Guest Post: The New Price Era Of Oil And Gold

Tyler Durden's picture

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paarsons's picture

I call bullshit.

Higher interest rates will crash commodities through the floor.

You can't keep the FED window at zero forever.

Bring the Gold's picture

I call bullshit on your constant pimping of your blog.

paarsons's picture

Well, I call bullshit on your bullshit.

So there.

And fuck all you motherfuckers who keep giving me minus ones.

slewie the pi-rat's picture

a re-tooled celente troll like you doesn't get to call nothin on nobody, asswipe

in fairness, your original comment is not as bad as usual, imo...

TheSilverJournal's picture

"New prices"..are we measuring in ounces yet?

The Monkey's picture

Keep on at it Tyler.  The 1970's bore "Energy Ant" - lessons for the Elementary school aged on alternative fuels - and articles and stats that showed world crude stocks depleted in 2000.  Here we are in 2011, another major commodity top.  After a decade boom in Houston, should we really expect another?  Seriously bro.


knukles's picture

Energy Ant.
Z'at like political Moon Cricket?

Snidley Whipsnae's picture

I have a problem with this sentence... "In the old oil cycle, such sovereign debt problems were merely a function of profligacy. In the new oil cycle, a debt crisis is no longer solvable with growth."

Too many assumptions that have not been proven...

This same set of assumptions was plastered all over The Oil Drum site years ago... and if I went there today I would see the same.

'Oil depletion' is the answer to every wiggle in the price of crude? What about dollar devaluation and export of inflation to Saudi Arabia and other major oil exporters? What about major specs in oil futures? Oil and PMs are the two most manipulated commodity classes in the world.

When oil hit $147 per bbl, predictions were rampant that peak oil had been reached and that oil was headed above $300 per bbl. Meanwhile, tankers loaded with crude were sitting in the Persian Gulf with no buyers. I was short and made a few bucks while the major shorts made billions. Suddenly the longs posting on The Oil Drum disappeared. Go figure...

SRSrocco's picture


Trying to forecast where a peak of production or what the price will be is just about impossible.  That is why we finally see the peak in the rear view mirror.  The world has gone from paying $10-$30 barrel oil from 1999-2004, to paying $80-$100 in the past 2-3 years.  Global production has been FLAT since 2005.

The natural decline rate from exisiting oil fields is 9%.  New fields are just keeping current production from falling.  The more TAR SANDS, DEEP SEA and SHALE OIL that comes online the lower EROI - energy returned on invested comes with it. 


DEEP SEA = 8-10/1

SHALE OIL = 4-5/1

TAR SANDS = 2-4/1

This sort of LOW GRADE OIL does not have the sort of EROI to allow our Advanced Economies to continue.  Sure, it adds supply and gives us the ILLUSION that we can continue living the SUBURBAN LEECH AND SPEND ECONOMY here in the USA forever, but we are closer to a collapse than few realize.

Interest rates are meaningless in the last stages of a FIAT CURRENCY FRACTIONAL RESERVE GLOBAL BANKING SYSTEM which controls the markets today.

Gold and Silver have been heading into an EXPONENTIAL TRAJECTORY due to the fact that the Fiat System is heading in the exact opposite direction.  Soon the price of these two precious metals will turn abruptly higher and head straight towards the moon.

Time to be in physical bullion unless you would like to get the MF GLOBAL ENEMA.


BigJim's picture

Someone help me out here, please.

It seems pretty clear we've hit peak oil, and consequently, oil prices must go up. Even if you believe in abiotic oil, the production statistics show the supplies are not being replenished as quickly as we are using them up.

We need oil for a lot of things.. but we also use a lot of it in applications when other sources would do just as well. I know oil is a key ingredient for plastics and fertilizers, but Liquid Natural Gas is just fine for powering ground vehicles, for instance.

Now, I keep hearing about trillions of cubic meters of new Natural Gas deposits coming online through new drilling methods (fracking), and less dangerous nuclear technologies like Thorium. Can these not aleviate our problems, at least for several decades? Yes, we still need oil, and it will still eventually run out, but if a lot of our energy will be coming from alternate sources, won't that time be pushed way into the future? And I know the arguments about EROI values, but if it's possible to get energy more cheaply by one method (say NG) to extract energy in a more convenient form (ie crude), then does bad or even negative (within reason) EROI really matter? Yes, civilization requires cheap energy... but does it need cheap oil?

