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Is Crude Setting Up for Something Big?
By: Brad Thomas and Chris Tell at: http://capitalistexploits.at/
Our friend and colleague Harris Kupperman recently wrote an article about Kashagan and the massive delays being enjoyed by this particular project. The problem is that Kashagan is a poster child for the sector as a whole. This isn't an anomaly.
Let me copy a few key paragraphs from his article:
Ever since oil prices bottomed in 2002, people have wanted to believe that new supply would reduce prices. Over the past decade, they’ve talked about increased Iraqi and Libyan oil; there has been the promise of tar sands and Brazilian pre-salts and now they’re talking about shale oil. Yet, despite all of this talk, world oil production has plateaued for years.
The simple truth is that much of the world’s easy oil has now been exploited. The world isn’t running out of oil any time soon, but we will need much higher prices to bring new supply online.
The oil industry is not dissimilar to large scale infrastructure, something I will never invest in for all the reasons I laid out here.
Further evidence of just how easily things go wrong in this industry landed in my inbox a few weeks ago from a friend, who is a technology expert working on an oil and gas deal.
Chris,
I'm working on an oil/gas field project these days. That industry has an amazing amount of waste - recently a series of shale oil wells were dug with pipe measured (manually) by a tape measure with 3" of the length project off - no one noticed. So all of these pieces of the well pipe were 3 inches short and thus the assemblies for 11 different wells came up short. In all cases, bits didn't make the end so all the wells had to be filled with concrete and started over.
A $100 tape measure cost $100M in damage with almost a month in delays, pulling bits back out of the wells, concreting them, starting over etc.
Yikes!
Laugh, or cry, this sort of situation, while anecdotal shows us the immense numbers involved and when something goes wrong it costs a HUGE amount of capital.
The reality is that the industry has failed to bring on increased supply and while in the short term fundamentals don't matter a jot in a central banker liquidity driven world, in the long term they ALWAYS matter.
Harris goes on to discuss the fundamentals...
Just look at how complex the problems related to these mega-projects are—mistakes in engineering can cost tens of millions and delay billions in cash flow. With oil at $100 a barrel, prices just aren’t high enough to justify the investment in many of these projects. At the same time, investors are learning that shale oil wells have higher decline curves than expected, which substantially reduces the economics on many of these projects.
Over the past few months, I’ve heard some very smart people speculate that oil prices will decline as new supply comes online—mainly related to shale oil. This just isn’t the case. If prices decline, it won’t be on the supply side—it will be demand related.
The oil bull market started over a decade ago and is a trend that you can bet on for decades into the future. Every time a Kashagan gets deferred by two years, it will force producers to re-assess their oil price assumptions for investment, and possibly choose not to make the investment. Don’t let people convince you that oil prices are going lower, they aren’t—they’re likely going much higher. If someone wants proof of this, have them do a bit of reading about the decade-long fiasco named Kashagan.
Even without Iraq descending into a civil war, the fundamentals for oil going higher are hard to ignore. Brad Thomas and I have made a habit of catching up on the markets on a weekly basis and so it was with interest that, when I rang him up this week and said something along the lines of "what's the topic this week?" he immediately responded... oil.
Brad's rationale is driven from his trading strategy which is "finding deep value situations with an asymmetric payoff". Brad mentioned how so many times over the decades of trading the markets he's been down 50% or more on a trade with years to run to expiry and has ultimately made out like a gangster with a bad rap song and millions of Twitter followers.
Specifically, Brad looks for low volatility coupled with very favorable fundamentals and his alert to subscribers this week he just bought a large oil company with 2 years to expiration. I've excerpted a small portion of his rationale...
All the recent talk about crude moving higher due to problems in Iraq/Ukraine is very misleading. For the last three years something has been brewing with crude. Its trading range has been narrowing and it appears to be set to break to the upside. Considering that crude has essentially gone nowhere for some 4 years, the upside is likely to surprise most, perhaps to a magnitude that will rival what happened in early 2008!
Take a look at crude - seems this sucker is about to blast into the stratosphere! We can see the base being built over the last 3 years. These formations typically break either up or down and given the fundamentals discussed I don't want to be short.
Brad then goes further to explain what makes for the asymmetry in the trade...
Few, if any, are expecting a dramatic move higher in the price of crude. I say this because volatility on long term call options on the big oilers is being sold at record low levels, and materially lower than it was being sold in 2007 prior to the price of crude doubling in some 12 months. If it was expected that crude would move materially higher over the coming months, then volatility certainly wouldn’t be sold at such low levels.
