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What a $200/Barrel World Looks Like

Discussion in 'Sports and News' started by Lugnuts, Jun 1, 2008.

  1. Lugnuts

    Lugnuts Well-Known Member

    Goldman Sachs says $200/barrel is happening in 6 to 24 months.

    Newsweek on what that will be like:


    I found the 'reversal of globalization' concept pretty wild.

    The unrest part of it is scary.

    On a thread a few weeks ago, we had a pretty good debate about whether rising oil prices is actually a good thing or not. This article argues even if you're as green as Kermit, it's NOT a good thing.
  2. dooley_womack1

    dooley_womack1 Well-Known Member

    One effect: With driving a lot becoming even more impractical, Lugnuts will have to stay home more and will start a thread in Sports and News every four minutes instead of every eight.

  3. Mizzougrad96

    Mizzougrad96 Active Member

    I still think we should invade Venezuela... :D
  4. dooley_womack1

    dooley_womack1 Well-Known Member

    Nah, too impractical. Just conquer one Citgo station at a time.
  5. Mizzougrad96

    Mizzougrad96 Active Member

    C'mon, we could take over Venezuela in six months or so and have gas for 11 cents a gallon by Xmas... :D
  6. novelist_wannabe

    novelist_wannabe Well-Known Member

    In don't know about you guys, but my world is already getting bigger. By that I mean I'm driving less. Not an altogether bad thing.
  7. Lugnuts

    Lugnuts Well-Known Member

    Somebody's got to fill the void.
  8. beefncheddar

    beefncheddar Guest

    Pretty big difference, woudn't you say?
  9. Armchair_QB

    Armchair_QB Well-Known Member

    6 to 24 months is a pretty broad time period.
  10. Inky_Wretch

    Inky_Wretch Well-Known Member

    I'm buying more canned goods and ammo.
  11. The Big Ragu

    The Big Ragu Moderator Staff Member

    Does DB write for Newsweek? That whole story isn't news. Anyone following the oil markets, the U.S. (stagnating) and worldwide economies, tracking inflation worldwide, etc. has been talking about this for more than a year. 2009 is going to be a very tough year for the U.S. VERY similar to 1979 when we got stagflation. It seems like the only thing thing that can make economic growth and inflation move together, rather than in opposite directions, is an oil shock. And an oil shock brings on the kind of inflation we are seeing with regard to other essential commodities, particularly food, which has already begun to creep up in price worldwide. It's an ugly situation. Demand for oil is not going to taper off. As Asia and South America continue to develop, the demand is going to keep increasing. India and China have billions of people and economies that are bringing them out of the stone age. And they are demanding more and more oil to keep the boom going. That has put a squeeze on our oil demands because competing demands drive up prices. OPEC smells opportunity and they are bastards. It is 1973 and 1979 all over again. They have leverage and they are going to use it. So Saudi Arabia has been limiting how much it pumps. By curtailing supply, at the same time demand is soaring, they drive the price up, and they make that much more money, even though they are supplying less. They are essentially creating a frenzy for a highly-demanded resource that they control a great deal of. And they are going to continue to do that, which is why the price is going to keep rising. In the late 70s, we had a confluence of things that really put a pall over our country. The natural economic cycle was in down mode. So we were skirting with recession no matter what. But the oil shock threw everything into turmoil. When the economy is stagnating, we have never had to deal with the inflation at the same time. Based on most of what we knew, they should be incompatible. But we had inflation and a retracting economy at the same time and we went into a death spiral. Interest rates were too high to spur investment, gas prices were killing people and this led to an inflationary environment on everyday consumer goods. That is what we are looking at right now. (Minus the high interest rates. The Fed can't continue on that path forever, though. They are playing Keystone cops right now, trying to stop an avalanche with a shovel; It is going to collapse on them unless something changes).

    The thing is, in the 70s, this wasn't enough for us to figure out how to break our dependence on oil. And we essentially found a way to spend (on credit) our way out of it, taking some of the leverage away from the oil producing countries. And once we were out of the spiral, it led to a really long period of economic growth, with a few short-term recessions (1990 or so, for example), but nothing that looked never-ending or bleak. So we remained dependent on oil. We had no reason not to. Even as the price rose over the last few years--as the developing world helped drive it up, by increasing demand--we were creating so much wealth in our economy that it wasn't a major worry. We could afford to pay more.

    But now? With economic growth stagnant and the dollar in the crapper and prices reaching a possible tipping point (although $200 a barrel is an arbitrary number. I don't know that that is the tipping point)? It's going to get ugly. And I think it is going to start to feel like 1979-80 again next year. Newsweek is just reporting this now? What other several-years-in-the-making trends that others have been commenting on for a while are they noticing?
  12. alleyallen

    alleyallen Guest

    Not to nitpick, but what does it really matter? Unless you plan on being dead or a billionaire by then.
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