Posted: Mon Aug 22, 2005 9:27 pm Post subject: Re: US recession affecting oil price ??
Marko,
You can add to the equation the Beijing olympic games in summer 2008. Chinese will probably try to maintain the economy before the olympics. At this point, US will already be in electoral campaign. 2009 is a very good possibility for hyperinflation.
Posted: Tue Aug 23, 2005 12:55 am Post subject: Re: US recession affecting oil price ??
marko wrote:
I assume that you are referring to the financial crash? I actually don't see this coming for another couple of years. That is, unless the Fed is determined to bring it on (which they just might be). In which case, if they continue with 0.25% rate hikes at each meeting, we might see the collapse begin in spring of 2006, just in time to avert another oil price spike.
When the crash does come, I think that we will see an initial period of deflation, in which prices drop, because the supply of money dries up due to mass joblessness and bankruptcy (including bank failures).
...
Once bankruptcy and deflation have allowed the rich to take possession of a large chunk of the real estate and productive assets in the US, I think that we will see hyperinflation, as Asian money creation spins out of control.
I agree with the scenario about deflation / inflation.
I think the initial phases of the crash are coming soon. In fact, it may have already begun at small degrees as reflected in the stock markets. They have all turned down - and so has oil, gold, and commodities. Since 1996, the movement of most major markets in the US has tracked M3 money supply. There is another factor to money though - the speed at which it can move through the economy. M1 is a good measure of 'mobile' money.
I think the fed is still pumping money, but without the desired effect. M3 continues to grow, but much of that money sits in corporate coffers and big lending institutions. Meanwhile, M1 is declining... _________________ Welcome to the Kondratieff Winter
Joined: Jan 31, 2005 Posts: 451 Location: Massachusetts
Posted: Tue Aug 23, 2005 8:40 am Post subject: Re: US recession affecting oil price ??
threadbear wrote:
Why will joblessness cause prices to drop? This is traditional economic theory, but will it be valid this time around?
I don't see why not. People without jobs have much less money to spend. When you have much less money chasing the same number of goods, you get deflation, or a drop in prices. That will apply to oil as well.
Even if the Fed is pumping money into the economy, by creating money to buy US debt to support government spending, unless we have a radical change in government policy, that money will go to pay for military adventures and handouts to the rich. The rich don't spend most of their money on consumables. They save it or use it to buy big assets. Such a policy might help to keep real estate prices from going through the floor (and to ensure that only the rich can afford foreclosed real estate). And it might provide support for the prices of armored Mercedes and Humvees. But it won't keep the prices of consumables like food and oil from dropping.
Once the Asian central banks' creation of money to buy dollars leads to hyperinflation in Asian countries, forcing the Asian countries to abandon their support of the dollar, however, the dollar will plummet, and the prices for most consumables will soar in dollar terms, because they are imported. Even domestically grown food will rise in price in this scenario, because its price reflects large inputs of imported oil and natural gas. As prices rise here, the Fed will be forced to create more money to pay for the expanding US deficit. Meanwhile, rising interest rates will sharply increase the US government's debt service costs. This will quickly lead to hyperinflation. At that point, the dollar price of oil will be going through the roof. Wages will rise, too, for those lucky enough to have jobs, but not as fast as the prices of consumables.
The dollar will ultimately become worthless, and the government will try to issue a new currency, perhaps a "new dollar" worth a million old dollars. Whatever it is, it will no longer be accepted as payment for oil. It might have to be backed by gold.
shady28 wrote:
I think the initial phases of the crash are coming soon. In fact, it may have already begun at small degrees as reflected in the stock markets. They have all turned down - and so has oil, gold, and commodities. Since 1996, the movement of most major markets in the US has tracked M3 money supply. There is another factor to money though - the speed at which it can move through the economy. M1 is a good measure of 'mobile' money.
I think the fed is still pumping money, but without the desired effect. M3 continues to grow, but much of that money sits in corporate coffers and big lending institutions. Meanwhile, M1 is declining...
This is an interesting perspective. I hope you are wrong!
The downturns in oil and gold are recent, small, and have followed big rises in both. I don't think it's clear yet that the trend has turned. Stocks have been more or less flat since last winter. (up a little, down a little, up a little, down a little)
If the oil price steadies, this is actually a promising sign for the economy in the short term. It means that we may escape a collapse triggered by oil prices this year (but probably not next year if the economy is still strong then).
