Average Oil Price at 150 Year High: Not your father's recovery

[cimon9999]

Historically the great majority of GDP came from western countries and there was excess oil supply, so when recessions occurred, it was accompanied by a fall in oil prices. These days, much of GDP growth comes from eastern economies who are at the stage of development where many families can afford a car, and their growth is typically oil intensive. Add to this the structurally higher oil field development costs (marginal oil costs around $80 - $100/bbl), and it's a recipe for pain.

Unfortunately this message is not getting through to Americans, with former treasury secretary Roger Altman claiming America is on its way to "energy independence" and it being an article of faith among Republicans - and a few here on pie - that an era of oil abundance is upon us if we just drill, baby, drill. Additionally, pickup sales in America rose 12.5% last year, confirming that hope never triumphs over experience.



Source: BP statistical review of world energy 2011; EIA; FRED

Note that recessions may be exaggerated because I've assumed if a recession was in any part of a year, it was shaded for full year.



Source: Bord Gais energy index

[nedkelly]

There is something very wrong with americans, sane people don't buy big v8 jeeps and pickups when oil prices are expected to go up.

[Aindriu]

It didn't stop them all during the oil crisis of the 1970's. It would take every oil well in the USA to dry up before the septics end their love affair with gas guzzling beasts. They think 15 MPG is good economy!!

[CptSternn]

There is something very wrong with americans, sane people don't buy big v8 jeeps and pickups when oil prices are expected to go up.

They do when they are free. Thanks to Bush Jr you can get a big 'gas guzzler' for free -

USATODAY.com - Bush plan gives huge tax break to buyers of big SUVs

Also remember they pay a fraction of what we pay for petrol, so the prices really don't hit them like they hit us. They are currently paying about $3.00 a gallon, which is what? 3.78 litres for about €1.50 - about €0.39 a litre? We are paying on average about €1.59 a litre, so if the price even tripled they still wouldn't feel it as much as we already do.

[cimon9999]

There is something very wrong with americans, sane people don't buy big v8 jeeps and pickups when oil prices are expected to go up.

The trouble is that facts have become politicised on the right (and to a lesser extent on the left). Right-wingers exist in a media bubble where whatever your gut says is right, is. It is fundamentally leftist to drive a small car, for example.

[cimon9999]

They do when they are free. Thanks to Bush Jr you can get a big 'gas guzzler' for free -

USATODAY.com - Bush plan gives huge tax break to buyers of big SUVs

Also remember they pay a fraction of what we pay for petrol, so the prices really don't hit them like they hit us. They are currently paying about $3.00 a gallon, which is what? 3.78 litres for about €1.50 - about €0.39 a litre? We are paying on average about €1.59 a litre, so if the price even tripled they still wouldn't feel it as much as we already do.

They might not feel it as much on the micro-economic scale, but at the macro level of trade deficits, they very much do. Oil last year accounted for about 60% of the US' trade deficit. The middle east and China are only going to accept depreciating paper dollars for a while longer, imo.

[cimon9999]

We're also now at the highs of 2008 in € terms:

FT Alphaville » Euro crisis, Brent oil edition

The current record oil prices for European consumers will morph into a new energy crisis for Europe and it will hit both consumer sentiment and disposable income right at the time when austerity measures will kick in.

[Pat Gill]

cimon9999,

Two articles from today's Drumbeat echo your OP.

Surging prices for oil and gas shales, in at least one case rising 10-fold in five weeks, are raising concern of a bubble as valuations of drilling acreage approach the peak set before the collapse of Lehman Brothers Holdings Inc.



Chinese, French and Japanese energy explorers committed more than $8 billion in the past two weeks to shale-rock formations from Pennsylvania to Texas after 2011 set records for international average crude prices and U.S. gas demand. As competition among buyers intensifies, overseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production, said Sven Del Pozzo, a senior equity analyst at IHS Inc. (IHS)


U.S. Shale Bubble Inflates After Near-Record Prices for Untested Fields - Bloomberg

The average price for a gallon of gasoline in the United States increased for the first time since mid-October, rising by 12 cents to about $3.36 over the last three weeks due to higher crude oil prices, an industry analyst said on Sunday.
"The higher crude prices pulled up wholesale prices by about 19 cents a gallon, but retailers have passed through only 12 cents of that so far," said Trilby Lundberg, editor of the Lundberg Survey.
If crude prices remain at current levels or rise, retailers will be forced to attempt margin recovery through further increases in the near future, she said.

Cost of gas rises for the first time since October - Business - Oil & energy - msnbc.com

[gijoe]

They do when they are free. Thanks to Bush Jr you can get a big 'gas guzzler' for free -

USATODAY.com - Bush plan gives huge tax break to buyers of big SUVs

Also remember they pay a fraction of what we pay for petrol, so the prices really don't hit them like they hit us. They are currently paying about $3.00 a gallon, which is what? 3.78 litres for about €1.50 - about €0.39 a litre? We are paying on average about €1.59 a litre, so if the price even tripled they still wouldn't feel it as much as we already do.

They are paying close to $4 a gallon in the US which is over $1 a litre or about €0.80.

PS wherever your paying 1.59 ditch them because mine are 1.49.

[gijoe]

Historically the great majority of GDP came from western countries and there was excess oil supply, so when recessions occurred, it was accompanied by a fall in oil prices. These days, much of GDP growth comes from eastern economies who are at the stage of development where many families can afford a car, and their growth is typically oil intensive. Add to this the structurally higher oil field development costs (marginal oil costs around $80 - $100/bbl), and it's a recipe for pain.

That is a load of bollix. The dearest production costs are in the Alberta Oil Sands where the cost of production can be as high as $60/bbl. Offshore can be as high as $20-35 and onshore can range from $2 in Saudi to $10 in more inaccessible parts of the world like Alaska.