Both Harris and Brad are two of the most knowledgeable traders I know, and both believe we should be looking at this sector right now. I'd love to know your thoughts. Send them to us here and as a shameless plug, I recommend you take advantage of Brad's 30 years of trading experience for less than the cost of your morning latte.
- Chris, Brad and the team
"A century ago, petroleum - what we call oil - was just an obscure commodity; today it is almost as vital to human existence as water." - James Buchan
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Nope CRUDE is not setting up for anything.
But assholes are.
HIGH PRICED OIL DESTROYS GROWTH
According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices. http://www.iea.org/textbase/npsum/high_oil04sum.pdf
> Oil cannot go any higher because even at 100+ it has destroyed growth (QE ZIRP are efforts to offset the impact of high oil prices)
> But if oil prices don't go higher big oil will not invest --- already they are cutting capex because they cannot make money on new projects even with oil at 110
> Oil cannot go much lower because tar sands shale require 80 bucks or more to break even --- so they would collapse
THERE IS NO WAY OUT OF THIS.
My read is that you spike crude higher prior to the Iran deal so the big guys can take their money home ...the issue is not crude supplies but product demand that is critical. Higher crude simply squeezes the refining margins that have been quite healthy for the last few years. Exxon still made 9 billion in Q1 this year!!
Inflation requires a change in expectations and certainly back warded markets in crude is not reflecting such....
Diesel market on the other hand are in contango, meaning demand is so poor that market paying supplier to store!
"world oil production has plateaued for years." I thought with U.S. oil production going up a million barrels per day year after year and the U.S. consuming half of as much imported oil as five years ago, the whole peak oil crap would be laid to rest but no. These Malthusian idiots keep bringing up the concept that is only logical that some day we are going to run out of things. Sigh. Reality check more people = more food not stravation. And more people means more oil.
The reason production has "plateaued" has been policial not geological. Iran went from 3.6 mbpd of oil production to 2.8 mbpd because of Obama's embargo. Libya was doing 1.7 mbpd, and while you don't see any news reports about it anymore, things are awful there. Production was 0.2 mbpd after Gadaffi went down, got up to 1.3 mbpd and is now back down to 0.2 mbpd. The main thing is to figure out who benefitted, and the big winners were Saudi Arabia and Russia. If you look at Ukraine and Syria as mechanisms for the Saudis and Qatar to build and cash in on a natural gas pipeline to Europe and take that market from Russia, those conflicts make much more sense.
$120 oil prices would be great for smart oil producers to lock in at that price. If oil goes that high for long, the already fragile world economy would tank and consumption would fall just like it did in 2008. That is the threat to the shale boom. This concept that Wall Street is losing money in shale is comical. You may have technical difficulties but there are no dry holes with shale.
Anyway, in five years at current rates, the U.S. will be self sufficent in oil, and in six, the U.S. will be exporting oil. The only thing stopping this from happening is oil falling in price. For those of us who think Afghanistan was really about an oil pipeline from the Caspian Sea and Iraq was really over peak oil, this will be a welcome relief. No more will our foreign policy be dictated by oil and gas.
There are indeed lots of hydrocarbons in the earth's crust. But the question is how much it might cost to bring them to the surface and refine and transport them as useful fuels. The argument of cornucopians is that getting hydrocarbons to the surface is essentially free or that somehow new tachnology for getting them to the surface for less money will appear for some reason.
Only trolls refer to peak oil with statements about potential supply. To be taken seriously you have to address the issue of cost - the economics of discovery and extraction, not the amount of hydrocarbon molecules in the earth's crust.
There are probably a million tons of gold in the molten core of the earth. Sadly, we can't seem to just stick a steel straw down there and pump it up to the surface.
The Breakout move has certainly begun for Brent through $150 & WTI through $130 was made 4 months ago here..
https://www.youtube.com/watch?v=msju0_Ri634
Here is the chart for the Squeeze and Breakout
http://stocktwits.com/message/23943309
an interesting observation about spx and oil...
http://goldenopportunitytrading.blogspot.co.uk/2014/05/god-doesnt-play-d...
The crude chart has an ASCENDING TRIANGLE within an ASCENDING TRIANGLE - SEE CHART HERE! Normally that is very bullish
and we all know the elite want barrels of crude to go skyhigh, so they can implement more of their ideas.
