We're oblivious

[YellowDog]

It's a conspiracy.

Oil prices are driven not by shortages but by international cartels. Cartels operate in many fields (pardon the pun) and we are powerless to stop them, plain and simple.

Our only hope is to drink piss, smoke pot, take as many recreational drugs as we can afford (or as much as our bodies can tolerate) have sex, and get out on our bikes as often as possible so as to forget these oppressive powers.

Or we could go to church.

The whole system is a complete racket.

The price of oil and a country's exchange rate are manipulated by those who have zero interest in the poor buggers who have to live in these countries.

Has anyone not ever considered why the pre recession US$ was 15% lower than it is now that the country is officially screwed?

Exporting oil and maintaining the well being of the middle-eastern cartels is more important than human values or anything else.

The USA needs exports to help rebuild the economy - why make the exchange rate higher? Exporting oil will not rebuild the country.

The base interest rate is <1% - how does this equate to a higher USA exchange rate? It doesn't.

This is not economics, it is screwenomics.

The oil price will always be as high as it can possibly be without demand falling.

[peasea]

The whole system is a complete racket.

The price of oil and a country's exchange rate are manipulated by those who have zero interest in the poor buggers who have to live in these countries.

Has anyone not ever considered why the pre recession US$ was 15% lower than it is now that the country is officially screwed?

Exporting oil and maintaining the well being of the middle-eastern cartels is more important than human values or anything else.

The USA needs exports to help rebuild the economy - why make the exchange rate higher? Exporting oil will not rebuild the country.

The base interest rate is <1% - how does this equate to a higher USA exchange rate? It doesn't.

This is not economics, it is screwenomics.

The oil price will always be as high as it can possibly be without demand falling.

Oil is mafor part of it, yes. If you like conspiracy plots you should watch a DVD entitled 'Zeitgeist'.

[imdying]

As bikers, all you need to know is this: Buy up and ride 2 strokes like there's no 2 stroke tomorrow!

[rainman]

Has anyone not ever considered why the pre recession US$ was 15% lower than it is now that the country is officially screwed?

Something to do with them being the reserve currency of the planet, perhaps? No accounting for tastes

The USA needs exports to help rebuild the economy - why make the exchange rate higher? Exporting oil will not rebuild the country.

Who they gonna export to? The world market is somewhat screwed at the moment.

And the US has been a net oil importer since they peaked in the 70s... so I'm not sure what you mean there?

The oil price will always be as high as it can possibly be without demand falling.

Assuming it's demand constrained. When supply becomes a constraint, there will be fewer options to play with the price.

[YellowDog]

Something to do with them being the reserve currency of the planet, perhaps? No accounting for tastes

If they had not forced the currency/price of oil back up, then the US$ would have been replaced by the Euro as the reserve currency of the planet.

Who they gonna export to? The world market is somewhat screwed at the moment.

The USA has a huge economy and they do have a strong and highly subsidised manufacturing base. If the US$ was at a rate to reflect the state of the country, then everyone would be buying cheap USA products.

The world market isn't that screwed. It is easy to confuse the behaviour of NZers with that of the rest of the world.

I appreciate that this arguament goes out of the window when you look at the utter stupidity of their automotive industry. The market will always be extremely limited for the rubbish they have produced over the past three decades.

And the US has been a net oil importer since they peaked in the 70s... so I'm not sure what you mean there?

Yes the USA is a net importer, though it is steadily moving back the other way. My point is that US companies have a very strong interest in the world oil industry, regardless of where is produced. A strong US$ is highly beneficial to some US corportates and individuals however not to 90% of the population.

Assuming it's demand constrained. When supply becomes a constraint, there will be fewer options to play with the price.

The supply and demand is a very easy equation to play with. I cannot think of a manufacturing industry where reducing or increasing production can be achieved to cheaply.

If the price drops too low, OPEC will reduce production to a level that creates more demand than supply and hence the price rises again. This merrigoround has been played for decades.

It was good news to read that France and Germany have started showing some growth. The USA and UK have screwed themselves tp a much higher degree and will take a lot longer to turn around.

Postie Plus has increased profits based upon the cost of money to run their busienss being cheaper and also reducing tjeir prices to make their wears seem more attractive. It has worked for them and others should take note (including the government).

