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Charting The Impact Of Prior Oil Crises, With A Particular Focus On The 350% Increase In Price Following The Yom Kippur War

Tyler Durden's picture


Morgan Stanley has compiled a convenient table looking at the impact of all prior oil crises, and how that reflected in peak oil production loss as well as the price of oil on a monthly, 3 month and 6 months basis. And while the biggest crises of modern days has so far been the Yom Kippur War with a total loss of 5 million mmb/d resulting in a 350% increase in the price of oil 6 months following, should the Libyan crisis escalate and impact even half of Saudi production (keep an eye on the March 11 organized protests), the current MENA crisis will promptly win the first prize for biggest oil surge. Should the past 6 month record be passed, Brent will likely be trading around $350 around July.

In terms of thresholds, oil burden has a few basis points to go before economic growth will be impacted. The oil burden which hit 3.4%, when Brent was $80.34, needs to surpass 4% for Oil Demand growth, and thus economic growth, to be impacted. Brent is now $115. We are beyond 4%.

Lastly, it wouldn't be a Morgan Stanley report if it didn't have a silver lining. Here is how MS tried to mask the impact of the oil price surge:

Sorry Morgan Stanley but that chart is also inversely correalted with the amount of cheap credit, and the 10 Year yield. All it shows is that the Great Moderation has resulted in GDP growth (which has now inverted on an incremental debt/GDP basis). As more and more countries commence to withdraw liquidity, it simply means that the double whammy of a liquidity contraction, coming as soon as June 30, will have that much more of a dire impact on the world economy as a result of the relentless grind up higher in oil.



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Fri, 03/04/2011 - 14:53 | 1019665 Sudden Debt
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Fri, 03/04/2011 - 14:53 | 1019666 Harmonious_Diss...
Harmonious_Dissonance's picture


Fri, 03/04/2011 - 15:02 | 1019705 Harmonious_Diss...
Harmonious_Dissonance's picture

Here comes the 2PM silver price monkey hammer??

Fri, 03/04/2011 - 15:15 | 1019759 Id fight Gandhi
Id fight Gandhi's picture

Things ugly in Libya

Wti is soaring at day highes. Only thing now is a dump of the NASDAQ momos and we can have a hard down day.

Fri, 03/04/2011 - 15:47 | 1019899 asdasmos
asdasmos's picture

Marc Faber on Bloomberg 3/3/11


Fri, 03/04/2011 - 16:38 | 1020118 william the bastard
william the bastard's picture


Fri, 03/04/2011 - 16:15 | 1020012 Bob
Bob's picture

35.5 . . .

Fri, 03/04/2011 - 14:56 | 1019683 Matto
Matto's picture

Poject Mayhem Bitchezz!!!

Fri, 03/04/2011 - 14:57 | 1019689 THE DORK OF CORK
THE DORK OF CORK's picture

Not to worry, the RN will keep the oil flowing.......................


Fri, 03/04/2011 - 15:07 | 1019726 depression
depression's picture

"It's important to note that there is considerable spare oil production capacity globally, and we and other major economies possess substantial strategic reserves of oil. If necessary, those reserves could be mobilized to help mitigate the effect of a severe, sustained supply disruption." said US Secretary of the Treasury Timothy Geithner in his testimony before the US Senate Foreign Relations Committee in Washington on Thursday.

The Treasury secretary reassured lawmakers that underlying inflation remains low nationwide. And he said the U.S. has "considerable spare oil production capacity" it could consider tapping in the event of a "major" supply disruption.

Fri, 03/04/2011 - 15:24 | 1019806 Flakmeister
Flakmeister's picture

 Running down a tank farm, (Saudis) or tapping the SPR ain't fucking production, jeezus!

Here is a little tid bit

Fri, 03/04/2011 - 15:33 | 1019831 cougar_w
cougar_w's picture

And don't forget all those topped-off oil tankers floating off Singapore. Last year's production bought at recessionary prices.

The GS commodities desk has been waiting for this day a long, long time.

Fri, 03/04/2011 - 15:43 | 1019887 Flakmeister
Flakmeister's picture

  Yeah, those fuckers will make some money, but to put it in perspective, 20 mm barrels is squat in terms of the market. It is about 6 hrs of world demand. At the height of the storage game, there was about 70 mm barrels involved or slightly less than one day of demand....Equivalently, if you consider the fraction of world demand that is "freely" traded, it becomes 12 hrs and 2 days... 

Fri, 03/04/2011 - 16:14 | 1020013 cougar_w
cougar_w's picture

Yeah, it's easy to forget the magnitude of consumption. The whole of ANWR at total draw-down is like -- what --- 6 months of supply for the US? There is a lot of money to be made, but it's not enough to buy a longer runway. They don't mention that much. They want the money and they don't care about anything else.

Fri, 03/04/2011 - 16:19 | 1020040 BobPaulson
BobPaulson's picture

You hit the big issue there, IMHO. Most oil is now locked into sovereign deals where you feed yourself first. Some countries are conned by the "free market" doubletalk, and let all their resource wealth leave their borders in exchange for green rectangular bits of paper, but the fraction of people who are that stupid is declining. So of the just sub 90 million a day we use, I bet the amount in play is _very_ much less.

Fri, 03/04/2011 - 15:27 | 1019814 Sudden Debt
Sudden Debt's picture

And lets not forget the drop in demand once oil crossed 120$ in the past.


Fri, 03/04/2011 - 16:25 | 1020063 bruiserND
bruiserND's picture


This is deceptive and intellectualy dishonest.

America gets about 11% of its imported oil from the Mid East according to a July 2007 Congressional report done for Rep. Jim Saxon , NJ in response to a shutdown of the Straits of Hormuz.

Try talking your book with the truth. The world has become enough of a shit sandwich as it is without this crap. 