But just wait till they implement obamacare in early 2015....that will be a 2008 crisis all over again. Do a little digging around google and it will shock you what they have coming.... the market tends to crash every seven years or so. SO their next plan falls perfectly on obamacare....which was doomed in the first place.
What a world in which we live. SCARY!
Rather than a triangle, its more like a pyramid with an eye on top.
the lazy easy solution, massive depopulation, evil, but what do the 0.1% care, they will still enjoy wealth and luxury, coal, nukes solar geothermal nat gas and oil, expensive with risks, energy is here for our wildest dreams, but the lazy evil solution is get rid of the eaters, and many here on ZH want that so called solution. nuts.
If it was expected that crude would move materially higher over the coming months, then volatility certainly wouldn’t be sold at such low levels.
Rubbish! The volatility of the LEAPS in big oil is ... the volatility of their traded prices.
Nobody is "setting" the volatility at low levels; the trading action is what's doing that.
Human expectations of the long-term trend is crude are most readily visible in the futures markets where CL has been in backwardation, with prices of successive contracts decreasing montonically.
If that reverses into contango while you're holding just one contract of a long-term calendar spread, oh boy, that one trade could make you rich, and 2/3 of the gain is taxed at long-term cap gain rates.
Think about it and post your trade ideas. You'd need to make sure it's traded as exchange-traded calendar spread, and those might not be available for the full three years of the open futures.
Kashagan ---> Cashisgone....
"Oil production is collapsing everywhere but in the USA." Nuff said.
To prove the conspiracy one need only look at Libyan production. A production collapse like that doesn't happen because their oil field suddenly went dry.
Thus everything written here is totally false. Oil in fact is everywhere. Planet Earth is huge...we're swimming in the stuff.
What the State is engaging in is the Sisyphean task of keeping prices high "to pay for everything"...since once these prices collapse (Iraqi oil is at a buck twenty five a BARREL folks...40 GALLONS to a barrel!) that is "the end."
I have to say I am impressed with this crazy and convoluted scheme "to pay for everything"....but the defaults and abandonments proceed apace.
There's no recovery. M2 has been dead in the water for 6 straight years.
Once the "financial economy" finally collapses (the debts no longer even have a pretense of being repayable...let alone obviously being repaid) then we'll get slammed with yet another price shock and "the State" for all intents and purposes (as nothing more than a "debt machine") will cease to exist.
That will mean The End for black budgets etc, etc.
The numbers point to the obviousness of the math. Already I'm hearing all the "Triumph of the Will" again as the mindless Social Darwinists spew out their last retarded verbage.
Not that strength or endurance don't count for anything. "Stealth" and "the mind" are what this war has been. Without the law to intercede...indeed without law that can even uphold itself...the only thing being "created" is anarchy.
The production cost of Iraqi oil is only relevant to their margins, not on the impact of market prices. Sure they could in theory build enough drilling rigs to run it dry in a decade and sink prices, but why would they want to? They have low hanging fruit ... few others do, better just to restrict supply.
Exactly. Reserves to meet global demand are beyond massive - 200+ years of known reserves in the middle east alone.
The economy is in the tank - demand declines.
Good article here on ZH a few weeks about stockpiling gasoline to keep production and prices up. I suspect oil, diesel, nat gas and home oil are same.
GS was busted recently for stockpiling aluminum and fucking vendors like Coke by choking supply.
It's deflation folks, but the banksters and their printers are buying everything that moves - similar to that Arnie flick - Total Recall - those bastards are controlling our air!!!!!!!!!!!! lol
It really is a joke shit show out there.
Anybody who stockpiles a commodity when the futures curve is in backwardation is a moron...
Morons, whether you like it or not, do not run the world...
And yes, GS and those fuckers are master of the skim... Stealing on average $5-10 from every American each year is good gig if you can get it... Because you really don't miss the $5 do you?
Crude through the stratoshphere = Industrialized nations through the FLOOR.
The way I look at it there is a huge swath of ebd/$10 hr job type folks out there that are expected to run cars to exist in this auto centric world we have created. Many of these people are on the verge of getting flushed out of thier cars because of the current economic squeeze. Around here I see them running around with no plates on their cars. If we add another $1/$2 to the price of fuel you will see a huge chunk of people all the sudden with no way to get around creating more crime and social problems on the spot.
"If we add another $1/$2 to the price of fuel you will see a huge chunk of people all the sudden with no way to get around creating more crime and social problems on the spot."
