9 ms·

> "Prices will rise up to 50% but that isn't much of a crisis " If a 50% price increase isn't a crisis, then what is?

sandworm101 7y ago
Not having enough at any price. The "peak oil" nightmare scenarios are where demand truly outstrips supply. Price eventually becomes irrelevant as physical access to the resource matters more than cash. I personally don't think that will ever happen. The increased adoption of renewables means oil demand will not outstrip supply.
- avip 7y ago
  idk. Global oil consumption has been steadily ramping up 1-2%/year with little regard to renewables or climate crisis. The increasing penetration of renewables is dwarfed by increased population + raising living standards.
  - AnthonyMouse 7y ago
    Oil consumption has been increasing primarily because the price has been declining. If the price was higher then more people would use alternatives that are currently more expensive but wouldn't be against higher oil prices. If the Saudis are under-reporting their reserves, that's why. They don't want oil prices to be higher because it makes alternatives more competitive. It doesn't help them to sell oil for 50% more for a few years while that spurs everyone to buy electric cars and charge them with solar panels, only to have that demand reduction cause oil prices to decline below their current level and stay there forever. Or worse (for them), for consumption to decline to the level that consumers no longer strongly oppose a carbon tax, which would naturally cause consumption to fall off a cliff (as intended) as even more people switch to alternatives. On top of that, the alternatives need volume to build economies of scale which make them more competitive. This is already happening but would happen faster with higher oil prices, and as it does the result is a permanent reduction in alternative energy costs, making oil less competitive even at lower prices.
    - avip 7y ago
      >Oil consumption has been increasing primarily because the price has been declining Not arguing, but here's the data that should be reconciled: https://ourworldindata.org/grapher/world-crude-oil-price-vs-oil-consumption https://ourworldindata.org/grapher/world-crude-oil-price-vs-...
      - AnthonyMouse 7y ago
        It's fair to say that oil consumption has been increasing both because the price has been declining and because of increasing industrialization. But you can see pretty clearly on that graph that whenever the price spikes, consumption then drops. Supply and demand is in effect. And for most of the period on that graph, we didn't have the alternatives we do today. When oil prices spiked in 1979, people bought smaller cars that got better mileage, but they still ran on petroleum and used gas stations, and then people started buying petrol SUVs when gas prices came back down. If that happens in 2020 then people buy electric cars rather than econoboxes, and then we get more charging infrastructure and more battery research and economies of scale, and there would be no obvious advantage in ever switching back even if oil prices subsequently declined to their current level.
    - BlueTemplar 7y ago
      Cars are only a part of oil consumption. Also, it's going to take decades to switch rich countries to electric cars, if that is even economically possible...
      - AnthonyMouse 7y ago
        Transportation is 71% of US oil consumption: https://www.eia.gov/energyexplained/oil-and-petroleum-products/use-of-oil.php https://www.eia.gov/energyexplained/oil-and-petroleum-produc... Moreover, you don't have to replace all cars to significantly reduce oil demand when each replacement with an electric vehicle reduces that driver's oil consumption by 100%, particularly when the vehicles most likely to be replaced as a result of higher oil prices would be the ones that drive the most miles. On top of that, the non-electric vehicles sold during periods of high gas prices would tend to be high fuel economy vehicles as well, and the vehicles in the existing installed base most likely to be junked would be the most inefficient ones.
- driverdan 7y ago
  > Not having enough at any price. No such thing. Prices will always hit a point where demand decreases. Inelastic isn't 100%.
  - hapless 7y ago
    If the price rises enough global markets will break down as state actors attempt to seize or hoard oil resourxes for internal consumption So, it’s true, right up until it’s not
- Jweb_Guru 7y ago
  "Running out of oil" is an economic criterion, where demand outstrips achievable supply (where the cost of extracting the oil is not so high that it becomes an economic net negative). There's no material difference in outcomes between this and your "doomsday" version, but the former is actually something that's going to happen, while the latter probably never will.
