Oct 16 2009
∞
“ At this week’s ASPO conference in Denver there was a convergence of thinking that when oil rises above 4.00% of GDP, the US economy starts to falter. An additional problem is that new oil really needs global prices above 70.00, on average, to make it worthwhile to pursue. As one analyst out of New York put it: “Houston needs 70.00 to create new supply, but the US economy is vulnerable once we get above 80.” To these remarks I would simply add that compared to last year, GDP is lower, unemployment is of course higher, and here we are tonight knocking on 80 dollar oil. Additionally, California is not the only region that is leveraged hard, to gasoline prices. Florida, Texas, and the mid-Atlantic states are also quite vulnerable. But among all these, California’s unemployment rate has now taken the lead. One wonders how the next move upward in gasoline prices will translate to the public mood, and the fortunes of current politicians. In a number of posts the past few months I’ve suggested that once California reaches 15% unemployment at a time of 100 dollar oil, the American public will finally understand that we are in an inflationary depression.
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Break Point
Sawickipedia: First, anyone interested in the energy markets needs to read Gregor. Second, we’re still screwed.
Second, we need to move the energy reform discussion away from the holy war known as the debate around global warming towards something that all sides will likely agree on - oil is getting very expensive and we need to move towards more efficient fuels. The fact that almost all alternatives are better on a carbon emissions basis is a bonus. The abundance of US Compressed Nat. Gas (CNG) makes it an interesting middle ground towards non-carbon energy production (hydro, solar, wind, etc.). Either way the double-dip oil shock that’s about to hit is hopefully going to finally force all sides to wake up and start movign forward.