Fri, 03/04/2011 - 17:20 | 1020334 Ruffcut
Ruffcut's picture

What is dishonest. SA is second largest exporter. It does not all end up here in US. It is a global concern. Most of our imports of crude come from canuckistan, at 27%.

IF prices go up, all producers rake in the cash, and they love it.

These crisises are party time. Cocaine, is a powerful drug. Crude is wallet fattener.

Fri, 03/04/2011 - 14:55 | 1019671 Id fight Gandhi
Id fight Gandhi's picture


They're saying rebel forces being pushed back. What happens if gaddiffy actually Stops them?

Fri, 03/04/2011 - 15:11 | 1019735 cougar_w
cougar_w's picture

What happens? We empty the Kearsarge on their asses, that's what happens. I bet you a bent nail we've already got an embedded team of "observers" with the rebels, ready to call in "humanitarian assistance" from the flight deck of the USS Enterprise on about 15 minutes notice.

Fri, 03/04/2011 - 15:44 | 1019890 TradingJoe
TradingJoe's picture

Make that 6 min, standard alert response time for all combat pilots in the NAVY!

Fri, 03/04/2011 - 16:17 | 1020019 aerojet
aerojet's picture

I hope they have special forces on the ground training the opposition right now.

Fri, 03/04/2011 - 16:23 | 1020055 BobPaulson
BobPaulson's picture

No secret. MSM has even reported that Canada has their special forces in play already (I only mention that country because I'm from there and follow that media, I'm sure most NATO forces have commandos and airborne deployed already).

Fri, 03/04/2011 - 16:16 | 1020022 InconvenientCou...
InconvenientCounterParty's picture

I haven't seen any material evidence that we are not supporting Qua-daffy on this. Until then, I consider it a real possibility.

Fri, 03/04/2011 - 16:50 | 1020160 Sudden Debt
Sudden Debt's picture

Give desperate people a cause and they are willing to die for it.

There aren't to many rebellions in history that didn't overthrow the regimes in the past.


Fri, 03/04/2011 - 14:54 | 1019675 John McCloy
John McCloy's picture

I would like to know which fools have any desire to go short oil going long into this weekend. Market should close at lows of day as even the mildest sign of irreversible escalation means Oil opens around 110 monday.

Fri, 03/04/2011 - 15:07 | 1019731 Caviar Emptor
Caviar Emptor's picture

And we got lots of flash points to escalate! The circle of fire around Saudi Arabia gets a little hotter every day. Meanwhile Pakistan is a powder keg. And Iraq (which no one mentions) has a suicide bombing every few days. What people don't see yet is that oil production regions in general are destabilizing, not only 1 or 2 in isolation. This is why the West preferred dictators. 

Fri, 03/04/2011 - 14:56 | 1019681 silvertrain
silvertrain's picture

 Is there a stress test app for that?

Fri, 03/04/2011 - 14:55 | 1019682 Id fight Gandhi
Id fight Gandhi's picture

Serious question, if rebels are crushed and the USA already took sides and put a fleet offshore what then?

Fri, 03/04/2011 - 15:03 | 1019714 Harmonious_Diss...
Harmonious_Dissonance's picture


Fri, 03/04/2011 - 15:09 | 1019738 malikai
malikai's picture

Seconded. I believe we'd be calling the former state of Libya "New Texas".

Fri, 03/04/2011 - 15:59 | 1019958 Huck T
Huck T's picture

Oceania has always been at peace with New Texas.

Fri, 03/04/2011 - 16:52 | 1020173 Sudden Debt
Sudden Debt's picture

Then the US will seize the oil fields and use the oil to rebuild the country and put democracy in place. That will take about a decade or so...

Fri, 03/04/2011 - 14:55 | 1019684 redpill
redpill's picture

Turd's crude options paying off in spades

Fri, 03/04/2011 - 15:48 | 1019907 TradingJoe
TradingJoe's picture

Turd's strike is April 105!! Not just there yet but give it a little :))! I'm already in the money so...let's see what the weekend brings!

Fri, 03/04/2011 - 22:56 | 1021277 walküre
walküre's picture

Joe, ich hätte auf dich hören sollen!

Fri, 03/04/2011 - 14:58 | 1019690 franzpick
franzpick's picture

CA gas prices were $3.95 a week ago, $4.05 3 days ago, and look to be $4.16 today, going up 3c per $1 rise in WTI. Oil at $113 will be $4.50/gal gas, approaching the price that will thin traffic back to the '08 level.

If the bond vigilantees, like the Libyans, are hiding from gov't. sniper fire, maybe some anticipatory fill-ups by several million gas vigilantes will give Ben-Hubris the next clue on how fast his ZIRP is unravelling, and if words like shortages, rationing, price-controls, and export-import controls aren't entering the federal strategy discussions, I wonder what page they are on?

Fri, 03/04/2011 - 15:33 | 1019832 SilverFiend
SilverFiend's picture

I completed my "anticipatory fill-up" yesterday.  50 gallons at my disposal.  I will be able to weather any shortages or rationing.

Fri, 03/04/2011 - 16:25 | 1020058 InconvenientCou...
InconvenientCounterParty's picture

Ah, the classic "petrol:brake pad" all -American butterfly trade.

all you need now is 22" sport tires.

Fri, 03/04/2011 - 15:02 | 1019698 cougar_w
cougar_w's picture

Demand destruction FTW.

Buy a bicycle. Listen up chumps, if I can build bikes you can at least get off your ass and buy one. Ride around a little in the park, take your dog for a run. Chicks love it and they'll think you're a stud. Heck, you ride enough and you might get those abs back.

Edit: Before anyone asks; no you cannot buy the bikes I build because you can't afford one. Besides that it wouldn't fit in your garage until you got rid of the F350.

Fri, 03/04/2011 - 15:16 | 1019771 Ben Fleeced
Ben Fleeced's picture

Go Cougar_w.

I'm rolling on a '56 Raleigh Sport/Touring. It ain't the Abs being looked at.