thunderbird120 7y ago
Oil prices have always been all over the place[1]. A 50% bump isn't great but it's not really much to be worried about. [1]https://www.macrotrends.net/1369/crude-oil-price-history-chart https://www.macrotrends.net/1369/crude-oil-price-history-cha...
- SomeOldThrow 7y ago
  I don’t have a car. How does this affect my life? I’d assume the prices of commodities go up mildly. What else could I expect?
  - vkou 7y ago
    Nothing much. Cost of liquid fuel is not the constraint on economic activity in the developed world.
  - CapitalistCartr 7y ago
    In the USA, oil represents about 17% of manufacturing pricing. It obviously hits some industries much harder than others. Agriculture is particularly vulnerable. Large-scale farmers have tight margins and fertilizer is essential to factory farming.
  - hapless 7y ago
    Food prices rise and fall with oil. That’s probably it.
  - mandevil 7y ago
    Food prices in general tend to follow hydrocarbon prices. Not just because of the tractors and trucks, but also because of fertilizer. The Haber process is essentially a method of turning natural gas into corn and wheat (and then beef, pork, etc.) Something like 5% of world natural gas consumption is to drive the Haber process to create fertilizer that then drives everything else in modern agriculture. Now, natural gas and oil prices are not as correlated now as they used to be (due to fracking) but there seems to be some residual connection between the two, so that could be something to look out for.
elihu 7y ago
People being unable to get to work, trucks being unable to deliver food to stores because gas is unavailable. (I don't foresee any scenario where we get to that point, but if it happened it would be a crisis.) A 50% price increase would be bad for people who have to drive and are in a financially precarious situation, but it's not any more a catastrophe than all the other various things that affect people in financially precarious situations, which upper-middle-class people can shrug off as a mild annoyance.
- WalterBright 7y ago
  > People being unable to get to work, trucks being unable to deliver food to stores because gas is unavailable. The only times gas has been unavailable for a sustained time is when the government fixed prices or otherwise prevented the market from working. For example, when there's a natural disaster and anti-gouging laws kick in, gas becomes unavailable.
  - BlueTemplar 7y ago
    What did the governments do in the West during the 1970's oil shocks ?
    - WalterBright 7y ago
      Nixon put price controls on oil. Later, the DoE started allocating (i.e. rationing) gas to gas stations. Reagan abolished these by executive order as one of his first acts as President: https://www.nytimes.com/1981/01/29/us/president-abolishes-last-price-controls-on-us-produced-oil.html https://www.nytimes.com/1981/01/29/us/president-abolishes-la... and the gas lines disappeared overnight and never returned.
      - BlueTemplar 7y ago
        Thanks for the reference, albeit paywalled - was the disparition of gas lines an immediate consequence of the order, or did it just potentially prevent future gas lines ?
aussiegreenie 7y ago
Oil prices are VERY VOLATILE in the last 50 years the number of times the price of oil has either halved or doubled with a year is not uncommon. It has occurred at least a dozen times. And more importantly, oil prices are less important to the economy than most people believe. TL: DR - Oil prices are not that important
- csomar 7y ago
  > TL: DR - Oil prices are not that important 50% is not very important if you are a software engineer in your average developed country. 50% is more than enough to wreck many countries and get them into chaos. Some countries will see their population go on strike full-retard for 5-10% price increases. Some governments will default because they are subsidizing oil and a 50% increase will wreck their budget. Such an increase will also cause food prices to skyrocket and some people in some places won't be able to afford food.
  - xyzzyz 7y ago
    Oil prices were 50% cheaper not too long ago, and the food wasn't significantly cheaper, so I can't see how more expensive oil will make the food prices "skyrocket".
    - ry_ry 7y ago
      Depends if the whole industry decides to take advantage of the opportunity to increase prices and blame the cost of oil or not. It's the prisoners' dilemma, but applied to exploiting consumers!
      - xyzzyz 7y ago
        Yes, and in a prisoners' dilemma with thousands of players, someone is surely going to defect and sell their stuff cheaper to undercut the competition. I don't think I've ever heard about large scale collusion to fix prices in food industry, and I won't hold my breath for it this time.
