Oil @ $150 dollars a barrel

[shadows]

Pickens, energy investor, predicts oil may soon reach $150 a barrel.

He says the depletion of producing wells will be sustained by the new wells at 85 million barrels daily.

Demand for oil is increasing at 1.4% or 1.19 M barrels yearly.

There are non governmental predictions that gasoline will reach near $5.00 a gallon by this fall.

$14 oil gave us gasoline under 30 cents a gallon.

30 cent a dozen eggs now $2. a dozen gave us chicken poop in our water.

Does this indicate a robust economy or runaway inflation?

 

[YoungTulsan]

Explain how the Federal Reserve's policies are at play here.

[waterboy]

I suggested here last fall that $5 gallon gasoline might be a good thing for America and as we approach that figure there are some positive outcomes emerging.

*The head of GM suddenly reverses the company mantra that electric cars, hybrids and smaller cars are not feasible. GM now is moving quickly to bring the Volt to market, which is stimulating efforts for more durable, effective battery drive systems. He was quite impressed with the Tesla performance and its pre-production sales. Now GM has spread its hybrid drives across their platform even including the ever popular Tahoe SUV. Ford is also on board.

*People are tiring of long commutes from inconvenient suburban neighborhoods that are not served by mass transit and thus have created an expensive car based lifestyles. I doubt the Cherry Street/Pearl/Brookside infill projects are anomalies. Momentum and school districts will continue to feed suburban housing as Realtors/Builders are in the same situation that GM was in with the larger profits that came from SUV's in spite of the fact they were gas hog dinosaurs. The move to economical inner city living is real. Once again we in Tulsa are behind the curve compared with our sister city 90miles away but we're coming around.

*We are starting to see the lunacy of converting food to fuel just to maintain lifestyles based on SUV's and remote, high status housing. Expect to see fewer vehicles per family and more locally grown food.

Its really exciting because there are more than these three and more to come. Politics, education, health care and transportation are all due giant changes. We have always needed drastic events to effect change in this country. 911, Pearl Harbor, stock market crashes, fuel shortages, influenza, etc. Out of each of those came changes that redirected our efforts. $5 gallon gas is an opportunity.

[Conan71]

Sure there's some opportunity to $5.00 per gallon fuel, but the negative impact will far outweigh the positive.  There are far-reaching implications to the economy, especially in retail and tourism- where much discretionary income gets spent.

Those who will take it the hardest will be middle class on down.  Vacations will be cancelled, discretionary spending is going to dwindle just to keep the car running to get back and forth to work.

I fail to see much optimism in this for the average work-a-day Joe or Jane.

[rwarn17588]

Something's going to have to happen anyway.

Let's face it: There's a finite amount of oil in the ground. There will be price fluctuations, but in the long haul it's clear the price will keep going up. That happens when you have trouble getting enough of it.

I know there are still number of people, albeit dwindling, who think it's a conspiracy by the oil companies. But the signs that worldwide production is flattening have been there for years. Saudi Arabia, the big dog in oil, has been warning for years that it simply is not able to crank out as much as it used to.

Yep, it's going to be somewhat painful. But we and the rest of the world are going to have to suck it up, find alternatives and start altering lifestyles a bit. We don't have a choice. People are going to have to stop living a bazillion miles from work. They're going to have to stop driving 15-miles-per-gallon behemoths as primary transportation.

I'm as middle-class as they come, and I started such energy-conservation changes a decade ago because I saw it was coming. And you know what? It wasn't that difficult.

As a whole, I'm optimistic that solutions will come. Great strides are being made with batteries that can run cars. Great strides are being made with the cost-efficiencies of solar. Ditto for wind power design.

There will be challenges as energy gets more costly. But there will be a lot of opportunities, too. The middle class and the poor will feel the impact the most. But America has dealt with more daunting situations before and emerged. It will again.

[buzz words]

So adding ethanol to the fuel system (Thinning the gas out) really did not decrease the rate that gasoline cost.  Why is that?

[TheArtist]

I don't think its the middle class that is going to be bothered with it, its the working class and poor that will. Most of those suburbanites arent going to care either, they are middle class and can afford it. Some of them may decide to get a more fuel efficient vehicle, but thats about it.

[cannon_fodder]

quote:shaodows wrote
Does this indicate a robust economy or runaway inflation?

Neither.  Thank you for once again putting your ignorance on display.  Our inflation rate is somewhere below 10%.  It might be as high as 7%, but it is not in the "runaway" area but a long shot.  The inflation rate over the last 15 years averages around 4.5%, exactly where we would want it to be.

Currently inflation is being pegged by two major forces.  1) The price of oil and 2) the weakening US Dollar.  Of the two the price of oil is the most concerning as it has no positive effect (weak dollar helps exports, encourages travel to the US, and makes the cost of doing business here cheap for foreign investors - THINK OUTSOURCING of Japanese jobs).  Oil just flat out makes everything more expensive across the board...  the only positive is it will wean us off oil in the long run.

