June 16, 2008

Are you ready for the Great Oil Bubble Implosion?


Bubbles are funny.

Until they aren't.

Let's look again at oil, where total world demand rose by... wait for it... a whopping
0.9% (YES, THAT'S ZERO POINT NINE PERCENT) over the past year, while world liquids and crude production increased slightly more than 1%. And yet prices per bbl. rose over 80% in the past year, and 697% since 2001. Pets.oil anyone?

So what's driving the current Great Oil Bubble (GOB) madness? Oh, maybe the $3.5 trillion in oil derivatives, or the $90 billion in speculative
hot money that's poured into the new commodity indexes.

There is no consumer-market-based justification for the rise in oil prices. The madness is purely and simply a speculative one, just like housing, just like dot-com stocks, just like tulip bulbs and tea.

Yes, the same hedge funds, pension funds, investment banks and hot-money investors who gave you the housing bubble and mortgage madness are now giving you the GOB.

Bubble after bubble after bubble... Just as we expected. But with housing it was "HEY, COOL, WE'RE ALL GETTIN' RICH RICH RICH!!!!", while with the Great Oil Bubble it's "HEY, CRAP, WE'RE ALL GETTIN' POOR, POOR, POOR!!!".

Keep in mind that bubbles last longer than you think they ever will. But in the end, they end. All of 'em. And this one will too. Where and when will it end? Who knows. But when it does, it will end spectacularly and gloriously. And when it does, there will be RAGE in the streets as gas prices don't come down along with the price of oil. But that's another story...

There is one nice lasting effect with this Great Oil Bubble though - it has changed the world's collective consciousness in regards to fossil fuels and consumption. The "GOB" will launch a clean energy revolution - wind, solar, biomass, nuclear and even some energies as-yet-undiscovered. And SUVs and trucks are the new mink coats - their owners are now social pariahs, scorned and mocked while they piss what's left of their money away at the pumps.


And a word for the Peak Oilers out there - yes, at current consumption and production rates, we've got a problem. But what you don't take into account is that the world (i.e. 'the market') because of prices, political instability, global warming and the dramatic change in collective consciousness, will now be making The Great Change, away from fossil fuels as fast as it can. Past demand does not equate to future demand as your projections dictate. And a Big Change is coming.

Here's some recent quotes on the GOB. Get some popcorn. And have at it.

" There's nothing different between this mania, the dot-com mania, the real estate mania, the Dow Jones mania of the 1920s, the South Sea bubble and the Dutch tulip-bulb mania. History repeats itself over and over and over again."
- Stephen Schork, oil analyst, June 2008

"Current price levels do not reflect supply and demand realities. A review of prospects for the remainder of the year also shows little support for prices to remain at current levels."
- OPEC statement, June 2008

"The supply-demand fundamentals do not explain the sharpness of the ascent this year. Nor does it make any allowance for the reaction of the end consumer."
- Bill Jamieson, Economics Editor, Sunday Telegraph, June 2008

153 comments:

ghawar ist tod said...

And a word for the Peak Oilers out there - yes, at current consumption and production rates, we've got a problem. But what you don't take into account is that the world (i.e. 'the market') because of prices, political instability, global warming and the dramatic change in collective consciousness, will now be making The Great Change, away from fossil fuels as fast as it can. Past demand does not equate to future demand as your projections dictate. And a Big Change is coming.

Indeed it is.

As a Peak Oilist myself it is simply axiomatic that as global production declines in the future, so will "demand". They always meet somewhere.

The question is how will this happen?

The idea that we can make this transition from fossil fuels very quickly just ain't there. There isn't enough capital and enough technology.

Where is the next new technology which is better than oil? It simply doesn't exist. Laws of physics. Everything else is worse. We will go to it, but it will be worse. We will be poorer, some, much poorer. there will be more pollution.

Quantitative computations matter.

In the past we always went from energy source to a better energy source. Never in the history of modern civilization to a worse one, involuntarily.

The idea that "demand" only went up 0.6% is ridiculous---demand at a given price equals supply at that price. There would be tremendously more demand at $20 a barrel---but Africa has been totally priced out and much of the poorer non-oil countries in South America and Asia are really really hurting. They are substantially poorer today versus 4 years ago as a result.

The right way to understand this is that despite a near quadrupling of oil prices, actual demand still went up a little bit. That shows you just how practical and deployable and deployed the alternatives are at the global scale necessary to impact oil consumption: not one bit.

Quantitative computations matter. Read the Hirsch Report. We are fuxxored.

Anonymous said...

God, I really hope this is a bubble. When food prices go up because of oil that is wrong. Truckers and farmers should be exempt from overpriced oil.

Anonymous said...

Keith said: "...trucks are the new mink coats - their owners are now social pariahs, scorned and mocked while they piss what's left of their money away at the pumps"
------------------------------

Well said. Truck owners are nothing but losers with mental instability. I even saw a commercial the other day about a pick up truck abandoned on the highway and the owner and his family get picked up by a driver in an economical car. The car driver talks about the his car's outstanding mpg but the truck owner goes "Ya, but can this car run over smaller cars" or words to that effect.

I believe the above quote sums up well what social pariahs these truck drivers are. People accustomed to living in Europe or other parts of the world who do not have to put up with these social pariahs really dont understand the crap that we in the certain parts of the US have had to put up with these ego maniacs that drive the F-250's.

In short, I think they are nothing but criminal bullys who buy these behomoths because they have issues with their own personal lives and so they take out their unhappiness, their aggression, on people who drive smaller more economical cars.

These truck drivers are nothing but criminal ego maniacs who need to pay dearly at the pump. May gas prices rise ever higher and higher so that we may live to see the day where driving a motorized vehicle is nothing more than a means to get from point A to point B and NOT a means for intimidating and killing innocent civilians who drive economical, down to earth and yes Practical cars!

keith said...

And just so we're clear, I'm a member of the "peak oil" crowd, but instead of doom, I see change - a big one - coming

As oil runs out over the next 100 years, drastic change runs in

And the end of oil reliance, especially oil used to power cars, should be a cause of celebration, not concern

Andrew from Russia (doped with combustion fumes) said...

Oil is not a bubble! How dare you! It's a permanent plateau, a completely different new paradigm that will bring the long-awaited prosperity to Russia, Venezuela and Gulf countries. Or, maybe I just need some fresh air to overcome the effects or today's exhaust gas poisoning. :-)

There's something sad with this oil'n'gas story. 8 years ago, Russia's federal budget was lean and was designed to withstand oil prices slashed by a half. When oil was up to $30, it could only withstand declines to $16/bbl. Then, the bureaucracy grew and the bar was raised to $35, $55, and this year, to $72. You see, we can adjust to this kind of "permanent prosperity"! We pass $6 billion appropriations for things like a govt-funded nanotech corp., we have $6000/sq.m flats and job creation in public works programs so massive that even the Moscow budget is running a deficit. Now, if someone could pull the rope and take all these dollars out of commodity markets, we'd need some hangover pills at first.

Lost Cause said...

I just can't wait for the day when Dick Cheney and Ed McMahon are neighbors.

Mike Hunt said...

Keith,

If you see oil coming to a crash may I recommend call options on some airline stocks? You'd make a killing...

Right now the rising gas / oil prices remind me of an auction. People keep standing up and bidding by continuing to drive or purchase airline tickets, etc. Slowly people are sitting down. When enough people stop participating then the price stays put and the auction is over.

-Mike

hurin said...

I have already argued why oil is not a bubble and will not do so again, sure it may fall back to 120$ and stay there a couple of months, but the long term trend is up.

About alternatives it is important to remember two things. One they have much lower EROEI than crude oil. And two they have no fixed cost. Remember two years ago how ethanol was supposed to be economical with oil at 70$? Now its twice that and ethanol is still not economical. Why? Because along with oil the cost of the inputs required to make ethanol have gone trough the roof.

Anonymous said...

Keith,

How did you miss the main issue with oil prices...The Helecopter Dollar!

Oil prices are peged to the US Dollar (for now anyway) Keith, and we all know how many it takes to buy a litre of petro and a pack of fags in the UK. For you not to make mention this fact is to be remiss.

RayNLa

Yoski said...

"while world liquids and crude production increased slightly more than 1%"
That is due to double accounting for things like ethanol. First the Diesel and other fuels to make ethanol get counted. Then the Ethanol itself gets counted in total liquids. Unfortunately there is no "Net total liquids" that would account for that.
There is no oil bubble. Crude stockpiles world wide are down. If you think its a bubble you're deluding yourself. Every time the oil prices go up we're served up another excuse. The war, liberals that won't allow us to drill, rebels, hurricanes, rusty piplines, greedy oil companies and now the excuse du jour are speculators. So back in the 90s when oil was chaep there were no wars, no liberals, no hurricanes, pipelines didn't rust and oil companies were operating on a not-for-profit basis only. Wake up!
If you think oil is a bubble then you should go short. I bet with the media hyping the "oil bubble" a lot of people get suckered into that idea.

keith said...

Ray - good point on the dollar as oil became a store of wealth just like corn or gold as Bernanke destroyed the currency.

However the gains in oil price per bbl. are far far far outrunning the drop in dollar value

Everyone's on the same side of the oil trade right now. That's gonna change soon and when it does, watch out

As for going long on airlines or short on OIL, I'm on the sidelines. The oil bubble can go on for quite some time, as easily as it could end today.

That said, I do own oil majors, russia and some green energy. They'll be printing money long after the price of a bbl. drops

Fire away with other oil play ideas. If you're getting nailed at the pumps at least try to hedge your bets (and own cop and xom!)

Metroplexual said...

And watch as Obama and a more Dem Congress get in office. Heads will roll and better regulation becomes the name of the game. But that will be better for the economy overall despite the repug opinion of free market ideology. Just look at our beef that has caused riots in South Korea. If you disagree I suggest you go to angrybear and check his archives for his analysis of D vs R presidencies and the economic output.

As for the great change Keith, I am skeptical, we have so much oil ourselves in the form of offshore, and shale oil in the southwest. Americans will forget this bubble and will go about their business when the resources are freed up. We should be going to electric cars or at least plug in hybrids.

I say we regulate the commodities traders like we do wall street and this BS will not happen again. BTW I thought this smelled too much like an Enron anyway.

keith said...

And don't forget to enjoy the wall of petrodollars that will be crashing ashore in America and around the world

http://www.spiegel.de/international/business/0,1518,554042,00.html

$130 bbl. of oil represents a massive transfer of wealth from America and Western Europe to the middle east

Get popcorn

Anonymous said...

