4 ms·

Why Oil Is Finally Declining

19 points by gasull 12y ago

api 12y ago
This should illustrate why getting "off oil" should be such a priority. That doesn't mean totally phasing it out, which would probably take centuries, but it does mean getting to the point where oil is no longer the rate limiting reagent in the economy. Right now our hopes, dreams, futures, and lives are pinned to the oil price graph. If it doesn't scare you, you haven't thought about it very much.
- krschultz 12y ago
  Unfortunately falling oil prices puts a lot of pressure on alternative energy sources. We were just getting to the point where the unsubsidized price of wind & solar was within spitting distance of oil. Though replacing coal with natural gas is a net win for the environment, and that might accelerate with natural gas prices dropping through the floor.
  - saryant 12y ago
    Natural gas prices in the US should stabilize as the American producers begin exporting to the world market.
- brandon272 12y ago
  Are you referring to climate change (i.e. low oil prices reduce efforts to move to alternative energy) or revenues from oil?
  - api 12y ago
    I'm referring to the eventual depletion of oil and other fossil fuels, which is the single greatest existential threat faced by humanity. It's far greater than worst case climate change scenarios. A good way to think about fossil fuel depletion: Imagine that there is a planet killer asteroid heading toward us. We've known about it since at least the 1950s, and there it is... heading slowly inexorably toward us. But for various reasons our math isn't perfect, so we don't know exactly when it's going to hit. It might be in the 2030s, or the 2050s, but almost certainly no later than 2100. When it does we all die. Nobody is talking about it, and very few are doing anything about it. Right now if we started to really run out of fossil fuels, everyone would starve to death. Our population is at least two orders of magnitude larger than what can be supported without that level of energy use. There would also probably be a global war, possibly thermonuclear, as every economy collapses at once and various warmongers and crackpots take over every country's leadership. There's an article about post-9/11 CIA torture on HN's front page right now... that was after an attack that just killed a few thousand people. Imagine the political lunacy that would ensue as the whole of modern civilization collapses in on itself, everyone's savings evaporates in a series of hyper-deflations, stock markets crash and then crash and then crash some more, etc. Every major nation would get a Hitler. Like I said... if you aren't afraid of this you haven't looked into it deeply or thought about it very much.
joosters 12y ago
The central banks have been frustrated in their insane and misguided aim to increase inflation because QE and ZIRP actually foster the opposite of what central bankers expect. Central bankers and economists think that to get inflation they only need to print more money, not recognizing that the inflation that does result from money printing, asset inflation, leads eventually to consumer goods deflation. Central bankers are wrong! Economists are wrong! This one blogger knows the truth! Seriously, it makes me lose all faith in a writer if they so openly and freely trash-talk so many other people.
silver1 12y ago
Dont know much about geo-politics but someone is playing a huge dirty game .... could be OPEC or USA ... it deals with many issues at hand: 1. Strangling Russian economy 2. Straightening out Iran 3. Disrupt Shale Oil production rise 4. Create financial gap between cheap oil and other renewable alternatives ....etc...etc...etc... It will be very interesting to see what happens in the countries where shale oil production is on rise .... somehow tax payers are going to pay because many shale oil companies may go bankrupt ... that means either you pay higher prices at gas pump & stores (b'cause oil is expensive) or pay for shale oil companies that cant sustain their economies.
- pseudometa 12y ago
  It isn't so much as they are now playing a dirty game, it is more that OPEC has been playing a dirty game for a long time. Now its members are no longer in lockstep and it is causing a huge correction.
gesman 12y ago
Last but not least tumbling oil prices is a convenient way to hurt russia. Add this to "why" list.
ck2 12y ago
Oil is declining because the Saudis are dumping it. Their oil is cheap to produce because it is near the surface and plentiful and "good quality". They probably figured they better halt development in other parts of the world by making it unprofitable for others to produce. The question is how long they will keep it up. Just imagine how much every extra penny on the cost of oil/gas squeezes out of the economy every day. http://i.imgur.com/hi9pTsQ.png http://i.imgur.com/hi9pTsQ.png
BenoitEssiambre 12y ago
This is wrong. There is no evidence "malinvestment" exists at economy scale in any significant way. Money is a government made artificial store of value made to make transactions and contracts easier. It has no intrinsic value in itself and it should not artificially keep value at a rate that makes it desirable enough so that it displaces private stores of value, such as private bonds, stocks, commodities, or even buying now what you will need later. It is a sad state that a lot of countries currently let the risk adjusted value of their money have better returns than private market stores of value thus making people invest in fiat instead of in the real economy. This causes unemployment and low productivity. When people, businesses and banks invest in government sponsored fiat instead of the real economy because fiat has a better return, it is a subsidy to economic idleness that jams the private markets. In Europe they desperately need inflation to overshoot a bit to unjam their markets. Otherwise all this idle money that accumulates without sufficient production capacity to back it up will create problems in the future. Idle money that starts chasing few goods is a risk of spikes in inflation, that or painful corrective high interest rates. In general a little overshoot of inflation early in a recession prevents more inflation later by making money less desirable compared to private investments and preventing it from accumulating idly too much.
pseudometa 12y ago
Planet Money on NPR has a great story on this. http://www.npr.org/blogs/money/2014/11/05/361424491/episode-580-the-other-side-of-the-pump http://www.npr.org/blogs/money/2014/11/05/361424491/episode-...

