Apologies for thin posts.
Fears harsh winter harmed UK wildlife BBC
PROMISES, PROMISES: Records not so open with Obama Associated Press. Obama is even less responsive to FOIA requests than Bush.
The politicization of economic problems Ed Harrison
N Korea ‘executes’ top official Al Jazeera (hat tip reader Steve L)
The U.S. No Longer Controls the Price of Oil Gregor Macdonald
Palin Slammed As ‘Wild Alaskan Dingbat’ After Hitting Grayson In Home District Ryan Grim, Huffington Post.
Ban Naked CDS Richard Portes, Eurointelligence (hat tip Mark Thoma)
City minister says every bank needs a ‘cynical Scot’ Telegraph. That’s the only job in banking I might enjoy. Chief Pessimism Officer.
Roach Rebuffs Krugman Call to Pressure China on Yuan Bloomberg. Note Krugman is not backing down.
Obama should table a Middle East peace plan Philip Stephens, Financial Times
JPMorgan also used accounting gimmick Financial Times
The Narrowing Roger Cohen, New York Times
Now for the Slaughter Peggy Noonan, Wall Street Journal. Noonan relishes Obama squirming on Fox. That does not reflect well on her, but it reflects even less well on him.
Shortcomings Exposed in Oil Data Wall Street Journal. The fact that the data stinks is not news.
It Was a Wonderful Life Jim Quinn. This long typically long piece hits some sour notes (its Fed bashing could be a bit less conspiracy-theoritorical but makes some good points re concentration in the financial services industry globally, as well as (implictily) that banks need to remember their obligation to the community.
WSJ: Business Sours on China Trader Mark (hat tip reader Paul S)
Risk management after Valukas Deus Ex Macchiato (hat tip reader Crocodile Chuck). This is a REALLY important post if you have any interest in Lehman. First, it summarizes the stunningly bad state of risk management at Lehman. Crocodile Chuck highlighted one item that would not be obvious to those who haven’t worked in banking. Lehman had no asset-liability management committee (ALCO) until 2007. Huh? Every little podunk bank in America has an ALM function of some sort. A $660 billlion levered firm with illiquid exposures doesn’t? Worse, it makes clear that risk management policies were merely advisory, meaning rules were not enforced (!?!). And even better, no one is liable for this garbage under Delaware law!
Antidote du jour (hat tip reader Crocodile Chuck). More on the baby elephant which was expected to be stilborn:
WRITTEN off for dead just five days ago, Taronga Zoo’s teak-tough elephant calf has emerged from intensive care to perform his first routine on the public stage.
Sticking close to the protective belly of his mother Porntip, the calf, dubbed Mr Shuffles, gingerly explored the confines of one of the world’s more unlikely elephant breeding grounds on the harbour’s rocky edge on the fringe of Mosman.
Venturing close to the waters of his yard’s little pond, his trunk danced like a conductor’s baton as he sampled smells and textures of his world, tasting the palm trunk that was his mother’s breakfast. He sniffed sawdust and almost teetered over as he struggled up a tiny mound of earth, a first lesson on just how high an elephant’s centre of gravity really is.
The story, which included a video, continues here.
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Re Gregor MacDonald piece:
It’s funny to read a piece like that which should be a reminder of the obvious, and yet to the MSM and the mentality which derives from it, the fact that oil is firmly back into the “green-shoots”-stomping >$80 range, even before the “recovering” US has resumed its prior consumption level, is an unfact, an unstory.
(It was also instructive to be reminded that oil futures speculation began in the 80s; like most of the biggest finance sector crimes, it’s a newfangled scam which never created any value at all, only costs and instability.)
The implications remain an impenetrable mystery, just like Peak Oil in general. The last time I saw the NYT tackle the conundrum (a few weeks ago), the result was this (the rest of this is a comment I posted on another forum):
http://www.nytimes.com/2010/03/09/business/global/09pemex.html?ref=business
This piece does a decent job of laying out the basic dilemma of Peak Oil and the Export Land Model (of course not using any such terms), but as usual depicts supply bottlenecks in terms of temporary political obstacles, not physical facts.
So this time it’s not pesky environmentalists or mean terrorists, but childish nationalist politics.
The blurb echoes Dick Cheney:
The country, which kicked out oil firms in 1938, now needs assistance to get its oil out of the ground.