If you want "runaway inflation" go to Zimbabwe or the Congo.  Where your $2 a dozen eggs will cost $2,300 by the end of the year.  THATS runaway inflation.

Though, the Feds recent policies have not made me happy.
- - -

Artist:  I agree with you for the most part.  The  middle class will be able to afford our gas.  BUT, we will have to cut back on other things.   The overall effect of this is bad news for everyone - including the middle class.

And corn based ethanol is a joke.  The energy inputs are far too high compared to the yield to be a truely viable alternative to oil.

[TheTed]

Hopefully the price of oil gives us a kick in the pants towards more Amtrak service and the development of high speed rail.

There's no more fuel efficient way to travel.

Here in Tulsa we have few options other than driving or flying (unless you count taking the Greyhound, which usually takes many times longer than driving, not to mention the extremely sketchy nature of greyhound passengers).

Airfares aren't going down. With fewer airlines and higher fuel prices we're gonna start seeing much higher prices for air travel.

[TulsaFan-inTexas]

Thumbs up on this post. I agree.

quote:Originally posted by rwarn17588

Something's going to have to happen anyway.

Let's face it: There's a finite amount of oil in the ground. There will be price fluctuations, but in the long haul it's clear the price will keep going up. That happens when you have trouble getting enough of it.

I know there are still number of people, albeit dwindling, who think it's a conspiracy by the oil companies. But the signs that worldwide production is flattening have been there for years. Saudi Arabia, the big dog in oil, has been warning for years that it simply is not able to crank out as much as it used to.

Yep, it's going to be somewhat painful. But we and the rest of the world are going to have to suck it up, find alternatives and start altering lifestyles a bit. We don't have a choice. People are going to have to stop living a bazillion miles from work. They're going to have to stop driving 15-miles-per-gallon behemoths as primary transportation.

I'm as middle-class as they come, and I started such energy-conservation changes a decade ago because I saw it was coming. And you know what? It wasn't that difficult.

As a whole, I'm optimistic that solutions will come. Great strides are being made with batteries that can run cars. Great strides are being made with the cost-efficiencies of solar. Ditto for wind power design.

There will be challenges as energy gets more costly. But there will be a lot of opportunities, too. The middle class and the poor will feel the impact the most. But America has dealt with more daunting situations before and emerged. It will again.

[shadows]

CF quoted: Thank you for once again putting your ignorance on display. Our inflation rate is somewhere below 10%. It might be as high as 7%, but it is not in the "runaway" area but (did you mean "by")a long shot. The inflation rate over the last 15 years averages around 4.5%, exactly where we would want it to be.

Good buddy I do not question that you are very intelligent and have an unlimited source of information but when you start spreading that inflation is 4.5%  BS I assume that Monroe calculator you are using to come up with that figure needs a few squirts of sewing machine oil on the gears.   You can buy a digital calculator at a flee market for a $1 dollar that will give you some update information.  

"Weak dollar" is the political excuse for run-away-inflation.  The trade with China where they are buying our recyclable throw-a-ways and sending them back here as a completed product, then they are taking our weak dollar and competing with us for the oil products.  This has allowed them to enter into the auto buying market and compete with us for the gasoline while we spend our time on entertainment like the Greeks and the Romans did.  I am not aware what world you live in but does it have pink clouds on the horizon all the time?

 

[YoungTulsan]

Ok, when you start talking about our historical rate of inflation being acceptable, that is where I get sick to my stomach.

The idea that we accept *ANY* sort of inflation as "normal" is insane.  Think about how large the US Economy is, and even larger the scope of the entire monetary system using the dollar is.  Debaseing something that huge by 4.5% a year (which is a compounding amount over time) is downright criminal.

Shadows is also trying to make the point that real world inflation is much higher than the crooks in charge will report in official numbers.  The reality is that over about the last 5 years, the prices of many necessities have doubled or tripled.  Energy being the biggest part of this, but also food, housing, education, and medical care.  There might be other areas of the economy offering better value and lower price increases, but for people on lower incomes, those few basic areas encapsulate their entire living.  Plasma TVs might be cheap and abundant, yard labor is affordable, and forum spammers are a dime a dozen, but the EFFECTIVE inflation rate for people who can't afford to even consider those luxuries is nowhere near as low as Bernanke and Bush want everyone to keep fooling themselves into believing.

In theory, a fiat money system regulated by a brilliant team of economists and banks will be able to survive, and provide a stable system free of panics and depressions.  Inflation, however, is the very proof that they are not doing their jobs correctly, and instead have chosen to defraud the citizenry.  Yes, as the world fills up with more people, more goods and services are being produced and rendered, as more innovative techniques and technologies are concieved, there is more VALUE in the system and thus, it would make sense, for there to be more MONEY in the system.  What INFLATION is, is when the Fed Reserve doesn't just put that new value into the system, they put in many times more new dollars than the actual increase in value has been.

