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Spot The (IMF) Difference
Expectations for global economic growth in 2015 have been falling for almost 2 years... and so the ever hockey-stickian IMF has finally started to catch down to that consensus trend - don't worry though, we are sure 2016 (or 2116) will be a great year...
Now is the collapse in oil prices a 'demand' issue or a supply issue?
Chart: Bloomberg
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"Now is the collapse in oil prices a 'demand' issue or a supply issue?"
The answer to YOUR question: it's a supply issue.
The answer to an unbiased questioner: BOTH.
So let's do math: if GDP growth is zero percent and consuption of petroleum was 100 units in 2014 then what will be the theoretical consumption in 2015?
Answer: 100 units.
FAIL!
But how much of the 100 units was speculation to drive up prices that's sitting in some tanker somewhere?
Since it was "speculation" it's not defined. Care to ask a question you can answer?
Do logic and math even matter in these "markets" anymore?
Wanna know why the Soviet Union failed, and why the West is failing? Read Mises' "Economic Calculation in the Socialist Commonwealth", and learn that when price signals are thwarted by government actions, economic systems collapse.
I see a hockey stick, an upside down one.
Ickyhock!
It just comes out that way.
We're in it....icky hock...ick...hocked up!
So does that mean Copper is also a supply issue? What about Iron Ore? For those willing to stick their heads down the rabbit hole and face reality things are not looking too chirpy.
Are not all market prices driven by speculators rather the true demand? How many warehouses does Goldman and JPM own to store aluminum in?
And who "reports" GDP growth versus what the actual global GDP is? It's a good fucking question and the answer can lead you down many paths...
I never down arrowed you Bang because technically you are correct. But I still believe that given EIA's report about a year ago on world consumption of oil and gas being at levels not seen since the 1970's the quantity of oil demanded has fallen at all price levels - in other words a shift in the demand curve has occurred as opposed to a movement along the demand curve (supply shift). Since GDP is measured by both price and quantity - I think real GDP will actually fall, and the tell is the industrial use of oil and gas. While it is true that declining rates of growth in GDP still gets you positive growth as you have illustrated, I think real GDP may actually be falling, since demand is about volume (quantity). Price is a monetary phenomenon. And the way the government has chosen whatever price deflator works.....the only tell that matters is volume - in my opinion.
Yep and I agree with you. My point was to be made with the author's simplistic viewpoint. You have expounded on the topic heads and shoulders above. My example was elementary textbook at best...the author didn't quite achieve that. Less hype...more facts is what I ask!
But your example is illustrative of what many misinterpret as declining demand when measured in percentage terms. A 5% annual growth rate in year 1. of GDP, for example, that declines to 2% growth in GDP in year 2, is declining growth, but, still growth. Moreover, 5% GDP growth in year 1 followed by 5% in year 2 is not constant growth year over year - it is exponential! As you point out a GDP print of 0% suggests that at worst demand has not changed - though its rate of growth has - nothing more, nothing less. cheers
What is WITH all this reasoned and intelligent discourse, gentlemen? This is Fight Club, damnit!
Even volume is simplistic. New efficiencies and alternate energy do have an impact, not to debate how much.
Wake me when they can turn the Hockey stick over...
Asshats!!!!
World GDP was 1.5% in 08 and -2% in 09. crude was trading between 35-70ish? so what's the answer? seems like supply. Or just gross market distortions. What's the normalized price of crude? I have no idea, but i bet it goes back to 60, 70, 80 in short order. You better believe that GS is loading up VLCC's and parking them offshore.
Like real supply and real demand have anything to do with anything. Markets only exist as a platform for manipulation.
We hope and believe that real markets will eventually return, but we should be care for what we wish....it could be painful.
Look bubba, markets are manipulated...I agree. Controlled...no effing way. So here's my suggestion: pick the LEAST manipulated market and ride it like a bitch! What market is that right now? OIL..petrol...Texas effing Tea, black gold.
Market forces are a bucking bronco in oil right now, and the manipulators are 1970s GI Joe dolls.
I don't play the markets. I don't believe that to participate does anything but perpetuate the corruption. But the markets still play me. When speculators see the opportunity for a fast buck, it is we consumers who pick up the tab. While it is grand that so many can make a fast buck off of the skim, at some point it will collapse the system. For us to have a sustainable economy, some people....more than a few, must actually do something, produce something. With everyone piled into the casinos, it will fail.
It's all a question of liquidity. Last housing boom: oversupply, but prices kept skyrocking. Supply and demand? No. Prices went up simply because banks made loans (provided liquidity) like crazy, nobody cared about oversupply. Or take Japan in the late 1980s. Tokyo was worth more than entire United States or something like that. They claimed it on land scarcity. Then prices collapsed by 84%. Was there suddenly more land in Japan? No. Prices went up simply because banks made loans like crazy, then crashed simply because banks closed the flood gates.
The crashing comodity complex is just a canary in the coalmine. A severe liquidity crisis is coming.
"A severe liquidity crisis is coming."
And it should start sometime this year if current trends keep up. If trends change, not so much. I expect it to start in the bond market, though USTs could see yields go even lower while the rest of the market blows up.
Read oilprice.com. It points to a supply issue...and guess what? The supply deviation isn't that much. WE're talking in the 0.5 to 1.0 mb/day. So you are on the right track! Less hype and more facts as you provided!
Link:
http://oilprice.com/Energy/Energy-General/IEA-Provides-First-Sign-That-T...
Supply is still increading while demand in the US and EU are decreasing.
Not to worry, we've decoupled. It's joydecupflation.
We've entered hyperloic observation. Its all good.
You see there, right at the end of 2014, that little blip, that's what I call a green shoot. Only it is red.
Obviously forecasting is a form of art, you don't even need to come close and some fuckhead will buy it.
So, where should Christiane Lagarde bug out to when Marine Le Pen wins the 2017 election in the first round?
Christiane isn't Jewish, so assume Tel Aviv is out.
New York City, where all the rich sophisticates can fawn over her.
And the Squid will give her a high paying job with no real work, so she can become a socialite and philanthropist.