LONDON (MarketWatch) -- Goldman Sachs cut its rating on a number of European airlines, saying that in a $200 a barrel oil price scenario, all airlines would be loss making and some would be insolvent.

http://tinyurl.com/3jem4m

Anonymous said...

One thing that nearly all sides agree on: the market isn't hankering for additional oil. Saudi officials have insisted loudly for months, most recently on Friday, that more oil wasn't the answer. Instead, they have blamed soaring prices on the falling dollar, U.S. interest-rate policy and the increasing involvement of big investment funds in the commodities market. Saudi Oil Minister Ali Naimi said Friday that soaring prices were "unjustified by the fundamentals" of supply and demand.

http://online.wsj.com/article/SB121355902769475555.html?mod=googlenews_wsj

keith said...

The US dollar vs the Euro is off 14% in the past year, and the US dollar index is off 10%, while oil is up 80%

With supply and demand in balance, I would suggest that the other 66% to 70% is pure hedge fund and hot money speculation

Agent 99 said...

This Great Oil Bubble is not exactly a popcorn moment...I kind of choked on it when I read about the sovereign wealth funds buying the GM Building, the Chrysler Building and the Flat Iron Building...I worked in all three of them, so it got a little personal. I understand that farmers (like Macklowe in NYC) are leveraging themelves like crazy to capitalize on the high food/corn prices (loans for land, tractors, fertilizer etc.) What if the farmers go bust...who'll sweep in and buy the farmland? I guess our Mexican migrant workers will be working for sovereign wealth funds and we'll be cut out completely. (And popcorn prices will go through the roof).

Anonymous said...

Holy shit Qweefie!! For once you actually make sense.

Anonymous said...

For those of you truck haters out there...a feq questions to ponder:

1. How do you think food production would fare without trucks available on farms?

2. How do you think construction would fare without trucks available for contractors?

3. Do you think deaths would increase or decrease in snowy areas without access to 4X4 trucks?

While it's all fine and good for everyone in an urban area to drive around in a Prius, it is not reality in the country. And while it's all fine and good to drive a Civic on your commute from the suburbs to the city, it won't do you much good when you need to transport wood or hay or chicken feed.

not andrea gressinger said...

http://youtube.com/watch?v=JnVVkCsw41c

Anonymous said...

just got back from France where gas is a 1.50 Euro a liter. That equals approximately $9/gallon.

sundry vermin said...

Kucinich spoke with O'Reilly about this recently. Good conversation.

Here's the link. Forward to 3:15 to get to the speculation part. Wow, I agree with Kucinich on something.

http://tinyurl.com/449ef6

Anonymous said...

just got back from France where gas is a 1.50 Euro a liter. That equals approximately $9/gallon

------

don't worry. a year from now with president st. obama, our economy will also look like france's.

Anonymous said...

"People accustomed to living in Europe or other parts of the world who do not have to put up with these social pariahs really dont understand the crap that we in the certain parts of the US have had to put up with these ego maniacs that drive the F-250's."

We're not any different than people in Europe. They have their own versions of egomaniacs (that's one word, Bubba).

keith said...

http://tinyurl.com/5mwmfk

good report and video on supply/demand

real estate said...

oil prices are getting too far and it's a pain the neck, anyway I like your point of view with this article.

Anonymous said...

Great Article Keith. I hope your are right on this one.

I think the Oil Bubble could be with us longer than we think, just as the housing bubble was.

So let's get a jump start on everyone else;;;;WHAT WILL BE THE NEXT BUBBLE AFTER OIL & other Commodities?

William Behm said...

Our Govt. is pressuring Saudi Arabia to increase production which they may commit to by next week.

Even with this increase, I believe that Oil will still be in a 1-3 year bull run and on its way to $200/barrel by 2009.

I hope I am wrong.

new gaz guzzler permits said...

TRUCK LOVERS:

First of all, only people and companies with special "LARGE ENGINE PERMITS" will be allowed to operate a 6-cylinder (or higher) GAS GUZZLER as follows:

(Price of guzzler permit is for EACH vehicle you own - per year)

Farm and livestock owners: $N/C

Freight companies: $35/Year

Mass-Public transportation: $35/Year

Heavy equipment haulers: $35/Year

Construction companies: $35/year

Manufacturers: $35/year

Distributers: $35/year

Rugged terrain home/owners: $100/Year

Auto racing: $200/year

RV owners: $200/Year


All classifications also include boats, trains and aircraft.

Anonymous said...

Got any oil investment tips from the supermarket checkout chick yet?

Anonymous said...

Just as the clueless talking heads said that oil production will ramp up towards 115 million barrels a day (they are wrong) by 2015 or so, the population of the planet will not triple or quadruple like one of them said sometime last week. Do these people even have a working brain? If it is even possible to switch to a different source of energy to power day to day life, I see no chance that the population can be sustained. Oil is requreid for that. It will have to be trimmed by about 4-5 billion. Africa will go back to pre-oil populations as the kill each other off and resort to thier primitive instincts. The middle east will become a barren desert void of life (no loss there either).

wc said...

To anon 12:09 - I don't think people are picking on trucks that are actually necessary - but rather the people that drive large SUVs and pickups that don't have any commercial need for them. However, I think the move to SUVs didn't so much come from big money - but more from the fact that people didn't want to drive their "parents" station wagons and with mandatory seat belt laws - it's hard to take your own kids and even 1 other kid anywhere in a standard or compact car. Add to that a huge increase in the actual size of Americans - kids included - my sister had to upgrade to an SUV because her new boyfriend wouldn't fit in her old car.

Anonymous said...

Peak oil is all about the lunacy of doom.

Obviously there will be a peak production point - there's a fixed amount of the stuff in the ground (well unless you can wait a few million years...) and some is easier to get at than others. Hence there will be a peak. That's common sense and has nothing to do with oil - it's the same for gold, coal, uranium, aluminium, iron, etc, etc.

As production falls, prices rise, and alternative energy sources become competitive. While we mightn't get anything comparable with oil (which is free energy that bubbles up out of the ground - at leasdt at one point...) over time we'll get back to close. And the remaining oil can be used for non-energy items that need it.

I admit the US might be in more trouble than the rest of the world, since it has made itself dependent on cheap gas (and substituting say cheap nuclear generated electricity doesn't work like it would in a country with electric trains getting your from any place to any place). But it'll manage.

Of course a nice oil bubble may help in the preparations, though the 70s oil shock sure didn't seem to...

Anonymous said...

304,000,000 people use 20+ million barrels of oil per day. LOL. What a bunch of locusts this country is. Recycle? Too fat and lazy to. Small economical car...to fat to get in it. Japan passed a fat law this year. Waist lines 33 inches or less. The US needs to follow Japan but the country has mutated beyond reason. Some fatty will cry foul.

Anonymous said...

Oil ain't gold, my friend.

Anonymous said...

So Oil prices have gone up by an order of magnitude and demand is still rising by 1%? Shouldn't demand be dropping since people can no longer afford to buy the stuff?

The fact that demand rises no matter how expensive it gets doesn't seem like a bubble to me.

As oil runs out over the next 100 years, drastic change runs in

And the end of oil reliance, especially oil used to power cars, should be a cause of celebration, not concern


When did Ford first start making cars? 1912?

So... if it is peak oil, it took us 100 years to piss away the first half. BUT... we now have how many hundreds of MILLIONS of cars on the road on the planet? It wont take 100 years to piss away the last half of the oil left out there... it might take 25 if we're extremely lucky. And with every passing year, the price of oil goes up because it's harder to pump, harder to refine, and a rarer commodity.

So... even if by some miracle we do find a new energy source - how exactly are we going to convert several hundred million cars that run on gasoline to this new energy source which hasn't been discovered yet? A new energy source which is easy to store and cheap btw. AND this has to happen in the next 10 to 20 years...

If you REALY start looking at this, and the problems with switching to a "new" energy source, you will see that this is the bubble to end all bubbles... since our civilization will be on the verge of collapse if we don't switch to something else in the next decade.

My guesstimate... there will just be more wars to fight over scarcer resources... which is the reason that all wars are fought. And considering past experience (Afghanistan and Iraq)... I'm thinking I'm pretty close.

NOW... since we now know that oil will disappear over the next two decades... is it any wonder that Iran is looking towards nuclear energy and is the reason it is telling the west to stick it up their a$$?

Mark said...

If you want to put some money on this bubble popping...

DUG is the way to go...

Anonymous said...

Is there some speculation, sure there is...every commodity has speculation riding it. So does gold, yet I don't see anybody running around saying there's a bubble their either.

The main issue with the entire oil situation is that NOBODY has the real data on the so-called 'proven reserves' and Saudi Arabia has always been touted as the 'backup producer' in case things got 'tight'...yet NOTHING has been done on their part. But I doubt that even if they could bring online another 3M/brls nothing will happen with the price.

I personally would not like to be an oil producer at the moment...taking in gazillions of those soon-to-be toilet paper dollars. Come on! Its a friggin setup!

Anonymous said...

Anon. (June 16, 2008 12:09 PM):

Thank you! Urbanites who make blanket statements about the evils of trucks and their drivers have never stepped foot on a farm and think their food comes from "a grocery store." And when they pray for drivers of pickup trucks to pay dearly at the pump, they forget that this also folds into higher food prices. Keep praying A-hole, you're about to get your wish.

Anonymous said...

Maybe the bubble in the US$ is popping and that is causing the commodities prices to increase. Why trade food and oil for worthless paper?

Anonymous said...


I say we regulate the commodities traders like we do wall street and this BS will not happen again


Yeah, there is no BS going on in Wall Street. You're an idiot.

Anonymous said...

Keith,

While I agree with the post, I find the phrasing of it a little rich seeing as it was only a week ago that you were saying peak oil has doomed us all.

Well done for coming out and calling Oil a bubble. Null points for writing as if that's what you'd been saying all along.

Nick

Anonymous said...

The right way to understand this is that despite a near quadrupling of oil prices, actual demand still went up a little bit. That shows you just how practical and deployable and deployed the alternatives are at the global scale necessary to impact oil consumption: not one bit.

-----------------------------------

Keith, that is what you are missing in your post:

despite oil being at 140, CONSUMPTION STILL INCREASED by .9%. I think you are mixing up DEMAND and CONSUMPTION.

There is far more demand than consumption.

