Out of this entire article what I don't comprehend is how the "fixed income team" at credit suisse comes up with oil having to rise 50-60% before energy costs put a "squeeze" on consumers. I think they are really wrong with that idea, the increase in oil prices to 90+ is already squeezing consumers and another 50-60% rise in oil would put this economy so far under the water Bubble ben bernanke would have to invent new magic tricks to prop up the economy. How Will US Consumers Cope With $100 Oil? CNBC.com | February 23, 2011 | 09:19 AM EST Oil prices will need to rise another 50-60 percent before energy costs put a squeeze on consumers with the same impact as 2008, according to the fixed income team at Credit Suisse. "'Manageable' is the word that springs to mind, so long as real instability does not roll on to the bigger oil suppliers in the region," Credit Suisse said in a report. "Manageable is also the bottom line in terms of the impact on US consumers' disposable income from the rise in energy costs so far: January's payroll tax holiday is about three times as large as the drain from higher gasoline prices to date," the Swiss bank's analysts wrote. The problem of higher oil could also be offset by further help from the Federal Reserve and Ben Bernanke, according to the report. "Our economist's view is that Mr. Bernanke will probably make it clear in next week's Humphrey Hawkins Testimony that any new threat to the recovery will only confirm his determination to keep rates low for an extended period," they wrote. Will the Revolt Spread? It will take time to understand the full implications of the current crisis but the following few months will be volatile, the Credit Suisse analysts warned. "Foreign policy realists could be gnashing their teeth, liberals celebrating (nervously) and some of the real radicals could be whooping for joy. Still, in this modern day 'Springtime of the Peoples,' it is striking to us how little of an Islamic revolution this has been." "It is, therefore, possible that the vast, underemployed and largely disenfranchised youth bulge in the Middle East and North Africa crescent can hope to alter the arc of history. One by one, they may force or provoke genuine reform that gives some form of democracy and more modern, liberal economies the chance to evolve," they wrote. The market is focusing on the chances of major negatives hitting investor sentiment but OPEC's excess supply and lower demand in the spring from the US and Europe will help offset the loss of Libyan supply, according to Credit Suisse analysts. "All oil exports from Libya seem to have stopped, but little major disruption to supplies from elsewhere has yet occurred. For a period, and with a shortish lag, there are ample existing inventories, official stockpiles and OPEC spare capacity to offset that shock," they wrote.
How Will US Consumers Cope With $100 Oil? Demand destruction. Americans learned in 2008 how to manage their consumption somewhat.
One would hope, by purchasing more fuel-efficient vehicles. But that does not appear to be the case. On the way to work this morning, I saw a huge billboard that said nothing but "Sexy Urban Vehicle!". A block or so down, there was another billboard advertising a local SUV dealership. If SUVs are now considered "sexy" again, it would seem to me that fuel demand in the US will continue to grow. The low in gas prices may already be in.
Those who can afford the price of Gas and Energy, will continue to live well. Others may have to adjust their life style. Sell their SUVs, cut back on the energy usage in their homes, ride a bike to work, car pool. The poor, will be taking care of by all the "Assistance" that the States, Gov and muni's provide until that money runs out. Nothing is going to change. I funded 5 Oil wells during the run n 08. (6 months) The increase in Oil prices brought Accredited investor attention to DPPs in Oil and Gas. I'm seeing the same interest now by clients. Gas will hit 4 and will not come back down. Oil will find itself above a 100 and will not come back down for years. Higher Food cost, Energy Cost are here to stay. Those stuck in the middle will have to make more money or cut back in Life Style. End of Story.
I'd LOVE to see $200/bbl oil. Perhaps THEN the US Government would pull its head out of its ass and develop natural gas as a transportation fuel. We have a 100% of need, 100 year supply of the stuff... yet we don't use it. Instead, we send $700 Billion/year to OPEC producers... some of which HATE OUR GUTS AND WOULD LIKE NOTHING MORE THAN TO KILL US ALL... yet, we persist on the same destructive path. Why is that??
by the way, I'm loving the higher price in oil and smile every time I fill up my S6! This is one of the many wells I raised Millions to drill on the Gulf.
A finished project. This baby is pump'n 100 barrels a day and 1000 BCF of natt aday. The Battery Tanks are about a half a Mile away. We sell the Natti and Oil to a major (confidential) who trucks it out every few days. Investors are on track to earn 10:1 on their money. Minimum buy in was 150k. This well bought my loft and my S6 in commission. Bring the higher prices in oil baby!
And the final picture for all. I run with the Black Gold. Fortunes have been made with nothing but. Notice the Flags....USA and TEXAS BABY! "Wish You where here".
Live close to your work! You can't imagine how big of a percentage of people's paycheck goes to just getting at work! Pure madness. You work to get money so you can get to work. Although I understand US city planning has been implemented in times when the price of oil was not a factor so this living far from work has grown historicaly to the problem it is today.