Fri, 03/04/2011 - 15:26 | 1019811 cougar_w
cougar_w's picture

That's righteous.

Fri, 03/04/2011 - 16:20 | 1020036 Bob
Bob's picture

I take it the snow has melted in your neighborhood?  My diamondback is still a clothes--make that sweater--rack.

Fri, 03/04/2011 - 20:08 | 1020906 cougar_w
cougar_w's picture


What is snow? We ride every day here, sunny days 3 days a week and winter is like maybe 3 weeks long.

It makes very little sense to drive around in Cali. I swear we must have the best riding conditions of anywhere in the world. People I know drive 2 miles to the store for milk and eggs, I ride 30 miles to work on an e-bike, love it the whole way, almost never get rained on. My kids ride bikes everywhere, 15 miles RT on a lot of things. Just get on and go, never worry about them ever.

Fri, 03/04/2011 - 17:57 | 1020551 franzpick
franzpick's picture

I used to buy the kind of bikes you make, but times are getting tough and people are now lurking in vans in the parking lots outside our big box stores, with illegal boltcutters, snatching high-end bikes from racks not in camera view; lost my 10 year old 21 pounder last fall to them outside Wally*Mart, security truck watching from the other entrance, so replaced it with the least attractive chinese aluminum I could find, and won't be going there again. 

Have ridden 10 plus miles/day, doing all but the heavy shopping, 300 days/year, 3000 mi./yr. for 25 years: 75k miles, 3 times around the world without ever leaving town, and zero carbon footprint.  Love the smell of gas vapors as I shortcut thru the stations.

My family/friends have rolled car lease payments due into their new leases, are hopelessly $10k plus underwater and choking on $600/mo. payments, and have been and remain sure the recovery is 2 quarters away.

Fri, 03/04/2011 - 20:12 | 1020926 cougar_w
cougar_w's picture

You are one of the serious riders. We are few. I do about 12K miles a year because I commute 60 mls/day RT (or did until recently, office is moving closer to home).

Nobody steals my bike. It weights 120 pounds and is 11 feet long. Most distinctive bicycle on the planet. Fact.

It's 36V electric, tho. I couldn't do 60 miles without the assist. Pulls like a diesel truck, has a trailer, goes about 20 miles an hour for 2 hours. I'm building another this month with dual rotors and a wood frame in a steampunk design. Brass lamps, copper forks, antique gauges, dual drive chains. 9 chain rings just to reach the rear wheel. Gonna be the most beautiful two-wheeled machine on the planet. Fact.

If you want to and you have a welder, you can make monster bikes and move yo ass.

Fri, 03/04/2011 - 18:07 | 1020584 cxl9
cxl9's picture

I wonder if statistically, the health benefits of riding a bike offset the risk of severe injury or death from being crushed beneath an automobile.

Fri, 03/04/2011 - 20:02 | 1020934 cougar_w
cougar_w's picture

Of course they do. What kind of question is that?

Fri, 03/04/2011 - 15:01 | 1019703 camaro68ss
camaro68ss's picture

I say bring on higher prices in gas = less retarted people driving on the road!

Fri, 03/04/2011 - 15:04 | 1019715 cougar_w
cougar_w's picture

You know this is totally true. And the ones that can afford to drive will drive slower and less often.

Means more room for bikes.

Fri, 03/04/2011 - 15:07 | 1019733 camaro68ss
camaro68ss's picture

I should go long on bikes then?

Fri, 03/04/2011 - 15:17 | 1019780 11b40
11b40's picture

Rather go long on Cougars ;O

Fri, 03/04/2011 - 15:28 | 1019819 cougar_w
cougar_w's picture

I think you want the ladies room down the hall. In here, we're all guys.

Fri, 03/04/2011 - 15:21 | 1019797 cougar_w
cougar_w's picture

Long bikes are way cool:

My long bike at home is 11 feet.

Fri, 03/04/2011 - 18:09 | 1020592 Dr. Porkchop
Dr. Porkchop's picture

I haven't ridden my Giant for a few years since moving. I used to ride but now I'm in a suburban area. You have to be insane to ride a bike around here, because people drive freeway speeds on these 3 lane suburban streets!

Fri, 03/04/2011 - 22:38 | 1021242 Bringin It
Bringin It's picture

Dr. I advise you to get out of suburbia.  No fuel no joy in suburbia.

Fri, 03/04/2011 - 15:04 | 1019716 gordengeko
gordengeko's picture


Fri, 03/04/2011 - 15:05 | 1019708 CrashisOptimistic
CrashisOptimistic's picture

Fuck Morgan Stanley.  This analysis flavor has "cyclical" and "historical norms" written all over it and it's irresponsible bullshit.

This is FOREVER.  This is not cyclical.  This has no historical precedent.

Oil will drop, sharply, after its spike destroys all shipping of products and therefore economies.  Then an attempt to recover will occur and oil will spike again, far higher and far worse.

It's over.  There is no cycle in play.  It's over.  The world goes relentlessly down from here with little wiggles of no consequence on the graph.

Mankind's pinnacle achievements are behind us.

Fri, 03/04/2011 - 15:05 | 1019725 Harmonious_Diss...
Harmonious_Dissonance's picture

Certainly agree. Oil makes the world go 'round, and theres less and less of it to go around everyday.

Fri, 03/04/2011 - 15:20 | 1019753 Dr. Acula
Dr. Acula's picture

>This has no historical precedent.

Actually, the prices of oil and gold have risen at the same rate when viewed over many decades. What you are seeing is the mundane and predictable consequence of inflation, defined as an increase in the money supply.

Neither oil nor human ingenuity is anywhere near exhaustion. 

Fri, 03/04/2011 - 15:16 | 1019764 tmosley
tmosley's picture

I hate you for your pessimism.  Oil was NOT the start of our current thrust up, and it won't be the end.  It has only been an accelerant. 