As for money supply, there are two big questions: 1) Will the Fed back down and lower the short-term interest rate if the economy shows clear signs of weakness? If so, this will help to prolong the current bubble. I don't understand the Fed's motivations, but I do understand that they are pretty much all Republicans who want to win the 2006 Congressional elections or at least steal those elections without being too obvious about it. So I think that they will try to keep the bubble from bursting. 2) Will Asian countries continue to suppress long-term interest rates by buying T-bills? Here I cannot see any reason why they will not. In fact, I think that they will step up their buying in order to lower long-term rates still further if they see the bubble starting to lose air. I expect to see long-term rates fall below short-term rates before the end of the year, giving new life to the mortgage/housing bubble.
For all of these reasons, I think that a collapse is unlikely before 2007 and perhaps before 2009. However, 2009 looks bad. VERY bad.
Posted: Tue Aug 23, 2005 9:41 am Post subject: Re: US recession affecting oil price ??
marko wrote:
For all of these reasons, I think that a collapse is unlikely before 2007 and perhaps before 2009. However, 2009 looks bad. VERY bad.
I don't really look at this from a political perspective. I'm pretty sure Greenspan has been around so long because he has been determined to use monetary policy to push the economy forward under any administration. I don't believe a change in administration will make any difference to the fed in that regard - they won't sucker punch the economy simply because their consensus is to dislike the current admin.
Basically, I think they have put themselves in a cul-de-sac. They cannot continue to grow the economy via montary looseness with money flowing into something as destructive as oil, while at the same time the spectre of the K-wave sits waiting in the wings, with the forces that power K-waves far stronger than they have ever been (debt, maldistribution of wealth). At the same time, the housing boom is hitting a plateu and the markets are in a weak technical position. Interesting times ahead.. _________________ Welcome to the Kondratieff Winter
Posted: Tue Aug 23, 2005 10:49 am Post subject: Re: US recession affecting oil price ??
Marko, Put yourself in the position of a retailer. If 40% of the population is underemployed or unemployed, homeless--no longer a strong consumer, why would prices drop down to accomodate them?
Pricing margins are razor thin for retailers marketing to the lower and lower middle classes anyway--in a supposedly 'strong' economy. Regardless what the price of oil is, why wouldn't a retailer, like Target, for example, just delete this type of customer right out of his marketing plans?
The 20% who are able to purchase aren't just middle class, they have large incomes and assets to draw from. Why not hike prices sky high (even relative to inflation) for the few who are functioning members of a consumer society?
When Argentina devalued it's peso, after depegging from the American dollar, many lost their jobs, in the ensuing depression. As the peso plunged and Argentian's situation grew more dire, retailers responded by hiking prices. The rising prices did more than compensate for inflation of the peso, they illustrated that standard marketing theory was tossed out the window.
Deflationary theory is based on North American model of the depression of the thirties. It ain't going to happen here--not even temporarily
An interesting side note. While everything else went up in price in Argentina, , real estate fell in price. I consider Argentina the working model of what the US and likely Canada to a much more limited extent, can expect in the very near future.
Argentina has partially pulled out of it, after tremendous suffering. Hopefully the US will reach some kind of homeostasis, after a currency collapse, but it seems that a true 'recovery' is unlikely.
Posted: Tue Aug 23, 2005 11:12 am Post subject: Re: US recession affecting oil price ??
threadbear wrote:
... Deflationary theory is based on North American model of the depression of the thirties. It ain't going to happen here--not even temporarily
But won't we start with deflation? If the companies see it coming then maybe, but I don't think they respond fast enough and suddenly they start to notice that customers ain't buying anymore (well a lot less). Then what we have is a lot of overcapacity, like big SUVs. They are already produced, so better sell them for less than not selling them at all. (However demand for expensive sportscars in the ME is growing, they are taking an interest in Ferrari and Spyker for example.)
I think we will first see another spike in oil prices when Peak Oil hits mainstream and a lot more people will speculate in the oil market. Right after that I think it will crash.
I think the stock markets are now in decline (reached a high last week, at least over here).
Posted: Tue Aug 23, 2005 11:41 am Post subject: Re: US recession affecting oil price ??
[quote="CARVER"]
threadbear wrote:
I think we will first see another spike in oil prices when Peak Oil hits mainstream and a lot more people will speculate in the oil market. Right
after that I think it will crash.
