Saildog

Rising Oil Price Could Slow or Kill Economic Recovery

Old trader - it seems your view is that oil is just another commodity that the world holds an infinite supply of. Not so. Oil is all about physical flows and these are impacted not just by geology, but also by economics, politics and several other factors such as an aging workforce and obsolete plant.

Then there is the interaction between what is a vital commodity with a wholly inelastic supply curve (higher prices do NOT equal more supply) and the capital markets. The higher prices last year (along with lax banking regulation) led directly to this recession/depression. It is unlikely production will ever exceed levels achieved since Q4 2004. According to Liebigs law of the minimum oil is now the limiting factor. Our economies will languish in lock-step with oils decline.

That is unless we get real smart real quickly. But I see no evidence of that. And BTW I am no tree-hugger.


On Apr 10 10:08 AM old trader wrote:

> Btw, before I get jumped on by the tree-huggers who believe alternative
> energy is the only answer, please recall that most, if not all, "green"
> alternatives are only economically viable when compared to higher
> oil prices. Do some reading, and it isn't hard to see how many projects
> have been scaled back/put on hold because they're not profitable
> when oil is at $40/bbl. (unless they receive heavy government incentives).