European Tribune - Comments - What do you call a long, shallow depression? A crater?

What do you call a long, shallow depression? A crater? | 21 comments (21 topical, 0 editorial, 0 hidden)

They are also assuming an economy can recover when oil prices are going through the roof. Sorry bub, that single issue changes all your rules.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Apr 28th, 2008 at 11:37:56 AM EST

Re: A crater? (none / 1)

It's quite possible the crater will be enough to drop oil prices way back again for a while by demand destruction. Nowhere near previous prices, but much lower than currently.

by Colman (colman at eurotrib.com) on Mon Apr 28th, 2008 at 11:41:43 AM EST
[ Parent ]

Re: A crater? (none / 0)

The answer to that is: an emphatic NO!

by Quentin on Mon Apr 28th, 2008 at 12:17:38 PM EST
[ Parent ]

Re: A crater? (none / 0)

Why?

by Colman (colman at eurotrib.com) on Mon Apr 28th, 2008 at 12:19:31 PM EST
[ Parent ]

Re: A crater? (none / 1)

Because the economy for most of the middle class has been in trouble for twenty plus years and whatever secure feeling the middle class was able to take away from the 'growth'(greed) of the economy of recent years, was due to their conspicuous consumption based on their ability to have higher limits on their credit cards and the ATM usage of their home equity. Their credit lines are being decreased dramatically and unfortunately their income will not be increased. Therefore they will no longer be the engine of the 'growth' of the economy for a small group of people and the illusion of this 'faux growth' will no longer be accepted by the middle class. No substantial recovery for many years until the inequality of income is addressed.

by An American in London on Mon Apr 28th, 2008 at 12:42:23 PM EST
[ Parent ]

Re: A crater? (none / 0)

I thought we were talking about the effect of a long-crisis on oil prices. Quentin seems to think the demand destruction will be insufficient to reduce them substantially I was wondering why.

by Colman (colman at eurotrib.com) on Mon Apr 28th, 2008 at 12:44:22 PM EST
[ Parent ]

How about Peak Oil? (none / 1)

Whether supply decreases or not, the direct and indirect expenses of capturing petroleum are already increasing: more difficult environments; the circular effect of increased 'energy' costs on production of tools, equipment, and supplies; the circular effect of increased 'energy' costs on transportation of oil; the lower EROI on potential 'alternative' sources (shale oil, tar sands, etc.).

Then, of course, there is the standard class analysis. Oil is oligopolistic, and the oligarchs have a fairly consistent history of trying to husband their interests. I would say that this is the more important aspect of the question; 'market forces' are secondary.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Mon Apr 28th, 2008 at 03:46:43 PM EST
[ Parent ]

Re: How about Peak Oil? (none / 1)

I think so too. The high prices will be maintained, in any way, for the benefit of the producers. The recession, no matter how deep, will be of no interest to them. Just cut production. 'Market forces' mean: I have something you need to stay alive and I can set the price. Even if Coleman is right and prices go down because of less demand, the previous level of demand will not/cannot be 'destroyed', it will only lie dormant, so to speak, as the bosses (1990s movers and shakers, ha!)are noy planning to kick the fossil fuel addiction. Tomorrow as the recession recedes, maybe partly owing to reduced energy prices, the price of energy will rise in parallel with the recovery. Any recession that causes prices to go down substantially over a long period will definitely not be a nice experience for most people around the world. The price is now structural. But everyone knows the solution: reduce the consumption of fossil fuels. Easier said than done, maybe. Where there is a will, there is a way. Maybe. Doomsday: the price of oil reflects devaluation and inflation, the price of food is catching up, and the prices of all other goods will soon follow suit. This implies that each individual will soon need twice as much money as (s)he has today to live at the same standard. And where are we going to get this money? I have no idea. Let the printing presses and the good times roll.

by Quentin on Wed Apr 30th, 2008 at 03:48:29 AM EST
[ Parent ]

True, true, and more true - (none / 1)

what is there to add? "The price is now structural." Well formulated.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Wed Apr 30th, 2008 at 04:51:55 PM EST
[ Parent ]

Oil prices (4.00 / 2)

because the West doesn't drive oil demand anymore:

a "recession" in China means 5% growth instead of 11%, and 5% growth still means increasing oil demand by them;
the countries with the biggest oil demand increases are pretty much all oil producers (Saudia Arabia, Iran, Russia), and they subsidize demand, or are otherwise booming thanks to high oil prices - thus demand over there will continue to go up;
and back 'at home', demand destruction is not really happening. In the 70s, the power sector and industry cut sharply on demand, but households not so much; even in a sharp recession we should only expect demand to go down by a few percent points, not enough to stave off price increases

given the elephant in the room: stagnating production and skyrocketing production costs...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Apr 28th, 2008 at 01:14:37 PM EST
[ Parent ]

Re: Oil prices (none / 1)

and back 'at home', demand destruction is not really happening. In the 70s, the power sector and industry cut sharply on demand, but households not so much; even in a sharp recession we should only expect demand to go down by a few percent points, not enough to stave off price increases

short term I agree, but over the longer term I suspect that demand destruction will occur as people gradually replace lower mileage vehicles with more efficient ones.

by MarekNYC on Mon Apr 28th, 2008 at 01:26:03 PM EST
[ Parent ]

Re: Oil prices (none / 0)

How long did the 70s oil shock last?

by Colman (colman at eurotrib.com) on Mon Apr 28th, 2008 at 01:28:45 PM EST
[ Parent ]

Re: Oil prices (4.00 / 2)

A decade. And it happened in two spikes with the the first being followed by a retreat in oil prices limiting the effect (oh, ok, that was just an aberration, no need to change). The latter part of that period did see significant gains in vehicle fuel efficiency, but the two decade long slump in fuel prices that followed quickly put an end to that, at least in the US. In Europe the policy of keeping gas prices high helped preserve the trend, but that's been partially counterbalanced by the simultaneous completion of the switch over to universal car ownership and the shift to a more American car based social geography (shopping outside city centers and suburbanization)

by MarekNYC on Mon Apr 28th, 2008 at 01:37:48 PM EST
[ Parent ]

Re: Oil prices (none / 1)

If we maintain a "bumpy plateau" for some number of years I think we'll see serious price volatility in both directions. Remember what the Asian financial crisis did to the price of oil - and the economic "crater" we're descending into will likely be worse.

you are the media you consume.

by MillMan (millguy at gmail) on Mon Apr 28th, 2008 at 01:39:26 PM EST
[ Parent ]

Re: Oil prices (none / 1)

a "recession" in China means 5% growth instead of 11%

I should have added that there is no reason to believe this will continue indefinitely.

you are the media you consume.

by MillMan (millguy at gmail) on Mon Apr 28th, 2008 at 02:41:50 PM EST
[ Parent ]

What do you call a long, shallow depression? A crater? | 21 comments (21 topical, 0 editorial, 0 hidden)

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