19 points by gasull 12y ago

api 12y ago

This should illustrate why getting "off oil" should be such a priority. That doesn't mean totally phasing it out, which would probably take centuries, but it does mean getting to the point where oil is no longer the rate limiting reagent in the economy. Right now our hopes, dreams, futures, and lives are pinned to the oil price graph. If it doesn't scare you, you haven't thought about it very much.

krschultz 12y ago
Unfortunately falling oil prices puts a lot of pressure on alternative energy sources. We were just getting to the point where the unsubsidized price of wind & solar was within spitting distance of oil. Though replacing coal with natural gas is a net win for the environment, and that might accelerate with natural gas prices dropping through the floor.
- saryant 12y ago
  Natural gas prices in the US should stabilize as the American producers begin exporting to the world market.
brandon272 12y ago
Are you referring to climate change (i.e. low oil prices reduce efforts to move to alternative energy) or revenues from oil?
- api 12y ago
  I'm referring to the eventual depletion of oil and other fossil fuels, which is the single greatest existential threat faced by humanity. It's far greater than worst case climate change scenarios. A good way to think about fossil fuel depletion: Imagine that there is a planet killer asteroid heading toward us. We've known about it since at least the 1950s, and there it is... heading slowly inexorably toward us. But for various reasons our math isn't perfect, so we don't know exactly when it's going to hit. It might be in the 2030s, or the 2050s, but almost certainly no later than 2100. When it does we all die. Nobody is talking about it, and very few are doing anything about it. Right now if we started to really run out of fossil fuels, everyone would starve to death. Our population is at least two orders of magnitude larger than what can be supported without that level of energy use. There would also probably be a global war, possibly thermonuclear, as every economy collapses at once and various warmongers and crackpots take over every country's leadership. There's an article about post-9/11 CIA torture on HN's front page right now... that was after an attack that just killed a few thousand people. Imagine the political lunacy that would ensue as the whole of modern civilization collapses in on itself, everyone's savings evaporates in a series of hyper-deflations, stock markets crash and then crash and then crash some more, etc. Every major nation would get a Hitler. Like I said... if you aren't afraid of this you haven't looked into it deeply or thought about it very much.

joosters 12y ago

The central banks have been frustrated in their insane and misguided aim to increase inflation because QE and ZIRP actually foster the opposite of what central bankers expect. Central bankers and economists think that to get inflation they only need to print more money, not recognizing that the inflation that does result from money printing, asset inflation, leads eventually to consumer goods deflation. Central bankers are wrong! Economists are wrong! This one blogger knows the truth! Seriously, it makes me lose all faith in a writer if they so openly and freely trash-talk so many other people.

silver1 12y ago

Dont know much about geo-politics but someone is playing a huge dirty game .... could be OPEC or USA ... it deals with many issues at hand: 1. Strangling Russian economy 2. Straightening out Iran 3. Disrupt Shale Oil production rise 4. Create financial gap between cheap oil and other renewable alternatives ....etc...etc...etc... It will be very interesting to see what happens in the countries where shale oil production is on rise .... somehow tax payers are going to pay because many shale oil companies may go bankrupt ... that means either you pay higher prices at gas pump & stores (b'cause oil is expensive) or pay for shale oil companies that cant sustain their economies.

pseudometa 12y ago
It isn't so much as they are now playing a dirty game, it is more that OPEC has been playing a dirty game for a long time. Now its members are no longer in lockstep and it is causing a huge correction.

gesman 12y ago

Last but not least tumbling oil prices is a convenient way to hurt russia. Add this to "why" list.

ck2 12y ago

Oil is declining because the Saudis are dumping it. Their oil is cheap to produce because it is near the surface and plentiful and "good quality". They probably figured they better halt development in other parts of the world by making it unprofitable for others to produce. The question is how long they will keep it up. Just imagine how much every extra penny on the cost of oil/gas squeezes out of the economy every day. http://i.imgur.com/hi9pTsQ.png http://i.imgur.com/hi9pTsQ.png

BenoitEssiambre 12y ago

This is wrong. There is no evidence "malinvestment" exists at economy scale in any significant way. Money is a government made artificial store of value made to make transactions and contracts easier. It has no intrinsic value in itself and it should not artificially keep value at a rate that makes it desirable enough so that it displaces private stores of value, such as private bonds, stocks, commodities, or even buying now what you will need later. It is a sad state that a lot of countries currently let the risk adjusted value of their money have better returns than private market stores of value thus making people invest in fiat instead of in the real economy. This causes unemployment and low productivity. When people, businesses and banks invest in government sponsored fiat instead of the real economy because fiat has a better return, it is a subsidy to economic idleness that jams the private markets. In Europe they desperately need inflation to overshoot a bit to unjam their markets. Otherwise all this idle money that accumulates without sufficient production capacity to back it up will create problems in the future. Idle money that starts chasing few goods is a risk of spikes in inflation, that or painful corrective high interest rates. In general a little overshoot of inflation early in a recession prevents more inflation later by making money less desirable compared to private investments and preventing it from accumulating idly too much.

pseudometa 12y ago

Planet Money on NPR has a great story on this. http://www.npr.org/blogs/money/2014/11/05/361424491/episode-580-the-other-side-of-the-pump http://www.npr.org/blogs/money/2014/11/05/361424491/episode-...