Anonymous said...

i have read somewhere that priced in Gold, oil really hasn't gone up that much, if at all.

if that is the case, then we are in a gold bubble too.

Anonymous said...

There are trillions of barrels of oil under Montana, N. Dakota, Wyoming and Colorado. There are hundreds of billions more in Alaska and off the coast of Florida and California.

You all can bitch and whine about Bush/Cheney all you want. The fact is we could be self-sustained in our oil needs for the next 75 years if we drilled domestically. We aren't because enviro-mental patients have taken over the asylum.

Anonymous said...

Anonymous Anonymous said...

For those of you truck haters out there...a feq questions to ponder:

1. How do you think food production would fare without trucks available on farms?

Trucks are needed on a farm yes.

2. How do you think construction would fare without trucks available for contractors?

Trucks are needed for construction yes.

3. Do you think deaths would increase or decrease in snowy areas without access to 4X4 trucks?

We live in a snowy area. Truck & SUV Owners think they can put it in 4WD and do 80mph on the freeway covered with black ice every winter here. This happens every freakin winter. These trucks cause more accidents than all the cars combined.

While it's all fine and good for everyone in an urban area to drive around in a Prius,.....it won't do you much good when you need to transport wood or hay or chicken feed.

We have an '85 Chevy pickup truck that we converted to propane a few years ago. Propane prices out about $1.50 less than gas, which really isn't all that great these days. We also considered that we are not hauling stuff in the truck everyday.

We decided to park the truck and buy a nice utility trailer at Harbor Freight. $300. We can haul anything we want with our economy car now.

The average Joe6 doesn't need a truck. He wants a truck.

mike said...

i expect corrections but i think we are well on our way to $200 oil. since 01 oil has also reflected actual inflation and increasing demand. india and china demand could put parabolic type demand on oil in the next decade. we may not be running out of oil - but we are running low on the cheap, easy sweet oil. and oil is being used as a hedge against inflation now, rather than precious metals; not sure i liken inflation hedge to bubble mania, at least at this point. i don't really see any of these things changing any time too soon either. so i think oil may come down to $100/barrel, but only on its way back up to $200/barrel within 2 years, if not sooner.

brianbb said...

If it's an oil bubble, where are the inventories piling up?

IN the 1980s and 1990s, OPEC would have quotas, as they do now. Whenever prices would go up, OPEC members would cheat and pump more to take advantage of the price. So prices FELL from 1980 and could never stay above $30.

Now oil prices are SUPER HIGH. So OPEC members should be pumping all out to take advantage. Why aren't they? Maybe they are. Maybe they are pumping all they can.

That's why there are no inventories piling up. They are being used, even at $130 per barrel. OPEC has to pump all out to make up for the production DECREASES in the north sea, mexico, alaska, GOM, etc.

So where are the new fields? When is the last time the world discovered more oil in a year than it used? 1970?

Maybe people will use less in teh future...but the aging fields will be producing even LESS in the future as well. And the new fields coming on line are tiny and expensive.

Brazil's 10B barrel oil field will cost $100B to develop? The world uses 30B barrels a year...so Brazil's "massive" find is 4 months of usage. That's how ridiculous it is.

AS for teh "speculators"...total contracts are 1 billion barrels, or about 3% of what hte world uses in a year. They have to take delivery (causing inventory spikes which don't exist) or roll over the contracts into the future (causing front month contracts to collapse...which hasn't happened). There are also OIL SELLERS (Opec countries, any producing entity basically) who are natural sellers of these contracts as they want to lock in high prices.

So speculators doesn't account for it either.

Silex said...

Interestingly Keith your 60-70% estimate of the amount due to speculation agrees with
[url=http://www.engdahl.oilgeopolitics.net/] FW Engdahl's estimate. [/url]

JordanT said...

Thank you! Urbanites who make blanket statements about the evils of trucks and their drivers have never stepped foot on a farm and think their food comes from "a grocery store.

"Urbanites" understand that trucks are useful to many people. Nobody is complaining about somebody who owns a truck for work, or an SUV with 4 kids in it. My parents owned a Suburban because we lived in the rural mountains and we needed a 4X4 SUV that could carry six people.

What I complain about is the shiny 4X4 truck with chrome trim and lifted with big wheels that has never touched dirt. The owners won't haul anything in it, because they are afraid of scratching it. Not that there's room in their bed to haul anything meaningful because they have a quad cab instead.

Gabor said...

Keith, help me understand this because I respecfull disagree. In 2000 I paid $1 for a gallon of gas. Today I pay $4. So that's a 400% increas. If the dollar lost half it's value since then and demand doubled since then, isn't $4 a gallon correct? I guess if supply is way up then I would be wrong. Just seems to me that the oil price is correct based on supply and demand.

Jason said...

If it's a bubble, where's the surplus? Where's all this oil that's not being used, that's so overvalued? Who's going to be left holding?

Anonymous said...

Build cars with smaller engines. We´ve been doing it in europe for ages. A 2 liter engine made by bmw or vw has more horsepower than most amercan v6's while using less gas. I used to drive a Fiat Punto GT with a 1.4 liter turbocharged engine with 140 HP wich i sold in good running condition with 200,000 kms on the clock. It used about 2 gallons every 60 miles.
It drove everywhere I wanted to go and had a decent trunk (i don´t need to haul much stuff anyway).
Start buying nore efficient cars and you will cope with price hikes more easily.

PJ

Paul E. Math said...

What if it's both a bubble and different this time? Just because you're paranoid doesn't mean everyone isn't out to get you.

Hot money speculators may have pushed up the price of oil but this may also somewhat coincide with the passing of hubbert's peak.

Sure, oil may be a speculative bubble, but its bursting may be prevented by imminent supply problems.

Just thinkin' out loud here.

max_in_wa said...

I don't think anyone has a problem with trucks being used for their utilitarian purpose. The vast majority of trucks I see however, are shiny-polished-cast-aluminum-wheel beauty queens whose tires have never felt anything but pavement. We all suffer high prices because some people don't care how much they use. That's selfish.

As for the poster talking about 4x4s and snowy areas -- how did people manage to drive in snow with 2wd cars in the past and why do I always see more SUVs in the ditch after a snow than anything else? People think 4wd makes them invincible -- here's something to think on though, 4wd gets you going but it doesn't get you stopping. In high school, I managed to get everywhere in rear-wheel drive 76 Corolla -- in Vermont winters (and never went off the road -- imagine that).

k.w. - Southern Ca. said...

I was at a restaurant with a friend the other night - The LongBoard in HB - for a Friday night, it was literally empty.

Also, at another restaurant, the owner/operator told me business has been down 40% from last year!

Oil is what's driving this madness, while a relatively few fat-cats get rich, others suffer for the outrageous price increases.

We've said clearly over and over in this country that the wealth of the few is more important than the well-being of the many.

However, it won't be such a great place to live even if you have money when all the reastuarants and entertainment centers are closed.

Reality said...

1. The Dollar Index does not measure the real value of the Dollar; it measures how quickly other countries are debasing their currencies compared to the Federal Reserve: if Dollar Index appreciates 10%, it means other coutries in the fiat currency basket are ripping off their citizens 10% faster than the US FED. If you want a real measure of the value of the Dollar, you will have to look at the gold price, silver price, industrial metal prices, oil price, etc. etc.
Instead of thinking the 80's and 90's as an oil bubble collapsing, what happened in the 90's was a Dollar Bubble! as newly liberated people coming out from behind the Iron Curtain thought the Dollar was a safe place to store their wealth. Now, with the Wall Street corruption and US government fictional accounting exposed for the world to see, how quickly do you think the dollar bubble will be able to re-inflate?

2. If oil price does crash in dollar terms, all the oil majors, exploration companies, and alternative energy plays are of course all toast.

3. The current high oil price is making SUV's good buys. For someone like me who drives about 7500 miles a year, buying a new SUV is getting mighty tempting. If you truely believe oil is in a bubble, go buy one :-) You can short oil too at the same time to pay for it . . . and have all your eggs in one basket :-)


2.

Anonymous said...

"Remember how housing reality shows really served to usher in the reality of the real estate bubble? A&E's reality series, "Flip This House" debuted on July 24, 2005. (Not sure what the fact the show remains highly-rated says about how far the bubble has deflated, but that's another story.) Anyway, we noticed some hype bubbling up from the ground surrounding this reality series debuting this Wednesday:

Black Gold: 2 Miles Deep or 6 Feet Under, a new reality-based series about "the high-stakes world of drilling for oil and has in Texas.""

http://www.minyanville.com/articles/spx-dillards-dds-google-goog-axp/index/a/17583/from/yahoo

Interesting isn't it...

F250 said...

It makes me wince when I see a man driving a Toyota Prius.
I think to myself, "I wonder who cut his nads off?"

devestment said...

http://tinyurl.com/4dc9nn

Right Said Ted said...

Forget oil! Corn is the final straw that will break the camel's back. Corn prices are skyrocketing and if you think food prices are high now.....you ain't see nothin'! Corn is the one commodity that it some way or another is used to produce almost everything we eat and drink. When you combine this price spike in conjunction with the rising costs to transport these food items, we are headed for a Soylent Green scenario.

Anonymous said...

Anonymous said...
For those of you truck haters out there...a feq questions to ponder:

1. How do you think food production would fare without trucks available on farms?

2. How do you think construction would fare without trucks available for contractors?

3. Do you think deaths would increase or decrease in snowy areas without access to 4X4 trucks?

While it's all fine and good for everyone in an urban area to drive around in a Prius, it is not reality in the country. And while it's all fine and good to drive a Civic on your commute from the suburbs to the city, it won't do you much good when you need to transport wood or hay or chicken feed.

______________________________________________________________________



The point is that most of us don't need a SUV, pick up trucks will always have their purpose. But a soccer mom never needs a Suburban, or a Land Cruiser. People think SUV's have more "room" but most don't. My BMW 5 Series Wagon can hold the same amount of people and carry more than double the cargo of the BMW X5 SUV. All the while getting better Fuel Economy and with the Sport Package handles better than any SUV and most other sedans on the market. In Europe you see a lot of small wagons and hatchbacks for the aformentioned reasons.

RayNLA

Anonymous said...

The idea that we can make this transition from fossil fuels very quickly just ain't there. There isn't enough capital and enough technology

An easy fix from the 70's - drop the Speed LImit to 55 mph. That dropped oil consumption in two months and gasoline prices under $1.00 in 1.5 years. Won't happen until after the election.

