Comments on: Interview with Jeff Rubin, Part 2

By: Howard McAskill

Howard McAskill — Sun, 04 Jul 2010 22:23:18 +0000

@Scott Benson - “If it goes too high, demand drops, and so does the price.” This is unlikely according to Rubin, because even though demand would fall, supply would be falling even faster.

By: Drumbeat: June 29, 2010 : Hawaii Clean Power

Drumbeat: June 29, 2010 : Hawaii Clean Power — Sat, 03 Jul 2010 06:29:06 +0000

[...] Interview with Jeff Rubin, Part 2 POR: Is there a growing number of economists who are getting the resource depletion story, or is it still business as usual? Rubin: I think more economists are coming around. I can just see that from the number of economists who respond to my blog. I think what’s happening is that economists are beginning to realize that, yes, the supply curve-meaning, the higher the price of oil, the more oil we’ll find-has a big problem in that much of the new oil that we’ll find, like tar sands or deep water, we won’t be able to afford to burn. Economists’ responses will be that $150 oil will give us new forms of supply but that those prices will send a lot of motorists to the sidelines. Sure, we can produce 4 or 5 million barrels a day out of the Athabasca tar sands or Venezuela’s heavy oil, but the prices to produce it translate into $7-a-gallon gasoline. Can we really afford to burn that? They are starting to understand that depletion is more an economic term than a geologic term because we not going to hit the absolute limit of oil supply; as we’re keep drilling towards the bottom of the barrel, it’s going to get too expensive to bring out what’s left. [...]

By: Les Denham

Les Denham — Wed, 30 Jun 2010 14:59:15 +0000

I’m not so sure about the economy not supporting $7 a gallon oil. I commute eight miles to work in a car that averages 28 miles per gallon, which means I use about three gallons per week, or $21 at $7 per gallon, $13 more than it costs now. That would mean cutting expenditure elsewhere by that much, but if my family had the average family income for my city (about $800 per week, perhaps $600 after tax) that would be slightly more than 2% of disposable income. My commuting distance is close to the national average, though my car is more economical than average. I also doubt high oil prices will stop imports from China: transport by sea is an extremely small part of the cost of goods made in China. High oil prices will show themselves in much more subtle ways: higher costs for food, higher costs for long distance travel, higher costs for infrastructure maintenance, etc. The real problem looming is excessive debt all round, and unfunded entitlements, all put in place with the expectation of unlimited economic growth, and that can’t happen with $100+ oil. That’s what will eventually kill off the economy, not a few dollars more for commuting.

By: Peter Hunt

Peter Hunt — Tue, 29 Jun 2010 21:02:35 +0000

%here is a basic misunderstanding relative to the price of oil. That being that although the US is the biggest consumer of gasoline it is a world market and our influence on demand is being eroded by growth in other sectors.

Given this, any assertion that the economies will not stand $7 a gallon gasoline as it will collapse with this price has to looked at as optimistic/jingoistic fiction. We do not control the price or the demand as we once did. Sorry folks. Add to this the underlying potential for stagflation and with the collapse of the dollar as a reserve currency inflation remains a real threat.

As of late we have been given a respite with the problems of the Euro but the abandonment of the dollar as THE reserve currency may well be in the offing. Just think of the impact of loosing our ability to sell our debt to foreigners in exchange for raw materials like petroleum. It could happen and believe will when the market realizes that China is selling our debt for long term supplies of raw materials all over the world.

Going to get pretty ugly, I suspect.

By: Scott Benson

Scott Benson — Tue, 29 Jun 2010 19:20:46 +0000

Gas isn’t going to get to $7-10 a gallon, because the economics won’t support it. Rising oil/gasoline/diesel prices will kill the economy, dropping demand for oil and its price. Oil has a self-limiting function. If it goes too high, demand drops, and so does the price. The U.S. is not Europe or Japan. We have a much bigger footprint, and have to travel by car a lot more as we are not constructed. We cannot operate normally with $7-10 gasoline, like France and Tokyo.

By: Mark

Mark — Tue, 29 Jun 2010 17:41:05 +0000

High oil prices does not necessarily mean fewer jobs.

High oil prices, say $200+, means imports from Asia will become too expensive for most products, which means products will have the be made in the West !!!

If I have to chose between uncontrollable hyperinflation because all our money is being shipped to Asia, or paying more for products made in the West, I prefer the last.

Globalization among western nations worked perfectly well after WWII.

Globalization between the West and Asia has been a train wreck, and I can’t wait for peak oil prices to get that stopped.

By: Bill Simpson in Slidell

Bill Simpson in Slidell — Mon, 28 Jun 2010 17:08:17 +0000

If the price of gasoline gets near $7 a gallon anytime soon, the economy will contract so much, that the demand for oil will fall significantly. That will delay the inevitable oil price explosion.
When gas does get to $7 a gallon, unemployment might double. People in the USA can only save so much gas, then many of them will be forced to start cutting back on nearly everything else they buy, so as to pay for gasoline to get to work, shop for food, and accomplish essential travel. That cutback will cause millions of jobs to disappear, just like in the Great Depression. Less overall demand = fewer jobs. That will be the first bite of peak oil that we will endure.
We are not yet at that point, and probably won’t be until the second half of this decade, because future US economic growth will be very slow for years. Another recession next year is quite possible.