Someone has remarked here on ZH that a lot of the new 'trillions' of cubic meters produced by fracking are illusory, claims made by drilling companies hoping to get bought. I can't believe some serious research hasn't been done on this whole area - can anyone point me to some good sources for further reading?

GMadScientist's picture

This is a solvable human behavioral problem, but so is trying to talk someone out of mainlining crank.

For many uses, oil has few substitutes. No solar-powered tractors or plastics made from natty gas on the horizon.


BigJim's picture

I agree we need oil for a lot of uses... but that's not the same as saying that the bulk of oil is presently used for purposes only oil can fulfill. Though it might well be - my point is, I don't know. Is it?

Why couldn't we run tractors on LNG? It works for cars/trucks/busses, no?

Sean7k's picture

Your assuming a smooth transition to a new energy paradigm. In a present with extrordinary energy requirements, it is more reasonable to assume that the supply will be uneven and driven by large disruptions.

This is not a recipe for growth. Consequently, the author has a valid thesis. Will it remain so? I doubt it. 

Man did not crawl out of the primordial ooze to die from energy depletion when many alternatives exist- the biggest being the conservation and more efficient use of existing supplies coupled with new sources of energy being brought online. Thorium reactors are very interesting, but will require a sales job for the public after Fuckyoushima blows another gasket.

Sean7k's picture

You might want to revisit the supply/demand channel chart in the article.

topcallingtroll's picture


Bankers wont kill fiat in a hyperinflation. They would lose their source of power and control.

A mild deflationary bias is highly possible the next ten years. Or slow growth will feel like deflation.

Gold wont do great in that environment, but then norhing will.

TheSilverJournal's picture

A miild deflationary bias isn't an option. The options are to allow depositors to lose their money or to keep the game going until hyperinflation. I don't think it's quite time yet, but it's certainly possibly the banks could break tomorrow. My guess is we have a few month at the least and a few years at the most until the banks break or until hyperinflation.

trav7777's picture

jeez you act like if they killed the FRN they wouldn't be back the next day with FRN2

bankers don't care.

Snidley Whipsnae's picture

Bingo! +1... They gotta fractionalize something Trav, else their franchise is dead... paper hanging azz holes...

Here is a good one from Bill Bonner...

"The bond holders want to know if the Euro-feds are going to bail them out…the Euro feds want to know if the Chinese are going to bail them out…and the taxpayers want to know how long their pension checks will keep coming.

Angela Merkel gave an answer yesterday.

“If politicians believe the ECB can solve the problem of the euro’s weakness, then they’re trying to convince themselves of something that won’t happen,” she said in a speech.

The question she was answering was when the ECB would step in to buy more bonds and bail out the bondholders. Apparently, that’s not a question worth asking, she says.

What the Germans really want to know is whether the Greeks and Italians can act like Germans. What the Greeks and Italians want to know is when the Germans are going to stop acting like Germans.

And what the French want to know is where to get a good piece of fois gras and a good bottle of Bordeaux."

Read more: More Questions Emerge as the Debt Crisis Continues

TheSilverJournal's picture


1) The ECB's structure changes so they can issue Eurobonds and print in order to hold yields down.


2) Yields keep going up and eventually the countries default over the weight of high interest payments, causing the Euro to fail which would break all the banks in the western world. 

Option 1) will be chosen and Eurobonds and printing will commence because without printing, Germany and every other European country will suffer a significant devaluation returning to their old currencies because the debt that would have to be wiped off, the US banking system would break, and bankers and politicians would much of their control of the printing presses. They can stay in control longer by dragging the game out through hyperinflation.

On Wednesday, the European Commission will propose two laws that will lead the way to Eurobonds and infinite Euro printing.

BigJim's picture

I'm inclined to qgree. TPTB seem to have a lot more to lose through immediate deflation and consequent rolling defaults across the entire planet. Ergo, they must print, even if that means hyperinflation will be the eventual result.

