World Economy Would Collapse If Oil Hit $200, Deutsche Says

Graeme

Cochise · Tar Sands Joined: Jun 13, 2008 Posts: 48 Location: LA

why don't they tell us something that we don't know???

DefiledEngine · Heavy Crude Joined: Aug 19, 2004 Posts: 272

I thought it was already collapsing?
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"Life is merely an orderly decay of energy states, and survival requires the continual discovery of new energy to pump into the system. He who controls the sources of energy controls the means of survival. "

SILENTTODD

Does this mean we won't be able to fly to Grammy's house each Christmas?!
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memmel · Tar Sands Joined: Oct 31, 2007 Posts: 41

For once I think they are being a bit melodramatic. I can see bankers being unhappy but this is only another 60 dollar increase on our current prices and about and additional dollar on a gallon of gas.

I'd guess this would result in at most a 5% contraction in the worlds economy not including growth if you included growth slowing down first then 200 dollar oil would introduce a mild and patchy recession.

I think 300 will send us closer to a global recession but we won't hit one until oil is at 500 a barrel. But then it should pretty much go strait into a depression.

At basically 140 a barrel we still have housing in the US insanely priced with a slow housing collapse underway. At the rate its moving its 2010 or so before prices even return to pre-bubble levels in most areas.
Pretty much the same for the rest of the overheated economy. Unemployment is just now picking up steam. No way 200 a barrel is going to dramatically change this. Overall people still have plenty of room to absorb higher fuel prices. Many countries still have significant subsidies. And the US economic stimulation thing was really a gasoline subsidy in disguise for those smart enough to use it correctly. I suspect we will get a similar handout next year that more people will devout to gasoline.

Expansion esp building etc that most banks depend on will drop sharply so a depression in finance will probably happen but this is a banking problem not a overall economic problem.

I do agree that the combination of 200 oil and the recent and ongoing banking fiasco will probably cause serious problems for the profitability of the banking sector and this will work to stop growth but the end of growth is not the end of the world economy. Even the first few years of shrinking is not going to be a huge problem.

Its when we hit the 300-500 range that real problems start cropping up.

anony_mus · Coal Joined: Jun 21, 2008 Posts: 5

Since the lions share of oil consumed is used for transportation, the primary affect of $200 - $250 oil will be a paradigm shift in the way we get around. Other forms of transportation will be come substituted - bicycles, mopeds, trains (ala warren buffet), less air travel etc. And that's not such a bad thing considering the reduction in greenhouse gasses emissions. Gas usage is down less than 2% at $140 so it hasn't even begun yet.

The affects of inflation will definitely be felt and have to be delt with and that's a wild card. The US had crazy inflation in the 70's and survived that.

So collapse? Its going to take a lot more than $200 oil. Its the developing nations that are going to have the most problems.
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anagami

socrates1fan · Heavy Crude Joined: Jun 04, 2008 Posts: 270

Plantagenet

I don't understand the panic by the Deutschesbank.

The EU has a tax rate on fuel of approximately 100%. Thats the reason gas costs twice as much in EU countries as in the U.S. This smart policy gives them the ability to to fiddle with their gas price.

The EU could simply reduce or drop their gas tax entirely, as French President Sarkozy is suggesting, and actually have gas prices LOWER then today even if oil goes to $200/barrel.
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Starvid

dohboi · Light Sweet Crude Joined: Dec 05, 2005 Posts: 1168

His actual quote talks about a global recession. Does anyone really doubt that this is already in the cards?

DantesPeak

vision-master

Plantagenet

eastbay

It's going to take a lot more than $200/bbl oil to stop The Machine. I was just in Malaysia and even with the limited and lingering (although recently modified ) subsidy, the freeways around KL and the primary N/S freeway are jammed with cars and trucks totally ignoring the posted speed limit speeding along as if the stuff was free.

This from a nation with a per capita GDP almost exactly the same as Mexico's. Interestingly, they're in a similar position too. Both about to become net energy importers after many decades sitting pretty in 'export land'.

So, IMO, if a nation like Malaysia can keep trucking along (mostly) just fine with $140/bbl oil, North America and Europe and the rest of the developed world can also (mostly) make ends meet with 2, 3, or 4 times the per capita income on $200/bbl oil.

So, in conclusion, Deutsche Bank is blowing political smoke for some reason. Maybe they're pushing to get the EU nations to reduce their petrol taxes. Maybe something else. I'm not sure what is the General Breaking Point, but $200/bbl oil isn't anywhere near Planet Doomsville folks. So relax. Smile

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Everything is Impermanent. Shakyamuni Buddha