CautiousInvestor

Top IEA Economist: Peak Oil by 2020

I'm not convinced of the usefulness of peak oil as oil production is a "dynamic" subject to political influences, cartel interests, pricing, discovery and technology.

Deflation vs. Inflation: The Great Debate Rages On

I don't think they are mutualy exclusive.........with the timeframe being of paramount importance.

In the near term there are deflationary pressures as evidenced in US housing, Japan and the Eurozone. Along with high levels of unemployment, there is much excess capacity suppressing prices.

Longer-term expectations, though, are different and are being shaped by rapid increases in the money supply, the expanding Fed balance sheet and the avalanche of debt to be unloaded on world markets by the Treasury over the next years. And there is also concern that the Fed, if necessary, will help Treasury by monetizing debt through direct purchases of debt.

The US is faced with the choice of either paring back its budget deficits and monetary base as soon as the current risks of deflation dissipate, or setting the stage for a potential upsurge in inflation.

Quoting Alan Greenspan:

"The Federal Reserve, when it perceives that the unemployment rate is poised to decline, will presumably start to allow its short-term assets to run off, and either sell its newly acquired bonds, notes and asset-backed securities or, if that proves too disruptive to markets, issue (with congressional approval) Fed debt to sterilise, or counter, what is left of its huge expansion of the monetary base. Thus, interest rates would rise well before the restoration of full employment, a policy that, in the past, has not been viewed favourably by Congress. Moreover, unless US government spending commitments are stretched out or cut back, real interest rates will be likely to rise even more, owing to the need to finance the widening deficit."

Why Is Oil Creeping Back Up?

A provocative article and many thoughtful comments.

On this one I will join forces with George Soros and others who believe the recent bounce in oil prices is a result of speculators anticipating an economic recovery nothwithstanding the falling dollar, reduced oil shipments and stockpiling by China.

Within the US, we are at a 25-year high in petroleum storage and have 139M barrels more in storage than last year - an average increase of nearly 3M barrels a week despite OPEC’s 29Mb/week production cut. And the same is true in Rotterdam, where oil storage is reaching record levels, and in England where tankers brimming with oil float off the south shore.

Even Iraqi Oil Minister said last week: "We don’t think it’s a wise economic decision to produce oil from secure underground fields and then pay to store it in floating tankers. Future generations can benefit from it better than we can, if we don’t need it."

To the extent that speculators are betting upon an economic recovery and attending increases in energy prices, it's somewhat ironical that the recent runup of over 50% could easily choke-off the very recovery they are betting on.