Yes, I believe oil tycoons and other elites understand this very well. They desire such an outcome.
So crude through the roof seems a safe bet. People have been saying this for years, just like they've been talking about inflation for years.
Now it's all real and happening.
Yeah, because the surefire way to succeed is to crash the system around you that has been the source of your wealth and power...
Via my favorite technical research site --
http://eideticresearch.com/uploads/2/8/3/4/2834543/crude_vs_pms_may_14_2014.pdf
http://eideticresearch.com/uploads/2/8/3/4/2834543/ny_wti_a_second_look_may_21_2014.pdf
This article appeared in my RSS feed but it doesn't appear from the site home page, a bug ?
Not sure that wedge is going to end with higher prices. I think it will coincide with the next economic crash. Hard to have high oil prices when demand plummets. Just another perspective, time will tell.
The End will happen with a price collapse.
Indeed these prices already are. We had a huge inflation last winter...but that's the last gasp of a system that sees in "growth" the solution being "more debt." Such a "duality" cannot coexist.
The debt must be repudiated...and the most obvious expression that this is in fact well underway is the collapse in "dirty coal."
Don't get me wrong....we have the best transportation system ever created in human history...but as with our Universities, our Hospitals, our Cities... "they will be without people, without students, without traffic, without patients."
There is nothing any of us can do now.
"Wait for the show trials" I guess.
the USA has more coal than half the world, but in our wisdom we have made it off limits..nukes off limits, gas and oil soon to be off limits, well walking is healthful you know.
Yes, could very "well" be the case, and that would put some more new capacity investment in danger (while some projects are laready scrapped at today's price ...)
Moar fracking! Not so much oil sands...
Clean drinking water be damned!
The consumer will pay what they must for oil and the effects of higher oil prices would slam us into the groud. higher oil prices act like a tax on the economy but help those who control the oil and not the government.
After much thought I have come to the conclusion that while inflation appears tame and is not showing up in a big way the seeds have been planted, and the number of them is somewhat shocking. Inflation lurks beneath the surface and is hidden away in the dark corners of our future. Want to know where the real cost of things is going, just look at the replacement cost from recent storms and natural disasters.
Several things to consider when trying to understand inflation come to mind, first competition tends to keep price increases in check, and our slow growth economy is helping the consumer in many areas, but the monster of inflation when unleashed will take a very large toll! More on this subject in the article below.
http://brucewilds.blogspot.com/2013/06/inflation-lurks-beneath-and-hidde...
Have you attempted to purchase bacon or beef at your local supermarket lately?
Because if you do, you will see that you may be a tad late with the whole "inflation monster comin anyday now thing". It's already here, my friend.
It's slowly wreaking havoc on anyone who lives off of fixed income or welfare. So, that's about half the entire country, or more.
The real HYPERinflation won't occur until the $9 Trillion or so FDR's out there come flooding back to the US homeland. (The Real Crash, as Peter Schiff says)
Until then, enjoy $4/gal. gas and $6/lb. bacon. Soon we will look back upon these days as "the good times".
Pig bacon has been replaced by sawdust bacon in the price comparisons so food inflation is, in fact, lower than the desired 2%
tvp & dd
it was short sighted of tptb & the fed not to have thought of installing a shredder next to the printer, although i suspect as do many others the plan was precisely devised to have the sudden return of all the confetti.
...until the $9 Trillion or so FDR's out there come flooding back...
I heard John WIlliams say 12-14 T. Either way, not a pretty prospect.
When the US treasury market goes boom, all those dollars get vaporized...
It is not as if there are stack of Benjamans that are going to be dropped from the sky like manna...
Inflation is just beneath the ice. When that breaks we'll all be swimming. And you only last so long in ice water if you don't do something immediately.
^^^ THIS MAKES NO SENSE AT ALL. The only pipe that would be out on tally is drill pipe, tubing, or casing. The geologist is there to confirm that you reached the TOTAL DEPTH of the well. You dont conduct a multi million dollar multi stage frac in the wrong formation by accident. You have a geologist on location to confirm by looking at the samples, further confirmed by a mud logger, further confirmed by LWD and wireline. So saying that the bit didnt "make the end" because of a tally error is flipping ridiculous.
