Comments on: Bad Signs, New Bubbles

By: The Aftermath of the Great Recession, Part I :: ASPO-USA: Association for the Study of Peak Oil and Gas

Thu, 17 Sep 2009 19:18:46 +0000

[...] 6 — From the San Francisco Fed’s Jobless Recovery Redux? See my Bad Signs, New Bubbles for [...]

By: A Resurgence In China? :: ASPO-USA: Association for the Study of Peak Oil and Gas

Thu, 16 Jul 2009 14:47:16 +0000

[...] to pay steady 12% dividends to older ones. All these schemes have now collapsed. See my essay Bad Signs, New Bubbles (and other articles referenced therein) for some related [...]

By: Bad Signs, New Bubbles :: ASPO-USA: Association for the Study of … | Study Abroad Education Links

Sat, 04 Jul 2009 05:46:43 +0000

[...] is the original: Bad Signs, New Bubbles :: ASPO-USA: Association for the Study of … Share and [...]

By: Have We Reached an Inflection Point in Economics History?: “Indeflation” and Energy | Climate Vine

Fri, 26 Jun 2009 18:54:12 +0000

[...] At the same time, food and energy prices have been rising rapidly. Oil has rocketed from the low $40s to the low $70s in just four months, a roughly 71% gain. Soybeans rose about 50% over the same period, with most other grains gaining similarly. Normally, this would suggest inflationary fears, and indeed it has apparently drawn hedge fund money off the sidelines, out of bonds, and back into energy and commodities. (Energy analyst Dave Cohen did a great study of speculation in the current commodity cycle last week in “Bad Signs, New Bubbles.”) [...]

By: A Shale Gas Boom? :: ASPO-USA: Association for the Study of Peak Oil and Gas

A Shale Gas Boom? :: ASPO-USA: Association for the Study of Peak Oil and Gas — Thu, 25 Jun 2009 16:34:37 +0000

[...] 10-15 years from now. This is my current view, but the political winds could change quickly as the Great Recession grinds [...]

By: Andrew McKillop

Andrew McKillop — Sat, 20 Jun 2009 15:02:27 +0000

BAD SIGNS NEW BUBBLES Dave Cohen June 18
Found on an Aspo site this article is even more of a surprise than elsewhere. Dave Cohen runs on rigorous short-term logic telling us the “China + India decoupling” theory is bunkum, like oil prices anywhere above lets say 25 USD/b are purely speculative. Just like the “green shoots” theory, judged true by those who want to believe, the dcoupling theory is heavily trashed by short term reality, but only by that.
But the bashed metal emporium and new imperium in the East, and its Emerging Economy sister establishment to the south, with a combined population 7 times the USA, is alive and well. Both are still burning imported (and local produced) oil, exactly like the USA. If their combined population of today consumed oil at the USA’s average per capita rate….

It would be a big surprise if decoupling wasnt heavily dented by the OECD country economic implosion, but only in the short term. The opposite of that short term isnt at all Keynes style, when we are all dead and taken to the morgue in a hydrogen or solar powered hearse. It concerns the next 6 - 9 months. Short term, in dramatically downsized “finance vision” is the next few weeks, if that.

We are talking about the 2010 oil outlook which includes, maybe features sure and certain export supply shock. We have to surmize the 2008 oil shock has been forgotten, after all it was an awful long time back, folks ! World oil demand has fallen, maybe still is falling, but has some “green shoots” or backstops of its own. When we take the actual fall of about 4% or 3.5 Mbd from midyear 2008 to midyear 2009, and compare this with the economic implosion in most OECD countries, we get another shock: the vast oil dependence of economic growth just leaps out, screaming, from the figures ! For example the incredible contraction of the Japanese economy, perhaps 12% GDP contraction year on year, only caused a 5% fall in Japanese oil demand. Plenty other examples exist, but the bottom line is that neither the global economy, nor oil depletion stopped.

In recession wracked 2009, using Bloomberg data, the hard hit European economy will be building about 17 million cars. The USA auto industry, to be sure, is a disaster zone - only producing about 10 M cars this year, already outdistanced by Chinese outut, with India coming up fast in car producing. What percentage of these are oil fuelled ? What percentage electric, hydrogen or pedal powered ? .Oil depletion also didnt stop. But big spending in the oil & gas sector, as the IEA now reminds us with breathtaking prose, has tailed off in a big way, if not stopped. Now add the Iran crisis. To be sure the history of US and UK “democracy loving” interference in Iran makes for unwillingness to get involved one more time - heavily reinforced by not doing anything at all that could further trim Iran’s flagging oil exports. This makes it more than possible that internal opposition to the mollah regime will have to include oil and gas sector strikes, cutting exports a little or a lot. Goodbye to 25-dollar oil forecasts for this Autumn !

There are plenty other backstops to the double jawed vice set by high and rising oil demand even in a recession wracked global economy, plus sagging net export supplies of oil. So many in fact that oil shock of the physical kind and type is looming. We can almost explain anything by this reality! The Aspo Barcelona conference gave a readout for likely shrinkage of net export supply or “offer” from 2010: a yearly compression of at least 3 Mbd, likely more. Meaning that any kind of green shoot recovery at the global level, inflationary due to the gargantuan deficit spending lurch that G20 leaders decided, will trigger oil shock. Andrew McKillop

By: David Butler

David Butler — Thu, 18 Jun 2009 21:56:44 +0000

The Oil Futures market is usually just that, a trading arena for finance. Indeed the purchaser of oil futures rarely intends to take delivery of actual oil.
But just suppose you have a massive amount of dollars that you fear the US is months away from turning into horse fodder?
We already know that the Chinese are buying or stockpiling everything from metals to oil to farming land. But could it be that they are buying massively into oil futures, not to trade but to actually take delivery? And the reasons why this could be so?
1. It adds to the hedging of a falling dollar.
2. Why build tanks to stockpile oil when you can own and stockpile it until 2015 where it lays?
3. The desire to rid themselves of dollars without spooking the money markets. We assume they have 2 trillion dollars in their wallet. But how much is committed to be handed over for oil in 2015, and hence already spent?
4. Even though $90 oil seems expensive, they will know that they have a supply of oil in Dec 2015, instead of container loads of inflation trashed dollars.
5. In 2015, it may be that $90 oil may be a bargain.

Posted 18th June 2009