Having said that... our economies are now entirely dependent on how governments/central banks behave. Most people will lose their shirts, not because they're stupid, but because they don't have insider knowledge of what these entities will do. If you're an insider, you can make a killing either way, because you know what's coming, and hence whether to go short or go long. That, to me, is the key weakness in assuming the bastards will print.


trav7777's picture

good time to be a chosen

vnguru's picture

The Futures Crude, and gold prices going down at this time. I belive that they will continue decrease in next 2 week. the War in Libya has stoped. So, the price of crude oil will be stable in next time. However, I don't know how the gold prices can increase crazy like that. besides, the currency converter also has many change.

Sean7k's picture

Can you say gold backed Rentenmark? They sold it in 1923. Big con job- bigtime result.

FeralSerf's picture

It's Tyler's fault.  He doesn't let us give anyone -2 or -100.

solgundy's picture

here's another one , you MF'er

Freddie's picture

Has the Tyler(s) allowed us to blog pimp here?  I have multiple blogs I would like to pimp if this is okay. 

topcallingtroll's picture


But blog pimps are even lower than trolls.

Dont debase yourself cutie.

GMadScientist's picture

Depends on the blog. The Turd is a fine counter-example.

No one complains about the hot streetwalkers.

infinity8's picture

I call bullshit on "if society doesn't consume energy, it's worthless". - huh?

infinity8's picture

Sorry, "If society consumed no energy, civilization would be worthless." - still Wha? What the fuck planet am I on??

tmosley's picture

Consumption of energy is a means to an end.  You could burn everything willy-nilly, and it wouldn't provide more "purpose".


topcallingtroll's picture

If you have no energy to use for purpose or waste then civilization will feel like it is over.

I dont want to go back to 1920's style per capita energy use. I like my energy slaves. They do a lot of work for me.

infinity8's picture

Is it so hard to imagine energy used for a purpose now? Personal energy? Recyclable (we DO have the technology now)? No wonder the mess we're in. . .

GMadScientist's picture

Row row row your generator...

jez's picture

And what about uncivilized people like me? Are we not allowed to consume energy too? In consuming energy, do the uncivilized add or subtract from the sum total of "civilization"?

The nation demands an answer.

steve from virginia's picture

Estimable Gregor Macdonald has excellent explanation, paints a nice sketch of world to come. Here is more detail:

- the economy must be able to afford to bring oil to market. Right now the price that the economy can afford is dropping while the cost of bringing new expensive crude is increasing. Why? Because the producers all wanna live like piggish Americans, as seen on television. The point where the two numbers are the same happens to be right where we are now! As economic price drops the available fuel will also drop.

Opec cutting production won't help, because this won't put dollars/yen/euros into anyone's pockets. The outcome is shortages. These will be:

a) permanent,

b) taking place in China right now. Don't say you weren't warned.

- Credit shortage is the consequence of high oil prices since peak oil took place in 1998!

"1998? That's crazy!"

- Not on this planet! Maximum oil available relative to paying demand was in 1998, real or relative price has risen since. The high price has been met/amplified by increased credit from banks and now sovereigns. Now, the credit lines have run out. Now what?

- Credit crisis is energy conservation by other means. The Eurozone is in the process of becoming car-free starting with Greece, Spain and Portugal. The EU will be joined over the next few years by the rest of the world.

The world has been wasting fuel for decades for zero return and has lied to itself about it quite convincingly. Now the 'stupid' party is over.

Car = target practice.

dark pools of soros's picture

lets just burn it faster and get to the next chapter

Seer's picture

"Right now the price that the economy can afford is dropping while the cost of bringing new expensive crude is increasing. Why? Because the producers all wanna live like piggish Americans, as seen on television. The point where the two numbers are the same happens to be right where we are now! As economic price drops the available fuel will also drop."

Economies of scale in reverse!

Ain't going to be pretty...

GMadScientist's picture

Sure, have all the energy you want. but we get to pick the form...hint: it'll mostly be kinetic.

Melin's picture

"Society," or more precisely, individuals, cannot consume zero energy.  Every organism on the planet has to make a living (or parasitize those who do) and that takes energy. 