I think the stock markets are now in decline (reached a high last week, at least over here).
If supply is really limited for oil, it will not crash until
a cheaper alternative for oil is found.
That may be many years away.
Posted: Tue Aug 23, 2005 11:44 am Post subject: Re: US recession affecting oil price ??
CARVER wrote:
threadbear wrote:
... Deflationary theory is based on North American model of the depression of the thirties. It ain't going to happen here--not even temporarily
But won't we start with deflation? If the companies see it coming then maybe, but I don't think they respond fast enough and suddenly they start to notice that customers ain't buying anymore (well a lot less). Then what we have is a lot of overcapacity, like big SUVs. They are already produced, so better sell them for less than not selling them at all. (However demand for expensive sportscars in the ME is growing, they are taking an interest in Ferrari and Spyker for example.)
I think we will first see another spike in oil prices when Peak Oil hits mainstream and a lot more people will speculate in the oil market. Right after that I think it will crash.
I think the stock markets are now in decline (reached a high last week, at least over here).
Yes, very temporary deflation in the SUV type market. This makes perfect sense. If it's already sitting in your lot, deteriorating in value, why not sell at firesale prices? Hell, they may even give them away!
I guess when it comes to getting rid of inventory of any kind, the economy could throw a big garage sale.
It's just extrapolating from there to draw conclusions about an on-going deflation, isn't likely to play out.
I even question hyperinflation, as wages aren't going to go up commensurate to the amount of money that the fed prints or wants to print.If you look at past hyperinflations, wages rose to accomodate rising prices.
Banks won't lend to indigents, and demand and desire are two very different things. The entire economy rests on a mountain of debt, but that rests on the expectation that the debt will be paid back. You don't need a gold backed system for this,--you can have a paper system that will function using these paramters. You could use cowrie shells, bird feathers, little glass marbles, beads, or sticks and accomplish the same.
The problem arises when banks start to assume that they won't be paid back, by many they previously lent to. Then the system locks up, for those in the middle and lower end of the spectrum with prices high, but not spiralling out of control.
What makes you think oil markets will crash? Smoke and mirrors?
Joined: Jan 31, 2005 Posts: 451 Location: Massachusetts
Posted: Tue Aug 23, 2005 11:58 am Post subject: Re: US recession affecting oil price ??
shady28 wrote:
I'm pretty sure Greenspan has been around so long because he has been determined to use monetary policy to push the economy forward under any administration.
I don't know about pushing the economy "forward," but Greenspan has been good at creating conditions that inflate profits, protect financial speculators, and maximize the portion of economic output that ends up in the hands of the rich.
As an example of Greenspan's partisanship, I cite his strident calls for fiscal restraint and spending cuts to end the deficit under Clinton. Earlier, he called for raising the social security payroll tax under Bush I. However, once Bush II was in office, Greenspan was all in favor of his tax cuts for the rich, even though they were fairly certain to lead to the kind of deficits that he opposed under Clinton. Funny, isn't it, that those income tax cuts for the rich are partly financed by the money that he wanted taken away from middle class people as payroll taxes. Now that we have the largest federal budget deficits in history, Greenspan has little to say about them. The difference this time is that a Republican is in office.
threadbear wrote:
Marko, Put yourself in the position of a retailer. If 40% of the population is underemployed or unemployed, homeless--no longer a strong consumer, why would prices drop down to accomodate them?
Because you have just received delivery of 300 tacky polyester tank tops from China, and you need to lower the price (and your margin) to sell them or risk taking a total loss.
threadbear wrote:
Pricing margins are razor thin for retailers marketing to the lower and lower middle classes anyway--in a supposedly 'strong' economy. Regardless what the price of oil is, why wouldn't a retailer, like Target, for example, just delete this type of customer right out of his marketing plans?
First, I'm not sure that margins are so thin. Walmart and Target seem to be quite profitable now. If they cut staff and other costs in response to the lower volume and close less profitable stores, they can trim their margins, as they will have to do to survive.
There is no way that Walmart and Target are going to be able to compete with Neiman Marcus or Gucci in marketing to the rich.
By the way, one way in which retailers will defend their margins is by demanding lower prices from their suppliers. Facing huge overcapacity in a recession, suppliers in places like China will have to cut their own costs and prices in order to make any sales to American retailers at all.
threadbear wrote:
The 20% who are able to purchase aren't just middle class, they have large incomes and assets to draw from. Why not hike prices sky high (even relative to inflation) for the few who are functioning members of a consumer society?