We have got to get down from supply demand equilibrium which allows speculation to run rampant. As long as there isn't a supply cushion, speculators can expect a positive alpha on oil prices. Only if speculators expect to lose will markets calm down.

I wish I could afford the risk to buy options to trade, before Election Day comes. I am retired and can't bet the ranch. I used to be a hedger for a company and made and lost millions in weeks. I predict when oil does come down, a lot of these speculators will go down harder than any house speculator. It will be a surprise.

Anonymous said...

This isn't a commodity bubble, it is the bust of the fiat bubble.

But if you missed the commodity train and sat on silly dollar-denominated assets all this time, then get on board the next scheduled departure: defense stocks. There's lots of war coming in the next few years (either starting next year w/ McCain, or in 5 years w/ whoever replaces the failed Obama).

Anonymous said...

keith, always respect your opinion, but you are missing a huge detail in this debate - the Export Land Model - this model says that as the oil exporters continue to get rich from the oil prices they use more of it, while at the same time fields decline, leaving the oil importers with net declines of oil availability at 5-15% per annum, causing a crushing problem. This issue has resulted in a decrease of 1% in '06 and 2.5% in '07 of exports but this year it may be much higher; unless these emerging economies and middle east economies dramatically curtail this growth the future is not bright, imho

Anonymous said...

Long time reader of HousingPanic and I almost puked when I saw this post. Keith, you obviously do not understand underlying problem very well. The "bubble" you speak of is being driven by the central banks trying to keep 1000 trillion in derivatives from imploding via risk of credit default derivatives. The fed cannot let one primary dealer go BK or the dominoes fall armageddon style. This means unprecedented monetary inflation that will lead to unprecedented price inflation in uindollar commodities. You have been speaking of deflation for over a year now and lower oil prices and have been wrong every time and you will continue to be wrong. The jawboning by central banks is a desperate attempt to save the US economy from crashing via $10 gas.

Anonymous said...

Build cars with smaller engines. We´ve been doing it in europe for ages. A 2 liter engine made by bmw or vw has more horsepower than most amercan v6's while using less gas.

==========

WTF? Here we go again with the blame America bullshit. In case you haven't noticed BMW makes a V8 and a V6. Audi has a V6 and a V8. Mercedes makes SUVs that guzzle gas. Range Rover is probably the least fuel efficient vehicle out there.

Get a clue.

Reality said...

Max in WA,

So why aren't you still driving your 1976 Corolla? Since you claim to be able to go "everywhere" with it, all the car replacements that you have had ever since then have gross waste of resources. I doubt you are still driving a 2000lb tin can that can't pass any crash test. Pushing such a light RWD car in the snow must have been a lot of fun. Comes to think of it, horse buggies also enable people to go "everywhere" that they desired to go; they just never thought of going anywhere they couldn't, including anywhere more than 100 miles away from home in one day.

Anonymous said...

As for the poster talking about 4x4s and snowy areas -- how did people manage to drive in snow with 2wd cars in the past

============

How did people live for years without antibiotics? Dude that is the dumbest argument ever.

Malcolm said...

In one of the great "three cheers for science" moments, we may have found the best possible solution...

It's a bacteria that eats waste and converts it into petroleum.

It's still at the early stage, but it could, for example, turn the US back into the premiere "Oil Nation"

http://www.timesonline.co.uk/tol/news/environment/article4133668.ece

Anonymous said...

1. The Dollar Index does not measure the real value of the Dollar; it measures how quickly other countries are debasing their currencies compared to the Federal Reserve: if Dollar Index appreciates 10%, it means other coutries in the fiat currency basket are ripping off their citizens 10% faster than the US FED. If you want a real measure of the value of the Dollar, you will have to look at the gold price, silver price, industrial metal prices, oil price, etc. etc.
----------------------------------

yea, i have often thought about that. What if the dollar gets back to 1:1 with the euro. What does that mean, exactly, other than 1 dollar == 1 euro? We could get back to 1:1 by increasing the supply of euros.

yu been skooled said...

FLASH:
Yu Been Skooled is stunned, shocked and amazed that the HP Leader finally gets it. Applause forthcoming.

In other news:
HP tinfoil conspiracy theorists condemn Keith's latest observation.

donald said...

The oil bubble will not pop anytme soon. Many people were preaching doom for the housing market as early as 2002. A year from now when gas is $160 + a barrel, we are all going to look back and LAUGH at the people who preached that the oil bubble is going to pop when it was $130 a barrel.

Anonymous said...

Let's look again at oil, where total world demand rose by... wait for it... a whopping 0.9% (YES, THAT'S ZERO POINT NINE PERCENT) over the past year, while world liquids and crude production increased slightly more than 1%
___________________________________

So what? This is really simple, so I suggest you get a pen and paper and write this down and slap it on your forehead so that the next time you feel like mouthing off on a subject you know nothing about, perhaps you'll think twice.

OK, this may seem VERY counter-intuitive to you, but the way the oil extraction industry works is that they extract the cheaper oil first. Guess what? All the cheap oil has now been extracted and what we have left is located in "hostile" drilling environments. Also, about those claims you hear coming from the Saudi's, et. al., about how they're "on the verge of" increasing production by X million barrels per day, take them with more than just a grain of salt. At a minumum, try asking a few (hopefully intelligent!) follow up questions like. "Gee that sounds swell. By the way, how are those depletion rates coming along in your existing wells?" Finally, and this is the MOST IMPORTANT THING to remember, figures on production increases are meaningless. What you want to look at is how much oil is available for export. The US imports about 14 or so millions of barrels of oil per day. Obviously, then, we depend on countries that have excess oil to sell it to us or others. They may or may not want to. That decision has more to do with price than whether production is up or down by one percent.

Stop sounding like such a moron and stich to what you know.

Glenna said...

Love the picture, it is great!

Kevin said...

The profits within the oil industry are enormous.

http://activerain.com/blogsview/522490/Oil-Companies-Profits-Deadly

Anonymous said...

"For those of you truck haters out there...a feq questions to ponder:"

Dude, I do not think they were lambasting those that use trucks for their utilitarian purposes, but rather, it was directed to your posers and other suburban SUV drivers.

Regarding the snow thing, unless the roads are not plowed, you do not need a 4X4 truck.

Reality said...

BMW is actually one of the few carmakers out there that choose to pay fines every year for missing federal fleet average target mandate instead of having a fleet mix that meets the mandate.

BTW, high performance sportscars are a far better indicator of misallocation of resources in economic cycles than SUV's or their big family wagon predecessors. The early 90's sportscar bubble topped out around 320hp; today, we are seeing those same import carmakers bringing to market 500hp cars that will most certainly have terrible sales. Also, the sportscar bubble in the 80's topped out around 200hp. So the 1.6x ratio peak-to-peak has been maintained in this latest cycle . . . such are the milestones of human progress and excess :-)

Anonymous said...

Keith better be shorting oil!

Anonymous said...

F250:

Everytime I see a douchebag poser in his poser truck, it makes me want to cut off his nads so he cannot continue to contribute his ignorant and stupid genes to the gene pool.

Anonymous said...

late 90s .com bubble

early 00s biotech bubble

mid 00s real estate bubble

late 00s gold/silver and oil bubble

10s...probably green tech bubble

each time there are/were people saying this time it's different. each time they were wrong. each time people made and/or lost fortunes

Tonino said...

Time for the greedy,white trash Americano culture to meet their new oil buddy. Ben Dover.

Your disgusting self-centered way of life is coming to a fast end as oil prices will soon reach $200 per barrel.

Anonymous said...

Keith,

Your supply and demand numbers are WAY OFF. Whatever sources you're using are incorrect.

The "commodities bubble" is based on the horrific inflation that results from unmitigated, obscene levels of "money" creation.

I'm amazed you fail to understand this.

So go ahead...place your bets against oil and other commodities. You'll lose.

FOLKS -- KEITH IS STILL AT THE KINDERGARTEN LEVEL WHEN IT COMES TO BASIC ECONOMICS.

Anonymous said...

sources are linked

mike said...

next bubble will probably be alt energy stocks for the most part. commodities are being used as inflation hedge. they will have corrections but trend upwards for sure, they are not in a bubble. just because the price rose rapidly doesn't mean bubble... does oil meet the other requirements layed out in determining a bubble? no...

Anonymous said...

FOLKS -- KEITH IS STILL AT THE KINDERGARTEN LEVEL WHEN IT COMES TO BASIC ECONOMICS.

+++++++++++++++++++++++++

you just now realized this?

F250 said...

The F250 is not a poser truck , it is a real truck for real men, you know, the men who do the real work in America.

Roccman said...

Hmmm...interesting Keith...you are wrong again.

Energy Hedge Funds Missing Oil Boom
Returns Lag Even as Futures Prices Soar,
Undermining Fears of Speculators' Clout
By GREGORY ZUCKERMAN and ERIC BAUM
June 9, 2008

If speculators are responsible for driving up energy prices, some of them haven't been doing a good job of profiting from the surge.

Hedge funds that focus on energy failed to cash in on huge moves in oil, natural gas, coal and other parts of the energy patch this year. Some were too cautious, bet against crude oil to protect other holdings or bought stocks of oil refiners and producers, many of which have struggled. Exxon Mobil Corp., for example, is down more than 7% this year.

Hedge funds generally take both bullish and bearish stances on an investment sector, so they don't usually keep up when a market soars.

Some of the hedge funds having difficulties may have been among those that bet against the price of long-term oil-futures contracts, while at the same time buying near-term oil futures, says Mary Ann Bartels, an analyst at Merrill Lynch. That strategy backfired in recent weeks when long-term energy-futures prices did better than near-term prices.

The strength in crude this year has caught some veteran traders by surprise, in part because oil inventories have been relatively full. "People seemed to get too scared when it neared $100 a barrel that a pullback was possible and have been gun shy getting back in ever since," said one hedge-fund manager.

Cheers.

Anonymous said...

solar energy was, is, and shall always be the best energy source.

In 30 minutes more energy falls on the earth from the sun than humanity can produce in one entire year.

We just need to harness and store it more effectively.

Roccman said...

"keith, always respect your opinion, but you are missing a huge detail in this debate - the Export Land Model - this model says that as the oil exporters continue to get rich from the oil prices they use more of it, while at the same time fields decline, leaving the oil importers with net declines of oil availability at 5-15% per annum, causing a crushing problem. This issue has resulted in a decrease of 1% in '06 and 2.5% in '07 of exports but this year it may be much higher; unless these emerging economies and middle east economies dramatically curtail this growth the future is not bright, imho"

ELM

You better believe it.