Further, this crisis is NOT a symptom of peak oil.  If it were, it would have been preceded by rising oil prices, not by rising monetary metals prices.  We have an oil shock ONLY due to unrest in the Middle East.  Having no water pressure due to a burst water main is not a symptom of peak water.

Fri, 03/04/2011 - 15:20 | 1019787 Harmonious_Diss...
Harmonious_Dissonance's picture

So your one of those Abiotic Oil guys, eh?

Fri, 03/04/2011 - 16:05 | 1019975 tmosley
tmosley's picture

1. There is a huge difference between "Peak oil is real" and "peak oil is HERE".

2.  "Abiotic" oil IS real, but no-one knows how fast it is, or if it even collects anywhere.  It has been proven by the discovery of oil digesting microbes (which can digest low hydrocarbons created by serpentization reactions deep in the crust, and by the fact of their existence create high-hydrocarbons) a kilometer beneath bottom of the Atlantic Ocean, in a region thousands of miles from any subduction zone.  That does NOT mean that the oil that we use was produced in that manner, but it could have been.  It also means that there are likely new reservoirs that are just deeper that are all "abiotic".

3. Peak oilers shout at the top of their lungs about peak oil every time there is a price shock, even if it is caused by politics.  Cry wolf too many times, and you lose credibility.

4.  There is a world beyond oil.  New technologies are coming that will make peak oil about as relevant as peak charcoal was to England during its industrialization (ie there was a minor depression as the supply of firewood for charcoal disappeared, but soon enough they discovered coal was actually much better for steel production).  Similarly, we have the possibility of replacing gasoline and other fuels with lithium-air batteries, charged by nigh-indestructible solar panels produced from graphene.

Fri, 03/04/2011 - 16:22 | 1020049 Bob
Bob's picture

Too damn bad there's a three year long line at the patent office.

Fri, 03/04/2011 - 16:31 | 1020087 That Peak Oil Guy
That Peak Oil Guy's picture

LOL!  You always crack me up, dude!


Fri, 03/04/2011 - 16:41 | 1020124 william the bastard
william the bastard's picture

cut and paste funnies.

Fri, 03/04/2011 - 16:42 | 1020129 Harmonious_Diss...
Harmonious_Dissonance's picture


Fri, 03/04/2011 - 16:40 | 1020126 Harmonious_Diss...
Harmonious_Dissonance's picture

Good points. Very interesting times, perhaps sustained high oil prices are not bad medicine in the long run? Otherwise instead of market forces, Obama, or whoever at the time, will decide what technology is best via gov't subsity...

Fri, 03/04/2011 - 17:17 | 1020321 tmosley
tmosley's picture

The oil shock in 2008 drove a lot of investment into alternative energy, including oil production methods that are coming online over the next year or so (at teeny tiny scales).  As oil price rises, those production methods will become more economical IF price is truly being driven by falling production.  General dollar debasement will NOT drive research n that direction, as the alternatives will get more expensive right along with oil.

Fri, 03/04/2011 - 16:49 | 1020148 CrashisOptimistic
CrashisOptimistic's picture


This is where you are wrong and how you and your family dies.

There is no world beyond oil.  Period.  End of subject.

There is no rule of the universe that says there is a happy ending.  There does not need to be.  The 1.8 billion who survive the next few decades will not be the cleverest or the most technically sophisticated.

Largely, they'll be the most lucky.  And they won't have computers.  That industry dies with all the rest, infected by the fatal disease of shipping costs.

Fri, 03/04/2011 - 16:54 | 1020177 tmosley
tmosley's picture

lol, according to you, this is how EVERYBODY dies (ie you say there is NO world beyond oil--meaning everyone is dead or shooting around in spaceships, lol).

You keep worshiping death in the hopes that when it comes it will spare you.

I, on the other hand, have PMs, so I am prepared for anything.

And don't try to throw "The Road" at me.  The only reason that guy wouldn't take the gold is if humans didn't produce anything anymore.  Mad Max is similar.  Those are jerk off fantasies of death worshippers.  Humans will NEVER stop producing.  Knowledge is too widespread and too easy to preserve now for it to be wiped out by anything less than a planetwide catastrophe.

Fri, 03/04/2011 - 19:14 | 1020781 naughtius maximus
naughtius maximus's picture

Abiotic means not made by biology. fail

Sat, 03/05/2011 - 19:32 | 1022569 tmosley
tmosley's picture

You will note the "quotes", which were accompanied by an explination.

In this case, "abiotic" means oil not made by surface microbes, but by deep dwelling microbes.

If you want to bitch about semantics, go troll some "organic" food forums and tell them that pesticides are organic compounds.

Fri, 03/04/2011 - 15:28 | 1019816 kaiserhoff
kaiserhoff's picture

Well said.  This hair on fire stuff is fun, to a point.  Remember Katla, BP, Iceland, Greece, etc., etc.

Nat gas is still near an all time low, and in essentially unlimited supply.  Many veggie oils are a fine substitute for diesel.  If we had Euro prices, every back yard in the midwest and the south would be growing canola oil, cameola, or some damn equivalent. 

Short term supply interruptions could be a problem, but high prices are solving the energy/rug head issue, even with special ed Obama at the healm.

Fri, 03/04/2011 - 15:51 | 1019924 Flakmeister
Flakmeister's picture

Re: Nat Gas, just for the record, US dry gas production peaked in 1970. We may yet exceed that peak, but it ain't unlimited.

Take a gander at the production graphs, it may sober you up.

Fri, 03/04/2011 - 16:25 | 1020059 Bob
Bob's picture

But the Canucks are good buddies.

Fri, 03/04/2011 - 16:28 | 1020070 Flakmeister
Flakmeister's picture

Did you look at the charts I posted? Hell yeah, good buddies

Fri, 03/04/2011 - 16:57 | 1020190 Bob
Bob's picture

Yeah, I was surprised.  But I knew about Canada. 