As I said, there is a limited pool of high-end consumers, and they will not be going to Walmart. Probably retailers like Neiman Marcus will face less downward pressure on their prices.
But the bottom line is that with a drastic drop in the incomes of 80% of the population, there will be less money chasing a similar amount of goods. There is only so much stuff that rich people can buy. Prices will drop.
threadbear wrote:
When Argentina devalued it's peso, after depegging from the American dollar, many lost their jobs, in the ensuing depression. As the peso plunged and Argentian's situation grew more dire, retailers responded by hiking prices. The rising prices did more than compensate for inflation of the peso, they illustrated that standard marketing theory was tossed out the window.
This is what happens when the currency collapses. I do not foresee an immediate collapse of the dollar. Too many Asian countries are prepared to defend the dollar. No one wanted to defend the Argentine peso.
I have argued that, during the initial year or two of the recession, Asian central banks are going to be desperately buying dollars and US Treasury bills in an effort to support the dollar and the US economy, on which they are heavily dependent. Only after Asian money creation spins out of control and leads to hyperinflation there will they be forced to give up this policy. Then the dollar will drop like a stone, leading to hyperinflation in the US.
threadbear wrote:
Deflationary theory is based on North American model of the depression of the thirties. It ain't going to happen here--not even temporarily
I think that it is actually going to look a lot like the depression of the 30s at first, before it shifts into something like the situation in Argentina.
Posted: Tue Aug 23, 2005 12:26 pm Post subject: Re: US recession affecting oil price ??
Marko--WalMart and Target have razor thin margins per unit and rely on volume and economies of scale. They won't survive unless they alter their marketing dramatically. They can't trim enough to counter the wave of poverty they'll be encountering. A strong dollar- relative to other currencies, cheap foreign labour, and oligopolic pressure brought to bear on their suppliers have enabled Americans to survive deflation style wages. They HAVE been living deflation. You're predicting the past here.
The American dollar is going to be realigned internationally, and that is what is going to hurt. The idea that other currencies will drop in a synchronized fashion, allowing the US to go on purchasing goods from China assumes many things, first of which is that China doesn't have a vested interest in seeing the US crater as it creates a stronger engine of consumption domestically.
If the US is successful and controls the flow of oil in the Middle East, that will have serious repercussions for the US, economically. China won't continue underwriting American economy if this happens.
If on the other hand the US doesn't control the flow of oil into China, this allows China to develop in a more unimpeded fashion, and they don't need the US. Either way, the US suffers economically, as China lets its currency climb ever higher relative to the American dollar.
The US has been important internationally as the biggest consumer. It is no longer in the international community's best interest to perpetuate this system. It WILL be cut adrift, and that is an inflationary scenario. Americans should take advantage and buy everything they can in the big ensuing yard sale, as that will unfold over a period of no more than six months, after the sh** starts hitting the fan.
Posted: Tue Aug 23, 2005 12:32 pm Post subject: Re: US recession affecting oil price ??
marko wrote:
shady28 wrote:
I'm pretty sure Greenspan has been around so long because he has been determined to use monetary policy to push the economy forward under any administration.
I don't know about pushing the economy "forward," but Greenspan has been good at creating conditions that inflate profits, protect financial speculators, and maximize the portion of economic output that ends up in the hands of the rich.
As an example of Greenspan's partisanship, I cite his strident calls for fiscal restraint and spending cuts to end the deficit under Clinton. Earlier, he called for raising the social security payroll tax under Bush I. However, once Bush II was in office, Greenspan was all in favor of his tax cuts for the rich, even though they were fairly certain to lead to the kind of deficits that he opposed under Clinton. Funny, isn't it, that those income tax cuts for the rich are partly financed by the money that he wanted taken away from middle class people as payroll taxes. Now that we have the largest federal budget deficits in history, Greenspan has little to say about them. The difference this time is that a Republican is in office.
That ignores the circumstances surrounding his decisions. In 2000/2001 Greenspan was attempting to reflate one of the biggest bubble bursts in history, barely 2 years after one of the worst multinational currency crisis in history.