And for those paying attention in class all these years...

Google Jeffrey Browm - the brain behind ELM.

You can read JB at:

www.theoildrum.com

Keith - you are going to lose your ass if you are short oil.

And I will laugh...hard...ong...and loud.

Anonymous said...

"Current price levels do not reflect supply and demand realities. A review of prospects for the remainder of the year also shows little support for prices to remain at current levels."
- OPEC statement, June 2008

______

Keith, if you believe statements by corrupt, slimey OPEC, I've got a couple of McMansion's in Afghanistan I'd love to sell you.

One of Saudi Arabia's dirty little secrets is that their reserves are nowhere near what they claim.

Cars are being made in the developing world at a breakneck pace. Demand for oil is soaring. How can you be missing this, Keith?

Your understanding of geology, the economy, and other big picture topics is sorely lacking Keith. You're at an infantile level.

The world's supply of oil is NOT staying ahead of demand. For there to be a bubble, you need more supply than demand. We don't have that.

Keith, you've bought the mainstream media's line that "speculation is what's driving up oil prices". That's retarded. Think about it. Do more research. You obviously have done very little.

Anonymous said...

FOLKS -- KEITH IS STILL AT THE KINDERGARTEN LEVEL WHEN IT COMES TO BASIC ECONOMICS.

+++++++++++++++++++++++++

you just now realized this?


________

No.

I've been saying it for over a year now.

You just now started to listen?

Anonymous said...

And a word for the Peak Oilers out there - yes, at current consumption and production rates, we've got a problem. But what you don't take into account is that the world (i.e. 'the market') because of prices, political instability, global warming and the dramatic change in collective consciousness, will now be making The Great Change, away from fossil fuels as fast as it can.

_______

Your thinking is very faulty, Keith.

How rapidly can we really switch away from fossil fuels?

New cars have to be developed and built.

New fuels have to be extracted and refined.

These things take years, if not decades.

The political will in most nations does not yet exist because insufficient pain has been felt.

You're way, way off, Keith.

Roccman said...

More to chew on Keith...

"Paul Horsnell of Barclays Capital, an investment bank, puts the total value of index funds and other similar investments at $225 billion. That is less than half the market capitalisation of Exxon Mobil, he points out, and a tiny fraction of the $50 trillion-odd of transactions in the oil markets each year"

Read that again Keith...then tread this:

"In 2007, the total value of futures contracts outstanding for all 25 index commodities amounted to only about $180 billion. Compare that with worldwide equity markets which totaled $44 trillion, or over 240 times bigger."

Thus the dollar value of the entire futures market is barely a rounding error compared to the equities market.

A rounding error Keith.

Can you say, "the well is dry"...

I knew you could.

Anonymous said...

late 90s .com bubble

early 00s biotech bubble

mid 00s real estate bubble

late 00s gold/silver and oil bubble

10s...probably green tech bubble

each time there are/were people saying this time it's different. each time they were wrong. each time people made and/or lost fortunes


_______

Good thing we have really smart people like you to tell us what's going on.

Sheesh.

Look pal, the dot-com bubble was soaring stock prices for companies that had nothing more then web sites, in some cases. A bubble based on vapor.

The housing bubble became a bubble because too many houses got built, and interest rates and lending standards were relaxed too much.

Gold, silver and oil are REAL, TANGIBLE THINGS of which there is a LIMITED SUPPLY. Rising prices on these things simply reflects insane inflation that is based on insane money creation.

Don't you kids get it yet?

Guess not. I keep reading the same infantile things on this blog.

Edgar Alpo said...

Sorry keith, I gotta disagree. If exporters said $500 / bbl the U.S. would pay up. Demand destruction will be slower than supply disruption = Permanently higher prices. Too much damn money in the world when a golfer and basketball player are worth over $1 billion each and you think prices are coming down? Not without rationing.

keith said...

Rocc - I'm not short or long oil, but I am long the oil majors and greens that will be be printing money for years to come, regardless of the price of a bbl.

My calls are usually early, I'll be the first to admit

So grab some popcorn and watch this sucker play out

Anonymous said...

Keith,

You are ignoring the massive demand coming from India and China. You have millions of people who did not own cars who are now affluent enough to own cars. Also, Chery, Tata motors and other auto manufacturers are reducing the prices where these are more affordable. Also, China and India are spending billions on infrastructure -- highways, power plants, factories, etc. All this new infracture is dependent on oil to be built and to be maintained. On the supply side, no country has come in to flood the market with oil. US, Mexico, Iraq, Nigeria, UK, and China's oil production is all down since 2000. Canada has been picking up the slack but there oil is costlier -- tar sands production is expensive.

Karl said...

You are missing the point, it is not about supply/demand it's about world currencies that are not tethered to anything. The price of oil is just a number nothing more. Lately I also believe the investment in oil is because our banking system is insolvent. Would you invest in any of their "products?"

Roccman said...

He's another truth for you Keith...

The world is going to dump the dollar.

I have been munching on popcorn for years now...

It's showtime!!!

Enjoy the dieoff Keith!!!

And THAT my friend is an early call.

Anonymous said...

For those of you truck haters out there...a feq questions to ponder:

1. How do you think food production would fare without trucks available on farms?

2. How do you think construction would fare without trucks available for contractors?

3. Do you think deaths would increase or decrease in snowy areas without access to 4X4 trucks?


Look at the 2nd graph down here:

gas facts

In 1976-1984 the proportion of cars versus cars + light trucks, was over 75%.

In 2004 it bottomed at 45%, and now is maybe 48%.

So---are there soooo many more farmers and construction workers and snowy-area blizzard rescuers than before?

No!

In 1980, did people have children? Yes. Did they have snow? Yes. Did they go to little league? Yes.

It's just a huge load of BS; as I see tons of rich mall bitches and macho dudes in their enormous V8 luxury SUVs & pickup trucks, which inexplicably and unnecessarily can take their 13 lb baby and dry cleaning 0-60 in 7 seconds.

When the car share is 75% again, and people who buy trucks buy working white trucks & vans with stuff in the bed, wheels (not jacked up) which get dirty, with vinyl bench seats, because they need it for their productive paying jobs---the way things used to be---then I'll stop accusing.

F250 said...

If they want my corn, then they are gonna have to fork over the diesel.

Oh by the way, it's too late, I've already proliferated:)

One more thing, y'all are worried about saving the planet by driving that goofy looking Prius (yeah, like that's gonna do it) when in the end you know the nukes are gonna fly.
It won't matter one iota.

max_in_wa said...

To the guy blathering about the 76 Corolla I had in HS: I paid $250 for that car and it wouldn't have passed inspection again for less than $1500. I drove that for a year like it was a smash up derby car. More fun than you can shake a stick at. Seriously, every HS kid needs a low powered car he can smash into stuff -- you learn stuff and don't do any damage.

The point I was making, and that others have made, is that snow driving does not take a big 4x4. 4wd helps you get going, but it really doesn't save your butt if you take a corner too fast on ice. That's why so many inexperienced 4x4 drivers end up in the ditch.

What actually makes a difference in winter driving is your tires. I once worked for the state and drove a Jeep Cherokee over icy passes and roads for hundreds of miles at a stretch. It was less stable in 4wd with snow tires, than my FWD Jetta with studded tires. Perhaps the Jeep could get out of a foot of mud, but I was just driving on the roads with either so that capability is immaterial.

Now I live in an area with rare snow. Every year I pass people who are stuck on the shoulder because their "All Season Tires" (a true misnomer) won't move the car in the snow. And I giggle when I pass SUVs in the ditch. Most of the cars in the ditch are trucks and SUVs in fact (perhaps because the cars with "all seasons" stayed home -- much cheaper than the repair bill BTW).

Anyway, to put this on point -- people have been sold a bill of goods with respect to the guzzlers that are so popular. But the real bad part is that this has increased demand and increased demand plays a huge roll in our gas prices.

Besides that, a set of snows on rims costs way less than an SUV and it only takes 30-40 minutes to change them out. True conservatives conserve everything.

Refuse to buy overpriced said...

GSCI

Anonymous said...

You are missing the point, it is not about supply/demand it's about world currencies that are not tethered to anything.

_______

It's about both, actually.

Anonymous said...

Keith,

Sometimes I disagree with you, but this time I'm with you. An anon states that this is happening because of massive money creation, show the numbers before you make a statement. Give us some figures...

How can you think oil can go from 20 a barril to 140 and possibly make sense, unless we are really running out of oil. This DOES NOT make sense buddy. Just like housing, there is nothing to support the increase. There are no fundamentals.

Sure we have the war in Iraq, and the US has printed at a higher level since Bush took over, but that would never account for a 700% increase. Remenber we are arguing on that 700% increase.

It is not easy to short oil, since noone knows when the reversal will happen. You might get wiped out before oil reverses. I and many others have been calling for a housing crash since 2003, and it happened in 2007. As you can see, it takes time for things to pan out, so don't laugh now. Oil might reach levels never imagined, but when it comes down, it will crash.

Dny

Anonymous said...

F250 said....
The F250 is not a poser truck , it is a real truck for real men, you know, the men who do the real work in America.

June 16, 2008 9:50 PM

Because you need that real truck for your long commute from the burbs to your i.t. job. or the 2 or 3 times a year you actually use the bed. GFY

Anonymous said...

oil = tulip bulbs = dotcoms

they all have the same usefulness to mankind and industry

vanilla ice said...

I love these threads!

Anonymous said...

Keith, people like you are supposed to sound the alarm not bury it under the carpet.
Demand and supply so far are matching, but the prices are going up as traders are realizing that peak oil is a very real threat.
Also look at the hedge funds that lost big time money by trying to short oil, thats what caused the 16dollar spike, it was the shorts covering, not all the hedge funds are long, there are massive short positions out there.
The human race had better take this problem seriously, not bury their heads in the sand, like yourself.

Yoski said...

"If it's an oil bubble, where are the inventories piling up?"
That's exactly what would be happening if it was a bubble. Like in housing builders cranking out a gazillion subdivisions. First speculators bought the crap up
(increase in stockpile) and later nobody wanted the crap, so speculators took a bath.
With oil it's a bit different. Where are the growing stockpiles. If it's a bubble there MUST be huge stockpiles building somewhere or some oil producers are witholding production. If that ain't happening it's not a bubble. Really not that difficult to understand.

tokyo-boy said...

