Allen Fuller

Not Just Another Bear Cycle

You guys are bickering about different ways to look at a math problem.
We all understand the underlying concept.

While you bicker, the bear market (no, I don't think it's just a "cycle" this time) will continue to destroy people's "wealth." The REAL currency powering the world's economy is crude oil, and the cheap, easy oil is fast disappearing. The bubble of easy credit in the monetary system was backed by the assumption of unlimited economic growth, powered by unlimited cheap oil. And now that oil is becoming more scarce, the monetary system is going through the first throes of its destruction. Not to mention our economy.

Oil may dip again to around $100... AFTER our economy is in shambles and demand is so totally destroyed that the price can fall. But oil will never again drop as low as, say $50 per barrel. Production of the cheap, easy oil that our economy is addicted to is already in decline around the world. The costs to fill the gap with new oil discoveries is skyrocketing... assuming we can even fill the gap. Again, if demand is sufficiently destroyed then the gap may not need filling, but the costs associated with extracting new oil will not go down, so the price will not drop too far. All the cheap oil is used up.

Google for "The End of Cheap Oil"... an article in the Scientific American from 1998. They predicted a peak in oil production in "about 10 years"...