Greenspan may not admit it, but he is clearly a closet Keynesian. However, he did make it clear that the cuts would help kick-start the economy. He has become more critical of the deficit as the economy has appeared healthy again. Again, I don't think he cares who is in office, he just wanted the tax cuts to help him with reflating. I look at greenspan as sort of an economic hacker, he enjoys the challenge and he doesn't like to lose. Technically, I suppose Greenspan didn't lose - that honor will be reserved for Ben Bernanke. _________________ Welcome to the Kondratieff Winter
Posted: Tue Aug 23, 2005 12:47 pm Post subject: Re: US recession affecting oil price ??
marko wrote:
This is what happens when the currency collapses. I do not foresee an immediate collapse of the dollar. Too many Asian countries are prepared to defend the dollar. No one wanted to defend the Argentine peso.
I have argued that, during the initial year or two of the recession, Asian central banks are going to be desperately buying dollars and US Treasury bills in an effort to support the dollar and the US economy, on which they are heavily dependent. Only after Asian money creation spins out of control and leads to hyperinflation there will they be forced to give up this policy. Then the dollar will drop like a stone, leading to hyperinflation in the US.
Asian central banks have allready more or less stepped out. Japan might still be game, given that it is semi-independent US vassal, and maybe Taiwan too, but China has depegged from dollar and is (together with Russia and many others) in the process of balancing their portfolio of currency reserves. Iranian Oil Bourse may quite likely force also Japan to start seriously rethinking their geopolitical strategy.
According latest stat I saw, only foreigners seriously buying US debt were Caribbian banks. Guess who that last straw for US might be? Illegal drug trade (protected by the DEA and al-CIAda mafias) is still bigger than oil trade, only second to arms trade, and US is the biggest single market for drug trade and US financial papers is where most of launderd drug money is invested. Why do you think keeping drugs illegal is main element of US foreign policy? Follow the money!
Posted: Tue Aug 23, 2005 2:14 pm Post subject: Re: US recession affecting oil price ??
threadbear wrote:
Yes, very temporary deflation in the SUV type market. This makes perfect sense. If it's already sitting in your lot, deteriorating in value, why not sell at firesale prices? Hell, they may even give them away!
I guess when it comes to getting rid of inventory of any kind, the economy could throw a big garage sale.
It's just extrapolating from there to draw conclusions about an on-going deflation, isn't likely to play out.
I even question hyperinflation, as wages aren't going to go up commensurate to the amount of money that the fed prints or wants to print.If you look at past hyperinflations, wages rose to accomodate rising prices.
Banks won't lend to indigents, and demand and desire are two very different things. The entire economy rests on a mountain of debt, but that rests on the expectation that the debt will be paid back. You don't need a gold backed system for this,--you can have a paper system that will function using these paramters. You could use cowrie shells, bird feathers, little glass marbles, beads, or sticks and accomplish the same.
The problem arises when banks start to assume that they won't be paid back, by many they previously lent to. Then the system locks up, for those in the middle and lower end of the spectrum with prices high, but not spiralling out of control.
What makes you think oil markets will crash? Smoke and mirrors?
What is the timescale of a new car from design till the end of its production, a couple of years at least I think. So lets say a company has designed a new model, created the factory, has signed the contracts for the supply of materials, and has just started production, all under the assumption demand will stay high. At this point unexpected the consumers stop buying (demand drops a lot). They can't raise the prices because that would cut demand even more (still competing with other car manufacturers). So they propose a paycut for the employees: you're fired or you agree on a paycut. It will be hard to get a job, so better take the paycut. As long as they can sell the cars for more than they have to spend to build the car from now on, it makes sense to make the cars. So prices drop. Now they have to decide how long they are going to keep this up. Are they going to invest in designing new models and smaller factories, or will they just keep extracting money from the old model as long as they can. I think they will try to extract money now, instead of investing money now, so I think this deflation could last a couple of years, while we try to extract as much of the money out of it as we can. You can't sell the factory and the machines, because nobody wants to buy it, so better use them while they still work. When the time comes that they (machines, factory, etc.) need to be replaced (don't work anymore, repair to costly/impossible) then they might decide to focus on the small rich group. I think it will take a couple of years, before they start investing again.
A lot of the industry is focussed on producing lots of products for a lot of buyers. You won't get the richest 20% to buy 10 SUVs each and all that other stuff, and these industries won't be able to compete with the companies that are already making the high quality customized products for the rich, without making more investments. So I think deflation will take a while and we won't skip it.