That excess new money in the system isn't an accident, however.  It is by design.  Because by this design, the wealthy have first use of the new money (in the form of loans so cheap they might as well be free), the government gets unlimited spending capabilities, and needless consumption will continue indefinitely.  This is all available to them by the ability to devalue your savings, and pass massive inflation along to you.

That is a pretty messed up system to just accept as "normal".

What this all comes down to with the price of oil is the fact that yes, the VALUE of oil is going up somewhat, due to demand pressures such as China, and worries about peak oil.  But the only reason the PRICE has gone up so much is the exposure of the Fed Reserve's inflationary tactics to the world oil market.  The petrodollar scheme set up when Nixon ended the gold standard was bound to backfire at some point.

[bokworker]

YoungTulsan... while not "devaluing" your comments as many of them are on point, the fact is a successful capitalistic economy needs "controlled" infaltion to be successful. We all have some inflationary expectations built in to our phsycology... you would expect to make more in 5 years than today right? You would expect, or maybe hope is the better word now, that you house is worth more in the future than now. You make decisions to invest your money in a way that builds wealth correct? All fo these things have an infaltionary aspect to them. Capitalism has 2 main enemies, "hyper"inflation and deflation. Hence the reason the Fed would like to be able to target 1-2% infaltion.... enough to make things worth more but not enough to debase their value. Targeting zero inflation would invite deflation... and we do NOT want deflation. I am not arguing that we do not have problems and that many of those problems can be attributed to excess leverage (debt) or acknowledging that debtors that attempt to pay of that debt with devalued money run the risk of causing uncomfortable high inflation but, it is a bit of a stretch to look at our economy and make the call for hyperinflation. When breaking down the components of CPI the single largest parts of the number is tied to housing and labor.... and those parts of our economy are suffering from at best disinflation, at worst actual deflation, which when combined with higher energy and food costs leads to a much lower number on overall inflation. In addition, the history of the Fed has been to strip out food and energy costs as they are too volitile to make monetary decisions based on short term movements in these components. This "core" CPI number is currently running at just over 2%... Sooner or later if food and energy stay higher for long enough this will bleed over into the core number but if they decline then it will not be an issue. I tend to believe that inflation will be more of a problem but not until housing and labor join the party.    

As to your other point of the government "masking" actual infaltion. I must admit I have a bit of cynism like you. The fact is their are a huge amount of entitlement programs tied to the reported CPI which puts the government in aposition to want that rate to be as low as possible.

[shadows]

Young Tulsan:  After reading your post I assumed you took in account that the downtown elitist will band you from their turf.   You describe inflation in words that are understandable to the working poor.  

I built a house in what is now midtown Tulsa in 1947.
The loan value was $5250.  The payments were $28 a month including escrow account.  After weathering and surviving Oklahoma storms and renting the house of which  the interior reflects a disaster, the market value is established at 9 times the original cost of construction, the taxes are $46 a month.   Is this inflation or increased value?  Is this an antique of gross inflation after the dollar was floated?

At the rate of compounded inflation those in their twenties who want to retire at 70, will be required to have in their savings near a million dollars to maintain the living standard they enjoy today.  

Inflation was capped during WWII by government freezing the value, including wages, on a closed monetary system.   After the war in a period of adjustment, private companies who entered into the political circus, looked at their employee pension plans and laid the ground work for our socialistic way of devaluating these pensions through inflation.  

Four airlines ask for protection in one week.  One would assume the retired WW2 pilots that flew for the airlines, now drawing their pension, has increased contributions to the fund to where it along with the fuel increases make fare increases their only choice thus more inflation.

Government pensions is another story.

[Conan71]

quote:Originally posted by shadows

CF quoted: Thank you for once again putting your ignorance on display. Our inflation rate is somewhere below 10%. It might be as high as 7%, but it is not in the "runaway" area but (did you mean "by")a long shot. The inflation rate over the last 15 years averages around 4.5%, exactly where we would want it to be.

Good buddy I do not question that you are very intelligent and have an unlimited source of information but when you start spreading that inflation is 4.5%  BS I assume that Monroe calculator you are using to come up with that figure needs a few squirts of sewing machine oil on the gears.   You can buy a digital calculator at a flee market for a $1 dollar that will give you some update information.  

"Weak dollar" is the political excuse for run-away-inflation.  The trade with China where they are buying our recyclable throw-a-ways and sending them back here as a completed product, then they are taking our weak dollar and competing with us for the oil products.  This has allowed them to enter into the auto buying market and compete with us for the gasoline while we spend our time on entertainment like the Greeks and the Romans did.  I am not aware what world you live in but does it have pink clouds on the horizon all the time?

 

Pretty damn lucid post there Shadows, I gotta say your Monroe calculator comment was the best laugh I had all day.