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WTI Crude Jumps By Over $2, Wipes Out $200 Billion In Annualized GDP In Under Two Hours
Following the earlier news from the DOE of a crude drawdown 4 times greater than expected, which happened to be the biggest weekly drawdown in 9 years, WTI has exploded by over $2 in the last two hours, and is once again threatening to take out the important $90 psychological barrier. What is the impact of this on the US economy? Oh just $200 billion in GDP. With a minus sign in front. And so, a substantial portion of the "benefit" from middle class tax cut extension has been eliminated almost entirely in just under 2 hours.
To wit:
Investors -- certainly U.S. stock investors -- would be wise to keep one eye on the price of oil, currently pushing $90 per barrel. Oil traded up 10 cents to $89.29 on Monday at mid-day.
And the reason is obvious enough: once again, oil is approaching the danger zone, from a U.S. GDP growth standpoint.
No one knows precisely at what point oil begins to substantially hinder consumer spending and slow commercial activity -- but this much is known: every $1 per barrel rise in oil decreases U.S. GDP by $100 billion per year and every 1 cent increase in gasoline decreases U.S. consumer disposable income by about $600 million per year.
This is all good though: it merely means the administration will battle future deficits by providing a $200 billion gasoline consumption subsidy. After all as democrats and republicans now agree, the only way to battle deficits is to spend much more.
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The Bernank is feeling the squeeze now.
And tax cut proponents, like myself, are feeling the futility.
Feelin the futility all around!
Oh well, easy come, easy go. I think this is the kind of matrix of interlocking financial problems that we're supposed to have in mind when we contemplate the probability that this is not fixable.
Every dollar is spoken for.
I am become debt, destroyer of wallets, I have come to claim this wealth. Even if you do not tax, it is all mine.
Actually I think everyone is going to feel this squeeze.
TSA might get jealous.
The Bernank spent all those years in his ivory tower. Too bad he missed these three simple words.
No. Free. Lunch.
He's probably had a government provided car and driver for what 20 years?
And didn't the Fed write a paper that said higher oil prices were good for the economy?
Fedtards.
Don't forget unemployment checks, a two for one boost to GDP according to the CBO, so as soon as we're all on the dole, it's "to the moon, Alice."
Ha, Ha. yes, well I suppose it's not part of "higher" economics.
Merry Christmas from your friends in the criminal syndicate known as Wall Street. Higher gas prices for all, and for all a good night.
eh frak it, who is travelling anymore anyway. Higher gas costs and getting fingered by the TSA.. YAY!!!!
AAPL up 2.06 which could only mean there is an app for finding oil two miles underground and a mile under the ocean, then producing it, transporting it half way around the globe, refining it, and transporting it it to my car, all without using more energy than said oil provides.
Oil doesn't have to be energy positive if you are using it to run your car. It only has to be energy positive if you are using it to run the grid, or if you are using it to run your oil rigs.
Demanding that oil production be energy positive is like demanding battery production be energy positive. There isn't really a reason for it, and in the long run it is likely going to be impossible, absent rapid replenishment rates from oil production deep within the crust.
It is the delta in EROEI over time that is a bit worrisome. No?
What I am saying is that you need to separate out the functions of oil into their different uses to see which ones are economical and which ones aren't.
The primary uses of oil are: a. fuel for cars, trains, ships, etc. b. as feedstock for plastics and chemical synthesis of many types and c. as an energy source (ie burning it to produce electricity).
The only use where the EROEI matters is C. Replace the use of oil with other energy sources, and you have no problem with A or B, because the increase in energy required to produce them only leads to higher prices proportional to the energy input. Since there are other ways to generate oil than pulling it out of the ground, there is an upper boundary to the price. Though such a rise in price might lead to a recession or depression, free markets (if they are allowed to operate) will force capital investment to either increase the availability of oil or some other equivalent energy storage mechanism, or force capital investment into methods of transportation that require less fuel. That might mean an end to personal "light trucks", or even cars as we know them, but it could easily lead to something better (perhaps buses, light rail, or high speed Segues). It certainly doesn't mean everyone will be forced to start taking horse drawn carriages wherever they need to go.
So you agree that the delta in EROEI over time is a bit worrisome?
Short term yes, medium term somewhat, long term no.
On a long enough timeline
the survival rate for
everyone drops to zero.
This fellow tmosely is somewhat typically a denier of oil scarcity, but he has this particuar issue correct.
