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5 Reasons Why the $700B Bailout Could Translate to $250 Oil

Yes, it's possible that oil prices could spike if there was a massive dollar devaluation and there very well could be, but this MOAB isn't going to be it. The $700 billion bailout is going to be used to buy worthless assets from banks at or near the price those assets are already valued by the banks. So while they are handing the money over, it's replacing something the banks had dishonestly claimed was worth practically the same amount and treated as part of its asset base.

Second, handing money to banks right now isn't going to make them hand it to anyone else. Banks aren't going to lend freely until we are out of this situation and that may be a long time. I think deflation is the more obvious and persistent threat with the massive credit destruction prevailing. The only way they can stop it is with a real and massive printing. No piddling $700 billion. They'd need more like $2.5 trillion and they'd have to make sure they were simply handing it over to the banks instead of trading it for stuff already listed on the banks' balance sheets for similar values.

People are desperate for cash to pay bills. Increasingly over the next six to twelve months people are going to be concerned to raise cash and sell assets. There's no way for the Fed to get money to ordinary people without bypassing the uber rich banking establishment and the Fed would never do that. So the best they can do is hand money to banks and watch them sit on it.

Would you loan an indebted, profligate American consumer money at this uncertain time?

Peak Oil is a Cost Issue

"... Underlying the poor economics of oil shale is the negative EROEI – that is, Energy Return on Energy Invested. It just takes too much energy to make crude out of oil shale. You spend more to make it than it creates. ..."

I never was able to understand this kind of reasoning. So what if it takes more energy (as measured in joules) to get oil out of oil shale. We do not create energy, we only transform it into different forms, and we always spend energy in the process. Oil is likely to remain valuable for a long time because it's such an efficient and versatile fuel. The rise in the value of oil creates incentives to use other forms of energy to extract it. Don't use oil to extract oil, use gas, electricity (solar, wind etc.), e.g. for heating shale or tar sands. There is no need to wait for "very cheap source of solar power," we just need to get to a point where oil is more valuable than solar-generated or other forms of energy.