Absolutely. Transport costs rise = price inflation + reduced activity = stagflation = reduction in living standards.
well this is not exactly true I lived in Turkey for 23 years and they never paid less than $10/gallon and yet they have an explosion in car sales, traveling etc etc. So many families have 2 cars now, unbelievable. The reason is people adjusted accordingly meaning small cars, small buses, efficient machines less consumption but more traveling done with less gas. So same thing will happen in the USA. Just wait and see
mistreno: The reason is people adjusted accordingly meaning small cars, small buses, efficient machines less consumption but more traveling done with less gas. ------------------------------------------------------------------------------------ I agree. The US infrastructure on Rail and Energy has been neglected for multiple decades. Traveling by rail is not efficient in America for passengers. We will start using more coal. Consumers consumption will drop. Small cars sales are on the rise now in the US. Life styles will change for those who can't afford the higher Energy Prices. Yet, this all depends on the length of time gas prices stay high. If it stays in the high 90s for years and gas around 4-5 bucks for years, this may have an effect. But a short term spike, does not have much of an effect other than those in the Energy Business making more money. We already have a test case, when oil hit 140 in 08. People did not change their habits much. Question is, are we going to have a 5 month period of higher energy prices then come back down to older levels? Or are we about to set a resistance level at 99 and see energy at these levels for decades to come? It's to early to tell. OPEC is talking about increasing production already.
Not really. Refined Products, like gasoline, take a while to catch up to crude prices. Oil didn't stay high long enough for gasoline to reflect the spike price of crude.
Everytime crude spikes we get threads like this. Someone always comes up with an outrageous price target in order to get their name mentioned in the media. The only way oil will hit $220 is if Iran sees the same type of revolution.
Please quantify "explosion in car sales". How was this "explosion in car sales" compared to real income growth, unemployment and GDP growth?
The truth is that the majority of pundits I have seen on the media (the so called "experts") talking on the Middle East issue have been dead wrong. The initial consensus was that the crisis was going to be confined to Egypt. So this gentleman's forecast of $220 is just as good as a monkey throwing darts. It is basically irrelevant. Unless you have a crystal ball, nobody can put a final price target of where crude is going.
http://www.businessweek.com/news/20...-equals-china-as-gdp-recoups-lehman-loss.html http://www.hurriyetdailynews.com/n.php?n=turkish-car-sales-hit-record-high-2011-01-11 By the way 1 liter of gas in Turkey is 4.08TL where 1 USD = 1.59TL So that means; 4.08X3.785/1.59 = $9.71/gallon Yet, car sales is exploding, of course mostly small cars
small cars means lower standard of living for americans. America is a macho society which means things like SUV's big cars, huge gas guzzlers.
I'm long oil to the 180's. Besides revolution and the specter of war in the middle east, devaluation is certain. America's fiscal position is near collapse. The economy itself is running on borrowed and printed money. Government, banks and consumers need a low-rate environment to survive. The cost to roll-over debt at 5% interest rates would simply bankrupt most lenders, households and least of all, the Government. Future entitlements are stratospheric and totally beyond affordable, yet a huge voting demographic who never saved for retirement, healthcare or perks are ready to march on the capital if that check isn't in the mail. Or, more aptly, vote down any challenger promising much-needed austerity. We're hugely overweight in bullshit speculative activities (real estate, finance, insurance) while our productive capacity and manufacturing technology was sold overseas. With the Government's blessing, our creditors and US-led multi-lateral organizations are implementing a global reserve currency in direct competition to the US dollar. When the American consumer recovers, there is nothing Bernacke can do to stop asset inflation. The debt is simply too large, funded on too short a maturity, with too much influence from private Banks, that will prevent us from ever cleaning out the system. The devaluation comes when we get a recovery. That's when credit creation outstrips credit destruction. Until then, Bernacke holds up the market and bankers through reiterations of quantitative easing to stave off deflation. Oil, gold and the ES are at, or near, all time highs. And that's in the middle of a recession at >9% unemployment (U3), with U6 running above 18%!! Even under the rosiest scenario, the US Dollar is toast. Done. What happens when the economy recovers? What happens when the SDR bond market opens up? Anyone? Bear in mind, when agricultural and energy commodities get back to, and go beyond their '08 highs, that Middle Eastern pressure cooker simmering at a good boil now, will absolutely explode. It's very likely we'll see a bunch emirates and OPEC members depeg from the dollar. Even large trade partners like China and Japan, will widen their bands. Possibly big, which will supercharge US inflation. Current instability is nothing. Wait until energy and grains double. Most of the third world will light itself up like that protester in Egypt. Then bloody revolution and violence will be the order of the day, which propels energy > food > misery index > revolution higher. This is nothing. Things will get a lot worse.