It does not matter if you are energy negative for oil, because there is no energy crisis. There is an oil crisis. If you have to run sea water pumps on coal powered or nat gas generated electricity in order to get oil to the surface, then do it. Coal doesn't power trucks that bring frozen meat from Kansas City to NYC. Oil does. And always will.
Are you a psychic?
Coal is perfectly capable of running trains from KC to NYC and other routes; recently a pair of chinese coal burning locomotives were bought by a railroad in the midwest and used for a demo. to haul 6,000 tons of American primary food production. This technology is all ready to go; and there's more high grade American coal then we know what to do with.
Anthracite is used mainly for coking now, too valuable for anything else. The energy density of coal being pulled out of Powder River is the same as Oak. For all intents and purposes we are mining wood.
What does this have to do with anything?
The price of oil is so f'n far removed from anything even remotely resembling either the concepts of supply or demand that I'm not sure I get your point.
The price of oil is yet another rigged market game brought to you by the criminal syndicate known as Wall Street through such games as sweet no money [virtually] futures trading between too infrequent delivery days.
If you had just been paying attention, you would have seen, for example that the syndicate did not even stop there but, upon ramping the stupid oil futures up on nothing [unless you count the criminal syndicates "expectations" for a weekly and bogus inventory report as something]...they answered that stupid manipulated futures spike with a sell program in the energy stocks in which, I might add, the criminal syndicate known as Wall Street is overweight...at least until 30 seconds ago.
Listen...don't put a fundamental argument on top of a totally bogus momentum rally because, when you do, you just look stupid.
Ummm, I think it was a joke?
Oh...well maybe I did not get the joke. If so, my apologies...but also Hedgeless kept altering his post...so even now I am not sure what he was trying to say.
Anyway, my sense of this oil rally stands, and I saw what I saw, and I'm hearing what I am hearing, and I do believe the price of oil is very probably near collapsing altogether....because the entire "price discovery" thing there is a complete farce like everything else in this market because it is polluted by criminal Wall Street bankers.
Hi ho.
Graham, Dodd, Bernanke, Jobs, and Hubbert together in the blender makes me look stupid?
Again, I am not sure about your question, nor am I confident that I get your sense of humor, so I could very well be wrong about you...but not about the spike in the oil futures today...a subject on which I am entirely right.
But I did extend my apology for the apparent language barrier between us...if that is what is causing confusion...or what have ya.
The professional junkers are out today...
Then one day he was shootin' at some food, and up through the ground came a bubblin' crude. Oil that is, black gold, Texas tea...
Glad I own a Honda.
Heh,
I say bring on the $4 gasoline again. Too many people driving around by themselves in 3000 lbs vehicles burning up fuel like it doesn't even matter.
Ill just use my scooter that gets 80mpg and I won't even think twice lol.
I also have a KLR 250 enduro(on/off road) .... tons of fun. Like a scooter not fast, but the same design for over 20 years. The military uses them because the parts are global, starts with 1 kick every time. 80-90 MPG.
Nice! I went with the Honda XR650R, but yea same deal, tons of fun out in the desert.
Sorry Sheep-
I'm pushing 5'8 I could not sit on your bike... Lo'
DR350
Thumpers, bitchez!!!
heh I have a 1985 KLR600 and couldnt help contrasting experiences here
dont u just love the old technology.
Everything you buy probably comes on a truck, not a scooter. Yes, you will be paying more for everything.
Exactly. Its not about SUV's or electric cars, its about long haul truckers being squeezed to oblivion. Hard to ship pallets of food to stores on Vespas.
You have obviously never been to India. If they can fit 400 people onto a scooter, I bet they can fit a few pallets of food on one!
Joking of course.
In all seriousness, if people are squeezed enough to stop driving their cars, that will leave a lot more fuel for the trucks. Think about the aftermath of 2008. All bets are off when hyperinflation hits, though.
...and in India they drive scooters in 4 inches of snow, with 30 kt. winds and 20 degree temps ? Yeah, those scooters are the shitz in the middle of a northern US winter...
Cash for Junkers last year sold mostly big gas guzzlers trucks etc.
Top selling autos were light trucks. These people aren't gonna have a merry Christmas.
Fuck those retail numbers
oh, but where do you put your family? oh, that's right you don't have any......
Drive down the road and take a look at the people you see driving vehicles. 99% of the time it will be a single person in a 5 person vehicle. It isn't about having every vehicle be a family . It's the fact that almost every single American thinks it's their god given right to just use as much resources as possible, screw the consequences. If this statement weren't true, you would see more people driving scooters, maybe because it saves gas and costs less, but primarily because in general it helps out in lessening the overall consumption of resources.