Yes indeed, that was the basic premise of the 2001 Cheney master plan for energy. There’s plenty of oil, but state companies aren’t competent to dig it out. Only private multinationals can do it. But these peasant governments have their pesky nationalisms. So America needs to figure out ways to kick in the doors.
That was the basis of the neocon plan to invade Iraq going back well into the 90s.
I was looking for the part where it documented all this oil which Pemex is simply incompetent to produce. All I could find was this:
Mexico probably still has plenty of oil, especially beneath the deep waters of the Gulf of Mexico, but Pemex lacks the technology and know-how to get it out…
In an interview, the Mexican energy secretary, Georgina Kessel, said she expected the drop in oil production to level off this year, “and we can begin on the road back toward reversing the fall in production in the coming years.”
To accomplish that, Ms. Kessel said, “Mexico is going to have to go to the deep waters of the Gulf of Mexico,” where she estimated there are at least 50 billion barrels in potential oil reserves — more than double the country’s current proven reserves.
International oil executives share the enthusiasm for Mexico’s potential deepwater fields, which lie near rich new American fields. Mexico “potentially has, if not the largest, one of the largest undiscovered deepwater petroleum resources in the world,” said Jon Blickwede, a senior geologist at Statoil, a Norwegian oil company active in the Gulf.
Same old cornucopian hype.
“Note Krugman is not backing down.” Has Krugman ever backed down – I really mean that, has he ever?
Krugman’s reply quoted in the Bloomberg article: “We have a world economy which is depressed by China artificially keeping its currency undervalued.” Yep, the US depression is all being caused by Chinese currency undervaluation. Or maybe not.
Krugman doesn’t back down; it is his major weakness. When he engaged Pr. Hansen of climate change policy, he was 200% wrong about cap and trade (it IS an horrible idea) yet, he argued with one of the foremost scientists in a field where he is clearly out of his depth big time.
And this commentary is from someone who avidly read Paul Krugman.
Cap and trade works. It works perfectly well in Europe, despite claims to the contrary from people like Hansen.
Hansen simply doesn’t get it. Yes, emitting gets cheaper, if there is some exogen source for reduced carbon emissions, but it gets as well more expensive, if there is exogenous reason for more emissions, like economic growth.
Especially in the face of tipping points in the climate a cap and trade is incredibly superior to a carbon tax. With cap and trade you can fix the cap below an estimate of such a tipping point. With a carbon tax, you have a mostly linear cost of carbon. But the externalities of carbon emissions are highly non-linear!
Carbon taxes have a further problem:
If you propose simply carbon taxes, I would like you to tell me, how do you check e.g. that Vietnam doesn’t subsidise its corporations with the income provided by a carbon tax, which is effectively the same as having no carbon tax.
A carbon tax could only work, if the proceeds are globally distributed e.g. on a per capita base. But I have never heard of such a proposal. It seems to me, that all the carbon tax people want the proceeds to end in the respective national state purse. In that case, carbon taxes won’t help a lot at all.
Krugman (and Martin Wolf and Dean Baker and Peter Morici) are not saying “China caused the U.S. depression.” They are saying that China (and Germany and Japan) as surplus countries can’t simply tell the deficit countries like the U.S., U.K., and Spain that they need to increase their “savings” but at the same time not to cut down on imports from the surplus countries. He and the others are saying that if the adjustment is going to be a painless as possible, then the surplus countries are goint to have to consume more, import more, and export less and if the deficit countries are going have to save more, export more, and consume less and import less. The speediest and least painful way maknig this adjustment is through an exchange rate adjustment. The alternative is through a deflation in incomes and wages, and a deflation of income for the already over extended extended middle income earner will mean more defaults.
Roach of Morgan Stanley represents Wall Street. For 10 years Wall street has earned huge fees moving U.S. multinational and manufacturing investment to China and then recirculating the Chinese (and Japanees) trade surplus back to Americans to borrow credit to buy the things made in China whose incomes along were insufficient to pay for the things made in China, Japan, etc. Naturally, the Chief Economist of Morgan Stanley wants to go back to the 2005-2007 world, but without a U.S. savings rate in the negative. Unfortunately, that world cannot work when the U.S. savings rate is at 5% and growing.
sherparick:
Whatever Mr. Roach’s globalization position, he’s written far more extensively on the growing problems of global debt than Mr. Krugman has ever considered thinking.
Mr. Krugman is in the position he’s in because he’s cheer led the corporate globalization scheme his entire career. To now look at the deindustrialized American landscape he’s advocated and call for currency tweaking as a cure is simply ludicrous.