Fri, 03/04/2011 - 15:33 | 1019834 Flakmeister
Flakmeister's picture

    Still playing with strawmen, eh?

Look at DXY over the past 10 years, it does not come close to explaining the price in crude.

And, give me your take on the following:

I will repeat it again:

On an Energy basis, liquids have been flat since 2005

Net oil exports *peaked* in 2005


Doesn't it ring bells when 1.5 mmbd is compromised and the oil market goes ape-shit? Especially when every shill is saying OPEC spare capacity is ~4-5 mmbpd?

This isn't Iran and Iraq at the time of their induced spikes, there were roughly 5-6% of world production at the time. Libya is not one of the big boys. Wake up. 

Fri, 03/04/2011 - 16:22 | 1020053 tmosley
tmosley's picture

Don't use the USDX for anything.  It is worthless.  

Note that I was talking about the rise in the price of metals, which clearly preceded the rise in the price of oil.  If oil were peaking, the price of oil in terms of gold would be going up, but it is hovering around the average.  You don't need a bunch of flashy math to understand that.  Trav would argue that the production of gold has peaked, so "of course the price is going up", but he ignores the difference between gold and commodities.  Gold is not used up, while commodities are.  As such, production of gold only lowers the price of gold relative to oil.  ANY gold production will have this effect.  The amount of gold on the surface is quite steady, even with the large amount that is produced every year.  

As for ringing bells, understand that the loss of Libya has been accompanied by rising tension across the middle east.  Would you, as an oil executive, want to start pumping more oil when your workers are starting to clamor for the local government's head?  Further, I don't think you can just "turn on" more production overnight.

More evidence comes from the article.  The rise in prices we have seen a month since the start of this crisis has only been about 20%, less than you might expect, given the other crises on the chart.  Further, the price has been rising fairly linearly since the crash in 2008, right in line with dollar debasement, and at a slower clip than silver, and about the same as gold.

I am not saying oil prices aren't going to explode, but it isn't going to be because of peak oil--it will be because of politics and printing.  The faucet was turned off, the well didn't run dry.

Fri, 03/04/2011 - 16:30 | 1020085 Flakmeister
Flakmeister's picture

 You are dancing around man... so net exports doesn't click in? Are you in denial? You must be, because someone with your analytic skills can surely see what it implies.

Fri, 03/04/2011 - 16:33 | 1020096 That Peak Oil Guy
That Peak Oil Guy's picture

TM has all the signs of someone catching on to hard reality but vascillating between anger and denial.

TM, it is okay, peak oil is a good thing, not a bad thing.  We are shitting in our own beds and it needs to stop.


Fri, 03/04/2011 - 16:45 | 1020139 tmosley
tmosley's picture

Have a look at this chart and tell me what it says to you:

To me, it says that the US has been taking advantage of its dollar reserve status to get a bunch of free oil from the rest of the world.  Once that stops, MOST nations will be producing a surplus, but will have no-one to sell it to.  Perhaps that is what peak oil really is.  A monetary issue.  Correct the issue, oil production peaks (due to nations shutting off their overcapacity), and everyone except the US goes on as normal.  

Real peak oil, ie declining production as a result of no more easy to tap resources, might happen later.  If and when it does, oil prices will lead everything else, not the other way around.

Stop crying wolf.  It destroys your credibility as a movement.

Fri, 03/04/2011 - 16:49 | 1020158 william the bastard
william the bastard's picture

Your'e just noise. You don't know jackshit. Abiotic oil could be blowing out of the buttcrack in your face and you wouldn't know it. That's over your pay grade.

Fri, 03/04/2011 - 16:53 | 1020174 CrashisOptimistic
CrashisOptimistic's picture

You do not understand the difference between All Liquids and Crude / Condensate.

1 mbpd, a measely 1 mbpd out of 75, is triggering talk of military moves.

How can you not see that there is no slack in the system.  At all.  1 mbpd has translated to talk of military action.  It's all over.  We used it up.  That point in time had to happen at some time.  Now is/was the time.

Fri, 03/04/2011 - 16:57 | 1020189 tmosley
tmosley's picture

I do understand the difference.  Do you not understand that the US is the only one overconsuming a large amount of oil?

But you are so zealous about worshiping death that you can not be considered rational, so I have no interest in speaking with you further.

Sat, 03/05/2011 - 10:46 | 1021798 Flakmeister
Flakmeister's picture


    The chart tells me that oil is an international commodity widely produced and traded.

As for the DXY being worthless: Oil is traded in dollars, not PMs, so therefore the strength of the dollar against other currencies is appropriate to estimate the effect of the weakening dollar on the price of oil. C'mon you are smarter than that and to state otherwise is disingenuous..

You still have not commented on increased Chindian demand, the *observed* decline in net exports as exporters are increasingly using their own production domesitically.

You have still not reconciled that production has outstripped new discoveries since 1980.

You have still not acknowledged that C+C production has topped out and failed to budge for ~5 years.  The increase in price has failed to result in new supply.

You still show complete denial and misunderstanding about EROEI and its gradual decline over the past 30 years. The newer finds result in less net energy available for economic activity. This applies to NG and Coal as well. You do know that the coal we are digging up now has basically the energy density of wood?

FWIW, oil production per capita peaked in 1979...

We are at best on the plateau and very possibly beyond it.

As far as credibility goes... you have demonstrated none in matters pertaining to Energy. You realize you are risking becoming the Energy threads version of Johnny Bravo and William the Bastard...


Sat, 03/05/2011 - 19:59 | 1022606 tmosley
tmosley's picture

I did not say that the dollar was worthless, I said that the USDX is worthless.  Like an altimeter that measures the distance to the floor of the aircraft it is installed in.  It can be fooled by coordinated devaluation, which is what we have had for decades.  If you want to measure the strength of the dollar, you have to use something that can not be manipulated.  I don't have a good answer for that.  Gold might be good, or the CRB index.