"1. How do you think food production would fare without trucks available on farms?

2. How do you think construction would fare without trucks available for contractors?

3. Do you think deaths would increase or decrease in snowy areas without access to 4X4 trucks?"

Not this again! Who here is saying that ALL TRUCKS SHOULD BE ELIMINATED? Come on!

Anonymous said...

The same thought cross my mind concerning the oil price bubble
yesterday when I heard about the car created by Genepax Co. which will run and operate on water. WOW! Once in major production, this same type of engine can power many applications. I only hope the technology does not get "buried".

Reality said...

"My BMW 5 Series Wagon can hold the same amount of people and carry more than double the cargo of the BMW X5 SUV."

Is that a little pot-calling-the-kettle-black? The problem with X5 is not that it's an SUV; the problem is that it's a BMW, the big waster of resources. Your 5 series wagon still uses 15% more gas than a RAV4 (16/23mpg vs. 19/26mpg), and has 30% less cargo space (58cf vs. 76cf). On top of that, RAV4 has much greater ground clearance. In terms of horsepower, it's only 300 vs. 270, a 10% advantage, moving a vehicle that is 500lbs heavier! What's the point of touting wagon over SUV, when you have a turd wagon that weighs 500lb more and consumes 15% more gas than an SUV that delivers 30% more cargo space and can seat 7 vs your 5!

Reality said...

"In 30 minutes more energy falls on the earth from the sun than humanity can produce in one entire year. We just need to harness and store it more effectively."

So is the energy from radioactive decay inside the earth, and the energy generated by the gravitational tidal force from the moon acting on the earth's crust and mantel (the hot and pressurized layer under the crust). Much of that energy inside the crust is harnessed when you tap a hole in the ground and pump out oil.

Anonymous said...

NEWSWEEK:

Learning From the Oil Shock

The world may have arrived at the equivalent of Peak Oil. Old fields are in decline, while governments limit new oil projects.

"But governments that control 75 percent or more of known oil reserves are behaving as if Peak Oil is already here. They're hoarding a scarce commodity by limiting new exploration projects. Meanwhile, production at some old fields is dropping rapidly. Spare capacity has been depleted, as demand outruns new supply."

full article:
http://tinyurl.com/52ctfd

Anonymous said...

Saudis May Be Strapped for Oil, Close to Full Capacity

Monday June 16

Saudi Arabia's pledge to boost oil production by 500,000 barrels per day may not be achievable, a source close to the Saudi oil industry told CNBC.com.

The New York Times reported on Saturday, citing unnamed analysts and oil traders briefed by Saudi officials, that the production increase was to be announced at a meeting of oil producing and consuming countries on June 22 in the port city of Jiddah to discuss ways of dealing with
soaring energy prices.|

The increase would bring Saudi's oil production to 10 million barrels a day, the country's highest ever, according to reports by the New York Times and the Middle East Economic. Saudi Arabia is the world's largest oil-producing country.

But the country's ability to produce more than 9.45 million barrels a day of easily refined sweet crude is reliant on the newly-discovered Khursaniyah field, which is of yet not producing to its full capacity, a source close to the industry said.

The field was expected to start pumping oil in 2007, but only started producing in 2008 because of technical delays. And even then, it was expected to produce 500,000 barrels per day, but is currently producing just 300,000 barrels per day.

The plan is that Khursaniyah can raise its production by 200,000 barrels, but that would be the maximum, according to Saudi Aramco's annual report.

The Saudis are concerned that sustained high oil prices will eventually slacken the world's appetite for oil, affecting them in the long run.|

U.S. light, sweet crude (BIS: US@CL.1) for July delivery slipped below $135 a barrel in the Asian session Monday on the news that Saudi plans to raise production. London Brent crude (KRF - US: GB@IB.1) also traded down.

Crude prices have reached record highs, surpassing $139 a barrel on June 6 after surging nearly $11 in the biggest single-day price leap ever. Meanwhile, the average national price for a gallon of regular gas in the U.S. rose to a record $4.066 Friday, up from $4.06 a day earlier, according to AAA and the Oil Price Information Service.

http://tinyurl.com/6mvzlz

Anonymous said...

Hey,
what happened to "Housing Bubble.."

When there's no bad news to talk about, you go to another issue to try and flog your fearmongering diatribe.

You're all a bunch of bitter losers, pissed that you got priced out of the housing market.

Anonymous said...

Oil is expensive in the US because of the decline of the US dollar. Iran has already quit taking the dollar as payment and so will others in the near future.

Gasoline in south America is well under $1 a gallon and even in Mexico it is under $2.50 if you pay in dollars; under $2 if you pay in Pesos.

HB Slacker said...

Re;It makes me wince when I see a man driving a Toyota Prius.
I think to myself, "I wonder who cut his nads off?"

So you mean that your big truck is your sexual identity??? I drive a prius 50 mpg and solo in the carpool lane and its a fun quick quiet car with gps and satelite radio whats not to like??

BTW; my suv stays parked in my driveway until I have to tow my boat with it

Lost Cause said...

Somehow a substance that you burn just cannot be that valuable. I don't think this is going to last.

Lost Cause said...

The F250 is not a poser truck , it is a real truck for real men, you know, the men who do the real work in America.

You mean, Mexicans?

Anonymous said...

Quote:
"Build cars with smaller engines. We´ve been doing it in europe for ages. A 2 liter engine made by bmw or vw has more horsepower than most amercan v6's while using less gas.

==========

WTF? Here we go again with the blame America bullshit. In case you haven't noticed BMW makes a V8 and a V6. Audi has a V6 and a V8. Mercedes makes SUVs that guzzle gas. Range Rover is probably the least fuel efficient vehicle out there.

Get a clue."

I´m giving you a clue. Of course BMW and Audi make V6s and V8s. On high end sports cars that most people can´t afford. So they are rarely seen on the streets. does any american brand makes 4 cyl. engines?
But how can you be educated in this matter when fords taxi cab fleet has a 4.6 V8 engine? The same engine Range Rover used on their most expensive and powerful model, the HSE?
Audi, BMW and Mercedes also manufacture some of the most reliable and fuel efficient vehicules. Check out their websites in the UK. A BMW 320 D has over 150 Hp while getting almost 50 mpg. And the engines last forever.
There is life beyond big block engines. And this is not and anti american thing. I just dont understand why on earth do you need v6 and v8 engines to go shopping.

Pleasy try one of this cars and you will be amazed.

Adapt, explore new possibilities or pay up for rising gas prices.

PJ

Anonymous said...

it won't do you much good when you need to transport wood or hay or chicken feed.
--------------
As if we don't understand this! The issue is the millions driving SUVs not because they need them but because of they are some form of a status symbol.

As for the money transfer from the Western world to the Middle east, I would be more worried if they were actually developing their countries in a more sustainable way. Islands shaped like palm trees, ski hills in a desert... looks like high maintenance excess to me.

NEPA gal said...

"my sister had to upgrade to an SUV because her new boyfriend wouldn't fit in her old car."

That right there says it all for me, folks...as the Mogambo sez, WE ARE FREAKING DOOMED!

That's the mentality in this grand land of ours...americanos think that everything revolves directly around their individual selves. Too fat to fit in a car? Well, I shall buy something bigger that fits ME, not reduce ME to fit into what I HAVE.

Good lord.

As for oil, sure there's a bubble there...and we knew all about peak oil 30+ years ago but were too busy drinking beer and buying more and more shit we don't need to DO ANYTHING ABOUT IT. There is no excuse for this...only our own sheeple complacency. If the transition from fossil had happened back then, it would be complete now and we wouldn't be having this conversation.

Distracted from reality to the brink of extinction.

Anonymous said...


Gasoline in south America is well under $1 a gallon and even in Mexico it is under $2.50 if you pay in dollars; under $2 if you pay in Pesos.


That's because the government subsidizes fuel in those countries with taxes collected from workers. That means people who drive smaller cars are subsidizing people who drive larger cars.

Anonymous said...

I call BS on Peak Oil. Where is the proof? I don't consider sites like Kunstler's to be proof that PO is real. This whole idea of Oil becoming ultra-expensive forever is batpoopoo

Anonymous said...

"The F250 is not a poser truck , it is a real truck for real men, you know, the men who do the real work in America."

The difference between a man and a boy is a boy sees a need to tell people he is a man...

I should cut you some slack though, because even at 58 my FIL acts like he's a high school tough guy. I guess life on the construction site tends to stick people in one point in time. I remember some factory losers at one job acting like teenagers, too. They wouldn't go on break with "girls" - I thought that was kind of gay, actually, to not want to go talk to women.

Do you have one of those red rubber ball bags on your trailer hitch? Those really crack me up.

Andrew Hac said...

Great Oil Bubble Implosion, my ass !!!

It is the Great Snapper Turtle coming to roost on the Americano stupid fat-ass head that will be the head turner around here.

Crude oil will hit $250 U.S Of Snapper-Turtle Shitty Currency by 2010's. By then, how does the Americano will react to this new ? Perhaps burying their muddle fried-burger brain inside their obese-ass will help for a little while.

Thus, I am asking you, Newton and Einstein, here a $69,000 question:

Is the obese Americano toasted yet ? And if not, when do you people, Joe and Jane of the SHRUB's Ass-Head Clan, think the Americano will be toasted ? Will they be toasted lightly as a marshmellow over a boy scout camp fire or hotly, juicely as a snapper turtle skewered on a green Chinese bamboo stick from head to ass all sizzling nicely, fat popping, juices dripping over a bed of red hot charcoal fire ?

Such is the fate of the fat-ass Americano. What a lowdown shame for such a great nation once !

George Washington is feeling real bad right now in his tomb...

But hey, SHRUB's lovers, you got what you asked for. Satisfaction guarantee from the land of the SHRUBBY and DICKY !!!

Reality said...

PJ,

"does any american brand makes 4 cyl. engines?"

Yes.

Chevy Aveo, Colbalt, HHR, Malibu
Chrysler PTCruiser, Sebring
Ford Focus, Escape, Ranger

That's just off the top of my head.

"But how can you be educated in this matter when fords taxi cab fleet has a 4.6 V8 engine? The same engine Range Rover used on their most expensive and powerful model, the HSE?"

You wish. The engine in the old Crown Vic (no longer available for sale to public) was a OHV V8 that was optimized for ease of maintenance (taxi fleets are rolling parts bins). The one in the HSE is a DOHC V8, completely different engine, about 20 years of difference in terms of automobile engine technology.