  - 7y ago
agapon 7y ago
I recall that the oil price was 100% higher for several years at the start of the decade. And it was considered normal. There was no crisis at all.
- BlueTemplar 7y ago
  Yeah, sure, no recession whatsoever...
  - deleted 7y ago
    [deleted]
colechristensen 7y ago
2011-2015 the price was around $100, peaking at $110 2015-present the price has been around $50-60 with some points below 30 and above 70 Has that 50% drop been some kind of miracle? We would just be returning to prices of the previous decade. https://www.macrotrends.net/2516/wti-crude-oil-prices-10-year-daily-chart https://www.macrotrends.net/2516/wti-crude-oil-prices-10-yea...
- pbhjpbhj 7y ago
  Somehow petrol and fuel oil [in the UK] doesn't seem to have fallen barely at all since 2011-2015? [Actually petrol is down about ~7%, 140p->130p per litre https://www.racfoundation.org/data/uk-pump-prices-over-time; https://www.racfoundation.org/data/uk-pump-prices-over-time; and fuel-oil about ~10%, £300->270 per 500 litres https://www.cheapestoil.co.uk/articles/trend https://www.cheapestoil.co.uk/articles/trend. But, compare that to https://www.macrotrends.net/2480/brent-crude-oil-prices-10-year-daily-chart https://www.macrotrends.net/2480/brent-crude-oil-prices-10-y... showing 2012 prices at 4 times 2015 prices.] I think when people are thinking of "oil prices", as consumers they're converting that to "petrol prices" (and fuel oil if they use that) and thinking "if petrol/heating prices rise >50% that's going to be very hard". Petrol prices only falling by four-twelths when the crude price fell by nine-twelths suggests that petrol costs a lot on top of the crude price and that a 50% crude increase might lead to, say a >100% petrol price increase.
  - laurencerowe 7y ago
    UK petrol prices are ~65% tax, with the bulk of that being the fixed fuel duty. Prices in the US swing much more dramatically with oil prices.
  - colechristensen 7y ago
    There are considerable refining costs and transport costs from the refinery to your tank. Especially so because in the UK I don't believe you have considerable refining industry so I assume much of it is imported and then FOREX comes into play. Fuel taxes, at least in the US, are constant per volume and not relative to price and in California make up currently about 15% of the cost. On top of all of those factors I would only guess that at high prices profit margins fell by ratio which was recovered (or just increased) when prices fell.
u801e 7y ago
I believe around 10 years ago, the price per gallon of gas was around $4. It's now around $2.50, so we have dealt with prices that high in the recent past.
- Jweb_Guru 7y ago
  I can't remember anything bad economically that happened about ten years ago, can you?
  - kdavyd 7y ago
    Hurricane Ike put most of the oil processing plants in the Houston area offline, which led to a US-wide spike in gas prices. I've been there when it happened and it wasn't pretty.
    - rohit2412 7y ago
      He's probably implying a correlation with the 2008 recession.
      - Jweb_Guru 7y ago
        I'm not implying a correlation--there is one, along with a very longstanding correlation between oil consumption and GDP. What I'm implying is the much more contentious claim that this relationship has a strong causal component, too.
        rohit2412 7y ago
        Weird. I thought it was common opinion that recession occured from housing mortgage defaults and the subsequent credit crunch.
        BlueTemplar 7y ago
        What started the mortgage defaults though ? (And, also, couldn't cheap oil have maybe helped with the overbuilding of houses in the first place ?)
Causality1 7y ago
I remember $4/gal gas. Seeing my pump price go from $2.30 to $3.50 would be unpleasant but it would still feel like the end of a lovely grace period, not the beginning of a crisis.
- mrep 7y ago
  Shit, it's around $3.80 here in Seattle if you naively go to shell which seems to be highly priced here everywhere. Granted, I always go to safeway and arco where I can get it for 3.10 but for some reason I see tons of people at the expensive ones when you can easily find stations on google maps with their pricing listed for much cheaper.
lainga 7y ago
The 1973 and 1979 oil crises had peak increases of 400% and 100%, respectively
ImprovedSilence 7y ago
The price of crude isn't a 1:1 correlation with the price of gas.
throwawaynihil 7y ago
Climate change? World hunger? Homelessness? Civil rights? Having to spend a few more bucks to get to the shopping mall isn't really a crisis. Don't worry. America and KSA will make a killing in this, that's the important part, protecting big oil's prophets.