I own a midsize truck and a scooter. The weather where I live allows me to drive the scooter for 8 months out of the year. I'm a college student and having the scooter actually gives me the opportunity of parking closer to many of my classes while many other students either park far away due to parking constraints or sit at the end of a parking lane and wait for 20 minutes until a spot opens.
Even if I were 45 years old and had a family and kids, I would still own a scooter/motorcycle and would use it when I can. Your statement that "I don't have a family" is just ignorant and unfounded. Claiming that having a family requires you to own several large vehicles and drive by yourself is also a pretty ignorant claim. Otherwise, you would see more vehicles carrying multiple passengers rather than 1 person.
This is why I welcome expensive gas prices. I wouldn't mind it going up to $10 dollars a gallon. Then people might actually start carpooling and being more conscious of their consumption. Yeah it will impact shipping costs too but there is currently 330 million people in the United States. If just 1/3rd of the population currently drives thats 110 million people. Consider the average mileage of a driver is 12000 miles per year (average out the mileage about 25mpg), thats 480gallons per year per driver, or 52 billion 800 million gallons of gas per year for the 110 million drivers per year. If you could cut that fuel usage by 1/3rd due to $10 gallon gas, you would have 17 billion 600 million gallons.
Considering you get about 19.5 gallons of gasoline per barrel of oil produced, and the world oil production is about 72 million barrels per day. That means the world produces about 1.4 billion gallons of gasoline per day. Under current U.S. usage, it takes the entire world about 38 days to produce enough oil to supply just the United States with enough gasoline to supply consumers who drive cars each day. This is all using the very conservative 110 million driver estimate. If you consider a much more realistic 190 million drivers the numbers go up significantly higher.
So I guess being conciencious about how many resources I use means that others can just jump to the conclusion of "I dont have a family". You can also just make excuses like "if you have a family you have to have several 5 person vehicles". I don't care what your excuse is, when gas hits $10 a gallon, I will be enjoying the changes that people will make in their consumption. Most likely though, people will still consume as much as possible.
Hey there is a "shortage" of oil? Supply and demand, right?
This is great news! Retail numbers will be up next month again, ex-automobiles, of course. If this isn't worth 50 points on the S&P, I don"t know what is
they just need this to help pitch the Volt.
Fuck the volt. Who has 44k for a hybrid. You can buy two prius for that.
Are they all leases? So just a financial fuck job in three years for gm when they aren't worth shit.
I'm willing to stipulate that a GM isn't worth shit; I wonder what the next one will be called ? The Watt ? Or the Amp ?
The minute we stopped exporting fuel to Japan they struck. The minute we stop the welfare state they'll lash out - except every day theres more of "them". Rising prices on everything those able and willing to work/earn a wage until they can't pay will accomplish virtually the same thing in my humble opinion.
Whatever. The market is up, The Dollar is up, I drive a Corolla. Life is good. Next....
Does you farmer use a Corolla to drag a plow, seed drill, fertilizer sprayer, and as a combine?
No. I live in it. Very difficult to sleep at night.
Or you can be like me living in a van down by the river.
oooo, you rich! I have cardboard box under bridge. We'll be like Hong Kong where people rent dog kennels to sleep.
No kidding ! But where do the dogs sleep ? In apartment houses ?
0.1% inflation bitchez
Hillarious to calculate quickly and see that Bernankes entire POMO mission has now been totaly lost. Pump FASTER Ben! PUMP!
That's all right. AAPL stock just added $200B in 2 minutes.
It's past time to convert to Nat Gas and solve this problem for the next hundred years. All we need is competent leadership..., oh right.
Did'nt they just find a billion barrels of oil in Ghana?? What shortage? This is like climategate, total BS.
A whole billion barrels eh? Well, at current worldwide consumption rates (85,085,664 barrels per day per the CIA world factbook) that should last just over 11 days!
As you say - what shortage? We can always find another billion barrels in a couple of weeks...and again a couple of weeks later..etc..etc
That damn math, again! First the national debt, now oil! What is next, food and water?
How'd you guess?
Dealers offer Fed $13 Billion in debt...Fed takes $6.7 Bil.
Those nay-sayers may wish to comment on the following
http://www.glgroup.com/News/What-statistics-can-tell-us-about-future-world-crude-oil-production-rates-51871.html
World production of crude (C+C):
Year Wells Production (bbl/day) bbl/day/well
2005 807,172 72.361 million bbl/day 89.64
2006 867,750 72.647 " " 83.72
2007 867,853 72.160 " " 83.15
2008 883,691 72.822 " " 82.41
2009 913,978 70.908 " " 77.58
I'll be impressed if we aren't seeing $100 a barrel by summer. The only thing that would prevent that would be a collapse of some large economies.