Give it a couple of years and NZ mortgages will be back to >10%. The monthly carry trades will make Mr Bollard very happy again and the OAPs will be relieved to see their incomes restored.

I am not sure who else wll be happy with this 'ideal sitation'. I certainly won't and neither will anyone who has to pay for the cash flow to run a business.

[rainman]

If they had not forced the currency/price of oil back up, then the US$ would have been replaced by the Euro as the reserve currency of the planet.

Why do you say that? Ultimately the USD is toast, but it's pretty hard to see such a change happening quickly. China and others hold too many of them, although they're gradually shifting that position. Also, the US has lots of guns.

The world market isn't that screwed.

Hope you're right, but not sure what you're basing your optimism on...?

Yes the USA is a net importer, though it is steadily moving back the other way.

Um, sorry, but no. From the EIA, who should know:

U.S. Field Production of Crude Oil (Thousand Barrels per Day)
Decade  	Year-0 	Year-1 	Year-2 	Year-3 	Year-4 	Year-5 	Year-6 	Year-7 	Year-8 	Year-9
1980's  	8,597  	8,572  	8,649  	8,688  	8,879  	8,971  	8,680  	8,349  	8,140  	7,613
1990's  	7,355 	7,417 	7,171 	6,847 	6,662 	6,560 	6,465 	6,452 	6,252 	5,881
2000's  	5,822 	5,801 	5,746 	5,681 	5,419 	5,178 	5,102 	5,064 	4,950

Now demand has also been dropping, true - but they are still importing around 9mbpd for the most recent week's stats. And that's crude only, not finished product.

They're done. Not coming back. As is the case with increasing countries. Check out Mexico, for example. And while you're at it - google the "export land" model.

The supply and demand is a very easy equation to play with. I cannot think of a manufacturing industry where reducing or increasing production can be achieved to cheaply.

If the price drops too low, OPEC will reduce production to a level that creates more demand than supply and hence the price rises again. This merrigoround has been played for decades.

Yup, while there is supply to play with. This link might point to some future problems with this approach, though.

Salient quotes:

The IEA estimates that the decline in oil production in existing fields is now running at 6.7 per cent a year compared to the 3.7 per cent decline it had estimated in 2007, which it now acknowledges to be wrong.

"If we see a tightness of the markets, people in the street will see it in terms of higher prices, much higher than we see now. It will have an impact on the economy, definitely, especially if we see this tightness in the markets in the next few years," Dr Birol said.

"It will be especially important because the global economy will still be very fragile, very vulnerable. Many people think there will be a recovery in a few years' time but it will be a slow recovery and a fragile recovery and we will have the risk that the recovery will be strangled with higher oil prices," he told The Independent.

In its first-ever assessment of the world's major oil fields, the IEA concluded that the global energy system was at a crossroads and that consumption of oil was "patently unsustainable", with expected demand far outstripping supply.

Oil production has already peaked in non-Opec countries and the era of cheap oil has come to an end, it warned.

In most fields, oil production has now peaked, which means that other sources of supply have to be found to meet existing demand.

Even if demand remained steady, the world would have to find the equivalent of four Saudi Arabias to maintain production, and six Saudi Arabias if it is to keep up with the expected increase in demand between now and 2030, Dr Birol said.

Note this is the IEA's chief economist speaking, not some kooky pinko environmentalist.

Six Saudi Arabias could pose a few problems.

[YellowDog]

Interesting stats. Thanks. My stats are a great deal shallower than yours. An alternative fuel source may be with us sooner than expected.

My optimism is based upon history. I do tend to agree that the (man made)dire financial position has not been this deep before and the recovery will need to me more than a BS marketing one. I read an interseting article from 1999 from the NY Times predicting the sub-prime catastrophe being a direct result of Clinton policy making.

With such a huge economy, I would never say that the US$ is toast. They do need to manage it (and the debt) a lot better and also appear to be taking their problems more seriously. A <1% interest rate was a good start however the currency rate does not make any economical sense. "We buy more than we sell therefore a strong currecy will help us" will not help the unemployed.

Looking to the future (with eternal optimism) this is an interesting presentation:

http://www1.alcatel-lucent.com/us/ev...alesVideo.html