Look, you can throw in all the complexities you want in an attempt to baffle any readers (whether it is bullshit or not I don't have time to address right now).  The fact is that the rising price of oil is in fact BEHIND the curve.  Gold and silver started rising first.  That is a fact.  That means that THIS economic depression has been caused by money printing, not peak oil.  I don't know why you people have such a problem with this.  You just have this idea in your head, and you want to bend the rules of causality to make it fit your theories.  You want to make all of this into something its not.  By doing so, you give a free pass to those who have brought us here.

Understand that I don't have a "belief" one way or another here.  I am examining the evidense as I see it.  You guys seem to jump to conclusions, and that burned the living shit out of your credibility in 2008.  As a student of economics, I look at what you are saying, and recognize the way out IS rising prices. 

Trav and Crashisoptimistic and others seem to have the end of the world jerk off fantasies that they refuse to recognize as being asinine.  They don't understand that as fuel and energy prices rise, alternatives emerge and become economical.  Once those alternatives come online, and gather capital, prices for both fuel and energy WILL come back down.  They refuse to see that technologies like genetically engineered fuel producing bacteria, new solar technologies, etc even exist, much less that they could even take the place of pumping oil out of the ground.  They use terms like EROEI, and use "thermodynamics" to say that they will never work.  This is foolish.  They refuse to acknowledge that there are different purposes that oil is put to (namely high energy desnisty fuels, electricity production, and feedstock for chemical manufacture), or that ERORI DOES NOT MATTER for two of those purposes. 

Funny that you try to compare me with one of those sickening trolls, just because I observe the FACT that oil prices aren't rising as fast as everything else, and started rising later than real money (ie PM) prices.  I have seen ZERO refutation of that point, only attempts to obfuscate the issue with overly complex arguments. 

Sun, 03/06/2011 - 12:12 | 1023483 Flakmeister
Flakmeister's picture

 Finally a moment to get back to this....

I agree that defining the true value of anything is difficult. But you do agree that the rise in oil prices since 2000 does not track with the straight "weakening" of the dollar or for that matter M2. We do agree that gold and oil have roughly tracked. And we do agree that it is interests of the FED to keep the price of oil and gold as low as possible. This is all very nice but not relevant to the issue of net Exports, which is the thesis under debate.

Yeah, there are some doomers out there. They are no worse than people that think energy supplies and consumption can increase foreever. Just that their view isn't shiny and happy. Don't ever attempt to discredit me for stuff I did not say or support. You are using the argumentative fallacy known as "Guilt by Association". Stop it.

Now to the meat. You of all people, claiming to have an economics background, talk about price as the driving mechanism. Sorry it is not. Economic activity relies on the leverage of free energy available to a society to create capital. Whether that be slaves building momuments that are fed from *excess* grain or a coal mine that burns some of the coal to power a pump to drain the mine. You agree that a coal mine that has to burn 98% of its produced coal to power the pumps is going nowhere fast? Now these are very simple illustrative examples, but the argument holds for other technologies. Corn to Ethanol is a modern example, it is "useful" to the extent you convert lower form of energy to a higher form by arbitraging the cost per BTU. I do not think you will argue that it is sustainable though, would you? I mean if it was not subsidized, it would be a money loser? Right?

Now, I agree that at some point oil will not be burned because it will too valuable for other purposes.  But here is the catch, we have finite hydrocarbon based energy endowment. Our transportation infrastructure is based on oil and well as our mineral extraction infrastructure. We have 1 trillion barrel of goo left and maybe ~250 billion that we can extract/synthesize. We use ~30 billion barrels a year. Now resources are not like a pan of brownies, so its not like taking a brownie a year. It is more a like a large can of water with holes at different heights. The hole at the bottom is the last to stop flowing... The EROEI for this goo is good enough, the order of 12 or so at present. What we have to figure out is the best way to leverage this endowment into an infrastructure that provides an adequate EROEI. We have 20 years to make a dent.  And right now there is no clear answer, wind, solar, nuclear have adequate EROEI, but they do not provide a fuel for our infrastructure. Using those solutions to convert one form of energy to another (CTL, GTL etc...) is being pushed but that only worsens the EROEI (and also is enviromentally destructive, but this is not my point of contention). It is not economics, it is physics and thermodynamics. Price is arbitrary, joules are not.

As far as where we are on the plateau, the issue of net exports is the tell. Short of invading the oil exporters to deny their population of their oil, how do you address this? The available oil on the market is descreasing and has been for 5 years. Do you dispute the analysis I provided?

You know my stance on PMs. Price signals in the energy sector are a bit different, oil is still the most economical source of energy. Users who lever its economic value will contine to until they cant. Unlike Gold, which we agree is very nice but not useful (i.e. it is not consumed), oil is consumed and as the price rises, marginal users are priced out of the market. So there is true demand destruction that does temper the price rise.

In essence, you have asked me to refute a point that is not relevant to the discussion. Price is not everything. You on the other hand, have not done anything to refute the peak in net exports or the flatlining of net liquid energies. These are facts, not opinions or beliefs or theories. You have failed to refute any of my postings on the nuts and bolts of energy. If we are to agree to disagree, then I simply ask you not to post your misunderstandings about energy on energy threads and we will have peace. The hedge is energy illiterate enough as it is.

Mon, 03/07/2011 - 21:35 | 1028221 tmosley
tmosley's picture

Please understand that it was never my intention to debate net exports one way or another.  That is a fact, and I am not going to dispute facts.  However, as a scientist, I spend a lot of time interpreting facts, experimental data, etc, and forming theories as to why things happen or don't happen.  When I look at a peak oil thread, I see a lot of people dismissing huge swaths of data that don't support their thesis.  They take the correlation between declining production and rising price, and then take rising price to mean declining production, no matter the circumstances.  This is a brilliant way to lose money, as they did in 2008.  Since it is very difficult to simply own oil, they, for the most part, could not just stay long from then until now unless they had zero margin and a LOT of conviction.  With gold and silver, it is easy to hold onto a position, even if it loses some value, as it did in 2008.