And China would never have been able to become that rich and to grow that fast without globalisation and the growth of debt elsewhere.
All countries that industrialised had an export led strategy. First the UK industrialised with a mercantilistic policy versus its colonies in Africa, Asia, etc. in the 17th century
Then France had an explicitly mercanitilistic strategy among others vs. Britain in the 18th century. Look up Luis XIV and Colbert on the internet. In the 19th century Germany and the USA grew rapidly by export dominated strategies. And 1900 international trade to GDP was similar high as only in the most recent phase of globalisation, before globalisation crashed again due to the World Wars.
In the 20th century Japan and South Korea had export led strategies to grow.
The problem today is
A) China is much too big, to pursue such a stratgy until it is similar developed as the US
B) All countries know by now of this trick and half Asia is in the mercantilistic business.
But the states that import the stuff can only run up so much debt.
Roach may have written about the debt problem, but he gets only half of it (and actually he is a lousy economist). China can not pursue the investment dominated growth strategy without a market to sell stuff. The moment the US becomes thrifty without another country taking over that role, China will crash. Roach doesn’t see the full picture, and just bets on China and against America without seeing, that the two are married.
And re: currency tweaking:
No Krugman is NOT advocating currency tweaking on principle. But you cannot have free trade and a gold standard with a country, that is deliberately enslaving its people (what China is effectively doing), and you don’t want to have extreme inflation of consumer prices (what China would get, if it stops suppression and staying on the “gold standard”).
The problem is as following:
Each country has a tradable good sector and a non-tradable good sector.
– The tradable good sector is dominated by manufactoring, that can have enormous productivity gains over time, e.g. from using of machinery.
– The non-tradable good sector is dominated by services, that usually have very low productivity gains like hair cutters, teachers, cooks etc.
As people can swich from one sector to the other, the wages of the two sectors will always move similar. E.g. a hair cutter in Zurich earns the multiple of a hair cutter in the Chinese province without that the hair cut actually differs a lot. Even if the Chinese hair cutter does a better job than his Zurich collegue, he will not be able to take the same amount of money, simply because his customers couldn’t pay it, and he can not serve the Zurich customers from China – hair cutting is a non-tradable good.
The tradable good has a severely different dynamic. The Chinese gadget producer CAN sell his gadgets to the Zurich customer. So there is no reason, why he should take a lower amount of money for his gadget, regardless, if he wants to sell his gadget in China or in Switzerland.
Now lets assume, that Chinese and Switzerland producers have the same productivity. In that case the wage of the Chinese gadget producer worker and the Switzerland gadget producer worker will be similar. And as hair cutters can change from one job to the other, actually hair cutters could indeed even demand the same wages as their Swiss collegues.
Now assume the productivity of a Swiss gadget maker worker is 10 times the productivity of a Chinese gadget make worker. In this case, the Chinese gadget worker will as well earn only about 1/10 of his Swiss collegue.
This was the situation until recently.
Now the productivity of the Chinese gadget worker increases to the one of the Swiss worker. What happens? If there is a relatively well working market economy, the wage of the Chinese worker will increase by a factor of 10. This will have NO EFFECT on the price of gadgets.
But the Chinese hair cutter now wants as well either a factor of 10 more money for his hair cut, or he wants to switch his job to be a gadget maker as well.
Now lets add an assumption. The average Chines customer buys about half his stuff from tradable and the other half from non-tradable goods.
If the hair cutter actually gets his 10 fold increase in price, the inflatin for the Chinese customer will be 500%!! The Swiss customer on the other hand will not see an increase in prices at all!!!
500% inflation of course are highly desruptive. So what is the solution. One possibility is obviously to have the Chinese currency revalue by a factor of 10. In this case the Chinese gadget worker can’t increase his wage at all. And gadgets will become a lot cheaper in Chinese currency. The hair cutter can’t change his prices neiter. In the end China is deeply in deflation, because the same goods now can be bought for only 60% of the old price.
Of course this assumes unrealistically, that the Chinese consumers wouldn’t increase their consumption of tradable goods over non-tradables in such a case.
Nevertheless, to have stable consumer prices in China in the example the gadget worker would have to increase his and the hair cutters wage by about 60%, and to have the gadget prices still the same as the Swiss producer, the Chinese currency would have to increase by about 10/1.6 ca. 6=600%.