Most likely a horizontal well w/ multi stage frac for shale *anything* So if they were out 3" on every single jt of drill pipe on a 5000m well that would put the tally 44meters short at TD. Not at all an issue if its a horizontal well with thousands of meters exposed to the target formation. Its also possible that because of the short "pipes", they landed the horizontal section high due to the tally error, thus the entire horizontal well bor may have been a few meters higher than anticipated - But this has to be confirmed by a geologist, or wireline, or something else. No one drills wells based on depth alone. No one knows how deep somethign is until its actually drilled. Seismic is just a guess +/- 100 m in any which direction. Geology calls the total depth of the well - Not the idiots who strapped that pipe.
blahhhh!
Thanks for being brave enough to call this B.S.
But do it too much or with too much enthusiasm and someday you'll try to log in and it won't work ... and it won't just be a glitch.
Mebbe it's not a good idea to criticize something we can't downvote, eh?
It's not like our posts or votes here have any effect on anything.
Cannot upvote you due to glitch in ZH but you are correct.
Story only makes sense if you are trying to sell to rubes who do not know the patch.
Nonsense! If they only ordered a fixed amount of pipe and all of it was used up on 11 wells before the shortage was discovered then it would take some time to order new pipe, and in the meantime, depending upon the condition of the layer they are in if there is NG or NG liquids escaping, they might have to seal the holes and start again. Easy to add assumptions to a hastily written email so as to make the author look ridiculous.
mR pALLADIUM
No. Just No. Its not an assumption its a normal industry practice.
Rgs
BT
If you desire the much-cherished green and red arrows be sure your post doesn't start with a copied or quoted section.
Also regarding oil and the petro dollar, if there is a "myth" or false common image that it would be extremely urgent to get out of these days, it is :
"first oil shock (73) = Yom Kippur/Arab embargo= geopolitical story= nothing to do with geologic constraints"
When the real story was :
- end 1970 : US production peak, the energy crisis starts from there, with some heating fuel shortages for instance (some articles can be found on NYT archive on that), or :
http://upload.wikimedia.org/wikipedia/commons/c/c5/US_Oil_Production_and_Imports_1920_to_2005.png
- Nixon name James Akins to go check what is going on.
- Akins goes around all US producers, saying this won't be communicated to the media, but needs to be known, national security question
- The results are bad : no additional capacity at all, production will only go down, the results are also presented to the OECD
- The reserves of Alaska, North Sea, Gulf of Mexico, are known at that time, but to be developed the barrel price needs to be higher
- In parallel this is also the period of "rebalance" between oil majors and countries on each barrel revenues (Ghadaffi being the first to push 55/50 for instance), and creation of national oil companies.
- there is also the dropping of B Woods in 71 and associated $ devaluation, also putting a "bullish" pressure on oil price.
- So to be able to start Alaska, GOM, North Sea, and have some "outside OPEC" market share, the barrel price needs to go up (always good for oil majors anyway) and this is also US diplomacy strategy
- For instance Akins, then US ambassador in Saudi Arabia, is the one talking about $4 or $5 a barrel in an OAPEC meeting in Algiers in 1972
- Yom Kippur starts during an OPEC meeting in Vienna, which was about barrel revenus percentages, and barrel price rise.
- The declaration of the embargo pushes the barrel up on the spots markets (that just have been set up)
- But the embargo remains quite limited (not from Iran, not from Iraq, only towards a few countries)
- It remains fictive from Saudi Arabia towards the US : tankers kept on going from KSA, through Bahrain to make it more discrete, towards the US Army in Vietnam in particular.
- Akins is very clear about that in below documentary interviews (which unfortunately only exists in French and German to my knowledge, and interviews are voiced over) :
http://www.youtube.com/watch?feature=player_embedded&v=fQJ-0jAr3LQ
For instance after 24:10, where he says that two senators were starting having rather "strong voices" about "doing something", he asked the permission to tell them what was going on, got it, told them, they shat up and there was never any leak. The first oil shock "episode" starts at 18:00
The "embargo story" was in fact very "practical", both for the US to "cover up" US peak towards US public opinion or western one in general, but also for major Arab producers to show "the Arab street" that they were doing something for the Palestinians.
In the end, clearly a wake up call that has been missed.
Note : About Akins, see for instance :
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/26/AR201007...
And his famous foreign affair article :
http://www-personal.umich.edu/~twod/oil-ns/articles/for_aff_aikins_oil_c...
His report to Nixon in 71 or 72 is still classified to my knowledge though, would be interesting to know if it can be declassified now.