Don't confuse cause and effect.... it is price of oil over $100 that will lead to economies collapsing. Demand will then fall, oil will drop in price and the cycle will repeat. We are entering the saw-tooth phase.
+1, -1, +1, -1, +1...
LOL it's good to have a sense of humor.
Mub
Munis are fucked
Papa,
Ummmmmm, your comment is either funny or ironic. It is so because, clearly, we have had huge economies collapsing. If you visit the demand side of the oil conundrum, you will instantly see what I mean.
Funny, also, is that you make no mention of a currently malfunctioning price discovery system [futures] which does not work properly because....1. The free market is not free 2. because oil companies like it that way.
You see, with too few delivery dates, and so little capital required to gamble, crude oil price discovery has entirely disconnected from normal forces like supply and demand...which is why we went to $150 a barrel and then plummeting down to $35 per barrel [in case you need a concrete example of what I am talking about.]
But carry on...and Merry Christmas...your gift from the criminal syndicate known as Wall Street is $3+ per gallon gas...because the syndicate knows what to do when its expectations are not met...if you know what I mean ;)
Bit too coincidental with the collapse in oil prices, don't you think? Oil production could have peaked at any time in the last two decades or in the next X, but it just happened to fall right in the middle of a global depression?
I wonder what world production was 1900-1950? Did it slightly decline during the depression?
To be honest, oil looks cheaper to me than it ever has in my lifetime: http://www.incrediblecharts.com/images/png_images/gold-oil_ratio_30yrs.p...
Edit: well, slightly off the lows: http://static.businessinsider.com/image/4bbb7fb17f8b9a9c6f3f0300/chart-o...
Lets get the time line correct. Oil spiked in June 08, the world economy was flying at the time. The fewment didn't hit the blades until September. The price dropped and bottomed when despair was its highest, Mar 09 and has been steadily climbing since.
When oil peaked at 147, the monthly average price was 134. It was a blowoff top. I would argue that the price action above 125 was driven by the specs.
Supply (oil production) and demand (oil demand, not consumption).
Yup, the price spiked in June and 3 months later Lehman folded. Mortgage payments were being pumped into gas tanks. It all unraveled.
Oil has now been at $90 in 2 of the last three years. Consumption is climbing, so demand is, too. Production is not, particularly.
Never EVER forget that oil demand is not synonomous with oil consumption. Right now the two are used as the same word.
When you see a curve on a chart of oil demand and under it, oil consumption, that will be when wars start. Soon.
Don't forget we all got a 3-6 hundred tax dollar "rebate" that year.
At the time I remeber thinking "Hmmm... The rebate checks came out and the prices went up a month or two later. Bush must be giving his Oil buddies a parting gift before he leaves office".
It fully cancelled the value of the Rebate.
Why, WHY on Earth, have the administration done nothing to reduce the oil dependency in the US today when the ground is flush with natural gas (as one alternative). Pickens, among others, have outlined simple plans on how to change this (http://www.pickensplan.com/).
Would be great to hear some theories addressing this. I find it hard to believe that this is because of lobbying by Exxon et al; after all, low oil prices would be in America's interest as it's a net importer (and will continue to be so going forward).
Because Obummer's left flank is guarded by those who worship solar power, and (literally) windmills. The simplest explanation is usually the truth.
No, because a 42 gallon volume (1 barrel is 42 gallons) of natural gas has about 1/1000th the energy in it as an equivalent volume of oil.
Guys it was announced that this is the First $3 gasoline Christmas ever!
In the past it only happened during the summer driving months.
This is a huge signal of inflation, for those of you out there who are looking. Meanwhile, we all know what's going to be deflating.
But they'll just *cntrl alt del* as usual...hell food and energy are not included in CPI so $4.50 gas in 25% unemployed america with the newly ignored 'mortgage debaucle', all is WELL! Boom times! Followed shortly by ka-boom times but oh well, rally on bitchez.
Are you serious? I'm kind of new here..haven't really looked into CPI calculations (I've got a feeling it would just be depressing), but food and energy aren't included? That's like 25%+ of spending in Canada
Food and energy are, of course, included in CPI, and very properly so.
Don't believe all you read on ZH.
