex, the system is far too complex for a given outcome to be traced to a single input. I see where ziggy12345 is coming from and don't exactly disagree with the fundamental point - I'd just add it's more complicated than that. We tipped into recession in the year of greatest primary energy available the world has ever known.

clv101 wrote:We tipped into recession in the year of greatest primary energy available the world has ever known.

Yes, but I would claim the very high price of that primary energy source, rather than the availability of it, was a major reason in the cause of the slowdown and eventual current reccesion.

clv101 wrote:We tipped into recession in the year of greatest primary energy available the world has ever known.

When you get to the top of the hill the only way on is down.

clv101 wrote:I agree with Vortex, the system is far too complex for a given outcome to be traced to a single input. I see where ziggy12345 is coming from and don't exactly disagree with the fundamental point - I'd just add it's more complicated than that. We tipped into recession in the year of greatest primary energy available the world has ever known.

The financial system is based on an increase of supply, not its level. We could be using 3 times the power we are using now and still hit a recession if we cant make the interest payments

clv101 wrote:We tipped into recession in the year of greatest primary energy available the world has ever known.

How about per capita?

High oil prices caused inflation, which caused higher interest rates and stretched a lot of households, which caused 'sub-prime' borrowers to default on their debts, which led to the credit crunch, which caused the real economy to go tits up.

ziggy12345 wrote:

Vortex wrote:We live in a complex, highly interconnected world ... no one single factor is likely to be key.

Completely wrong. The world runs on energy and energy alone. everything else is subject to its supply or lack of.

Not completely wrong.

Certainly the end of industrial civilisation - which is more than a single event - will in hindsight (if there is anyone left to have hindsight) prove to have been due to energy shortfalls. But it is simplistic to say that the economic crisis (a single event in the EOIC) is *simply* due to high oil prices.

I think the high oil prices sent a shock to influential and knowledgeable investors who had been waiting for it for some time: they knew it signalled the end of industrial (and hence economic) growth. These investors withdrew their funds from markets predicated on high growth, and other investors - "wave riders" - followed.

That is my guess, in any case, and of course it is greatly simplified. Clearly high oil costs had a direct impact too, to some extent. And the sheer amount of leverage involved in loans has amplified the disaster, but the disaster would still have happened.

What you're conveniently forgetting are the regions of the world which will BENEFIT from high oil prices.
By my reckoning, they have between them about 400 million people.

Putting aside everything else, it will be extremely interesting simply to see what happens as the oil price goes up. Fascinating indeed.