Not having enough at any price. The "peak oil" nightmare scenarios are where demand truly outstrips supply. Price eventually becomes irrelevant as physical access to the resource matters more than cash. I personally don't think that will ever happen. The increased adoption of renewables means oil demand will not outstrip supply.

avip 7y ago
idk. Global oil consumption has been steadily ramping up 1-2%/year with little regard to renewables or climate crisis. The increasing penetration of renewables is dwarfed by increased population + raising living standards.
- AnthonyMouse 7y ago
  Oil consumption has been increasing primarily because the price has been declining. If the price was higher then more people would use alternatives that are currently more expensive but wouldn't be against higher oil prices. If the Saudis are under-reporting their reserves, that's why. They don't want oil prices to be higher because it makes alternatives more competitive. It doesn't help them to sell oil for 50% more for a few years while that spurs everyone to buy electric cars and charge them with solar panels, only to have that demand reduction cause oil prices to decline below their current level and stay there forever. Or worse (for them), for consumption to decline to the level that consumers no longer strongly oppose a carbon tax, which would naturally cause consumption to fall off a cliff (as intended) as even more people switch to alternatives. On top of that, the alternatives need volume to build economies of scale which make them more competitive. This is already happening but would happen faster with higher oil prices, and as it does the result is a permanent reduction in alternative energy costs, making oil less competitive even at lower prices.
  - avip 7y ago
    >Oil consumption has been increasing primarily because the price has been declining Not arguing, but here's the data that should be reconciled: https://ourworldindata.org/grapher/world-crude-oil-price-vs-oil-consumption https://ourworldindata.org/grapher/world-crude-oil-price-vs-...
    - AnthonyMouse 7y ago
      It's fair to say that oil consumption has been increasing both because the price has been declining and because of increasing industrialization. But you can see pretty clearly on that graph that whenever the price spikes, consumption then drops. Supply and demand is in effect. And for most of the period on that graph, we didn't have the alternatives we do today. When oil prices spiked in 1979, people bought smaller cars that got better mileage, but they still ran on petroleum and used gas stations, and then people started buying petrol SUVs when gas prices came back down. If that happens in 2020 then people buy electric cars rather than econoboxes, and then we get more charging infrastructure and more battery research and economies of scale, and there would be no obvious advantage in ever switching back even if oil prices subsequently declined to their current level.
  - BlueTemplar 7y ago
    Cars are only a part of oil consumption. Also, it's going to take decades to switch rich countries to electric cars, if that is even economically possible...
    - AnthonyMouse 7y ago
      Transportation is 71% of US oil consumption: https://www.eia.gov/energyexplained/oil-and-petroleum-products/use-of-oil.php https://www.eia.gov/energyexplained/oil-and-petroleum-produc... Moreover, you don't have to replace all cars to significantly reduce oil demand when each replacement with an electric vehicle reduces that driver's oil consumption by 100%, particularly when the vehicles most likely to be replaced as a result of higher oil prices would be the ones that drive the most miles. On top of that, the non-electric vehicles sold during periods of high gas prices would tend to be high fuel economy vehicles as well, and the vehicles in the existing installed base most likely to be junked would be the most inefficient ones.
driverdan 7y ago
> Not having enough at any price. No such thing. Prices will always hit a point where demand decreases. Inelastic isn't 100%.
- hapless 7y ago
  If the price rises enough global markets will break down as state actors attempt to seize or hoard oil resourxes for internal consumption So, it’s true, right up until it’s not
Jweb_Guru 7y ago
"Running out of oil" is an economic criterion, where demand outstrips achievable supply (where the cost of extracting the oil is not so high that it becomes an economic net negative). There's no material difference in outcomes between this and your "doomsday" version, but the former is actually something that's going to happen, while the latter probably never will.

thunderbird120 7y ago

Oil prices have always been all over the place[1]. A 50% bump isn't great but it's not really much to be worried about. [1]https://www.macrotrends.net/1369/crude-oil-price-history-chart https://www.macrotrends.net/1369/crude-oil-price-history-cha...