About the oil price, I think a lot of speculators will enter the market when peak oil becomes mainstream, which together with some hype over another refinery burn/shutdown could drive up the price of oil in a short time to over $100 per barrel for light sweet. For the western/rich world $100 per barrel of light sweet is not an oil crisis, but it is for all the other oil importing countries. In those places you will get demand destruction, like we are already seeing today. In the western world we also get demand destruction, because we will make and buy less stuff and, carpool more and other energy savings. When we see that we don't get shortages here (yet) the price of light sweet will crash from around $100 to say $30-$40 (I consider that to be a crash), because there is now an oversupply of oil. After that the price will go up again a bit because demand will go up a bit at those prices and production might be lowered. Due to oil production declining over time oil will become more and more a product only the rich (including companies) can afford. (Untill oil production stabilizes). This is how I think it will go.
Posted: Tue Aug 23, 2005 8:15 pm Post subject: Re: US recession affecting oil price ??
CARVER wrote:
threadbear wrote:
Yes, very temporary deflation in the SUV type market. This makes perfect sense. If it's already sitting in your lot, deteriorating in value, why not sell at firesale prices? Hell, they may even give them away!
I guess when it comes to getting rid of inventory of any kind, the economy could throw a big garage sale.
It's just extrapolating from there to draw conclusions about an on-going deflation, isn't likely to play out.
I even question hyperinflation, as wages aren't going to go up commensurate to the amount of money that the fed prints or wants to print.If you look at past hyperinflations, wages rose to accomodate rising prices.
Banks won't lend to indigents, and demand and desire are two very different things. The entire economy rests on a mountain of debt, but that rests on the expectation that the debt will be paid back. You don't need a gold backed system for this,--you can have a paper system that will function using these paramters. You could use cowrie shells, bird feathers, little glass marbles, beads, or sticks and accomplish the same.
The problem arises when banks start to assume that they won't be paid back, by many they previously lent to. Then the system locks up, for those in the middle and lower end of the spectrum with prices high, but not spiralling out of control.
What makes you think oil markets will crash? Smoke and mirrors?
What is the timescale of a new car from design till the end of its production, a couple of years at least I think. So lets say a company has designed a new model, created the factory, has signed the contracts for the supply of materials, and has just started production, all under the assumption demand will stay high. At this point unexpected the consumers stop buying (demand drops a lot). They can't raise the prices because that would cut demand even more (still competing with other car manufacturers). So they propose a paycut for the employees: you're fired or you agree on a paycut. It will be hard to get a job, so better take the paycut. As long as they can sell the cars for more than they have to spend to build the car from now on, it makes sense to make the cars. So prices drop. Now they have to decide how long they are going to keep this up. Are they going to invest in designing new models and smaller factories, or will they just keep extracting money from the old model as long as they can. I think they will try to extract money now, instead of investing money now, so I think this deflation could last a couple of years, while we try to extract as much of the money out of it as we can. You can't sell the factory and the machines, because nobody wants to buy it, so better use them while they still work. When the time comes that they (machines, factory, etc.) need to be replaced (don't work anymore, repair to costly/impossible) then they might decide to focus on the small rich group. I think it will take a couple of years, before they start investing again.
A lot of the industry is focussed on producing lots of products for a lot of buyers. You won't get the richest 20% to buy 10 SUVs each and all that other stuff, and these industries won't be able to compete with the companies that are already making the high quality customized products for the rich, without making more investments. So I think deflation will take a while and we won't skip it.
About the oil price, I think a lot of speculators will enter the market when peak oil becomes mainstream, which together with some hype over another refinery burn/shutdown could drive up the price of oil in a short time to over $100 per barrel for light sweet. For the western/rich world $100 per barrel of light sweet is not an oil crisis, but it is for all the other oil importing countries. In those places you will get demand destruction, like we are already seeing today. In the western world we also get demand destruction, because we will make and buy less stuff and, carpool more and other energy savings. When we see that we don't get shortages here (yet) the price of light sweet will crash from around $100 to say $30-$40 (I consider that to be a crash), because there is now an oversupply of oil. After that the price will go up again a bit because demand will go up a bit at those prices and production might be lowered. Due to oil production declining over time oil will become more and more a product only the rich (including companies) can afford. (Untill oil production stabilizes). This is how I think it will go.
So !!, to make this thesis make money, buy oil stocks now,
unload at above 80 bucks, wait for recession,
buy back oil stocks at 35 barrel level.
Finally, I have an answer to a complicated question.
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