What is happening now is extremely dangerous because it could easily lead to a repeat of the 2008 financial crisis, only on steroids. If you look up a graph of global oil demand, you will note that, except during brief recessions, oil demand always goes up. That is because new oil consuming machines, which perform more work than humans alone could ever hope to do, are constantly being built. Last year China alone built 22,000,000 new vehicles. The world population is increasing, and globalization has displaced manufacturing far away from where products are finally consumed. So more oil is continually needed. Ask yourself what has to happen if all the oil the system needed wasn't available. It follows that since there is no substitute for petroleum in transportation that can replace the energy now obtained from oil in any reasonable period of time, the economy would be forced to shrink. Wishing won't deliver goods from China to the US, or move people to work, or fly tourists from the EU to the Olympics in Brazil. The price of oil could go to $300 a barrel, and the amount of oil produced could only be expanded so fast. It takes time to find oil and drill wells. Any shortage caused by lack of investment in oil exploration today, will take time to remedy. Therein lies a potentially dangerous condition - the time delay getting new oil to a refinery. With the record level of debt just about everywhere, and with interest rates near zero, a recession caused by a physical shortage of oil could rapidly transform a shrinking economy, otherwise known as a recession, into a financial collapse that takes down the banks and everything else. We could regret that today's low oil prices caused the search for replacement supplies to virtually disappear. That could be the thing that pops the global debt bubble that has been blowing for the last 35 years. That experience would be a lot more unpleasant than expensive gasoline or diesel fuel. All this talk of shutting down US shale producers is silly. Any shutdown forced on them by a world oil price at which US shale can't compete will only be temporary. Even if most of the current US frackers go broke, so what? The oil is still there and somebody owns it. When prices rise, as the Saudis pray, back will come the frackers. And what with Iraq coming back on stream, the oil world has changed, not that Saudi seems to have noticed. OPEC has never been anything other than a price fixing cartel and the sooner it collapses the better.
Access Investments-Building Awareness - European Union-ROMANIA
Sunday, January 31, 2016
What is happening now is extremely dangerous because it could easily lead to a repeat of the 2008 financial crisis, only on steroids. If you look up a graph of global oil demand, you will note that, except during brief recessions, oil demand always goes up. That is because new oil consuming machines, which perform more work than humans alone could ever hope to do, are constantly being built. Last year China alone built 22,000,000 new vehicles. The world population is increasing, and globalization has displaced manufacturing far away from where products are finally consumed. So more oil is continually needed. Ask yourself what has to happen if all the oil the system needed wasn't available. It follows that since there is no substitute for petroleum in transportation that can replace the energy now obtained from oil in any reasonable period of time, the economy would be forced to shrink. Wishing won't deliver goods from China to the US, or move people to work, or fly tourists from the EU to the Olympics in Brazil. The price of oil could go to $300 a barrel, and the amount of oil produced could only be expanded so fast. It takes time to find oil and drill wells. Any shortage caused by lack of investment in oil exploration today, will take time to remedy. Therein lies a potentially dangerous condition - the time delay getting new oil to a refinery. With the record level of debt just about everywhere, and with interest rates near zero, a recession caused by a physical shortage of oil could rapidly transform a shrinking economy, otherwise known as a recession, into a financial collapse that takes down the banks and everything else. We could regret that today's low oil prices caused the search for replacement supplies to virtually disappear. That could be the thing that pops the global debt bubble that has been blowing for the last 35 years. That experience would be a lot more unpleasant than expensive gasoline or diesel fuel. All this talk of shutting down US shale producers is silly. Any shutdown forced on them by a world oil price at which US shale can't compete will only be temporary. Even if most of the current US frackers go broke, so what? The oil is still there and somebody owns it. When prices rise, as the Saudis pray, back will come the frackers. And what with Iraq coming back on stream, the oil world has changed, not that Saudi seems to have noticed. OPEC has never been anything other than a price fixing cartel and the sooner it collapses the better.
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