SomeOldThrow 7y ago
I don’t have a car. How does this affect my life? I’d assume the prices of commodities go up mildly. What else could I expect?
- vkou 7y ago
  Nothing much. Cost of liquid fuel is not the constraint on economic activity in the developed world.
- CapitalistCartr 7y ago
  In the USA, oil represents about 17% of manufacturing pricing. It obviously hits some industries much harder than others. Agriculture is particularly vulnerable. Large-scale farmers have tight margins and fertilizer is essential to factory farming.
- hapless 7y ago
  Food prices rise and fall with oil. That’s probably it.
- mandevil 7y ago
  Food prices in general tend to follow hydrocarbon prices. Not just because of the tractors and trucks, but also because of fertilizer. The Haber process is essentially a method of turning natural gas into corn and wheat (and then beef, pork, etc.) Something like 5% of world natural gas consumption is to drive the Haber process to create fertilizer that then drives everything else in modern agriculture. Now, natural gas and oil prices are not as correlated now as they used to be (due to fracking) but there seems to be some residual connection between the two, so that could be something to look out for.

elihu 7y ago

People being unable to get to work, trucks being unable to deliver food to stores because gas is unavailable. (I don't foresee any scenario where we get to that point, but if it happened it would be a crisis.) A 50% price increase would be bad for people who have to drive and are in a financially precarious situation, but it's not any more a catastrophe than all the other various things that affect people in financially precarious situations, which upper-middle-class people can shrug off as a mild annoyance.

WalterBright 7y ago
> People being unable to get to work, trucks being unable to deliver food to stores because gas is unavailable. The only times gas has been unavailable for a sustained time is when the government fixed prices or otherwise prevented the market from working. For example, when there's a natural disaster and anti-gouging laws kick in, gas becomes unavailable.
- BlueTemplar 7y ago
  What did the governments do in the West during the 1970's oil shocks ?
  - WalterBright 7y ago
    Nixon put price controls on oil. Later, the DoE started allocating (i.e. rationing) gas to gas stations. Reagan abolished these by executive order as one of his first acts as President: https://www.nytimes.com/1981/01/29/us/president-abolishes-last-price-controls-on-us-produced-oil.html https://www.nytimes.com/1981/01/29/us/president-abolishes-la... and the gas lines disappeared overnight and never returned.
    - BlueTemplar 7y ago
      Thanks for the reference, albeit paywalled - was the disparition of gas lines an immediate consequence of the order, or did it just potentially prevent future gas lines ?

aussiegreenie 7y ago

Oil prices are VERY VOLATILE in the last 50 years the number of times the price of oil has either halved or doubled with a year is not uncommon. It has occurred at least a dozen times. And more importantly, oil prices are less important to the economy than most people believe. TL: DR - Oil prices are not that important

csomar 7y ago
> TL: DR - Oil prices are not that important 50% is not very important if you are a software engineer in your average developed country. 50% is more than enough to wreck many countries and get them into chaos. Some countries will see their population go on strike full-retard for 5-10% price increases. Some governments will default because they are subsidizing oil and a 50% increase will wreck their budget. Such an increase will also cause food prices to skyrocket and some people in some places won't be able to afford food.
- xyzzyz 7y ago
  Oil prices were 50% cheaper not too long ago, and the food wasn't significantly cheaper, so I can't see how more expensive oil will make the food prices "skyrocket".
  - ry_ry 7y ago
    Depends if the whole industry decides to take advantage of the opportunity to increase prices and blame the cost of oil or not. It's the prisoners' dilemma, but applied to exploiting consumers!
    - xyzzyz 7y ago
      Yes, and in a prisoners' dilemma with thousands of players, someone is surely going to defect and sell their stuff cheaper to undercut the competition. I don't think I've ever heard about large scale collusion to fix prices in food industry, and I won't hold my breath for it this time.
- 7y ago

agapon 7y ago

I recall that the oil price was 100% higher for several years at the start of the decade. And it was considered normal. There was no crisis at all.

