André Sautou

And You Think Today's Gas Prices Are High?

There is a major difference between 1929 and now : at that time many sectors of economy could be operated without cheap energy. Consider, for instance, agriculture : it mainly worked with human and animal labor. The average distance traveled by food, from producers to consumers, was small. Other features : in most houses, electricity was just used for light ; urban cities were not so big and heavily dependant on transportation ; our world had not yet become addicted to fast growth, as it is now (thanks to cheap energy) ; etc …etc …
Now, we are heavily dependant on cheap energy, and all features linked to such dependence will crumble down as energy prices get higher and higher.

Is 'Peak Oil' Already Affecting the Stock Market?

Like Hirsh, a lot of ordinary citizens think that there will come a time when oil scarcity will hobble the economy so severely that the stock market will crash and that it will no longer be profitable to own any stocks, even energy stocks. There is no need to be an expert to understand that. You just have to remark that 1°/ economic growth is fed by the growth of energy production, 2°/ sooner or later energy production will reach a summit and then decline and 3°/ a stock market needing expansion to remain viable will obviously crash (or maybe have crashed already) when expansion reverses into contraction.

Can Saudi Arabia Push Down the Price of Oil?

Until around 2005, Saudi Arabia acted as a “swing producer”, adjusting its production to demand in such a way that crude prices were kept moderate. But why did they then stop playing that role ? Because they could not play it any longer on account of their oilfield’s decline, or because of deliberate policy intended to prop up prices in order to increase their profits while extending the lifespan of their resource ?
Maybe for both reasons simultaneously. The kingdom’s ruling elites may have judged, on one hand, that they could no longer act as a “swing producer” in the context of a demand growing too fast ; and, on the other hand, that getting bigger profits from high selling prices would allow them to solve serious domestic problems …
Now, with demand greatly bridled by those high selling prices, they may estimate that they can – and must – resume their previous role in order to stabilize the prices (or at list moderate further increases) and in doing so avoid a premature collapse of the world economic system they depend on and in which they detain profitable capital.

"My grandfather rode a camel. My father rode in a car. I fly a jet airplane. My grandson will ride a camel", use to say the Saudis. With God’s help, reverting to riding a camel may be delayed by one or two generations … on condition to make decisions able to lead God’s will in the right direction.

André Sautou

Upside to Oil Stocks?

This news is very interesting and clearly presented for ordinary citizens.

I share Eric Parnel’s analysis. But I also think that oil prices have now begun to pass the threshold beyond which further increases could substantially slow down world economic growth, up to a point that demand for oil might fall sharply while the world recurs more and more massively to coal, nuclear, renewables, further improvements in energy efficiency and restraint from using energy for non necessary purposes. And therefore prices could stop rising, stabilize for a while, and maybe slightly decrease.

Many investors may feel the same, and that perception may explain their hesitation about betting about further important increases …