Posts tagged “recession”
Following last year’s ASPO conference, I was interviewed by Aaron Wissner of Local Future, which is a non-profit educational organization dedicated to issues of energy, the environment, and sustainability. Aaron just made that interview available, and instead of an R-Squared Energy TV episode this week, I thought I would share this interview with readers.
Among other things, we discuss:
- The reasons that I became interested in energy issues
- My Long Recession hypothesis
- The relationship between oil prices and recession
- The importance of taking control of your personal energy consumption
- Why lower oil consumption in the U.S. didn’t lead to lower oil prices
- The climate change challenge
Here’s why I believe that the current high price of oil is not enough to derail the U.S. economic recovery.
Although the prices of oil and gasoline have risen significantly from their values in October, they are still not back to the levels we saw last spring or in the summer of 2008. There is a good deal of statistical evidence (for example, ,) that an oil price increase that does no more than reverse an earlier decline has a much more limited effect on the economy than if the price of oil surges to a new all-time high.
I have just returned from the annual ASPO conference in Washington, D.C. This was only my 2nd ASPO conference; the first one I attended was in 2008 in Sacramento. There were many familiar faces; some of whom I had previously met and some I only knew by reputation. The mood seemed remarkably calmer than in 2008. That year, oil prices were just coming down from record highs, a pair of hurricanes were causing spot gasoline shortages, and the economy was headed into the toilet. The general mood was that things were rapidly unraveling. Three years later, the long-term outlook isn’t really any different, but I think some who predicted imminent doom are starting to change their views on how things… Continue»
Economic Heartache Normally, consumers consider falling oil and gasoline prices to be good news. They have to pay less to fill up their tanks. And if the reason for that is that oil supplies are increasing at a rate faster than demand is increasing, it can indeed be a good situation for consumers, and good for the economy. But here’s the bad news: That is not the case today. Oil prices fell last week to below $90 a barrel, their lowest level in six months. I think oil prices are likely to fall further in the short term, and gasoline prices won’t be far behind. While this news alone does mean that consumers will get some relief, the broader picture… Continue»
The Steep Cost of Sudden Price Spikes One of my recent essays discussed the relationship between high oil prices and recession. Consumers who suddenly find themselves paying more for fuel are hit with the equivalent of a stealth tax, leaving less money available to fuel domestic growth through purchases or investments. Thus, unsurprisingly, there is a strong historical link between escalating oil prices and economic recessions. But despite the financial pain (in fact, because of it) there is a major upside to higher oil prices. Consumers do respond to the price signal, and this response can provide some protection against further price spikes. In this essay, I point out how we can mitigate against the effects of sudden price spikes,… Continue»
Former Secretary of Labor Robert Reich recently warned that the U.S. is likely headed back into recession: The Economic Truth That Nobody Will Admit: We’re Heading Back Toward a Double-Dip Why aren’t Americans being told the truth about the economy? We’re heading in the direction of a double dip — but you’d never know it if you listened to the upbeat messages coming out of Wall Street and Washington. Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It’s weaker today on average than at the lowest point of the Great Recession. The Reuters/University of Michigan survey shows a 10 point decline in March — the tenth largest drop on record. Part of that drop is… Continue»
I am between flights and have been traveling for a few days, but wanted to get off a quickie on current oil prices. In hindsight, perhaps I was not aggressive enough with my predictions for 2011. My predictions covered two themes: Next generation biofuel producers whose business models would begin to collide with reality, and oil prices that would head back over $100 per barrel. Less than two months into 2011, there has been big news on both fronts. We have already spent a few weeks discussing the Range Fuels debacle, and now oil prices have once again breached $100. In fact, many markers such as Brent crude have been above $100 for several weeks, and they recently approached $120… Continue»
A theme that I commonly discuss in articles and presentations is the problem of economic recovery when oil prices are high. If the market is well-supplied and there is ample excess oil production capacity, oil prices tend to be moderate and stable, and economic growth can proceed without much headwind. However, the world has now had essentially flat oil production for several years in the face of historically high prices. This implies — and I believe it is true — that there are serious supply constraints within the system. I believe that some countries do still possess spare capacity, but that the overall amount isn’t large. I think if there was much excess capacity, we would see countries taking advantage… Continue»
Respected oil analyst and oil industry veteran Charles Maxwell has forecast peak oil by 2017 or 2018.
I saw a humorous story a few days ago: Oil Should Be Around $10 a Barrel The price of a barrel of oil would be closer to $10 if the commodity wasn’t traded as an investment instrument, given the record-high levels of U.S. oil inventories, Peter Beutel, president of Cameron Hanover, told CNBC Monday. “I honestly think that if there were no investors using oil as an asset that the price of oil right now would be $10 or $15 or $18, but it wouldn’t be anywhere near where it is,” Beutel said. First off, the cost of production for most producers is significantly higher than that. The easy, cheap oil is gone. That’s why we are drilling a mile… Continue»