What happens in reality is, that the Chinese keep there currency pegged. The obvious result is, that for keeping gadget prices stable, the Chinese wages have to increase dramatically (assuming a gold standard, that leaves the price of gadgets in gold stable). The resulting inflation (from the price increase of the non-tradables) is totally unacceptable for China. Therefore the Chinese gov’t is busting unions, buying up foreign currency and neutralising it with bonds, which depresses demand (and thereby inflation), limits household income and lets state owned enterprises park money etc. etc.
So what exactly is “tweaking the currency”? I want a currency, that is stable with my consumption basket. As that includes non-tradables, this can mean that currencies are moving against each other, and still the consumer price infaltion is in every country the same e.g. 2% per year.
As another side note. As China is pegged to the US$ and not to the Euro, the consequences for Europe are not the same as for the US. Europe loses business to China, due to the undervalued Yuan, but wins business from the US due to its overvalued dollar. The same is true for Brasil, Russia etc. This of course means, that the US trade deficit would improve by a much larger amount in case of a Chinese revaluation than the bilateral trade deficit with China indicates. Actually, yes, by and large, the trade deficit is caused now by China.
And the profiteers in the US are the big banks, because the money flows through the hands of the big banks, when it comes into the country, as as well Yves has acknowledged.
Krugman back down? Naw, can’t have happened.
Although I don’t know who wrote this:
http://www.nybooks.com/articles/18802
Can we fix health care?
Health policy experts know a lot more about the economics of health care now than they did when Bill Clinton tried to remake the US health care system. And there’s overwhelming evidence that the United States could get better health care at lower cost if we were willing to put that knowledge into practice. But the political obstacles remain daunting.
A mere shift of power from Republicans to Democrats would not, in itself, be enough to give us sensible health care reform. While Democrats would have written a less perverse drug bill, it’s not clear that they are ready to embrace a single-payer system. Even liberal economists and scholars at progressive think tanks tend to shy away from proposing a straightforward system of national health insurance. Instead, they propose fairly complex compromise plans. Typically, such plans try to achieve universal coverage by requiring everyone to buy health insurance, the way everyone is forced to buy car insurance, and deal with those who can’t afford to purchase insurance through a system of subsidies. Proponents of such plans make a few arguments for their superiority to a single-payer system, mainly the (dubious) claim that single-payer would reduce medical innovation. But the main reason for not proposing single-payer is political fear: reformers believe that private insurers are too powerful to cut out of the loop, and that a single-payer plan would be too easily demonized by business and political propagandists as “big government.”
These are the same political calculations that led Bill Clinton to reject a single-payer system in 1993, even though his advisers believed that a single-payer system would be the least expensive way to provide universal coverage. Instead, he proposed a complex plan designed to preserve a role for private health insurers. But the plan backfired. The insurers opposed it anyway, most famously with their “Harry and Louise” ads. And the plan’s complexity left the public baffled.
We believe that the compromise plans being proposed by the cautious reformers would run into the same political problems, and that it would be politically smarter as well as economically superior to go for broke: to propose a straightforward single-payer system, and try to sell voters on the huge advantages such a system would bring. But this would mean taking on the drug and insurance companies rather than trying to co-opt them, and even progressive policy wonks, let alone Democratic politicians, still seem too timid to do that.
So what will really happen to American health care? Many people in this field believe that in the end America will end up with national health insurance, and perhaps with a lot of direct government provision of health care, simply because nothing else works. But things may have to get much worse before reality can break through the combination of powerful interest groups and free-market ideology.
Who wrote that? It sounds a lot like what happened this past year. But no, that couldn’t be the case, because that was none other than Paul Krugman expressing his Good Intentions back in 2006 when the Republicans were still in power. As he would lecture any peasant stupid enough not to understand, things are different today.
http://attempter.wordpress.com/2010/01/16/krugman-hack-number-one/
And there is nothing wrong with this text, and Paul Krugman is still in favour of a single payer system in contrast what the link claimed.
Hm, being in favor of something means:
1. Doing exactly what one had just days before said had been the wrong thing to do on the stimulus, unilaterally pre-negotiate everything away.
2. Then cultishly support something – a mandate to buy worthless toxic paper from a protection racket, with zero cost controls – which not only won’t take us one step closer to real reform but will discredit it once and for all, a stealth starve-the-beast strategy.
3. And cultishly be the lead Pied Piper of that reactionary fraud, endlessly piping the vicious lie that it’s “reform”.
No, I’d say that makes someone one of the worst traitors of our time.
