Is the most unlikely of cavalry on its way?

andyh · Post by **andyh** » 17 May 2006, 23:16

So most of us are expecting from a supply/demand perspective that we are at/shortly will be at the peak.........

But there is an increasing chance IMO the supply/demand equation is changing/about to change more, and not perhaps as we were imminently expecting. Somewhat weirdly the Yankee consumer (who is as much to blame as most for peakoil), is perhaps about to run blindly to our temporary rescue. The US economy (and hence the world economy) has been expanding away (and demanding more oil as a result) off the back of the US consumer going on a debt filled binge, fuelled, in the last 3 years at least, off the back of the US housing bubble. That bubble is deflating as we speak - the latest figures are quite dramatic:

http://money.cnn.com/2006/05/16/news/ec ... ney_latest

Meanwhile the Fed is struggling with resurgent inflation (oil played its role there for sure), and may now be toying with more rises in rates, worsening the debt position further. Its hands are tied from responding to an incipient housing crash, and consumer retrenchment, by the existing inflation in the system. We will therefor see a marked fall off in the US economy (hell, really it ought to turn into a recession) some time in the next 12 months. I cant see why these effects wont then spread worldwide.

Result - significant demand destruction in the near term, and probably short term falls in the price of oil (once the hurricane season is over?). We may well temporarily see demand drop back from 85m barrels a day, allowing some sort of buffer to be established, at least for a year or two (as long as supply stays constant of course!).

I think this is growing possibility, so for all those worried they havent got their affairs in order - there maybe time yet! (although the incipient debt led recession wont be nice either!)

ToY · Post by **ToY** » 17 May 2006, 23:47

The BBC has reported today that Venezuela has hinted it could price its? oil exports in Euros rather than US dollars, further weakening its links to the US.

The FTSE 100 went down 170.7 points today (2.9 per cent) to 5,675.5.

The Dow Jones Industrial Average is also down (1.88%) to 11205.61.

So a ?Peak Oil? crunch might not simply be sudden high price and scarcity of fuel. It might creep in crab-like as a monetary crisis or a war that affects the globe adversely.

Something is brewing ? the next 48 hours of stock trading should be interesting.

SILVERHARP2 · Post by **SILVERHARP2** » 18 May 2006, 12:59

Interesting comments. It could be argued that we are approaching peak demand as well as peak supply. On the demand front a lot of consumption has been pulled from the future on the back of reckless credit creation by the US and Japan. Also if you look at China, rolling out a city the size of London every year is much more energy intensive then any economic activity that could be carried out there for the next 10 or 15 years, so a slowdown in china on the back of a recession in the US would have a disproportionate effect on commodities and energy in particular. On the flip side OPEC countries have a huge infrastructure deficit which might keep the party going even longer.