"Audi, BMW and Mercedes also manufacture some of the most reliable and fuel efficient vehicules."

Nonsense. The statement might had some truth to it back in the 80's, compared to the completely atrocious domestics back then. Nowadays, Audi, BMW and Mercedes are butts of jokes in terms of reliatibility. In terms of fuel efficiency, they pay huge fines to EPA every year because their fleets do not meet the fleet fuel average mandate. Just to give you a hint how bad the Germans are, here are their base model mid-size sedans in comparison to the top sellers in the mid-size segment:

Audi A6 255hp 18/27mpg
BMW 528i 230hp 18/27mpg
MB E350 268hp 17/24mpg

Toyota CamryV6 268hp 19/28mpg
Honda AccordV6 268hp 19/29mpg

The I4 and hybrid versions from the Toyota and Honda are even more fuel efficient.

"Check out their websites in the UK. A BMW 320 D has over 150 Hp while getting almost 50 mpg."

The car is not emission-legal in the US. BTW, those are Imperial Gallons (nearly 20% more than US gallons), and the testing methods are entirely different.

"There is life beyond big block engines. And this is not and anti american thing. I just dont understand why on earth do you need v6 and v8 engines to go shopping."

Yes, there is indeed life beyond big block engines . . . however the three German brands sell nothing but big block or turbo charged engines. Turbo charging increase the effective displacement (fuel charge requirement) per stroke by about 40%. American preference for larger displacement also has a lot to do with the way the roads are laid out; we have intersections instead of rotaries; accelearation from a dead stop without clutch dumping like a crazy boy racer is important.

Reality said...

Max in Wa,

"Seriously, every HS kid needs a low powered car he can smash into stuff -- you learn stuff and don't do any damage."

If that's your ideal world, I'd rather drive a heavy SUV, so those pimply faced idiots can bounce off my car when they are having "more fun than they can shake a stick at."

"snow driving does not take a big 4x4. 4wd helps you get going, but it really doesn't save your butt if you take a corner too fast on ice."

That must be why AWD cars always win the rally races, despite their extra weight. LOL. AWD helps you up a slippery hill. A good AWD system also helps aportion torque appropriately among wheels so the ones having grip get the power and keep you driving where you are pointed.

"That's why so many inexperienced 4x4 drivers end up in the ditch."

That's why they need to spend more time with their 4x4's to gain experience; and get a good AWD system, not a crappy one.

"What actually makes a difference in winter driving is your tires."

That's such a load of tripe. Of course tires matter. However, studded tires are not legal in most states; whereas good snow tires burn up rapidly on dry asphalt and lose their 10% silicate layer thereby cutting their snow bite ability in half. Yes, only the first 3k miles of the top rated dedicated snow tires give you the top rated performance; after that, you are back to the decades-old soft rubber technology. So would you like to switch tires every 3 months in winter?

"Now I live in an area with rare snow."

Then you are not exactly the authority on snow driving now, are you?

"I giggle when I pass SUVs in the ditch."

Whereas I have helped out quite a few car drivers who were caught in sudden snow storms.

"Besides that, a set of snows on rims costs way less than an SUV and it only takes 30-40 minutes to change them out."

AWD options on many light SUV's cost only a couple thousand dollars. Good snow tires are $150 each, and they are only good for 5-10k miles . . . whereas the AWD system lasts the life of the vehicle. Not everyone has a shop jack in the house. The emergency jacks that come with cars are nearly useless; it would take hours just to replace one wheel with those.

gutless and lazy, greed is evil said...

Gordon Gecko laughing is a$$ off at 99% of Americans.

Traders are running America now.

Anonymous said...

Look pal, the dot-com bubble was soaring stock prices for companies that had nothing more then web sites, in some cases. A bubble based on vapor.

The housing bubble became a bubble because too many houses got built, and interest rates and lending standards were relaxed too much.

Gold, silver and oil are REAL, TANGIBLE THINGS of which there is a LIMITED SUPPLY. Rising prices on these things simply reflects insane inflation that is based on insane money creatio

============================

Oh a limited supply....like 'they can't build any more land'?

Moron

Anonymous said...

I concur. Any man driving a Prius is not right. Same goes with a Miata.

I'm not saying you should drive an F250. But come one people, a fucking Prius? Sure you can do a little better.

And to the guy who asked if American cars exist with a 4cyl engine...are you high? Ford Focus. Chevy Malibu. Dodge Caliber. Chevy Aveo. Ring any bells? Really man, try to get out in the real world sometime you'll be amazed what you find.

Anonymous said...

oh come on keith. i think most of the demand is real. sure there is some speculation. but when you have india, china, and brazil coming on line with economies going like gangbusters, guess what. unless you find more oil, the price will go up. i have never seen the price of gas go down in price more or less. it won't this time. when i was stationed in germany in 1972, the price of a gallon of gas even then was about $3.50 a gallon. so now it is over $4.00/gallon here in the states. there is no question in my mind, that we are headed north, not south my friend. believe that bubble nonsense if you want, but those fairytales of this being a bubble are only believed by those who want to believe in wishful thinking. then someone says. well what about demand destruction? well what about it? listen folks, what happens here really doesn't matter that much anymore. we can stop driving. sure. but the price will not go down. because the same people who own the banking system own the oil companies. they want more per gallon for their gas and they will get it. the only thing that will stop them is a rebellion, plain and simple.

Anonymous said...

Realty:

"Chevy Aveo, Colbalt, HHR, Malibu
Chrysler PTCruiser, Sebring
Ford Focus, Escape, Ranger"
===================================

True, but how many of them are ont he roads, compared to how many v6 and v8? (btw, the Caliber in europe has a VW engine).

You wish. The engine in the old Crown Vic (no longer available for sale to public) was a OHV V8 that was optimized for ease of maintenance (taxi fleets are rolling parts bins). The one in the HSE is a DOHC V8, completely different engine, about 20 years of difference in terms of automobile engine technology.

==================================

Still, an oversized engine and although technology made them more efficient, they use up lots of gas. Remebmer, the same technology has made smaller engines more powerful and more eficient.The point of this discussion is finding alternatives to save on gas.


Nonsense. The statement might had some truth to it back in the 80's, compared to the completely atrocious domestics back then. Nowadays, Audi, BMW and Mercedes are butts of jokes in terms of reliatibility. In terms of fuel efficiency, they pay huge fines to EPA every year because their fleets do not meet the fleet fuel average mandate. Just to give you a hint how bad the Germans are, here are their base model mid-size sedans in comparison to the top sellers in the mid-size segment:

Audi A6 255hp 18/27mpg
BMW 528i 230hp 18/27mpg
MB E350 268hp 17/24mpg
Toyota CamryV6 268hp 19/28mpg
Honda AccordV6 268hp 19/29mpg

==================================
Have to disagree on MB, Audi and BMW being rubish. I don´t know what are you getting over there, perhaps they are like mexican and brazilian made VW wich are rolling pieces of crap. Here in portugal, most cabs are Mercedes Benz, chosen for their proven reliability, cheap parts and labour and tank like build. I´ve seen MBs with over one million kms having their engine opened up for the first time. I have a 20 years old VW Golf/Rabbit Cabriolet that runs perfectly. Unfortunatly I don´t know about american made cars because they use up so much gas that they left the market in the 60's over here. Why not an Accord with 1.8 liter engine? I´ve driven some and they are very nice cars.
Also, the models you list are directed for the american market, but the question remains, why do you need an every day car with over 250 bhp? Why not a smaller engine car (more frugal on gas)?

Yes, there is indeed life beyond big block engines . . . however the three German brands sell nothing but big block or turbo charged engines. Turbo charging increase the effective displacement (fuel charge requirement) per stroke by about 40%. American preference for larger displacement also has a lot to do with the way the roads are laid out; we have intersections instead of rotaries; ===================================

They sell big block and TC engines because thats what the market demands. They do have other engines. And the market demands that because fuel is dirt cheap over there.
We have to stop entering rotaries here unless its late at night and theres no traffic (wich tends to be hellish in europe).

accelearation from a dead stop without clutch dumping like a crazy boy racer is important.
==================================
One of the ways to save fuel is by changing driving habits. Do you really have to fast accelerate? I thought that traffic police over there was pretty srict... And you don´t need to dump the clutch on normal driving. (and as most cars in america are automatic, theres no clutch to be dropped;))
Oh, and the 320d is a diesel engine. but i bet it pollutes less than a v8;)

Nice replies BTW, just trying to help you guys save money on gas. Believe me, over here, we are experts on it;)

PJ

Anonymous said...

"And to the guy who asked if American cars exist with a 4cyl engine...are you high? Ford Focus. Chevy Malibu. Dodge Caliber. Chevy Aveo. Ring any bells? Really man, try to get out in the real world sometime you'll be amazed what you find."
===================================
Just 4 models? Wasn´t the PT cruiser phased out? How many people do you know who drives one of the cars on the list? Whats their weight on total car sales?
From someone who says that driving a miata or a prius isn´t manly... the miata is a joy to drive (as recognized worldwide) and the prius is confortable and economic. Both of them get you from point a to point b fast and safe.
There are alternatives, you know? There are cheaper ways of motoring. We have been doing this for years in Europe. The US are worldwide known for their terrible use of energy.(this is not an anti american thing ok? just a fact).
When things change, we have to change and adapt. Why are you so resistant to the idea of smaller engines? Cheers

PJ

Anonymous said...

Meanwhile, Brazil, a third world country, is building its 3rd Nuclear Plant, found 2 more oil fields offshore to drill, and began exporting cheap sugar ethanol to Japan.

Hey, but gays can get married in California; that's what it matters, right?

Our country is doomed!

Anonymous said...

People who don't appreciate V6 engines have no business driving. Go take the bus since you know nothing about cars.

Anonymous said...

Miata = Gaymobile

George L said...

I used to buy the whole peak oil thing for a while,but I did a lot of research on oil and alternative fuels a came to the conclusion that current oil prices are a huge bubble,nothing more than wall street making back all the money lost in the sub-prime bubble by creating panics in commodities.

car makers will be damned if they will let some wall street hack hurt their sales for too long.as a result Toyota is rolling out all electric cars by 2010.

a small company in the united states has solved the problem of car batteries being drained too fast when you accelerate too fast thus enabling batteries to get far better millage per charge.

and if you don't like electric then you'll love algae diesel. no longer created in ponds which limited production.algae,depending on the system that is used to create it,can produce anywhere from 30,000 to 180,000 gallons of oil per acre per year versus corn which can only produce 18-20 per acre per year.

best of all is that most of this new technology is being created right here in the U.S. of A!