Obviously, when something is attainable, which single-payer was (if every liar or coward who claimed to want it had simply demanded it, we’d easily have it), the one and only measure of really wanting it is to fight for it.
And if you don’t fight for it, by definition you don’t want it.
Krugman hasn’t prenegotiated away anything. The opening move of health care reform came from the Obama administration. Obama was never for a real single payer system and has made that clear during the campaign. Krugman warned people, that Obama would not do decent health care reform during the primary season. Too bad people voted for Obama anyhow.
The next is the question, if single payer would have been possible. If the US would be a democracy – sure. But the US is governed by an oligarchy of rich people. The question is not, what is possible to agree on with the majority of people, but with the majority in the senate. And the people at dailykos, who are as well in favour of single payer, believe the current reform is the best you can get. To believe that the street could force single payer through congress against a president, who has promised during his primary not to do a single payer system (because a mandate is a necessary precondition for single payer), is delusional. The dailykos people do not know much, but I think they know a lot about what they can expect from the congressional Democrats.
And with respect to what actually will be done. Well, it is shit, but it will be an improvement over the current situation. Actually it has cost control measures, most importantly the mandate plus the no discrimination on preconditions. This will save a lot of money.
If in the face of the short comings the system will be fixed or abolished is difficult to judge now. But if I would live in the US, I would clearly be on Krugman’s side on this one.
It doesn’t matter at all, if China had anything to do with the causes for the US depression. Actually it had.
Of course the US had played its part as well, as the banks have profitted enormously and the politics was (and actually still is) in the pockets of the banks. The US dollar has been overvalued for a decade now at least.
However, up to the recent crash the US borrowers had the advantage of lower interest rates. This not true any more, as the interest rate on safe assets is now pretty much zero. Look on short term US treasuriy yields.
So whatever upside the US had in that deal, it hasn’t anymore.
And re: Krugman back down. Yes, he backed down on something. He once claimed the Bush tax cuts would cause an unsustainable federal deficit with stronly increasing interest rates. Obviously it has not. Interest rates are still low and if that ever changes it will be health care costs, that cause a problem. He has acknowledged that he was wrong with the content of the critisism of the Bush tax cuts.
“Crocodile Chuck highlighted one item that would not be obvious to those who haven’t worked in banking. Lehman had no asset-liability management committee (ALCO) until 2007. Huh?”
At one point, being extremely cycnical of the intelligence and wisdom of men, my philosophy was to never attribute to malice what can be explained by stupidity.
But my outlook is being sorely tested – it seems beyond credulity that it was merely stupidity. As some of the posts at this blog have noted, it seems more likely that it was designed looting.
A US-backed proposal to ban the international trade of polar bear skins, teeth and claws was defeated today at a UN wildlife meeting over concerns it would hurt indigenous economies and arguments the practice didn’t pose a significant threat to the animals.
The US argued at the 175-nation Convention on International Trade in Endangered Species, or CITES, that the sale of polar bears skins was compounding the loss of the animals’ sea ice habitat due to climate change.
There are projections that the bear’s numbers, which are estimated at 20,000 to 25,000, could decline by two-thirds by 2050 because of habitat loss in the Arctic.
http://climatechangepsychology.blogspot.com/2010/03/us-proposal-to-ban-polar-bear-trade.html
Yves
Here is a great article over at billy blog for your links tomorrow.
http://bilbo.economicoutlook.net/blog/?p=8796
Thanks
Can’t remember if I posted this yesterday. Amazing catch by some commenter at Balloon Juice which makes Michael Lewis look like a total moron, and which makes the attention his book is getting totally unjust:
Davos Is for Wimps, Ninnies, Pointless Skeptics
Excerpt:
Memo to Governor Grayson: the Alaska Dinbat is a subspecies of Godwit, to wit, the Halfwit.
Oops. Rep Grayson
My pitch to follow the FCIC again.
As you know, it took $38M to get the Lehman Examiner’s report out.
As you know, the FCIC has $8M to investigate the meltdown.
As you know, this is far from perfect for a lot of reasons.
My theory is this simple:
1. We the people must “follow” the FCIC to show the powers that be, the millions are demanding answers. [Think – media campaign for Move Your Money from HuffPo.]
2. The extra media attention could bring out, as example, programmers to do an open source type financial transparency campaign to raise awareness, find the truth, get results etc creating a positive feedback loop into more media exposure.