The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:
Another great sign: Maxwell House caves and announces today an across the board rise in their coffee price.
Excerpted from:
http://www.chrismartenson.com/blog/straight-talk-tyler-durden-can-us-avoid-free-falling-bankruptcy/49554
What is without doubt is that like any natural resource, the accelerating extraction of oil will deplete the resource, once again based on increasing marginal rates of utilization. While we certainly would wish that the G20 countries were investing capital in alternative energy infrastructures, this will come sooner or later, voluntarily or otherwise. The longer the delay, the greater the ultimate incurred cost. In the meantime, should oil and other commodity prices surge, well-known higher priced alternatives (solar, geothermal, wind) will suddenly become equitable, and as more and more energy production shifts to less efficient modes of energy creation, increasingly more R&D spending will occur in those alternative fields, which in turn will result in a decline of the energy equivalent costs as efficiencies improve
Chris is a great resource but he fails with regard to timeline. This quote will more than likely be true... 21 years from now.
there be no shelter here
Don't worry the Irish austerity measures will offset rises in Chinese consumption................................... ............... ......
.. .
Bicycles bitches
Not rioting in the home country after the vote?
Just wait. They won't allow the press to film inside the underground training bunkers down in Cork; not even the Russian press.
The Eksund's siblings may yet get in the game?
Larry boy , there will be no rioting until they cut the dole in half.
However the middleclass are already silently rioting in this country - the deposits of the Irish banks are being drained of cash - some is remaining as cash ,some is going to the post office / and foreign banks and I bet a considerable sum is being converted into PMs.
The farmers especially who sold land to the developers and banks are converting their cash to hard assets.
Just remember in a property bubble there are two sides to the trade - unfortunately our most productive elements have bought the bullshit and will leave again for pastures new.
Its always been this way here - the place is a gigantic septic tank.
The Irish banks are fucked beyond repair - Olli and co just want to get something back by taxing the exchequer - good luck to them when all that will be left soon is pensioners ,toddlers and Nigerians.
thats what inflation's for, no need for actual cuts, few years should have it halved nicely.
No Poles? Then no plumbers, which explains the, "gigantic septic tank."
Larry Boy to the rescue? http://www.larryboy.com/police/images/mugshotjpgs/LarryBoy.jpg
@Hedgeless
Yes there are still Poles here - I am secretly hoping that when I am a dirty old man I can purchase a Polish / Irish hybrid model for the road.
Higher the oil/gas the more tax revenue, there is no such thing as coincidences.
Assuming consumption stays the same? Big assumption, and did not prove to hold true last time gas was at $3.50.
How does that work? Sliding scale for taxes indexed to price or will I just use as much as possible?
For auto gas for instance, High population density areas will still buy now matter what. Over 1/3 is tax. Local muni can tax it also. Percents go up to price.
http://www.gaspricewatch.com/usgastaxes.asp
Thanks for this:
I learned something today.
Our enemies know this and are laughing all the way to the bank
"We have met the enemy, and he is us" Pogo; a cartoon character.
In 2008 when gas peaked, its likely that helped collapse the economy. Too much to pay for gas, everyone cuts back, mortgages go under.
But this isn't inflation - it isn't included in the CPI
Bernanke suicide imminent.
dog collar inflation is catching on quickly. Would the most effictive be a choke-chain?
it's not even officially winter yet! gonna buy me a new siphon!
Tried it. Doesn't work on newer vehicles with the screens installed in the filler tube. Damn!
Oil production is flatlining. The peak is not a V. Flat is not good enough.
China this year bought 17 million cars. The US bought about 9 million. What is worst about this is that the 9 million US cars usually have one drop off the age cliff and get junked off the back end when a new one arrives. For the Chinese, they have not been driving that long. All 17 million is new oil consumption -- not consumption balanced somewhat by an old junker getting broken up.
Chinese sales are expected at 21 million in 2011. And 27 million in 2012.
How many of those are electric in 2010? I'll tell you. 5.
No, not 5 million.
5.
How many are "volts"? how many are a "volt"? hmm. maybe this is good for exports?
the inflation CPI thing is total BS. Ben wants to reflate the economy, and he certainly reflated all the prices we need every day, but these price increases are not included in his fuzzy numbers. the who economy is based on these fuzzy numbers.
Inventory draw down just lowers their property tax bills now.
Call the Helicopter Ben for assistance. He will compensate any additional expenses.
Are numbers with zeros on the end really so "psychologically important" to you pathetic lot? Damn you guys are easier to herd than sheep.
Did someone say "wealth effect"?