$200 a barrel? nah!
$10 a gallon? never!

Reality said...

PJ,

Seeing that you are in Portugal, it's not really fair to thrash you on debating cars in America. I have no idea what propaganda is being fed to Europeans nowadays about America, but here's a hint: I4 Camry and Accord outsell their V6 models by about 3:1 in the US.

Audi, BMW and MB are the ones peddling only big engines in the US, not the doemstics. Because the Germans are not competitive at the low to mid segments of they market at all. They are barely competitive in the high price range, where there's more money than common sense. Like I mentined before, none of the wagons from Audi, BMW and MB can come close to the fuel efficiencies offered by some of the SUV's offered by the likes Toyota and Honda in the US market.

Use in the taxi fleet doesn't mean jack about reliability. Taxis are rolling parts bins that get maintained and repaired regularly. Crown Victoria is not a realible car for consumer by any stretch of imagination . . . however, if you blow a gasket, you can have the engine fixed or replaced this very afternoon, because there are parts all over the place. The same logic holds for those MB taxis in Europe. 1 million miles doesn't mean squat because if you are willing to replace every item in the car and maintain it religiously, any car can run forever, including the original model T. Reliabilty for conumer means reliaibity when only minial attention is given, and no one liter of engine oil every 5000km, either; the VW Rabbit probably has to have oil level check every month, lest oil runs low after a couple thousand kilometers, and the engine self-destructs as a result. That's not reliability.

530d is way more polluting than most V8 engines in the US. That's what being illegal due to emission means. Some V8 engines are actually very clean as far as emission is concerned, cleaner than even hybrids. BTW, American V6 engines are also very fuel efficient for their displacement; they are usually lighter than German engines that have smaller displacement.

Reality said...

"Just 4 models? "

PJ, you are coming across like a redneck American who thinks Portugese still ride on donkeys for transportation. I gave you a long list of popular 4-cylinder cars in the US; it was by no means a complete list. The top selling car in the US this past month was Civic and Corolla!

a.creampuff said...

I just got back from out west. Spoke to two oil guys who should know. FWIW, both said there are large, untapped reserves of oil and gas. I'm a peak oiler, and other oil industry people I've spoken with are less optimistic. What they were talking about was shale oil and some resources that have recently been blocked from exploration, but still.

Anonymous said...

Realty:

Its a good thing that all those v6 and v8 are getting replaced by smaller engines, and that was my point from the start. I know that american car makers are trying to cope with rising gas prices. The Ford Focus has been aroun in europe for years, now available in the US, wich I think it makes sense. Also, Opel (saturn I think inthe US) now offers the Astra model (very popular here) with a 1.6 liter engine. I think that's the easiest way for you to cope with high gas prices, until something better appears.

I gave the example of BMW, VW and Audi becuase they are the most known european cars in the US. And they sell you those cars because thats what the american consumer wants, due to the market segment they aim. I don´t think that the american market is a priority for these brands.
It´s good news that the american public is responding to the oil crisis by rationalzing the use of fuels, switching to less powerful but more energy efficient cars.

I think its more important getting form point A to B, safely and cheaply rather than having lots of torque or performance. The faster you go, the more expensive the ride is.

In Europe we and car makers have adapted to our reality. We pay huge taxes on fuel wich in turn forced us to rationalize the use of fuels. Therefore, car makers developed more frugal engines. We even have a VW that uses 3 liters of diesel every 50 miles. Thats less than a gallon every 50 miles.
Also, the Smart Mcc car is an example of a practical city car thats cheap, reliable and economical.
It's all about keeping an open mind (not believing that the miata and prius aren't real or manly cars) and being able to adapt (as you have been doing for the past 200 and something years).
It has happened after the 1970's oil crisis and will happen again.

Btw, Hondas are very economical cars indeed, and well built. As a Civic owner if he's happy with its fuel economy.:)
And to someone who said: "People who don't appreciate V6 engines have no business driving. Go take the bus since you know nothing about cars."

Well, dont go whining on fuel costs then. And why do I need a V6 if I can´t go over 60 miles per hour? I´ll save a seat on the bus for you when gas prices get to high.
And btw, Its easy to build a huge engine, but its an art to build a small engine that is as powerful as a v6.

My point is not saying that you shouldn´t drive cars with big engines, but to tell you that there are fairly easy ways to save on gas. If you want to drive a large car, fine with me beacuse im not directly affected by riseng gas prices, but the you must be prepared to pay the price.

Cheers!

PJ

Anonymous said...

Realty:

Adapting is the key to survival. With 1 liter of regular unleaded gas costing usd 2.50 i´ve adapted my civic to run both on gas or autogas (liquefied petroleum gas). The result was a 5-10% decrease on power but 60% less on fuel costs (assuming I only run it on autogas). Thats a pretty nice trade off, dont you think? Do you have autogas in the US?

PJ

Mike Hunt said...

Reality,

Regarding your comments about cars in the UK I must correct you. I was in Manchester for business and drove the company BMW 520d (5 speed) to Newcastle and back... the car was phenomenally fast for a diesel- 2nd gear was a scream... I'd say 0-60 in about 8.5 seconds (good enough for me) and I averaged 43 Miles per gallon, not imperial gallons mind you since I paid for fuel in liters and divided by 3.78 to get US Gallons. The math is correct and the cars put what we have in the US to shame, BIG TIME.

I rented a Ford Mondeo ... a bloody Ford for crying out loud. It was a diesel 6 speed manual. Heavy car but fairly quick (a bit slower than the BMW but it really had some nice pulling power). I was cruising at 80 MPH in 6th gear with the engine turning 2500 RPM. The car averaged 52 Miles per gallon (again using liters and converting to US gallons). End of story, the US can have these cars now and I'm so surprised there isn't more news on this.

-Mike

Mike Hunt said...

Keefer,

Did you see the start up companies that are bio-engineering microbes to produce petroleum:

http://www.timesonline.co.uk/tol/news/environment/article4133668.ece

In a sense all oil reserves we have came from plant matter that was on the earth, in that sense burning these hydrocarbons would make us carbon neutral to what was in the atmosphere when these plants were alive... if we can use plants and microbes to produce oil then we have a renewable closed system. Again we are using the suns power as the source so nothing changes there. The only caveat is that we need to get the ability to convert cellulose based plant matter to petroleum, I'm highly skeptical of using sugar and other foodstuffs to make fuel... too much like the current crisis we are in now.

Everyone please sound off on your thoughts here.

-Mike

Mike Hunt said...

It's my birthday today... turning 35. I hope to see the next 35 years! .. and even 35 more years after that, health permitting...

Party on HP'ers.

-Mike

don OC said...

Houses are assets

Oil, gold, corn etc are commodities

Well gold is money too

The point is, there is so much more land to develop for housing. As it vast areas, able to house billions and billions more.

However oil, metals, arable land is not.

Another counter argument for cyclical crowds is that credit is not money. And credit creation will soon reach Quadrillion dollars (with Q). This has been going on for nearly 30 years.

What gives? Do you really think governments will tighten the belt, raise rates etc.

Maybe in words and for show.

In reality, after brief deflation (read period of drawing weak hands and amassing hard assets) , there will be massive inflation - to the tune of at least 10 years, closer to 20 probably.

Yes housing will be reflated, that OC house will be million bucks again. Wage inflation will come back. Gallon of milk will be $20.

Sad for savers but true. Governments will not risk their own demise and uprising just to save a few savers, and risk tens of millions lose their homes.

If you buy commodities short term (meaning months to a few years again), you will not sleep well at night.

But if you're thinking 5 years +, then you will simply preserve your wealth with hard assets.

If you want to make a profit, go to work and start making money.

Days of easy profits are gone.

You will be lucky to preserve purchasing power and what you have.

Some people predict gold will pull back. Maybe in short term. But gold is absolutely nothing.

Gold is just a barometer of inevitable political moves by central banks, long term. Otherwise, completely useless.

Other commodities, such as silver, platinum, oil, corn etc are worth something to us in our daily lives.

Recent spikes are more a reflection of coming political (and economical) moves of inflation than anything else.

Reality said...

Mike,

Happy Birth Day!

530d and 520d are not in the US because they can not pass the emission test.

Mondeo getting better fuel mileage than 520d goes to show that there's really nothing special about BMW's diesel engines.

Diesel engines for the US market suffer from two obstacles:

(1) emission standards; diesel emission is worse than gasoline with higher NOx output due to higher combustion temperature, the same high combustion temperature that produces better fuel economy

(2) Diesel fuel is substantially more expensive than gasoline because a barrel of oil can produce about 23 gallons of gasoline, but only 12 gallons of diesel. There's more use for diesel and kerosene than gasoline; such as heating, electricity generation and jet aircrafts.

Mike Hunt said...

Reality,

Thanks for the birthday wishes and your response.

Given the cost advantage to these higher effiency cars couldn't someone design a scrubber to remove these NOx emissions? Even if it came through a water based system that is later chemically neutralized?

I didn't know that about how many gallons of diesel comes out of a barrel of oil. But then again when oil is fractionally distilled there are many grades of the product so it will produce kerosene, diesel, high volatile gas, etc. So it would only make a big difference if all cars were diesel but you could easily ramp up more diesel engines.

Good discussion.

-Mike

Anonymous said...

I used to live in a a city, where the land is completely flat and it never snowed. I moved to rural mountainous area where it snows every year.

In that city, at least half the vehicles on the road were SUVs and pickups. Mostly 2WD variety. Status symbols that never touched dirt or a load of manure.

Out here, there are lots of economical cars and the trucks you do see are genuine work vehicles that need 4WD, carry manure, firewood, livestock, and that sort of thing.

Its the city/suburb folk who think they 'need' a truck because it is 'safer' (check some actual stats on that and get back with me), their image or whatever.

Funny how in an area where a 4wd is more useful, I see a lot of FWD cars boogying around in snow with no problem

Anyone who says a 2wd SUV is needed for inclement weather is FOS. They are as useless as a lips on a chicken.

Foothiller
Proud owner of a 1982 F100 work truck that only runs when its 8' bed is full of something. Who drives a 60 mpg motorcycle or a 45 mpg car when not hauling anything heavy. Need a truck my ass