I was not associating you with doomers.  I was talking about a specific (very large) portion of the peak oil community, and specific members of this blog.

Yes, price IS a driving mechanism.  EROEI is reflected directly by the price.  Government intervention has made the direct comparison of energy producing technologies difficult or impossible.  However, peak oilers, in general, tend to deny the possibility of ANY alternative.   Every one I have dealt with here refuses to consider new technologies, which I have talked about at length, and they have refused to acknowledge scientific proof of "abiotic" oil (which is made self evident by the presence of bacteria greater than 1000 meters beneath the Atlantic plate, far from any subduction zone).  I acknowledge that the existence of those bugs does not by any means imply that all oil, or even any of the oil produced to now was created in that manner, but it DOES make it much more likely that there are many more deep reservoirs in existence that have not been tapped.  Further, for your coal argument, I would indeed say that that is a crappy coal mine, but it is a great way to dig a hole.  Once you get to the bottom, you now have a giant hole with a number of power generation possibilities, whether geothermal, methane recovery from garbage, or what-have you.  Other problems with your thesis, such as the problems with ethanol, are that you again fail to separate the different functions of oil.  There is fuel, for which energy density is the prime requirement (you think rocket fuel is energy positive?  why should it be?); chemical manufacturing feedstock, and energy generation.  Ethanol, of course, has the added use of intoxicant, for which purpose NO-ONE expects energy positivity.  Of course, it is a shitty, uneconomical fuel.  I am not debating that.  However, there is a price where it becomes economical as fuel, if not as an energy source.

You recognize the principles above, clearly, but it hasn't sunk in yet.  The missing link is economics.  You only see a price, forever rising as the supply falls.  Thing is, there is more than one way to skin a cat, and there is more than one way to provide electricity, fuel, and chemical feedstocks.  Most of these alternatives are expensive at small (start up) scale, but many scale rapidly.  At higher scale, they wind up becoming so cheap that oil resources become moot.  THAT is the thing about peak oil.  It only matters until it doesn't, and then it never matters again.  I see the same thing happening in silver.  I see numerous technologies coming to supplant the use of silver in everything from electronics to solar panels to medical devices.  Alternatives which, at scale, will be infinitely cheaper than silver ever thought of being, in addition to being more versatile and longer lasting.  All it will take is a rise in price that is high enough to get the first production plants started, and it will take off like a rocket.  Same thing with oil and the coming alternatives.  Just because you don't see the answer doesn't mean there isn't one.  There is ALWAYS an answer, it only depends on economics.

As far as net exports goes, please understand that the US is basically the only country that imports a large amount of oil, both in absolute terms and in per capita terms.  This has only been made possible by our hegemonic dollar.  As the dollar falls, and as other countries develop by adopting the free markets we have abandoned, they will naturally grow while we naturally wither.  The point is that oil hasn't peaked so much as the ability of the US to import has.  

And no, I will not shut up.

Fri, 03/04/2011 - 16:44 | 1020140 william the bastard
william the bastard's picture

I want the 30 seconds of my life back that I wasted reading that grammatically impaired non starter of a argument.

Fri, 03/04/2011 - 16:45 | 1020145 tmosley
tmosley's picture

You can get it back by drinking some ethylene glycol.  It will cure all your ills, as well.

Fri, 03/04/2011 - 15:54 | 1019932 Flakmeister
Flakmeister's picture


      you are a fairly sharp guy, but in energy matters you don't know shit. As Trav suggested, stick to the PM threads, where, you deal with the trolls rather effectively.

Fri, 03/04/2011 - 16:22 | 1020048 falak pema
falak pema's picture

You've put the clamp on TM worse than a japanese judo Uchi Mata.

Fri, 03/04/2011 - 16:26 | 1020068 tmosley
tmosley's picture

Unfortunately, I trained with the Gracies (figuratively speaking).

Although I did take a Brazilian ju jitsu class from someone who did.  I got to be pretty good.  No tournament champion or anything, but I could break a guys back if I had to.

Fri, 03/04/2011 - 16:45 | 1020141 william the bastard
william the bastard's picture

You're a liar

Fri, 03/04/2011 - 16:46 | 1020152 tmosley
tmosley's picture

No, there are literally thousands of people who have trained with the Gracies, and most of them have gone on to open up their own studios, many of them in the US.

But then, you are too stupid to know anything about that.

Fri, 03/04/2011 - 16:56 | 1020184 william the bastard
william the bastard's picture

Fuck the gracies you too

Fri, 03/04/2011 - 16:58 | 1020196 tmosley
tmosley's picture

lol, I dare you to go down the the nearest Brazilian jujitsu dojo and say that, coward.

By the way, when is QE going to end, coward?

Sat, 03/05/2011 - 11:37 | 1021850 Flakmeister
Flakmeister's picture

  Be careful how you chose your tactics...

I can assure you that you don't want me or someone else chasing you around with

"Hey coward, when are net oil exports going to rise"


"Hey coward, when is net energy going to rise"

Sat, 03/05/2011 - 20:02 | 1022615 tmosley
tmosley's picture

You will note that I have never said that energy prices would crash when net oil exports rise.  He has continually said that all PM holders are going to get smashed when QE ends, as if it were going to end tomorrow.

In fact, I never even said oil prices would crash.  It is much more likely that they will continue to rise, continuing the hyperinflationary feedback loop.

Sat, 03/05/2011 - 00:52 | 1021483 lo574
lo574's picture

This research paper by James Hamilton @ U of C documents recessions and economic downturns which follow a spike in crude.  Going back to the 1800s there's clear evidence that history is about to repeat itself once again and you got it; it's not going to be pretty.