BlueTemplar 7y ago
Yeah, sure, no recession whatsoever...
- deleted 7y ago
  [deleted]

colechristensen 7y ago

2011-2015 the price was around $100, peaking at $110 2015-present the price has been around $50-60 with some points below 30 and above 70 Has that 50% drop been some kind of miracle? We would just be returning to prices of the previous decade. https://www.macrotrends.net/2516/wti-crude-oil-prices-10-year-daily-chart https://www.macrotrends.net/2516/wti-crude-oil-prices-10-yea...

pbhjpbhj 7y ago
Somehow petrol and fuel oil [in the UK] doesn't seem to have fallen barely at all since 2011-2015? [Actually petrol is down about ~7%, 140p->130p per litre https://www.racfoundation.org/data/uk-pump-prices-over-time; https://www.racfoundation.org/data/uk-pump-prices-over-time; and fuel-oil about ~10%, £300->270 per 500 litres https://www.cheapestoil.co.uk/articles/trend https://www.cheapestoil.co.uk/articles/trend. But, compare that to https://www.macrotrends.net/2480/brent-crude-oil-prices-10-year-daily-chart https://www.macrotrends.net/2480/brent-crude-oil-prices-10-y... showing 2012 prices at 4 times 2015 prices.] I think when people are thinking of "oil prices", as consumers they're converting that to "petrol prices" (and fuel oil if they use that) and thinking "if petrol/heating prices rise >50% that's going to be very hard". Petrol prices only falling by four-twelths when the crude price fell by nine-twelths suggests that petrol costs a lot on top of the crude price and that a 50% crude increase might lead to, say a >100% petrol price increase.
- laurencerowe 7y ago
  UK petrol prices are ~65% tax, with the bulk of that being the fixed fuel duty. Prices in the US swing much more dramatically with oil prices.
- colechristensen 7y ago
  There are considerable refining costs and transport costs from the refinery to your tank. Especially so because in the UK I don't believe you have considerable refining industry so I assume much of it is imported and then FOREX comes into play. Fuel taxes, at least in the US, are constant per volume and not relative to price and in California make up currently about 15% of the cost. On top of all of those factors I would only guess that at high prices profit margins fell by ratio which was recovered (or just increased) when prices fell.

u801e 7y ago

I believe around 10 years ago, the price per gallon of gas was around $4. It's now around $2.50, so we have dealt with prices that high in the recent past.

Jweb_Guru 7y ago
I can't remember anything bad economically that happened about ten years ago, can you?
- kdavyd 7y ago
  Hurricane Ike put most of the oil processing plants in the Houston area offline, which led to a US-wide spike in gas prices. I've been there when it happened and it wasn't pretty.
  - rohit2412 7y ago
    He's probably implying a correlation with the 2008 recession.
    - Jweb_Guru 7y ago
      I'm not implying a correlation--there is one, along with a very longstanding correlation between oil consumption and GDP. What I'm implying is the much more contentious claim that this relationship has a strong causal component, too.
      - rohit2412 7y ago
        Weird. I thought it was common opinion that recession occured from housing mortgage defaults and the subsequent credit crunch.
        BlueTemplar 7y ago
        What started the mortgage defaults though ? (And, also, couldn't cheap oil have maybe helped with the overbuilding of houses in the first place ?)

Causality1 7y ago

I remember $4/gal gas. Seeing my pump price go from $2.30 to $3.50 would be unpleasant but it would still feel like the end of a lovely grace period, not the beginning of a crisis.

mrep 7y ago
Shit, it's around $3.80 here in Seattle if you naively go to shell which seems to be highly priced here everywhere. Granted, I always go to safeway and arco where I can get it for 3.10 but for some reason I see tons of people at the expensive ones when you can easily find stations on google maps with their pricing listed for much cheaper.

lainga 7y ago

The 1973 and 1979 oil crises had peak increases of 400% and 100%, respectively

ImprovedSilence 7y ago

The price of crude isn't a 1:1 correlation with the price of gas.

throwawaynihil 7y ago

Climate change? World hunger? Homelessness? Civil rights? Having to spend a few more bucks to get to the shopping mall isn't really a crisis. Don't worry. America and KSA will make a killing in this, that's the important part, protecting big oil's prophets.