The idea for blogs like this:
http://solanic.com/wordpress/econ-geeks/
Yes – this is no where near the best solution to get to the bottom. But – more importantly – the masses do not understand what is going on compared to what the readers here do. We gotta get the appropriate word out to the masses.
The WSJ article on oil data is behind the paywall, and you can only read the first paragraph through Yves’ link. If you want to read WSJ articles behind the paywall, type the title of the article — “Shortcomings Exposed in Oil Data” — into a Google search, and click the WSJ link that Google returns. Then you can read the entire article. Why? Don’t ask why. It’s magic.
Glad to see Mr. Shuffles is doing well and wise enough to stay close to mama for you never know if Emela Ntouka, the legendary Central African elephant killer is around.
The Macdonald piece on oil prices manages to be dimwitted and condescending at the same time. Of course, we are in peak oil. But the peak is more of a plateau before it begins its descent. Meanwhile prices have bounced around with very little relationship between supply and demand. But for types like Macdonald it is all about supply and demand because that is all his worldview encapsulates.
I have never understood why oil people are so resistant to the notion that oil markets aren’t susceptible to the kinds of distortions and manipulations we see everywhere else. You want to know why oil is trading at $80/bbl, instead of $35, in a worldwide recession? Don’t ask OPEC, ask Goldman Sachs.
Investment bank risk management could be fixed by converting the banks back to partnerships.
When i-banks converted from partnerships to listed corporations in the 1990s, their top managers no longer had unlimited liability. Presented with unlimited upside and limited downside, the rational sociopath should obviously take big risks. They merely did the logical thing, given the personal incentives and their lack of any sense of civic obligation.
Training civic obligation is pie in the sky. Instead, i-banks should simply be forced to convert back to limited partnerships, whose general partners have unlimited liability. Even sociopaths will rein themselves in accordingly.
In case anyone else has been wondering what is actually in that insurance company bailout bill, this summary is excellent…
Fact Sheet: The Truth About the Health Care Bill http://fdlaction.firedoglake.com/2010/03/19/fact-sheet-the-truth-about-the-health-care-bill/
Another observation is that in the WSJ article on the EIA, it is SAIC that did the report. SAIC tried to put in a new computerized system for the FBI which was a disaster. It was eventually replaced by Lockheed Martin and there are reports out to day that they are screwing up as well. SAIC is, of course, one of these politically connected mega government contractors. It is one of those places that knows how to use the revolving door in both directions. Just hope they don’t get the contract to “fix” the EIA systems.
Re: re: risk management…
This quote
should be the text book example as to why the idea of health care insurance competition across state lines is such a stupid idea.
The race to the bottom would be endless.
Gee…who’s that long-time US Senator from Delaware again? Seems to me I ought to remember his name…
Hmm my memory seems to be bidin’ its time…
“That was the basis of the neocon plan to invade Iraq going back well into the 90s.”
There are lots of things wrong with this way of thinking, but the most obvious one is that there is a finite amount of oil on this planet. Yes, you can bring down the price of oil NOW by pumping more oil from Iraq, or the ANWR, or some other place neocons want to pump. But then these sources will get tapped out.
All you’ve accomplished is to deplete the world’s oil resources faster (not dissimilar to killing the goose to get the eggs). From the perspective of someone in 2100 it doesn’t help to increase oil production in 2010, quite the opposite.
At least the people pushing the abiotic oil rejoinder have a logical response to concerns about peak oil -we can always make more! While this is based in total fantasy, it is actually more coherent than the various schemes to increase production.
“There is a finite amount of oil on this planet, as far as we know.”
Fixed that for you.
Or perhaps not truly “infinite”- but practically so.
Or truly so, given enough time.
There’s an awful lot of things we don’t know.
But we do know that people can live without oil ; such a time is barely out of living human memory.
I mean petroleum.
We’ve always needed our oils.
We in the “Dimwitted” community of oil analysts have been forecasting sustainably higher oil prices since early 2004, when prices above 40.00 were regarded as impossible to sustain by everyone from ExxonMobil, to the sovereign oil agencies, and of course many of the mainstream energy analysts attached to the investment banks.
And every step of the way, a loud but hollow group of table pounders have tediously said that oil prices were never justified by the “fundamentals” that supply and demand “had nothing to do with the price”, that “manipulation” was the cause, and that oil would eventually return to its rightful place at 25 bucks a barrel.
Shall I do on? :-)
Gregor