The level of specialization in a civilization depends on the availability of energy.  If you had to scrape two sticks together for warmth, you may find you've burned the only tool you had to dig the grubs for your evening meal.  If you discover, produce and utilize more efficient sources of energy, you get to spend time doing other, far more interesting things.  And (and this is the best part), you get to trade with other individuals who've also specialized producing interesting, useful things. 

Can you see how nice an non-energy-starved civilized society might be?

infinity8's picture

Don't try to tell me that a civilization that has to procure their "energy" in more difficult/inconveniewnt ways than our modern-day world is "worthless". If anything, that energy is worth "more", because it's better appreciated. Snap out of it man. And, I would say that "discovering" more efficient sources of energy could be Quite interesting. /nerd

Melin's picture

I guess I misunderstood.  I thought you were suggesting civilization could survive without energy.

Melin's picture

For "a civilization that has to procure their "energy" in more difficult/inconvent ways...that energy is worth "more", because it's better appreciated."

It's not "worth more," it's more expensive. It takes more of everyone's time/labor to produce. That's why individuals within societies set about making it easier, and therefore cheaper, to obtain. Everyone gets a little freer with every btu produced.

infinity8's picture

It's more expensive to people who won't /can't use their own bare hands to do anything. It's more satiisfying and valuable to those who are not helpless. Are you a "park shark" who circles forever wasting fuel until you find a spot right next to the closest handicap space?

Melin's picture

It's not an inability to use your own hands.  It's how do you want to spend your time and how well have the individuals within your society developed their own skills so that you can trade with them for mutual gain, mutual benefit.

I can fell trees, chop firewood, fish, plant, harvest and build serviceable handmade tools.  I can also manage a database for an international company.  It isn't stupidity or laziness that keeps others from learning to sharpen a chainsaw (or hatchet as I'd guess you'd prefer), it's the fact that our society has advanced enough so that they don't have to spend all their time merely surviving. They get to pursue their happiness and learn anything they wish and put their knowledge to work trading with other like-minded, civilized individuals.

infinity8's picture

First, fuck off with the hatchet remark. Next, it IS stupidity and laziness that keeps people from learning righty tighty. Lastly, why can one not pursue their happiness and learn anything they wish if they also have to chop some fucking wood?

steve from virginia's picture

We Americans and our wannabes don't have a civilization, there is nothing civil about what we endure, a 'pop culture'.

Why are Obama/Krugman/Merkel/Japgov/Bernanke/etc. failures? They aren't real, they are actors reading from a script. None of the economists alive to day 'makin' policy' could carry Keynes' jock strap. Obama is to Churchill as the eagle is to a tsetse fly. We turn our back on 'competence' we want people who fit the 'Central Casting' idea of celebrity politicians and money managers.

Our economy destroys value. It substitutes score keeping -- currency/money -- for value. The axle around which all this turns is the automobile. Look around you and ask yourself why everything sucks, particularly 'new' things? Because these things are substitutes for all the capital that has been destroyed, for the value that has been lost. Part of that capital is energy.

We've run out of value to destroy, we are in the (short) cannibalism phase. No other civilization has ever had our waste, they were too smart ...

The West had a well-developed civilization but WWI put an end to it, the first war of humans versus machines and their 'owners'. Not surprising if you think about it: Federal Reserve, Income tax, Gilded Age all happened @ the same time an entire European generation was annihilated.

Some value ... right?

Husk-Erzulie's picture

Great comment man.

Reminds me of (I think it was HPD) who pointed out that WW2 lobotomized, or rather it was the final thrust of the ice pick, the two most advanced cultures on the planet, Germany and Japan.  These fucking wars have cost the human race much more than we know.  As a civilization we are way behind where we should be and losing ground across the board.

trav7777's picture

yes, the aftermath has empowered a lot of people whose ethos should have been destroyed.

For it is the love of money that is the root of all evil.  This is a 2000 year old observation and you'll have to recall the region of the world he was evangelizing in.

Melin's picture

Do you object to individuals whose lives never require them to chop some wood?  You seem to view it as a moral achievement to have to do so or to want to do so or simply to have done so. 

Are you saying that people should know how to live as if our civilazation were far less advanced?  Why?