YES.
My family had a sailboat berthed at Terminal Island (think Port of Long Beach, CA.). The summer of the embargo we would go sailing on the weekends. At any one time during this period, we observed the fully-laden supertankers anchored around. One day, I counted 60 of them. SIXTY fully-laden SUPERTANKERS (900 to 1100 feet long). They couldn't offload, due to the fact that ALL the oil storage tanks in Los Angeles were FULL.
It is my observation that the OPEC accords and the embargo were not coincidental. My educated opinion is; rather than the oil production being a TRUE issue in the CONUS, it was far more likely that the transformation in to the forced usage of the PETRODOLLAR in order to buy OPEC's oil was the REASON for the 'embargo'. Lots of oil to buy requires LOTS of 'USD' in circulation. Simply increasing the supply of 'dollars' is also known as 'inflation'.
The cover for the agreement to use OPEC oil as promised by the CONUS must have credible lies to back it up. The wicked spiral of 'inflation' during the entire decade was a direct result of flooding world markets with USD to give nations the 'currency' in order to continue trading with OPEC. The 'embargoes' were the ONLY way that the increase in prices that are related to this policy could be masked. it wasn't JUST 'oil' that went up in price, if you recall.
During the 'second oil crisis', when the prices went from $.65 per gallon to $1.30 per gallon, three friends and I had an idea. We were between the eighth and ninth grades in school, and wanted to make a little spending money, so we took a Radio Flyer wagon and bought a case of soda and some ice. We walked up the gas line, selling sodas. One line was about a mile and a half long at our local Union 76 station. We sold out three times before we got to the end.
Yeah, your little anecdote about tankers is the be all and end all...
You understand very little of oil and the petro-dollar...
You're taking the time to read and comment. So far the latter is just snide shit. Why don't you educate us? Enlighten us with your superior understanding.
I don't even have a dog in this argument, I just don't like knobheads.
It very simple, the US peaked and the shit hit the fan, Nixon did the only thing he could...
The first commenter basically gets it with his cut and paste, Aikens 1973 article give you close insight into what expected demand was and the numbers were staggering...
The real issue was either you tell the American people that the get oil party was over when imports were rocketing or create a fiat. The petro-dollar was the only viable political solution. No country has ever willingly given up global hegemony when they did not have to. The US had just watched England bankrupt itself and it wasn't going to repeat the exercise...
The current balance shifted by from +2 to -8 billion from 1970 to 1972, or at a the time when 1,000 tonnes of gold was ~$1 billion dollars...
The alternative was to cede to OPEC financial control of the world. Would you have wanted to do that?
Moreover, price was destined to rise because the cost of production was going to rise as well.
Thanks a lot for the info, this episode is for sure still very strange, and the sequence is :
1970 : US peak
1971 : dropping Bretton Woods moving to the petro dollar
1973 : Yom Kippour/"Embargo"
Clarifying what really happened would not change anything regarding current situation, but maybe could bring more people up to how critical the situation is now.
The situation is indeed critical, and under an almost complete omerta.
Below graphs and links to PDFs from Laherrère as a good summary :
http://www.powerswitch.org.uk/forum/viewtopic.php?t=23200&highlight=
And this without adressing the EROEI aspects (Energy return on enerygy invested), which was around 100 at the beginning of oil, around 4 or 5 in the tar sands now.
I DRINK YOUR MILKSHAKE!
As to price evolution, oil (and energy in general) is so fundamental to the economy that there is also a kind of "wall" or price ceiling corresponding to "what the economy can bear" without going into recession, and the consumption (and price) decreasing as a consequence. (2009 : the world consumption decreased)
Laherrère represents that in below graph :
http://tribune-pic-petrolier.org/wp-content/uploads/2013/05/murs.jpg
The vertical one represents the maximum flow (production or extraction rate), the horizontal one "what the economy can bear"
So that the outcome will probably be higher volatility more than anything else, like the 2007 2009 episode.
(on a global rising trend)
Obama, the Democrats, and the lying sack of shit Socialist Semite Democrat Media bashed Bush and said Bush was responsible for the high price of gas.
Then the serial lying racist kneegrow said when he was elected President that he would do something about the high cost of gas.
Now President Obama, and the Socialist semite Democrat Media says the President is not to blame for gas prices.
Is there anything that this sad sack of Dicktaster shit HASN'T lied about?
Gas was $1.79 when he took over, now, it's more than doubled.....