Sat, 03/05/2011 - 20:06 | 1022617 tmosley
tmosley's picture

No arguments here.  It certainly does.  The question is, what caused the price of crude to rise?  Is it the end  of oil, or was it just money printing.  The fact that oil has lagged just about everything else points to a monetary problem.  This does not mean that this won't be a problem in the future.  It just didn't cause THIS crisis.

Fri, 03/04/2011 - 15:04 | 1019720 Id fight Gandhi
Id fight Gandhi's picture

Why are they chasing the momos today?

Fri, 03/04/2011 - 15:10 | 1019745 Caviar Emptor
Caviar Emptor's picture

This is the economy.

This is the economy with an oil shock.

Any questions? 

Fri, 03/04/2011 - 15:17 | 1019773 Caviar Emptor
Caviar Emptor's picture


Give me oil, or give me death!

Or give me a little of both because of the health consequences ! 

-A Patriotic American from 2011

Fri, 03/04/2011 - 15:21 | 1019790 ivana
ivana's picture


- 1971 Nixon declared USD full fiat - no gold backing
- 1973 Oil HAD to soak up piles of fiat bs
- USD fiat continues down until end of 80ties
- than Walker fixed it temporary with astronomic interest rates + iraq/iran war and oil up again

this time utilities control food prices, commodities etc so we are in foreplay at the moment ... waiting for oil to go up up mich higher as MENA unfolds

Fri, 03/04/2011 - 15:24 | 1019809 malikai
malikai's picture

So is anybody buying the +200pt dip in the DJIX?

Fri, 03/04/2011 - 15:45 | 1019889 clones2
clones2's picture

no thanks...  i see a few sectors and large cap stocks breaking 50 dma support today.  I'm waiting for the market to choose a direction from this volatile choppy range.  Looks like a top has formed to me.

We shall see...

Fri, 03/04/2011 - 15:26 | 1019815 Guerette
Guerette's picture

What's an appropriate call option? DIG, USO or WTI/Brent future options? Any thoughts?

Fri, 03/04/2011 - 15:46 | 1019897 clones2
clones2's picture

I like "OIL"....

Fri, 03/04/2011 - 15:42 | 1019877 Village Idiot
Village Idiot's picture

Yom Kippur? Yeah, we Jews kicked some ass in that one. 

Fri, 03/04/2011 - 16:05 | 1019981 Tense INDIAN
Tense INDIAN's picture

Nifty ---Some pretty charts ..............

Fri, 03/04/2011 - 16:16 | 1020023 Tense INDIAN
Tense INDIAN's picture

Some Pretty Charts showing India will get SICKER

Fri, 03/04/2011 - 16:55 | 1020183 chistletoe
chistletoe's picture

this is not comparable.  history does not repeat, but sometimes it rhymes.

Long before crude gets to $350, there will be riots, anarchy, armed looters in every corner of the globe as governments everywhere collapse.

Fri, 03/04/2011 - 16:59 | 1020200 Lapri
Lapri's picture

Someone bought 15,000 USO July $42 calls today at $3.80 a piece (x100). Open interest was 9664. He must have read Zero Hedge..

Fri, 03/04/2011 - 23:09 | 1021293 walküre
walküre's picture

The short side was bought hard today. If we're seeing a repeat of 2008 with a massive spike and then a brutal selloff, the short side will be rewarded well.

Oil is going up on speculation and fear, not market fundamentals. The fundamentals are getting worse, the economy is sliding into recession.

This is almost fools play.

Dollar debasement or not. 2008 was a precursor of what's possibly coming.


Fri, 03/04/2011 - 18:21 | 1020612 Dr. Acula
Dr. Acula's picture

Oil/gold price ratio basically hasn't changed for decades

Go back 60 years and you'll see the ratio is almost identical to today's.

Nominal prices are rising largely due to inflation (of the money supply). Duh.

Fri, 03/04/2011 - 22:45 | 1021255 Bringin It
Bringin It's picture

That's why the Saudis sell oil cheap.  They get to accumulate gold cheap.

Sat, 03/05/2011 - 02:52 | 1021586 PulauHantu29
PulauHantu29's picture

Nice chart. Doesn't it show there is a good chance oil will go up, i.e., the numerator will rise similar to 2008-2009 especially given the ME situation?

Or am I reading it incorrectly? Thanks.

Sat, 03/05/2011 - 11:10 | 1021830 DaveyJones
DaveyJones's picture

how does this chart change geology? We can and do manipulate the price of both. All we do with crude is manipulate the speed of extraction   

Fri, 03/04/2011 - 18:54 | 1020730 Yen Cross
Yen Cross's picture

Interesting Mask Dr. acula (aculla?) I'm not a crude expert, but I am a F/X expert. I would enjoy a dicussion with you,on your time "of course". Thank you.

Fri, 03/04/2011 - 20:19 | 1020979 Buck Johnson
Buck Johnson's picture

This is spreading into Saudi Arabia and it will soon break into the MSM.  The kingdom has a major problem with unemployment of both Sunni's and Shia.  Also a large youth population that is in this predicament and you have revolution.  People say they like the king, but it's hard to go interview someone with a different view if it's done in Saudi Arabia.  They see how much the king and his 7,000 prince and princesses and hanger on's have squandered the wealth of the country.  That much wealth in a country of 29 million (as of 2009 there where 8.8 million expats working in the country) should have made that desert into a paradise and the people one of the richest per capita in the world.

Sat, 03/05/2011 - 02:46 | 1021580 PulauHantu29
PulauHantu29's picture

350% is reasonable. After all, The Bernank has just lost control of silver manipulation and he and his jolly band of rogues is having a nightmare trying to control oil when the demand for physical is going through the roof.

Mon, 03/07/2011 - 20:37 | 1028050 lsjcma
lsjcma's picture

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